Strong earnings growth driven by data revenue in wireless and wireline
Quarterly dividend increased to 34 cents per share up 11.5 per cent from year ago
Extending target of semi-annual dividend increases of circa 10 per cent annually to 2016
Announcing up to $500 million share purchase program in 2013 and same target each year to 2016 for a total of up to $2.0 billion
VANCOUVER, May 9, 2013 /PRNewswire/ - TELUS Corporation's first quarter 2013 revenue increased by nearly five per cent to $2.76 billion from a year earlier while earnings before interest, taxes, depreciation and amortization (EBITDA) increased by more than five per cent to $1.03 billion. Earnings per share (EPS) rose 14 per cent to $0.56, which reflects the mid-April two-for-one stock split.
The increase in consolidated revenue was generated by greater than six per cent growth in wireless revenue and almost three per cent growth in wireline revenue. TELUS continued to attract new wireless customers and increase average revenue per unit (ARPU) from use of more wireless data services and continued focus on higher value postpaid subscribers. Wireline benefited from a nine per cent increase in data revenue generated from the company's Optik TV and high-speed Internet services. Consolidated EBITDA growth reflects seven per cent higher wireless EBITDA and two per cent higher wireline EBITDA.
TELUS started the year with strong subscriber growth, adding 59,000 postpaid wireless customers, 34,000 TV subscribers and 16,000 high-speed Internet customers, partially offset by losses of prepaid wireless customers, and wired phone lines. TELUS' total wireless base of 7.7 million is up nearly five per cent year-over-year, the TELUS TV subscriber base of 712,000 is up 29 per cent, and the high-speed Internet connections are up nearly seven per cent to more than 1.3 million.
Free cash flow of $358 million in the first quarter was unchanged from a year ago. Underlying free cash flow, before income taxes, was up strongly by 25 per cent to $506 million, giving the company the ability to invest in the growth of its core operations while returning capital to investors and funding higher income tax payments.
|C$ and in millions, except per share amounts||three months ended|
|(unaudited)||2013||2012|| per cent
|Operating expenses before depreciation and amortization(1)||1,722||1,650||4.4|
|Earnings per share (EPS), basic(1)(3)(4)||0.56||0.49||14.3|
|Free cash flow(5)||358||358||-|
|Free cash flow before income taxes||506||406||24.6|
|Total customer connections(6)||13.15||12.75||3.1|
|(1)||Figures for 2012 have been adjusted for retrospective application of accounting standard IAS 19 Employee benefits (2011).|
|(2)||EBITDA does not have any standardized meaning prescribed by IFRS-IASB. For definition and explanation, see Section 11.1 in the accompanying 2013 first quarter Management's discussion and analysis (MD&A).|
|(3)||Net income and EPS for the first quarter of 2013 included favourable income tax-related adjustments of $5 million or 1 cent per share compared to $10 million or 2 cents per share a year ago.|
|(4)||Adjusted for two-for-one stock split effective April 16, 2013.|
|(5)||Free cash flow does not have any standardized meaning prescribed by IFRS-IASB. For definition and explanation, see Section 11.2 in the accompanying 2013 first quarter MD&A.|
|(6)||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 realised strong first quarter results driven by our company's revenue and EBITDA growth in both the wireline and wireless segments of our business. Our unwavering focus on investing in broadband data technology and services combined with our unremitting commitment to put our customers first enhances the loyalty of our existing client base, attracts new customers and generates strong bottom line growth. This is evidenced by our 59,000 new postpaid wireless customers, 34,000 new TV clients, 16,000 additional high-speed Internet connections and industry leading postpaid subscriber churn rate of only 1.11 per cent per month. Furthermore, the strength of our earnings per share, up 14 per cent, and free cash flow position are enabling us to proceed with numerous initiatives aimed at continuing to create value for our investors."
Mr. Entwistle stated, "Building on the momentum generated by our successful two-for-one stock split completed in April, I am pleased to announce four additional shareholder-friendly initiatives. Firstly, we are increasing our quarterly dividend to 34 cents per share, 11.5 per cent higher than the dividend level one year ago. Secondly, we are extending our dividend growth program for an additional three years to 2016, targeting semi-annual increases of circa 10 per cent annually. Thirdly, we are requesting regulatory approval to make a normal course issuer bid to purchase and cancel up to 15 million TELUS shares valued at up to $500 million in 2013. Finally, it is our intention to extend this share purchase program for up to $500 million in each of the next three calendar years for a total of up $2 billion. We see all these initiatives as consistent to our goal of providing superior investment returns to TELUS shareholders."
