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
VANCOUVER, Feb. 11 /PRNewswire-FirstCall/ - TELUS Corporation reported fourth quarter 2010 revenue of $2.55 billion, an increase of more than four per cent. 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.
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 $227 million and 70 cents, 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 $121 million this quarter increased by $171 million. The increase reflects lower cash interest payments and improved EBITDA, partially offset by higher capital expenditures.
| C$ and in millions, except per share
| 3 months ended
|Earnings per share (EPS), basic(2)(3)||0.70||0.49||42.9|
|Free cash flow(4)||121||(50)||-|
|Total customer connections (millions)(5)||12.25||11.88||3.2||
|(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 Darren Entwistle, TELUS 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 Canada's fastest coast-to-coast network 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.
Robert McFarlane, TELUS Executive Vice-President and CFO, said "TELUS' 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 $200 million pension contribution in January 2011. 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.|
- External wireless revenues increased by $113 million or 9.2% to $1.34 billion in the fourth quarter of 2010, compared to the same period a 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 million or 36% to $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 million to $284 million in the quarter due to strong EBITDA growth and flat capital spending.
- External wireline revenues decreased slightly by $5 million to $1.21 billion in the fourth quarter of 2010, when compared with the same 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 in June 2010, as well as increased installation capabilities, enhanced service 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 SpeedTM 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 $1 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 British Columbia, Alberta, and Eastern Quebec. At the end of 2010, TELUS' IP TV footprint covered 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.
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, David Fuller, TELUS' Chief 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 Océanic, Baie-Comeau Drakkar and Quebec Remparts hockey games. All 612 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 Canada. In January, the TELUS Health Space platform extended into the Canadian healthcare landscape with its first external pilot with 200 participants in Quebec City at La Cité Médicale.
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 Canada
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 Canada) for excellence 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 Canada and the United States.
TELUS' chief general counsel named one of Canada's Most Powerful Women
For the third time in four years Audrey Ho, TELUS' senior vice-president and chief general counsel, was named one of Canada's Most Powerful 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 University of British Columbia. As well, she is TELUS' representative on the Canadian Board Diversity Council. The goal of the council is to improve the diversity of corporate and public sector boards in Canada.
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 Jill Schnarr, 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 - 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 examined 2,750 applications to select the top 100.
TELUS International Philippines launches university
TELUS International Philippines (TIP) announced TELUS International University (TIU), a unique program providing continuing education opportunities for ambitious TIP team members. TIP has partnered with leading educational institutions in the Philippines, such as De la Salle University and University of Asia and the Pacific, to provide the 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.
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 Latin America, has been honoured with three awards from the United Way in Guatemala - Heroes of Volunteerism, Heroes of Employee Fund Participation and Golden Hero. Transactel received the Heroes of Volunteerism for the largest participation of volunteers of any company in Guatemala when more than 2,000 team members participated in their second annual TELUS / Transactel Day of Service. The Heroes of Employee Fund Participation recognized the largest employee contribution of any company in Guatemala, as 65 per cent of Transactel employees participated in the company's 2010 giving programs. Transactel president Guillermo Montano was honoured as a Golden Hero for his personal commitment in leading the company's corporate social responsibility movement in Guatemala.
TELUS Diabetes 'Balance' Campaign brings insulin pumps to kids in need
In November, TELUS announced the launch of a new campaign to help raise $200,000 to purchase insulin pumps and other life-saving devices for children across Canada. The TELUS Diabetes 'Balance' Campaign launched 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, $1 goes toward the purchase of a new insulin pump. If you forward the link, an additional dollar goes toward the cause.
TV marketing campaign raises close to $4 million for B.C. and Alberta community charities
TELUS is approaching the $4 million mark committed to local communities across British Columbia and Alberta as a result of its Community TELUS TV campaign. Since 2009, TELUS has donated $100 for every new customer 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 $2 million to support battle against breast cancer
In May 2010, TELUS announced it would donate $25 from every pink Blackberry sold across Canada through the end of the year towards digital mammography machines or other breast cancer detection equipment in regional hospitals. Combined with employee and corporate donations, the campaign raised more than $2 million. The Go Pink campaign will help buy digital mammography machines or other innovative breast cancer technology for healthcare facilities in communities across Canada, including BC Women's Hospital & Health Centre Foundation, Alberta Cancer Foundation, Saskatchewan Cancer Agency, CancerCare Manitoba, Princess Margaret Hospital Foundation in Toronto, The Ottawa Hospital Foundation, Segal Cancer Center at the Montreal Jewish General Hospital, the Juravinski Cancer Center in Hamilton, and QEII Health Sciences Centre in Halifax.
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 $200,000 donation from TELUS to help 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 October 22, TELUS was the fourth most popular Canadian brand on Facebook, by fan number.
The Board of Directors has declared a quarterly dividend of fifty-two and a half cents ($0.525) Canadian per share on the issued and outstanding Common shares and fifty-two and a half cents ($0.525) Canadian per share on the issued and outstanding Non-Voting shares of the Company payable on April 1, 2011 to holders of record at the close of business on March 11, 2011.
This quarterly dividend represents a five cent or 10.5 per cent increase from the forty seven and a half cents paid a year earlier on April 1, 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 February 11, 2011 at 11:00 am ET and will feature a presentation about our fourth quarter 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 February 11 until February 21, 2011 at: telus.com/investors or by telephone (1-403-669-1055 or 1-877-353-9587, reservation no. 525134#).
TELUS (TSX: T, T.A;NYSE: TU) is a leading national telecommunications company in Canada, with $9.8 billion of annual revenue and 12.3 million 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, 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 have contributed $211 million to charitable and not-for-profit organizations and volunteered 3.7 million hours of service to local communities since 2000. Nine 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.
SOURCE TELUS Corporation