events archive
events archive
Q2 2004 investor conference call - Darren Entwistle presentation
Thanks, Robert. Good morning, and thank you for joining us today.
Let me begin by noting that the solid 5% growth in 2nd Quarter revenue, a 9.5% increase in EBITDA, and a significant increase in net income, are the product of our national growth strategy focused on data and wireless expansion. Investors in TELUS are reaping the benefit of the strategic direction and investments made four years ago, and of course the follow-through in respect of operational execution. Also noteworthy is the continued generation of record amounts of cash flow, allowing us to continue paying down debt and to achieve our 2004 year-end net debt to EBITDA leverage target well ahead of plan; at the same time, two areas of continuing management focus, our high-speed internet and non-ILEC operations. While softer high-speed net additions could be attributed to some end-of-school seasonality or slower growth across the industry, the fact of the matter is TELUS had good gross additions. Frankly, I expect TELUS to manage customer churn better and thereby post higher net additions as we go forward.
A secondary of under-performance is our non-ILEC operations in central Canada. While I'm disappointed in the short-term results, it is important to understand that we are successfully executing on our objective to migrate away from our dependency on the non-recurring CPE business to focus on increasing the proportion of revenues derived from quality recurring income available from winning large, multi-year contracts.
As shown on Slide 5, recurring revenues are up 17% in the 2nd Quarter of 2004 versus the 2nd Quarter of 2003. Moreover, recurring revenues now represent approximately three-quarters of the total non-ILEC revenues.
The short-term impact is higher start-up costs and capex, which come in front of building revenues, and this is reflected in our non-ILEC results thus far this year. We are executing on a series of major wins that we've announced like the TD Bank and the Co-operators and a number of significant national managed data contracts that we cannot announce publicly, unfortunately. Let me assure you we are remaining disciplined and focused on selling managed data solutions and exploiting our two-year lead time over our major competitors on our existing IP-based next-generation network and IP applications. I am pleased with what I see in the sales pipelines, with the Central Canada Leadership Team and with the new contract implementation being accomplished by our organization.
Let me now comment on our progress on two of the strategic imperatives set out for 2004 starting on Slide 6. In an increasingly competitive market, it is important to ensure we have not only good customer service, but superior levels of customer service that can differentiate us in the marketplace. In 2003 TELUS encountered a number of internal and external events within a short period of time that impaired our ability to deliver the desired levels of service to our customer base in Western Canada. A focused effort was put in place to exceed all historical levels of service and sustain these improvements on a permanent basis. With this effort, TELUS has far exceeded industry standards relating to accessing our customer care contact centres and repair bureaus. TELUS has sustained its superior level of service for more than eight straight months. In addition, TELUS has continued to provide consistently high levels of access to its operator services throughout 2003 and 2004.
TELUS has also focused on improving its ability to meet customer repair appointments and to restore telephone outages within 24 hours within both urban and rural locations. I am pleased to say that we have met or exceeded industry standards relating to these measures as indicated again on Slide 6. On July 6th, TELUS received a strong acknowledgement from the CRTC relating to our progress, commending us for the actions taken and the strong results generated in customer service. Accordingly, we are well on track to deliver on our 2004 corporate objective of growing brand value through superior customer service.
Slide 7 highlights an area of frustration for this organization, namely, our impasse with the TWU and more recently with the various delays on outstanding applications with the Canadian Industrial Relations Board. We are appealing to the federal court the automatic sweeping into the TWU of the TELUS Mobility non-unionized employees in Eastern Canada without a representational vote. We are pleased that we have received an expedient federal court date in early October.
Most important for us is to realize progress on reaching a collective agreement for our unionized team members and the need for the CIRB to issue its decision on our reconsideration appeal of its arbitration decision. While TELUS believes that the return to collective bargaining is desirable and warranted, we are also very well-prepared for moving forward on binding arbitration, if necessary. We are optimistic that the CIRB will act soon and we can move forward on this 2004 corporate priority. We remain committed to reaching a reasonable agreement for all parties involved - employees, customers, and investors - that allows TELUS to compete more effectively within the changing environment in which we operate.
Turning to Slide 8, a final highlight is the strong performance at TELUS Mobility this quarter. Once again, this validates our strategic investments over the last four years to become a leading national wireless player. With 20% revenue growth this quarter, 42% EBITDA growth, a 69% increase in cash flow as measured simply by EBITDA less capex, a $3 increase in ARPU and a low churn rate of 1.3%, we are once again a leading wireless operator in North America and, indeed, around the globe. Clearly, our outstanding bid to acquire Microcell is consistent with our national growth strategy in wireless, and has the benefit of making TELUS Mobility more competitive with the other major players in the Quebec and Ontario markets.
In closing, I am pleased to report to investors that based on our 2nd Quarter performance, we are able to revise upwards our full-year guidance both at TELUS Mobility and at the consolidated level for TELUS Corporation, including EBITDA, EPS and free cash flow.
As shown on Chart 9, TELUS remains the global leader amongst our telecom peers in projected growth in 2004 EBITDA at 7%. We are tracking well against its measure on a year-to-date basis, delivering 9% growth in the first half of the year.
On Slide 10, you can also see that in terms of growth in respect of simple cash flow projected in 2004, TELUS at 10% again remains at the forefront of global telecom companies. Moreover, at 24%, TELUS' cash flow yield for the first half of 2004 is in the top quartile of TSX 300 companies which have reported to date.
The next slide shows that we've also compared very well against our peers based on projected EPS growth.
Let me assure shareholders and debt-holders alike that the TELUS team continues to work hard on delivering against all our priorities and financial targets and, as always, we appreciate your support.
Now over to Bob to recap the quarter.
Q2 2004 investor conference call - presentations
Robert Mitchell, director, investor relations
Darren Entwistle, president and chief executive officer, TELUS Corporation
Robert McFarlane, executive vice-president and chief financial officer
Question period
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