) reported first-quarter 2014 adjusted earnings of 62 Canadian
cents per share (per ADS of 57 cents), 10.7% up year over year and
ahead of the Zacks Consensus Estimate of 56 cents.
Total revenue grew 5.0% year over year to C$2.9 billion ($2.66
billion), surpassing the Zacks Consensus Estimate of $2.60 billion.
The year-over-year increase was buoyed by higher revenues from
wireless and wireline data services.
Quarterly adjusted EBITDA grew 5.1% year over year to C$700
million ($635 billion), resulting in an EBITDA margin of 45.3%, up
40 basis points.
revenues rose 5.7% year over year to C$1.57 billion ($1.42 billion)
in the reported quarter driven by higher subscriber and ARPU
Within network revenues, data revenues grew 10.2% year over year
on continued strong adoption of smartphones and related data
applications and higher data roaming revenues. Voice revenues slid
5.6% year over year, due to falling voice average revenue per user
ARPU grew 2.0% year over year to C$61.24 ($55.58). The monthly
subscriber churn (customer switch) improved to 1.39% from 1.48% in
the year-ago quarter on the back of high-value client retention,
lower smartphone churn and the company's customer-first service
Quarterly, net wireless subscriber addition was 12,000,
reflecting a massive decline of 63.6% from the year-ago quarter.
Telus lost 36,000 net prepaid customers in the first quarter
compared with a net loss of 26,000 in the year-ago quarter.
Additionally, net post-paid subscriber addition was 48,000,
representing an annualized decline of 18.6%.
Telus had 7.8 million wireless subscribers (up 1.5% year over
year), including 6.80 million post-paid customers (up 3.0% year
over year) and $1.02 million prepaid customers (down 7.4% year over
year) at the end of the reported quarter.
revenues increased 4.2% year over year to C$1.38 billion ($1.73
billion) on strong growth in data services and equipment revenues,
partially compensated by lower voice local and voice long
During the quarter, Telus added 27,000 TV subscribers to reach a
total of 842,000 customers (up 18.3% year over year). Net
high-speed Internet subscriber additions were 21,000, bringing the
total number of customers at the end of the first quarter to 1.42
million. The upside was driven by the success of Optik TV and Optik
high-speed Internet service launched in Jun 2010.
Telus exited the quarter with net debt of C$8.20 billion ($6.984
billion) as compared to C$7.59 billion ($6.984 billion) at the end
of 2013. Net debt to EBITDA (excluding restructuring costs)
increased to 1.97 times from 1.67 times in the prior quarter and
was well within the company's long-term target range of 1.5−2
Telus generated free cash flow of C$291 million ($1.03 billion),
exhibiting an annualized decline of 18.7%. Capital expenditure
crept up 6.2% year over year to C$496 million ($1.93 billion) in
the first quarter.
Telus increased quarterly dividend by 11.8% to
38 Canadian cents
. The increased dividend is payable on Jul 2, 2014 to holders of
the record on Jun 10, 2014.
We believe Telus' ongoing investments in the expansion of LTE
and increased rollout of smartphones and Internet data centers will
fuel strong growth leading to more opportunities in the wireless
and cloud computing businesses. Likewise, on the wireline front,
Telus continues to focus on the efficiency of the Optik TV and
Optik High-Speed Internet broadband services, which remain as its
strengths. Nevertheless, persistent erosion in access lines in the
wireline segment and weak voice services in wireless might weigh on
the company's future earnings. Competitive threats from other
Rogers Communications Inc.
), and reduced roaming charges are other impediments, which keep us
on the sidelines.
Telus currently carries a Zacks Rank #4 (Sell).
A better-ranked stock in this sector is
Level 3 Communications, Inc.
), which holds a Zacks Rank #1 (Strong Buy).
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