TELUS Reports Fourth Quarter 2010 Results
EPS grows 43 per cent, EBITDA up 7 per cent, free cash flow increases
Results driven by growth in wireless subs, ARPU, high-speed Internet,
record TV additions
2010 revenue of
This increase was generated by nine per cent growth in wireless revenue
and seven per cent growth in wireline data revenues, which more than
offset declines in traditional voice services.
Notably, wireless average revenue per unit (ARPU) increased 1.9 per cent
this quarter, the first year-over-year increase in 14 quarters. In this
seasonally strong quarter, the company added 119,000 wireless
subscribers and a record 48,000 TV subscriptions due to the success of
Optik TV. In 2010, total customer connections increased by 378,000,
generated by a seven per cent increase in wireless subscribers and 85
per cent growth in TELUS TV customers, partially offset by continued
declines in landline connections.Â
Consolidated fourth quarter earnings before interest, taxes,
depreciation and amortization (EBITDA) increased by over seven per cent
due to revenue growth, lower restructuring costs and ongoing benefits
from efficiency initiatives. Reported net income and earnings per share
(EPS) for the fourth quarter were
representing year-over-year increases of 46 and 43 per cent,
respectively. When the fourth quarter of 2009 is adjusted to exclude a
loss on redemption of debt and both quarters are adjusted for
favourable income tax related adjustments, fourth quarter 2010 net
income and EPS increased by 41 per cent and 40 per cent, respectively.
The consolidated and segment results were consistent with the company’s
most recent 2010 public guidance provided last December.
Free cash flow of
The increase reflects lower cash interest payments and improved EBITDA,
partially offset by higher capital expenditures.
| FINANCIAL HIGHLIGHTS | Â | Â | Â | |||
| C$ and in millions, except per share amounts | 3 months ended December 31 | Â | ||||
| (unaudited) | 2010 | 2009 | % Change | |||
| Operating revenues | 2,551 | 2,443 | 4.4 | |||
| Operations expense | 1,672 | 1,577 | 6.0 | |||
| Restructuring costs | 32 | 77 | (58.4) | |||
| EBITDA((1) ) | 847 | 789 | 7.4 | |||
| Net income((2)(3)) | 227 | 156 | 45.5 | |||
| Earnings per share (EPS), basic((2)(3)) | 0.70 | 0.49 | 42.9 | |||
| Capital expenditures | 564 | 514 | 9.7 | |||
| Free cash flow((4)) | 121 | (50) | - | |||
| Total customer connections (millions)((5)) | 12.25 | 11.88 | 3.2 | Â | Â | Â |
| (1) |
Earnings before interest, taxes, depreciation and amortization (EBITDA) is defined as Operating revenues less Operations expense less Restructuring costs. See Section 6.1 in 2010 fourth quarter Management’s review of operations. |
| (2) |
Net income and EPS for the fourth quarter of 2010 included favourable income tax-related adjustments of approximately $10 million or 3 cents per share, compared to $71 million or 23 cents per share respectively for the same period in 2009. |
| (3) |
Net income and EPS for the fourth quarter in 2009 included an unfavourable after-tax impact of approximately $69 million or 22 cents per share resulting from the loss on early partial redemption of June 2011 notes. |
| (4) |
See Section 6.2 in 2010 fourth quarter Management’s review of operations. |
| (5) |
The sum of wireless subscribers, network access lines (NALs), Internet access subscribers, and TELUS TV subscribers (IPTV and satellite TV). |
“These results demonstrate the success of TELUS’ strategy to make
significant investments over recent years in advanced wireline and
wireless broadband infrastructure,” said
President and CEO. “These investments have underpinned our strong
competitiveness and increasing growth in wireless and wireline data
services.”
“Importantly, the positive reaction of our customers to the advanced
functionality of smartphones on
accelerated wireless data revenue growth and drove higher
year-over-year average revenue per unit this quarter for the first time
in over three years, and by extension a material uplift in EBITDA.
