Industry Update Telecommunications 22 July 2020 Aravinda Galappatthige, CFA | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7303 Matthew Lee, CFA | Associate Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.687.5363 Company Rating Price Target Telecommunications Telecom ESG themes BCE-TSX Buy C$56.70 C$61.00 RCI.B-TSX Buy C$55.53 C$60.00 Three key themes impacting the sector T-TSX Hold C$23.56 C$24.00 Priced as of close of business 20 July 2020 Within the telecom space, the greatest ESG focus is on affordability and viewing connectivity as a human right, as communications services are increasingly recognized as vital to social participation, education, and employment. As a result, the incumbents in the telecommunications industry have grown their efforts to offer affordable products to disenfranchised members of the community. Rogers, for example, subsidizes over 25,000 households with its “Connected for Success” program, while TELUS offers all students in need within Western Canada access to high-speed internet for $10 with its “Internet for Good” program. These programs have become increasingly important during the COVID-19 pandemic, as unemployment rates have risen substantially and communication has become a greater part of everyday life, for work, education, and leisure. In addition to affordability, we see a greater demand for telecommunications companies to be involved in conversations around health. Bell’s “Let’s Talk Day”, for example, has become one of the country's most recognized charity events supporting mental health, while TELUS’ “Health for Good” helps make healthcare more accessible to Canadians. Lastly, as with many other corporations, diversity has come into greater focus, with social movements demanding that companies hold themselves to higher standards in terms of inclusion. With those criteria in mind, TELUS is leading the way TELUS continuously demonstrates its commitment to the environment, the communities it serves, and its shareholders. The company has shown its understanding of the symbiotic relationship between profitability and sustainability. Through initiatives such as the TELUS Friendly Future Foundation, the company has donated over $1.2 billion and 1.3 billion hours to a variety of causes since 2000. Throughout the pandemic, in addition to its programs connecting low-income families and students, TELUS distributed 10,000 free phones to isolated seniors and vulnerable Canadians, with a free 3GB data plan. The “For Good” suite of services removes the barriers to connectivity. Utilizing its telecom infrastructure and broad health offerings, TELUS offers communities a variety of services under its “For Good” program, which is split into four categories. “Health for Good” offers mobile health clinics, using technology to improve the effectiveness of outreach nurses. “Mobility for Good” helps children in foster care to stay connected, with subsidized phone plans and handsets. “Internet for Good” provides low-cost internet access. Lastly, “Tech for Good” invests in solutions to assist differently abled Canadians in staying connected. Diversity and independence a key focus on the TELUS board. TELUS’ desire to support diversity and strong governance is clearly reflected in its board of directors. Currently, 45% of TELUS’ independent directors are women, and 55% of independent directors represent diversity. TELUS is one of the companies committed to the Catalyst Accord 2022, which pledges to increase the average percentage of women on boards and in executive positions to 30%+ by 2022. Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX) The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein. 22 July 2020 11