TORONTO – The slowdown in the oilpatch is again showing its effects on the wider economy, this time with Telus Corp. citing the struggling Alberta economy along with a very competitive market as factors that took a big bite out of fourth-quarter profits.
Telus (TSX:T) reported Thursday that net profits in the final three months of 2015 dropped 16.3 per cent to $261 million from $312 million a year earlier, although adjusted net income slipped just 1.2 per cent to $324 million from $328 million.
Overall, the Vancouver-based company added a net 62,000 postpaid wireless subscribers in the quarter, 52,000 fewer than in the same period last year. It also reported a 1.01 per cent postpaid subscriber churn rate, which was a seven-basis-point increase over the previous year.
Average revenue per user for the wireless arm was $63.74 in fourth quarter, up from $63.34 in the same prior-year period.
The company attributed the decline in subscriber growth to a more competitive environment as two-year and three-year contracts started to expire simultaneously last June to make the so-called double-cohort, and to Alberta’s economic slowdown.
In Alberta, the company added just 4,400 postpaid wireless customers in the second half of 2015, well down from the net 50,000 it added in the comparable year-earlier period, president and CEO Darren Entwistle said during a conference call with analysts.
In the province, average revenue per user declined more than 4.5 per cent in the second half of 2015 compared with the same time the year prior, he said.
Still, the impact on Telus in the province was most pronounced in the business wireless sector, where average revenue per business user declined 7.6 per cent in the fourth quarter, Entwistle said.
David Heger, a senior equity analyst at Edward Jones,, said consumers in the province may be watching what they spend on cellphone plans a bit more closely, but noted they are unlikely to drop their service completely.
Some businesses, on the other hand, have had to cut back on employees and have been trying to trim expenses wherever they can, including wireless, he said.
Meanwhile, Entwistle said that while the company has a disproportionate exposure to the Alberta market, there is a silver lining.
“If we can generate results of this ilk within the context that we face now economically within Alberta then I would say we have a very bright future ahead of us” when the province’s improves, he said.
The company projects a three per cent increase in revenue growth this year and committed to hiking its dividend 10 per cent in 2016.
The company’s next dividend will be unchanged 44 cents per share, payable April 1. However, there will be a five per cent increase the following quarter and another five per cent increase in the fourth quarter, said chief financial officer John Gossling.
If these increases occur, this will be the sixth consecutive year in which Telus has increased its divided by 10 per cent or more in what Entwistle calls a multi-year dividend growth program, which remains a priority for the company.
Telus said it paid out $252 million in dividends in the fourth quarter and spent $234 million to repurchase its own shares under its 2015-16 share buyback program.
Note to readers: This is a corrected story: An earlier version incorrectly gave average revenue per user as $36.74