Telus fails to deliver on Entwistle's IPO-based growth strategy
Would anyone buy another initial public offering promoted by long-serving Telus Corp. T-T chief executive officer Darren Entwistle?
If the answer to that question is no, Mr. Entwistle's growth strategy at Telus is dead in the water.
And it's hard to imagine investors stepping up for future Telus spinoffs after Tuesday's announcement that the parent company wants to put troubled offspring Telus International (Cda) Inc. TIXT-T out of its public market misery.
Telus is offering to buy out shareholders in its subsidiary at a steep 86-per-cent discount to the price of its IPO, done with considerable fanfare just four years ago.
Mr. Entwistle, a dominating personality who has been at the helm for 25 years, built Telus beyond its legacy phone networks by investing billions in subsidiaries focused on digital customer services, health care and agriculture. The idea was to incubate these businesses inside the Vancouver-based telecom, then launch them as public companies, with Telus shareholders reaping rewards from the value created on Mr. Entwistle's watch.
Telus International – rebranded in 2024 as Telus Digital Experience – was meant to be the first in a series of spinoffs. Telus Health is up next, with an IPO anticipated as early as 2026.
The incubator concept initially looked like a winner, as Telus Digital went public in 2021 at US$25 per share in what the parent company proudly heralded as the largest tech IPO in Toronto Stock Exchange history. At the time, Telus Digital's US$8.5-billion market capitalization rivalled that of the parent telecom.
Execution failed to match ambition.
Telus Digital proved a case study in value destruction. The company's challenges include a core business that runs call centres for clients such as retailers, hotels and banks. Artificial intelligence-based systems now dominate this space. Telus Digital proved slow to pivot, and customers moved on.
On Wednesday, Telus reversed field by making a 'non-binding indication of interest,' or IOI, to acquire the 42.6 per cent of Telus Digital shares it doesn't own for US$3.40 each.
Telus Digital shares promptly jumped 24 per cent Thursday to close at US$3.67 on expectations the parent company will be forced to goose its bid to get a deal done.
Mr. Entwistle put a brave face on Telus Digital's face plant. In announcing the IOI, he said reintegrating the unit's tech expertise will benefit all of Telus's businesses, including telecom.
While that may be true, buying back the subsidiary is an admission of failure. Telus set lofty goals for its diversification strategy, then failed to hit them.
Telus proposes buying back Telus Digital for more than US$400-million
Telus Health prepares to stand alone after years of acquisitions
'Today's rather dismal proposal has no 'congratulatory' terms that were to be found at the time of the IPO,' said analyst Tyler Tebbs at Tebbs Capital in a report. He said Telus is only offering to repurchase its subsidiary after failing to find a buyer for the business.
Memories are long in financial circles. Mr. Tebbs compared the Telus offer to the ill-fated M&A at Time Warner Inc. in the recent past. He said the buyback 'is yet another example of a telecom/media company reversing a transaction done in much better times at the expense of shareholders.'
In public markets, you're only as good as your last deal. Fund mangers got caught up in a craze for all things digital during the early days of the pandemic. That dynamic set the stage for a successful IPO at Telus Digital.
The second time around, institutional and retail investors will be far more skeptical about buying when Mr. Entwistle is selling. To get an IPO done at Telus Health or Telus Agriculture, the parent company will likely be forced to accept a steep discount to the underlying value of the business, which defeats the purpose of the incubator concept.
Yet without the ability to exit investments, Mr. Entwistle is running a debt-heavy conglomerate, anchored by a well-run but slow-growth telecom network that qualifies as critical infrastructure for the Canadian economy.
Outside of founder-run businesses, it's hard to name a domestic public company more identified with its CEO than Telus.
At Telus Digital, Mr. Entwistle's IPO-based growth strategy failed to deliver. The Telus board, chaired by former deputy prime minister John Manley, needs to ask hard questions about what comes next and who is best positioned to lead a business that has become the vision of a single executive.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CTV News
20 minutes ago
- CTV News
WestJet cyberattack remains unresolved one week in, but operations unaffected
Passengers are seen in the WestJet check-in area at Pearson International Airport, in Toronto, Saturday, June 29, 2024. THE CANADIAN PRESS/Christopher Katsarov WestJet says a cyberattack that began last week remains unresolved, as questions linger about the nature and fallout of the breach. The country's second-largest airline says it is working to assess whether sensitive data or customers' personal information was compromised after hackers accessed its internal systems. An online advisory says the attack, which was detected late last week, has not affected operations but that some customers may run into 'intermittent interruptions or errors' on WestJet's website and app. Spokesman Josh Yeats says investigations in collaboration with law enforcement are ongoing, but the company has not specified the type of the incident, such as a malware or ransomware attack. The breach at the Alberta-based airline arrived just ahead of foreign leaders, who gathered last weekend for the G7 summit in Kananaskis, Alta., though no direct link to the event has been identified. Airlines and airports have become increasingly popular prey for hackers, as their troves of personal and financial data and global reach make for tempting targets. This report by The Canadian Press was first published June 20, 2025. Christopher Reynolds, The Canadian Press
CTV News
20 minutes ago
- CTV News
Strathcona defends unsolicited takeover offer for oilsands peer MEG Energy
CALGARY — Strathcona Resources Ltd. says MEG Energy Corp. has made errors and misleading statements in its justifications for rejecting its unsolicited takeover bid. Last month, Strathcona made a cash-and-stock offer to buy all of the MEG shares it does not already own, and MEG shares have consistently been trading higher than the implied offer price. Earlier this week, MEG urged shareholders to reject the bid, in part because it says combining with Strathcona would expose shareholders to inferior assets and capital market risk. Strathcona has published a new presentation taking aim at the 'Fact vs. Fiction' in MEG's director's circular outlining its rationale for opposing the offer. In the presentation, Strathcona says its oilsands assets are comparable to or sometimes better than MEG's. It adds that Waterous Energy Fund, led by Strathcona executive chairman Adam Waterous, has no intention of selling its stake in Strathcona post-takeover, which MEG contends is a risk. --- Lauren Krugel, The Canadian Press This report by The Canadian Press was first published June 20, 2025.
