A move by Ottawa to open up local phone service competition and allow mobile phone users to keep their number when they change companies is being undervalued by investors, Telus Corp. chief executive Darren Entwistle said Friday.
“With the imminent liberalization of local pricing as well as wireless number portability, Telus is gaining competitive tools that were not formally in the repertoire of our company,” Entwistle told a conference call with analysts.
“This will allow us to judiciously, over time, to secure a more balanced approach to the market based on the quality of our comprehensive communications solutions.”
Entwistle's comments came as Telus tripled its fourth-quarter profit from a year earlier to report earnings of $236.2-million or 69 cents per diluted share for the three months ended Dec. 31. That compared with a profit of $78.5-million or 22 cents per share for the fourth quarter of 2005.
Revenues moved up eight per cent to $2.25-billion from $2.09 billion in the year-before period.
The average analyst estimate had been for earnings of 66 cents per share based on 13 analysts surveyed by Thomson Financial. The average revenue estimate was for $2.23-billion, based on seven analysts.
The federal government moved in December to stop regulating local phone service in areas where there was demonstrable competition, no matter how fledgling, as early as this spring.
The decision followed an earlier move to allow mobile phone users to keep their number with they change companies later this year.
“Telus considers number portability an opportunity because it is one of the biggest impediments that we face in growing our relatively low market share within the business market in central Canada,” Entwistle said.
Troy Crandall, an analyst with MacDougall, MacDougall and MacTier, said it is difficult to determine what the change in regulations will mean for the company.
“It all comes down to how well they execute,” Crandall said.
“If they're very surgical and precise in where they're focusing their promotions, then I think they really could have an impact on cable telephony adoption in those areas.”
For the full year, Telus reported a profit of $1.12-billion, $3.23 per diluted share, up 60.3 per cent from $700.3-million, $1.94 in 2005. Revenues grew to $8.68 billion, compared with $8.14-billion in 2005.
Wireless was a key driver for the business, however the company fell short of its target for net new subscribers for the year with 535,000 net additions compared with a target of 550,000.
Chief financial officer Robert McFarlane said the lower-than-expected new subscribers was somewhat offset by higher average revenue per user of $64.50 compared with $62.54 a year ago, as mobile phone users used more data services.
“People now are getting the handsets that are capable of higher data speeds and are starting to use and subscribe to a lot more data services than ever before and that's driving just tremendous growth for us overall,” he said.
In setting its targets for 2007, Telus forecast revenue between $9.175-billion and $9.275-billion, up six to seven per cent from 2006. Normalized earnings per share are expected to be $3.25 to $3.45 per share, up 16 to 24 per cent.
Capital expenditures are expected to be about $1.75 billion, up eight per cent.
The average analyst estimate for 2007 had been for revenue of $9.154 billion based on 13 analysts surveyed by Thomson Financial. The average earnings estimate had been for $3.27 per share, based on 16 analysts.
Telus shares were up 98 cents $58.68 in trading on the Toronto Stock Exchange.
