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TELUS Corporation’s consolidated operating revenue increased 3.9 per cent to $3.3 billion in the second quarter of 2017, over the same period a year ago.
TELUS reports strong results for second quarter 2017
2017-08-11
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TELUS reports strong results for second quarter 2017

Strong wireless loading with 99,000 high-quality postpaid net additions, up 62 per cent over last year. Record wireless postpaid churn of 0.79 per cent combined with ARPU growth of 3.9 per cent yields industry-leading lifetime revenue of $6,700, up 19 per cent over last year 121,000 new postpaid wireless, Internet and TELUS TV customer additions, up 32 per cent over last year. Consolidated revenue and EBITDA growth of 3.9 per cent and 3.6 per cent respectively, including leading wireline profit growth of 4.1 per cent.

Vancouver, B.C. – TELUS Corporation’s consolidated operating revenue increased 3.9 per cent to $3.3 billion in the second quarter of 2017, over the same period a year ago. This growth reflects higher wireless network and wireline data services revenue growth, which represents 85 per cent of consolidated revenue. Earnings before interest, income taxes, depreciation and amortization (EBITDA)1 increased by 0.4 per cent to $1.2 billion, while Adjusted EBITDA was up 3.6 per cent as higher revenue growth, as well as ongoing execution of operational efficiency and effectiveness initiatives, offset increased costs to support higher wireless gross loading and retention volumes.

“TELUS reported strong second quarter results, including high-quality postpaid wireless loading, anchored by the TELUS team setting unprecedented industry benchmarks for customer loyalty and lifetime revenue,” said Darren Entwistle, President and CEO. “Importantly, we continued to deliver value-creating financial results in conjunction with strong customer loading, reflecting the company’s operational discipline, the high quality attributes of our wireless and wireline asset base, and our team’s relentless focus on our customers first promise.”

Mr. Entwistle added, “Through consistent execution of our longstanding strategy, we continue to deliver on our capital allocation programs focused on delivering long-term value for our customers and investors. This includes investing in our broadband networks to deliver advanced capabilities to our customers for decades to come, while simultaneously building on our track record of providing investors with the industry’s best multi-year dividend growth program, targeting annual dividend growth between seven and 10 per cent through to 2019. Notably, our track record of delivering on our industry-leading shareholder-friendly initiatives is highlighted by TELUS having now returned more than $14 billion to shareholders, including $9 billion in dividends, or $24 per share since 2004.”

Doug French, Executive Vice-President and CFO said, “TELUS’ strong financial results and high-quality loading and retention are a reflection of our team’s focus on operational excellence, financial discipline and driving cost efficiencies. These strong and consistent financials results are also built on the foundation of our entire team’s longstanding commitment to a customers first focus, which underpins the confidence we have in our capital allocation initiatives, future growth priorities, and our ability to maintain a strong balance sheet during this period of elevated capital intensity.”

In wireless, network revenue increased by 7.2 per cent to $1.7 billion, reflecting higher ARPU as customers move to higher-rate plans, including Premium Plus, and increased data usage, continued postpaid subscriber growth, including subscribers acquired from Manitoba Telecom Services (MTS), and higher roaming revenues. In wireline, data services and equipment revenue increased by 5.6 per cent to $1.0 billion, reflecting increased Internet and enhanced data service revenues from continued high-speed Internet subscriber growth and higher revenue per customer, growth in business process outsourcing revenues, higher TELUS Health revenues driven by organic growth through additional professional services and support revenue, and through acquisitions, and an increase in TELUS TV revenues from subscriber growth.

In the quarter, TELUS attracted 121,000 new wireless postpaid, high-speed Internet and TV customers, up 29,000 over the same quarter a year ago. The higher net additions included 99,000 wireless postpaid customers, 17,000 high-speed Internet subscribers, and 5,000 TELUS TV customers. TELUS’ total wireless subscriber base of 8.7 million is up 3.2 per cent from a year ago, reflecting a 5.1 per cent increase in the postpaid subscriber base to 7.8 million. TELUS’ high-speed Internet connections have increased 5.3 per cent to 1.7 million, while TELUS TV subscribers are higher by 4.5 per cent to 1.1 million.

