Telus to Double International Unit

  • Business outsourcing operations valued at C$1.2 billion
  • Telus lowered its economic forecast for the Alberta economy

Telus Corp. is pressing deeper into international markets as economic weakness and intensifying competition in Canada damps prospects for domestic growth.

The Vancouver-based telecommunications provider plans to double the size of its Telus International business-services unit over the next five years. Telus sold a 35 percent stake in the unit to Baring Private Equity Asia Ltd. and plans to leverage the Hong Kong-based firm’s connections to sell into fast-growing Asian markets, according to a statement Thursday. The deal values Telus International at C$1.2 billion ($930 million), or 12 times earnings before interest, taxes and depreciation and amortization.

When the company looks for the next region for expansion, “Asia jumps far and away to the top of the list,” Josh Blair, executive vice president of Telus Health and Telus International, said in a phone interview. “It’s an area we don’t serve very extensively right now.”

Oil Slump

The announcement came along with quarterly results that missed analyst estimates for profit and new subscribers. Telus is facing an economic downturn in oil-dependent Alberta, one of its key markets. At the same time, its western Canadian cable rival Shaw Communications Inc. is jumping into the wireless market with the purchase of Wind Mobile, while BCE Inc., the country’s largest telecommunications company, is pushing west with the acquisition of Manitoba Telecom Services Inc. BCE plans to sell Telus a third of Manitoba Telecom’s wireless subscribers once the acquisition has closed.
Telus fell less than 1 percent to C$39.63 at the close in Toronto. The company’s shares are down 3.6 percent so far this year.

The telecommunications company estimates Alberta’s economy will contract 1 percent to 1.5 percent in 2016, revising its earlier estimate of growth of 0.5 percent to 1 percent, the company said in a statement. The western oil-producing province has been struggling as prices for the commodity have slipped, causing companies to shed employees and reducing government revenue.

Telus added 8,000 wireless contract customers, fewer than the average estimate of 19,000. Revenue was in line with analyst estimates of C$3.11 billion, and profit excluding some items was 70 Canadian cents a share, compared with the average estimate of 71 cents.

“Residential line, Internet and TV net additions were all well below our forecast,” Aravinda Galappatthige, an analyst at Canaccord Genuity Corp., said in a note to clients. Increased competition from Shaw Communications contributed to the lackluster subscriber additions.

Telus International consists of a network of call centers that provide customer service and other outsourced services to companies including Google. With its 22,000 employees in Europe, Latin America and the Philippines, Telus is unique among Canadian telecommunications firms in having an international presence.

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