Revenue grows 6.5 per cent and EPS increases 28 per cent
Accelerating data revenue generated by strong smartphone and Optik TV additions
Quarterly dividend increased three cents to 58 cents per share
VANCOUVER, Nov. 4, 2011 /CNW/ - TELUS Corporation reported third quarter 2011 revenue of $2.6 billion, an increase of 6.5 per cent over the same period last year. This increase was generated by nine per cent growth in wireless revenue and four per cent growth in wireline revenue, both driven by very strong data growth.
The company produced good subscriber results across all major product lines in the third quarter. TELUS added 133,000 postpaid customers in the quarter as smartphone adoption continued to accelerate causing wireless data revenue to surge by 53 per cent. This increase more than offset declining voice revenues, resulting in wireless average revenue per unit (ARPU) growth of three per cent - the fourth consecutive quarter of year-over-year ARPU growth. In the wireline segment, the company added 50,000 TV customers taking the total subscriber base over 450,000, while the residential access line decline of six per cent year-over-year was the best since the third quarter of 2007. TELUS also attracted 22,000 new high-speed Internet subscribers, which together with Optik TV growth drove wireline data revenue growth of nearly 15 per cent.
Consolidated third quarter earnings before interest, taxes, depreciation and amortization (EBITDA) of $968 million increased by three per cent due to revenue growth being offset in part by higher costs to acquire and retain wireless customers and to support growth in Optik services. Net income and earnings per share (EPS) for the third quarter were $326 million and $1.00, representing year-over-year increases of 30 and 28 per cent, respectively. Adjusting for three non-recurring items in the third quarter of 2010, normalized net income and EPS for the third quarter of 2011 were higher by 12 and 11 per cent, respectively.
Free cash flow this quarter of $345 million was higher by $7 million or two per cent due primarily to lower interest payments, higher EBITDA, and lower contributions to defined benefit pension plans, partially offset by higher capital expenditures.
|C$ and in millions, except per share amounts||3 months ended|
|September 30||per cent|
|Operating expenses before depreciation & amortization||1,654||1,520||8.8|
|Earnings per share (EPS), basic(2)(3)||1.00||0.78||28|
|Free cash flow(4)||345||338||2.1|
|Total customer connections(5)||12.57||12.13||3.6|
|(1)||Earnings before interest, taxes, depreciation and amortization (EBITDA). See Section 11.1 in the 2011 third quarter Management's discussion and analysis (MD&A).|
|(2)||Net income and EPS for the third quarter of 2010 included favourable income tax-related adjustments of approximately $9 million or 3 cents per share.|
|(3)||Net income and EPS for the third quarter of 2010 included an unfavorable after tax loss on early partial redemption of debt of $37 million or 12 cents per share, and an after tax regulatory financing charge of $11 million or 3 cents per share.|
|(4)||For definition, see Section 11.2 in 2011 third quarter MD&A.|
|(5)||Sum of wireless subscribers, network access lines, total Internet subscribers, and TELUS TV subscribers (IPTV and satellite TV).|
Darren Entwistle, TELUS President and CEO said, "TELUS remains committed to our strategy of focusing on data solutions that we initiated in 2000. Our ongoing investments in broadband networks are generating operational and financial momentum as evidenced by strong sales of smartphones, Optik IPTV service and 440,000 new customer connections in the last year. Moreover, TELUS delivered industry leading data revenue growth in both wireless and wireline services at 53 and 15 per cent, respectively, in the third quarter."
Mr. Entwistle stated, "Supported by a double digit increase in net income and consistent with our May announcement outlining TELUS' three-year goals associated with our dividend growth model, TELUS declared a dividend increase to 58 cents per quarter to be paid on January 3, 2012. This is the second of our six targeted semi-annual dividend increases out to 2013, representing a 10.5 per cent increase from the dividend a year earlier."
Mr. Entwistle has confirmed today that for the third consecutive year he intends to take the entirety of his 2012 annual cash salary compensation in TELUS shares. In addition, he has chosen to take the after-tax value of his Restricted Stock Units (RSUs) that are vesting and paying-out in mid-November all in TELUS shares.
