VANCOUVER – As at many traditional telcos, growth on the wireless side at Telus is offsetting the losses they are all experiencing in their conventional wireline business.
The company today reported first quarter revenue of $2.35 billion, a 6.6% increase from a year ago. That performance was generated by 10% growth in wireless revenue and 19% growth in wireline data revenue during the three months ended March 31st, as compared to Q1 ’07.
Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) increased 24% to $950 million, largely due to the $173.5 million net-cash settlement feature expense recorded in the first quarter of 2007, reports the big western-based telco. Excluding this expense underlying EBITDA increased slightly by $12 million as ongoing growth in wireless was largely offset by a reduced EBITDA in the wireline segment.
Net income in the first quarter was $291 million, up 49%. However, adjusted to exclude the net cash settlement feature expense, net income decreased 4%. Net income and EPS this quarter also included favourable tax related adjustments of approximately $17 million, compared to $4 million in the first quarter of 2007. Free cash flow was up 21% to $580 million this quarter, driven primarily by higher EBITDA and lower capital expenditures. Capex is down 16.3% in Q1 08, well under the $382 million spent during the first quarter of 2007.
Telus Q1 highlights, from its press release, were:
* External revenues for Telus’ wireless division increased by 10% to $1.1 billion in the first quarter of 2008, when compared with the same period in 2007
* Wireless data revenue increased $51 million or 53% due to the continued adoption of full function smartphones and increased adoption of data services such as text messaging
* Net subscriber additions were 88,400, representing a 2.3% decrease from the same quarter in 2007. Postpaid net additions were 72,400, an increase of 19%, while net prepaid loading decreased 46% to 16,000
* ARPU (average revenue per subscriber unit per month) was relatively stable at $61.88 compared to the same quarter a year ago. The fast-growing wireless data component of $8.72, represented 14% of ARPU while the voice component continued to decline as a result of intense competition
* Wireless EBITDA as adjusted of $502 million is an increase of $38 million over the first quarter of 2007, representing 8.3% growth, due to network revenue growth and lower cost of acquisition (COA) expense, partially offset by increased customer retention costs and network and other expenses to support the 10% growth in the wireless subscriber base. Costs were also incurred for the late March launch of the Koodo brand
* Cost of acquisition per gross wireless addition decreased 27% year-over-year to $319 reflecting lower advertising and promotions cost per unit, a higher proportion of new subscribers from lower cost distribution channels and lower equipment subsidies
* Blended monthly subscriber churn increased to 1.53% from 1.35% a year ago due to higher prepaid churn and shifting product mix to prepaid, combined with higher deactivations associated with introduction of wireless number portability (WNP) in March 2007. Postpaid churn increased slightly
* Cash flow (EBITDA as adjusted less capital expenditures) increased 24% to $438 million in the quarter due to an increase in EBITDA and lower capital spending.
* On the wireline side, external revenues increased by $45 million or 3.7% to $1.25 billion in the first quarter of 2008, when compared with the same period in 2007, as data growth more than offset the declines in local and long distance revenues
* Wireline data revenues increased by $81 million or 19% due to revenues from the two January acquisitions, enhanced data and hosting services, and increased high-speed Internet subscribers. When adjusted for the two acquisitions (Fastvibe and Emergis) and a regulatory adjustment, underlying data growth was approximately 8%.
* Telus added 20,300 net high-speed Internet subscribers, a 37% decrease from a year ago reflecting strong competitive activity and market maturity
* EBITDA as adjusted of $447.5 million decreased $27 million or 5.6%, due to increased costs from acquisitions, cost of sales including Telus TV COA, initial costs for new enterprise customers and increased costs to maintain higher service levels.
* Network access lines declined by 39,000 in the quarter and are down 3.6% from a year ago. This reflects continued residential line losses from ongoing competitive activity and wireless substitution, partially mitigated by an increase in business access lines
* Cash flow (EBITDA as adjusted less capital expenditures) decreased $11 million or 5.4% to $192 million in the quarter due to lower EBITDA as adjusted partially offset by lower capital expenditures.
