Strong growth in net income of 21% and free cash flow of 67%
Improving wireless trends in ARPU, subscriber additions and churn
TELUS TV additions of 29,000 lead to doubling of
subscriber base in last year
VANCOUVER, Aug. 6 /PRNewswire-FirstCall/ - TELUS Corporation reported second quarter 2010 revenue of $2.4 billion, an increase of one per cent, as continued growth in wireless revenues and wireline data revenues more than offset declines in traditional voice services. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) increased by five per cent due to revenue growth, lower restructuring costs and ongoing benefits from efficiency initiatives.
Reported net income and EPS for the second quarter were $296 million and 92 cents, respectively, representing year-over-year increases of 21 and 19 per cent. When excluding for positive income tax-related adjustments, normalized net income and EPS were $286 million and 89 cents, respectively, increases of 27 and 25 per cent. Second quarter results included favourable income tax-related adjustments of approximately $10 million or three cents per share compared to $18 million or six cents in the same period a year ago.
Free cash flow of $241 million increased by 67 per cent from a year ago, primarily due to capital expenditures being $160 million lower, which was partially offset by cash income tax payments being $50 million higher.
Over the 12 month period, total customer connections increased by 288,000, driven by a 6.5 per cent increase in wireless subscribers and 98 per cent growth in TELUS TV customers, partially offset by continued declines in landline connections.
FINANCIAL HIGHLIGHTS
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C$ and in millions, except per share amounts 3 months ended
June 30
(unaudited) 2010 2009 % Change
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Operating revenues 2,398 2,377 0.9
Operations expense 1,460 1,451 0.6
Restructuring costs 19 53 (64.2)
EBITDA(1) 919 873 5.3
Net income(2) 296 244 21.3
Earnings per share (EPS), basic(2) 0.92 0.77 19.5
EPS (excluding income-tax related adjustments) 0.89 0.71 25.4
Capital expenditures 397 557 (28.7)
Free cash flow(3) 241 144 67.4
Total customer connections (millions)(4) 11.98 11.69 2.5
(1) Earnings before interest, taxes, depreciation and amortization
(EBITDA) is defined as Operating revenues less Operations expense
less Restructuring costs. See Section 11.1 in 2010 second quarter
Management's discussion and analysis.
(2) Net income and EPS for the second quarter of 2010 included favourable
income tax-related adjustments of approximately $10 million or
3 cents per share, compared to $18 million or 6 cents per share
respectively for the same period in 2009.
(3) See Section 11.2 in 2010 second quarter Management's discussion and
analysis.
(4) The sum of wireless subscribers, network access lines (NALs),
Internet access subscribers, and TELUS TV subscribers (IP TV and
satellite TV). In addition, historical residential and business NALs
reflect previously announced restatements.
"Our second quarter results demonstrate that our major strategic investments in broadband networks and operating efficiency are driving improved growth in wireless and data revenues, 25 per cent growth in underlying earnings per share and 67 per cent growth in free cash flow," said Darren Entwistle, TELUS president and CEO.
Mr. Entwistle stated, "these results demonstrate strong progress during this transition year for our company as we increasingly realize the benefits from our broadband wireline and wireless investments."
Mr. Entwistle noted, "wireless operational performance was robust this quarter with excellent customer net additions up 12 per cent to 124,000, combined with a continued improving trend in monthly revenue per subscriber - down modestly at 1.9 per cent - and our lowest customer churn rate in two years."
"TELUS is offering Canadian customers competitive choice with the newest devices like the iPhone 4," added Mr. Entwistle. "Moreover, Canada's fastest mobile network is about to get even faster using cost efficient HSPA+ Dual Cell technology - in coming months manufacturer rated speeds will double to up to 42 megabits per second."
Mr. Entwistle also commented, "TELUS continues to demonstrate leadership and innovation for the benefit of consumers with the recent launch of Optik TV powered by Microsoft Mediaroom with the advanced functionality of PVR Anywhere. Optik TV clients are among the first globally to be able to use the Xbox 360 as a digital set top box. Furthermore, we are now providing customers the flexibility to manage their PVR by using Remote Recording over the Web or iPhone while they are on the move."
Robert McFarlane, TELUS executive vice-president and CFO said "TELUS in late July again demonstrated ready access to the capital markets with our notable $1 billion 10-year notes issue at an attractive 5.05% coupon. This successful outcome has been earned due to our transparent and prudent financial policies, our strong balance sheet, and management's long-term track record for execution against TELUS' public objectives and policies."