Robert McFarlane, TELUS Executive Vice-President and CFO said, "I am pleased to announce that we have closed a new five-year $2 billion bank credit facility, which reinforces our strong capital structure and liquidity, and provides TELUS continued access to low-interest commercial paper financing. There was wide participation in the syndicated facility with 15 North American financial institutions led by the five major Canadian banks, which is an indication of our strong credit ratings and adherence to prudent financial policies."
The consolidated and segmented annual guidance for 2011 has been reaffirmed. See section 9 of the third quarter 2011 MD&A.
|This news release contains statements about expected future events and financial and operating performance of TELUS that are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and predictions and are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future performance and events to differ materially from that expressed in the forward-looking statements. Accordingly this news release is subject to the disclaimer and qualified by the assumptions (including assumptions for 2011 annual guidance), qualifications and risk factors (including those for semi-annual dividend increases to 2013) referred to in the Management's discussion and analysis (MD&A) in the 2010 annual report, and in the 2011 first, second and third quarter reports. Except as required by law, TELUS disclaims any intention or obligation to update or revise forward-looking statements, and reserves the right to change, at any time at its sole discretion, its current practice of updating annual targets and guidance.|
- External wireless revenues increased by $115 million or 9.0 per cent to $1.4 billion in the third quarter of 2011, compared to the same period a year ago. This growth was driven by the increasing subscriber base and higher average revenue per customer driven by data.
- Data revenue growth continued to accelerate, increasing by $153 million or 53 per cent to $444 million this quarter. Data ARPU increased by $6.37 or 44 per cent to $20.90. These increases were due to accelerated adoption of smartphones and related data plans, growth of mobile Internet devices and tablets, and higher roaming revenues.
- Blended ARPU increased by $1.77 or 3.0 per cent to $60.52 as 44 per cent data ARPU growth more than offset a 10 per cent voice ARPU decline. This is the fourth consecutive quarter of year-over-year ARPU growth.
- Wireless net additions this quarter of 114,000 were down 25 per cent year over year and included 133,000 postpaid subscribers and a loss of 19,000 lower ARPU prepaid subscribers. However, postpaid net additions were up one percent, even after the loss of a federal service contract to a competitor at the beginning of the year, which accounted for approximately 19,000 postpaid deactivations this quarter. Total wireless subscribers of 7.2 million are up 5.2 per cent from a year ago and the proportion of high value postpaid subscribers increased 1.3 points to 83 per cent.
- Smartphones represented 70 per cent of postpaid gross additions in the third quarter, as compared to 38 per cent a year ago. Smartphone subscribers now represent 48 per cent of the total postpaid subscriber base as compared to 28 per cent a year ago.
- Cost of acquisition per gross addition increased year over year by 17 per cent to $397, reflecting higher per-unit subsidies from more smartphones sales and competitive dynamics.
- Cost of retention as percentage of network revenue increased by 1.2 points to 11.9 per cent, primarily reflecting higher retention volumes and equipment subsidy costs from increased migrations to higher cost smartphones.
- Blended monthly subscriber churn increased 13 basis points (bps) year over year to 1.67 per cent, reflecting the loss of a federal government contract, which contributed 9 bps. Reflecting the success of retention investments churn was flat compared to the second quarter and down slightly from the first quarter in 2011.
- Wireless EBITDA of $570 million increased $36 million or 6.7 per cent. The EBITDA margin of 40.5 per cent was down slightly from last year due to increased acquisition and retention costs.
- Simple cash flow (EBITDA less capital expenditures) decreased by $8 million to $413 million in the quarter due to increased capital spending, including LTE related investments, partially offset by EBITDA growth.
- External wireline revenues increased by $46 million or 3.9 per cent to $1.23 billion in the third quarter of 2011, when compared with same period a year ago. This growth was generated by increasing data revenues, partially offset by declines in local and long-distance revenues.
- Data service and equipment revenues increased by $82 million or 15 per cent, reflecting strong growth in TELUS TV services, growth in Internet and enhanced data services including large enterprise deals, increased data equipment sales and higher managed workplace revenues.
