TELUS (TU) Completes Lionbridge Buyout, Expands Portfolio

Zacks Equity Research
·4-min read

TELUS Corporation TU recently announced that it has completed the acquisition of Lionbridge AI to augment its AI (artificial intelligence) capabilities as demand for high-quality, multilingual data annotation continues to rise. The transaction also expanded its portfolio of digital solutions and enabled it to better serve its customers across diverse business segments.

Data annotation refers to the process of labelling data to render it usable for AI applications. Lionbridge AI is reportedly one of only two global data annotation services providers that annotates data in text, images, videos and audio in more than 300 languages and dialects. It also boasts a proprietary data annotation platform for the development of AI algorithms to power ML (machine learning) for usage in various companies in social media, search, retail and mobile sectors across the globe. With an attractive business model, Lionbridge AI recorded revenues of about C$206 million in 2019, up 29% year over year.

The acquisition is a strategic fit for TELUS as it aims to harness the power of technology to accelerate its digital transformation policy. The buyout will enable the company to expand its global service offerings for higher market penetration in one of the fast growing services in the world. The combined entity is likely to encourage the development of next-generation AI and ML systems to better address the evolving customer demands with the coronavirus pandemic stimulating enhanced digitization efforts across the board.

TELUS is poised to benefit from the increasing penetration of smart devices, wireless data services and wireline fiber optic networks. The Canadian telecommunications company expects balanced growth in the wireless and wireline businesses. TELUS has secured new 600 MHz spectrum licenses in British Columbia, Alberta, Saskatchewan, Ontario and Quebec for a consideration of $931 million. Equating to a national average of 11.3 MHz, these licenses will allow it to provide improved mobile broadband connectivity at a time when the industry is moving from 4G LTE to 5G. The deployment of this latest spectrum is important to TELUS’ 5G growth strategy coupled with better network quality, speed and coverage. The 600 MHz band can travel distances in rural areas and penetrate barriers to better reach in-building locations.

Markedly, TELUS’ 4G LTE network covers 99% of the country’s population and the addition of 600 MHz spectrum will help it increase urban capacity while expanding the rural availability of wireless broadband service. The company is focused on the execution of its strategies along with amplifying efforts for cost efficiency leading to margin-accretive customer growth and investments to support its expansion strategy. With the expansion of the Internet of Things marketplace into Canada, TELUS is focusing on consolidating its foothold in the market. It has introduced the TELUS Global IoT Connectivity platform to deliver seamless connectivity and simplified billing across 200 networks globally, thus supporting the expansion of Canadian business enterprises.

In the next two years, the company aims to offer direct fiber access to 93% of Greater Quebec City and Eastern Quebec residents. The company plans to generate subscriber growth in key growth segments, including wireless, high-speed Internet and TELUS TV. Increasing demand for reliable access and fast-data services are expected to support customer addition. Furthermore, TELUS International and TELUS Health are likely to contribute to the company’s organic and inorganic growth as exemplified by the Lionbridge AI buyout.

The stock has gained 7.7% in the past year against 6.7% decline for the industry.

TELUS currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader industry are Knowles Corporation KN and Plantronics, Inc. PLT, sporting a Zacks Rank #1 (Strong Buy), and Corning Incorporated GLW carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Knowles has a long-term earnings growth expectation of 10%. It delivered an earnings surprise of 19.3%, on average, in the trailing four quarters.

Plantronics delivered a trailing four-quarter earnings surprise of 560.4%, on average.

Corning has a long-term earnings growth expectation of 2%. It delivered an earnings surprise of 41.6%, on average, in the trailing four quarters.

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