The company reaffirmed its consolidated annual 2010 EBITDA, EPS and capital expenditure guidance set in mid-December 2009. Wireless revenue and EBITDA guidance was maintained as was wireline EBITDA. Consolidated and wireline revenue guidance has been reduced by one to one and a half percent and two to three per cent, respectively. See section 9 in MD&A for updated detail on guidance, status and assumptions.
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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 2010 guidance), qualifications and
risk factors referred to in the Management's discussion and analysis in
the 2009 annual report, and in the 2010 first and second 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.
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OPERATING HIGHLIGHTS
TELUS wireless
- External revenues increased by $71 million or 6.2% to $1.2 billion in
the second quarter of 2010, compared to the same period a year ago,
driven by a 4% increase in network revenue, as well as a 49% increase
in equipment and other revenue, which included revenue from Black's
Photo acquired in September 2009.
- Data revenue of $273 million increased by $57 million or 26% due to
increased adoption of smartphones and related data plans and
applications, increased mobile Internet keys, and higher in-bound
volumes of data roaming.
- Blended ARPU (average revenue per subscriber unit) per month declined
by 1.9% to $57.47 from the same quarter a year ago reflecting a
sequential improvement from the 4.4% decline in the first quarter of
2010. The improving trend is due to a lower rate of decline in voice
ARPU and a higher rate of increase in data ARPU, which increased by
19% to $13.80.
- Total net subscriber additions of 124,000 increased by 12% over the
same period a year ago. Higher value postpaid net additions increased
15% to 109,000. Smartphone subscribers now represent 25% of total
postpaid subscribers compared to 16% a year ago.
- Cost of acquisition per gross addition increased by 10% year-over-year
to $342, reflecting higher per-unit subsidy (including a one-time
settlement for prior periods) and commission costs driven by a higher
smartphone mix, higher advertising and promotion expenditures for new
device launches, partly offset by a favourable U.S. dollar exchange
rate.
- Cost of retention of $112 million decreased slightly by $2 million,
reflecting a favourable U.S. dollar exchange rate, lower commissions
per subscriber, partly offset by higher retention volumes and
equipment subsidy costs from increased migrations to higher cost
smartphones.
- Blended monthly subscriber churn improved 10 basis points to 1.45%,
reflecting improving economic conditions, availability of new handsets
including the iPhone, and successful retention efforts.
- Wireless EBITDA of $523 million increased by 6.1% due to improved data
revenue growth and lower bad debt expense.
- Simple cash flow (EBITDA less capital expenditures) increased by
$120 million or 39% to $424 million in the quarter due to higher
EBITDA and a $90 million reduction in capital spending due to the
November 2009 completion of the new HSPA+ wireless network.
TELUS wireline
- External revenues decreased by $50 million or 4.1% to $1.2 billion in
the second quarter of 2010, when compared with the same period in
2009, primarily due to continued declines in traditional local and
long-distance revenues.
- Data revenues increased by $27 million or 5.1%, reflecting TELUS TV
subscriber growth, higher managed workplace revenues and increased
Internet, enhanced data and hosting services.
- TELUS high-speed Internet net additions of 3,000 were unchanged from a
year ago, due to ongoing competitive intensity and a maturing market.
- TELUS TV net additions were 29,000, an increase of 71% over the same
period last year, due to improved installation capabilities, enhanced
service including PVR Anywhere, investment in expanded broadband
coverage, and addition of TELUS Satellite TV service in mid-2009.
TELUS TV subscriber base now totals 228,000 up 98% over last year.
- Total network access lines (NALs) declined by 63,000 to 3.85 million,
down 5.6% from a year ago. Residential NAL losses of 51,000 increased
due to intense cable-TV competition and wireless substitution.
Business NALs declined by 12,000 primarily in Western Canada from
competitive factors, which more than offset increased data lines in
Ontario and Quebec.
- Wireline EBITDA of $396 million increased by $16 million or 4.2% in
large part due to lower restructuring costs and operational savings
from efficiency initiatives.
- Simple cash flow (EBITDA less capital expenditures) increased by $86
million to $98 million due to higher EBITDA and a $70 million
reduction in capital spending.
CORPORATE AND BUSINESS DEVELOPMENTS
TELUS unleashes Optik
TELUS' ongoing investment in the expansion of its fibre optic network has given the company the capacity needed to introduce Western Canadians to the most compelling home entertainment services on the market.
