Telus' profit hit by spending; subscriber metrics holding up

By Alastair Sharp

TORONTO (Reuters) - Telus Corp (Toronto:T.TO - News)(NYSE:TU - News), one of Canada's three big telecommunications companies, reported a smaller-than-expected quarterly profit on Friday, hurt by increased spending on its broadband networks.

Telus is spending billions of dollars to upgrade and expand its wireless and fixed-line networks to deal with rising demand for data as it competes with BCE Inc (Toronto:BCE.TO - News) and Rogers Communications Inc (RCIb.TO) for wireless customers across the country, and against Shaw Communications Inc (SJRb.TO) for television, internet and phone customers in western Canada.

The company's capital spending, which can typically be lumpy, rose 26 percent in the third quarter.

Telus' earnings before interest, tax, depreciation and amortization and excluding restructuring and other costs rose 6.4 percent.

"Being able to deliver 6 percent growth in earnings in an environment where it was not easy for them to grow with the Western Canadian economy being under pressure, I think it's good operational control," said Maher Yaghi, analyst at Desjardins.

The company's shares gained slightly in a down market in early trade.

The Vancouver-based company said it added 87,000 net postpaid wireless customers, typically its most data-hungry, while the company's average wireless customer, a blend of those on contracts and those who pay upfront for cellular service, paid C$66.67 a month.

That was fewer new high-end wireless customers than the more than 100,000 both Rogers and BCE added in the quarter, but a sharper jump in the average wireless customer's bill than at Rogers, which collected C$62.30 a month in the period.

Telus is more reliant on Alberta, where a prolonged oil-related slowdown weighs, than its national wireless peers.

The company said it added 14,000 internet connections, down 10,000 from a year ago in part due to tougher competition and the economic slowdown.

Telus' main cable rival in Western Canada, Shaw Communications Inc (SJRb.TO), launched an aggressively priced high-speed internet offer in mid-July, and recently added wireless via its purchase of Wind Mobile.

Telus' wireless revenue rose 4.9 percent, while its fixed-line business saw a 2.3 percent increase, pushing overall operating revenue up 2.6 percent to C$3.24 billion ($2.42 billion).

The company's net income fell to C$355 million, or 59 Canadian cents per share, in the third quarter from C$365 million, or 61 Canadian cents per share, a year earlier.

Its adjusted earnings were 65 Canadian cents per share, missing the average analyst estimate of 67 Canadian cents, according to Thomson Reuters I/B/E/S.

($1 = C$1.34)

(Additional reporting by John Benny in Bengaluru; Editing by Anil D'Silva, Maju Samuel and Meredith Mazzilli)