Strong wireless and data results drive earnings growth
Free cash flow up 23 per cent
Quarterly dividend increased to 64 cents per share - up 10.3% from a year ago
CEO to take salary in TELUS shares for fourth consecutive year
VANCOUVER, Nov. 9, 2012 /CNW/ - TELUS Corporation's third quarter 2012 revenue increased six per cent to $2.8 billion, while earnings before interest, taxes, depreciation and amortization (EBITDA) increased by five per cent to $1.0 billion. Earnings per share rose eight per cent to $1.08.
TELUS' growth was primarily generated by a seven per cent increase in wireless revenue and a 12 per cent increase in wireless EBITDA, resulting from a 23 per cent increase in data revenue due to continued smartphone adoption. Wireline revenue growth of four per cent was generated by a 14 per cent increase in data revenue driven by strong TV and high-speed Internet growth.
TELUS' total customer base of 13 million grew with the addition this quarter of 116,000 new postpaid wireless customers, 42,000 new TV subscribers and 26,000 high-speed Internet customers, partially offset by a moderating network access line loss of 39,000. TELUS' total wireless subscriber base of 7.6 million is up five per cent year over year and the average revenue per unit increased by 1.5 per cent. The TELUS TV subscriber base of 637,000 is up 41 per cent from a year ago, while high-speed Internet customers are up seven per cent to surpass 1.3 million.
Free cash flow in the third quarter increased 23 per cent from a year ago to $426 million primarily due to higher EBITDA.
Annual guidance for 2012, which was last adjusted in August, has been reaffirmed.
|C$ and in millions, except per share amounts|| 3 months ended
|Operating expenses before depreciation & amortization||1,756||1,654||6.2|
|Earnings per share (EPS), basic(2)||1.08||1.00||8.0|
|Free cash flow(3)||426||345||23.5|
|Total customer connections(4)||12.98||12.57||3.3|
|(1)||See Section 11.1 in the 2012 third quarter Management's discussion and analysis.|
|(2)|| Net income and EPS for the third quarter of 2012 included favourable income tax-related
adjustments of $3 million or one cent per share.
|(3)||For definition, see Section 11.2 in 2012 third quarter Management's discussion and analysis.|
|(4)|| Sum of wireless subscribers, network access lines, total Internet subscribers, and TELUS TV
subscribers (IPTV and satellite TV).
"Our long-standing strategy to invest in broadband wireless and wireline data technology, services and applications within our core businesses coupled with a focus on putting customers first has resulted in strong quarterly operational and financial growth," said Darren Entwistle, TELUS President and CEO. "We attracted 116,000 new postpaid wireless customers, 42,000 new TV customers, and 26,000 new high-speed Internet customers and encouragingly we saw those customers continuing to stay with us longer, as evidenced by our industry leading 1.44 per cent wireless churn rate. This strong performance translated this quarter into double-digit data revenue growth, eight per cent earnings per share growth and 23 per cent free cash flow growth."
"I am pleased that our winning strategy and continued strong operational execution is enabling us to again increase the quarterly share dividend, consistent with our dividend growth model that we announced last year," Mr. Entwistle added. "We are increasing TELUS' dividend by 3 cents to 64 cents a quarter, or $2.56 annually, a 10.3 per cent increase from a year ago. We look forward to continuing to deliver strong operational and financial results to support the realisation of our dividend growth ambitions through our 2013 commitment and beyond."
"I would like to take this opportunity to extend my deep gratitude to Bob McFarlane for his enormous commitment and extraordinary contributions to TELUS. After an outstanding 12 year career at our company as CFO, Bob has decided to retire at the end of the year and devote more time to his family and community endeavours," said Mr. Entwistle. "Bob's distinguished leadership of TELUS' finance team has yielded a legacy that includes setting rigorous financial policies, achieving a stellar track record of disclosure transparency and helping TELUS consistently deliver on our public commitments to the investment community. His efforts, alongside those of his colleagues across TELUS, have contributed greatly to our company's business success, globally leading shareholder value creation amongst our peers and industry leading balance sheet. Bob and our TELUS team have received countless Canadian and global awards for excellence in corporate disclosure, sustainability reporting, risk management and investor relations. Bob was named CFO of the Year by Canadian Business magazine, and he was honoured with the prestigious Queen's University Kathleen Beaumont Hill Award for outstanding service and advocacy that have contributed to the country's prosperity and growth in business, education and community development. I greatly appreciate Bob's many years of support and his commitment to ensuring a smooth transition to his highly capable successor, John Gossling, who joins TELUS with a wealth of experience in the communications and broadcasting industries."
Mr. Entwistle confirmed today that for the fourth consecutive year he intends to take the entirety of his 2013 annual cash salary compensation in TELUS common shares.
Robert McFarlane, TELUS Executive Vice-President and CFO, said, "TELUS has a strong financial position as reflected by the combination of continued good earnings and cash flow growth along with a 1.7 times net debt to EBITDA ratio, which is well within our policy range and represents the best such credit metric in the Canadian media and telecom industry. This positions TELUS favourably for continued advantaged access to the capital markets and to be in a strong position for future wireless spectrum auctions, as well as for continued dividend growth, and builds on our track record of balancing the interests of debt and equity investors."
|This news release contains statements about expected future events and financial and operating performance of TELUS that are forward-looking. 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 that expressed in the forward-looking statements. Accordingly this news release is subject to the disclaimer and qualified by the assumptions (including assumptions for 2012 annual guidance), qualifications and risk factors (including the potential for a future non-voting to common share exchange proposal on a one-for-one basis, semi-annual dividend increases to 2013 and CEO three year goals for EPS and free cash flow growth to 2013 excluding spectrum costs) referred to in the 2012 Information Circular, Management's discussion and analysis (MD&A) in the 2011 annual report, and in the 2012 first, second, and third quarter reports. 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.|
- External wireless revenues increased by $104 million or 7.4 per cent to $1.5 billion in the third quarter of 2012, compared to the same period a year ago. This growth was driven by continued subscriber and average revenue per unit (ARPU) growth.