TELUS is revolutionizing home entertainment and communications with a new suite of advanced TV and High Speed Internet services - newly branded as Optik in June. The TELUS team has tapped the latest fibre optic and IP technologies to bring customers the most advanced home services - Optik TV, powered by the award-winning Microsoft Mediaroom, and Optik High Speed, offering Internet access speeds of up to 15 megabits per second that can be accessed anywhere in the customers household with home Wi-Fi.
Optik TV offers PVR Anywhere, networking up to six TVs in the home with one multi-tuner PVR so customers can pause a recorded show or movie in one room and pick it up in another from where they left off. It also brings TELUS customers video on demand with DVD-style controls, picture-in-picture browsing, fast channel changing and on-screen call display.
TELUS Optik TV customers among first in world to use Xbox 360 as digital set top box
The Xbox 360 is a first-class home entertainment and gaming system that Optik TV customers can now use as a digital set top box. Beginning in August, the Microsoft Mediaroom software that powers Optik TV also supports delivery of Optik TV to the Xbox 360 to provide great functionality for watching television anywhere in the home.
TELUS is among the first TV providers in the world to offer this innovative capability with the Xbox 360. All the features of TELUS' popular Optik TV service now become available directly via the Xbox 360 console. This means that customers can use an Xbox 360 as a digital set top box to:
- Access any of Optik TV's over 400 TV channels including over 50 in HD
- Watch any shows that they have recorded on their Optik HD PVR digital
box
- Use PVR Anywhere to record up to three shows simultaneously from any
room
- Get PVR functionality from any TV when watching recorded programs -
pause, replay, rewind and fast-forward.
With the Xbox 360 console, Optik TV delivers the ultimate integration of gaming and entertainment on one platform. In addition to being able to watch recorded shows and schedule recordings, subscribers can also use the Xbox 360 console to access digital photos and digital music libraries on the TV via their home wireless network and connected Windows PC.
TELUS HEALTH SPACE launched
TELUS HEALTH SPACE, Canada's first consumer health platform to achieve Canada Health Infoway pre-implementation certification for providing a secure, interoperable application environment and personal health information platform, was launched on May 31. Twelve leading national health organizations are collaborating with TELUS to embed life-changing applications, medical devices and educational materials into TELUS HEALTH SPACE.
Powered by Microsoft HealthVault, TELUS HEALTH SPACE is a cutting-edge, high-security data storage and sharing service where individual Canadians will be able to keep all their personal healthcare information - such as lab results and prescription information - in an online database for access over any Internet connection. With the user-friendly TELUS HEALTH SPACE application, Canadians can create, store and manage all aspects of their health information and that of their family, such as immunizations, allergies, medications, height, weight, symptoms, key medical measurements, pre-existing conditions, as well as their medical history.
TELUS issues $1 billion of long-term debt to fund early redemption of 2011 Notes
In July, TELUS successfully completed a public offering of 10-year Canadian dollar notes, raising $1 billion. The net proceeds of the new 5.05% notes are to be used to fund the early partial redemption of the 8% US dollar notes due in June 2011 and terminate associated cross-currency interest rate swaps. The early redemption is expected to cause a pre-tax charge of approximately $58 million or after tax a 13 cent negative impact to third quarter 2010 EPS.
The first early redemption occurred in December 2009 with proceeds of a 10-year $1 billion notes issue. This second partial redemption reduces refinancing risk in 2011 as two thirds of the originally maturing C$3 billion of the swapped US 8% notes have now been refinanced. This US debt has an effective yield of approximately 8.5% and is being refinanced at lower interest rates of approximately five per cent. Another important benefit is that TELUS is successfully balancing the company's overall debt maturity profile out over many years so as to reduce the risk of having large amounts of debt coming due in any one year. Finally, the average total debt maturity has now been extended by 1.3 years to almost six years.
TELUS answers Canada's smartphone craving with award winning HTC Desire
TELUS announced an important addition to its leading 3G+ Android powered device line-up with the July launch of HTC Desire, with Android 2.1. This device was named Hottest Handset of 2010 at Mobile Magazine's 2010 Mobile Industry Awards. Featuring a large, crisp touchscreen, HTC Desire is being called the perfect Android powered smartphone to personalize and access social networks, including the most popular Google apps, such as free Google Navigation and Youtube and choosing from over 50,000 apps in the Android Market. Multiple social networks such as Twitter, Facebook and Flickr are easy to follow and update in a single view with HTC's Friend Stream app. Users can expect a more vivid view of rich web pages for embedded videos on the touchscreen and the ability to navigate with double-tap, multi-touch, and pinch and zoom. The 3.7 inch touchscreen and powerful 1 GHz Qualcomm Snapdragon processor, combined with HTC Sense and the fast speed of TELUS' 3G+ network, should make this smartphone incredibly responsive.
