Results in line with most recent guidance
VANCOUVER, Feb. 12 /PRNewswire-FirstCall/ - TELUS Corporation reported fourth quarter 2009 financial results consistent with the company's most recent public guidance. Revenue of $2.4 billion was a slight decrease of $11 million over the same period a year ago reflecting continued declines in traditional voice services, which offset growth in data and wireless revenues. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) decreased by 16 per cent from the fourth quarter of 2008, primarily due to higher restructuring costs from ongoing operating efficiency initiatives and higher defined benefit pension plan expenses. When excluding restructuring costs and these pension plan expenses, underlying EBITDA decreased by eight per cent.
Net income in the fourth quarter was $156 million and earnings per share (EPS) were 49 cents, which were decreases of approximately 45 per cent. Net income and EPS included, as previously communicated, the unfavourable after-tax impact of approximately $69 million or 22 cents per share related to the costs of early partial redemption of June 2011 notes from the successful $1 billion refinancing in December. Net income and EPS included favourable income tax-related adjustments of approximately $79 million or 25 cents per share this quarter, compared to $32 million or 10 cents in the same period a year ago. Excluding the debt redemption and income tax-related adjustments, the underlying net income for the quarter was $146 million or 46 cents per share compared to $253 million or 80 cents for the same period a year ago.
Free cash flow of negative $35 million represented a decrease of $96 million from the same period a year ago, primarily due to higher customer retention costs, and financing costs related to the early partial redemption of June 2011 notes, partially offset by lower capital expenditures. For the full year, 2009 free cash flow was $500 million, an increase of 39 per cent with the primary factor due to the prior year payments for advanced wireless services (AWS) spectrum licenses.
In the fourth quarter, TELUS added 105,000 net new customer connections as growth in wireless, TELUS TV and high speed Internet subscribers partially offset by decreases in traditional landline phone and legacy data connections. Total customer connections for the year increased by 284,000 to 12 million.
FINANCIAL HIGHLIGHTS
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C$ and in millions, except per share amounts 3 months ended
December 31
(unaudited) 2009 2008 % Change
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Operating revenues 2,443 2,454 (0.4)
Operations expense 1,577 1,479 6.6
Restructuring costs 77 38 n.m.
EBITDA(1) 789 937 (15.8)
Income before income taxes 108 373 (71.0)
Net income(2)(3) 156 285 (45.3)
Earnings per share (EPS), basic(2)(3) 0.49 0.90 (45.6)
Cash provided by operating activities 624 747 (16.5)
Capital expenditures 514 631 (18.5)
Free cash flow(4) (35) 61 n.m.
Total customer connections (millions) 11.96 11.67 2.4
(1) Earnings before interest, taxes, depreciation and amortization
(EBITDA) is defined as Operating revenues less Operations expense
less Restructuring costs. See Section 6.1 of Management's review of
operations.
(2) Net income and EPS for the three month period in 2009 included
favourable income tax-related adjustments related to prior year tax
matters of approximately $79 million net of tax or 25 cents per share
respectively, compared to $32 million or 10 cents for the same period
in 2008.
(3) Net income and EPS for the three month period 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 of Management's review of operations.
Darren Entwistle, TELUS president and CEO, noted that the results are consistent with TELUS' latest guidance.
"There is no question that the last year was a challenging one economically, but also one where we progressed game-changing capital projects and made significant investments in operational efficiency to improve our cost structure. Combined, these initiatives will launch TELUS into its next stage of net income and cash flow growth," Mr. Entwistle said.
Mr. Entwistle noted, "The TELUS team is looking forward to 2010 with hardened optimism as we start benefiting from the launch of Canada's largest 3G+ wireless network in November, expansion of HD TV coverage in B.C. and Alberta, plus the introduction of TELUS TV's new Microsoft Mediaroom platform in February. The launch of Mediaroom sets TELUS TV apart in the marketplace with a powerful new customer home entertainment experience. We look forward to capitalizing on these developments in the current year and into 2011 and beyond."