- Data revenue increased by $102 million or 23 per cent to $546 million. Data ARPU increased by $3.61 or 17 per cent to $24.51. These increases were due to continued strong adoption of smartphones and related data plans, higher roaming volumes, growth in mobile Internet devices and tablets, and increased revenues from text messaging.
- Blended ARPU increased by $0.90 or 1.5 per cent to $61.42 as 17 per cent data ARPU growth more than offset a 6.8 per cent voice ARPU decline. This is the eighth consecutive quarter of year-over-year blended ARPU growth.
- Blended monthly subscriber churn decreased 23 basis points year-over-year to 1.44 per cent - the lowest third quarter result in five years - reflecting the successful customers-first marketing and service approach, effective investments in retention and lower churn on smartphones. Postpaid churn was 1.10 per cent, down 23 basis points from a year ago.
- Total wireless net additions of 111,000 were lower by 2.6 per cent year-over-year from the addition of 116,000 postpaid subscribers and a loss of 5,000 lower-ARPU prepaid subscribers. Postpaid net additions, which declined by 13 per cent from a year ago, were impacted by delayed customer purchase decisions ahead of the anticipated launch of the new iPhone 5 in late September.
- Total wireless subscribers were up 4.8 per cent from a year ago to 7.56 million and the proportion of high-value postpaid subscribers increased by two points to 85 per cent. Smartphone subscribers now make-up 63 per cent of the total postpaid subscriber base of 6.4 million as compared to 48 per cent a year ago.
- Wireless EBITDA of $640 million increased $70 million or 12 per cent due to strong revenue network growth and expense control. The margin of 42.4 per cent increased by 1.9 points over last year. Network service revenue margin was up 2.4 points to 46.6 percent.
- Simple cash flow (EBITDA less capital expenditures) increased by $52 million or 13 per cent to $465 million in the quarter as EBITDA growth was partially offset by increased capital spending related to the ongoing expansion of TELUS' new 4G LTE network, as well as investments in HSPA+ network capacity and coverage, and Internet data centres.
- External wireline revenues increased by $48 million or 3.9 per cent to $1.27 billion in the third quarter of 2012, when compared with same period a year ago. This growth was generated by increased data service and equipment revenues, partially offset by declines in local, long-distance, and other service and equipment revenues.
- Data service and equipment revenues increased by $93 million or 14 per cent, due primarily to strong growth in the TELUS TV subscriber base and high-speed Internet and enhanced data services, rate increases, and higher equipment sales.
- TELUS TV additions of 42,000 were lower by 8,000 over the same quarter last year, as stable growth in new customers and a significantly lower churn rate were offset by a higher amount of deactivations from the increasing subscriber base. The total TELUS TV subscriber base increased 41 per cent to 637,000 up by 184,000 from a year ago.
- High-speed Internet net additions of 26,000 were 18 per cent higher than a year ago and reflect successful promotions and the pull-through effect of Optik TV sales. TELUS' high-speed subscriber base of 1.3 million is up 7.0 per cent or 85,000 from a year ago.
- Total network access lines declined 5.3 per cent from a year ago to 3.45 million. Residential line losses of 30,000 were unchanged year-over-year, showing an improving sequential trend from the previous two quarters. Residential lines are down 7.7 per cent year-over-year, reflecting ongoing competition and wireless and Internet substitution. Business NAL losses of 9,000 reflect ongoing price based competition in the small and medium business market, and conversion from legacy voice services to IP services.
- Wireline EBITDA of $378 million decreased by $20 million or 5.0 per cent due to ongoing declines in higher margin legacy voice services that were not offset by growth in lower margin data services.
- Simple cash flow (EBITDA less capital expenditures) declined slightly by $3 million to $82 million in the quarter as lower EBITDA was largely offset by lower capital spending.
CORPORATE AND BUSINESS DEVELOPMENTS
Bob McFarlane, EVP and CFO, retiring at year's end after outstanding career
Bob McFarlane, executive vice-president and chief financial officer is retiring effective at the end of the year after an extraordinarily successful 12 years at TELUS. Bob will hand over responsibilities to John Gossling effective January 1 after a transition period.
Bob began his career at TELUS as part of the Clearnet acquisition in August 2000, a historic milestone in the expansion of our national growth strategy focused on wireless and data. He was soon after appointed CFO of TELUS based on his strong knowledge of the business, deep understanding of the financial markets and proven track record for raising capital. Bob has been instrumental in helping to answer numerous and unprecedented challenges presented by the equity and credit markets over the past dozen years such that TELUS has always had access to long term financing to fund its prescient growth investments in broadband wireless and wireline technology.
Indicative of his capabilities and excellent work ethic, Bob's responsibilities while encompassing all the traditional Finance functions, were extended in later years to include Corporate Strategy, Mergers & Acquisitions, TELUS Ventures and Government & Regulatory Affairs.
Bob's contributions alongside the efforts of his colleagues across TELUS' leadership team have helped elevate TELUS' brand and reputation to the highest levels in Canada and globally. In the area of corporate and financial disclosure, TELUS has been ranked number one in Canada for four of the last five years by the Canadian Institute of Chartered Accountants. Our annual report has been recognized as the best in the world, and TELUS was the only company globally to be ranked in the top 10 for eight consecutive years. Additionally, TELUS has won numerous awards for its comprehensive social responsibility reporting including 12 consecutive years of recognition on the prestigious Dow Jones Sustainability Indices.
Bob will be retiring from TELUS with a wonderful legacy of making exceptional contributions that have benefited TELUS' shareholders, customers, team and the communities in which we live, work and serve.
"Bob's distinguished contributions in combination with those of his colleagues across TELUS' leadership team have delivered world-leading shareholder value creation through price appreciation and dividend growth," Mr. Entwistle concluded.