TELUS and the CFL team-up to bring Canadians mobile app
In July the CFL named TELUS as their official wireless provider bringing fans the first-ever CFL mobile app, called TELUS CFL Mobile. The premier app offers Canadians mobile access to live streaming of all games, real time scoring and exclusive content for TELUS customers with special in-game and on-demand features to complement live video streaming. TELUS CFL Mobile is now available on BlackBerries and will be available on other select Smartphones.
TELUS launches the Smart Hub 3G+ Wi-Fi Router with voice
TELUS launched its first TELUS Smart Hub 3G+ Wi-Fi router with voice that allows users to share their high speed Internet connection wirelessly across multiple devices and plug in an analog phone for voice services. Developed by NetComm Limited, the TELUS Smart Hub operates on TELUS' 3G+ network and is designed to support both voice and data traffic. Capable of connecting multiple Wi-Fi enabled devices simultaneously, the TELUS Smart Hub offers the benefits of a landline experience wirelessly.
TELUS Data Notifications helps customers manage data usage
In June, TELUS introduced a free SMS notification system called TELUS Data Notifications, informing wireless customers when they are nearing their data thresholds. The automatic service alerts customers when they are close to using all of the data included with their monthly rate plan or add-on feature so they can better manage their data usage. For customers with data packages, SMS notifications are sent informing customers when they have reached both 75 per cent and 95 per cent of their data thresholds. For customers using pay per-use data, SMS notifications will be sent when customers have used $10 and $50. These alerts will work in Canada and while roaming in the U.S. and Internationally.
TELUS to increase Canada's fastest wireless data network speeds
TELUS in August announced Canada's fastest* mobile network is to get even faster by deploying HSPA+ Dual Cell technology. TELUS will increase manufacturer-rated maximum download speeds to up to 42 Mbps when network deployment is complete in Canadian cities and towns. Dual Cell capable devices starting with Mobile Internet keys are expected to be commercially available starting in the first quarter of 2011. Canadians are amongst the most sophisticated users of wireless data in the world, and TELUS is committed to meeting their growing needs with the best technology available anywhere.
By leveraging the investment TELUS has already made in its 3G+ network, the company is able to support the deployment of Dual Cell technology with a small investment that is within TELUS' overall capital expenditure guidance for 2010. The implementation of HSPA+ and Dual Cell technology are expected to provide an optimal future transition to 4G long-term evolution (LTE) technology.
*Based on TELUS' tests of data throughput speeds in large Canadian urban centres available from national HSPA+ service providers. Internet access speed provided by the network operator may vary due to the device being used, network congestion, distance from the cell site, local conditions and other factors. Speed on the Internet is beyond the wireless network operator's control and may vary with your configuration, Internet traffic, website server and management policies, and other factors.
TELUS builds IP next-generation network cloud services
In partnership with Cisco, TELUS announced in June that it was enhancing its service delivery network using Cisco Unified Service Delivery. The solution combines the power of the data centre with the power of the network to transform service delivery and build a foundation for Internet-based "cloud" computing services to deliver the best-in-class managed services and offer a comprehensive range of innovative data and communication services. The investment helps to enable the interconnectivity of TELUS' diverse data centres to increase efficiencies and on-demand service delivery to customers.
François Gratton selected as "Top 40 Under 40"
François Gratton, senior vice-president, Business Markets for TELUS Québec, was selected in the 2009 Top 40 Under 40. François Gratton is one of the 40 Canadians and 8 Quebecers under 40 years old to be chosen from 1,200 leaders from private, public and non-profit organization across Canada. The winners of the Top 40 Under 40 are chosen by an independent advisory board of 25 Canadian business leaders. The judges base their choices on five key criteria: vision and leadership, innovation and achievement, impact, community involvement and growth strategy.
Environmentally friendly TELUS House Toronto opened
TELUS officially opened the doors of its new green office tower, TELUS House Toronto, home to 1,600 team members. TELUS House Toronto is environmentally future-friendly, targeting gold LEED (Leadership in Energy and Environmental Design) certification, an internationally accepted benchmark for design, construction, and operation of high-performance sustainable buildings. The 30-storey office tower offers street-level access as the newest leg of the PATH connecting team members and Toronto commuters to the busiest transit hub in the country. TELUS House Toronto brings together 15 offices across the Greater Toronto Area and houses some of the most advanced technology innovations like super high definition virtual meeting rooms called Telepresence, which is helping to reduce travel costs at TELUS.
