TELUS reports second quarter 2013 results
VANCOUVER, Aug. 8, 2013
Strong Consolidated Revenue growth driven by Wireless and Wireline
Normalized EBITDA up 6.5 per cent
Double digit Adjusted Net income and Adjusted EPS growth
Returning $1.175 billion of capital to shareholders through July
VANCOUVER, Aug. 8, 2013 /PRNewswire/ - TELUS Corporation's second quarter 2013
revenue increased by six per cent to $2.83 billion from a year earlier while
earnings before interest, taxes, depreciation and amortization (EBITDA)
increased by three per cent to $1.0 billion. Normalized EBITDA increased by
6.5 per cent to $1.04 billion. Basic Earnings per share (EPS) declined by two
cents to $0.44, however, Adjusted EPS rose 12.5 per cent to $0.54.
The $161 million increase in consolidated revenue was generated by six per
cent growth in both wireless and wireline revenue. This strong growth was
supported by continued subscriber additions and higher average revenue per
unit (ARPU) across all growth services including wireless, Optik TV and
high-speed Internet services. Higher consolidated normalized EBITDA reflects
growth in both normalized wireless and wireline EBITDA of six and seven per
TELUS' total customer base of nearly 13.2 million increased by 83,000
customers in the second quarter and reflects the net addition of 100,000
postpaid wireless customers, 31,000 TV subscribers and 13,000 high-speed
Internet customers. This was partially offset by the loss of prepaid wireless
customers and legacy wireline services. TELUS' total wireless base of 7.7
million is up 3.5 per cent year-over-year, the TELUS TV subscriber base of
743,000 is up 25 per cent and high-speed Internet connections are up six per
cent to 1.36 million.
Simple cash flow (EBITDA less capital expenditures) increased $65 million or
15 per cent to $487 million. However, free cash flow of $192 million in the
second quarter was down 32 per cent, reflecting accelerated in-year
contributions to defined benefit pension plans, as well as higher cash income
taxes, as expected.
During the quarter TELUS returned $490 million to shareholders, including $209
million in dividends and $281 million in share purchases. For the seven months
ended July 2013, the company has returned $1.175 billion to shareholders,
including $639 million in dividend payments and $536 million in share
C$ and inmillions, except per share amounts Three months ended
June 30 per cent
(unaudited) 2013 2012 change
Operating revenues 2,826 2,665 6.1
Operating expenses before depreciation and
amortization^(1) 1,828 1,695 7.8
EBITDA^(1)(2) 998 970 2.9
Normalized EBITDA^(1)(2)(3) 1,037 975 6.5
Net income^(1) 286 299 (4.3)
Adjusted net income^(1)(4) 354 312 13.5
Basic earnings per share (EPS)^(1) 0.44 0.46 (4.4)
Adjusted EPS^(1)(4) 0.54 0.48 12.5
Capital expenditures 511 548 (6.6)
Free cash flow^(5) 192 284 (32.4)
Total customer connections^(6) 13.16 12.84 2.4
Figures for 2012 have been adjusted for retrospective application of
^(1) accounting standard IAS19 Employee benefits (2011).
^(2) EBITDA does not have any standardized meaning prescribed by
IFRS-IASB. For definition and explanation, see Section11.1 in the
accompanying 2013 second quarter Management's discussion and
^(3) Normalized EBITDA does not have any standardized meaning prescribed
by IFRS-IASB. This term is defined in this news release as EBITDA
excluding Restructuring and other like costs, and the gain net of
equity losses related to TELUS Garden residential real estate
partnership. For the second quarter of 2013 and 2012 Restructuring
and other like costs were $39 million and $13 million, respectively,
while the gain net of equity losses related to TELUS Garden was
$nil and $8 million, respectively.
^(4) Adjusted net income and Adjusted EPS do not have any standardized
meaning prescribed by IFRS-IASB. These terms are defined in this
news release as excluding (after income taxes): 1) Gain net of
equity losses related to TELUS Garden residential real estate
partnership; 2) Restructuring and other like costs; 3) Long-term
debt pre-payment premium; and 4) Income tax-related adjustments. For
further analysis of the aforementioned items see Section 1.3 in the
accompanying 2013 second quarter MD&A.