Experienced communications industry CFO, John Gossling joining TELUS executive team
After an extensive executive search, John Gossling was chosen to join TELUS' leadership team as our next executive vice president and chief financial officer. He starts on November 12th and will work closely with retiring EVP and CFO, Bob McFarlane, until the end of 2012 to ensure an effective transition with respect to the leadership of the TELUS Finance team.
John is a highly talented and proven finance executive with extensive experience in the communications industry. From 2008 to 2011, he was the CFO of CTVglobemedia, leading all financial activities for the company. John helped drive dramatically improved financial performance at CTVglobemedia prior to the sale of the company to BCE.
From 2000 to 2008, John held senior leadership roles with the Rogers Communications organization, including CFO at Rogers Wireless. In this role, John led all financial activities for the company. As a member of the Rogers Wireless senior management team, John was a key player in the turnaround of the company's operating performance and was a lead executive on the acquisition of Microcell Telecommunications.
John is a Fellow of the Institute of Chartered Accountants of Ontario (FCA). He and his family will be relocating to Vancouver.
TELUS shareholders vote decisively to approve 1:1 share exchange proposal
At a joint shareholder meeting on October 17th, TELUS announced that shareholders voted strongly in favour of its proposal to exchange the company's non-voting shares for common shares on a one-for-one basis. Mason Capital's four resolutions proposing alternate share exchange ratios were also voted on at the meeting and did not pass.
Once final votes were tallied, 81.1 per cent of total shares voted were in favour of TELUS' share exchange proposal. Of the 128.8 million common shares voted, 62.9 per cent were in favour, and 99.5 per cent of the 127.7 million non-voting shares voted were in favour. Excluding Mason Capital's most recently reported voting stake, 84.4 per cent of common shares voted were in favour. The voting results easily exceeded the approval thresholds for the proposal to pass, specifically a simple majority of common shares voted and two-thirds of non-voting shares voted. Voting participation by shareholders was high at 73.6 per cent of the common shares outstanding and 84.6 per cent of the non-voting shares outstanding.
The hearing before the Supreme Court of British Columbia to hear Mason Capital's appeals and TELUS' final order application under a plan of arrangement to approve the share exchange began on November 7th. In order for the share exchange to be effective, the Court will have to approve the Company's application for a final order and dismiss all current and further possible appeals. It is currently estimated that the share exchange would not be effective until late November at the earliest.
TELUS' 4G LTE wireless network continues to grow
In the third quarter, TELUS launched its LTE network in more than 50 new communities across the country and now covers more than 60 per cent of the Canadian population. Newly launched communities include:
- Alberta: Brooks, Camrose, Drayton Valley, Grande Prairie, Lethbridge and Taber, Medicine Hat, Red Deer, Strathmore, Okotoks and High River;
- British Columbia: Okanagan, Sea to Sky, Victoria, Fraser Valley, Surrey, Richmond, North Delta, White Rock, Langley, Maple Ridge, Pitt Meadows, Southern Vancouver Island, Kamloops, Vernon, Prince George, Comox, Courtenay, Campbell River;
- Ontario: Newmarket, Aurora, Windsor, Kanata, Orleans, Nepean and Cumberland;
- Quebec: Quebec North East, Charny, Quebec City South Shore Levis, Ste-Dorothe, Chomedey, Blainville, Terrebonne Mascouche, Joliette, Joliette Repentigny, Vaudreuil-Dorion.
TELUS launches iPhone 5
TELUS launched iPhone 5 to customers in Canada beginning on September 21. iPhone 5 is the thinnest and lightest iPhone ever, completely redesigned to feature a stunning new 4-inch Retina display; an Apple-designed A6 chip for blazing fast performance; and ultrafast wireless technology—all while delivering even better battery life. iPhone 5 comes with iOS 6, the world's most advanced mobile operating system with over 200 new features including: Shared Photo Streams, Facebook integration, all-new Maps app, Passbook organization and even more Siri features and languages. iPhone 5 customers can connect to TELUS' fast 4G LTE, HSPA+ and DC-HSPA+ networks with Wideband Audio..
TELUS eliminates activation fees for new and renewing customers
As part of the company's commitment to putting customers first and being fair and transparent, TELUS announced that it will no longer charge a $35 activation fee for new customers or a $25 equipment exchange fee for renewing customers who purchase a new device. TELUS is the first of the established wireless brands to eliminate activation fees as part of the Company's ongoing efforts to make the customer experience clear and simple. In addition, starting November 1, 2012, TELUS announced it will begin charging $10 for SIM cards to cover the product cost that was previously included in their renewal and activation fees.
TELUS launches Optik Smart Remote
In October, TELUS launched the Optik Smart Remote app, an innovative way to surf TV and more using your mobile or tablet device. This app enables customers to surf through all their content choices on their phone or tablet instead of the traditional guide on the TV. Customers can spend less time channel surfing by using guide filters to show only what they are looking to find. By linking the mobile device with the digital set top box, they can use swipes to change the channel. Customers can also navigate the interactive program guide on their mobile device without interrupting a show and, retrieve more program related information from sources like Internet Movie Database (IMDb), Wikipedia and YouTube. .
TELUS also added 10 new HD channels to its lineup during the quarter. Optik TV offers more than 550 channels, including more than 135 in HD, which TV customers can get all their HD channels for no extra charge.
TELUS Health eClaims continues to drive efficiencies in claims and benefits management
In the third quarter, TELUS Health launched its nationwide eClaims service for extended healthcare providers and extended its partnerships with Sun Life and Desjardins to now offer TELUS Health eClaims web portal service to their members across Canada. In addition, TELUS Health entered into an agreement with Standard Life to integrate the TELUS Health's eClaims service into its advanced TELUS Health Multi-Benefit Claims Management (MBCM) platform, which will help reduce out-of pocket expenses for plan members, decrease time spent processing insurance paperwork for care providers and streamline the reimbursement process.
