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TELUS

Revenue and earnings growth driven by both wireless and wireline data
81,000 net new wireless postpaid, TV and high-speed Internet subscribers
Industry-leading customer loyalty with monthly postpaid wireless churn of 0.91 per cent - seventh consecutive quarter below 1.0 per cent
$664 million returned to shareholders this year through April 2015
Quarterly dividend increased 10.5 per cent to 42 cents per share

 

Vancouver, B.C. – TELUS Corporation’s consolidated operating revenue grew 4.6 per cent in the first quarter of 2015, from a year earlier. Earnings before interest, income taxes, depreciation and amortization (EBITDA) increased by 5.4 per cent to $1.1 billion. Net income of $415 million was higher by 10 per cent, while basic earnings per share (EPS) rose by 11.5 per cent to $0.68.

 

Darren Entwistle, TELUS Executive Chair said “The positive start to 2015 continues to reflect our team’s world-leading engagement and ongoing commitment to delivering the best customer experience amongst our global telecom industry peers each and every day. Indeed, their unwavering dedication in this regard was reflected in the net addition of 81,000 new wireless postpaid, TV and high-speed subscribers in the first quarter.” 

 

Mr. Entwistle added, “Our strong results underscore the efficacy of our 15 year strategy focusing on the growth of wireless and wireline data technologies and services. This focus, combined with client service excellence, continues to support our ongoing ability to return significant amounts of cash to our shareholders through our multi-year share purchase and dividend growth programs. Indeed, through the first four months of 2015, TELUS has returned $664 million to shareholders, building on the more than $3.4 billion returned over the prior two years. Moreover, I am pleased to announce that we are once again raising our quarterly dividend to 42 cents per share, a 10.5 per cent increase year-over-year. This is our ninth dividend increase since announcing our multi-year dividend growth program in May 2011.”

 

TELUS President and CEO Joe Natale said, “Our persistent focus on customer service continues to distinguish TELUS from the competition and provide customers with a clear choice. Once again we demonstrated the impact strong customer loyalty can have on financial performance, as both our wireless and wireline operations experienced revenue and customer growth. Importantly, our monthly postpaid wireless churn of 0.91 per cent remained below one per cent for the seventh consecutive quarter and is the lowest of any national carrier by a substantial margin. These results validate our strategy and motivate and inspire our team to continue to deliver for our customers and shareholders.”

 

John Gossling, TELUS Executive Vice-President and CFO said, “Our consistent financial results and strong operational performance continue to be supported by our investment grade balance sheet. During this recent period of an unprecedented number of spectrum auctions, capital markets have confidently supported our strategy of investing in this core long-term asset. As a result, we have enhanced the company’s future growth opportunities while simultaneously strengthening our balance sheet by extending our average term to maturity to an impressive 11.1 years and lowering our average cost of long-term debt to an industry-best 4.42 per cent.”

 

CONSOLIDATED FINANCIAL HIGHLIGHTS

 

C$ and in millions, except per share amounts

Three months ended

March 31

Per cent

(unaudited)

2015

2014

change 

Operating revenues

3,028

2,895

4.6

Operating expenses before depreciation and amortization

1,893

1,818

4.1

EBITDA(1)

1,135

1,077

5.4

EBITDA excluding restructuring and other like costs(1)(2)

1,152

1,085

6.2

Net income

415

377

10.1

Adjusted net income(3)

427

383

11.5

Basic earnings per share (EPS)

0.68

0.61

11.5

Adjusted EPS(3)

0.70

0.62

12.9

Capital expenditures

635

496

28.0

Free cash flow(4)

271

291

(6.9)

Total customer connections(5)

