May 8, 2014 1:49 pm

Telus posts higher Q1 profit, boosts dividend

A Telus store is seen on Bloor Street West in Toronto, August 15, 2013. THE CANADIAN PRESS/Galit Rodan

Top executives touted the “customers-first culture” at Telus Corp. (TSX:T) as the “secret sauce” behind the company’s industry-leading low churn rates that continued to help drive growth in its wireless, TV and Internet business in the first quarter.

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“This positive start to the year reflects our long-standing strategic focus on investing in advanced broadband technologies and services, and our commitment to delivering exceptional customer experiences,” said outgoing president and CEO Darren Entwistle, who stepped down at the company’s annual meeting on Thursday.

In addition to gaining net additions of 96,000 new postpaid wireless, TV and high-speed Internet customers, the company also achieved a North American industry-leading postpaid wireless churn rate of 0.99 per cent, he said, using the term for customer turnover.

“Importantly, this represents our third consecutive quarter delivering a postpaid churn rate below one per cent and the fourteenth sequential quarter of improving ARPU (average revenue per user), further exemplifying the success of our differentiated customers-first culture coupled with attractive new products and services,” said Entwistle, who has taken on the role of executive chairman.

His replacement as president and CEO, Joe Natale, formerly chief commercial officer, picked up on the theme during a conference call to discuss the company’s earnings.

“It creates strong economics as a whole because its best to keep the customers you already have versus spending money to get new customers . . . clearly a simple equation from that perspective,” said Natale, who variously describe the organizations customer-focused culture as both a “secret weapon” and a “secret sauce.”

Vancouver-based Telus reported a higher first-quarter net profit of $377 million, up from $366 million in the comparable year-earlier period.

The profit translated into earnings of 60 cents per share diluted, up 9.1 per cent from 55 cents in the 2013 period.

Revenue rose five per cent to $2.9 billion compared with $2.75 billion in the same quarter of 2013.

Analysts’ estimates for revenue were $2.87 billion on net earnings per share of 61 cents, according to data compiled by Thomson Reuters.

The telecommunications company also raised its quarterly dividend by two cents to 38 cents per share.

Amid overall customer gains, Telus said it added 48,000 net postpaid wireless subscribers, usually smartphone customers on two-year contracts, although that was down 18.6 per cent from 59,000 in the same quarter last year as the wireless market matures.

But it beat rivals Rogers (TSX:RCI.B), which added 2,000 and BCE (TSX:BCE) which added 34,000 in their respective first quarters.

On Wednesday, BCE Inc.’s chief executive George Cope blamed Canada’s new wireless code of conduct for a drop in the company’s wireless business. The federal regulatory agency introduced changes in December that allowed consumers to cancel their wireless contracts after two years – instead of three – without fees, as well as certain limits on roaming and excess data charges.

Cope said the move to two-year contracts pushed up prices.

Telus wireless network revenues increased by 5.3 per cent to $1.44 billion in the first quarter of 2014, compared to the same period a year ago.

Revenues in its wireline division, which includes TV, Internet and phone services, increased 4.4 per cent to $1.34 billion year-over-year.

Telus said net TV subscribers of 27,000 were lower by 7,000 from the same quarter last year. The total TV subscriber base of 842,000 increased by 130,000 or 18 per cent from a year ago.

High-speed Internet net additions of 21,000 increased by 5,000 over the same quarter a year ago. The high-speed subscriber base of 1.4 million is up 74,000 or 5.5 per cent from a year ago.

Canaccord Genuity analyst Dvai Ghose said Telus had a “peer group leading” quarter with its wireless results. Telus reported a strong quarter in line with expectations, Ghose said in a research note.

RBC Capital Markets analyst Drew McReynolds also said Telus had another strong quarter across the board.

“Subscriber growth was the positive surprise in the quarter,” he said in a note.

Entwistle, who has been president and CEO for 14 years, helped grow into one of Canada’s three major telecommunications companies, alongside Rogers and Bell.

Entwistle started his career at Bell, where his father worked, and went on to be president of U.K.-based Cable & Wireless Communications before returning to Canada to lead Telus.

He helped transform Telus by shelling out what was then considered a staggering $6.6 billion to buy Clearnet Communications, an early cellphone service provider, in 2000, just after he became CEO.

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