Robert McFarlane, TELUS executive vice-president and CFO said, "TELUS made significant progress with major strategic investments in 2009 such as the new wireless HSPA and wireline ADSL2+ higher speed broadband networks that we expect to positively impact future financial results. We are also looking forward to significant cash flow expansion as consolidated capital investment levels return to more historical levels in 2010. In December, TELUS successfully accessed the Canadian capital markets at an attractive 5.05 per cent interest rate for $1 billion of new debt, which funded the early redemption of a third of the US dollar denominated 8% notes due in June of 2011."
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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 (including those
associated with the deployment and operation of the new national high-
speed packet access network and associated introduction of new products,
services and systems) referred to in the Management's discussion and
analysis in the 2008 annual report, and in the 2009 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.
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OPERATING HIGHLIGHTS
TELUS wireless
- External revenues increased by $37 million or 3.1% to $1.2 billion in
the fourth quarter of 2009, compared with the same period in 2008,
with equipment sales and other revenue growth of $56 million, which
included a full quarter of revenue from newly acquired Black's Photo,
offsetting a decline in network revenue.
- Wireless data revenue of $243 million increased $40 million or 20%
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.
- ARPU (average revenue per subscriber unit per month) declined by 7.7%
to $57.38 compared to the same quarter a year ago, as voice ARPU
continued its downward trend due to declining minutes of use and plan
optimization by consumers and businesses, lower business-oriented
Mike service revenue, increased proportion of Koodo Mobile customers,
and decreased inbound roaming revenues. The fast growing data
component increased by 13% to $12.60 and represented 22% of ARPU.
- Net subscriber additions of 122,000 were 18% lower than for the same
period a year ago. The year-over-year decrease was primarily due to
lower prepaid net additions and the company's focus on launching a
number of major wireless strategic initiatives that began ramping up
in November. Higher value postpaid net additions were 109,000 and
represented 89% of total new wireless customers, up from 80% in the
year-ago period.
- Blended monthly subscriber churn was essentially flat year-over-year
at 1.60%.
- EBITDA of $435 million decreased by 12% due to declining voice ARPU
and increased retention costs.
- Cost of acquisition per gross addition increased by only 2.2% year-
over-year to $380, reflecting higher advertising and promotional
expenses related to the new 3G+ wireless network launch in November,
and higher cost of subsidizing smartphone devices (notably including
the Apple iPhone), partially offset by lower commissions.
- Cost of retention of $133 million increased by $28 million,
reflecting higher costs associated with increased retention volumes
to support customer migrations to smartphones, including the Apple
iPhone.
- Simple cash flow (EBITDA less capital expenditures) decreased by $13
million to $243 million in the quarter due to lower EBITDA,
partially offset by lower capital spending.
TELUS wireline
- External revenues decreased by $48 million or 3.8% to $1.2 billion in
the fourth quarter of 2009, when compared with the same period in
2008, largely due to declines in voice local and long distance
revenues.
- Data revenues increased by $26 million or 4.9% due to TELUS TV
subscriber growth, increased Internet, enhanced data and hosting
services, and higher managed workplace revenues.
- TELUS high-speed Internet net additions of 11,000 were down from
19,000 in the same period a year ago, due to a maturing market, a
decline in household formation, as well as promotional and winback
activity by cable-TV competitors.
- TELUS TV net additions were 33,000, an increase of 120% over the same
period last year, due to improved installation capabilities, enhanced
broadband coverage and capability and the addition of TELUS Satellite
TV service.
- Network access lines (NALs) declined by 52,000 in the quarter to 4
million, down 4.7% from a year ago. Residential NAL losses of 41,000
slightly improved year-over-year due to more effective winbacks and
the positive impact from bundled service offerings, including TELUS
TV. Business NALs declined by 11,000 primarily in Western Canada, due
to economic and competitive factors, which more than offset increased
business lines in Ontario and Quebec.
- EBITDA of $354 million decreased by $91 million or 20% in large part
due to higher restructuring costs and pension expenses. EBITDA
excluding restructuring costs and pension expenses decreased by $20
million with cost savings partially offsetting the decline in
revenue.
- Simple cash flow (EBITDA less capital expenditures) decreased $18
million to $32 million in the quarter as lower EBITDA was partially
offset by lower capital expenditures.
