TELUS CORP. $39 (Toronto symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 622.3 million; Market cap: $24.3 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.telus.com) gets 55% of its revenue from its 7.8 million wireless subscribers across Canada. It also has 3.3 million phone customers, 1.4 million high-speed Internet users and 815,000 TV subscribers.
The company continues to expand its wireless operations. In November 2013, it paid $229 million for Public Mobile, which had 220,000 customers. To put the price in context, Telus earned $1.4 billion, or $2.16 a share, before unusual items in 2013.
Telus is now offering $350 million for Mobilicity, which has 165,000 wireless customers. This is the company’s third attempt to buy Mobilicity, after Ottawa blocked the last two.
However, Telus feels this bid will succeed. Under its 2008 license, Mobilicity could not transfer its spectrum for five years, and that time limit has expired. Moreover, Mobilicity is financially troubled and currently under creditor protection, which could speed up the approval process.
Meanwhile, Telus continues to upgrade its wireless and Internet services. In 2014, it plans to devote $2.2 billion to these improvements, excluding the $1.14 billion it recently spent on new spectrum. Telus has issued $1 billion worth of long-term notes to help pay for these investments and cover the $845 million it will likely pay out in dividends in 2014. The current annual dividend rate of $1.52 a share yields 3.9%.
The company is also continuing to expand its e-commerce operations. To that end, it recently paid an undisclosed sum for Groupe Enode, a Quebec firm whose software protects databases from online intruders. Enode’s expertise should help Telus attract more government and corporate clients and make its cloud computing services more secure.
Strong demand for wireless and high-speed Internet should increase Telus’s earnings to $2.32 a share in 2014. The stock trades at 16.8 times that estimate. However, its 2015 earnings could reach $2.71 a share, and the stock trades at a more reasonable 14.4 times that forecast.
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