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TMCNet:  TELUS reports results for first quarter 2014

[May 09, 2014]

TELUS reports results for first quarter 2014

(ENP Newswire Via Acquire Media NewsEdge) ENP Newswire - 09 May 2014 Release date- 08052014 - TELUS reports results for first quarter 2014.

Vancouver, B.C. - For the first quarter of 2014, TELUS Corporation reported consolidated operating revenue growth of 5.0 per cent from a year earlier to $2.9 billion, while earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 4.2 per cent to $1.08 billion.

Basic earnings per share (EPS) rose by 8.9 per cent to $0.61 and when excluding the dilutive impact from Public Mobile, EPS increased by 10.7 per cent to $0.62.

Consolidated revenue growth was generated by 5.6 per cent growth in wireless revenue and 4.4 per cent growth in wireline revenue. In wireless, revenue was primarily driven by subscriber growth and increased data usage from continued smartphone adoption. Wireline revenue was primarily driven by data revenue growth of 10 per cent, generated by ongoing robust TELUS TV and high-speed Internet subscriber growth, and increasing revenue per customer.

In the first quarter, TELUS attracted 48,000 net new wireless postpaid customers, 27,000 TV subscribers and 21,000 high-speed Internet customers. The total TELUS TV subscriber base is up 18 per cent from a year ago to 842,000, while high-speed Internet connections are up 5.5 per cent to 1.4 million.

TELUS' ongoing focus on delivering outstanding customer service supported a 12 basis point improvement in monthly postpaid wireless subscriber churn from the same period last year to 0.99 per cent - the third consecutive quarter this key metric was below one per cent.

Free cash flow of $291 million was down $67 million, largely reflecting higher cash income taxes, as well as increased capital expenditures due to the Company's continued focus on investments in advanced broadband network technologies and investments to support our ongoing customers first initiatives. Free cash flow before cash income taxes of $515 million was $9 million higher year-over-year, driven primarily by EBITDA growth, partially offset by higher capital expenditures.

In the first quarter of 2014, TELUS returned $381 million to shareholders including $222 million in dividends paid and $159 million in share purchases under its 2014 normal course issuer bid (NCIB) program. Through the end of April, TELUS has returned $648 million to shareholders including $446 million in dividends and the purchase of 5.4 million shares for $202 million under its 2014 NCIB program.

FINANCIAL HIGHLIGHTS C$ and in millions, except per share amounts Three months ended March 31 Per cent (unaudited) 2014 2013 change Operating revenues 2,895 2,756 5.0 Operating expenses before depreciation and amortization 1,818 1,722 5.6 EBITDA(1)(2) 1,077 1,034 4.2 EBITDA excluding Public Mobile 1,087 1,034 5.1 Net income 377 362 4.1 Basic earnings per share (EPS) 0.61 0.56 8.9 Capital expenditures 496 467 6.2 Free cash flow(3) 291 358 (18.7) Total customer connections(4) 13.33 13.15 1.4 EBITDA does not have any standardized meaning prescribed by IFRS-IASB. We have issued guidance on and report EBITDA because it is a key measure used to evaluate performance at a consolidated level and the contribution of our two segments. For definition and explanation, see Section 11.1 in the accompanying 2014 first quarter Management's discussion and analysis.

EBITDA for the first quarter of 2014 was negatively impacted for the inclusion of Public Mobile by $10 million.

Free cash flow does not have any standardized meaning prescribed by IFRS-IASB. For definition and explanation, see Section 11.1 in the accompanying 2014 first quarter Management's discussion and analysis.

Sum of active wireless subscribers (excluding Public Mobile subscribers), network access lines, total Internet subscribers and TELUS TV subscribers (Optik TV subscribers and TELUS Satellite TV subscribers). Effective with the second quarter of 2013 and on a prospective basis, wireless machine-to-machine (M2M) subscriptions have been excluded from all subscriber-based measures. Cumulative subscribers include an April 1, 2013 opening balance adjustment to remove approximately 76,000 M2M subscriptions. Effective with the fourth quarter of 2013, and on a prospective basis, we have adjusted postpaid wireless subscribers to remove Mike subscriptions, as we have ceased marketing the Mike product and started to turn down the iDEN network. Cumulative subscriber connections include an October 1, 2013 adjustment to remove from the postpaid wireless subscriber base approximately 94,000 Mike subscribers representing those who, in our judgment, are unlikely to migrate to our new services.