CORPORATE AND BUSINESS DEVELOPMENTS
Exciting developments with TELUS TV
In early February, TELUS launched a new TELUS IP TV platform in B.C.'s Lower Mainland and parts of Alberta, bringing its customers the latest in carrier-grade, digital TV technology. Clients on the new service, powered by Microsoft Mediaroom and available exclusively by TELUS in Western Canada, have a single enhanced Personal Video Recorder (PVR) allowing them to record and watch TV programs on up to six TVs throughout their home. Clients can use impressive new features like PVR Anywhere, enabling them to record a show on one television and watch it on another television in another room in the house, record over 300 hours of Standard Definition programming or 120 hours of High Definition (HD) programming, record multiple programs at one time, use up to six digital boxes, and access HD programming on all televisions. These and additional features such as picture correction and instantaneous channel changing are expected to provide differentiation over services offered by cable-TV competitors.
TELUS continues to expand the reach of HD TV service and Internet-based TELUS TV to other communities. Notably, HD service coverage in greater Vancouver increased sequentially in the fourth quarter from half to almost three quarters of households. We also launched TV service in seven new communities in British Columbia and Alberta during the quarter, including Mission, Chilliwack, Campbell River, Sardis, Medicine Hat, Lethbridge and Cochrane. TELUS customers can now bundle IP TV with their home phone and Internet services in these and dozens of other communities. Smaller communities benefit from TELUS Satellite TV service that launched in mid-2009 and covers over 90% of the households in B.C. and Alberta.
These developments have been made possible by and leverage the significant investments TELUS made in 2009 to enhance the coverage and capabilities of its broadband network.
TELUS wireless major developments
In November, TELUS announced a number of developments that significantly improved TELUS' competitive position in wireless. The launch of Canada's largest 3G+ network offers customers HSPA/HSPA+ technology for increased wireless data download speeds of up to 21 megabits per second and an enhanced range of wireless data applications.
The new network allows TELUS to benefit from the future global ecosystem, economies of scale and enhanced roaming revenues. The 3G+ network provides TELUS immediate access to the world's best selection of devices from Apple, HTC, Huawei, LG, Nokia, RIM, Samsung, Sierra Wireless, and others including new devices powered by the Google Android operating system. This enables us to offer customers better choice in terms of devices, services and applications.
To complement the new smartphone line-up, and based on consumer research, TELUS introduced a suite of Clear Choice rate plans to simplify its approach to the market place. Clear Choice plans have no system access or carrier 911 fees, and a reduced number of options, making it easier for customers to choose a plan right for them, while at the same time supporting enhanced efficiency.
Also in November, TELUS expanded its wireless distribution capabilities by launching wireless sales in Black's Photo Stores, which were acquired in September. Black's is a national imaging and digital retailer in Canada, with 113 stores that are primarily in premium mall locations. Eighty-one, or 72 per cent, of Black's stores are in Ontario, where TELUS is targeting increased distribution.
TELUS implements enhanced wireless emergency 911 service
Late in January, TELUS implemented phase II enhanced wireless 911 (e911) services across its three wireless networks, which are based on HSPA, CDMA, and iDEN (Mike) technologies. The new technology allows TELUS and other wireless carriers to pass enhanced location information to 911 operators, helping them to be better able to locate an emergency 911 caller using a wireless device with the applicable technology. The system uses a combination of the most advanced GPS technology available, as well as cell tower trilateration to provide the most accurate possible location information, depending on the handset type. Each technology has different strengths, with Assisted GPS providing the best possible location. In ideal conditions, Assisted GPS should be able to locate a caller within 50 meters.
Phase II e911 is a complex project requiring coordination between wireless carriers, and third party 911 operator centres (called public safety answering points or PSAPs), and emergency services. While TELUS is offering this enhanced service across its networks, a small number of PSAPs have not yet integrated the required technology or training. TELUS is continuing to work with those PSAPs to implement the new system as soon as they are ready.
TELUS issues long-term debt to fund early partial redemption of 2011 Notes
In early December, TELUS issued 10-year Canadian dollar notes, raising approximately $1 billion. The net proceeds of the new 5.05 per cent notes were used to fund the partial redemption of notes due in June 2011. TELUS redeemed US$577 million of the 8% US$1.925 billion notes due in 2011, and paid $315 million to terminate associated cross-currency interest rate swaps. The partial redemption reduces refinancing risk in 2011, provides a lower effective interest rate for the replaced debt in 2010 and beyond and extended our average debt maturity by an additional year to five years.
