Growth in earnings and cash flow due to expense control and lower capital expenditures
Quarterly dividend increase of 5.3 per cent to 50 cents per share
VANCOUVER, May 5 /PRNewswire-FirstCall/ - TELUS Corporation reported first quarter 2010 revenue of $2.375 billion, unchanged from the same period a year ago as four per cent growth in both wireless revenue and wireline data revenue offset continued declines in traditional voice services. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) increased by four per cent due to lower restructuring costs, efficiency initiatives and expense control.
When excluding income tax-related adjustments, net income and EPS increased this quarter by 2.5 per cent. First quarter results included favourable income tax-related adjustments of approximately $2 million or one cent per share this quarter and $62 million or 20 cents in the same period a year ago. Reported net income in the first quarter was $268 million and earnings per share (EPS) were 84 cents, down approximately 17 per cent.
Free cash flow of $246 million nearly doubled from a year ago, primarily due to capital expenditures being lower by $163 million, partially offset by a $37 million increase in cash tax payments.
Over the 12 month period, total customer connections increased 2.4 per cent or 276,000, driven by a 6.4 per cent increase in wireless subscribers and 103 per cent growth in TELUS TV customers, partially offset by declines in legacy landline connections.
FINANCIAL HIGHLIGHTS
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C$ and in millions, except per share amounts 3 months ended
March 31
(unaudited) 2010 2009 % Change
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Operating revenues 2,375 2,375 -
Operations expense 1,429 1,441 (0.8)
Restructuring costs 6 28 (78.6)
EBITDA(1) 940 906 3.8
Net income(2) 268 322 (16.8)
Earnings per share (EPS), basic(2) 0.84 1.01 (16.8)
EPS (excluding income-tax related adjustments) 0.83 0.81 2.5
Capital expenditures 311 474 (34.4)
Free cash flow(3) 246 125 96.8
Total customer connections (millions)(4) 11.89 11.62 2.4
(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 first quarter
Management's discussion and analysis.
(2) Net income and EPS for the three month period in 2010 included
favourable income tax-related adjustments of approximately $2 million
or 1 cent per share, compared to $62 million or 20 cents per share
respectively for the same period in 2009.
(3) See Section 11.2 in 2010 first quarter Management's discussion
and analysis.
(4) Historical NALs have been restated for prior periods commencing in
2007, as a result of a periodic subscriber measurement review and
correction. See section 5.4 in 2010 first quarter Management's
discussion and analysis.
"The growth in postpaid wireless and TELUS TV net additions coupled with the improvement in quarterly earnings and free cash flow in the first quarter of 2010 are a testament to our major strategic investments and the team's hard work," said Darren Entwistle, TELUS president and CEO. "We are starting to benefit from Canada's fastest 3G+ wireless network and enhanced wireline broadband network, leading to greater sales of smartphones and TELUS TV. Importantly, we are experiencing significant traction in our operational efficiency and cost control endeavours."
"Based on our positive financial outlook, we are increasing our dividend by 5.3%" noted Mr. Entwistle. "This reflects our confidence in the prospect for earnings and cash flow growth in 2010 and beyond."
Robert McFarlane, TELUS executive vice-president and CFO said, "The Board decision to increase the company's dividend this quarter as well as the dividend payout ratio target guideline to 55 to 65 per cent of prospective sustainable earnings, is aligned with our future expected earnings and free cash flow growth profile. TELUS is moving to a new phase of moderated capital expenditures and normal cash tax rates."
The company reaffirmed its annual 2010 guidance set in mid-December 2009.
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This news release contains statements about expected future events and
financial and operating results of TELUS that are forward-looking. By
their nature, forward-looking statements require the Company to make
assumptions 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 results 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 quarter report. 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 $47 million or 4.2% to $1.2 billion in
the first quarter of 2010, compared with the same period in 2009,
driven primarily by equipment and other revenue growth of
$30 million, which included revenue from Black's Photo, as well as a
1.6% increase in network revenue.
- Data revenue of $258 million increased $50 million or 24% due to the
continued adoption of smartphones and mobile Internet keys, and
increased use of data services such as text messaging and wireless
social networking.
- Blended ARPU (average revenue per subscriber unit per month) declined
by 4.4% to $55.80 compared to the same quarter a year ago. The
downward trend in ARPU moderated from the 7.7% decline experienced in
the fourth quarter of 2009. The improved trend is due to a lower rate
of decline in voice ARPU and a higher rate of increase in data ARPU.