^(5) Free cash flow does not have any standardized meaning prescribed by
IFRS-IASB. For definition and explanation, see Section11.2 in the
accompanying 2013 second quarter MD&A.
^(6) Sum of wireless subscribers, network access lines, total Internet
subscribers and TELUS TV subscribers (IPTV and satellite TV).
Effective with the second quarter of 2013 and on a prospective
basis, machine-to-machine (M2M) subscriptions have been excluded
from all subscriber-based measures. Cumulative subscribers include
an April 1, 2013 opening balance adjustment to remove approximately
76,000 M2M subscriptions.
Darren Entwistle, TELUS President and CEO said, "TELUS continues to generate
strong operating and financial results driven by both the wireless and
wireline segments of our business, which is significantly differentiating us
from our global peers. Our steadfast focus on making investments in advanced
broadband data technology and services coupled with our unwavering commitment
to putting customers first continues to enhance the loyalty of our existing
client base, attract new customers and generate strong bottom line growth.
This is evidenced in our second quarter results that realised 100,000 new
postpaid wireless customers, 31,000 additional TV subscribers, 13,000 more
high-speed Internet customers and an industry-leading low postpaid wireless
churn rate of only 1.03 per cent per month. Revenue and normalized EBITDA
growth of more than six per cent were driven by both wireless and wireline and
clearly demonstrate the growing robustness of our wireline financial results."
Mr. Entwistle noted, "Supported by our strong cash flow position and balance
sheet, we have returned $1.175 billion to our shareholders in the first seven
months of 2013 through dividends and share purchases. Additionally, we have
recently received regulatory approval to double our share purchase program in
2013 to up to $1 billion or 31.9 million shares. It is our intention, subject
to on-going Board assessment, to continue this share purchase program for up
to $500 million in 2014, 2015 and 2016 for a total of up to $2.5 billion.
These initiatives, coupled with our multi-year 10 per cent annual dividend
growth program, are consistent with our goal of providing on-going and
superior investment returns to TELUS shareholders. Owing to the excellence of
our winning strategy since 2000, TELUS has earned the position of being one of
the few companies in the world that can simultaneously make significant
investments in broadband technology and client services that underpin our
future success and as well, return cash to investors on a material and
Mr. Entwistle added, "Recent reports from the OECD and the CRTC-commissioned
Wall Report confirm that Canadians have access to the best quality wireless
service in the world, reflecting the significant investments made by TELUS and
other Canadian carriers in network coverage and technology. The OECD report
ranked Canada first in investment per capita amongst the 34 countries in their
study. By contrast, the European Commission recently issued a report that
cited that three-quarters of Europeans have no access to the 4G LTE wireless
service that is already available to nearly 80 per cent of Canadians.
Moreover, Canada's superior investment in wireless technology has led to our
country being ranked second in mobile data speeds, surpassing the U.S. and the
U.K. by being three to nine times faster, respectively. Finally, these reports
show that wireless pricing in Canada falls in the middle compared with its G7
peers across all combinations of voice and data services."
John Gossling, TELUS Executive Vice-President and CFO said "TELUS' robust cash
flow, strong financial position and modest debt leverage ratio support our
increased return of cash to shareholders while giving TELUS ample flexibility
to invest in our business operations and participate in future spectrum
auctions. Solid year-to-date results put TELUS on track to achieve our revenue
and profitability targets set out for 2013, which we reaffirmed today."
Mr. Gossling added, "The entire TELUS leadership team continues to focus on
streamlining our business to focus resources on key growth areas of our
business while adapting to declining revenue from traditional phone services.
We tripled our restructuring investments to $39 million in the second quarter
compared to a year ago and have raised our restructuring estimate for the full
year by $25 million to $100 million."