13.868

13.527

2.5

  • EBITDA does not have any standardized meaning prescribed by IFRS-IASB. We have issued guidance on and report EBITDA because it is a key measure used to evaluate performance at a consolidated and segmented level. For further definition and explanation, see Section 11.1 in the accompanying 2015 first quarter Management’s discussion and analysis.
  • For the first quarter of 2015 and 2014, restructuring and other like costs were $17 million and $8 million respectively.
  • Adjusted net income and Adjusted EPS do not have any standardized meaning prescribed by IFRS-IASB. These terms are defined in this news release as excluding (after income taxes): 1) restructuring and other like costs. For further analysis of the aforementioned items see Section 1.3 in the accompanying 2015 first quarter Management’s discussion and analysis.
  • Free cash flow does not have any standardized meaning prescribed by IFRS-IASB. For definition and explanation, see Section 11.1 in the accompanying 2015 first quarter Management’s discussion and analysis.
  • The sum of active wireless subscribers, network access lines (NALs), high-speed Internet access subscribers and TELUS TV subscribers (Optik TV™ and TELUS Satellite TV® subscribers), measured at the end of the respective periods based on information in billing and other systems. Effective January 1, 2014, subscriber connections have been restated to exclude 25,000 dial-up Internet subscribers and include 222,000 Public Mobile prepaid subscribers in the opening subscriber balances. TELUS acquired 100% of Public Mobile, a Canadian wireless communications operator focused on the Toronto and Montreal markets, in November 2013.

 

Consolidated revenue growth was generated by higher data revenue in both wireless and wireline operations. Wireless data revenue was up 19 per cent, leading to overall network revenue growth of 6.4 per cent, while wireline data revenue was up 7.2 per cent from a year ago. In wireless, data revenue was driven by subscriber growth, increased customer adoption of higher-rate two-year rate plans, higher data usage as a result of continued smartphone growth and other data-centric devices, increased data roaming and the expansion of TELUS’ LTE network coverage. Wireline data revenue growth was generated by an increase in Internet and enhanced data service revenue from continued high-speed Internet subscriber growth and higher revenue per customer, TELUS TV subscriber growth, as well as growth in business process outsourcing services and TELUS Health revenues.

 

In the quarter, TELUS attracted 37,000 new wireless postpaid customers, 23,000 high-speed Internet subscribers, and 21,000 TELUS TV customers. These gains were partially mitigated by the loss of wireless prepaid customers and network access lines. TELUS’ total wireless subscriber base is up 3.1 per cent from a year ago to 8.3 million (which includes Public Mobile subscribers in both periods), high-speed Internet connections are up 5.8 per cent to 1.5 million, and TELUS TV subscribers are up 11 per cent to 937,000.

 

TELUS’ ongoing focus on putting customers first delivered a year-over-year improvement of 8 basis points in monthly postpaid wireless subscriber churn to 0.91 per cent. This is the seventh consecutive quarter this important metric was below 1 per cent.

 

Free cash flow of $271 million was lower by 6.9 per cent from a year ago as higher EBITDA and lower income tax payments were offset by high capital expenditures due mainly to investments in wireless and wireline broadband infrastructure to support TELUS’ long-term growth.

 

The company’s net debt to EBITDA - excluding restructuring and other like costs ratio has increased to 2.30 times at the end of the quarter due to the acquisition of significant additional spectrum which has been auctioned in unprecedented amounts over the past 15 months. We have revised our long-term financial objective to 2.00 to 2.50 times (previously 1.50 to 2.00 times). The company believes that this new range optimizes our cost of capital and puts TELUS’ leverage in line with global peers. The company’s strategy is to maintain investment grade credit ratings in the range of BBB+ or the equivalent.

In the first quarter of 2015, TELUS returned $400 million to shareholders including $244 million in dividends paid and $156 million in share purchases under its 2015 normal course issuer bid (NCIB) program. Through the end of April, TELUS has returned $664 million to shareholders, including $487 million in dividends paid and the purchase of 4.3 million shares for $177 million under its 2015 NCIB program.

 

This news release contains statements about financial and operating performance of TELUS (the Company) and future events, including with respect to future dividend increases and normal course issuer bids through 2016 and the 2015 annual targets and guidance that are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and predictions and are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future performance and events to differ materially from those expressed in the forward-looking statements. Accordingly, this news release is subject to the disclaimer and qualified by the assumptions (including assumptions for the 2015 annual targets and guidance, semi-annual dividend increases through 2016 and our ability to sustain and complete our multi-year share purchase program through 2016), qualifications and risk factors referred to in the accompanying first quarter Management’s discussion and analysis and in the 2014 annual report, and in other TELUS public disclosure documents and filings with securities commissions in Canada (on SEDAR at sedar.com) and in the United States (on EDGAR at sec.gov). Except as required by law, TELUS disclaims any intention or obligation to update or revise forward-looking statements, and reserves the right to change, at any time at its sole discretion, its current practice of updating annual targets and guidance.