Similarly, I am encouraged by our team’s delivery of cutting edge
wireline data services that are attracting new customers including
strong Optik TV and high-speed Internet net additions,” noted Mr.
Entwistle.
“Looking forward over each of the next three years, I expect the
monetisation of the significant investments that TELUS has made in its
broadband infrastructure, to support attractive growth in operating
earnings, net income, free cash flow and our dividend growth model,”
stated Mr. Entwistle.
positive operational performance and treasury activities in 2010 have
reinforced its strong financial position with profits increasing and
leverage decreasing. With growing operating earnings, declining debt
costs following two very successful debt re-financings and declining
cash taxes, TELUS expects its free cash flow growth to continue into
2011. Given our healthy liquidity and financial position, we
voluntarily funded a
Moreover, starting this quarter we are reducing share dilution by
providing shares through open market purchases rather than issuances
from treasury. In summary, we are entering 2011 with momentum and from
a position of financial strength.”
The 2011 consolidated and segmented targets announced in mid-December
have been reaffirmed.
|
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 targets), qualifications and risk factors referred to in the Management’s discussion and analysis in the 2009 annual report, and in the 2010 quarterly 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. |
OPERATING HIGHLIGHTSÂ
TELUS wireless
-
External wireless revenues increased by
$113 million or 9.2% to$1.34 in the fourth quarter of 2010, compared to the same period a
billion
year ago, driven by a 6.9% increase in the subscriber base and higher
revenue per customer. -
Data revenue growth accelerated over recent periods increasing by
$87 or 36% to
million$326 million due to increased adoption of smartphones
and related data plans and applications, increased sales of mobile
Internet keys and tablets, and higher in-bound volumes of data roaming,
partly offset by lower roaming rates. -
Blended ARPU (average revenue per subscriber unit) per month increased
by 1.9% to$58.48 . This is the first year-over-year increase in
quarterly ARPU since the second quarter of 2007. Data ARPU growth of
27% to$16.01 , exceeded the moderating voice ARPU decline. -
Total net subscriber additions of 119,000 declined by 2.5% reflecting
increased competition from new entrants. Postpaid subscriber growth of
109,000 was unchanged from a year ago. -
Smartphones represented 46% of postpaid gross additions in the fourth
quarter, as compared to 25% in same period last year. Higher revenue
smartphone subscribers now represent 33% of total postpaid subscribers
compared to 20% a year ago. -
Cost of acquisition per gross addition increased year-over-year by 2.1%
to$388 , reflecting a higher per-unit subsidy largely caused by a
higher smartphone mix. -
Cost of retention of
$170 million increased by 28%, primarily reflecting
higher retention volumes and equipment subsidy costs from increased
migrations to higher cost smartphones. -
Blended monthly subscriber churn increased slightly by 12 basis points
to 1.72%, reflecting increased number of competitors and price
discounting in the market. -
Wireless EBITDA of
$476 million increased by$41 million or 9.4% due to
improved data revenue growth, subscriber growth, higher ARPU and lower
bad debt expense. -
Simple cash flow (EBITDA less capital expenditures) increased by
$41 in the quarter due to strong EBITDA growth and
million to $284 million
flat capital spending.
TELUS wireline
-
External wireline revenues decreased slightly by
$5 million to $1.21 in the fourth quarter of 2010, when compared with the same
billion
period in 2009, primarily due to continued declines in traditional
local and long-distance revenues, offset by strong growth in data
revenues. -
Data revenues increased by
$37 million or 6.7%, reflecting strong TELUS
TV subscriber growth, increased Internet, enhanced data and hosting
services, and higher managed workplace revenues. -
TELUS TV net additions were a record 48,000, an increase of 45% over the
same period last year, due to the launch of the Optik TV brand inJune , as well as increased installation capabilities, enhanced service
2010
including PVR Anywhere and expanded broadband coverage. The TELUS TV
subscriber base totals 314,000, up 85% over last year. -
TELUS high-speed Internet net additions of 18,000 increased by 64% from
a year ago due to the launch of Optik High Speed(TM) Internet and Optik TV service in June, as well as the continued
broadband expansion and accompanying speed enhancement. -
Total network access lines (NALs) declined by 55,000 to 3.74 million,
down 5.7% from a year ago due to competition and wireless substitution.