John Gossling, TELUS Executive Vice-President and CFO said, "The successful completion of our $1.7 billion debt financing on April 1 of 11 year and 30 year notes, at an attractive average blended coupon rate of 3.7 per cent, demonstrates our excellent access to Canadian and U.S. capital markets. This outcome is something TELUS has earned by maintaining a strong balance sheet and adhering to our financial policies year-after-year. In addition, this financing significantly reduces our refinancing risk with our average term to maturity almost doubling to nine years. With this issue and almost $2 billion of available liquidity, we are well positioned to early redeem this month $700 million of higher cost 2014 debt, participate in the upcoming spectrum auction and to action our $500 million share purchase program in 2013."
TELUS has reaffirmed its full year 2013 targets on all eight financial metrics announced in mid-February.
This news release contains statements about 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 2013 annual guidance, CEO three-year goals to 2013 for EPS and free cash flow growth to 2013 excluding spectrum costs, semi-annual dividend increases to 2016, ability to sustain and complete multi-year share purchase programs to 2016), qualifications and risk factors referred to in the attached first quarter Management's discussion and analysis, in the 2012 annual report, and in other TELUS public disclosure documents and filings with securities commissions in Canada (on SEDAR at sedar.com) and in the United States (on EDGAR at sec.gov). 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 $89 million or 6.4 per cent to $1.5 billion in the first quarter of 2013, compared to the same period a year ago. This growth was driven by continued growth in data services and subscribers.
- Data revenue increased by $85 million or 17 per cent to $583 million, representing 43 per cent of wireless network revenue in the quarter. Data ARPU increased by $2.79 or 12 per cent to $25.62. These increases were due to continued strong adoption and usage of smartphones and data applications and higher roaming volumes.
- Blended ARPU increased by $1.17 or 2.0 per cent to $60.04 as data ARPU growth more than offset a moderating 4.5 per cent voice ARPU decline. This is the tenth consecutive quarter of year-over-year growth in blended ARPU.
- Monthly postpaid subscriber churn was 1.11 per cent, down three basis points (bps) from a year ago, while blended churn decreased seven bps to 1.48 per cent. This is the best first quarter blended churn result in six years, reflecting our successful Customers First service approach, investments in retention and lower churn on smartphones.
- Postpaid net additions of 59,000 were partially offset by a loss of 26,000 lower ARPU prepaid subscribers for net additions of 33,000 - an increase of 50 per cent from 22,000 a year ago. Total wireless subscribers were up 4.6 per cent from a year ago to 7.7 million, while the proportion of high-value postpaid subscribers grew to 86 per cent of the base. Smartphone subscribers now represent 68 per cent of our postpaid base, up from 56 per cent a year ago.
- Wireless EBITDA of $666 million increased by $46 million or 7.4 per cent over last year due to strong network revenue growth and expense management. The EBITDA margin based on network service revenue increased by 0.5 points to 48.6 per cent. Wireless simple cash flow (EBITDA less capital expenditures) increased by $63 million to $532 million in the quarter due to higher EBITDA and $17 million lower capital expenditures.
- External wireline revenues increased by $36 million or 2.9 per cent to $1.3 billion in the first quarter of 2013, when compared with the same period a year ago. This growth was generated by increased data service revenue, partially offset by declines in legacy voice revenues.
- Data service and equipment revenues increased by $64 million or 9.1 per cent, due primarily to strong growth in TELUS TV subscribers, high-speed Internet and enhanced data services, combined with TV and high-speed Internet rate increases.
- Total TV additions of 34,000 were lower by 10,000 over the same quarter last year, as lower gross additions were partly offset by a lower churn rate. The total TV subscriber base of 712,000 increased by 159,000 or 29 per cent from a year ago.
- High-speed Internet net additions of 16,000 were stable year-over-year, and reflect successful promotions and the pull-through effect of Optik TV sales. TELUS' high-speed subscriber base of 1.3 million is up 85,000 or 6.8 per cent from a year ago.
