Telus earnings suffer from Amp’d shutdown

Canadian telecom provider Telus Corp. reported Q2revenues were up 4% year-over-year due to growth in wireless and data, but that its earnings for the second quarter were impacted by the advent of wireless number portability in Canada as well as the bankruptcy of Amp’d Mobile Inc.
The company said that customer acquisition and retention costs increased by about $44.6 million due to number portability, and that another factor affecting its performance was the introduction of a new billing and client care system in Alberta. Telus also said its profits were affected by it venture investment and business with Amp’d Mobile. Telus had partnered with the now defunct U.S.-based mobile virtual network operator to bring its content to Canadian audiences, and sold the MVNO’s wares through its distribution channels as a way to offer up a youth-specific product. Telus stopped selling Amp’d Mobile products shortly before the MVNO ceased operating this week.
However, Telus added that it is “reaffirming our commitment to Amp’d clients by ensuring that all voice and basic messaging services continue to function until we are able to contact subscribers to offer them a comparable or better package of voice and Spark multimedia services.”
The company detailed its expenses related to Amp’d Mobile as: a pre-tax write-off of $11.2 million in equity investment, as well as pre-tax adjustments of about $4.7 million for accelerated depreciation and about $1.9 million in operations expenses, for a total of $17.8 million.
Overall, Telus reported that its net profits were down 29% to $240 million year-over-year due to a large positive tax adjustment received in the second quarter of 2006; earnings per share took a 26% hit.
“I am less than satisfied with these quarterly results,” said Darren Entwistle, Telus’ president and CEO. While he noted that wireless revenue and subscriber growth “remained robust, earnings did not meet expectations. This was largely caused by excess costs associated with the implementation of the new wireline billing and client care system as well as from the introduction of wireless number portability and the commercial failure of Amp’d Mobile.”
Entwistle also confirmed that Telus has no intention of submitting an offer to acquire competing carrier BCE.
Telus’ wireless net subscriber additions were up 3.5% year-over-year to 128,200 custoemrs, with postpaid growth accounting for 99,200 customers and prepaid gaining 29,000 customers. Wireless revenues increased 11% compared with the second quarter of 2006, to around $997 million. The carrier’s average revenue per user bumped up slightly, from $59.98 in the second quarter of 2006 to $60.44 this year. Data ARPU jumped 48% to $6.25, which the company noted “more than offset the ongoing decline in voice ARPU.”
Blended churn did see an uptick, which the carrier said was due to number portability. Churn increased from 1.3% a year ago to 1.45% during this year’s second quarter. However, Telus noted that its postpaid churn remained low at 1.07%.