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TELUS

119,000 net new wireless postpaid, high-speed Internet and TV customers

TELUS’ total wireless subscriber base up 2.8 per cent from a year ago to 8.4 million

Wireless monthly postpaid churn of 0.97 per cent – ninth straight quarter below 1 per cent

TELUS expands efficiency initiatives by additional $125 million

$1.4 billion returned to shareholders year-to-date through October 2015

Quarterly dividend increased 10.0 per cent to $0.44 per share – tenth dividend increase under multi-year dividend growth program

 

Vancouver, B.C. – TELUS Corporation’s consolidated operating revenue grew 4.2 per cent to $3.2 billion in the third quarter of 2015, from a year earlier, as a result of higher data revenue in both wireless and wireline operations. Wireless data revenue increased 12 per cent from a year ago, leading to overall network revenue growth of 4.0 per cent, while wireline data revenue increased 11 per cent to generate 3.3 per cent growth in external wireline revenue. Earnings before interest, income taxes, depreciation and amortization (EBITDA), increased 0.2 per cent over the same period a year ago and, when excluding restructuring and other like costs from both periods, EBITDA was higher by 2.2 per cent to $1.1 billion. Net income increased 2.8 per cent to $365 million, while basic earnings per share (EPS) increased 5.2 per cent to $0.61. Adjusted net income increased 2.8 per cent to $398 million, while adjusted EPS of $0.66 per share was up 3.1 per cent from the prior year.

 

“Our company continued to deliver solid financial and operational results in both our wireline and wireless businesses,” said Darren Entwistle, President and CEO. “The TELUS team’s unwavering focus on our number one priority to put customers first once again earned us the leadership position with respect to lifetime revenue per customer and an unmatched ninth consecutive quarter of customer loyalty as reflected by wireless monthly postpaid churn below one per cent. Moreover, we distinguished ourselves as one of the only telecom companies globally to report wireline subscriber, revenue and EBITDA growth.”

 

Darren added, “As we finish the year and look towards 2016, we will continue to focus on the company’s long-term and disciplined strategy of investing in our wireless and wireline data growth engines, and earning the privilege of building customer loyalty through constantly improving client service excellence. The $4.5 billion to be spent in capital expenditures and spectrum in 2015 are the most significant annual investments in our company’s history, helping progress TELUS’ position as the industry leader in customer service, operational performance and financial results, including shareholder friendly initiatives. While TELUS is one of the largest and most important infrastructure investors in Canada and has established a track record for leveraging these capital decisions, the generational investments we make also come with parallel investments in process and efficiency initiatives. We are increasing our efficiency initiatives by an additional $125 million in the fourth quarter, which will include a net reduction of approximately 1,500 full-time positions, a notable number of which are voluntary departures and early retirements. These are very difficult decisions to make but a necessary element of aligning our organization with the growth, customer service and capital allocation activities we are implementing.”

 

John Gossling, TELUS Executive Vice-President and CFO said, “I am pleased that the TELUS team has maintained strong performance in key financial and operating metrics, while navigating a period of significant investment and heightened consumer activity. Our track record is strong for leveraging the investments we make in our customers, new technology and efficiency enhancements, and we anticipate the additional cost efficiency initiatives to provide annual recurring savings of between $100 million to $125 million, including some savings commencing in the fourth quarter of 2015.”

 

John added, “Through the consistency of our performance and the quality of our asset mix, TELUS also continued to reward our valued shareholders in the third quarter with our multi-year share purchase and dividend growth programs. We returned an additional $363 million to shareholders in dividends paid and share purchases, and year-to-date, we have returned $1.4 billion. Today, we also announced our tenth double digit dividend increase since 2011 under our multi-year dividend growth program. TELUS has now returned $12.2 billion or more than $20 per share to shareholders over the past decade.”

