Telus’ internet, TV businesses steal spotlight from wireless amid intense competition

Telus Corp.’s wired businesses outshone its wireless results in the second quarter, with executives crediting investments in fibre connections for higher demand for internet and television services and better customer retention.

The Vancouver-based company reported Friday wired business revenue of $1.57 billion for the three months ended June 30, up 7.1 per cent from the same period last year thanks to the addition of 29,000 internet customers and 15,000 TV customers. The influx beat analysts’ expectations of 15,000 and 4,000 new customers, respectively.

Revenue in its wireless business rose at a slower rate of 3.6 per cent to $1.94 billion. Telus added 87,000 new customers, but average billings per user edged up just 0.6 per cent to $67.24. While the subscriber volume met Bay Street’s predictions, Telus fell short of its top competitors with Rogers Communications Inc. and BCE Inc. each adding 122,000 wireless subscribers in the period.

Still, overall revenue increased 5.3 per cent in line with analysts’ predictions. Profit was flat at $390 million or 66 cents per share.

The outperformance for wired services caught analysts’ attention since mobile operations across the industry have stolen the spotlight in recent years as revenue continuously climbed due to increased data usage and higher smartphone adoption.

On a conference call with analysts, Telus chief executive Darren Entwistle said the momentum in high-speed internet and TV sales shows the success of building fibre-to-the-premises connections. Fibre customers, he said, make fewer technician visits and customer service queries, spend more money and have a lower churn rate, meaning they’re less likely to ditch Telus. As such, Telus will focus on retention and churn in the wired business, Entwistle said.

On the wireless side, he expects moderated revenue growth to continue due to competition fuelled by larger data buckets and extra gigabyte promotions that he described as “bordering on the irrational.”

He pointed to “extremely aggressive” data promotions in 23 of the first 26 weeks of the year as proof of the competitive intensity between the Big Three. He cautioned against diluting the value of data too quickly. “These larger data buckets and promotions risk prematurely consuming the major capital investments industry is making in spectrum and network capacity and coverage,” he said.

He downplayed the gap between Telus’ wireless subscriber additions and those of its two largest competitors, stating Telus cares more about adding high quality subscribers for higher lifetime revenue per customer.

Analysts agreed Telus faced heightened competition in wireless. Desjardins analyst Maher Yaghi noted that industry-wide average billings per user growth is declining slightly faster than expected. He told clients this “could put a damper on future earnings growth for all participants.”

Still, Telus posted a “standout” performance in internet and TV, Barclays analyst Phillip Huang noted to clients. This reflects the advantage of fibre-to-the-premises connections, he said.