May 13th, 2008Telus Q1 2008 earnings
A stay-the-course quarter for Telus’ wireless division, which announced (audio | transcript) a 10% increase in overall revenue on slightly lower net additions (88,000 as opposed to 91,000 in first quarter 2007), offset by a stronger share of post-paid additions (82% vs. 67% in the quarter) and a 53% surge in wireless data revenue.
The net result of all this was essentially flat ARPU in the quarter at $61.88, down slightly from $62.03 in the first quarter last year.
Capital expenditures were also down 42% on the year, perhaps reflecting President and CEO Darren Entwhistle’s preference, expressed during the Q4 2007 analyst call, to “sweat the heck out of” the telco’s sizeable EVDO Rev-A investment and wring maximum ROI from it before contemplating other investments in the network (he was responding specifically to an analyst question about whether Telus was contemplating building a GSM overlay on its CDMA network).
In the area of network expansion, the evidence is that at least for now, the telco’s attention is elsewhere: even though Telus’ potential participation in the wireless spectrum auction is not reflected in capital expenditures, $230 million (in the form of letters of credit) has been deposited with Industry Canada for the upcoming advanced wireless services (AWS) auction.
And speaking of not putting all your eggs in one basket, Telus execs were underwhelmed by the recently announced Sprint/Clearwire deal to launch a new WiMax mobile broadband network in the US. Telus VP and CFO Robert McFarlane’s take on the deal was that it more likely signalled Sprint’s trouble in making a viable go of the business than any groundshifting mass-market move towards WiMax, all the more since LTE looks increasingly to be the “overwhelming choice” of carriers globally (whether CDMA or GSM).
The “what-to-look-for” item next quarter? Impact on earnings from Koodo. Even though Telus execs reaffirmed earnings guidance for 2008 (including any effect from Koodo), it remains to be seen how the launch of the discount brand will affect financials, especially cost per acquisition (which was down 27% from last year) and post-paid ARPU. See our take on the discount brand here.
Is this a savvy business move that will lead to the premiumization of the Telus brand, or is the telco dipping its toe in the MVNO deadpool? My guess is that eschewing risky content creation and licensing deals, as well as “artificial features like TV on your mobile phone“, probably makes good business sense. But since Koodo launched only a few days before the end of the first quarter, we’ll have to wait and see.
