) reported second-quarter 2014 adjusted earnings of 63 Canadian
cents per share (58 cents per ADS), 16.7% up year over year and
ahead of the Zacks Consensus Estimate of 54 cents.
Total revenue grew 4.4% year over year to C$2.95 billion ($2.69
billion), but missed the Zacks Consensus Estimate of $2.70 billion
by a whisker. The year-over-year increase was buoyed by higher
revenues from wireless and wireline data services.
Quarterly adjusted EBITDA grew 4.5% year over year to C$1,084
million ($989.7 million), resulting in an EBITDA margin of
revenues rose 6.2% year over year to C$1.62 billion ($1.35 billion)
in the reported quarter. Wireless network revenues grew 6.1% year
over year driven by higher subscriber and data growth. Meanwhile,
Equipment and Other revenue leaped 7.7% to C$126 million ($115
Within Network revenues, data revenues grew 20% year over year
owing to continued strong adoption of smartphones and related data
applications, expansion of LTE base and higher data roaming
revenues, partially offset by increased used of data sharing plans,
lower roaming rates and more competitive U.S. roaming packages.
Voice revenues slid 7.7% year over year due to falling voice usage
and substitution by data services and features.
ARPU grew 2.3% year over year to C$62.51 ($57.01). The monthly
subscriber churn (customer switch) improved to 1.26% from 1.40% in
the year-ago quarter on the back of the company's customer-first
service approach and greater portion of post-paid clients in its
Net wireless subscriber addition in the quarter was 58,000,
reflecting a decline of 26.6% from the year-ago quarter. Telus lost
20,000 net prepaid customers in the second quarter compared with a
net loss of 21,000 in the year-ago quarter. Additionally, net
post-paid subscriber addition was 78,000, representing an
annualized decline of 22%.
Telus had 7.88 million wireless subscribers (up 2.2% year over
year), including 6.88 million post-paid customers (up 3.8% year
over year) and 1 million prepaid customers (down 7.4% year over
year) at the end of the reported quarter.
revenues increased 2.4% year over year to C$1.39 billion ($1.27
billion) on strong growth in data services, partially compensated
by lower voice local and voice long distance.
During the quarter, Telus added 23,000 TV subscribers to reach a
total of 865,000 customers (up 16.4% year over year). Net
high-speed Internet subscriber additions were 15,000, bringing the
total number of customers at the end of the second quarter to 1.43
million. The upside was driven by the success of Optik TV and Optik
high-speed Internet service launched in Jun 2010, enhanced
broadband speeds and improvement in customer churn rate.
Telus exited the quarter with net debt of C$9.27 billion ($8.69
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 2.21 times from 1.71 times in the prior quarter and is
outside the company's long-term target range of 1.5−2 times.
Telus generated free cash flow of C$210 million ($192million),
exhibiting a year-over-year rise of 9.4%. Capital expenditure crept
up 24.5% year over year to C$636 million ($581 million) in the
Dividend and Share Repurchase
Telus has returned $412 million to shareholders in the second
quarter including $224 million in dividends and $188 million in
share repurchase activity.
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 its core
strengths. Nevertheless, persistent erosion in access lines in the
wireline segment and loss of prepaid subscribers might weigh on the
company's future earnings. Competitive threats from other players
like Rogers Communications Inc. (
) and BCE Inc. (
) and reduced roaming charges are other impediments, which keep us
on the sidelines.
Telus currently carries a Zacks Rank #3 (Hold).
A better-ranked stock in this sector is Chunghwa Telecom
Co., Ltd. (
) which holds a Zacks Rank #2 (Buy).
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