Big Gig-spawned deals ‘artificially’ inflated churn for Telus

The holiday season caused a dramatic inflation of Telus Corp.’s defection rate at the start the year, CEO Darren Entwistle said Thursday. Entwistle said the Vancouver-based company saw its churn rate — a metric showing how much of a customer base switched providers in a period — balloon to an “artificially” high 1.15 per cent in January, higher than the 0.99 per cent at the end of the previous quarter. "We consider that to be a particular anomaly,” Entwistle said on a conference call with analysts after the company posted its first quarter results. By the end of the quarter, March 31, Telus saw its postpaid churn hit 0.95 per cent, up two basis points from the 0.93 per cent it saw in the first quarter last year. It ended 2017 with an average rate of 0.90 per cent, according to a presentation at its annual general meeting Thursday. Entwistle said the January “pollution” was a result of the fallout from wireless promotions ignited by Shaw Communications Inc., whose Freedom segment in October began offering "Big Gig" plans starting at 10 GB for $50. Telus, along with the other major telecoms, followed with its own 10 GB for $60 promotions in December. However, in February and March this year, the company rebounded to an average churn of about 0.85 per cent. That figure “is more indicative or more predictive of what you can expect from this organization” in the quarters ahead, factoring in marketing activity, he said. Before that, Telus was enjoying bottom-of-the-barrel churn rates in the summer, when it achieved sub 0.8 per cent rates. Entwistle then, like now, chalked it up to the company’s customer-first strategy, initiated a decade ago. He also made sure to point out that Telus only made up 7.5 per cent of telecom complaints in the latest report by the Commissioner for Complaints for Telecommunications Services. Entwistle added that the company has kept its churn rate below one per cent in 18 out of its last 19 quarters, and that Telus is in its fifth year of having churn under one per cent. But he also said the average revenue per user (ARPU) — transitioning to average billing per user (ABPU) following a change in financial reporting — has moderated due to lower chargeable data use as a result of competitive activity, which includes adding bonus data in promotions. Telus’ ARPU stood at $55.55, up 0.1 per cent year-over-year, while its calculated ABPU was $66.51, up 1.5 per cent. BCE Inc. also experienced some moderation in that metric in its own first quarter report. Bell’s head George Cope said this was due to competition and customers now settling into their data buckets where before there were more customers moving up plans. Entwistle also said part of it results from customer-friendly moves, including introducing data notifications when customers are close to going over their allotment, which reduced overage revenue and “diluted the ARPU.” Telus added 48,000 new postpaid wireless subscribers in the quarter, up 9.1 per cent year-over-year, for a total sub base of about eight million. The growth in wireless had already been a trending story last year, but results from the other telecoms showed this quarter to be something special — at least for some. Rogers Communications Inc. added 95,000 subscribers, compared to 60,000 the previous year, its best in nine years. And Shaw saw a record 93,500 subs in its fiscal second quarter. Entwistle calculated the industry’s postpaid gains to be about 60 per cent in the quarter, which he used to illustrate the health of the industry. Cope also said he was “thrilled” about the results in his own first quarter conference call. “I think we can do better than what we’ve been doing on monetizing growing the data usage,” he said, adding it's incumbent on companies to do so considering how much they spend on spectrum. Prepaid losses were contained to 43,000 in the quarter, improving 18.9 per cent compared to the 53,000 it lost over the same period a year ago, totalling 890,000 prepaid customers. Total wireless customers stood at 8.9 million. On the wireline side, Telus added 22,000 internet subscribers, down 8.3 per cent from 24,000 in the same quarter last year. Telus TV adds were 6,000, down 14.3 per cent from the 7,000 it added last year. Entwistle said the company’s relatively new IPTV service Pik TV did not account for a large portion of the adds. Total internet subscribers stood at 1.77 million, up 4.7 per cent over the year, while TV subs were up 3.2 per cent to 1.1 million. Total wireline revenues were up 4.9 per cent to $1.5 billion, and data services made up the bulk of that, increasing 9.8 per cent over the year to $1.1 billion. Overall revenues increased six per cent to $3.4 billion, but net income dipped 2.4 per cent to $412 million compared to the same period last year. Minutes after the conference call began, the Competition Bureau announced it was launching a study into whether more competition can be had in the broadband space. Entwistle was asked about the move in general, to which he responded that the industry is already “extremely healthy and competitive.” He urged the analysts to compare Canada to the rest of the G7 countries. “I think there needs to be more fact-based investigations and more empirical evidence, both absolutely and relative, to where other countries are as it relates to the deployment of critical fibre,” he said. Earlier in the call he noted that Telus will look to do some fixed-wireless tests in the next year or two. “This is a massive success story for Canada that I don’t think has gotten the level of attention that it warrants,” he said. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Bryson Masse at bmasse@thewirereport.ca

Big Gig-spawned deals ‘artificially’ inflated churn for Telus

News | May 10, 2018

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