TELUS Health launches Emergency Profile
TELUS Health recently created an Emergency Profile feature within TELUS Health Space online portal. Emergency Profile is a free resource that helps prepare families for an emergency quickly and easily and makes it easy to access and share important health information with family members and others. Consumers can sign up for an Emergency Profile by visiting myhealthreference.com. Emergency profile is built on TELUS Health Space, a secure platform certified by Canada Health Infoway to store, organize and share health information.
In September, TELUS Health unveiled the new TELUSHealth.com, an online hub to help bring customers smart healthcare solutions that turn information into better health outcomes to help improve the effectiveness of the country's healthcare system.
TELUS Health acquires KinLogix, Quebec's fastest-growing cloud-based EMR provider
In October, TELUS acquired KinLogix, Quebec's fastest-growing cloud-based Electronic Medical Record (EMR) provider. This is TELUS' second EMR company acquisition this year, following B.C.-based Wolf Medical Systems. These strategic acquisitions extend TELUS Health' reach to physicians and strengthen its leadership in the EMR market to further its efforts to accelerate the adoption of EMR solutions across Canada. With these investments, TELUS is delivering on its national strategy and commitment to the physician EMR market so the company can continue to improve Canada's health system and deliver better health outcomes for patients.
Generation INC., powered by TELUS: Season 3
The business TV show Generation INC., powered by TELUS, has started its third season. The show features 12 local businesses from the province of Québec who are visited by multidisciplinary experts who help them reach their full potential through innovative advice, know-how and technological tools. The Generation INC. movement has created much enthusiasm amongst the small and medium business market such that more than 500 local business owners submitted an application to be part of the show and for a chance to benefit from the advice of the experts.
Toronto glass company wins The Challenge from TELUS and The Globe and Mail
In September, TELUS and The Globe and Mail named Toronto-based glass company Glassopolis the winner of The Challenge contest and awarded the company a $100,000 small business grant to purchase new machinery and expand production across North America.
This second annual contest invited Canadian small business owners to present their biggest business challenge for the opportunity to win a $100,000 grant from TELUS. Entrepreneurs across Canada were invited to submit their entries to be judged by a panel that included entrepreneurs and small business experts.
TELUS executive vice-president Josh Blair recognized as Breakaway Leader
In September, Josh Blair, TELUS executive vice-president of Human Resources, was recognized as one of the Top 10 Breakaway Leaders in the world at the Evanta Global HR Leadership Summit in Denver, Colorado. The awards honoured international leaders who are changing the face of their industry and inspiring a legacy of excellence through ingenuity and dedication. Notably, TELUS is one of only two Canadian companies represented on the Top 10 Breakaway Leaders list.
TELUS' annual report ranked one of best in world
The TELUS 2011 annual report has been ranked the 14th best in the world across all industries and was the top-ranked Canadian company, according to this year's Annual Report on Annual Reports 2012. To develop the ranking, judges evaluated 500 annual reports shortlisted from a wider selection of publicly listed corporations. The comprehensive survey looks at 10 key evaluation criteria: packaging, highlights, strategy, business, financials, investors, governance, accounting, responsibility and communication. The judges gave the TELUS 2011 annual report an 'A' rating and cited it as an example of excellence in four areas (executive message, financial review and analysis, goals-targets-outlook, and risk factors and management). To put this accomplishment in perspective, only 19 Canadian companies made the top 300 and only two other Canadian companies made the top 50.
TELUS Celebration of Giving events laud local charities
This fall, TELUS celebrated local charities as it announced how much it is giving this year toward local community initiatives through TELUS Community Boards and other initiatives in Vancouver, Edmonton, Toronto, Ottawa and Montreal. The TELUS Celebration of Giving is an annual event that brings together professionals and volunteers from the community sector. During this special day, TELUS recognizes the generosity and dedicated work of all those who make a difference in their community. In 2012, TELUS and its team expect to give $8 million to Vancouver-area organizations, $4.5 million to local community initiatives in Edmonton, $5.5 million to Greater Toronto-area charities and community organizations, $1.4 million to Ottawa-based charities, and $3 million to local charities in Montreal. In addition, funds are given to numerous local community initiatives in other regions across Canada.
TELUS Community Excellence Awards in Quebec
In October, TELUS honoured three outstanding community leaders in the Greater Montreal region. The top three winners of the TELUS Community Excellence Awards are Manon Barbeau, co-founder, executive director and artistic director of Wapikoni mobile; Ugo Dionne, co-founder of Bénévoles d'affaires; and Bernard Lamarre, chairman of the board, École Polytechnique. This important honour was part of the TELUS Celebration of Giving in Montreal. Part of TELUS Quebec's 85th anniversary celebrations, the TELUS Community Excellence Awards publicly recognizes people who stand out because of their generosity, commitment to philanthropy and passion for innovation in three main regions: Montreal, Quebec and East of Quebec. This award was launched with the Association of Fundraising Professionals-Quebec Chapter (AFP) and the Association des professionnels en gestion philanthropique (APGP).
TELUS puts fans in the Canadian Football Hall of Fame with The Fan Cup
In September, TELUS and the Canadian Football League (CFL) announced The Fan Cup presented by TELUS, the first ever trophy honouring the game's most important player - the fans. Fans will have the opportunity to put their name on a 100th anniversary replica Grey Cup that will sit alongside the greats of the game inside The Canadian Football Hall of Fame. Cast from the copper of Canadian pennies, The Fan Cup will be engraved with the names of thousands of CFL fans from across Canada be a symbol of appreciation for a century of loyal fan support. Fans will create The Fan Cup trophy during The Grey Cup 100 Tour by using a custom-built TELUS Penny Press to make their own 100th Grey Cup Game collectable out of a Canadian penny. A sliver from every penny used to create The Fan Cup presented by TELUS, which will then be etched with all fans' names.
