) reported fourth-quarter 2012 adjusted earnings per ADS of 86
cents (86 Canadian cents per share), which fell short of the
Zacks Consensus Estimate by a penny. Adjusted earnings increased
17.8% from 73 Canadian cents (74 cents) per share registered in
the year-ago quarter.
Adjusted earnings for the reported quarter excluded the 3-cent
per share impact of a special item related to favorable income
Adjusted earnings for the year rose 7.7% year over year to
C$4.05 (approximately $4.05)
Total revenue grew 6.0% year over year to C$2.85 billion
($2.86 billion) and surpassed the Zacks Consensus Estimate of
$2.63 billion. The year-over-year increase was buoyed by higher
revenues from wireless and wireline data services.
Total revenue for the year increased C$10.9 billion ($10.96
billion), up 5% year over year.
Quarterly adjusted EBITDA grew 8.4% year over year to C$974
million ($977 billion), resulting in an EBITDA margin of 33.2%,
up 70 basis points. For 2012, EBITDA grew 5.1% year over year to
$3.972 billion, resulting in an EBITDA margin of 36.4%, up 10
revenues rose 7.7% year over year to C$1.54 billion ($1.55
billion) in the reported quarter driven by higher subscriber and
Within network revenue, data revenue jumped 22% year over year
on continued strong adoption of smartphones and related data
plans, increased mobile Internet devices and tablets, and higher
data roaming revenues. Voice revenue slid 0.4% year over year,
due to falling voice average revenue per user (ARPU).
ARPU grew 3.2% year over year to C$60.95 ($61.15) primarily
attributable to higher data ARPU (up 17.0% year over year)
negated by lower voice ARPU (down 4.7%) to some extent. The
monthly subscriber churn (customer switch) improved to 1.51% from
1.67% in the year-ago quarter on the back of high-value client
retention and lower smartphone churn.
Quarterly, net wireless subscriber addition was 112,000,
reflecting a decline of 13.2% from the year-ago quarter. Telus
lost 11,000 net prepaid customers in the fourth quarter compared
with a net loss of 19,000 in the year-ago quarter. Additionally,
net post-paid subscriber addition was 123,000, representing an
annualized decline of 17.0%.
Telus had 7.67 million wireless subscribers (up 4.5% year over
year), including 6.54 million post-paid customers ( up 6.7% year
over year) and $1.12 million prepaid customers (down 6.9% year
over year) at the end of the reported quarter.
revenues nudged up 4.1% year over year to C$1.36 billion ($1.37
billion) on strong growth in data services and equipment revenue,
partially compensated by lower voice local, voice long distance
and other services and equipment revenues.
Data and equipment revenue climbed 13.0% year over year to
C$770 million ($773 million) owing to healthy TV subscriber
growth, higher rates, enhanced Internet and data services, and
increased data equipment sales.
Voice local revenues fell 4.3% year over year to C$352 million
($353.2 million) while voice long-distance revenue dropped 10.0%
to C$103 million ($103.3 million), hurt by lower revenues from
basic access, ongoing industry-wide price competition, shift to
wireless and Internet-based services, and declining residential
During the quarter, Telus added 41,000 TV subscribers to reach
a total of 678,000 customers (up 33% year over year). Net
high-speed Internet subscriber additions were 23,000, bringing
the total number of customers at the end of the fourth quarter to
1.4 million. The upside was driven by the success of Optik TV and
Optik high-speed Internet service launched in Jun 2010.
Telus ended the year with cash and investments of C$107
million ($107.04 million) compared with C$46 million ($46.5
million) at the end of fiscal 2011. Net debt reduced to C$6.58
billion ($6.583 billion) compared with C$6.96 billion ($7.04
billion) at the end of 2011. Net debt to EBITDA (excluding
restructuring costs) decreased to 1.6 times from 1.8 times in the
prior year and was within the company's long-term target range of
Telus generated free cash flow of C$1.3 billion ($1.3
billion), exhibiting an annualized growth of 33.5%. Capital
expenditure crept up 7.3% year over year to C$1.2 billion ($1.2
billion) in 2012.
Based on year-to-date results and the favorable outlook for
the balance of the year, Telus raised its fiscal 2013 guidance.
The company now expects consolidated revenue to grow in the range
of 4-6% to C$11.4-C$11.6 billion, EBITDA to increase 2-8% to
C$3.95-C$4.15 billion and earnings per share to grow 3-14% to
Capital expenditure is expected at approximately $1.95
billion, which is below the 2012 level. Further, it expects free
cash flow of $1.2 billion to $1.4 billion. On the flipside, the
company estimates cash taxes to increase, creating a headwind of
C$390 million to C$440 million, substantially higher than C$150
million in 2012.
For 2013, Telus expects wireless revenues to grow 6-8% to
C$6.2-C$6.3 billion and EBITDA to grow 5-9% to C$2.575-C$2.675
billion for 2012.
For the wireline segment, Telus expects revenue to grow 2-4%
to C$5.2-C$5.3 billion and EBITDA to range between $1.375 billion
and $1.475 billion, representing a decline of 2% to a growth of
5% year over year.
We believe the company's ongoing investments in the expansion
of LTE and Internet data centers will fuel strong future growth,
leading to more opportunities in wireless and cloud computing
businesses. Likewise, in the wireline front, Telus continues to
focus on the efficiency of the Optik TV and Optik High Speed
Internet broadband services, which remain the strong part of
Nevertheless, persistent erosion in access lines in the
wireline segment and weak voice services in wireless might weigh
on the company's future earnings. Further, a weak Canadian
economy, competitive threats from players such as
), and reduced roaming charges keep us on the sidelines.
Telus retains a Zacks Rank #2 (Buy) rating.
Upcoming Earnings Release
Another foreign telecom company,
), is expected to report its fourth quarter 2012 results on Feb
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