Globe and Mail
22 minutes ago
- Globe and Mail
RTX's Arm Secures $300M Contract for ESSM Block II Missile Assemblies
RTX Corporation 's RTX business segment, Raytheon, recently secured a $299.7 million modification contract involving the Evolved Seasparrow Missile (ESSM). Per the terms of the deal, RTX will provide test equipment and spares, as well as exercise options for ESSM Block 2 guided missile assemblies. Details of RTX's Deal The work related to this contract will be executed in multiple locations globally, including the United States, Australia, Canada, Norway, the Netherlands and a few other nations. This contract is projected to be completed by September 2030. The award has been provided by the Naval Sea Systems Command, Washington, D.C. What's Favoring RTX? With countries worldwide enhancing their defense capabilities, spending on advanced military arms and ammunition has been rapidly increasing lately. This includes growing investments in missiles and missile systems, which are essential for modern warfare. RTX, as a prominent manufacturer of missile systems, has thus been witnessing a steady flow of orders from the Pentagon and other U.S. allies. The recent contract is an example of that. RTX's ESSM Block II is a versatile, combat-proven naval defense system with more than 330 successful live sea firings. Offering enhanced performance over Block I, it strengthens fleet protection against diverse threats. These advanced features likely drive its growing demand, reflected in the latest contract win. RTX's Growth Prospects Rising military conflicts, terrorism and border disputes have led nations to increase their focus on national security, particularly on missile defense systems in recent times, backed by the rapid development of advanced missile technologies over the last decade. This is likely to have prompted the Mordor Intelligence firm to forecast a compound annual growth rate of 5% for the global missiles and missile defense systems market during the 2025-2030 time period. Such strong growth projections indicate solid opportunities for RTX, which has a handful of combat-proven missiles in its product portfolio, like the TOW missile, Guidance Enhanced Missile, Advanced Medium Range Air-to-Air Missile, Tomahawk, Standard Missile 2 and a few more, in addition to the ESSM. Opportunities for Other Defense Stocks Other defense companies that are likely to enjoy the perks of the expanding missiles and missile system market have been discussed below: Northrop Grumman NOC: Northrop Grumman provides high-speed, long-range strike weapons like the AARGM-ER, which is a supersonic, air-launched tactical missile system. It also builds advanced missile defense technology, ranging from command systems to directed energy weapons, advanced munitions and powerful sensors. The company's long-term (three to five years) earnings growth rate is 3.3%. The Zacks Consensus Estimate for NOC's 2025 sales indicates year-over-year growth of 2.8%. The Boeing Company BA: It manufactures various missile defense systems, including the Ground-based Midcourse Defense, Aegis Ballistic Missile Defense and Avenger. Boeing-built missile defense systems have been protecting its customers for nearly 25 years against threats ranging from intercontinental ballistic missiles to hostile aircraft. The company has a long-term earnings growth rate of 18.1%. The Zacks Consensus Estimate for BA's 2025 sales indicates year-over-year growth of 25.6%. Lockheed Martin LMT: Lockheed Martin's missile defense program includes the Patriot Advanced Capability-3 and Terminal High-Altitude Area Defense air and missile defense programs. It also manufactures the Multiple Launch Rocket System, the Joint Air-to-Surface Standoff Missile and Javelin tactical missiles. The company has a long-term earnings growth rate of 10.5%. The Zacks Consensus Estimate for LMT's 2025 sales indicates year-over-year growth of 4.7%. RTX Stock's Price Movement Shares of RTX have gained 25.1% in the past six months compared with the industry 's 15.5% growth. RTX's Zacks Rank RTX currently carries a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Zacks Names #1 Semiconductor Stock It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom. With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028. See This Stock Now for Free >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Boeing Company (BA): Free Stock Analysis Report Lockheed Martin Corporation (LMT): Free Stock Analysis Report Northrop Grumman Corporation (NOC): Free Stock Analysis Report RTX Corporation (RTX): Free Stock Analysis Report This article originally published on Zacks Investment Research (