TELUS expands five-year partnership as National Co-Title sponsor of We Day
TELUS is expanding its partnership with Free the Children, a non-profit organisation that encourages youth to be agents of change and help find solutions for local and global societal problems such as poverty, hunger, bullying and environmental concerns. In addition to its five-year partnership as national co-title sponsor of We Day, a series of inspirational concerts taking place in cities across Canada, TELUS is contributing funds to Free the Children through its Phones for Good campaign. TELUS is also encouraging youth to share examples of their volunteer efforts by writing to the company at telusforweday.com where they can participate in a national video contest. The winner will receive $20,000 to carry out a volunteer activity with a local charity.
TELUS Community Ambassadors donate 9,600 backpacks across Canada
This year, Community Ambassadors across Canada assembled 9,600 "Kits for Kids", backpacks filled with basic school supplies for less fortunate children. A challenge many families face in the fall is affording school supplies. TELUS and its Ambassadors recognize the importance of having these supplies to a young person's confidence and ability to get off to a successful start at school. Since 2007, the Ambassadors have given out nearly 60,000 Kits for Kids.
Dividend Declaration - Increase to 64 cents per quarter - up 10.3 per cent year-over-year
The Board of Directors has declared a quarterly dividend increase of three cents to sixty-four cents ($0.64) Canadian per share on the issued and outstanding Common shares and sixty-four cents ($0.64) Canadian per share on the issued and outstanding Non-Voting shares of the Company payable on January 2, 2013 to holders of record at the close of business on December 11, 2012.
In the event that the proposed share exchange of Non-Voting Shares to Common Shares on a one-for-one basis receives all requisite approvals and is effective prior to the dividend record date of December 11, 2012, holders of record on such date who previously held Non-Voting Shares would hold Common Shares and would therefore receive the same dividend as all other holders of Common Shares.
This new quarterly dividend represents the second increase this year and the fourth of six planned under TELUS' plan for semi-annual dividend increases of circa 10 per cent through to 2013. The dividend is a three cent or 4.9 per cent increase from the $0.61 quarterly dividends paid on July 3 and October 1, 2012 and a six cent or 10.3 per cent increase from the $0.58 quarterly dividends paid on January 3 and April 2, 2012, which is consistent with TELUS' dividend growth model. Dividend decisions will continue to be subject to the Board's assessment and determination of the Company's financial situation and outlook on a quarterly basis.
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 investor webcast call, supplementary financial information and our full 2011 annual report on our website at telus.com/investors.
TELUS' third quarter conference call is scheduled for November 9, 2012 at 11 a.m. ET and will feature a presentation followed by a question and answer period with analysts. Interested parties can access the webcast at: telus.com/investors. A telephone playback will be available on November 9 until December 9 (1-855-201-2300), reservation no. 859140#, access code no. 30599). An archive of the webcast will also be available at: telus.com/investors and a transcript will be posted on the website within several business days.
TELUS (TSX: T, T.A; NYSE: TU) is a leading national telecommunications company in Canada, with $10.8 billion of annual revenue and 13.0 million customer connections including 7.6 million wireless subscribers, 3.4 million wireline network access lines, 1.3 million Internet subscribers and more than 635,000 TELUS TV customers. Led since 2000 by President and CEO, Darren Entwistle, TELUS provides a wide range of communications products and services including wireless, data, Internet protocol (IP), voice, television, entertainment and video.
In support of our philosophy to give where we live, TELUS, our team members and retirees have contributed more than $260 million to charitable and not-for-profit organizations and volunteered 4.2 million hours of service to local communities since 2000. Fourteen TELUS Community Boards lead TELUS' local philanthropic initiatives. TELUS was honoured to be named the most outstanding philanthropic corporation globally for 2010 by the Association of Fundraising Professionals, becoming the first Canadian company to receive this prestigious international recognition.
For more information about TELUS, please visit telus.com.
| condensed interim consolidated statements of
income and other comprehensive income
|Three months||Nine months|
|Periods ended September 30 (millions except per share amounts)||2012||2011||2012||2011|
|Other operating income||19||10||52||45|
|Goods and services purchased||1,222||1,178||3,490||3,410|
|Employee benefits expense||534||476||1,555||1,393|
|Amortization of intangible assets||99||112||338||340|
|INCOME BEFORE INCOME TAXES||471||433||1,392||1,285|
|OTHER COMPREHENSIVE INCOME|
|Items that may subsequently be reclassified to income|
|Change in unrealized fair value of derivatives designated as cash flow hedges||(2)||7||(5)||9|
| Foreign currency translation adjustment arising from translating financial
statements of foreign operations
|Change in unrealized fair value of available-for-sale financial assets||11||—||11||—|
|Item never subsequently reclassified to income|
|Employee defined benefit plans actuarial gains (losses)||94||(360)||82||(443)|
|NET INCOME ATTRIBUTABLE TO:|
|Common Shares and Non-Voting Shares||$||351||$||325||$||1,027||$||973|
|TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:|
|Common Shares and Non-Voting Shares||$||447||$||(22)||$||1,113||$||541|
|NET INCOME PER COMMON SHARE AND NON-VOTING SHARE|
|DIVIDENDS DECLARED PER COMMON SHARE AND NON-VOTING SHARE||$||0.61||$||0.55||$||1.800||$||1.625|
| TOTAL WEIGHTED AVERAGE COMMON SHARES AND NON-VOTING
|condensed interim consolidated statements of financial position||(unaudited)|
|As at (millions)|| September 30,
| December 31,
|Cash and temporary investments, net||$||45||$||46|
|Income and other taxes receivable||12||66|
|Property, plant and equipment, net||8,109||7,964|
|Intangible assets, net||6,126||6,153|
|Real estate joint venture||11||—|
|Other long-term assets||142||81|
|LIABILITIES AND OWNERS' EQUITY|
|Accounts payable and accrued liabilities||1,547||1,419|
|Income and other taxes payable||192||25|
|Advance billings and customer deposits||669||655|
|Current maturities of long-term debt||969||1,066|
|Other long-term liabilities||1,113||1,343|
|Deferred income taxes||1,619||1,600|
|Common Share and Non-Voting Share equity||8,047||7,513|
|condensed interim consolidated statements of cash flows||(unaudited)|
