Telus Earnings: Good Performance Throughout the Business for the Industry’s Model of Consistency

As has been the case in recent quarters, Telus’ T wireless net additions, which tend to dominate the headlines, didn’t keep pace with Rogers’. However, Telus posted industry-best growth in average revenue per wireless phone customer, or ARPU, while maintaining a steady pace, and the firm’s wireline business continues to impress with its consistent success in taking broadband share while continuing to add television subscribers. Overall, revenue growth was very good across business lines while margins held up pretty well. We’re raising our fair value estimate to CAD 33 from CAD 32 and believe Telus’ stock is the most attractive of the Big Three Canadian telecom companies.

Telus’ first-quarter wireless service revenue growth of 7.6% year over year was the best of the Big Three carriers, despite Rogers having been the clear leader in widening its mobile phone subscriber base over the past year. Credit ARPU growth of 3.8% year over year for the outperformance, while wireless ARPU for both peers was relatively flat. We expect greater competition throughout the industry after Quebecor’s entrance to compress pricing and limit ARPU growth. However, Telus’ steady ARPU gains over the past year show its discipline in not chasing lower-quality subscriptions and an ability to shift customers to higher-rate plans.

Wireline is where we think Telus differentiates itself more due to its recently built fiber network, and its performance has been remarkably consistent as it continues to take broadband share. Wireline data services revenue grew 6.7% year over year as the firm added 35,000 internet subscribers and 9,000 TV customers, both similar to last year’s first quarter. The firm has also successfully stabilized the secular decline in wireline voice customers, with the base contracting by about 0.5%-1.0% each quarter for the past five years, including 0.7% this quarter. Wireline voice revenue was down 4% year over year and now only makes up about 6% of total telecom revenue.