- TELUS TV additions of 50,000 increased by 32 per cent over same period last year, due to the success of the superior entertainment experience of Optik TV. The TELUS TV subscriber base of 453,000 is up 70 per cent from a year ago.
- Optik High Speed Internet net additions of 22,000 increased 47 per cent from a year ago due to the pull through effect of Optik TV sales, as well as continued broadband service expansion.
- Total network access lines (NALs) declined 4.0 per cent from a year ago to 3.6 million, which is the slowest rate of decline in two and a half years. Residential lines declined by 6.3 per cent, due to competition and wireless substitution. Residential NAL losses of 30,000 improved by 9,000 due to the pull-through effect of bundling offers with Optik services. Business NALs decreased by 13,000 due to ongoing competition in the small and medium business market and conversion to IP services.
- Wireline EBITDA of $398 million decreased by $9 million or 2.2 per cent due to ongoing declines in higher margin legacy voice services that were not fully offset by growth in lower margin data services. The EBITDA margin was 31.4 per cent, down 2 percentage points from last year.
- Simple cash flow increased by $14 million to $85 million in the quarter due to reduced capital spending partially offset by lower EBITDA.
CORPORATE AND BUSINESS DEVELOPMENTS
TELUS to provide 10 years of telecom services to Government of British Columbia
In July, TELUS and the Province of British Columbia finalized a 10-year, $100-million-a-year telecommunications contract. Under the terms of the contract TELUS will continue to provide telecommunications services to the government and its public sector partners and will extend advanced wired and wireless communications infrastructure into both urban and rural B.C. communities. TELUS will connect 1,700 kilometres of highway corridor with wireless service over the next five years, run fibre optic cable directly to 450 schools over 10 years, and increase Internet speeds in some remote B.C. communities connected under the terms of TELUS' last contract with the province.
CRTC sets framework to address vertical integration
In September, the Canadian Radio-television and Telecommunications Commission (CRTC) released its much anticipated policy decision to address vertical integration caused by the increased joint ownership of content and distribution services in the broadcasting industry. The CRTC made clear that exclusive content distribution arrangements were not in the public interest and constitute an undue preference. The CRTC has strengthened rules around withholding of signals during a dispute, which is key to enabling successful commercial negotiations between independent distributors and vertically integrated broadcasting conglomerates. Binding arbitration has also been extended to all disputes brought to the Commission. The CRTC has outlined a code of conduct for better business practices, which sets important rules around commercial terms for carriage of content services and set principles to prevent anti-competitive pricing and unfair terms, to allow for good commercial negotiations to proceed.
The CRTC's new policy should protect consumer choice, ensure competition in the TV distribution market and make sure that new entrants like TELUS' Optik TV can continue to access content in line with our desire to deliver that content on any device our customers choose. TELUS was pleased with the decision as being fair and balanced.
TELUS finalizes $2 billion long-term bank facility
In November, TELUS successfully entered into a new five-year $2 billion bank credit facility expiring in November 2016 with a syndicate of 15 financial institutions. This new facility replaced the Company's pre-existing $2 billion credit facility that was set to expire in May 2012. The new facility is to be used for general corporate purposes including the backstop of TELUS' ongoing low interest cost commercial paper program.
TELUS expands 4G wireless coverage in Manitoba and Atlantic Canada
Delivering on its commitment to serve more communities in Manitoba, TELUS turned on two new wireless sites in Oakbank and Dugald and upgraded 42 existing sites in and around Winnipeg and also brought new 4G coverage along Highways 1, 7 and 75. This represents a 15 per cent increase in 4G wireless coverage since launching service in February 2011. By year-end, TELUS will further extend coverage around Victoria Beach and Steinbach.
In September, TELUS announced it has upgraded its wireless network to HSPA+ dual cell in Atlantic Canada offering faster wireless Internet speeds in Moncton, New Brunswick; Charlottetown, Prince Edward Island; Halifax, Nova Scotia; and St. John's, Newfoundland.