|Three months||Nine months|
|Periods ended September 30 (millions)||2012||2011||2012||2011|
|Adjustments to reconcile net income to cash provided by operating activities:|
|Depreciation and amortization||461||443||1,387||1,329|
|Deferred income taxes||147||84||(4)||257|
|Net employee defined benefit plans expense||(4)||(8)||(7)||(24)|
|Employer contributions to employee defined benefit plans||(14)||(13)||(145)||(263)|
| Gain on 51% Transactel (Barbados) Inc. interest re-measured at acquisition-date
fair value and subsequent adjustment to contingent consideration
|Net change in non-cash operating working capital||18||8||236||(419)|
|Cash provided by operating activities||965||837||2,516||1,808|
|Cash payments for capital assets||(475)||(435)||(1,463)||(1,345)|
|Cash payments for acquisitions and related investments||(7)||(3)||(48)||(79)|
|Real estate joint venture advances and contributions||(29)||—||(67)||—|
|Real estate joint venture receipts||29||—||47||—|
|Proceeds on dispositions||2||—||20||—|
|Cash used by investing activities||(490)||(438)||(1,544)||(1,420)|
|Non-Voting Shares issued||—||—||—||19|
|Dividends paid to holders of Common Shares and Non-Voting Shares||(198)||(178)||(575)||(463)|
|Issuance and repayment of short-term borrowing||3||35||(1)||39|
|Long-term debt issued||928||700||3,624||3,110|
|Redemptions and repayment of long-term debt||(1,235)||(921)||(4,021)||(2,993)|
|Acquisition of additional equity interest in subsidiary from non-controlling interest||—||—||—||(51)|
|Dividends paid by a subsidiary to non-controlling interest||—||—||—||(4)|
|Cash provided (used) by financing activities||(502)||(364)||(973)||(349)|
|Increase (decrease) in cash and temporary investments, net||(27)||35||(1)||39|
|Cash and temporary investments, net, beginning of period||72||21||46||17|
|Cash and temporary investments, net, end of period||$||45||$||56||$||45||$||56|
|SUPPLEMENTAL DISCLOSURE OF CASH FLOWS|
|Income taxes (inclusive of Investment Tax Credits) (paid), net||$||(58)||$||(43)||$||(137)||$||(159)|
|Three-month periods ended||Wireless||Wireline||Eliminations||Consolidated|
|September 30 (millions)||2012||2011||2012||2011||2012||2011||2012||2011|
|EBITDA less CAPEX||$||465||$||413||$||82||$||85||$||—||$||—||$||547||$||498|
|Operating revenues (above)||$||2,774||$||2,622|
|Goods and services purchased||1,222||1,178|
|Employee benefits expense||534||476|
|Income before income taxes||$||471||$||433|
|Nine-month periods ended||Wireless||Wireline||Eliminations||Consolidated|
|September 30 (millions)||2012||2011||2012||2011||2012||2011||2012||2011|
|EBITDA less CAPEX||$||1,378||$||1,346||$||187||$||223||$||—||$||—||$||1,565||$||1,569|
|Operating revenues (above)||$||8,070||$||7,707|
|Goods and services purchased||3,490||3,410|
|Employee benefits expense||1,555||1,393|
|Income before income taxes||$||1,392||$||1,285|
|(1)|| Earnings before interest, taxes, depreciation and amortization (EBITDA) does not have any standardized meaning prescribed by IFRS-IASB
and is therefore unlikely to be comparable to similar measures presented by other issuers; EBITDA is defined by the Company as operating
revenues less goods and services purchased and employee benefits expense. TELUS has issued guidance on, and reports, EBITDA
because it is a key measure that management uses to evaluate performance of its business and is also utilized in measuring compliance
with certain debt covenants.
|(2)||Total capital expenditures (CAPEX).|
Management's discussion and analysis
Caution regarding forward-looking statements
| This document contains forward-looking statements about expected future events and financial and operating performance of TELUS Corporation (TELUS or the Company, and where the context of the narrative permits, or requires, its subsidiaries). By their nature, forward-looking statements are subject to inherent risks and uncertainties, and require the Company to make assumptions. There is significant risk that assumptions, predictions and other 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 future performance, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed. Except as required by law, the Company disclaims any intention or obligation to update or revise any 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. Annual targets, guidance and related assumptions for 2012 are described in Section 9. Factors that could cause actual performance to differ materially include, but are not limited to:
Management's discussion and analysis (MD&A)
November 9, 2012
The following sections are a discussion of the consolidated financial position and financial performance of TELUS Corporation for the three-month and nine-month periods ended September 30, 2012, and should be read together with TELUS' Condensed interim consolidated financial statements dated September 30, 2012. This discussion contains forward-looking information qualified by reference to, and should be read together with, the Caution regarding forward-looking statements.
The generally accepted accounting principles (GAAP) used by TELUS are International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and Canadian GAAP. The terms IFRS-IASB and IFRS used subsequently in this document refer to these standards. The Condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. All amounts are in Canadian dollars unless otherwise specified.
|Management's discussion and analysis contents|
|1.||Introduction||A summary of TELUS' consolidated results for the third quarter and first nine months of 2012|
|2.||Core business and strategy||A discussion of activities in support of TELUS' six strategic imperatives|
|3.||Key performance drivers||A list of corporate priorities for 2012|
|4.||Capabilities||An update of factors that affect the capability to execute strategies, manage key performance drivers and deliver results|
|5.||Discussion of operations||A discussion of operating performance for the third quarter and first nine months of 2012|
|6.||Changes in financial position||A discussion of changes in the Consolidated statements of financial position for the nine-month period ended September 30, 2012|
|7.||Liquidity and capital resources||A discussion of operating cash flows, investments and financing activities, as well as liquidity, credit facilities and other disclosures|
|8.|| Critical accounting estimates and
accounting policy developments
|Accounting estimates that are critical to determining financial results, and changes to accounting policies|
|9.||Annual guidance for 2012||Reaffirmed guidance for the full year of 2012 and related assumptions|
|10.||Risks and risk management||An update of certain risks and uncertainties facing TELUS|
|11.||Definitions and reconciliations||Definitions of operating, liquidity and capital resource measures, including calculation and reconciliation of certain non-GAAP measures used by management|
The discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of the MD&A.
