Telus Corp. reported first-quarter revenue and subscriber figures that were stronger than expected ahead of a planned acceleration of its network investments.
The increased capital expenditures, which will be funded with the proceeds of a recent $1.3-billion stock sale, will expand Telus’s 5G wireless footprint and allow the telecom to move customers who are still on copper networks onto much faster fiber-optic networks sooner, particularly in parts of Alberta.
Telus will spend about $750-million of that money this year, bringing its total capital expenditures for 2021 to about $3.5-billion, and the remainder in 2022. Its total capital expenditures will fall to $2.5-billion or less in 2023, the company said.
Customers who are connected to Telus’s fibre-optic network tend to buy more services from the telecom, require less customer support and are less likely to leave than those connected through copper wiring, said Zainul Mawji, president of home solutions.
“As we shift customers from traditional copper networks and bring them into the fiber ecosystem, the benefits are just incredible,” Ms. Mawji said in an interview. “There’s an up to 30-per-cent cost reduction in supporting those customers because the network is so much more reliable,” she added.
The Vancouver-based telecom also boosted revenue at its Telus Health subsidiary – which includes its health-benefits management business, virtual-care services and an electronic medical-records division – by about 10 per cent to $123-million. TD Securities analyst Vince Valentini said in a note to clients that the revenue growth was not as high as he had hoped.
Telus Health is one of the divisions that the company has said it could eventually make into a stand-alone unit through an initial public offering, as it did with its Telus International business earlier this year. Other segments that the telecom could eventually take public include Telus Agriculture and its security business.
Taking Telus Health public would give the unit its own valuation, making it easier for it to grow through acquisitions, chief financial officer Doug French said.
“We’ll do it when the company is ready, the timing is right and the markets are right,” Mr. French said in an interview.
Telus reported first-quarter revenue on Friday of $4.02-billion, up nearly 9 per cent from a year ago and above the consensus analyst estimate of $3.94-billion.
Telus’s profit for the three-month period ended March 31 declined 5.7 per cent to $333-million, compared to $353-million a year ago.
The telecom attributed the lower profit to increased depreciation and amortization, the lingering impact of the pandemic, lower legacy voice and data services and higher employee benefits expenses. The decrease was also partly owing to a gain that Telus saw during the first quarter of last year related to an adjustment to the purchase price of one of its acquisitions.
The earnings amounted to 25 cents per share, down from 28 cents a share during the same quarter last year. After adjusting for restructuring and other costs, Telus had 27 cents per share of earnings, compared to 32 cents a year ago. That fell slightly below analyst expectations of 28 cents of adjusted earnings a share, according to market researcher S&P Capital IQ.
Telus also added 31,000 net new mobile phone customers, and 51,000 net new fixed customers – which includes internet, TV and security subscribers – during the quarter.
Ms. Mawji said the telecom has seen “unprecedented demand” for its services as the global health crisis has moved most activities online.
“The capabilities of this network have really come to life through the course of the pandemic. More and more customers are working from home, more of them are doing video calls all day. Their kids are in school online,” Ms. Mawji said. “We’ve had some of our absolute best quarters that we’ve ever posted in this past 12 months.”
Although the pandemic has prompted some customers to upgrade to faster internet speeds, travel restrictions have caused roaming revenues, which telecoms charge when wireless customers use their devices abroad, to plummet. Mr. French said that amounted to a $50-million hit to Telus.
He said that given the continuing lockdowns and the fact that most Canadians won’t be fully vaccinated until summer or fall, the impact to roaming revenues is likely to continue until late 2021, with a full recovery not expected until next year at the earliest.
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