Corporate Highlights 

In the first quarter of 2015, TELUS made significant contributions and investments in communities and the Canadian economy on behalf of customers, shareholders and team members:

• Paid, collected and remitted a total of $510 million in taxes to Federal, Provincial and municipal governments in Canada consisting of corporate income taxes, sales taxes, property taxes, employer portion of payroll taxes and various regulatory fees. Since 2002, the company has remitted approximately $16 billion in these taxes.
• Purchased AWS-3 wireless spectrum across Canada’s most populated provinces for $1.5 billion. Since the beginning of 2014, we have purchased wireless spectrum licences for $2.6 billion in the 700 MHz, and AWS-3 spectrum auctions, and paid annual spectrum renewal fees of $58 million to the Canadian federal government. Since 2002, total tax and spectrum remittances to Federal, Provincial and municipal governments in Canada totaled approximately $20 billion.
• Invested $635 million in capital expenditures in communities across Canada and more than $27 billion since 2000.
• Spent $1.8 billion in total operating expenses, including goods and service purchased of $1.2 billion, and since 2000, spent $85 billion and $56 billion respectively in these areas.
• Generated a total team member payroll of $684 million, including payroll taxes of $245 million, and since 2000, total team member payroll totaled $34 billion.
• In 2015 through April, paid total dividends of $487 million to individual shareholders, mutual fund owners, pensioners and institutional investors, and purchased 4.3 million shares for $177 million on behalf of shareholders under our 2015 share purchase program.
• Returned $11.5 billion to shareholders through its dividend and share purchase programs from 2004 through April 2015, including $6.9 billion in dividends and $4.6 billion in share buybacks.

 

Operating Highlights 

 

TELUS wireless
• Wireless network revenues increased by $92 million or 6.4 per cent to $1.54 billion in the first quarter of 2015, when compared to the same period a year ago. This growth was driven by a 19 per cent increase in data revenue, reflecting subscriber growth, increased customer adoption of higher-rate two-year plans, higher data usage from a continued increase in smartphone adoption and other data-centric devices, increased data roaming and the expansion of TELUS’ LTE network coverage. 
• Blended ARPU increased by 3.2 per cent to $62.34, reflecting TELUS’ eighteenth consecutive quarter of year-over-year growth.
• Monthly postpaid subscriber churn declined 8 basis points year-over-year to 0.91 per cent and blended monthly churn was down 22 basis points to reach 1.28 per cent. TELUS’ low blended churn rate reflects the Company’s successful customers first service approach, investments in customer retention as well as a greater proportion of postpaid clients in TELUS’ subscriber base. 
• Total wireless net additions of 8,000 decreased by 2,000 over the same period a year ago. Postpaid net additions of 37,000 decreased by 11,000, while prepaid net losses of 29,000 improved by 9,000 year-over-year. The total wireless subscriber base was up 3.1 per cent or 250,000 from a year ago to 8.3 million. Higher-value postpaid subscribers represent approximately 86 per cent of TELUS’ total subscriber base.
• Wireless EBITDA excluding restructuring and other like costs increased by $57 million or 8.0 per cent over last year to $750 million due primarily to network revenue growth and operational efficiency initiatives including the integration of Public Mobile, partially offset by higher retention costs and higher customer service and distribution channel expenses.
• Wireless EBITDA less capital expenditures decreased by $29 million to $496 million in the quarter as higher EBITDA was offset by an increase in capital expenditures mainly due to our investments in wireless broadband infrastructure, including the deployment of 700 MHz spectrum.