TELUS to adopt "say on pay"
In January, TELUS announced that its Board of Directors has unanimously approved the adoption of a non-binding advisory vote by shareholders on executive compensation. This vote, to be held at the annual general meeting next year, will give TELUS shareholders an opportunity to give direct feedback to the Board of Directors on the company's approach to executive compensation. Being one of the first large corporations in Canada to voluntarily offer a 'say on pay' vote to shareholders, continues TELUS' long-standing commitment to best-in-class corporate governance practices.
Award of Excellence for TELUS corporate reporting
TELUS received an Award of Excellence for Corporate Reporting from the Canadian Institute of Chartered Accountants (CICA) in its sector. The award is for TELUS' 2008 financial reporting including its annual report, information circular, corporate social responsibility (CSR) report, and the online investor relations and corporate governance sites. This is the 15th straight year CICA has recognized TELUS for excellence in corporate reporting. The judges remarked that TELUS' corporate social responsibility practices clearly demonstrate the company's commitment to the environment. They also commended TELUS for its clear annual targets, an outstanding discussion of TELUS business and environment, an honest assessment of TELUS strengths and achievements, an easy-to-navigate financial statement, transparent scorecard disclosure, an online annual financial statement second to none and hotline services in many languages, making TELUS unique to the telecommunications industry.
TELUS named most outstanding philanthropic corporation with global award
TELUS in January was named the top philanthropic corporation for 2010. TELUS is the first Canadian company to ever receive this global award - the Freeman Philanthropic Services Award for Outstanding Corporation from The Association of Fundraising Professionals (AFP). Paulette V. Maehara, president and CEO of AFP said "Their approach to philanthropy and their demonstrated commitment to employee involvement through their charitable giving and volunteerism programs sets the standards for corporations around the world." The AFP represents 30,000 members in 207 chapters throughout the world, working to advance philanthropy through advocacy, research, education and certification programs.
Guided by the motto, "We Give Where We Live," TELUS, its team members and retirees gave $24 million in 2009 alone to a variety of community initiatives, including support to Children's Hospitals, TELUS Worlds of Science, Alpine Canada Alpin, and the Juvenile Diabetes Research Foundation. Central to TELUS' realization of innovation and philanthropic giving, nine TELUS Community Boards - Victoria, Vancouver, Edmonton, Calgary, Ottawa, Toronto, Montreal, Rimouski and Atlantic Canada - guide the company's local community support.
TELUS Calgary Community Board appoints new chair
In February, Ken King, president and CEO of the Calgary Flames NHL hockey team, was announced as the TELUS Calgary Community Board's new chair. He succeeds Harold and Marilyn Milavsky in this role. Mr. King's current community involvement spans numerous organizations, including co-chair of REACH, the Calgary Committee to End Homelessness, the Calgary Sport Tourism Authority, the Calgary Exhibition & Stampede, Borden Ladner Gervais CIAU Athlete of the Year Awards Committee and the Rotary Club of Calgary.
TELUS connects with Haiti relief efforts
Haiti was hit by an earthquake in January leaving an estimated three million people injured or displaced. TELUS, in conjunction with the Mobile Giving Foundation, used new wireless technology to allow customers to text donations through their mobile devices. Through TELUS, customers could text a $5 donation up to six times a month to charitable organizations working in Haiti, including the Salvation Army, Red Cross, Clinton Giustra, Care Canada, UNICEF Canada, World Vision, and Plan Canada. This has resulted in $110,000 of donations pledged until the end of January, which is matched by the federal government. TELUS also donated $25,000 to the Salvation Army and $25,000 to the Red Cross to assist their work in Port au Prince, Haiti. In addition to funds being donated by TELUS and its customers, TELUS supported a fundraising concert at TELUS Theatre in Montreal.
