Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers, CFO says

Open this photo in gallery:

Telus Corp. T-T reported higher third-quarter profit and raised its dividend, despite competitive headwinds in the sector that put pressure on the telecom’s new wireless subscriber numbers.

In its results released Friday, the company lowered telecom revenue growth guidance for 2024 to “slightly below” its expected range of 2 per cent to 4 per cent, citing an intensely competitive wireless market. Canada’s mobile providers have offered aggressive promotional pricing to win customers this year – a trend that is likely to continue into the typically discounted holiday season.

Telus posted net income of $257-million or 19 cents a share, up 87 per cent from last year as a result of customer growth across its various business lines, broad-based cost reduction efforts and better margins across its non-telecom businesses. (Last year’s income was affected by higher restructuring and financing costs.) Operating revenue was $5.1-billion, up 1.8 per cent.

Telus added net 130,000 wireless subscribers during the quarter, in line with analyst expectations but down 30,000 from last year. This compared with 102,000 for BCE Inc. BCE-T and 194,000 at Rogers Communications Inc. RCI-B-T

Average revenue per user (ARPU) was down by 3.4 per cent, similar to last quarter. Telus said this was because customers were signing up for plans with lower base rates. The company’s churn rate – the measure of how many customers cancelled or did not renew subscriptions during the quarter – was also up, but less so than its competitors.

“In a tough operating environment and relative to peers, we view Q3/24 results that were in line to slightly better than forecast as the best of the bunch,” said RBC Dominion Securities Inc. analyst Drew McReynolds. Telus shares closed up 79 cents at $21.81 on the Toronto Stock Exchange Friday.

Overage and roaming revenues fell this quarter, another trend common across the industry, as subscribers are increasingly opting for plans with more or unlimited data.

“Overall, this was a relatively quiet update for [Telus], which will probably be welcomed by telecom investors given recent sector developments,” said Desjardins analyst Jerome Dubreuil in a note to investors Thursday morning. In the past few weeks, Rogers raised $7-billion in a structured equity deal to pay down debt and BCE Inc acquired a U.S. fibre internet company for US$5-billion .

On a call with analysts, Telus chief executive officer Darren Entwistle said the company still sees “significant opportunities” in fibre and 5G revenue growth, as well as opportunities for the company to improve cost efficiency.

The company also announced it was raising its dividend by 3.4 per cent, which was expected by analysts. Investors may be sensitive to this hike, after news this week that Bell Canada owner of BCE Inc. paused increases to its dividend for the first time in 16 years.

BCE’s dividend is currently yielding about 10 per cent, while Telus’s dividend yields about 7.7 per cent. Mr. Dubreuil said he considers Telus’s payout ratio high, but that that should improve in future years as the company increases its free cash flow.

Meanwhile, revenues from Telus’s health and agriculture segments were up 4 and 20 per cent, respectively, from last year.

Several years ago, Telus was expected to spin those businesses out with initial public offerings, but has not yet done so after the poor performance of its Telus International spinout, whose stock has dropped nearly 90 per cent since pandemic highs.

Telus chief financial officer Doug French said in an interview Friday that the company is still strategizing around bringing in a partner or doing an initial public offering to help the businesses scale up. “We’ve had a lot of interest from third parties to date,” Mr. French said. “There is definitely opportunity that would be in the next year or two.”

Mr. Entwistle told analysts on the call the company has “prospective monetization opportunities” for partnerships, IPOs or a “combination of both” for these two business lines.