Telus sees itself as something greater than a telephone company. Is it?

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Telus Corp.’s venture arm invested in a tiny company in 2017 that was working on software to enable virtual doctor-patient consultations. Two years later, Telus chief executive Darren Entwistle bought that disruptive upstart outright, and Toronto-based Akira Health became Akira by Telus Health, one offering among many at a corporation that generates annual revenue of about $15 billion.

Before you shrug at what looks like a classic big-fish-eats-little-fish story, take a closer look at the big fish.

It’s from a species known for getting fat on monopoly rents, not risking its ability to return money to shareholders and managers by making bets on non-core businesses. Startup investing is way too risky of most of Canada’s blue bloods. Telus is one of 13 corporations that have venture divisions, according to the Canadian Venture Capital and Private Equity Association, and just six of those are non-financial companies.

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Telus, of course, is also a member of a telecommunications oligopoly: a trio beloved by dividend investors, disliked by customers who know how much cheaper mobile data is almost everywhere else on the planet, and loathed by rural Canadians who have been cut off from modern society because of chronic underinvestment in broadband outside urban areas.

BCE Inc. and Rogers Communications Inc. appear to care little about how they’re perceived by anyone other than their largest shareholders. Telus appears to be more sensitive. It wants to be seen as something greater than a “telephone company,” which it demonstrated most recently in November by launching the Telus Pollinator Fund for Good, seeding it with $100 million to invest in startups that propose innovative ways to deliver health care, make agriculture more efficient, reverse climate change and improve social cohesion.

We believe we’re world leaders in social capitalism

Jill Schnarr, chief social innovation officer, Telus

“We believe we’re world leaders in social capitalism,” said Jill Schnarr, chief social innovation officer and one of a handful of company leaders that Telus made available to discuss its strategy. Entwistle, who declined to be interviewed, “saw the other telcos investing in content and decided that we weren’t going to do that,” she said. “We would invest in more of a social challenge and leverage our technology and productivity to address a social challenge.”

It was about a decade ago — around the same time BCE diversified by purchasing the CTV television network (2010) and Rogers sought to maximize its networks by securing the rights to Hockey Night in Canada (2013) — that Entwistle, who took over as Telus CEO in 2000, spent about $3 billion to build a health-care business that could manage digital medical records and connect doctors and patients over the internet.

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It was a bet on needs over wants and it made Entwistle the Don Quixote of the Canadian telecommunications industry.

But if they were laughing on Bay Street then, they aren’t now. BCE and Rogers now look like utilities that dabble in sports and entertainment, rather than dominant media enterprises. Telus, on the other hand, has adopted the swagger of a technology company. Thanks to a combination of foresight and luck, Telus is now better positioned to take advantage of forces that will reshape the global economy than its bulkier rivals.

“We are raising our target price” to $30 per share, from $26, Bank of Montreal telecommunications analyst Tim Casey informed his clients this week after Telus’s latest earnings report, “based on Telus’s superior operating performance and attractive asset mix.”

To be sure, anyone shopping for a mobility plan this week will have found little to choose between Montreal-based BCE’s Bell Canada ($85 per month, unlimited data, but slower speeds after 25 gigabytes), Toronto-based Rogers ($70 per month, unlimited data, slower speeds after 25 GB), and Vancouver-based Telus ($75 per month for 25 GB).

But investors appear to detect a difference. Telus’s share price has gained about 35 per cent since last March, when global stock markets collapsed, while BCE’s shares have gained only about 20 per cent over that period. Rogers is about 23 per cent higher.

The two bigger members of the oligopoly have been humbled by the pandemic. The National Hockey League and National Basketball Association suspended their seasons last year, and virtually all film production stopped. BCE this month laid off hundreds of people at its media unit, including some popular on-air personalities. Rogers’ Toronto Blue Jays baseball team played its 2020 season in Buffalo, N.Y., because the Canadian government refused to give American teams a special permit to cross the border.

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All three big telecommunications companies will find their way through this crisis because they hold golden keys to the broadband and wireless networks that are now widely recognized as essential infrastructure. But that no longer guarantees a steady stream of new customers. The federal government for years has tried and failed to create space for competitors outside the oligopoly, and yet it continues to try.

BCE, Rogers and Telus all claimed emergency wage subsidies worth a combined $225 million while continuing to pay dividends, a choice that has angered some members of Parliament and could end up complicating life for the three companies, whose outlooks depend on a number of upcoming policy decisions going their way.

Telus is probably the least exposed to political risk. Entwistle donated his salary from April, May and June to health workers, including a $100,000 contribution to the McGill University Health Centre. His commitment to “social capitalism” jibes with the ethos of Prime Minister Justin Trudeau’s government, as do Telus’s efforts at diluting the influence of the patriarchy. The Telus board of directors features seven men and five women, making it a paragon of diversity in corporate Canada. By comparison, BCE’s board consists of 12 men, all of them white, and only four women.

Academic research suggests that diverse leadership results in more resilient companies and Telus has the look of a company that is built for the post-pandemic future.

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Entwistle this month spun off Telus International Inc., a provider of digital services such as fraud protection, in an initial public offering that raised $8.5 billion, making it the biggest IPO in the S&P/TSX composite index’s history. He told analysts on a conference call this week that he “won’t be satisfied” until he realizes “that particular outcome” for Telus’s other sidelines in health, agriculture and security. “It’s all about digital progression.”

Indeed. Demand for Akira, which Telus pitches to employers who want to give their employees around-the-clock access to doctors and mental-health professionals, grew 350 per cent last year compared with 2019, said François Gratton, an executive vice-president and a member of Telus’s core leadership team.

That growth is from an extremely small base, but telehealth surely holds more promise than professional sports and broadcast radio and television.

“We’ve transformed ourselves from a telco to a major IT player,” Gratton said.

Financial Post

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