Telus' (Toronto: T.TO) Q3 profit down, but broadband, TV help it beat analyst forecasts

Telus' (Toronto: T.TO) 12 percent Q3 profit decline may appear disastrous, but the service provider was able to save the day with strong gains in both video and broadband access services.

The western Canadian service provider reported that Q3 revenue was C$247 million (US$245 million), down from C$280 million in Q3 2009. Telus' revenue of C$2.46 billion narrowly missed analyst's expectations of C$2.47 billion.  

Not surprisingly, the biggest contributor to Telus' Q3 profit woes was ongoing declines in its traditional wireline voice business as consumers that are either cutting their POTS line in favor of wireless plan or are churning to cable operator competitors such as Shaw Cable.

Here's a breakout of Telus' key wireline metrics:

  • Wireline Revenues: Mirroring the ongoing common trend seen by all wireline operators, Telus' external wireline revenues declined 2.7 percent or C$32 million to C$1.17 billion in Q3 2010, a factor it attributes to ongoing declines in local and long-distance revenues. Telus' total network access lines (NALs) declined by 51,000 to 3.79 million, down 5.6 percent from the same period last year. In total, Telus lost 39,000 residential voice subscribers and 12,000 Business NALs due to cable competition and what Telus said was "slower growth in data lines from the completion of certain large enterprise deals." 
  • Data Growth: Data growth was up 7.3 percent, or C$38 million, in Q3 due to strong TELUS TV subscriber growth, higher managed workplace revenues and increased Internet, enhanced data and hosting services. Broadband was a major contributor to Telus' overall data growth. During the quarter, Telus' broadband subscription base was up 67 percent from Q3 09 due to the launch of its Optik TV and Optik Internet service in June 2010, in addition to expanding the reach of its broadband services and new speeds.
  • Video Growth: Buoyed by the launch of Optik TV, Telus reported that it added 38,000 new TV subscribers in the quarter or 73 percent over what it added in Q3 09. Interestingly, TELUS' TV net additions were achieved even as its installation staff was being used to migrate its existing customers on legacy video platforms to its Microsoft Mediaroom platform. Overall, TELUS has 266,000 video subscribers, a 94 percent increase over 2009.  

"These results once again demonstrate the foresight and effectiveness of TELUS' significant investment over recent years in advanced broadband infrastructure, both wired and wireless," said Darren Entwistle, TELUS President and CEO in the earnings release. "The consistent pursuit of our strategy is resulting in increasing growth in wireless and wireline data revenues, while capital expenditure levels decrease from last year's peak investment phase."

Looking ahead, Telus will increase its quarterly divided by 5 percent to CAD 52.5 cents per share payable on Jan. 4 to stockholders on record as of Dec. 10.

For more:
- see the earnings release
- Reuters has this article

Related articles:
Telus Q2: Cost cutting, video service growth offsets line loss
Telus' Q1 results beat analyst forecasts, but revenue remains flat
Telus' wireline revenues dip, but IP services continue to shine
Weak Canadian economy drives down Telus Q3 earnings
Telus IPTV gains, satellite coverage expands
Telus starts re-selling BCE satellite TV

Q3 wireline earnings:
Click here for the ongoing summary

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