TELUS one of Canada's 10 most admired corporate cultures
Waterstone Human Capital named TELUS to its list of Canada's 10 Most Admired Corporate Cultures in Canada. The list recognizes Canadian organizations for having a culture that has helped them enhance their financial performance and sustain a competitive advantage. TELUS was judged on five components: vision and leadership; cultural alignment, measurement and sustainability; rewards, recognition and innovative business achievement; corporate performance; and corporate social responsibility. TELUS is the only telecom company to be named to this list in its five-year history. The judges noted the company's strong leadership as the driver behind the culture of innovation they see within TELUS - specifically the launch and success of Koodo Mobile, the acquisition of Emergis and the company's continued focus on transforming Canadian health care.
SickKids Toronto receive a healthy dose of social networking
TELUS and Kids' Health Links Foundation launched Upopolis.com at The Hospital for Sick Children (SickKids) in Toronto. Upopolis is an online social network designed especially for young patients in hospital. Upopolis aims to make hospital walls virtually invisible between family and friends through the power of social networking. SickKids is the largest centre in Canada to offer this site to its patients. Upopolis is now in use at six hospitals and healthcare organizations across Canada.
Awards for business excellence, community and environmental involvement
TELUS and its team members were honoured with a number of other awards in the fourth quarter including:
- 2009 Health Transformation Company of the Year by the Information
Technology Association of Canada (ITAC). The award honours TELUS
Health Solutions as the healthcare information and communication
technology company that has most fundamentally transformed healthcare
in 2009 through the use of health informatics.
- 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.
- The American Society for Training and Development recognized TELUS
with a BEST Award, designating the company as one of the top
organizations worldwide for employee learning and development that
drives enterprise-wide success.
- Capacity Magazine's Global Wholesale Award for Best Regional North
American Wholesale Offering, for demonstrating thought leadership in
the development and implementation of its wholesale strategy within
North America. TELUS is the first Canadian company to receive the
award.
- 2009 Prix Arts-Affaires de Montréal in the large enterprise category
recognized TELUS for its support of Montreal arts and cultural
organizations. The award is an initiative of the Board of Trade of
Metropolitan Montreal and the Conseil des arts de Montréal, in
collaboration with daily newspaper Le Devoir and ARTV.
- Award from Greener Containers, Packaging and Printed Matter: Today's
Reality, Today's Opportunities! organized by Éco Entreprises Québec.
TELUS submitted its new plastic-free eco-packaging designed for phone
cases, chargers, memory cards and other accessories. The new
packaging will enable TELUS to save annually close to 1,000 trees,
eliminate 30 kilograms of solid waste, and trim consumption by 2,675
litres of water and nearly 4,000 cubic metres of natural gas.
DIVIDEND DEVELOPMENTS
TELUS dividend reinvestment program offers 3% share price discount
In November, the Board of Directors approved an amendment to TELUS' dividend reinvestment and share repurchase program (DRISP), for the benefit of participating shareholders. Beginning with the common and non-voting quarterly dividend paid on January 4, 2010, TELUS is issuing non-voting shares from treasury for reinvested dividends at a three per cent discount from the average market price. This compares to the previous practice of purchasing shares in the open market. The DRISP participation increased from four percent to 14 per cent for the January 2010 dividend. Full details of the plan are available at telus.com/drisp.
Dividend Declaration
The Board of Directors has declared a quarterly dividend of forty-seven and one half cents ($0.475) Canadian per share on the issued and outstanding Common shares and forty-seven and one half cents ($0.475) Canadian per share on the issued and outstanding Non-Voting shares of the Company payable on April 1, 2010 to holders of record at the close of business on March 11, 2010.
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 first, second, and third quarter 2009 report on our website at telus.com/investors.
Full quarterly earnings release available at: http://www.newswire.ca/en/releases/archive/February2010/12/c7961.html
Quarterly conference call and webcast presentation
TELUS quarterly conference call is scheduled for February 12, 2010 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 12 until February 22, 2010 at: telus.com/investors or by telephone (1-403-669-1055 or 1-877-353-9587, reservation no. 239403 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 6.5 million wireless subscribers, 4 million wireline network access lines and 1.2 million Internet subscribers and 170,000 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 more than 3 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 ever to receive this prestigious international recognition.
For more information about TELUS, please visit telus.com.
SOURCE TELUS Corporation
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