VANCOUVER – Growth in its wireless and surprisingly, wireline businesses, drove fourth quarter revenue up by 6% at Telus to $2.85 billion from a year earlier, while EBITDA increased by more than 8% to $947 million. Net profit was $291 million, up 23% compared to earnings of $237 million in the same period last year. Earnings per share (EPS) rose 17% to $0.89.
Consolidated revenue growth was generated by an 8% increase in wireless revenue, due to continued subscriber and data average revenue per unit (ARPU) growth, and a 13% increase in wireline data revenue. Telus said its consolidated EBITDA growth reflects higher wireless EBITDA driven by revenue growth and higher margins.
The carrier says its plans to generate further growth in 2013 through wireless net additions combined with smartphone adoption and upgrades, continued Optik TV and high-speed Internet subscriber growth, while assuming ARPU growth across these services. And with $1.9 billion of available liquidity it says it’s eager to do some spectrum shopping in 2013.
However TV additions, for both IP-based Optik TV and satellite Telus TV of 41,000 were lower by 15,000 than the same quarter last year.
The telecom finished the year with 13.1 million customer connections, adding 132,000 connections in the final quarter of the year. In the quarter, it added 123,000 new postpaid wireless customers, 41,000 new TV subscribers and 23,000 high-speed Internet customers, partially offset by losses of prepaid wireless customers, phone lines and dial-up Internet. Telus' total wireless subscriber base of 7.7 million is up 4.5% year-over-year, Telus TV subscriber base of 678,000 is up 33%, and the number of high-speed Internet customers reached 1.3 million, up nearly 7%.
Free cash flow in the fourth quarter increased 29% from a year ago to $263 million primarily due to higher EBITDA. For the year, free cash flow increased 34% to $1.3 billion.
"2012 was an exceptional year for Telus, fuelled by our long-term strategy of investing in broadband data technology and services and applications within our core business. This has been achieved whilst maintaining an unremitting focus on putting customers first in every aspect of our business,” said Darren Entwistle, Telus President and CEO.
He noted that in 2012 it added 385,000 new customers across its Optik TV, high-speed Internet and wireless lines of business.
“Our valued customers are staying with us longer as evidenced by our industry leading 1.12% postpaid wireless monthly churn rate. This operational performance translated into strong fourth quarter 2012 financial results as demonstrated by growth in wireless data revenue of 22% and in wireline data revenue of 13%.”
He added that operating efficiency is a key focus of Telus made necessary by the competitive intensity of the industry and legacy business margin pressure.
“Accordingly, we are implementing an earnings enhancement programme over the next 36 months to drive improvements in annual EBITDA of $250 million by 2015. This is reflected in the 56% increase in our planned 2013 restructuring charge of $75 million and our 2013 targets, which include a significant improvement in our wireline EBITDA trend in 2013."
John Gossling, Telus Executive Vice-President and CFO said in 2013 it’s targeting EPS growth of up to 14%.
“This is made possible by our planned EBITDA growth not only in the wireless business, but also in wireline, facilitated by on-going major strategic network and technology investments, as well as a continued intense focus on operational efficiency initiatives."
Telus wireless highlights:
• External wireless revenues increased by $109 million or 7.7% to more than $1.5 billion in the fourth quarter of 2012, compared to the same period a year ago. The growth was driven by continued growth in subscribers and ARPU.
• Data revenue increased by $104 million or 22% to $570 million, which makes up 41% of network revenue. Data ARPU increased by $3.64 or 17% to $25.29. These increases were due to continued strong adoption of smartphones and applications, as well as related data plans, higher roaming volumes, increased revenues from text messaging and growth in mobile Internet devices and tablets.
• Blended ARPU increased by $1.87 or 3.2% to $60.95 as data ARPU growth more than offset a moderating 4.7% voice ARPU decline. This is the ninth consecutive quarter of year-over-year growth in blended ARPU.
• Monthly postpaid subscriber churn was 1.12%, down 11 basis points from a year ago, while blended churn decreased 16 basis points to 1.51 per cent. This is the best fourth quarter churn result in six years, reflecting Telus' successful Customers First marketing and service approach, investments in retention and lower churn on smartphones.
• Total wireless net additions of 112,000 were lower by 17,000 year-over-year, as postpaid net additions of 123,000 were offset by a loss of 11,000 lower ARPU prepaid subscribers. Postpaid net additions, which declined by 17% from a year ago, were impacted by lower gross additions, partly offset by lower churn.
• Total wireless subscribers were up 4.5% from a year ago to 7.67 million, while the proportion of high-value postpaid subscribers grew to 85%. Smartphone subscribers now represent 66% of Telus postpaid subscriber base, which is up from 53% a year ago.
• Wireless EBITDA of $569 million increased $69 million or 14% over last year due to strong network revenue growth and expense management. The EBITDA margin increased by 2.0 points to 36.9%. Simple cash flow (EBITDA less capital expenditures) increased by $46 million or 14% to $378 million in the quarter. EBITDA growth was partially offset by increased capital spending related to the ongoing investments in Telus' 4G network capacity and coverage.
Telus wireline highlights
• External wireline revenues increased by $52 million or 4.1% to more than $1.3 billion in the fourth quarter of 2012, when compared with the same period a year ago. This growth was generated by increased data service and equipment revenues, partially offset by moderate declines in legacy voice and other revenues.
• Data service and equipment revenues increased by $90 million or 13%, due primarily to strong growth in the TelusTV subscriber base and high-speed Internet and enhanced data services, TV and high-speed Internet rate increases and higher data equipment sales to businesses.
• TV additions, both IP-based Optik TV and satellite Telus TV of 41,000 were lower by 15,000 than the same quarter last year, as lower gross additions were partly offset by a significant improvement in churn. The total TV subscriber base of 678,000 is up 33% or 169,000 from a year ago.
• High-speed Internet net additions of 23,000 were stable year over year, and reflect successful promotions and the pull-through effect of Optik TV sales. Telus’ high-speed subscriber base of 1.3 million is up 6.8% or 84,000 from a year ago.
• Total network access lines declined 5.2% from a year ago to 3.4 million. Residential lines are down 7.7% over last year, reflecting ongoing wireless and Internet substitution and competition. Business lines are down 7,000 in the quarter and 39,000 for the year, reflecting ongoing price-based competition in the small and medium business market and customer adoption of IP services.
• Wireline EBITDA of $378 million increased by $4 million or 1.1% due to improving Optik TV and Internet margins resulting from price increases, a lower cost of subscriber acquisition and subscriber growth. This is the first quarter-over-quarter increase in two years.
• Simple cash flow (EBITDA less capital expenditures) increased by $18 million or 60% to $48 million in the quarter due to lower capital spending and higher EBITDA.