 

CONSOLIDATED FINANCIAL HIGHLIGHTS

 

C$ and in millions, except per share amounts

Three months ended

September 30

Per cent

(unaudited)

2015

2014

change 

Operating revenues

3,155

3,028

4.2

Operating expenses before depreciation and amortization

2,087

1,963

6.3

EBITDA(1)

1,068

1,065

0.2

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

1,119

1,095

2.2

Net income

365

355

2.8

Adjusted net income(3)

398

387

2.8

Basic earnings per share (EPS)

0.61

0.58

5.2

Adjusted EPS(3)

0.66

0.64

3.1

Capital expenditures

623

657

(5.2)

Free cash flow(4)

310

219

41.6

Total customer connections(5)

14.027

13.730

2.2

  • EBITDA does not have any standardized meaning prescribed by IFRS-IASB. TELUS issues guidance on and reports 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 third quarter Management’s discussion and analysis.
  • For the third quarter of 2015 and 2014, restructuring and other like costs were $51 million and $30 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; 2) long-term debt prepayment premium; 3) favourable income tax-related adjustments; and 4) asset retirement costs from the closure of all Black’s Photography retail stores. For further analysis of the aforementioned items see Section 1.3 in the accompanying 2015 third 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 third 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 per cent of Public Mobile, a Canadian wireless communications operator focused on the Toronto and Montreal markets, in November 2013.

 

In wireless, data revenue was driven by subscriber growth, an increased but moderating proportion of higher-rate two-year plans in the revenue mix, a more favourable postpaid subscriber mix, increased data roaming, and the expansion of TELUS’ LTE network coverage across Canada. Meanwhile, 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, growth in business process outsourcing services, TELUS TV subscriber growth and higher TELUS Health revenues.

 

In the quarter, TELUS attracted 119,000 net wireless postpaid, high-speed Internet and TV customers. This included 69,000 wireless postpaid customers, 26,000 TELUS TV customers and 24,000 high-speed Internet subscribers. These gains were partially offset by the ongoing loss of traditional telephone network access lines. TELUS’ total wireless subscriber base is up 2.8 per cent from a year ago to 8.4 million, high-speed Internet connections are up 6.3 per cent to 1.5 million, and TELUS TV subscribers are up 10 per cent to 980,000.

 

Free cash flow of $310 million was higher by $91 million or 42 per cent from a year ago primarily due to lower income tax payments and lower capital expenditures. Year-to-date, free cash flow of $881 million was higher by $161 million or 22 per cent compared to the first nine months of 2014, due to lower income tax payments, EBITDA growth and lower restructuring costs net of disbursements.

 

In the third quarter of 2015, TELUS returned $363 million to shareholders including $253 million in dividends paid and $110 million in share purchases under both the 2015 and 2016 normal course issuer bid (NCIB) programs. Year-to-date, through the end of October, TELUS has returned $1.4 billion to shareholders, including $992 million in dividends paid and the purchase of approximately 9.9 million common shares for $412 million under its 2015 and 2016 NCIB programs.

 

The assumptions for TELUS’ 2015 outlook, as described in ‘Section 9 General trends, outlook and assumptions’ in TELUS’ 2014 annual Management’s discussion and analysis and updated in ‘Section 9 Update to assumptions’ in TELUS’ 2015 second quarter Management’s discussion and analysis, remain the same, with the exception of restructuring and other like costs. TELUS now anticipates 2015 restructuring and other like costs to be approximately $250 million, up from approximately $125 million to support ongoing and incremental operational efficiency initiatives including personnel-related costs and real estate rationalization. The new efficiency initiative will include a net reduction of approximately 1,500 full-time positions over the next several quarters of which a notable number are voluntary departures and early retirements. This efficiency initiative is expected to generate annual recurring savings of between $100 million to $125 million, with some savings commencing in the fourth quarter. TELUS continually invests in operational efficiency initiatives, similar to its continual investment in its products, services and technology, all of which is in support of its top priority of putting customers first, while continuing to drive to a more efficient cost structure. The increase in TELUS’ 2015 restructure charge will continue to position the company to effectively compete in its dynamic industry and support growth in its core strategic priorities. These efficiency measures are not expected to impact TELUS’ customer service or its significant infrastructure investments.