TELUS’ consistent execution of putting customers first delivered a best-ever wireless monthly postpaid churn rate of 0.79 per cent, while blended churn was a record low 1.00 per cent. TELUS’ postpaid churn rate has now been below 1.00 per cent for 15 of the past 16 quarters.

  • EBITDA is a non-GAAP measure and does not have any standardized meaning prescribed by IFRS-IASB. TELUS issues guidance on and reports EBITDA because it is a key measure used to evaluate performance. For further definition and explanation of this measure, see Section 11.1 in the accompanying 2017 second quarter Management’s discussion and analysis.
  • Adjusted EBITDA is defined in this news release as excluding 1) restructuring and other costs of $39 million and $23 million from the second quarter of 2017 and 2016 respectively; 2) a gain of $15 million from the exchange of wireless spectrum licences in the second quarter of 2016; and 3) net gains and equity income of $3 million and $9 million in the second quarter of 2017 and 2016 respectively, related to real estate joint venture developments.
  • Adjusted net income and adjusted basic EPS are non-GAAP measures and do not have any standardized meaning prescribed by IFRS-IASB. These terms are defined in this news release as excluding from net income attributable to common shares and basic EPS (after income taxes), 1) restructuring and other costs; 2) a gain from the exchange of wireless spectrum licences in the second quarter of 2016; 3) net gains and equity income in the second quarter of 2017 and 2016 related to real estate joint venture developments; and 4) favourable income tax-related adjustments in the second quarter of 2017. For further analysis of adjusted net income and adjusted basic EPS, see Section 1.3 in the accompanying 2017 second quarter Management’s discussion and analysis.
  • Free cash flow is a non-GAAP measure and does not have any standardized meaning prescribed by IFRS-IASB. For further definition and explanation of this measure, see Section 11.1 in the accompanying 2017 second quarter Management’s discussion and analysis.
  • The sum of active wireless subscribers, residential network access lines (NALs), high-speed Internet access subscribers and TELUS TV® subscribers (Optik TV® and TELUS Satellite TV® subscribers) measured at the end of the respective periods based on information in billing and other systems. In relation to an acquisition and a divestiture both undertaken during the first quarter of 2017, beginning of period residential NALs, high-speed Internet and TELUS TV subscriber balances have been increased by a net 1,000, 6,000 and 5,000 respectively. Effective April 1, 2017, postpaid subscribers, total subscribers and associated operating statistics (gross additions, net additions, ARPU and churn) have been adjusted to include an estimated migration of 85,000 MTS subscribers in the opening subscriber balances. Cumulative subscriber connections also include an April 1, 2017 adjustment to remove approximately 19,000 prepaid and 25,000 postpaid subscriptions from the respective subscriber bases, primarily due to our national CDMA network shutdown.

For the quarter, net income of $386 million and basic EPS of $0.64 decreased by 7.2 per cent and 8.6 per cent respectively, while adjusted net income and adjusted basic EPS decreased by 2.7 per cent and 2.9 per cent respectively.

Free cash flow4 of $260 million in the second quarter doubled from $126 million a year ago due primarily to lower cash taxes paid.

This news release contains statements about financial and operating performance of TELUS (the Company) and future events that are forward looking, including with respect to the Company’s 2017 annual targets and guidance and future dividend increases. By their nature, forward-looking statements require the Company to make assumptions and predictions and are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future performance and events to differ materially from those expressed in the forward-looking statements.

Accordingly, the forward-looking statements in this news release should be read together with the cautionary note in the accompanying 2017 second quarter Management’s discussion and analysis. Forward-looking statements in this news release are made based on the assumptions (including assumptions regarding the 2017 annual targets and guidance, semi-annual dividend increases through 2019, and our ability or intention to sustain or complete any normal course issuer bid), and subject to the qualifications and risk factors referred to in the accompanying Management’s discussion and analysis for the second quarter of 2017, in the 2016 annual Management’s discussion and analysis, and in other TELUS public disclosure documents and filings with securities commissions in Canada (on SEDAR at sedar.com) and in the United States (on EDGAR at sec.gov).

The forward-looking statements contained in this news release describe our expectations at the date of this news release and, accordingly, are subject to change after such date. Except as required by law, TELUS disclaims any intention or obligation to update or revise forward-looking statements, and reserves the right to change, at any time at its sole discretion, its current practice of updating annual targets and guidance.

