TELUS CORP. (Toronto symbols T $31 and T.A $30; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 317.2 million; Market cap: $10.3 billion; Price-to-sales ratio: 1.0; SI Rating: Above Average) has 4.2 million phone customers and 2.1 million Internet subscribers in Alberta, British Columbia and parts of Quebec. Telus also operates a national wireless service with 6.1 million subscribers. Wireless provides roughly half of Telus’s revenue and earnings. This is a much higher percentage than other Canadian telephone companies.

In 2008, Telus’s revenue rose 6.4%, to $9.65 billion from $9.1 billion in 2007. Wireless revenues rose 8.6%, thanks to the growing popularity of smartphones, which let users access the Internet and send and receive email. (Telus charges higher fees for these services than it does for regular voice calls.) Telus also successfully launched Koodo, a new brand aimed at first-time cellphone buyers, in March 2008. Revenue at Telus’s traditional phone division rose 4.4%, mainly on strong demand for high-speed Internet services.

Telus’s 2008 earnings fell 10.3%, to $1.1 billion from $1.3 billion in the prior year. Earnings per share fell 6.6%, to $3.51 from $3.76, on fewer shares outstanding. The earnings drop was mainly because of lower taxes in 2007 thanks to one-time income-tax adjustments.

Telus made two major purchases in 2008. It paid $743 million for business software specialist Emergis in January 2008, and bought new wireless frequencies for $882 million. Higher interest costs related to these acquisitions hurt Telus’s 2008 earnings, but they should fuel its long-term growth.

As a result of the slowing economy, Telus’s customers may reduce their wireless spending. However, Telus is improving the speed of its wireless networks, which should help it attract more subscribers.

Telus trades at a reasonable 9.1 times its likely 2009 earnings of $3.41 a share (8.8 times for the non-voting “A” shares). The $1.90 dividend yields 6.1% (6.3% for the “A” shares). The current payout accounts for a moderate 56% of its earnings, so Telus has room to increase the dividend.

Telus is a buy. The cheaper, higher-yielding “A” shares are the better choice.