Voice ARPU declined 9.5% this quarter compared to 12% in the
fourth quarter. Data ARPU increased by 17% to $13.14, which
represented 24% of total ARPU, and is higher than the 13% increase in
data ARPU in the fourth quarter of 2009.
- Total net subscriber additions of 51,000 increased by 6.3% over the
same period a year ago. Higher value postpaid net additions increased
48% to 65,000, while prepaid subscribers decreased 14,000. As a
result, postpaid subscribers represented 127% of aggregate net
subscriber additions. Smartphone subscribers now represent 22% of
total postpaid subscribers compared to 15% a year ago.
- Cost of acquisition per gross addition decreased by 4.2%
year-over-year to $322, reflecting the impact of loading through
lower variable cost channels and a shift in product mix, partly
offset by higher cost of subsidizing smartphone devices.
- Cost of retention of $123 million increased by $10 million,
reflecting higher retention volumes and equipment subsidy costs
associated with increased customer migrations to high cost
smartphones, notably including the Apple iPhone.
- Blended monthly subscriber churn improved to 1.55%, reflecting
improving economic conditions.
- EBITDA of $497 million increased by 1.8% due to improved wireless
revenue growth, partially offset by increased retention costs.
- Simple cash flow (EBITDA less capital expenditures) increased by
$146 million or 50% to $438 million in the quarter due to higher
EBITDA and $137 million reduction in capital spending due to late
2009 completion of the new HSPA wireless network.
TELUS wireline
- External revenues decreased by $47 million or 3.8% to $1.2 billion in
the first 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 $20 million or 3.7% due to TELUS TV
growth, increased enhanced data and hosting services, and higher
managed workplace revenues.
- TELUS high-speed Internet net additions of 3,000 were down 11,000
from the same period a year ago, due to aggressive pricing and
promotional activity in the quarter by the Company's primary cable-TV
competitor.
- TELUS TV net additions were 29,000, an increase of 45% over the same
period last year, due to improved installation capabilities,
investment in expanded broadband coverage, and the addition of TELUS
Satellite TV service in mid-2009.
- Total network access lines (NALs) declined by 58,000 in the quarter
to 3.9 million, down 5.2% from a year ago. Residential NAL losses of
50,000 increased year-over-year due to aggressive pricing and
promotional activity by the cable-TV competitor and wireless
substitution. Business NALs declined by 8,000 primarily in Western
Canada, due to competitive and economic factors, which more than
offset increased business data lines in Ontario and Quebec.
- EBITDA of $443 million increased by $25 million or 6% in large part
due to lower restructuring costs and operational savings from
efficiency initiatives.
- Simple cash flow (EBITDA less capital expenditures) increased by
$51 million to $191 million due to higher EBITDA and $26 million
lower capital expenditures.
CORPORATE AND BUSINESS DEVELOPMENTS
TELUS TV surpasses 200,000 subscriber milestone and launches Mediaroom
TELUS' all-digital television service hit another notable milestone in April as the TELUS TV subscriber base surpassed 200,000 customers. Since launching TELUS TV, the company has advanced the service by introducing more than 400 channels, including over 40 in High Definition, and video on demand and pay per view.
In February, TELUS launched an enhanced version of TELUS TV powered by Microsoft Mediaroom. This new platform offers customers impressive new features including a single personal video recorder (PVR) solution for the whole home, allowing customers to record and play back shows on up to six TVs in a home and record three programs simultaneously from any room. TELUS' new PVR-anywhere service allows customers to record over 300 hours of Standard Definition programming or 120 hours of High Definition programming.
$1.7 billion capital investment extends reach and speed of advanced broadband
TELUS plans in 2010 to invest $1.7 billion across Canada, including $650 million in both British Columbia and Alberta and $400 million in Ontario and Quebec, as the Company continues extending the reach and speed of its advanced wireline and wireless broadband services. TELUS' investment in information, communications and technology is delivering advances in priority areas such as healthcare, the environment and the quality of life for Aboriginal people. TELUS is continuing to invest in broadband networks to deliver advanced Internet services and high definition digital TELUS TV to more than 1.8 million households. TELUS will also continue to enhance its wireless broadband network, building on the November 2009 launch of its 3G+ network, now covering more than 31 million Canadians.
