By CHRISTINE DOBBY
Friday, November 10, 2017
Telus Corp.'s third-quarter numbers fell just short of profit expectations as it spent more on handset subsidies and marketing to woo and keep wireless subscribers - a strategy it has said is an investment in the future as it leads the industry in hanging on to those customers.
The Vancouver-based telecommunications company said Thursday that it added 115,000 new mobile customers on contracts in the third quarter, well ahead of average analyst estimates closer to 90,000. It said its rate of wireless customer turnover, known as churn, came in at 0.86 per cent, which is far below its rivals in the industry.
While Telus said customers are spending more as they migrate to higher-use monthly plans and consume more data on their devices, the company also spent more on smartphone subsidies, advertising and promotion to acquire and keep subscribers.
Yet, Telus insists that its low rate of churn and ever-growing average revenue per user (ARPU) set it apart from its national rivals by combining to produce higher lifetime revenue from loyal customers who stick around with a company they like.
"Telus drove record lifetime revenue of more than $6,500 per subscriber. This represents an increase of 16 per cent as compared to a year ago," chief executive officer Darren Entwistle said on a call with investors on Thursday, adding that it is higher than both BCE Inc. and Rogers Communications Inc., neither of which break out that figure in their reports.
Telus is the last of the Big Three national carriers to report and its wireless results follow its peers' steady growth in new contract customers, even though it came in third behind BCE with 117,000 and Rogers with 129,000 in the period.
Over all, Canada's Big Three added 361,000 new contract wireless subscribers in the busy third quarter, which includes the back-to-school season, compared with 308,000 in the same period last year.
BCE leads the pack in terms of ARPU, bringing in $69.78 per month on average from its wireless subscribers (that figure includes prepaid accounts as well as those on contracts). Telus reported ARPU of $68.67 for the third quarter while Rogers, which has the largest base of lower-paying prepaid customers, posted ARPU of $63.70.
Telus's profit in the third quarter increased by 4.2 per cent to $370million or 62 cents per share. On an adjusted basis it reported earnings of 66 cents per share, missing the consensus forecast of 69 cents.
Total revenue at the company was up 4 per cent to $3.37-billion and EBITDA grew by 4.4 per cent to $1.23-billion, both falling just short of estimates. (EBITDA is earnings before interest, taxes, depreciation and amortization).
Telus also announced an increase in its quarterly dividend Thursday, raising it to 50.5 cents per share, up from 49.25 cents.
It's the second hike in the payout in 2017 and is in line with the company's focus on returning capital to shareholders even as it spends billions on a multiyear program to increase home internet speeds by bringing fibre-optic cable directly to customers' doors.
Telus says it will be halfway through that plan by early next year, which means its heavy spending will begin to ease up and it expects to return to having positive growth in free cash flow in 2018.
The company provided an early estimate of capital expenditures on Thursday, saying it expects to spend $2.85-billion in 2018, less than the $3-billion it has projected for this year and also less than some analysts had expected.
Telus shares were up 0.91 per cent or 43 cents, closing at $47.52 on Thursday as analysts lauded the anticipated decrease in spending.
"While the capex decline in 2018 may appear modest, we believe it sends a strong positive signal to the Street on free cash flow given capex has been increasing since 2011," Barclay's Capital analyst Phillip Huang said Thursday.
The company's fibre investments come as western rival Shaw Communications Inc. is aggressively marketing its own high-speed internet and an improved television product to compete with Telus's IPTV (internet protocol television) offering.
Telus added 19,000 new internet customers, which was up from 14,000 in the third quarter last year and about in line with Shaw's results for the period.
On the television front, Telus said on its earnings call that it added 12,000 new IPTV customers, which was more than analysts expected and ahead of the 5,000 new cable customers Shaw said it added.
Telus (T) Close: $47.52, up 43¢