Telus Corp. added fewer new wireless customers than its biggest rivals in the first quarter and its signature low rate of subscriber turnover even edged upward, but chief executive officer Darren Entwistle isn’t worried.
Speaking with analysts on Thursday after the Vancouver-based company reported its financial results, Mr. Entwistle said the month of January remained particularly competitive owing to “the flow-through of aggressive holiday promotions,” referencing the shopping frenzy in December, when the three national carriers offered deep discounts on plans with large data buckets in Ontario, British Columbia and Alberta.
Telus finished the first quarter with 48,000 new wireless subscribers on contracts, more than the 35,000 analysts had predicted, but behind Rogers Communications Inc. and BCE Inc., which added 95,000 and 68,487, respectively. And Shaw Communications Inc.’s regional carrier, Freedom Mobile, added 93,500 new customers, a record for the company, as it began to offer the iPhone for the first time (although its quarter ended Feb. 28 and is not directly comparable).
It all points to a wireless market that keeps expanding at a fast pace and Mr. Entwistle insists Telus remains well positioned to seize its share of that growth.
“I continue to believe that the organization that will do well within a competitive environment is the organization that’s got the best loyalty and retention because it’s got the best customer service and the best network performance,” he said, adding that Telus also benefits from growth in its home internet and television business as well as on the wireless front.
Telus’s wireless subscriber turnover, or churn, was 0.95 per cent for the quarter, much lower than BCE and Rogers, but up slightly from 0.93 in the same period last year. Mr. Entwistle said churn was about 1.15 per cent for the month of January and then below 0.85 for the following two months, after what he called the “pollution” of the Christmas promotional period died down.
“In the absence of that … the performance in February and March is more indicative or more predictive of what you can expect from this organization.”
Canada’s Big Three carriers are under pressure to convince regulators and the government that their wireless prices are competitive. The Canadian Radio-television and Telecommunications Commission (CRTC) recently required the trio to submit proposals for low-cost, data-only plans. In addition to those, the carriers insist they already offer a range of price options across budget and premium brands (Telus operates its main brand, plus Koodo and Public Mobile, for example).
The regulatory focus is on low-price plans, but the spike in demand in December, when the Big Three offered 10 gigabytes of data for $60 a month, suggests customers also want better prices for plans with more than just basic bandwidth.
“There is a demand for more data – I think that’s the current trend,” Telus chief financial officer Doug French said in an interview, adding, “The volume [of data] that our customers are getting is increasing year over year over year and the cost of the infrastructure to build national networks in Canada is not going down.”
“We’re building the best networks in the world and we’re offering rate plans with volume increases that continue and you can see our ARPU [average revenue per user] is actually slowing,” Mr. French said. Telus charged wireless customers an average of $66.51 a month in the first quarter, up 1.5 per cent year over year, compared with an increase of 3.9 per cent in the same period last year.
Telus said its profit slipped 2.4 per cent to $412-million in the quarter, attributing that to restructuring costs tied to efficiency initiatives as well as an increase in the corporate tax rate in B.C.
Revenue increased by 6 per cent to $3.4-billion, but expenses were up even more, surging 8.2 per cent to $2.1-billion, as it spent heavily to woo wireless customers with up-front subsidies on smartphones.
EBITDA, which increased by 5.2 per cent to $1.3-billion, and adjusted earnings per share of 73 cents were roughly in line with analyst estimates (EBITDA means earnings before interest, taxes, depreciation and amortization).
Telus also increased its dividend by 6.6 per cent on an annual basis, hiking it to 52.5 cents a share.
The company added 22,000 internet subscribers and 6,000 new TV customers in the quarter.
Macquarie Capital Markets analyst Greg MacDonald said the results were “in line, though with a positive spin on wireless metrics, which is important in the context of our sector investment thesis; the Canadian wireless industry is humming, so strongly [prefer] stocks with the most wireless exposure.”