Residential NAL losses of 37,000 were 8,000 less compared to same
period last year. The improvement reflects enhanced bundling
capabilities with the launch of Optik and retention offers. Business
NALs declined by 18,000 primarily from competitive factors, conversion
of voice lines to more efficient IP services and slower growth in data
lines from completion of certain large enterprise deals. -
Wireline EBITDA of
$371 million increased by$17 million or 4.8% due to
lower restructuring costs and operational savings from efficiency
initiatives, partially offset by the costs associated with high growth
services such as Optik TV. -
Simple cash flow decreased by
$33 million to negative$1Â million due to
a $50 million increase in capital spending.
CORPORATE AND BUSINESS DEVELOPMENTS
TELUS expands Optik footprint to more than 2 million households
The company continued to expand its Optik TV and high-speed Internet
broadband footprint in communities across
and
2.1 million households. In addition, the company continued to upgrade
its broadband network to VDSL2 technology, enabling data download
speeds of up to 30 Mbps, which permits Optik TV subscribers to watch or
record up to four channels (three in HD) simultaneously on any TV in
the home.
TELUS makes it clear and simple to upgrade to newest wireless device
In November, TELUS launched the Clear and Simple Device Upgrade program
to help customers upgrade to the latest and greatest wireless devices
faster, without waiting for contract renewal time. The program creates
a transparent linkage between the real price of today’s powerful
wireless devices and the sizeable discount customers receive when they
select an optional one, two, or three year term contract. Customers who
wish to upgrade to a new device before the end of their term can simply
pay an Early Device Upgrade Fee (EDUF) equivalent to the unrecovered
portion of the original handset discount. The closer they are to the
end of their contract term, the lower their EDUF will be. Customers can
then sign up for a new term and enjoy promotional pricing on a new
device.Â
TELUS’ Chief Marketing Officer predicts consumer 2011 technology trends
With increased adoption of smartphones, the Android explosion and the
successful launch of Windows Phone 7, smartphones took centre stage as
2010′s top technology. Looking ahead,
Marketing Officer predicts 2011 will be a year that new options in
hardware and services will enable consumers to do more in more places
than ever before – Facebook posting on the television, video gaming on
powerful smartphones and finishing last night’s TV viewing on a tablet
on the train. In 2011, it’s about flexibility and choosing the best
screen for the job, whether that’s a smartphone, tablet, e-reader,
gaming device, home computer or TV. David’s top five trend predictions
for 2011 include:
- Growth in tablets and mobile-enabled accessories and peripherals
- Increasing use of Smartphones as WiFi hotspots
- Over The Top and multi-screen Video Services for TV Anywhere
- Internet-powered interactive TV services for sharing content
- Mobile platforms transition to cloud-based computing.
Quebec Major Junior Hockey League on TELUS Mobile TV
TELUS announced that the action and excitement of the Quebec Major
Junior Hockey League (QMJHL) is now available to TELUS wireless
subscribers for free and right at their fingertips as the company made
the QMJHL Network available on TELUS Mobile TV. Fans can watch over a
dozen regular-season and playoff games from any location, on their
Android, BlackBerry, and other smartphones. In addition to the new
mobile application, TELUS TV will carry select Rimouski Oceanic,
regular-season games, as well as playoff matches will be available on
Webcast. Fans can also download a wide range of ringtones, images,
videos and other content from the QMJHL. See all the available content
at lhjmq.montelus.com.
