Canada Markets close in 3 hrs 18 mins

Telus sat out 'uneconomic' pricing competition for mobile customers in Q3: CEO

Telus Corp.'s wireless business faced bruising competition from aggressive pricing during the back-to-school period, but chief executive Darren Entwistle told analysts Thursday his company chose to "remain on the sidelines" during some of the most intense rivalry.

The Vancouver-based company, which operates the Telus, Koodo and Public Mobile wireless services, reported 111,000 net mobile phone additions during the three months ended Sept. 30 — 10,000 lower than last year's third quarter, but better than some analyst estimates.

"The year-over-year decline was largely due to Telus purposely choosing to remain on the sidelines for some of the more aggressive and uneconomic competitive activity that occurred in the quarter," Entwistle told a conference call.

Analyst Aravinda Galappatthige wrote in a report for Canaccord Genuity that the Telus wireless net additions topped his estimate of 105,000 net additions. Drew McReynolds of RBC Dominion Securities had expected 115,000 additions, but noted the consensus had been 109,000.

Entwistle said many customers opted for unlimited data plans with a higher monthly cost than they had previously, but without the potential for overage fees for going over usage limits.

He said the simplified pricing structure helped reduce the number of calls to customer support and quicker marketing and support calls, which are part of company's cost of acquiring and cost of retaining customers.

However, Entwistle said reduction of those costs was "significantly moderated" by "competitive intensity around device promotions and the persistence of the subsidy model alongside unlimited data by some of our peers."

The comments came after Telus reported $440 million or 72 cents per share in net income for the three months ended Sept. 30, down from $447 million or 74 cents per share a year ago.

On an adjusted basis, Telus earned 76 cents per share for the quarter, up from an adjusted profit of 74 cents per share a year ago.

Analysts on average had expected a profit of 75 cents per share, according to financial markets data firm Refinitiv.

Operating revenue totalled nearly $3.7 billion, down from $3.77 billion a year ago when the company saw $171 million in one-time equity income related to the sale of Telus Garden.

Wireless operating revenue was $2.1 billion, up $23 million from a year earlier after excluding the impact of Telus Garden. Wireline operating revenue, including home television and internet, was up 0.1 per cent at $1.68 billion.

Telus said it will increase its quarterly dividend to 58.25 cents per share, up from 56.25 cents per share, and expects to spend about $2.75 billion per year on capital projects in both 2020 and 2021. 

Telus was the last of Canada's three national wireless companies to report quarterly results since they all introduced a new pricing strategy and new device financing options.

Both Bell Canada and Freedom Mobile, a regional carrier that competes with Telus in parts of Ontario, Alberta and British Columbia, said last week they used subsidies to reduce their customers' cost of new devices.

Rogers said it also offered device subsidies during the back-to-school period but indicated that it's strategy is to eliminate or reduce that expense as much as possible.  

Several analysts lowered their expectations for the sector after Rogers slashed its revenue expectations for this year, primarily because of the swift adoption of new unlimited data plans and intense price competition on mobile devices.

This report by The Canadian Press was first published Nov. 7, 2019.

Companies in this story: (TSX:T, TSX:RCI.B, TSX:BCE, TSX:SJR.B)

 

David Paddon, The Canadian Press