Telus begins separating ‘quality’ wireless subs in financial reports

One year after claiming it registers similar smartphone-specific new subscribers compared to its major competitors, Telus Corp. has separated out what it traditionally considers less lucrative wireless additions in its financial statements. The company has now merged its pre- and postpaid wireless numbers in one line item, under “mobile phones,” while putting connected devices, such as tablets, wearables, connected cars, and internet of things (IoT) under a separate “mobile connected devices” category. Previously, those devices weren’t broken out in public disclosure. For the three months that ended March 31, Telus added 11,000 new mobile phones compared to a loss of 3,000 in the same period last year, which is adjusted to reflect the new categorization. Mobile connected devices increased 19.5 per cent in the quarter to 49,000 devices. In total, the company added 60,000 subscribers, an increase of 58 per cent. The total mobile phones base increased 3.1 per cent to 8.47 million, while the mobile connected devices base jumped 18.9 per cent to 1.26 million. The change is in-line with messaging from the outspoken executive team, led by CEO Darren Entwistle, which has emphasized in many conference calls the importance of the “quality” of new subscribers to show “sustainable attractive economic return,” Entwistle said on a conference call with analysts Thursday. The company defines quality as having a high percentage of its postpaid adds being smartphones with voice and data rate plans. But the decision surprised some analysts. "The Street was perplexed by management’s decision to stop reporting the split between prepaid and postpaid," Desjardins analyst Maher Yaghi said in a note Friday. "While we agree that not all loading is equal, the reduction in comparability vs peers is likely to put on the defensive." RBC capital markets analyst Drew McReynolds said also said the "surprise in the quarter was a shift to new wireless disclosure." But he added that while new format "will require some digesting and will make peer comps more challenging, we do see the logic behind this change given the evolution of growth drivers as the wireless industry moves to 5G." Telus has long suspected its rivals of having inflated their new additions with lower average revenue data supplements such as tablets, wireless home phones, government contracts and prepaid to postpaid migrations. The company’s executive vice-president David Fuller said at an analyst conference that its smartphone plan uptake for the same quarter last year was equivalent or better than its bigger competitors, which leapt the Vancouver-based company in net additions that quarter. “I think if you look at growth at Telus versus growth at our peers, it compares in a very favourable fashion, particularly when you start stripping out loading to look at the quality component of that,” Entwistle said on the call Thursday. Fuller’s claim could not be independently verified because none of the other telecoms break out those other devices in their balance sheets. Telus' move to do just that in its first quarter statement comes on the heels of the single hottest year for new wireless subscribers in the industry. The move also comes in time for a surge in the number of IoT devices, especially with the advent of 5G, which Telus said on the call it expects to be a boon down the road. “The other thing that’s extremely clear that was really the key impetus in terms of modernizing our disclosure was the realization that we’re heading into a prolific, what I call, hyperconnected 5G world,” Entwistle said on the call, “and we wanted to create a delineation in terms of quality smartphone loading...but greater insight and transparency in terms of growth, as it relates to connected devices within a ubiquitous IoT ecosystem. “It’s not just about volume growth in terms of connected devices and IoT, but what does it do for profitable revenue growth,” Entwistle added. “It’s going to be a big story for this organization prospectively,” he said. “We’ve got nine million connections...the machine-to-machine world is going to grow over time.” The prepaid segment has been a central focus for some of the telecoms, as they attempt to bump up that base to postpaid. Telus said it wants to add more prepaid subscribers. In the first quarter, Telus’ larger rivals reported record low churn figures -- the rate of defections from the company -- for at least some aspect of their postpaid wireless business. By combining the prepaid and postpaid figures in one line item, Entwistle said he wants to set a new bar for churn -- which his company has historically lead on. For the first quarter of 2019, Telus reported ABPU increasing 0.1 per cent to $72.9 and average revenue per user declining 1.5 per cent to $59.33, while its combined prepaid and postpaid churn was 1.02 per cent. “It’s gotten pretty boring on the traditional front to talk about Telus churn being below one per cent,” Entwistle said. “The goal for the team is to take our combined churn from 1.02 into the dot nine categories. “Wouldn’t it be a great thing to talk about pre and post together be below one per cent,” he said, “rather than just talking about consecutive quarters having postpaid churn below one per cent. “It’s about making sure that our churn pieces exclusive to postpaid, but it’s also permeating through the prepaid because if prepaid has very attractive ABPU characteristics associated with it, shouldn’t we want to drive down the churn rate? Absolutely.” Rogers Communications Inc. reported a record low churn of 0.99 per cent for its entire wireless division, while BCE Inc. said it reached a 0.98 per cent churn for its Bell-branded wireless product -- not including its flankers -- for the first time as well. Telus added 22,000 internet subscribers, flat compared to the same period last year, for a total base of roughly 1.9 million -- an increase of 7.4 per cent. The TV side added 17,000 subscribers compared to the 6,000 it added last year, partly attributed to lower churn, for a total base of 1.1 million, an increase of 0.5 per cent over the year. All in, Telus reported revenues of $3.5 billion, up 4.1 per cent compared to last year, while over the same period it netted $437 million in income, an increase of 6.1 per cent. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Telus begins separating ‘quality’ wireless subs in financial reports

News | May 9, 2019

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Telus begins separating ‘quality’ wireless subs in financial reports

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