May 30th, 2024

Telus bolsters network investments, raises quarterly dividend as Q1 profit down

By Sammy Hudes, The Canadian Press on May 9, 2024.

Telus offices are seen in Ottawa on Friday, Aug. 4, 2023. Telus Corp. raised its quarterly dividend as it reported its first-quarter profit fell compared with a year ago.THE CANADIAN PRESS/Justin Tang

Telus Corp. plans to invest $73 billion to bolster its networks over the next five years, chief executive Darren Entwistle announced Thursday at the telecommunications company’s annual general meeting.

The investment would cover new infrastructure, technology, operations and spectrum, he said.

It comes at a time when some of Telus’ rivals have announced they are scaling back network spending in response to unfavourable regulatory policies.

“These funds will ensure that our networks remain robust, resilient, reliant and, critically, accessible for the millions of customers and businesses that rely on us day in and day out,” said Entwistle, noting the funding builds on $259 billion that Telus has invested in technology and infrastructure since 2000.

Telus was awarded the most licences in the federal government’s most recent auction for wireless spectrum – the radio wave bandwidths that carry signals – last fall. The auction offered telecommunications companies the chance to purchase chunks of mid-band wireless spectrum touted for being able to carry a lot of data over long distances.

Telus secured 1,430 licences for nearly $620 million.

Entwistle said the decommissioning of Telus’ copper networks as it transitions to fibre remains a key ongoing project. Since 2018, Telus has migrated over half a million residential customers in provinces such as B.C. and Alberta from copper to fibre networks.

“Our goal “¦ is to retire copper on a community-by-community basis within our pure fibre footprint in the next few years,” Entwistle said.

“This approach enables (Telus) to prioritize our efforts to harvest deeper cost savings, have a stronger competitive position in the market and, critically, contribute to the circular economy.”

Meanwhile, the cost of building and operating wireless networks is rising “markedly,” the CEO said, noting the price of telecom equipment paid in U.S. dollars rose over 24 per cent from 2020 to 2023.

Earlier in the day, Telus announced it raised its quarterly dividend as it reported its first-quarter profit fell compared with a year ago. Telus said it will now make a quarterly payment to shareholders of 38.91 cents per share, up from its previous rate of 37.61 cents per share.

Telus reported net income attributable to common shares of $127 million or nine cents per share. The result was down from a profit of $217 million or 15 cents per share in the same quarter last year.

The results were “in line to slightly ahead of forecasts,” said RBC analyst Drew McReynolds in a note.

“We view the results as largely neutral for the shares at current levels,” he said.

Operating revenues and other income for the quarter totalled $4.93 billion, down from $4.96 billion in the first quarter of 2023.

On an adjusted basis, Telus said it earned 26 cents per share in its latest quarter, down from an adjusted profit of 27 cents per share in the same quarter last year.

But Entwistle told shareholders he was so confident in the future of the company that he would be receiving his entire salary in Telus shares indefinitely – something he previously did from 2010 to 2015.

Entwistle’s total compensation for 2023 was $19.1 million, up 16 per cent compared with 2022, documents circulated to shareholders for the meeting show.

That included a $1.3 million performance bonus, 22 per cent higher than the previous year, which was meant to “align with median market benchmarking data for other long-tenured Canadian large-cap CEOs,” the documents stated.

Telus saw a total of 209,000 net customer additions across its telecom services in the first quarter, up 28.2 per cent from a year earlier and marking its strongest result on record for the three-month period, it said.

But the company’s 45,000 net mobile phone subscriber additions in the quarter were down 4.3 per cent from the same quarter a year earlier. Telus’ churn rate for mobile subscribers – a measure of subscribers who cancelled their service – was 1.13 per cent, up from 0.9 per cent during its previous first quarter, which it said was largely due to “more aggressive marketing and promotional activities.”

Chief financial officer Doug French said Telus is “feeling a little bit more pressure on the revenue line as customers are getting lower pricing” across Canada. He said competition in February “was probably more intense than I’ve seen in a very long time” for the industry.

French said Telus is emphasizing its bundling opportunities, along with other advantages, to retain and attract customers.

“There’s always going to be enhanced competition and we will work our way through what that looks like through product superiority of bundling, network superiority by having the best fibre networks and 5G networks in the world,” he said in an interview.

“So we will compete and we will do very well either way. I think you can’t be concerned with competition, you really just have to lead with your strengths.”

Telus’ mobile phone average revenue per user was $59.31, down $1.07 or 1.8 per cent from the first quarter of the prior year. The company attributed the decrease to customers increasingly subscribing to base rate plans with lower prices, along with more promotions targeting both new and existing customers.

It said those factors, along with a decline in overage revenues, were partly offset by higher roaming revenues as a result of increased travel.

This report by The Canadian Press was first published May 9, 2024.

Companies in this story: (TSX:T)

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