Trader’s Narrative

Just a few days ago Telus announced that they were converting their legal structure from a corporate one to an income trust. This was yet another of a string of smart moves by Telus’ management. Their $800 million tax loss will be all used up and by converting to a trust they transfer the tax burden from themselves to their shareholders.

This means that Telus will have to continue to execute without fail since fiscal discipline will be imposed by their comittment to distribute much of their free cashflow to shareholders. Contrast this with Bell Canada’s bumbling management that has nuked billions of shareholder equity over the last decade and their dogged refusal to conver to an income trust.

Telus will become the largest income trust and by default will have to be included in all major trust indexes, mutual funds and managed accounts. People running money have will have no choice but to own this. So it doesn’t take a lot of analysis to conclude that that amount of institutional buying will propel Telus higher.