TELUS' HSPA+ dual cell network offers manufacturer's rated peak wireless Internet download speeds of up to 42 megabits per second with an expected average of 7 to 14 megabits per second, and is now available to 74 per cent of Canadians coast-to-coast.
TELUS hiring team members to support growth and enhance customer service
TELUS has added approximately 800 employees (full time equivalents) across Canada so far this year to support the growth of Optik TV, wireless and business services, and to enhance the customer service experience. In British Columbia, TELUS has added 200 team members to its Burnaby customer support call centre and 130 in the Prince George call centre. In Ontario, 250 positions have been added in Toronto, many in front line positions.
TELUS launches Samsung Galaxy, Motion tablets and introduces tablet flex plans
In August and September, TELUS introduced the business-oriented Motion CL900 Tablet PC and the Samsung GALAXY Tab 10.1. In addition, TELUS introduced a new $5 Tablet Flex Plan, giving customers flexible and convenient data buckets. TELUS' latest Clear and Simple initiative helps customers avoid unexpected fees by offering a data plan designed for occasional use with the flexibility to accommodate spikes in data consumption without expensive overage charges. Starting at $5 per month for 10 megabytes (MB) of data, customers can enjoy peace of mind when using their tablet in areas without Wi-Fi coverage.
During the third quarter, TELUS continued to offer customers a choice of the latest smartphones. This included the INQ Cloud Touch, LG Optimus Black - Skype Edition, LG Optimus Chat, HTC Status, BlackBerry Bold 9900, BlackBerry Torch 9810, BlackBerry Curve 9360, 4G Samsung Galaxy S II X, Samsung Galaxy Ace, HTC Amaze 4G and Sony Ericsson Xperia Ray.
TELUS introduces Business Freedom to simplify SMB communication
In October, TELUS introduced the TELUS Business Freedom bundle in B.C. and Alberta. For the first time, small and medium business (SMB) customers can bundle their office phone lines, Internet and wireless services into one flexible, simple and cost-effective service bundle. Ideal for SMBs up to 100 employees, Business Freedom makes it easier for businesses to be successful and includes two flexible, open-ended packages. Initial demand for this SMB solution has been strong.
TELUS chairman Brian Canfield honoured by Canada's Telecommunications
Hall of Fame
In October, Canada's Telecommunications Hall of Fame recognized TELUS chairman of the board, Brian Canfield, as the 2011 recipient of the Neotelis Canadian Telecom Career Service Award. The Award acknowledges the tremendous accomplishments and leadership of Canadians who have made a material contribution to the advancement of the telecom industry. Mr. Canfield began his distinguished career in the telecommunications industry as an apprentice switchboard installer in 1956 for TELUS' predecessor B.C. TEL. Spanning more than half a century of service at B.C. TEL and TELUS he held several key positions in Network Services, Engineering, Operator Services, Sales and Operations and became president and CEO of B.C. TEL in 1990. Three years later, Mr. Canfield was appointed chairman of the board. His courage to innovate and ability to make pivotal decisions has helped establish the framework upon which TELUS now stands - as a global leader in telecommunications. Mr. Canfield also developed a track record for governance, corporate disclosure and transparency that is best in class as recognized externally many times.
TELUS connects remote Quebec communities
In August, TELUS announced that by year-end it plans to bring High Speed Internet service to five remote communities in Quebec - Mingan, Natashquan, Saint-Joseph-des-Érables, Colombier and Saint-Théophile. Funding comes from TELUS' deferral account established by the CRTC. TELUS already offers service to about 95 per cent of households in its eastern Quebec territory.
TELUS invites Canadians to help fight breast cancer
To celebrate Breast Cancer Awareness month, TELUS and the Canadian Breast Cancer Foundation announced the launch of the Go Pink campaign raising money to fund breast cancer research. In October, Canadians were invited to visit TELUS stores across the country to purchase a pink BlackBerry Curve 9360 smartphone. TELUS will contribute $25 to the Foundation for each purchase of a pink BlackBerry and $5 for each purchase of select pink phone accessories. Canadians were also invited to visit TELUS' Facebook page (facebook.com/TELUS) to create their own Pink Network: an online, shareable photo gallery of their best friends and support network. For every new photo gallery created, TELUS will contribute an $1 to the Foundation.