Second quarter 2017 operating highlights

TELUS wireless

  • Wireless network revenues increased by $117 million or 7.2 per cent year-over-year to $1.7 billion. This growth was driven by a larger proportion of higher-rate two-year plans in the revenue mix, including Premium Plus plans launched in June 2016, increased adoption of larger data buckets or topping up of data buckets, continued subscriber growth, including subscribers acquired from MTS, a more favourable postpaid subscriber mix, a higher smartphone mix, and higher roaming revenues.
  • Blended ARPU was higher by 3.9 per cent to $66.87. This represents TELUS’ twenty-seventh consecutive quarter of year-over-year growth and was driven by network revenue growth as described above.
  • Monthly postpaid subscriber churn declined by 11 basis points year-over-year to a record low of 0.79 per cent. The improvement reflects our focus on executing customers first initiatives and retention programs. Blended monthly churn declined by 15 basis points to 1.00 per cent reflecting improvements in both postpaid and prepaid churn rates, as well as an increase in the mix of postpaid subscribers.
  • Postpaid net additions of 99,000 were higher year-over-year by 38,000 due to higher gross additions, reflecting the success of targeted promotions and marketing efforts focused on higher-value postpaid and smartphone loading, cost-effective prepaid to postpaid migrations and lower churn. Prepaid subscribers decreased by 16,000 and reflect the focus on higher-value postpaid loading, increased competition for prepaid services, and conversions to postpaid services.
  • EBITDA decreased by $10 million or 1.3 per cent reflecting non-recurring 2016 gains related to the exchange on wireless spectrum licences as well as higher restructure and other costs including those associated with the migration of subscribers acquired from MTS. Adjusted EBITDA increased by $26 million or 3.3 per cent over last year to $809 million, reflecting higher network revenue as well as ongoing operational efficiency and effectiveness initiatives. This growth was partly offset by higher equipment sales expense related to higher-value smartphones in the sales mix, increasing handset costs, higher postpaid gross additions and increased retention volumes, higher network operating expenses, and an increase in customer support and administrative expenses, including incremental costs related to the acquisition of MTS subscribers.
  • Wireless capital expenditures increased marginally by 0.4 per cent over the same period a year ago due to ongoing investments in TELUS’ fibre-optic network to support its small-cell technology strategy to improve coverage, capacity and back-haul while preparing for a more efficient and timely evolution to 5G.

TELUS wireline

  • External wireline revenues increased by $33 million or 2.2 per cent to $1.4 billion. This growth was generated primarily by higher data services revenue.
  • Data services and equipment revenues increased by $55 million or 5.6 per cent, due to increased Internet and enhanced data revenues from continued high-speed Internet subscriber growth and higher revenue per customer, growth in business process outsourcing services, increased TELUS Health revenues driven by organic growth through additional professional services and support revenue, and through acquisitions, and higher TELUS TV revenues from continued subscriber growth and certain rate increases.
  • High-speed Internet net additions of 17,000 were slightly lower by 1,000 over the same quarter a year ago. The continued growth reflected the ongoing expansion of TELUS’ high-speed broadband footprint, including fibre to the premises.
  • Total TV net additions of 5,000 were lower by 8,000 over the same quarter a year ago, as a result of lower gross additions and satellite-TV subscriber losses due to slower subscriber growth for paid TV services reflecting a high rate of market penetration for TV services and heightened competitive intensity, including from over-the-top services. These factors were partly offset by the ongoing expansion of our addressable high-speed Internet and Optik TV footprint, connecting more homes and businesses directly to fibre and bundling of these services together.
  • Residential network access lines (NALs) declined by 19,000 in the quarter, an improvement of 1,000 over the same quarter a year ago. Residential NAL losses continue to reflect the ongoing trend towards wireless and Internet substitution, as well as increased competition, partially mitigated by the success of TELUS’ bundled service offerings and our customers first initiatives.
  • Wireline EBITDA increased by $15 million or 3.8 per cent while Adjusted EBITDA increased by $16 million or 4.1 per cent over last year to $421 million. This growth reflects ongoing growth in data service margins, including Internet, TELUS Health, TELUS TV, and business process outsourcing services, as well as execution on operating efficiency and effectiveness initiatives.
  • Wireline capital expenditures increased 7.8 per cent over the same period a year ago due primarily to continued strategic investments in broadband network infrastructure, including connecting more homes and businesses directly to TELUS’ fibre-optic network. These investments support high-speed Internet and Optik TV subscriber growth, as well as TELUS’ growing customer demand for faster Internet speeds, and extend the reach and functionality of TELUS’business and healthcare solutions.

