Smartphone adoption “surged” at Telus Corp., with BlackBerry and iPhone customers helping increase revenues in its wireless division, as fourth-quarter profit rose 45.5 per cent to $227 million.
Vancouver-based Telus (TSX:T) said Friday that it made the gains in a highly competitive quarter that included the holiday season and numerous promotions and brands from new and established players.
“Smartphone subscriber loading hit an inflection point in the quarter as smartphone adoption surged,” chief financial officer Robert McFarlane told analysts on a conference call Friday to discuss the quarterly results.
McFarlane said 46 per cent of new customers in the quarter opted for smartphones, compared with 25 per cent in the same period a year ago.
Those customers generally pay a subsidized, lower price for their smartphone but are on a three-year contract.
Smartphone customers continued to choose BlackBerrys and iPhones and added revenue due to their higher monthly data and voice plans and their longer term contracts, he said.
Telus said it added a total of 119,000 wireless subscribers overall in the quarter, which McFarlane described as “stable in a very competitive environment” with 109,000 of them on the more lucrative longer-term contracts.
“Wireless revenues increased by nine per cent to surpass $1.3 billion for the first time,” said McFarlane.
Average revenue per mobile phone user increased by 1.9 per cent in the quarter, he said, the first such increase in 3.5 years, or 14 quarters.
McFarlane said during the quarter that consumers had become more aware of smartphones and their capabilities, which accelerated their adoption at Telus.
However, the telecom has no plans to offer smartphone users unlimited data plans, especially with the increasing popularity, of video which uses a lot of network capacity.
“Basically, you can’t sustain a flat-rate data plan because you will erode your profitability,” McFarlane said.
Robert Gorman, chief portfolio strategist at TD Waterhouse, said the increase in smartphone users is positive for Telus going forward.
“It tells you that the consumer is, first of all, shifting more to the smartphones, which have a higher revenue per user than the conventional cellphone,” Gorman said. “So that’s reflecting that trend.”
RBC Capital Markets analyst Jonathan Allen said rising smartphone adoption is having a positive impact on data revenue and new wireless competitors are “stealing” mostly lower value customers.
“In our view, this is a very positive result: not only does it show that Telus Mobility can continue to grow even in the face of new competition, but bodes well for achieving Telus’ six to 11 per cent EBITDA growth target in 2011,” he wrote in a note to clients.
Total operating revenue improved to $2.55 billion from $2.44 billion, above expectations of $2.51 billion. About half of those revenues came from its wireless business, up about $110 million from the same period last year. Wireline revenues were steady at $1.25 billion.
Earnings per share came in at 70 cents, falling short of average analyst expectations of 72 cents per share, according to Thomson Reuters. A year ago Telus earned 49 cents per share.
Telus said it had a profit of $156 million in the same three-month period ended Dec. 31 last year.
The telecom company also said it had a record 48,000 TV subscriptions in the quarter.
The company offers its Internet-Protocol television service in British Columbia, Alberta and eastern Quebec. At the end of 2010, Telus said it had 314,000 households with its Optik IPTV service.
Telus is one of the few major telecom companies that has said it won’t pursue a strategy of buying up media properties to give it content for its online and mobile phone platforms. The company recently announced that it would unlock its customers’ mobile phones for a $50 fee to allow them to run on other carriers’ networks.
The telecom company also announced Friday it will pay a quarterly dividend of 52.5 cents per share, the increase was announced last November, on April 1.
Telus shares fell 58 cents to close at $47.31 Friday on the Toronto Stock Exchange.