Big Yields from This Mobile Magnate

03/14/2012 8:00 am EST


Patrick McKeough

Editor, Successful Investor

Transitioning this traditional wireline firm into a major mobile force in the Canadian market has helped this company deliver impressive growth and a healthy dividend, writes Pat McKeough of TSI Network.

Telus (Toronto: T) gets most of its growth from wireless services. Its 7.3 million subscribers across Canada now supply 52% of its earnings.

The remaining 48% of Telus’s earnings comes from its wireline division, which mainly consists of 3.6 million traditional phone customers in BC, Alberta, and eastern Quebec. This division also includes 1.3 million Internet users and 509,000 TV customers.

Telus added 369,000 wireless subscribers (net of deactivations) in 2011. That’s down 17.4% from a net gain of 447,000 users in 2010, mainly due to the loss of a contract with the federal government.

Even so, Telus continues to benefit as more of its subscribers opt for smartphones. These users now account for 53% of Telus’s wireless subscribers under long-term contracts, up from 33% a year earlier.

Telus also sells most of its smartphones under long-term contracts, which makes it harder for users to switch providers. Customers under long-term contracts now account for 83.5% of its total wireless customers, up from 81.8% a year earlier.

Telus’s overall revenue in 2011 rose 6.2%, to $10.4 billion, from $9.8 billion in 2010. Wireless revenue rose 9%, while wireline revenue rose 3.3%. Earnings rose 15.5%, to $1.2 billion, from $1.05 billion. Earnings per share rose 14.4%, to $3.74 from $3.27, on more shares outstanding.

Telus now plans to merge its common and class A non-voting shares into a single class of shares. If shareholders approve, each non-voting share will become one common share.

Telus also recently raised its quarterly dividend by 5.2%, to 61 cents a share from 58 cents. The new annual rate of $2.44 yields 4.3% for both classes.

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