1.1 Preparation of the MD&A
The Company's disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management on a timely basis, so that appropriate decisions can be made regarding public disclosure. Management determines whether or not information is material based on whether it believes a reasonable investor's decision to buy, sell or hold securities in the Company would likely be influenced or changed if the information were omitted or misstated. The MD&A and the Condensed interim consolidated financial statements were reviewed by TELUS' Audit Committee and approved by TELUS' Board of Directors.
Management has issued guidance on and reports on certain non-GAAP measures to evaluate performance of the Company and its segments. Non-GAAP measures are also used to determine compliance with debt covenants and to manage the capital structure. Because non-GAAP measures do not generally have a standardized meaning, securities regulations require such measures to be clearly defined, qualified and reconciled with their nearest GAAP measure (see Section 11). The term EBITDA (earnings before interest, taxes, depreciation and amortization) used in this document means standardized EBITDA as defined by the Canadian Performance Reporting Board of the Canadian Institute of Chartered Accountants (CICA). Adjusted EBITDA used in this document deducts from standardized EBITDA, items of an unusual nature that do not reflect ongoing telecommunications operations. See Section 11.1 for the definition, calculation and reconciliation of EBITDA.
1.2 Canada's economy
The Bank of Canada maintained its target for the overnight borrowing rate at 1% in its October 2012 bank rate announcement. The Bank's October 2012 Monetary Policy Report projected Canada's economy will grow at 2.2% in 2012, 2.3% in 2013 and 2.4% in 2014. In addition, Statistics Canada's Labour Force Survey reported the September 2012 national unemployment rate at 7.4% as compared to 7.2% in June and March 2012, and 7.5% in December 2011.
1.3 Consolidated highlights
|Third quarters ended Sept. 30||Nine-month periods ended Sept. 30|
|($ millions, unless noted otherwise)||2012||2011||Change||2012||2011||Change|
|Consolidated statements of income|
|Operating revenues||2,774||2,622||5.8 %||8,070||7,707||4.7 %|
|Operating income||557||525||6.1 %||1,638||1,575||4.0 %|
|Income before income taxes||471||433||8.8 %||1,392||1,285||8.3 %|
|Net income||351||326||7.7 %||1,027||978||5.0 %|
|Basic earnings per share1 (EPS) ($)||1.08||1.00||8.0 %||3.16||3.00||5.3 %|
|Diluted EPS1 ($)||1.07||1.00||7.0 %||3.14||2.98||5.4 %|
|Cash dividends declared per share1 ($)||0.61||0.55||10.9 %||1.80||1.625||10.8 %|
|Average shares1 outstanding - basic (millions)||326||325||0.4 %||325||324||0.4 %|
|Consolidated statements of cash flows|
|Cash provided by operating activities||965||837||15.3 %||2,516||1,808||39.2 %|
|Cash used by investing activities||490||438||11.9 %||1,544||1,420||8.7 %|
|- Capital expenditures2||471||470||0.2 %||1,460||1,335||9.4 %|
|Cash used by financing activities||502||364||37.9 %||973||349||178.8 %|
|Subscriber connections3 (thousands)||12,981||12,571||3.3 %|
|EBITDA4||1,018||968||5.2 %||3,025||2,904||4.2 %|
|Adjusted EBITDA4 5||1,018||968||5.2 %||3,018||2,888||4.5 %|
|Adjusted EBITDA margin6 (%)||36.7||36.9||(0.2) pts.||37.4||37.6||(0.2) pts.|
|Free cash flow4||426||345||23.5 %||1,068||793||34.7 %|
|Net debt to EBITDA - excluding restructuring costs4 (times)||1.7||1.8||(0.1)|
|Abbreviations used in MD&A: n/a - Not applicable; n/m - Not meaningful; pt(s). - Percentage point(s).|
|1||Includes Common Shares and Non-Voting Shares.|
|2|| Capital expenditures exclude changes in associated non-cash investing working capital, and therefore differ from
Cash payments for capital assets, as presented on the Condensed interim consolidated statements of cash flows.
See Note 24(b) of the Condensed interim consolidated financial statements.
|3|| The sum of wireless subscribers, network access lines (NALs), 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
|4|| Non-GAAP measures. See Section 11.1 EBITDA, Section 11.2 Free cash flow and Section 11.4 Definitions of liquidity
and capital resource measures.
|5|| Adjusted EBITDA for the first nine months of 2012 excludes equity losses of $2 million for the TELUS Garden
residential real estate redevelopment partnership and a $9 million pre-tax gain on land contributed to the residential
project. TELUS anticipates that it will not retain an ownership interest in this residential project after completion of
construction. Adjusted EBITDA for the first nine months of 2011 excludes a $16 million non-cash gain on Transactel
(Barbados) Inc. that resulted from re-measurement of the Company's 51% interest in Transactel at fair value when
TELUS exercised its purchased call option and asserted control.
|6|| EBITDA margin is EBITDA divided by Operating revenues. The calculation of Adjusted EBITDA margins for 2012
excludes equity losses and gain on contributed land for the TELUS Garden residential project from both EBITDA
and Operating revenues. The calculation of Adjusted EBITDA margin for the first nine months of 2011 excludes the
non-cash gain on Transactel from both EBITDA and Operating revenues.