 

TELUS wireline
• External wireline revenues increased by $16 million or 1.2 per cent to $1.36 billion in the first quarter of 2015, when compared with the same period a year ago. This growth was generated by increased data service revenue, partially offset by continued declines in legacy voice revenues and lower data and voice equipment sales.
• Data revenues increased by $61 million or 7.2 per cent, due to higher Internet and enhanced data revenues from continued high-speed Internet subscriber growth and higher revenue per customer, a higher TELUS TV subscriber base, growth in business process outsourcing services, and increased TELUS Health revenues.
• Total TV net additions of 21,000 were lower by 6,000 from the same quarter last year, as expansion of TELUS’ addressable high-speed broadband footprint, increasing broadband speeds and improvements in customer churn rate were offset by business additions in the first quarter of 2014, the effects of slower subscriber growth for paid TV services and increasing competition from over-the-top services.
• High-speed Internet net additions of 23,000 increased by 2,000 over the same quarter a year ago. The high-speed subscriber base of 1.5 million is up 82,000 or 5.8 per cent from a year ago, reflecting expansion of our broadband coverage, the pull-through effect of Optik TV and lower churn.
• Total network access lines (NALs) declined by 25,000 in the quarter compared to a loss of 24,000 a year ago. Residential NAL losses of 20,000 reflect an improvement of 4,000 over the same period a year ago, while business NAL losses were 5,000, compared to no losses in the same period a year ago. The improvement in residential NAL losses reflects the ongoing success of TELUS’ customers first initiatives and bundling strategy, offset by ongoing wireless and Internet substitution and competition.
• Wireline EBITDA excluding restructuring and other like costs of $402 million increased by $10 million or 2.8 per cent year-over-year. The improvement reflects continued growth in high-speed Internet and enhanced data, TELUS TV, business process outsourcing services and TELUS Health revenues, as well as improving margins and ongoing operating efficiency initiatives.
• Wireline EBITDA less capital expenditures decreased by $52 million to $4 million as higher EBITDA was more than offset by higher capital expenditures that are supporting TELUS’ long-term growth. Capital expenditures increased over the same period last year due to continued investments in broadband network infrastructure, including connecting more homes and businesses directly to our fibre optic broadband network and extending the  reach and functionality of our healthcare solutions, and investments in system resiliency and reliability and to support business service growth.


Dividend Declaration - increased to 42 cents per quarter, up 10.5 per cent from a year ago

The TELUS Board of Directors has declared a quarterly dividend of 42 cents ($0.42) Canadian per share on the issued and outstanding Common Shares of the Company payable on July 2, 2015 to holders of record at the close of business on June 10, 2015.

 

This second quarter dividend represents a four cent or 10.5 per cent increase from the $0.38 quarterly dividend paid on July 2, 2014.


About TELUS
TELUS (TSX: T, NYSE: TU) is Canada’s fastest-growing national telecommunications company, with $12.1 billion of annual revenue and 13.9 million customer connections, including 8.3 million wireless subscribers, 3.1 million wireline network access lines, 1.5 million high-speed Internet subscribers and 937,000 TELUS TV customers. TELUS provides a wide range of communications products and services, including wireless, data, Internet protocol (IP), voice, television, entertainment and video, and is Canada's largest healthcare IT provider.

 

In support of our philosophy to give where we live, TELUS, our team members and retirees have contributed more than $396 million to charitable and not-for-profit organizations and volunteered and more than 6 million hours of service to local communities since 2000. Created in 2005 by Executive Chairman Darren Entwistle, TELUS’ 11 community boards across Canada have led the company’s support of grassroots charities and will have contributed $47 million in support of 3,700 local charities organizations by the end of 2014, enriching the lives of more than two million Canadian children and youth. TELUS was honoured to be named the most outstanding philanthropic corporation globally for 2010 by the Association of Fundraising Professionals, becoming the first Canadian company to receive this prestigious international recognition. 

 

For more information about TELUS, please visit telus.com.


Media relations:
Shawn Hall
(604) 619-7913
shawn.hall@telus.com 

 

Investor relations:
Paul Carpino
(647) 837-8100
ir@telus.com


Access to Quarterly results information
Interested investors, the media and others may review this quarterly earnings news release, management’s discussion and analysis, quarterly results slides, audio and transcript of the investor webcast call, supplementary financial information, and our full 2014 annual report at telus.com/investors.

TELUS' first quarter 2015 conference call is scheduled for May 7, 2015 at 3:30pm ET (1:30pm MT, 12:30pm PT) and will feature a presentation followed by a question and answer period with investment analysts. Interested parties can access the webcast at telus.com/investors. A telephone playback will be available on May 7 until June 20 at 1-855-201-2300. Please use reference number 1178137# and access code 92105#. An archive of the webcast will also be available at telus.com/investors and a transcript will be posted on the website within a few business days.