TELUS helps introduce Upopolis to Canada's largest children's rehabilitation hospital
In September, TELUS and Kids' Health Links Foundation launched Upopolis.com at Holland Bloorview Kids Rehabilitation Hospital in Toronto, Canada's largest children's rehabilitation hospital. Powered by TELUS, Upopolis.com is the only private, secure and trusted online social network designed just for kids in hospital. The system aims to make hospital walls virtually invisible between family, friends and school. TELUS provided the technology to develop and build Upopolis and continues to provide site expansion, ongoing access to Upopolis, managed web hosting, application support and maintenance services. Upopolis is now in use at eight hospitals and healthcare organizations across Canada.
TELUS helps Toronto youth achieve new heights
In August, TELUS and Junior Achievement of Canada announced they have raised $250,000 to help support young Torontonians succeed in our global economy. In May, in an initiative designed to further realize the unlimited potential of youth, TELUS donated $50 to Junior Achievement of Canada for every smartphone activation by a Toronto-based business. These funds will be used by Junior Achievement to promote and expand and deliver its youth oriented education program in the Greater Toronto Area.
TELUS' annual report ranked as one of the best in world for eighth year in a row
The TELUS 2010 annual report has been ranked the eighth best in the world across all industries, according to this year's Annual Report on Annual Reports 2011. To develop the ranking, judges evaluated 500 annual reports shortlisted from a wider selection of publicly listed corporations. The comprehensive survey looks at 10 key evaluation criteria: packaging, highlights, strategy, business, financials, investors, governance, accounting, responsibility and communication. The judges gave the TELUS 2010 annual report an 'A' rating and cited it as an example of excellence in five areas. To put this accomplishment in perspective, only 12 Canadian companies made the top 300 and only one other Canadian company made the top 50.
TELUS receives Urban Design Award of Excellence
The City of Toronto honoured TELUS House Toronto with an Award of Excellence in the Tall Commercial Building category during its annual Urban Design Awards in September. An independent jury of design professionals recognized TELUS House Toronto as a fresh landmark and praised its energy-efficient features such as advanced heating and cooling systems. According to the judges, TELUS House Toronto "represents a strong and distinctive addition to the city's downtown skyline, and also creates new possibilities for the public open space near the base." The Urban Design Awards are held annually to acknowledge the significant contributions architects, landscape architects, urban designers, artists, design students and city builders make to the look and livability of Canada's largest city.
TELUS handed Tree Canada Ultimate Award
TELUS was one of only two recipients of the 2011 Ultimate Award from Tree Canada. This award, presented in September, recognizes partners that have contributed more than $1 million in support of the stewardship of trees. TELUS has been an active partner with Tree Canada since 1998, helping to plant more than 300,000 trees from coast to coast. One example is TELUS employees and customers supporting Tree Canada through the Mobile Device Recycling Program. For each device recycled, TELUS gives $3 directly to Tree Canada. Since 2008, TELUS has recycled more than 266,000 mobile devices. Tree Canada is a non-profit organization that encourages Canadians to plant and care for trees in rural and urban areas.
TELUS "Kits for Kids" ease back-to-school strain for youngsters in need
TELUS Community Ambassadors gave nearly 9,500 school bags filled with supplies to elementary, secondary and alternative schools across Canada. Thanks to the TELUS "Kits for Kids" program, students in more than 20 B.C., Alberta, Ontario and Quebec communities received supplies in time for the new school year. The number of backpacks distributed this year represents an increase of more than 1,500 over last year.
TELUS partners with Université Laval
In September, TELUS announced a 20-year, $4.55 million sponsorship with the Université Laval. The funds will support expansion of the university's soccer and football stadium, support the Rouge et Or sports excellence program, and fund the Leadership and Sustainable Development Scholarship Program. The Stade TELUS-Université Laval is a major economically stimulating project that represents an important asset for the University, its community, and residents of the greater Québec City area. Once the project is complete, the new facility will be the largest sports complex in eastern Canada and will be capable of hosting international-caliber events.