Darren Entwistle, TELUS President and CEO said 'TELUS delivered strong revenue and profitable growth in the first quarter driven once again by strong results from both our wireless and wireline operations. This positive start to the year reflects our longstanding strategic focus on investing in advanced broadband technologies and services, and our commitment to delivering exceptional customer experiences. During the quarter, TELUS gained 96,000 new wireless postpaid, TV and high-speed Internet net additions, while delivering an industry-leading postpaid wireless churn rate of 0.99 per cent and the best access line retention results we have experienced in the past seven years. Importantly, this represents our third consecutive quarter delivering a postpaid churn rate below one per cent and the fourteenth sequential quarter of improving ARPU, further exemplifying the success of our differentiated customers first culture coupled with attractive new products and services.' Mr. Entwistle added, 'Our strong profitable growth, robust free cash flow generation and solid balance sheet are enabling TELUS to make prudent capital investments to sustain our future growth, while simultaneously returning significant amounts of cash to our shareholders through our multi-year share purchase and dividend growth programs. Indeed, in the first four months of 2014 TELUS has returned $648 million to shareholders, building on the more than $1.85 billion returned in 2013. Moreover, with our July 2 dividend payment, we will surpass $10 billion in total cash returned to our shareholders since 2004. Today, I am pleased to announce that we are raising our quarterly dividend to 38 cents per share, an 11.8 per cent increase year-over-year. This is our seventh dividend increase since announcing our multi-year dividend growth program in May 2011.' John Gossling, TELUS Executive Vice-President and CFO said, 'In the first quarter, we continued our consistent, value-creating approach of driving strong financial returns while investing in the future with capital investments in broadband networks and 700 MHz spectrum. Capital markets continue to embrace our strategy with the successful completion of our $1.0 billion debt financing at attractive interest rates. As a result of this successful financing, TELUS' average cost of long-term debt has decreased to 4.89 per cent compared to 5.44 per cent at the end of 2012, and the average term to maturity of TELUS' long-term debt increased to 10.3 years, compared to 5.5 years at the end of 2012.' This news release contains statements about financial and operating performance of TELUS (the Company) and future events, including with respect to future dividend increases and normal course issuer bids through 2016 and the 2014 annual targets that are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and predictions and are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future performance and events to differ materially from those expressed in the forward-looking statements. Accordingly, this news release is subject to the disclaimer and qualified by the assumptions (including assumptions for 2014 annual guidance, semi-annual dividend increases through 2016, ability to sustain and complete our multi-year share purchase programs through 2016), qualifications and risk factors referred to in the attached first quarter Management's discussion and analysis, in the 2013 annual report, and in other TELUS public disclosure documents and filings with securities commissions in Canada (on SEDAR at sedar.com) and in the United States (on EDGAR at sec.gov). Except as required by law, TELUS disclaims any intention or obligation to update or revise forward-looking statements, and reserves the right to change, at any time at its sole discretion, its current practice of updating annual targets and guidance.

Operating Highlights TELUS wireless Wireless network revenues increased by $72 million or 5.3 per cent to $1.44 billion in the first quarter of 2014, compared to the same period a year ago. This growth was driven by continued subscriber growth and higher blended ARPU as a result of a continued increase in smartphone adoption and data usage.

Blended ARPU (excluding Public Mobile) increased by 2.0 per cent to $61.24, reflecting TELUS' fourteenth consecutive quarter of year-over-year growth in blended ARPU.

Monthly postpaid subscriber churn declined 12 basis points to 0.99 per cent - the lowest first quarter postpaid churn result in seven years. Blended monthly churn (excluding Public Mobile) was down 9 basis points to 1.39 per cent. TELUS' industry-low churn reflects the Company's successful customers first service approach, investments in customer retention and a higher portion of smartphones in the subscriber base, which are lower churn in nature.

Postpaid net additions of 48,000 were partially offset by a loss of 36,000 lower-ARPU prepaid subscribers (excluding Public Mobile) for total net additions of 12,000, compared to 33,000 a year ago. The total wireless subscriber base (excluding Public Mobile) was up 1.5 per cent from a year ago to 7.8 million, while the proportion of high-value postpaid subscribers represents 87 per cent of the base.

Smartphone subscribers now represent 78 per cent of TELUS' postpaid base, up from 68 per cent a year ago.

Wireless EBITDA increased by $24 million or 3.6 per cent to $690 million over last year due to network revenue growth and lower acquisition spending. EBITDA excluding the negative $10 million impact from Public Mobile was $700 million, an increase of 5.1%, reflecting a margin of 45.3 per cent, up 40 basis points year-over-year.

Wireless simple cash flow (EBITDA less capital expenditures) decreased by $7 million to $525 million in the quarter due to increased broadband network investments and a negative EBITDA impact from Public Mobile.

TELUS wireline External wireline revenues increased by $56 million or 4.4 per cent to $1.34 billion in the first quarter of 2014, when compared with the same period a year ago. This growth was generated by increased data revenue, partially offset by declines in legacy voice revenues.

Data service and equipment revenues increased by $78 million or 10 per cent, due primarily to strong growth in TELUS TV and high-speed Internet subscribers, combined with TV and high-speed Internet ARPU growth and revenue increases from enhanced data services, and TELUS Health services.

Total TV net additions of 27,000 were lower by 7,000 from the same quarter last year. The total TV subscriber base of 842,000 increased by 130,000 or 18 per cent from a year ago.

High-speed Internet net additions of 21,000 increased by 5,000 over the same quarter a year ago. The high-speed subscriber base of 1.4 million is up 74,000 or 5.5 per cent from a year ago.

Total network access lines (NALs) declined by 24,000 in the quarter compared to 43,000 in the same period a year ago. Total NALs of 3.23 million were lower by 133,000 year-over-year, reflecting an improvement of 40,000 compared to the same period a year ago. This improvement reflects the success of our customers first initiatives and bundling strategy offset by ongoing wireless and Internet substitution and competition.

