VANCOUVER – While still reeling from this week’s income trust announcement from the Federal government that would seem to put the kibosh on Telus’ previously announced conversion plans, the company reported solid third quarter results on Friday.
The company reported a 7% increase in revenue compared to a year ago to $2.2 billion "due to continued strong wireless and data growth," says the quarterly release. EBITDA increased 13% to $952.4 million for the quarter ended September 30th.
Operating income came in at $569.1 million, a jump of 32.2% while net income rose 68.1% to $319.6 million. Free cash flow, however, dropped by 9.1% to $528.3 million.
"Third quarter results showed continued wireless and data growth consistent with our national strategy, which drove strong consolidated revenue and earnings," said company CEO Darren Entwistle. "Notably, for the first time, Telus generated more than 50% of consolidated EBITDA from its fast growing wireless operations. We were also pleased to experience resiliency in our wireline segment as a result of strong data revenues, which offset increased competitive pressures affecting local and long distance revenues. Data revenues increased 9% supported by a 41,500 increase in our high-speed Internet base and continued growth in enhanced data and business services," he said.
During the company’s conference call with the financial community, Entwistle said most of the new high speed Internet customers in its regions are signing on with Telus.
Data revenues increased 9.2% driven by strong high speed Internet and enhanced data service growth while long-distance revenue declined 10% to $199 million, reflecting industry trends of lower volumes, strong price competition and technological substitution, said the company’s release.
High-speed Internet net adds were 41,500 in the quarter, up significantly from a year ago bringing Telus’ total Internet subscriber base to 1.1 million.
However, on the traditional wireline side, network access lines declined by 40,000 in the quarter, down 2.8% from a year ago "reflecting residential line losses from ongoing competitive activity and wireless substitution," said the company.
The company is still not making public its customer numbers for Telus TV, its digital television service. However, "early results are encouraging," said Entwistle.
"Telus is installing advanced equipment in more than 7,000 sites and running fibre optic cable closer to customer homes to drive faster Internet access speeds in support of new offerings, including Telus TV," says the press release. This broadband build complements a rural capital investment program to bring high speed Internet services to more than 450 additional remote communities in British Columbia, Alberta, and eastern Quebec by 2010.
"In the quarter, Telus began the commercial launch of Telus TV in select Vancouver neighbourhoods. The neighbourhood-by-neighbourhood rollout follows similar successful launches of digital TV service in Calgary and Edmonton in 2005."
As for the income trust changes, "Telus is assessing the impact of the unexpected announcement, by Canada’s Finance Minister that income trusts will be taxed in a manner similar to corporations, on the company’s proposal it reorganize into an income trust. As a result of the October 31 announcement, there can be no assurance at this time that Telus will proceed with the proposed income trust conversion it announced September 11," said the release.
"Telus is disappointed at the lack of consistency in the taxation legislation environment and that the government would make such a fundamental shift in policy without giving investors and Canadian companies the benefit of consultation or notice they were considering changing the rules. The lack of consistency makes it difficult for any company to make major long-term strategic decisions. As proposed, the new trust tax policy discriminates against Telus investors and as such Telus considers it unfair. If Telus completes its trust conversion as previously planned, then Telus would not receive an equitable tax treatment compared to existing publicly traded trusts for the four years ending 2010."
