VANCOUVER – Telus is selling 35% of its international call centre and business process services subsidiary Telus International to an Asian private equity firm in a deal worth about $600 million.
Telus said Thursday that it will retain its 65% majority ownership position in Telus International, which it said is valued at $1.2 billion based on the price paid by Baring Private Equity Asia.
Launched in 2005, Telus International provides customer service, IT, and business process services to the telecommunications, utilities, high tech, gaming, finance, retail, e-commerce, travel and logistics, and health care sectors. It has more than 22,000 employees in Canada, the United States, Europe, Central America and Asia, and serves clients in more than 35 languages.
Telus president and CEO Darren Entwistle said that the company will invest the $600 million proceeds in the continued expansion of its broadband wireline and wireless networks across Canada.
The Vancouver-based company also released its first quarter financial results Thursday which saw profits fall 9.1% despite an uptick in revenues.
For the period ended March 31, 2016, Telus reported a 2.6% increase in consolidated operating revenue to $3.1 billion, driven by continued data revenue growth in both wireless and wireline operations. Net income dropped from $415 million to $378 million year-over-year, due to higher restructuring and other costs, an increase in depreciation and amortization expense reflecting, in part, the company’s higher asset base from ongoing investments in its fibre optic and 4G LTE networks, and higher financing costs. Adjusted net income, excluding the effects of restructuring and other costs, decreased 3% to $414 million.
When excluding restructuring and other costs, earnings before interest, income taxes, depreciation and amortization (EBITDA) increased 3.1% to $1.2 billion, reflecting growth in Telus' wireless and wireline operations and operational efficiencies. EBITDA including restructuring and other costs increased 0.4% from a year ago.
Free cash flow of $108 million in the first quarter was lower by $163 million from a year ago, primarily due to higher income tax payments, mainly reflecting a higher final income tax payment for the 2015 income tax year, an increase in interest paid, and higher restructuring disbursements partially offset by lower share-based compensation payments.
In wireless, data revenue increased 8.3% from a year ago, driven by subscriber growth, a larger proportion of higher-rate two-year plans in the revenue mix, a more favourable postpaid subscriber mix, and increased data usage, partially offset by the effects of an economic slowdown, particularly in Alberta.
Wireline data revenue increased 10%, generated by growth in Telus International's business process outsourcing services, an increase in Internet and enhanced data service revenue from continued high-speed Internet subscriber growth and higher revenue per customer, continued Telus TV subscriber growth and higher Telus Health revenues.
In the first quarter of 2016, Telus attracted 31,000 net wireless postpaid, high-speed Internet and TV customers, including 12,000 high-speed Internet subscribers, 11,000 Telus TV customers and 8,000 wireless postpaid customers. These gains were partially offset by the ongoing loss of traditional telephone network access lines and a decline in wireless prepaid customers. Telus ' total wireless subscriber base is up 1.2% from a year ago to 8.4 million, high-speed Internet connections grew 6.7% to 1.6 million, and Telus TV subscribers are higher by 8.4% to just over 1 million.
Telus said that its monthly postpaid wireless subscriber churn rate increased 6 basis points year-over-year to 0.97%, the tenth quarter in the past 11 that this important metric was below one percent, despite increasing competitive pressures due to the simultaneous expiration of two-year and three-year contracts commencing in June 2015. Blended churn of 1.26% in the period is Telus' lowest first quarter churn rate since becoming a national carrier 16 years ago.
"Our revenue and EBITDA growth in the first quarter reflect the quality and resiliency of our operations despite ongoing economic challenges, most notably in Alberta”, said Entwistle in the press release. “We continued to deliver on core elements of our consistent and winning strategy, including sustaining our leadership in customer loyalty, wireline EBITDA growth and wireless postpaid churn of 0.97 per cent."
