Telus profit drops on restructuring charge, high cost of winning customers
Telus Corp. reported higher quarterly revenue thanks to a growing base of data-hungry wireless subscribers, but higher costs to attract customers and a $305-million payoff to employees dampened its fourth-quarter profit.
The company’s profit of $87 million or 14 cents per share for the three months ending Dec. 31 fell 67 per cent from the same period last year, according to financial results released Thursday.
When excluding restructuring costs including the compensation expense, which unionized employees agreed to in exchange for a 30-month salary freeze, adjusted profit of $316 million or 53 cents per share was in line with analysts’ expectations.
Telus, the third largest telecommunications company in Canada, largely beat analysts’ expectations when it came to subscriber metrics. It added 87,000 postpaid wireless subscribers, 24,000 high-speed Internet customers and 16,000 television customers and lost 22,000 telephone subscribers.
Wireless revenue increased, with average revenue per user up 3.9 per cent to $66.24. Telus credited higher data usage for the increase. Fewer customers left Telus, with churn falling below 1 per cent for the third consecutive year.
Costs, however, went up as Telus spent more on device subsidies for higher-value smartphones in order to keep and attract customers in a competitive environment, heightened by the lower Canadian dollar.
Telus expects growth to continue this year. Its 2017 guidance estimates revenue growth between 2.5 to 3.5 per cent, earnings before interest, taxes, depreciation and amortization growth of 3 to 6 per cent and earnings per share growth between 2 to 8 per cent.
It announced a targeted dividend increase of 7 to 10 per cent in 2017.
Analysts reacted positively to the results. RBC’s Drew McReynolds noted to clients there was steady performance in the wireline division and no surprises in the 2017 guidance.
“Overall, with industry-leading earnings and dividend growth and yet with it still trading at a discount to peers, the stock remains at the top of our pecking order,” Desjardins analyst Maher Yaghi wrote in a note.