TELUS has reaffirmed its full year 2013 targets on all eight financial metrics
announced in mid-February 2013. The Company is increasing its full year 2013
restructuring and other like costs assumption by $25 million to $100 million
after recording $50 million in the first half of the year. With the increase
in the B.C. corporate income tax rate, the Company is raising its blended
statutory income tax rate assumption to between 25.5 and 26.5 per cent, up by
0.5 points on both the low and high end of the original range. The Company is
increasing its assumption for net financing costs by $40 million to $440
million, after our second quarter financing activities, including the $23
million second quarter long-term debt prepayment premium. In addition, the
Company lowered its assumption for depreciation and amortization expense from
approximately $1.9 billion to approximately $1.85 billion primarily due to
adjustments resulting from the Company's continuing program of asset life
This news release contains statements about financial and operating
performance of TELUS and future events, including with respect to future
normal course issuer bids, 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 2013 annual guidance,
CEO three-year goals to 2013 for EPS and free cash flow growth to 2013
excluding spectrum costs, semi-annual dividend increases to 2016, ability to
sustain and complete multi-year share purchase programs to 2016),
qualifications and risk factors referred to in the first and second quarter
Management's discussion and analysis, in the 2012 annual report, and in other
TELUS public disclosure documents and filings with securities commissions in
Canada (on SEDAR at sedar.com) and in the United States (on EDGAR at sec.gov).
Except as required by law, TELUS disclaims any intention or obligation to
update or reviseforward-looking statements, and reserves the right to change,
at any time at its sole discretion, its current practiceof updating annual
targets and guidance.
*External wireless revenues increased by $82million or 5.9 per cent to
$1.5 billion in the second quarter of 2013, compared to the same period a
year ago, driven by continued growth in data services and postpaid
*Data revenue increased by $89million or 17 per cent to $601 million,
representing 43 per cent of wireless network revenue in the quarter. Data
ARPU increased by $3.12 or 13 per cent to $26.44. These increases were due
to continued strong adoption and usage of smartphones and data
applications and higher roaming volumes.
*Blended ARPU increased by $0.83 or 1.4 per cent to $61.12 as data ARPU
growth more than offset a 6.2 per cent voice ARPU decline. This is the
eleventh consecutive quarter of year-over-year growth in blended ARPU.
*Monthly postpaid subscriber churn was 1.03 per cent, up three basis points
from a year ago, while blended churn increased slightly by one basis point
to 1.40 per cent. TELUS' stable churn reflects the Company's successful
Customers First service approach, investments in retention and lower churn
*Postpaid net additions of 100,000 were partially offset by a loss of
21,000 lower-ARPU prepaid subscribers for net additions of 79,000 as
compared to 86,000 a year ago. Total wireless subscribers were up 3.5 per
cent from a year ago to 7.7 million, while the proportion of high-value
postpaid subscribers grew to 86 per cent of the base. Smartphone
subscribers now represent 71 per cent of TELUS' postpaid base, up from 59
per cent a year ago.
*Reported wireless EBITDA of $666 million increased by $32 million or 5.1
per cent over last year due to network revenue growth. The EBITDA margin
based on total network revenue increased slightly to 47.4 per cent. EBITDA
excluding restructuring and other like costs increased by $38 million or
six per cent to $676 million or 48.1 per cent on total network revenue.
*Wireless simple cash flow (EBITDA less capital expenditures) increased by
$55million to $495million in the quarter due to higher EBITDA and $23
million lower capital expenditures.
*External wireline revenues increased by $79million or 6.3 per cent to
$1.3 billion in the second quarter of 2013, when compared with the same
period a year ago. This growth was generated by increased data service
revenue, partially offset by declines in legacy voice revenues.
*Data service and equipment revenues increased by $103million or 15 per
cent, due primarily to strong growth in TELUS TV subscribers, high-speed
Internet and enhanced data services, combined with TV and high-speed
Internet rate increases.
*Total TV additions of 31,000 were lower by 12,000 over the same quarter
last year partly due to lower gross additions. The total TV subscriber
base of 743,000 increased by 148,000 or 25 per cent from a year ago.
*High-speed Internet net additions of 13,000 were lower by 7,000 over the
same quarter a year ago due to lower gross additions, partially offset by
an improvement in churn. TELUS' high-speed subscriber base of 1.36 million
is up 78,000 or 6.1 per cent from a year ago.
*Total network access lines declined by 4.7 per cent from a year ago to
3.3million. Residential lines were down 7.2 per cent over last year,
reflecting ongoing wireless and Internet substitution and competition.
Business lines were down 1.9 per cent over last year, reflecting ongoing
price-based competition in the small and medium business market and
customer adoption of IP services.