Federal Government supports opening door to more foreign investment in telecom
At the beginning of March, the Federal Government signaled its intention to consider easing foreign ownership restrictions in the telecommunications sector. While the Industry Minister has signaled he will consider a number of options including removing all restrictions for carriers under the Telecommunications Act, he has also signaled that the government is not considering any changes under the Broadcasting Act at this time. This would make it difficult for all converged or integrated carriers like Shaw and TELUS to take advantage of any rule changes because all distribute broadcasting over the same networks used to carry telecom traffic.
There is also a possibility that government may consider a previously recommended phased-in approach to liberalization that would allow increased flexibility for carriers with less than 10% national market share or allow for more access to foreign capital in upcoming spectrum auctions expected in the 2011 to 2012 timeframe. It is currently not clear what, if any, changes to the foreign ownership regulatory structure may occur.
TELUS has not opposed foreign ownership restrictions being lifted in Canada, but has rather advocated that it be done in a fair and symmetrical basis for all communications carriers including satellite and cable-TV companies in Canada. At the same time, TELUS does not support changing Canadian control regulations for broadcasters.
TELUS Consumer and Business units combining into TELUS Customer Solutions
Beginning in March, as part of an organizational change, TELUS began the process of combining Consumer and Business Solutions into one team. The new Customer Solutions business unit is uniting under the leadership of Joe Natale, who assumed a new role as TELUS' chief commercial officer. The integration enhances our ability to collaborate more effectively on competitive strategies, market and customer care activities, and business support processes, which will also help achieve efficiency and cost synergies.
Latest Motorola devices available from TELUS
TELUS and Motorola launched the much-anticipated MOTOROLA MILESTONE in Canada. Powered by Google's new Android operating platform, the MILESTONE delivers a rich mobile web experience, superior messaging and top-of-the-line multi-media features in an innovative design. MILESTONE features the best of both worlds with a full QWERTY keyboard and touchscreen navigation, as well as the opportunity for users to customize their mobile with widgets and the freedom to run multiple applications at once.
Also in late April, TELUS launched the latest Android-powered device, the industry acclaimed MOTOROLA BACKFLIP with MOTOBLUR, available only on Canada's fastest 3G+ network. The unique reverse flip smartphone comes fully equipped with a 3.1" high resolution touchscreen, 3G+ speed, Wi-Fi access and access to more than 30,000 applications and widgets from the Android Market.
TELUS the first mobile carrier in Canada to offer over-the-air DRM-free music
TELUS is the first wireless carrier in Canada to offer over-the-air DRM-free (digital rights management) music tracks to Canadians. Canadians now have the freedom to play music purchased from the TELUS Music shop on any of their digital music-capable devices. DRM-free music expands the TELUS music experience by allowing clients to transfer the music they buy from TELUS to their own electronic devices including cell phones, smartphones or PCs.
TELUS CTO recognized for courage to innovate
TELUS Chief Technology Officer Ibrahim Gedeon was named to the distinguished list of honourary degree recipients for 2010 from the University of British Columbia (UBC). Honorary degrees recognize individuals who have made substantial contributions to society at the provincial, national and/or international levels.
TELUS again named a Global 100 Most Sustainable Corporations
Corporate Knights again recognized TELUS on its list of the Global 100 Most Sustainable Corporations in the World for 2010. TELUS is one of only nine Canadian companies and the only Canadian telecommunications company, to earn a spot on the list. The annual list of Global 100 Most Sustainable Corporations in the World is compiled by Corporate Knights magazine and Global Currents Investment Management. The Global 100 list is announced each year at the World Economic Forum in Davos, Switzerland.
TELUS recognized as one of Canada's Best Diversity Employers
For the second straight year, TELUS has been named one of Canada's Best Diversity Employers in an annual competition that recognizes the nation's leaders in creating diverse and inclusive workplaces. This year's list pays tribute to 45 companies and organizations in Canada that have developed exceptional diversity initiatives to promote inclusiveness among employee groups such as women, members of visible minorities and persons with disabilities.
2010 TELUS World Skins Game raising funds for Jeneece Place
The TELUS World Skins Game will bring some of the top names in golf to Canada this June when the event visits Victoria, British Columbia's Bear Mountain Resort. Canada's own Mike Weir, Camilo Villegas of Colombia, Fred Couples of the United States, Ian Poulter of England and Retief Goosen of South Africa make up the 2010 field. This summer's game will improve the quality of life for Vancouver Island's sick kids and their families for years to come. The money raised during the event will benefit the Queen Alexandra Foundation for Children in support of Jeneece Place, a home-away-from-home for families staying in Victoria to be near their children being treated at Victoria General Hospital. TELUS, the Jeneece Place Foundation, the Queen Alexandra Foundation for Children and their partners have already raised more than $400,000 for this important project, jump-starting the planning and architecture work.
