Telus withdraws guidance, records 19 per cent net income reduction

Telus Corp.’s net income for the first quarter of 2020 dropped 19 per cent to $353 million and the company joined the other major incumbents in withdrawing financial guidance for the year due to uncertainty surrounding the COVID-19 pandemic. In a news release, Telus attributed the $84 million profit drop to “higher depreciation and amortization due to growth in our capital assets from recent acquisitions,” including Competence Call Centre and ADT Security Services Canada. It was also affected by ongoing infrastructure investments, the company said. The quarter ended on March 31, two weeks after the COVID-19 pandemic and resulting social distancing measures hit the country. Overall revenue for the quarter increased by $171 million on the year before, to $3.69 billion, an increase of 5.4 per cent. CEO Darren Entwistle told analysts the COVID-19 pandemic had significantly increased wireless call and messaging traffic, as well as home internet usage. “Our ongoing investment in technology and infrastructure have allowed us to effectively manage a 50 per cent daily increase in voice traffic, four times the traffic that occurred on Mother’s Day last year,” Entwistle said. Multimedia messaging service (MMS) usage had almost doubled, Entwistle said, while the company detailed in a news release that home internet usage had also increased by about 25 per cent. Chief financial officer Doug French said in a release that the rapidly evolving COVID-19 pandemic meant Telus was unable to predict the impacts it would have on the company, but intended to provide an update on “overall assumptions and guidance” when it released its second quarter results at the end of July. French said the company had already identified more than $250 million of “cost reduction and margin accretion initiatives,” which he said would allow Telus to “mitigate the transient impacts related to the current crisis, manage through various stakeholder initiatives in response to the COVID-19 pandemic, and remain focused on driving free cash flow toward our original expectation for 2020.” Wireless operating revenues dropped to $1.9 billion, a $39 million decrease on what Telus recorded in the first quarter of 2019, as overseas roaming revenue dropped. The company had 21,000 net mobile additions in the quarter, a 90.9 per cent increase, despite its gross additions decreasing compared to a year before. Churn decreased eight base percentage points to 0.94 per cent, reflecting a decline in customers changing phone plans during the pandemic. Telus’ total mobile subscriber base as of Mar. 31 increased to 8.69 million, a 223,000 rise on a year earlier, while mobile phone average revenue per unit (ARPU) decreased 1.2 per cent to $58.60, down from $59.33. In wireline, revenues increased 14.3 per cent to $1.87 billion, despite the company’s decision to suspend data overage charges from Mar. 13 due to the pandemic. Telus had 26,000 internet service net additions for the quarter, a 18.2 per cent increase, taking its total subscriber base to two million, 5.9 per cent more than the 1.90 million subscribers it had as of Mar. 31 2019. Telus had 8,000 TV net additions, a 52.9 per cent reduction on a year earlier, but its total subscriber base grew 5.2 per cent to 1.17 million. The company lost 13,000 landline customers in the quarter, 2,000 more than in 2019, and its subscriber base reduced by 3.7 per cent to 1.19 million. Telus also deferred its planned dividend increase due to COVID-19, leaving it steady at $0.29 per share, with French saying he was hopeful the company would be able to meet or exceed its targeted dividend increase when it announced its third quarter results in November. In a note to investors, RBC Capital Markets analyst Drew McReynolds said the withdrawal of guidance and decision to defer the dividend increase were both expected and Telus’ quarterly results had been largely in line with expectations. — With reporting by Adam Langenberg at alangenberg@thewirereport.ca and editing by Michael Lee-Murphy at mleemurphy@thewirereport.ca

Telus withdraws guidance, records 19 per cent net income reduction

News | May 7, 2020

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Telus withdraws guidance, records 19 per cent net income reduction

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