TELUS health space in two trials before national roll-out
In November, TELUS announced the launch of a large trial of TELUS health
space, powered by Microsoft HealthVault, involving 2,000 TELUS team
members across
extended into the Canadian healthcare landscape with its first external
pilot with 200 participants in
TELUS health space is giving Canadians the ability to create, store and
manage their family’s health information in a safe environment
utilizing the latest in encryption and protection technology. This
includes moving personal health information quickly and securely across
the healthcare continuum whether it’s at home, in a clinic, at a
hospital or wherever consumers’ lifestyles or business travels take
them. In a world where wireless network technology has enabled powerful
mobile computing, health information can soon be right at their
fingertips using their smartphones and tablets.
TELUS wins array of top disclosure awards in
TELUS received four awards from the Canadian Institute of Chartered
Accountants (CICA), including the Overall Award of Excellence for
Corporate Reporting, recognizing the company’s 2009 corporate
reporting. The awards were given for all aspects of corporate reporting
including the annual report, information circular, corporate social
responsibility report and online investor relations and corporate
governance information. In addition to the top award, TELUS was awarded
an honourable mention (second best in
sustainable development reporting, an honourable mention for excellence
in corporate governance disclosure, and was tops in the communications
and media sector.
In February, TELUS was recognized with the 2011 IR Magazine Canada Award
for Best Financial Reporting. This recognition was based on an
independent survey of 250 analysts and portfolio managers from across
TELUS’ chief general counsel named one of
For the third time in four years
and chief general counsel, was named one of
Women by the Women’s Executive Network (WXN). Audrey was recognized in
the Executive category for her achievements in 2009. She has led the
evolution of many TELUS board governance practices that have been
externally recognized as exemplary. Recently, this has included the
development of our ‘say on pay’ policy and enhanced disclosure of
executive compensation. Ms. Ho also dedicates time to the community as
a board member of various non-profit organizations. She has
participated in WXN’s Wisdom II mentoring program, and is an advisory
council member to the Dean of the Faculty of Law at the
British Columbia
Board Diversity Council. The goal of the council is to improve the
diversity of corporate and public sector boards in
TELUS vice-president community affairs lauded for leadership excellence
In February, the Canadian Women in Communications (CWC) bestowed their
Leadership Excellence Award in the Innovator category to
TELUS vice-president of Community Affairs. The annual awards
recognize accomplished women in the communications and technology
sectors and those who support their advancement. Ms. Schnarr leads
TELUS’ community investment team, where she has spearheaded a
transformation to focus on corporate philanthropy based on innovative
business initiatives in three key areas -Â creating healthy communities
through grassroots support, engaging employees in the community and
supporting causes aligned with TELUS’ business strategy. Ms. Schnarr is
also the national chair of Connections – the TELUS women’s
network. Through Connections, she is helping foster a culture of
learning and development, engagement and recognition for women at TELUS
and in the community. Canadian Women in Communications is a national,
bilingual organization dedicated to the career advancement of women
through networking, targeted professional development and recognition.
TELUS takes its place on Top 100 Employers list
For the second straight year, TELUS earned a place on the Top 100
Canadian Employers list, reflecting the company’s success in creating
an industry-leading workplace for attracting and retaining employees.
TELUS is the only telecommunications company to achieve this honour.
TELUS was recognized for community involvement, workplace environment,
and training and development programs. The company earned the highest
scores possible in categories that considered physical workspace,
training and community investment. This year, the organizers examinedÂ
2,750 applications to select the top 100.
TELUS International Philippines launches university
TELUS International Philippines (TIP) announced TELUS
University
opportunities for ambitious TIP team members. TIP has partnered with
leading educational institutions in
Salle University
opportunity for team members to earn college degrees in various fields
while concurrently working full-time. By participating in TIU,
qualified team members can save up to 50 per cent on the cost of their
tuition. TIP will make its training facilities available so instructors
and professors from participating schools can hold classes directly at
TELUS sites. TIU will also offer several extracurricular clubs that
cater to the interests of the students, such as photography, sports,
and travel.Â
TELUS presented the National Philanthropy Business Leader Award
In November, TELUS was again recognized for extraordinary giving when it
received the 2010 National Philanthropy Business Leader Award from the
David Foster Foundation. This foundation helps families of kids under
the age of 19 who are in need of or are recipients of organ donations.
