Telus’ record low wireless churn difficult to sustain: CEO

Telus Corp. took some analysts by surprise when it reported postpaid wireless gains that leapfrogged its rivals in its second-quarter earnings Friday, with a record low 0.79-per-cent churn rate that the company’s president and CEO Darren Entwistle said would be difficult to beat. “We embarked on a customer-first strategy back in 2008, and we have been banging away at that, year-in and year-out ever since, trying to do better by the customer, exceed expectations, take the culture of Telus and see it manifest itself in terms of great execution upon the client,” Entwistle said on a second-quarter conference call with analysts Friday. “But when you look at that result, I would say if we beat it again on a going-forward basis, that would be a nice thing, but again I don’t think that’s a realistic expectation. If we can camp out in that zone — yeah, I think that’s something to strive for.” Last month, Rogers Communications Inc. reported a lower wireless postpaid churn rate, compared to a year prior for its second quarter, of 1.05 per cent. In a conference call with analysts, the company’s president and CEO Joe Natale said he believes Rogers can drive that below one per cent by focusing on the customer experience. Earlier this month, BCE Inc. also reported a postpaid churn rate of 1.08 per cent for its second fiscal quarter, which company president and CEO George Cope said was their “lowest reported quarterly churn rate in 11 years.” The lower postpaid churn numbers come in the face of the CRTC’s wireless code decision in June that effectively banned device unlocking fees and required all new phones be sold unlocked by December. Entwistle noted that one concern for the company to maintain that low churn will be to minimize the number of customers not signed to contracts. “We think it’s important to mitigate the number of out-of-contract customers because that either leads to churn in the future or it leads to more expensive when they go to renew during seasonally intense promotional periods .” For the three months ended June 30, the Vancouver-based company added 99,000 postpaid subscribers in the quarter for a 62-per-cent increase over the same period last year, which at the time generated just 61,000 new subscribers. Total postpaid subscribers increased 5.1 per cent over the year to 7.7 million. Entwistle stressed the “quality” of those adds, pressing the point that the 99,000 shows a “preponderance” of smartphones as compared to other devices such as tablets and wireless home phones in the mix. Those numbers added to the torrid pace in which the wireless industry has been keeping. To put the numbers in perspective, Bell added 88,611 postpaid wireless subscribers in its last quarterly report, while Rogers added 93,000 of its own in its second quarter this year. Barclays Capital analyst Phillip Huang said in a Friday note that “we were wowed” by the gains, which included the 11-basis-point decrease in postpaid churn over the year and average revenue per user gains of 3.9 per cent to $66.87 compared to the $64.38 it had in the same period last year. The postpaid net adds also easily beat Canaccord Genuity analyst Aravinda Galappatthige’s estimate of 68,000 in the quarter and the 0.98-per-cent postpaid churn he anticipated. The numbers also beat those of RBC Capital Markets analyst Drew McReynolds, who estimated gains of 65,000 and a churn of 0.88 per cent. Telus’ wireless network revenues increased 7.2 per cent from the second quarter of 2016, or $117 million, to $1.7 billion due partly to higher rate plans and customers moving up to larger data buckets. Despite the strength of wireless, the company’s profits floundered. Net income was down 7.2 per cent to $386 million, compared to $416 million in the same period last year. In a Friday note, Desjardins Capital Markets analyst Maher Yaghi said the softer profitability was likely due to the stronger postpaid subscriber numbers, reflecting increased subsidy costs. On the wireline side, revenues were up 2.2 per cent, or $33 million, to $1.4 billion, which was driven by higher data services revenue. High-speed internet net additions in the period were 17,000, 1,000 fewer than in the same quarter last year. Total internet subscribers by quarter-end was 1.7 million, up 5.3 per cent over the year. Telus said growth in that segment reflects the ongoing expansion of its broadband footprint, including fibre-to-the-premises (FTTP). Entwistle noted on the call that the company’s fibre build will be halfway complete by early next year. Meanwhile, television subscribers grew 4.5 per cent over the year to a total of 1.1 million. However, it added only 5,000 new TV customers in the quarter compared to 13,000 in the same period last year — a decline of 61.5 per cent. Those declines were partly attributed to heightened over-the-top (OTT) services competition. The company suffered a 6.3-per-cent decline in its landline phone segment to 1.3 million compared to about 1.4 million in the same quarter last year. It lost 1,000 fewer landline subscribers (19,000) in the second-quarter this year compared to the 20,000 it lost in the equivalent period in 2016. In all, wireline operating revenues increased 2.5 per cent to approximately $1.5 billion, with contribution from higher data services revenue, compared to the same period in 2016. The company's total revenues increased 3.9 per cent to $3.3 billion compared to the same period last year. Entwistle also touched on Innovation, Science and Economic Development (ISED) Canada’s 600 MHz consultation document, released last week, which suggested set-asides to smaller providers to boost competition. “Having been in the industry for quite sometime, I’m disappointed by the presence of a proposed set-aside. I’m scratching my head in that regard, particularly given the size, the balance sheet strength and the permanency of the fourth player that we’ve seen emerge. These are just empirical facts,” Entwistle said, adding Telus will be participating in the auction. Analysts have said that the set-asides would benefit Quebecor Inc. and Shaw Communications Inc., the latter being a regional competitor to Telus. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Charelle Evelyn at cevelyn@thewirereport.ca

Telus’ record low wireless churn difficult to sustain: CEO

News | August 11, 2017

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

Telus’ record low wireless churn difficult to sustain: CEO

News | August 11, 2017

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Related Stories

Watchdogs find deceptive privacy practices across majority of websites, apps studied

Meta considers blocking Facebook news in Australia

Rizwan Jamal leaves Xplore to become CEO of Beanfield

Internet service quality bill becomes law

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us