 

TELUS is reiterating its original target range for full year consolidated 2015 EBITDA, excluding restructuring and other like costs, of $4.4 billion to $4.575 billion. Earnings per share (EPS) for 2015 will be negatively impacted by net unfavourable income tax-related adjustments, including the revaluation of deferred income tax liabilities from the recent increase in corporate income tax rates in Alberta, as previously disclosed with TELUS’ 2015 second quarter earnings release on August 7, 2015, as well as the aforementioned increase in restructuring and other like costs expense. When excluding these items, TELUS still expects full year EPS to be within its original guidance range of $2.40 to $2.60.

 

The preceding disclosure with respect to TELUS’ 2015 financial targets, guidance and assumptions contains forward-looking information and is fully qualified by the ‘Caution regarding forward-looking statements’ at the beginning of the accompanying Management’s discussion and analysis for the third quarter of 2015 and are based on management’s expectations and assumptions as set out in TELUS’ fourth quarter 2014 results and 2015 financial target news release and in Section 9 entitled ‘General trends, outlook and assumptions’ in TELUS’ 2014 annual MD&A.

 

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 first, second and accompanying third 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 

TELUS makes significant contributions and investments in the communities where team members live, work and serve and to the Canadian economy on behalf of customers, shareholders and team members by:

• Paying, collecting and remitting a total of $460 million in taxes during the third quarter of 2015 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 more than $17 billion in these taxes.
• Purchasing six additional AWS-3 wireless spectrum licences in Industry Canada’s residual spectrum auction for the 700 MHz and AWS-3 bands. Since the beginning of 2014, TELUS has purchased 81 MHz of wireless spectrum nationally for approximately $3.2 billion. In addition, TELUS has paid annual spectrum renewal fees of more than $117 million to the Canadian federal government since the beginning of 2014. Since 2002, TELUS’ total tax and spectrum remittances to federal, provincial and municipal governments in Canada have totaled over $21 billion.
• Investing $623 million in capital expenditures primarily in communities across Canada in the third quarter of 2015 and more than $28 billion since 2000.
• Spending $2.0 billion in total operating expenses, including goods and service purchased of $1.3 billion. Since 2000, TELUS has spent $89 billion and $58 billion respectively in these areas.
• Generating a total team member payroll of $755 million, including payroll taxes of $139 million. Since 2000, total team member payroll totals $36 billion.
• Paying $992 million in dividends in 2015 through October to individual shareholders, mutual fund owners, pensioners and institutional investors, and purchasing approximately 9.9 million shares for $412 million on behalf of shareholders under TELUS’ 2015 and 2016 share purchase programs.
• Returning $12.2 billion to shareholders through TELUS’ dividend and share purchase programs from 2004 through October 2015, including $7.4 billion in dividends and $4.8 billion in share buybacks, representing $20 per share.

 

Third Quarter 2015 Operating Highlights 

 

TELUS wireless
• Wireless network revenues increased by $62 million or 4.0 per cent to $1.6 billion in the third quarter of 2015, when compared to the same period a year ago. This growth was driven by an 12 per cent increase in data revenue, reflecting subscriber growth, an increased but moderating proportion of higher-rate two-year plans in the revenue mix, a more favourable postpaid subscriber mix, the expansion of TELUS’ LTE network, and increased data roaming.
• Blended ARPU increased by 1.1 per cent to $64.22, reflecting TELUS’ twentieth consecutive quarter of year-over-year growth.
• Monthly postpaid subscriber churn of 0.97 per cent, the ninth consecutive quarter below one per cent, increased 7 basis points year-over-year. The increase reflects the high competitive intensity as two-year and three-year customer contracts began expiring simultaneously starting in June 2015, as well as the effects of the economic slowdown on the business market. Despite this industry-wide effect from the implementation of the Wireless Code, TELUS’ monthly postpaid churn rate continues to exemplify the success of its differentiated customers first approach. Blended monthly churn improved 4 basis points to 1.28 per cent.
• Total wireless net additions of 69,000 decreased by 38,000 over the same period a year ago. Postpaid net additions of 69,000 decreased by 44,000, while prepaid net additions were flat. Postpaid net additions were lower year over year due to lower gross additions resulting primarily from higher handset prices, a slower business market, and higher churn.
• Wireless EBITDA excluding restructuring increased by $11 million or 1.4 per cent over last year to $729 million as higher network revenue growth and operational efficiency initiatives were partially offset by higher retention expenses. Retention costs as a percentage of network revenue of 14.3 per cent increased 280 basis points over the same period a year ago arising from a 14 per cent increase in retention volumes.
• Wireless EBITDA excluding restructuring less capital expenditures increased by $53 million to $520 million in the quarter due to lower capital expenditures and higher EBITDA.

