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Telus cites strength in customer service as subscriber base grows

File photo of a Telus store in Toronto.

Fred Lum/Fred Lum/The Globe and Mail

Subscriber growth in wireless, Internet and TV subscribers propelled Telus Corp. to a stronger profit and a dividend increase in its first fiscal quarter.

The Vancouver-based telecom company put distance between competitors with 48,000 new postpaid wireless subscribers in the quarter, at a time when providers are aggressively competing for customers.

By comparison, BCE Inc. reported 34,000 net new postpaid additions, and the country's largest telecom provider, Rogers Communications Inc., added just 2,000.

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Darren Entwistle, the outgoing chief executive officer at Telus and new executive chairman of the board, attributes this success to the company's strength in customer service, which he said has been the first corporate priority at Telus since 2008.

"Customer service is a team sport that requires the engagement and focus of everyone in the organization," Joe Natale, incoming CEO, added on a conference call with analysts. Mr. Natale's new role became effective at the formal conclusion of the company's annual general meeting Thursday.

"The greatest advantage we have is cultural," Mr. Natale said. "It's part of our secret sauce and we're going to maintain our focus on keeping our secret to ourselves because it's very important to our future."

Monthly postpaid churn at Telus, a measure of the number of non-prepaid customers leaving the company, came in at 0.99 per cent. This rose sequentially from 0.97 per cent in the last quarter of 2013, but marks the third quarter in a row that Telus has kept the figure below 1 per cent.

"There are only two other companies around the world that have had post churn rates below 1 per cent in the last three quarters, and I think that's empirical evidence that, holistically, what we're doing to advance the client experience is paying off."

Customers across Canada now have a brighter view of their telecom providers, according to new research by J.D. Power.

Customers reported an overall decrease in the perceived cost of their monthly wireless bills than they did one year ago, which researchers attributed in large part to the Canadian Radio-television and Telecommunications Commission's (CRTC) new wireless code.

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The new rules essentially disallowed three-year contracts and put limits on data and roaming bills, among other changes. Customers with two-year contracts report being happier and say they pay less.

"This is the first year it's really been around cost. The additional transparency and options customers have now ... seem to be favourably received," said Adrian Chung, account director at J.D. Power.

Mr. Chang said one of the most surprising figures in the study was that smartphone penetration grew by double digits again to 73 per cent of the market. But now that providers are competing less on hand-held devices, the intangible draws to a company, such as customer service, have become more important than ever.

Customers at SaskTel reported the highest customer satisfaction in the full-service wireless segment, with Telus following closely behind. The Koodo Mobile brand, owned by Telus, ranked highest in the standalone segment.

Telus's profit climbed by more than 4 per cent to $377-million or 61 cents a share in its first quarter from $362-million or 56 cents in the same period last year.

When Telus excluded the costs associated with shuttering its Public Mobile's wireless network, earnings per share were 10.7 per cent higher at 62 cents a share. Analysts expectations were for 61 cents a share on an adjusted bases, according to Bloomberg data.

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Operating revenue also climbed 5 per cent to $2.9-billion from last year. Telus has pledged to grow revenue between 4 and 6 per cent this year.

The company said increased data usage by customers drove revenues in its land-line business as more customers used Telus TV and signed up for high-speed Internet. There were 27,000 new TV subscribers and 21,000 new high-speed Internet customers added in the quarter.

"We're seeing operational growth in TV, and operational growth in Internet, but we're now seeing profit growth because of the scale economies," Mr. Entwistle said. He added that this is the company's sixth consecutive quarter of operational earnings growth on its land-line business.

Mr. Entwistle is stepping back from the role of CEO, but he's still focused on investing in new business areas for the future of the company. "When I talk about multiple growth engines, yes it's nice to complement wireless with [land line], but we're trying to develop new growth engines with areas like health," he said.

Earlier this year, the company acquired Ontario's largest provider of electronic medical records, and it has invested nearly $1-billion in the sector in the past five years. In three years Mr. Entwistle said he would like to see "significant contributions" to Telus coming through that business channel.

The company also bumped up its dividend by 2 cents to 38 cents a share, in line with expectations. Telus is building on its multiyear dividend growth program, which began three years ago. In the first three months of 2014, the company has returned $381-million to shareholders through dividends and repurchases.

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About the Author
Financial Services Reporter

Jacqueline Nelson is a financial services reporter at the Report on Business. Prior to that she was a staff writer at Canadian Business magazine, covering news and writing features on a wide variety of subjects. More


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