TELUS has committed ongoing support to help children who are fighting
for their lives. TELUS uses its national reach, major investments in
healthcare technology, and spirited team members to drive awareness and
increase the number of Canadians registered as organ donors.
Transactel recognized by United Way for commitment to giving
Transactel, a TELUS International company based in
from the United Way in
Employee Fund Participation and
Heroes of Volunteerism for the largest participation of volunteers of
any company in
in their second annual TELUS / Transactel Day of Service. The Heroes of Employee Fund Participation recognized the largest
employee contribution of any company in
Transactel employees participated in the company’s 2010 giving
programs. Transactel president Guillermo Montano was honoured as a
the company’s corporate social responsibility movement in
TELUS Diabetes ‘Balance’ Campaign brings insulin pumps to kids in need
In November, TELUS announced the launch of a new campaign to help raise
children across
during World Diabetes Day 2010. Through a new interactive TELUS
website, the TELUS Diabetes ‘Balance’ Campaign will give Canadians the
opportunity to test how well they can ‘balance’ and help TELUS give
insulin pumps to kids who need them. For each participant who plays the
online balancing game,
pump. If you forward the link, an additional dollar goes toward the
cause.
TV marketing campaign raises close to
community charities
TELUS is approaching the
across
TV campaign. Since 2009, TELUS has donated
who signs up for TELUS Optik TV or TELUS Satellite TV service in more
than 20 participating communities to a local charity. Each program runs
one full year from its launch.
TELUS’ Go Pink campaign raises
breast cancer
In
Blackberry sold across
digital mammography machines or other breast cancer detection equipment
in regional hospitals. Combined with employee and corporate donations,
the campaign raised more than
help buy digital mammography machines or other innovative breast cancer
technology for healthcare facilities in communities across
including BC Women’s Hospital & Health Centre Foundation,
Cancer Foundation, Saskatchewan Cancer Agency, CancerCare Manitoba,
Princess Margaret Hospital Foundation in
Foundation, Segal Cancer Center at the Montreal Jewish General
Hospital, the Juravinski Cancer Center in
Sciences Centre in
Global recognition for TELUS Go Pink Facebook campaign
TELUS’ Pink Facebook app that allowed users to turn their profile
picture pink achieved global recognition. More than 800,000 users went
online to go pink, triggering a
fight breast cancer. Additionally, the app’s success is in large part
responsible for a huge jump in fans of TELUS’ Facebook page. For the
week ending
brand on Facebook, by fan number.Â
Dividend Declaration
The Board of Directors has declared a quarterly dividend of fifty-two
and a half cents
outstanding Common shares and fifty-two and a half cents
Canadian per share on the issued and outstanding Non-Voting shares of
the Company payable on
of business on
This quarterly dividend represents a
from the forty seven and a half cents paid  a year earlier on
2010
Access to Quarterly results information
Interested investors, the media and others may review this quarterly
earnings release, management’s discussion and analysis, quarterly
results slides, supplementary financial information and our full 2009
annual report on our website at telus.com/investors.
Full quarterly earnings release available at: http://www.newswire.ca/en/releases/archive/February2011/11/c9099.html
Quarterly conference call and webcast presentation
TELUS quarterly conference call is scheduled for
results. It will be followed by a question and answer period with
analysts. Interested parties can access the webcast at: telus.com/investors. A transcript will be posted on the website within several business
days. Also, a recording will be available on
21, 2011
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About TELUS
TELUS (TSX: T, T.A; NYSE: TU) is a leading national telecommunications
company in
customer connections including 7 million wireless subscribers, 3.7
million wireline network access lines and 1.2 million Internet
subscribers and more than 300,000 TELUS TV customers. Led since 2000 by
President and CEO,
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 have contributed
not-for-profit organizations and volunteered 3.7 million hours of
service to local communities since 2000. Nine TELUS Community Boards
across
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.
SOURCE TELUS Corporation