TELUS International hosts TELUS Days of Giving and launches Community Boards
In October, TELUS International Philippines held its fifth annual TELUS Day of Giving in Manila. Almost 2,000 team members worked to build homes, engage children in activities, work on medical missions, and teach livelihood sessions. Also in October, TELUS International Central America (TICA) had its third annual TELUS Day of Giving, with more than 2,000 team members building a school in Guatemala and in Xela hundreds of volunteers refurbishing an elementary school.
TELUS has also launched the TELUS Manila Community Board chaired by TELUS International Philippines president Javier Infante and launched the Guatemala Community Board chaired by TELUS International Central America president Guillermo Montano. These boards will each provide $100,000 in funding to local organizations that support youth-oriented projects and community initiatives improving living conditions, providing access to education, and fostering employment opportunities by encouraging entrepreneurship.
Generation INC., powered by TELUS
The TV business show Generation INC., powered by TELUS, has started its second season successfully with a record number of viewers. Generation INC. is a TV business show starring 12 local businesses from the province of Québec who are visited by subject matter experts to help propel them to reach their full potential. Its mission is to stimulate entrepreneurship in Québec. As well as being a successful business TV show, Generation INC. is an elaborate web platform and a province-wide tour to meet local entrepreneurs. More than 500 local business owners have attended the tour. The second season is currently airing on channel V.
Dividend Declaration - increase to 58 cents per quarter
The Board of Directors has declared a quarterly dividend of fifty-eight cents ($0.58) Canadian per share on the issued and outstanding Common shares and fifty-eight cents ($0.58) Canadian per share on the issued and outstanding Non-Voting shares of the Company payable on January 3, 2012 to holders of record at the close of business on December 9, 2011.
This new quarterly dividend represents the second increase this year. The dividend is a three cent or 5.5 per cent increase from the $0.55 quarterly dividends paid on July 4 and October 3, 2011 and a 5.5 cent or 10.5 per cent increase from the $0.525 quarterly dividends paid on January 4 and April 1, 2011 and is consistent with TELUS' dividend growth model. In May 2011, the Company announced plans to continue with two dividend increases per year to 2013, normally declared in May and November, and expects the increase to be in the range of circa 10 per cent annually. Notwithstanding this, dividend decisions will continue to be subject to the Board's assessment and determination of the Company's financial situation and outlook on a quarterly basis.
Access to Quarterly results information
Interested investors, the media and others may review this quarterly earnings news release, management's discussion and analysis, quarterly results slides, audio and transcript of investor webcast call, supplementary financial information and our full 2010 annual report on our website at telus.com/investors.
Full quarterly earnings release available at: http://www.newswire.ca/en/releases/archive/November2011/04/c9415.html
TELUS' third quarter conference call is scheduled for November 4, 2011 at 11:00 am ET and will feature a presentation followed by a question and answer period with analysts. Interested parties can access the webcast at: telus.com/investors. Also, a recording will be available on November 4 until November 14, 2011 at: telus.com/investors or by telephone (1-403-699-1055 or 1-877-353-9587, reservation no. 652094#). A transcript will be posted on the website within several business days.
TELUS (TSX: T, T.A; NYSE: TU) is a leading national telecommunications company in Canada, with $10.3 billion of annual revenue and 12.6 million customer connections including 7.2 million wireless subscribers, 3.6 million wireline network access lines and 1.3 million Internet subscribers and more than 450,000 TELUS TV customers. Led since 2000 by President and CEO, Darren Entwistle, TELUS provides a wide range of communications products and services including data, Internet protocol (IP), voice, entertainment and video.
In support of our philosophy to give where we live, TELUS, our team members and retirees will, by year-end 2011, have contributed $245 million to charitable and not-for-profit organizations and volunteered 4.1 million hours of service to local communities since 2000. Eleven TELUS Community Boards across Canada lead TELUS' local philanthropic initiatives. TELUS was honoured to be named the most outstanding philanthropic corporation globally for 2010 by the Association of Fundraising Professionals, becoming the first Canadian company to receive this prestigious international recognition.
For more information about TELUS, please visit telus.com.