- Total network access lines declined by 4.9 per cent from a year ago to 3.4 million. Residential lines were down 7.2 per cent over last year, reflecting ongoing wireless and Internet substitution and competition. Business lines were down 2.3 per cent over last year, reflecting ongoing price-based competition in the small and medium business market and customer adoption of IP services.
- Wireline EBITDA of $368 million increased by $7 million or 1.9 per cent year over year due to improving Optik TV and Internet margins helped by a lower cost of subscriber acquisition and subscriber growth. This is the second consecutive quarter of positive year over year EBITDA growth.
- Wireline simple cash flow (EBITDA less capital expenditures) declined by $36 million to $35 million in the quarter due to a $43 million increase in capital expenditures.
CORPORATE AND BUSINESS DEVELOPMENTS
Dividend Declaration - increased to 34 cents per quarter, up 11.5 percent from a year ago
The Board of Directors has declared a quarterly dividend increase of two cents to thirty-four cents ($0.34) Canadian per share on the issued and outstanding common shares of the Company payable on July 2, 2013 to holders of record at the close of business on June 10, 2013.
This new quarterly dividend represents the fifth of six under TELUS' 2011 dividend growth program announced in May 2011 that targeted semi-annual increases of circa 10 per cent annually. The new dividend represents a 3.5 cent or 11.5 per cent increase from the $0.305 quarterly dividend paid on July 3, 2012.
TELUS extends semi-annual dividend growth program to 2016
TELUS is providing shareholders with additional clarity on our intentions regarding our dividend growth program through to 2016. The Company plans to continue with two dividend increases per year to 2016, normally announced in May and November, and is targeting the increase to also be in the range of circa 10 per cent annually. Notwithstanding this, dividend decisions will continue to be dependent on earnings and free cash flow and subject to the Board's assessment and determination of our financial situation and outlook on a quarterly basis. There can be no assurance that the Company will maintain its dividend growth program through to 2016.
TELUS to file for $500 million TELUS common share purchase program in 2013 and intends to have multi-year share purchases
The Board of Directors has authorized TELUS to file shortly with the Toronto Stock Exchange (TSX) a request for approval to make a Normal Course Issuer Bid (NCIB). Subject to TSX approval, the NCIB program will enable TELUS to purchase until December 31, 2013 up to a maximum of 15.0 million TELUS common shares or approximately 2.3 per cent of the public float of our common shares, for an aggregate purchase price of up to $500 million. All shares purchased will be cancelled. The Company believes that the proposed purchase of its shares is an attractive investment opportunity and a desirable use of TELUS' funds to enhance the value of the remaining shares.
In addition, TELUS currently intends to renew its NCIB program in each of the next three years in order to permit purchases for up to $500 million in each calendar year. Future NCIBs will be dependent on earnings and free cash flow, subject to Board assessment and determination, and obtaining regulatory (including TSX) approvals. There cannot be any assurance as to how many shares, if any, will ultimately be acquired by TELUS under any NCIB.
TELUS (TSX: T,NYSE: TU) is a leading national telecommunications company in Canada, with $11 billion of annual revenue and 13.2 million customer connections, including 7.7 million wireless subscribers, 3.4 million wireline network access lines, 1.4 million Internet subscribers and 712,000 TELUS TV customers. Led since 2000 by President and CEO, Darren Entwistle, TELUS provides a wide range of communications products and services, including wireless, data, Internet protocol (IP), voice, television, entertainment and video.
In support of our philosophy to give where we live, TELUS, our team members and retirees have contributed more than $300 million to charitable and not-for-profit organizations and volunteered 4.8 million hours of service to local communities since 2000. Fourteen TELUS Community Boards 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.
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 2012 annual report at telus.com/investors.
Full quarterly earnings release available at: http://www.newswire.ca/en/releases/archive/May2013/09/c3953.html
TELUS' first quarter 2013 conference call is scheduled for May 9, 2013 at 2 p.m. ET and will feature a presentation followed by a question and answer period with investment analysts. Interested parties can access the webcast at telus.com/investors. A telephone playback will be available on May 9 until June 8 at 1-855-201-2300. Please use reference number 956698# and access code 30599. An archive of the webcast will also be available at telus.com/investors and a transcript will be posted on the website within several business days.
SOURCE TELUS Corporation