Significant investments in its high-speed networks continue to help Canada’s third largest wireless carrier attract new customers while hanging onto old ones. They’ve also helped support earnings and revenue growth and have boosted cash flow.
The company has just raised its dividend—the 16th time since 2011—and that payment now yields a high 4.8%.
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TELUS (Toronto symbol T; www.telus.com) is Canada’s third-largest wireless carrier after Rogers Communications (No. 1) and Bell Mobility (No. 2). The wireless business supplies about 55% of its revenue and 70% of its earnings.
The remaining 45% of revenue and 30% of earnings comes from Telus’s wireline business. That operation has 1.3 million landline phone customers in B.C., Alberta and eastern Quebec as well as 1.8 million Internet users and 1.1 million TV customers.
In addition to attracting new customers, Telus continues to hang on to its existing users. What’s more, the company’s wireline business continues to win new customers. That growth is driven by Telus’s investments in high-speed, fibre-optic lines.
Between 2013 and 2017, Telus spent $13.1 billion on upgrades to its wireless networks and operations. It likely spent $2.85 billion in 2018 and will spend the same in 2019.
In the three months ended September 30, 2018, earnings rose 6.7%, to $445 million, or $0.74 a share, from $417 million, or $0.70, a year earlier. Revenue improved 10.9%, to $3.77 billion from $3.40 billion.
The stock trades at 15.7 times the company’s forecast 2019 earnings of $2.88 a share. Telus will now increase its quarterly dividend payment by 3.8%. Starting in January 2019, investors receive $0.545 a share, up from $0.525. The shares yield a high 4.8%. Telus has now raised its dividend 16 times since 2011.
Telus signed 109,000 wireless subscribers to long-term contracts in the latest quarter, net of cancellations. However, the company’s monthly average revenue per user fell 1.2%, to $57.28 from $57.97. That’s because more of those users have switched to plans with higher data limits, which has cut fees from excess data use.
The expanded data plans have also helped Telus to better hang onto its existing users. Its overall churn rate, which shows how many wireless subscribers—both new and long-term—cancelled their service, improved to 1.03% compared to 1.05% a year earlier.
As of September 30, 2018, the company’s long-term debt was $13.1 billion. That’s a somewhat high 47% of its market cap. However, Telus’s strong cash flow lets it service that debt. Its free cash flow (regular cash flow less capital expenditures) in the first nine months of 2018 totalled $1.1 billion. That’s up 55.3% from $692 million a year earlier.
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