*Reported wireline EBITDA of $332million decreased by $4million or 1.4
per cent year over year due to significantly higher restructuring and
other like costs of $29 million. Normalized EBITDA increased by $24
million or 7.3 per cent to $361 million, reflecting improving Optik TV and
Internet margins helped by a lower cost of subscriber acquisition and
subscriber and ARPU growth.
*Wireline simple cash flow (EBITDA less capital expenditures) improved
year-over-year by $10million due to lower capital expenditures.
Normalized EBITDA less capital expenditures of $21 million increased by
$38 million in the quarter due to growth in normalized EBITDA and lower
CORPORATE AND BUSINESS DEVELOPMENTS
TELUS increases share purchase program to $1 billion for 2013
In May 2013, the Toronto Stock Exchange (TSX) approved the our Normal course
issuer bid (NCIB) to purchase up to 15 million of TELUS' outstanding Common
Shares (up to $500 million), until December 31, 2013. On July 23, the TSX
authorized an amendment to the NCIB to increase the maximum number of Common
Shares we may purchase for cancellation to 31.9 million (up to $1.0 billion)
until December 31, 2013. All other terms of the NCIB remain unchanged.
As of July 31, TELUS has purchased for cancellation approximately 16.5 million
of its common shares for over $536 million under the share purchase program.
TELUS' Board of Directors believes that such share purchases are in the best
interest of TELUS and that such purchases constitute an attractive investment
opportunity and desirable use of TELUS' funds that should enhance the value of
the remaining shares.
In addition, TELUS currently intends to renew its NCIB share purchase program
in each of the next three years in order to permit purchases for up to $500
million in each calendar year. Future NCIBs will be dependent on earnings and
free cash flow, subject to Board assessment and determination, and obtaining
regulatory (including TSX) approvals. There cannot be any assurance as to how
many shares, if any, will ultimately be acquired by TELUS under any NCIB.
Experienced executive Raymond Chan joins TELUS Board of Directors
TELUS is pleased to announce Baytex Executive Chairman Raymond Chan has been
appointed to the TELUS Board of Directors. This appointment furthers TELUS'
commitment to recruit outstanding board members that make TELUS stronger
through their wide range of experience across Canada. The Alberta-based Mr.
Chan is a Chartered Accountant and has held senior executive positions in
Canada's oil and gas industry since 1982. He first joined Baytex as senior
vice-president and Chief Financial Officer in 1998 and went on to serve as
President and Chief Executive Officer from 2003 through 2007, then Chief
Executive Officer from November of 2007 through December of 2008. He
transitioned to Executive Chairman in January of 2009 and continues to serve
in that role. He has served on numerous boards in the last 15 years including
the TMX Group and the Alberta Children's Hospital Foundation. He is also
Chairman of TORC Oil & Gas.
The Board of Directors has declared a quarterly dividend of thirty-four cents
($0.34) Canadian per share on the issued and outstanding Common Shares of the
Company payable on October 1, 2013 to holders of record at the close of
business on September 10, 2013.
This third quarter dividend represents a 3.5 cent or 11.5 per cent increase
from the $0.305 quarterly dividend per share paid a year ago on October 1,
TELUS (TSX: T, NYSE: TU) is a leading national telecommunications company in
Canada, with $11.2 billion of annual revenue and 13.2million customer
connections, including 7.7million wireless subscribers, 3.3million wireline
network access lines, 1.4million Internet subscribers and 743,000 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
In support of our philosophy to give where we live, TELUS, our team members
and retirees have contributed more than $300million to charitable and
not-for-profit organizations and volunteered 4.8million 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.
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 2012 annual report at telus.com/investors.
Full quarterly earnings release available at:
TELUS' second quarter 2013 conference call is scheduled for August 8, 2013 at
12 p.m. (noon) ET and will feature a presentation followed by a question and
answer period with investment analysts. Interested parties can access the
webcast at telus.com/investors. A telephone playback will be available on
August 8 until November 7 at 1-855-201-2300. Please use reference number
1045101# and access code 35175. An archive of the webcast will also be
available at telus.com/investors and a transcript will be posted on the
website within a few business days.
SOURCE TELUS Corporation
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