Wireline EBITDA of $387 million increased by $19 million or 5.0 per cent year over year, reflecting improving Optik TV and high-speed Internet margins helped by subscriber and ARPU growth, as well as ongoing operating efficiency initiatives.

Wireline simple cash flow (EBITDA less capital expenditures) increased year-over-year by $21 million to $56 million due primarily to higher EBITDA. Capital expenditures declined modestly over the same period last year due to the completion of Internet Data Centres in 2013 and lower capital expenditures on implemented large customer contracts, partially offset by increased broadband expenditures.

Mary Jo Haddad and Joe Natale to join TELUS Board of Directors TELUS is pleased to announce Mary Jo Haddad and Joe Natale as new nominees to our Board of Directors, and to be elected at the TELUS Annual General Meeting held on May 8.

Mary Jo recently retired as President and CEO of The Hospital for Sick Children (SickKids) in Toronto, a position she had held since 2004. Recognized for her innovative leadership and commitment to health through a distinguished career in healthcare in Canada and the U.S., Mary Jo previously held several leadership positions at Sick Kids including Executive Vice-President and Chief Operating Officer, and Chief Nurse Executive. She is an Honours graduate of the Faculty of Nursing at the University of Windsor, holds a Master's Degree in Health Science from the University of Toronto and an Honorary Doctorate of Laws Degree from the University of Windsor. Mary Jo will be drawing upon her extensive expertise and knowledge of the Canadian healthcare system to help TELUS advance its leadership position in healthcare information management.

Joe Natale is TELUS' incoming President and CEO. Most recently, he served as Executive Vice-President and Chief Commercial Officer of TELUS, where he led a team of 25,000 team members responsible for our consumer, business and wholesale markets across wireless, wireline, entertainment and information technology solutions. He joined TELUS in 2003 as Executive Vice-President (EVP) and President, Enterprise Solutions. Subsequently, he was promoted to EVP and President of Business Solutions and in 2009 to EVP and President of Consumer Solutions. He will be promoted to President and Chief Executive Officer following the Annual General Meeting. Prior to joining TELUS, Joe held successive senior leadership roles within KPMG Consulting, including Managing Partner for Canada and one of the Global Industry Leaders. Joe has a Bachelor of Applied Science (Electrical Engineering) from the University of Waterloo.

These appointments, when combined with other recent additions to the TELUS board, reflect TELUS' ongoing commitment to recruit outstanding directors who bring diverse, world-class experience to the Board.

Dividend Declaration -- increased to 38 cents per quarter, up 11.8 percent from a year ago The TELUS Board of Directors has declared a quarterly dividend of 38 cents ($0.38) Canadian per share on the issued and outstanding Common Shares of the Company payable on July 2, 2014 to holders of record at the close of business on June 10, 2014.

This second quarter dividend represents a four cent or 11.8 per cent increase from the $0.34 quarterly dividend paid on July 2, 2013.

About TELUS TELUS (TSX: T, NYSE: TU) is Canada's fastest-growing national telecommunications company, with $11.5 billion of annual revenue and 13.3 million customer connections, including 7.8 million wireless subscribers, 3.2 million wireline network access lines, 1.4 million Internet subscribers and 842,000 TELUS TV customers. TELUS provides a wide range of communications products and services, including wireless, data, Internet protocol (IP), voice, television, entertainment and video, and is Canada's largest healthcare IT provider.

In support of our philosophy to give where we live, TELUS, our team members and retirees have contributed more than $350 million to charitable and not-for-profit organizations and volunteered 5.4 million hours of service to local communities since 2000. TELUS was honoured to be named the most outstanding philanthropic corporation globally for 2010 by the Association of Fundraising Professionals, becoming the first Canadian company to receive this prestigious international recognition.

Access to Quarterly results information Interested investors, the media and others may review this quarterly earnings news release, management's discussion and analysis, quarterly results slides, audio and transcript of investor webcast call, supplementary financial information and our full 2013 annual report at telus.com/investors.

TELUS' first quarter 2014 conference call is scheduled for May 8, 2014 at 1:00 p.m. PT (4:00 p.m. ET) and will feature a presentation followed by a question and answer period with investment analysts. Interested parties can access the webcast at telus.com/investors. A telephone playback will be available on May 8 until June 15 at 1-855-201-2300. Please use reference number 1154310# and access code 92105#. An archive of the webcast will also be available at telus.com/investors and a transcript will be posted on the website within a few business days.

2014 Annual meeting of shareholders TELUS' annual meeting is scheduled for May 8, 2014 at 10:00 a.m. PT (1:00 p.m. ET) at the Fairmont Pacific Rim located at 1038 Canada Place, Vancouver, B.C. An Internet webcast, complete with video and audio, will be available to shareholders around the world. Interested parties can access the webcast at telus.com/investors.

For more information about TELUS, please visit telus.com.

Media relations: Shawn Hall (604) 619-7913 shawn.hall@telus.com Investor relations: Paul Carpino (647) 837-8100 ir@telus.com (c) 2014 Electronic News Publishing -

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