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People pass by a Telus store in Toronto on June 3, 2012. (Michelle Siu For The Globe and Mail)
People pass by a Telus store in Toronto on June 3, 2012. (Michelle Siu For The Globe and Mail)

Keeping customers pays off for Telus Add to ...

Telus Corp. has seized on a novel business strategy for a large telecom company: Try not to drive away customers with poor customer service.

The Vancouver-based national wireless, Internet and TV provider’s so-called churn rate – the percentage of customers who leave the company each month – fell to a five-year low of 1.39 per cent in the second quarter on a base of 7.4 million subscribers. That rather obscure measure, which was nearly 1.6 per cent at Telus in 2007, powered solid wireless results as the company reported earnings on Friday.

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With fewer customers leaving and internal surveys saying people are increasingly more likely to recommend its service to friends and family, Telus spends less money enticing people to stay – and isn’t offering deep discounts to attract wireless customers.

In turn, that means Telus has seen gradual improvements in its wireless business, resulting in greater smartphone adoption by customers and more mobile Internet usage. As a result, data revenue increased by 27 per cent to $512-million in the quarter and Telus hauled in an average revenue per user (ARPU) of $60.29 a month, up 2.4 per cent for the seventh straight quarter in a row, even as Rogers Communications Inc. saw a 1.9-per-cent decrease.

“If you do things that make customers satisfied, they'll stay with you longer, they'll use your product more, and you'll get more ARPU,” Telus chief financial officer Robert McFarlane said in an interview, adding that he also believes Telus offered much better customer service than rivals BCE Inc. or Rogers Communications Inc.

“Being the best of a lousy bunch is nothing to brag about,” Mr. McFarlane added, noting Telus does not measure its customer service performance against its Canadian telecom rivals, but instead against other industries.

Mr. McFarlane says that keeping an eye on the customer is simply good business. In Toronto, in particular, Rogers continues to suffer as new entrants such as Wind Mobile, which is based in Toronto, focus attention on the Canadian wireless sector’s high prices.

Rogers no longer breaks out a comparable churn rate that includes both high-value “post-paid” customers who pay bills at the end of the month and less-valued, top-up-card-using “prepaid” customers, who leave companies more frequently.

But Greg MacDonald, an analyst with Macquarie Capital Markets Canada, has calculated the number at 1.66 per cent. With roughly 9.35 million wireless subscribers, Mr. MacDonald notes, that means Rogers loses roughly 150,000 subscribers each month, or about 450,000 each quarter.

“It is easier, cheaper (no commission) and less risky (because you know the spending habits and credit quality) to keep a customer than to sell [to] a new one, so churn is perhaps the most important metric in a maturing industry,” Mr. MacDonald wrote in an e-mail.

Telus increased revenue by 4 per cent in the second quarter to $2.7-billion, with profit up 1.2 per cent to $328-million. Earnings per share increased 2 per cent to $1.01. The company added 112,000 high-value customers, more than analysts expected, and also continued to expand its new TV service, bringing the total number of TV customers to 595,000 – which has put Calgary-based cable outfit Shaw Communications Inc. under a lot of pressure. Results were in line or ahead of analysts’ expectations.

Telus has also avoided the public controversies that have stung its rivals, sitting out as Bell defended its “usage-based billing” Internet pricing plan in Ottawa to much public outrage, and watching as Rogers got dinged $10-million by the Competition Bureau for misleading ads that criticized new wireless companies. The case is currently before the courts. 

The company has also done well at keeping ahead of politicians at the provincial level, by revoking widely disliked system-access fees and by slashing international roaming rates.

 
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