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Telus Fourth-Quarter Profit Climbs 66% on Tax Gain

February 15, 2008 | Chris Payatagool
Telus Logo.gifBy Chris Fournier

Feb. 15 -- Telus Corp., Canada's second-largest telephone company, said fourth-quarter profit gained 66 percent because of a tax benefit. Wireless subscriber additions trailed some estimates, offset by lower costs to acquire customers.

Net income rose to C$400.1 million ($401 million), or C$1.22 a share, Vancouver-based Telus said today in a statement. Revenue increased 3.4 percent to C$2.33 billion, compared with the $2.36 billion estimate of analysts in a Bloomberg survey.

Average revenue per wireless user fell for the second straight quarter. Telus shares have dropped about 26 percent since Nov. 2, when the company reported its first quarterly decline in revenue per user in more than four years. The mobile- phone business accounts for almost half of total sales.

"Wireless maturity clearly remains the market's main concern," National Bank Financial's Greg MacDonald wrote in a note to clients today. The Toronto-based analyst, citing valuation and "reasonable" subscriber growth, reiterated his prediction that the shares will perform better than peers.

Telus fell 19 cents to C$41.79 at 12:09 p.m. in Toronto trading. The shares had lost 15 percent this year before today.

Profit excluding the tax gain and other items was 79 cents a share, matching the estimate in the Bloomberg survey. Telus restated its results from last year's fourth quarter, adding C$4.3 million to net income to reflect a change in pension accounting. Profit in the fourth quarter last year, as restated, was C$240.5 million, or 70 cents a share.

'Competitive Impacts'

Per-user wireless revenue dropped 1.2 percent to $63.70 because of "competitive impacts" on pricing for voice service, the company said. Genuity Capital Markets analyst Dvai Ghose in Toronto had projected C$63.53.

Mobile subscribers canceled at a higher rate than a year ago and a rising proportion of customers paid in advance for calls rather than signing long-term contracts.

These developments "do not bode well for future margins," Ghose wrote in a note today. He advises clients to hold the shares, calling them "very cheap."

Telus spent $352 per user to acquire wireless customers in the fourth quarter, about 19 percent less than last year and below Ghose's $500 prediction.

The company added 161,400 wireless subscribers, missing MacDonald's estimate of 180,300. Wireless revenue grew 8.8 percent, the company said. That exceeded the 8.4 percent rate that larger rival BCE Inc. reported this month. Rogers Communications Inc., Canada's largest wireless carrier, reports earnings on Feb. 22.

(Telus held a conference call today to discuss results. Go to to listen.)

To contact the reporter on this story: Chris Fournier in Montreal at [email protected]

[via Bloomberg]  

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