TELUS' long-standing commitment to local charities such as Jeneece Place recently won international recognition when the Association for Fundraising Professionals named TELUS the world's top philanthropic corporation for 2010.
TELUS donates $679,000 to Atlantic Canada Boys and Girls Clubs
In February, TELUS donated $679,000 to 30 Boys and Girls Clubs in Atlantic Canada to further its commitment to helping at-risk youth. The Help Kids Go Further campaign was originally launched in April 2009 by TELUS President and CEO Darren Entwistle in celebration of the launch of the TELUS Atlantic Canada Community Board. The campaign saw $25 from the sale of every TELUS smartphone and mobile phone sold in Atlantic Canada earmarked for the local member agencies of Boys and Girls Clubs throughout the region.
TELUS supports local programs and charities through sales of TELUS TV
TELUS has expanded a local community investment program promoting TELUS TV while supporting communities in British Columbia and Alberta. Starting March 2 and lasting one year, TELUS will give $100 to community infrastructure projects for every new TELUS TV customer in Vernon, Powell River, Penticton and Lethbridge. This expands the program already in place in Airdrie and Medicine Hat Alberta and in B.C. in Kelowna, Sechelt, Prince George, and Vancouver Island.
TELUS and its customers partner locally to save lives with pink BlackBerry smartphones
With the launch of the pink BlackBerry Curve 8530 and pink BlackBerry Pearl 3G, TELUS will be giving customers the opportunity to get directly involved in a very local and important fundraising initiative. Starting this month and running until October 31, 2010, TELUS will donate $25 from the sale of each of these pink BlackBerry smartphones to a local breast cancer organization for the purchase of digital mammography equipment at hospitals in the province the device is purchased. Together, TELUS and its customers will advance the early detection and treatment of breast cancer, and thus save lives. The pink BlackBerry Curve and BlackBerry Pearl 3G will be available only from TELUS later in May.
TELUS turns out the lights and turns on the texts for Earth Hour 2010 Canada
TELUS gave its customers another way to get involved in Earth Hour 2010. In cooperation with the Mobile Giving Foundation, TELUS created an easy way for Canadians to text donations to the World Wildlife Fund Canada, the official organizer of Canada's Earth Hour. Through their TELUS mobile devices, customers simply had to text the word "earth" to 45678 to donate $5, to a maximum of $30 each month. Additionally, on March 27, TELUS and its team members joined tens of thousands of businesses and millions of people around the world in turning out the lights in support of Earth Hour 2010.
Go paperless for Earth Day to save 60,000 trees
This Earth Day, TELUS and the Nature Conservancy of Canada (NCC) are encouraging TELUS' wireless customers to go paperless, and save 60,000 trees in just one year. Each week, from April 26 to September 26, TELUS will give $1,000 to a selected client who makes the switch from paper to online billing and will also donate an additional $1,000 to NCC in honour of the winning client. For every client going paperless, TELUS will also donate $2 to the Nature Conservancy of Canada.
Dividend Declaration - 5.3% increase and new dividend payout ratio target guideline
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 July 2, 2010 to holders of record at the close of business on June 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 January 4 and April 1, 2010 and the four dividends paid in 2009. This is the sixth increase in the dividend over the last six years.
The Board of Directors has also approved a dividend payout ratio target guideline of 55 to 65 per cent of sustainable net earnings, up from the previous guideline of 45 to 55 per cent. This prospective target guideline signals management and Board confidence in the outlook of the company into 2011.
Access to Quarterly results information
Interested investors, the media and others may review this quarterly earnings release, 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/May2010/05/c7932.html
Quarterly conference call and webcast presentation
TELUS quarterly conference call is scheduled for May 5, 2010 at 4:30 pm ET and will feature a presentation about our first 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 May 5 until May 15, 2010 at: telus.com/investors or by telephone (1-403-669-1055 or 1-877-353-9587, reservation no. 296209 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 11.9 million customer connections including 6.6 million wireless subscribers, 3.9 million wireline network access lines and 1.2 million Internet subscribers and 200,000 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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