Volunteers make a difference on fifth TELUS Day of Service
On May 29, the fifth annual TELUS Day of Service took place across Canada. On this one special day, TELUS team members and retirees mobilized in a massive nationwide volunteer effort to make positive, lasting connections within their communities. This year a record 10,000 TELUS volunteers, friends and family from coast-to-coast came together to give and support the communities where they live, work and serve. Over 175 volunteer activities were organized, which included preparing and serving meals for the homeless and those in need, planting trees and plants in parks and gardens and donating blood for Canadian Blood Services. TELUS Day of Service is part of TELUS' overall commitment to Corporate Social Responsibility in which we strive to engrain the triple bottom line of sound economic, social and environmental sustainability practices into all aspects of our business.
TELUS tops up Jeneece Place campaign to $1 million after TELUS World Skins Game
At this year's TELUS World Skins Game, TELUS partnered with the Queen Alexandra Foundation for Children, to have all funds raised going to Jeneece Place. TELUS started its fundraising efforts for Jeneece Place last July, when TELUS president and CEO Darren Entwistle announced that the 2010 TELUS World Skins Game would be held at Bear Mountain, in Victoria B.C. and kicked-off the fundraising with a $100,000 donation. At the closing of the 2010 TELUS World Skins Game on June 22, TELUS announced that it had raised $1 million for Jeneece Place through its donations and fundraisers, including donating $100 on behalf of every new Optik TV customer on Vancouver Island. Jeneece Place will provide accommodation for children and their families who need to travel to Victoria for care at Victoria General Hospital, the Queen Alexandra Centre or for specialist appointments and lab tests.
TELUS Walk to Cure Diabetes
In June, Juvenile Diabetes Research Foundation's (JDRF) biggest fundraiser, the TELUS Walk to Cure Diabetes, swept across Canada. TELUS team members and retirees, friends and family were excited to be shoulder-to-shoulder with JDRF on the third annual TELUS Walk to Cure Diabetes. More than 300,000 Canadians are currently affected by this devastating disease that can suddenly strike both children and adults, leaving them dependent on injected or pumped insulin for life. This annual, family-focused event raises awareness of type 1 diabetes as well as raises funds that are necessary to continue research towards finding a cure and improving treatments for this disease. More than 45,000 Canadians take part in the TELUS Walk annually and this year's fundraising goal is $7.5 million. Together, we can help find a cure for Juvenile Diabetes and make a real difference to current and future generations of Canadian children.
Go Pink with TELUS bringing digital mammography to Canadian communities
TELUS in cooperation with certain healthcare facilities across Canada launched a campaign to make a 'pink' difference and help bring digital mammography to various communities. Between May and October 31, 2010, TELUS is donating $25 for each purchase of a pink BlackBerry Curve 8530 or the pink BlackBerry Pearl 3G smartphone available only at TELUS. Digital mammography enhances early detection of breast cancer for women and men. The coast-to-coast campaign has already raised more than $300,000 and is funding innovative breast cancer technology in healthcare facilities 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 and QEII Health Sciences Centre in Halifax.
Dividend Declaration
The Board of Directors has declared a quarterly dividend of fifty cents ($0.50) Canadian per share on the issued and outstanding Common shares and fifty cents ($0.50) Canadian per share on the issued and outstanding Non-Voting shares of the Company payable on October 1, 2010 to holders of record at the close of business on September 10, 2010.
This quarterly dividend represents a two and one half cent or 5.3 per cent increase from the forty seven and a half cents paid on October 1, 2009.
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/August2010/06/c8004.html
Quarterly conference call and webcast presentation
TELUS quarterly conference call is scheduled for August 6, 2010 at 11:00 am ET and will feature a presentation about our second 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 August 6 until August 16, 2010 at: telus.com/investors or by telephone (1-403-669-1055 or 1-877-353-9587, reservation no. 371224 followed by the number sign).
About TELUS
TELUS (TSX: T, T.A; NYSE: TU) is a leading national telecommunications company in Canada, with $9.6 billion of annual revenue and 12 million customer connections including 6.7 million wireless subscribers, 3.8 million wireline network access lines and 1.2 million Internet subscribers and 228,000 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 $158 million to charitable and not-for-profit organizations and volunteered 3.1 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
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