- Consolidated Operating revenues increased by $152 million and $363 million, respectively, in the third quarter and first nine months of 2012 when compared to the same periods in 2011.
Service and equipment revenues increased year over year by $143 million and $356 million, respectively, in the third quarter and first nine months of 2012. The increases were mainly due to growth in wireless network revenue from subscriber growth and ARPU increase, as well as growth in wireline data revenue. Growth in wireline data revenue resulted primarily from Optik TV, enhanced data and Internet services, data equipment sales and managed workplace services, which exceeded declines in legacy voice local and long distance services.
Other operating income increased year over year by $9 million and $7 million, respectively, in the third quarter and first nine months of 2012. The increases were mainly due to drawdowns from the regulatory price cap deferral account for provisioning broadband Internet service to a number of qualifying rural and remote communities, as well as recoveries of employee costs under eligible government-sponsored employment programs. The nine-month period also included the second quarter 2012, $9 million gain on land contributed to the TELUS Garden residential real estate project offset by the first quarter 2011, $16 million non-cash gain on Transactel (Barbados) Inc.
Excluding the equity losses and gain on land related to the TELUS Garden residential real estate redevelopment project in 2012 and the non-cash Transactel gain in 2011, adjusted operating revenues increased year over year by $372 million or 4.8% in the first nine months of 2012.
- Total subscriber connections increased by 410,000 during the 12-month period ended September 30, 2012, as a result of 7.3% growth in wireless postpaid subscribers, 41% growth in TELUS TV subscribers and a 5.7% growth in total Internet subscriptions, partly offset by an 7.4% decrease in wireless prepaid subscribers, a 7.7% decline in residential network access lines (NALs) and a 2.5% decline in business NALs. Wireless net subscriber additions were 111,000 and 219,000, respectively, in the third quarter and first nine months of 2012. TELUS TV and Optik High Speed Internet subscriber additions totalled 68,000 in the third quarter and 191,000 in the first nine months of 2012.
For the third quarter of 2012, wireless blended ARPU was $61.42, up $0.90 or 1.5% from the same period in 2011, while for the first nine months of 2012, blended ARPU was $60.20, up $1.09 or 1.8% from the same period in 2011. Quarterly blended ARPU has increased year over year for eight consecutive quarters driven by increased roaming and growth in data usage.
Blended monthly wireless subscriber churn rates were 1.44% and 1.46%, respectively, in the third quarter and first nine months of 2012, down 0.23 percentage points and 0.22 percentage points, respectively, from the same periods in 2011. Improvement in the churn rates was due to retention efforts, as well as significantly higher migrations in 2011 related to the loss of a federal government wireless service contract to a low-priced bid from an established competitor.
- Operating income increased by $32 million and $63 million, respectively, in the third quarter and first nine months of 2012 when compared to the same periods in 2011, as higher EBITDA more than offset increases in total depreciation and amortization expenses. Wireless EBITDA increased year over year by $70 million and $212 million, respectively, in the third quarter and first nine months of 2012 mainly due to growth in network revenue and 47% flow through to EBITDA. Wireline EBITDA decreased year over year by $20 million and $91 million, respectively, in the quarter and nine-month period as growth in wireline data services was more than offset by higher content and support costs for the growing Optik TV service and ongoing declines in higher margin legacy voice services.
- Adjusted EBITDA increased by $50 million and $130 million, respectively, in the third quarter and first nine months of 2012, when compared to the same periods in 2011. Adjusted EBITDA in the first nine months of 2012 excludes equity losses from the TELUS Garden residential real estate redevelopment project, as well as a $9 million gain on land contributed to the project. Adjusted EBITDA for the first nine months of 2011 excludes the $16 million non-cash gain on Transactel. Adjusted EBITDA margins in 2012 decreased slightly from the comparable periods in 2011, as 2.4 percentage point increases in wireless margins for the quarter and nine-month periods were offset by decreases in wireline margins of 2.7 percentage points for the quarter and 2.9 percentage points for the nine-month period.
- Income before income taxes increased by $38 million and $107 million, respectively, in the third quarter and first nine months of 2012 when compared to the same periods in 2011. The increases were due to higher EBITDA and lower financing costs, partly offset by higher total depreciation and amortization expenses.
- Income taxes increased by $13 million and $58 million, respectively, in the third quarter and first nine months of 2012 when compared to the same periods in 2011. The increases reflect higher pre-tax income and the effects of income tax revaluations and adjustments, partly offset by a lower blended statutory income tax rates in 2012.
- Net income increased by $25 million or 7.7% in the third quarter of 2012 and increased by $49 million or 5.0% in the first nine months of 2012 when compared to the same periods in 2011. Excluding income tax-related adjustments, the gain net of equity losses for the residential real estate redevelopment project and the 2011 gain on Transactel, as shown in the following table, Net income increased year over year by $22 million or 6.7% in the quarter and $64 million or 6.7% in the nine-month period.
|Analysis of Net income|
|Third quarters ended Sept. 30||Nine-month periods ended Sept. 30|
| Deduct after-tax gain net of equity losses related to the
TELUS Garden residential redevelopment project
|Deduct after-tax Transactel gain||—||—||—||—||(12)||12|
| Add back net unfavourable (deduct net favourable)
income tax-related adjustments, including any related
interest income (see Section 5.2)
|Net income before above items (approximate)||348||326||22||1,019||955||64|
- Basic earnings per share (basic EPS) increased by eight cents in the third quarter of 2012 and 16 cents in the first nine months of 2012 when compared to the same periods in 2011. Excluding income tax-related adjustments, the gain net of equity losses for the residential real estate redevelopment project and the 2011 gain on Transactel, as shown in the following table, basic EPS increased year over year by approximately seven cents in the quarter and 20 cents in the nine-month period.
|Analysis of basic EPS|
|Third quarters ended Sept. 30||Nine-month periods ended Sept. 30|