 

TELUS wireline
• External wireline revenues increased by $44 million or 3.3 per cent to $1.4 billion in the third 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 and equipment revenues and lower business activity.
• Data revenues increased by $92 million or 11 per cent, due to higher Internet and enhanced data revenues from continued high-speed Internet subscriber growth and higher revenue per customer, growth in business process outsourcing services, higher TELUS TV revenues from continued subscriber growth, and increased TELUS Health revenues.
• High-speed Internet net additions of 24,000 increased by 2,000 over the same quarter a year ago, reflecting the expansion of TELUS’ high-speed broadband footprint in urban and rural communities, including fibre to the premises, and the pull-through effect of Optik TV.
• Total TV net additions of 26,000 were higher by 3,000 over the same quarter a year ago due to the expansion of TELUS’ addressable high-speed broadband footprint, increasing broadband speeds and improvements in customer churn rate.
• Total network access lines (NALs) declined by 33,000 in the quarter compared to a loss of 21,000 a year ago. Residential NAL losses of 25,000 compared to a loss of 24,000 in the same period a year ago, while business NAL losses of 8,000 compared to a net gain of 3,000 a year ago. Relatively stable residential NAL losses reflect the ongoing success of TELUS’ customers first initiatives and bundling strategy, offset by ongoing but moderating wireless and Internet substitution and competition. Business losses reflect increased competition in the business sector as well as a slowdown in the business market associated with the national and regional economies. Business NAL losses also reflect conversion of voice lines to more efficient IP services, thus expanding the NAL decline without a similar decline in revenue.
• Wireline EBITDA excluding restructuring and other like costs of $390 million increased by $13 million or 3.6 per cent year-over-year. The improvement reflects improving margins in data services, including Internet, TELUS Health, TELUS TV and business process outsourcing services, as well as ongoing operating efficiency initiatives.
• Wireline EBITDA excluding restructuring and other like costs less capital expenditures increased by $5 million to $(24) million as higher EBITDA was offset by higher capital expenditures that are supporting TELUS’ long-term growth. Capital expenditures increased over the same period last year due to continued strategic investments in broadband network infrastructure, including connecting more homes and businesses directly to TELUS’ fibre optic network and investments in system and network resiliency and reliability. 


Dividend Declaration – increased to 44 cents per quarter, up 10.0 per cent from a year ago
The TELUS Board of Directors has declared a quarterly dividend of 44 cents ($0.44) Canadian per share on the issued and outstanding Common Shares of the Company payable on January 4, 2016 to holders of record at the close of business on December 11, 2015.

This fourth quarter dividend represents a four cent or 10.0 per cent increase from the $0.40 quarterly dividend paid on January 2, 2015.


About TELUS
TELUS (TSX: T, NYSE: TU) is Canada’s fastest-growing national telecommunications company, with $12.4 billion of annual revenue and 14.0 million customer connections, including 8.4 million wireless subscribers, 3.1 million wireline network access lines, 1.5 million high-speed Internet subscribers and 980,000 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 President and CEO Darren Entwistle, TELUS’ 11 Canadian community boards and 4 International boards have led the Company’s support of grassroots charities and will have contributed more than $54 million in support of over 4,800 local charitable projects by the end of 2015, enriching the lives of more than 2.1 million 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’ third quarter 2015 conference call is scheduled for November 5, 2015 at 11:00am ET (8:00am 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 November 5 until January 30, 2016 at 1-855-201-2300. Please use reference number 1187283# and access code 93015#. 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.