Broadband investments driving growth
TELUS’ wireless and wireline broadband investments continued to drive enhanced financial and operating performance in 2011. These investments strengthened TELUS’ competitive position and helped attract new customers and retain existing ones.
Consolidated revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) continued to grow in 2011, increasing by $605 million and $128 million to $10.4 billion and $3.8 billion, respectively. This growth reflects increasing customer connections, higher wireless average revenue per subscriber unit (ARPU) and ongoing benefits from enhanced operational efficiency. TELUS’ consistent execution of its national growth strategy, focused on wireless and data, has resulted in total wireless revenues and wireline data revenues increasing to 77 per cent of consolidated revenues in 2011, up from 74 per cent in 2010.
$605 M to $10.4 B
$128 M to $3.8 B
In wireless, total revenues increased by nine per cent to $5.5 billion in 2011, due to growth in subscribers and a $537 million (47 per cent) increase in data revenue growth. This resulted in a 2.5 per cent ARPU increase in 2011, as compared to a one per cent ARPU decline in 2010. These results reflect TELUS’ strong growth in smartphone sales, adoption of Clear & Simple® rate plans and a wide variety of compelling devices following TELUS’ launch of Canada’s fastest* coast-to-coast HSPA+ wireless network in late 2009. Wireless EBITDA increased by 8.2 per cent to $2.2 billion in 2011 reflecting the increase in revenue, partially offset by higher combined acquisition and retention costs associated with increased subscriber volumes and continued smartphone adoption.The wireless EBITDA margin remained in the 40 per cent range.
9% to $5.5 B
Wireless gross subscriber additions increased by five per cent in 2011, with higher-value postpaid gross additions up by 11 per cent. While overall net subscriber additions were down by 17 per cent, higher-value postpaid net additions increased by 2.4 per cent, a notable achievement given continued intense competition throughout the year, the loss of 77 thousand subscribers related to the loss of a low value government contract, and continuing new entrant expansion across Canada. At December 31, 2011, smartphone subscribers represented 53 per cent of the total postpaid subscriber base, a very strong 20 point increase compared to 33 per cent a year earlier.
*Based on TELUS’ tests of data throughput speeds in large Canadian urban centres available from national HSPA+ service providers. Limitations apply.
Wireline total revenues increased by three per cent to $4.9 billion in 2011, primarily due to a 13.7 per cent increase in data revenues, which was partially offset by a nine per cent decrease in legacy voice and long distance revenues. Data revenue growth was driven by TELUS TV® and Internet services. Launched in mid-2010, TELUS’ Optik™ brand offers an enhanced, premium suite of advanced IP-based entertainment services for the home. This has accelerated TV subscriptions which were up by 62 per cent to 509,000 at the end of 2011. TV subscriber additions are generally accompanied by upfront earnings dilution from introductory promotions offered to our customers. In 2011, TELUS acquired control of, and increased its equity to 95 per cent in Transactel (Barbados) Inc., a business process outsourcing and call centre company with facilities in Central America. This contributed $39 million of data revenue growth. Wireline EBITDA decreased 2.3 per cent to just under $1.6 billion in 2011, and EBITDA margin declined from 33 per cent to 31 per cent, as growth in lower margin data services did not fully offset declines in higher margin legacy services.
3% to $4.9 B
Free cash flow
In 2011, free cash flow increased by six per cent to $997 million due to improved EBITDA, and lower interest and income tax payments, partially offset by higher capital expenditures and increased contributions to defined pension benefit plans for retirees. The increase in TELUS’ free cash flow position and prospects for continued earnings growth has allowed TELUS to increase the Company’s dividend by 10.5 per cent in 2010 to $2.32 on an annualized basis. In February 2012, TELUS announced one of two expected bi-annual dividend increases for 2012. The quarterly dividend was increased by three cents or 5.2 per cent to 61 cents per quarter beginning with the July 2012 dividend payment and resulting in an annualized dividend of $2.44, up by 10.9 per cent from a year earlier.
For 2012, TELUS is targeting a consolidated revenue increase of three to six per cent and an EBITDA increase of one to six per cent. Revenue and EBITDA are expected to benefit from TELUS’ continued strong execution in data and wireless. Earnings per share (EPS) is targeted to grow in a range of zero to 10 per cent due to EBITDA growth and lower financing costs. While not a target, growth in free cash flow from ongoing operations is expected to be even higher.
Free cash flow at TELUS has been reduced in 2011 and 2012 due to the decision to make discretionary additional pension contributions of $200 and $100 million respectively. These have maintained a strong pension funding position that is among the best in corporate Canada.
TELUS has a solid track record of attaining the challenging targets we set publicly each year. In the past decade, we have met or exceeded 77 per cent of our 52 consolidated financial targets, including three out of four in 2011. Capital expenditures exceeded the initial 2011 target due to an accelerated timeline to commence building of our urban 4G LTE wireless network, as well as success-based capital spending resulting from strong growth of Optik TV™.
For a longer term view of our financial performance or to learn more, visit TELUS’ 2011 Annual Report.
2011 financial and operating highlights
|$ in millions, except per share amounts||2011 (IFRS-IASB)||2010 (IFRS-IASB)||% change (2010 to 2011)||2009 (Previous Canadian GAAP)|
|Operating revenues||$ 10,397||$ 9,792||6.2||$9,606|
|Net income attributable to Common Shares & Non-Voting shares||$1,219||$1,048||16.3||$998|
|Basic earnings per share (EPS)||$3.76||$3.27||15.0||$3.14|
|Basic EPS, as adjusted2||$3.66||$3.33||9.9||$2.84|
|Free cash flow (before dividends)||$997||$939||6.2||$485|
|Subscriber information (000s)|
|Residential and business network access lines||3,593||3,739||(3.9)||3,966|
|Total customer connections||12,728||12,253||3.9||11,875|
|1||Earnings before interest, taxes, depreciation and amortization, which is equivalent to Operating income before depreciation and amortization.|
|2||In 2011, excludes positive income tax-related adjustments of six cents per share and gain on acquisition of control of Transactel of four cents per share. In 2010, excluded positive income tax-related adjustments of nine cents per share, loss on debt redemption of 12 cents per share and regulatory financing charge of three cents per share. In 2009, excluded income tax-related adjustments of 52 cents per share and loss on debt redemption of 22 cents per share.|
|3||TV subscribers consist of Optik TV™ and TELUS Satellite TV®.|
Economic value distributed
|($ in millions)||2011||2010||2009|
|Goods and services purchased||4,726||4,236||3,995|
|Employee benefits expense, excluding net employee defined benefit plans expenses||1,925||1,915||2,100|
|Employer contributions to defined benefit plans||298||140||180|
|Dividends declared for the holders of Common Shares and Non-Voting Shares||715||642||601|
|Interest on long-term debt||374||442||474|
|Loss on redemption of long-term debt||-||52||99|
|Other interest expenses||15||33||9|
|Income taxes (inclusive of investment tax credits) paid, net||150||311||266|
|1||International Financial Reporting Standards as issued by the International Accounting Standards Board. The Company’s date of transition to IFRS-IASB is January 1, 2010, and its date of adoption is January 1, 2011.|