Dividend declaration

The TELUS Board of Directors has declared a quarterly dividend of $0.4925 Canadian per share on the issued and outstanding Common Shares of the Company payable on October 2, 2017 to holders of record at the close of business on September 8, 2017.

This third quarter dividend represents a 7.1 per cent increase from the $0.46 quarterly dividend paid on October 3, 2016.

Corporate highlights

TELUS makes significant contributions and investments in the communities where team members live, work and serve and to the Canadian economy on behalf of customers, shareholders and team members. These include:

  • Paying, collecting and remitting a total of approximately $1,056 million in taxes in the first half of 2017 to federal, provincial and municipal governments in Canada consisting of corporate income taxes, sales taxes, property taxes, employer portion of payroll taxes and various regulatory fees. Since 2000, the Company has remitted approximately $22 billion in these taxes.
  • Disbursing spectrum renewal fees of $50 million to Innovation, Science and Economic Development Canada in the first half of 2017. Since 2002, TELUS’ total tax and spectrum remittances to federal, provincial and municipal governments in Canada have totaled approximately $26 billion.
  • Investing $1.5 billion in capital expenditures primarily in communities across Canada in the first half of 2017 and $34 billion since 2000.
  • Spending $3.7 billion in total operating expenses in the first half of 2017, including goods and service purchased of $2.7 billion. Since 2000, TELUS has spent $103 billion and $68 billion respectively in these areas.
  • Generating a total team member payroll of $1.3 billion in the first half of 2017, including payroll taxes of $91 million. Since 2000, total team member payroll totals $41 billion.
  • Returning $860 million in dividends in the first seven months of 2017 to individual shareholders, mutual fund owners, pensioners and institutional investors. Since 2004, TELUS has returned $14.5 billion to shareholders through its dividend and share purchase programs, including $9.3 billion in dividends and $5.2 billion in share purchases, representing over $24 per share.

About TELUS

TELUS (TSX: T, NYSE: TU) is Canada’s fastest-growing national telecommunications company, with $13 billion of annual revenue and 12.8 million subscriber connections, including 8.7 million wireless subscribers, 1.7 million high-speed Internet subscribers, 1.3 million residential network access lines and 1.1 million TELUS TV customers. TELUS provides a wide range of communications products and services, including wireless, data, Internet protocol (IP), voice, television, entertainment and video. TELUS is also Canada's largest healthcare IT provider, and TELUS International delivers business process solutions around the globe.

In support of our philosophy to give where we live, TELUS, our team members and retirees have contributed over $482 million to charitable and not-for-profit organizations and volunteered more than 7.7 million hours of service to local communities since 2000. Created in 2005 by President and CEO Darren Entwistle, TELUS’ 12 Canadian community boards and 5 International boards have led the Company’s support of grassroots charities and have contributed more than $60 million in support of 5,595 local charitable projects, enriching the lives of more than 2 million children and youth, annually. TELUS was honoured to be named the most outstanding philanthropic corporation globally for 2010 by the Association of Fundraising Professionals, becoming the first Canadian company to receive this prestigious international recognition.

For more information about TELUS, please visit telus.com.

Media relations
Richard Gilhooley
(778) 868-0235
Richard.Gilhooley@telus.com

Investor Relations:
Paul Carpino
(647) 837-8100
ir@telus.com

Access to quarterly results information

Interested investors, the media and others may review this quarterly earnings news release, management’s discussion and analysis, quarterly results slides, audio and transcript of the investor webcast call, supplementary financial information, and our full 2016 annual report at telus.com/investors.

TELUS’ second quarter 2017 conference call was scheduled for Friday, August 11, 2017 at 11:00am ET (8:00am PT) and featured a presentation followed by a question and answer period with investment analysts. Interested parties can access the webcast at telus.com/investors. A telephone playback will be available on August 11 until September 15, 2017 at 1-855-201-2300. Please use reference number 1220942# and access code 77377#. An archive of the webcast will also be available at telus.com/investors and a transcript will be posted on the website within a few business days.