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Telus Profit Beats Estimates as Data Spending Climbs

Telus Corp., Canada’s third-largest wireless carrier, raised its forecast for annual revenue after second-quarter profit beat analysts’ estimates on a surge in smartphone data spending.

Net new mobile customers fell 8.5 percent to 86,000 from the same quarter the year before while postpaid subscribers, who typically spend more on data, soared 22 percent to 112,000. Average revenue per user rose 2.4 percent to C$60.29, the company said today in a statement.

“The company continues to grow the subscriber base with great products and advertising,” said Maher Yaghi, an analyst at Desjardins Capital Markets. “Wireless is a large part of the company’s revenue, so improving results in wireless outweighs any loss in other sectors.”

Data revenue increased 27 percent to C$512 million ($512.6 million) and represents more than a third of network sales, Telus said.

The Vancouver-based firm increased postpaid subscribers more than larger rival Rogers Communications Inc., which reported an 87,000 rise and beats a 95,000 forecast for BCE Inc. by Yaghi. Telus’ strategy stands in contrast to Rogers and BCE, Canada’s number one and two wireless operators respectively, who together have spent more than C$6 billion buying up programming and sports teams.

Raises Forecast

The rise in wireless revenue prompted the company to increase its forecast for annual sales to C$11.2 billion to C$11.5 billion from C$10.7 billion to C$11 billion previously.

The company said it is retaining subscribers at the highest level in five years as churn, decreased 28 basis points year-over-year to 1.39 percent. Postpaid churn, or customers leaving the company, came in at 1 percent.

“Really, smartphones have driven the ARPU increase in the industry -- and to a very significant extent at Telus,” Robert McFarlane, Telus chief financial officer, said in an analyst call. “People’s life begins to revolve around smartphones and the contacts and the kind of activity it provides. That trend is positive for the organization. That kind of smartphone penetration, we expect it to continue to be as significant as it has been.”

Profit Beat

Excluding one-time charges, profit per share was C$1.02, the company said. The average estimate from analysts surveyed by Bloomberg was C$1. Sales rose 4.3 percent to C$2.67 billion, matching the average estimate.

Telus’ net income climbed 1.2 percent to C$328 million, or C$1.01 a share, from C$324 million or 99 cents a year earlier.

Telus rose 1.3 percent to end at C$63.17 at 4.09 p.m. in Toronto. Its shares have gained 10 percent this year.

The company poured C$194 million, or 81 percent, more into its wireless segment in the second quarter, up from C$107 million last year. The segment includes its LTE network and funding its two new Internet data centers in Kamloops, British Columbia and Rimouski, Quebec.

With assistance from Stefanie Batcholino in Toronto.

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