Telus reports 20% profit decline in Q1, withdraws 2020 guidance due to coronavirus

Vancouver-based national carrier Telus (T.TO) reported $353 million net income, or 28 cents per share, in Q1 2020, a nearly 20 per cent decline year-over-year. The carrier also said it is withdrawing its fiscal guidance for 2020 due to the uncertainty caused by COVID-19.

In Q1 2019, the carrier reported a net income of $437 million, or 36 cents per share.

In the three months that ended on March 31, the carrier said operating revenue was $3.69 billion, a 5.4 per cent increase from the $3.51 billion it reported in the same period a year ago.

Telus added 119,000 new wireless, internet, TV and security customers, up 14,000 over the same quarter a year ago. 21,000 of those customers signed up for new mobile plans.

CEO Darren Entwistle said in its earnings report that the carrier remains resilient despite the uncertain period and has seen record-breaking traffic on its network.

“By way of illustration, during these peak periods, we experienced traffic rates that were four times those that occurred on Mother’s Day in 2019 – traditionally one of our highest traffic days of the year,” he said in the report. “Our team’s efforts to sustain our networks during the pandemic is tantamount to supporting Super Bowl-level traffic, every day.”

CFO Doug French said in an interview with Yahoo Finance Canada that the carrier has not “formally laid off” any of its employees due to the virus.

He added that those working in the retail sector have been transitioned within the organization “for customer service and in helping our customer base as we go through these challenging times.”

French said that the carrier has also been able to offset future revenue losses with more than $250 million in cost reduction initiatives.

“We’ve identified significant opportunities for cost reduction or margin enhancements to help offset some of that revenue pressure that we currently feel and that would include reductions in [marketing],” he said.

Part of the plan will also be to re-allocate capital expenditures, which French indicated would be towards building out its fibre footprint in locations that need it.

“Specifically in Calgary and continuing to build our fibre footprint, which enhances both our customer service offerings on our wireline but also helps wireless,” he said. “That is the main re-deployment, back into fibre infrastructure to continue to build our network.”

Focus on 5G is now towards enhancing 4G LTE

French also indicated that the carrier’s 5G plans have been redirected to focus on network enhancements in 4G LTE and ensuring customers are connected to existing networks.

“It is our first and foremost objective, is keeping Canadians connected across both rural and urban areas in Canada,” he said. “The [Request for Proposal] is still out for 5G, and at the end of the day there really is no hurry.”

In Q4 2019, the carrier indicated it was not going to pre-announce its 5G launch plans but that its initial module, or the first phase of the 5G rollout, would be with Huawei until the government approves its RFP.

The carrier said that while stores have been shut it has implemented “innovative solutions” to support its customers that are going into the store for emergency services.

“We are adapting our go-to-market strategy and implementing innovative solutions to continue supporting our customers such as touchless in-store experiences, virtual installations and repairs, and leveraging our digital footprint as our primary sales channel,” Telus said in its earnings.

The carrier’s mobile phone Average Revenue Per User was $58.60, a decrease of 73 cents, which the carrier said was “driven by the impacts of the COVID-19 pandemic in March.

“Mobile phone ARPU continues to be impacted by the continued trend of declining chargeable usage and the impact of the competitive environment putting pressure on base rate plan prices,” the carrier said.

The carriers churn rate, or the measure of subscribers who deactivate their services, was 0.94 per cent, compared to the 1.02 per cent it reported in the same period a year ago.

“The impact from the COVID-19 pandemic resulted in less switching activity between carriers in the last two weeks of March, as customers reduced their general shopping habits and as a significant number of physical sales channels were closed during that period,” Telus said.

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