MONTREAL — With the use of smartphones increasing, Telus Corp. (TSX:T) is expecting revenue growth from its data plans as more consumers surf the Internet and use other applications while they’re on the go.
The Vancouver-based telecom launched an advanced wireless network last fall and started selling the Apple’s popular iPhone and other smartphones to take advantage of the trend.
“The usage of data is going up exponentially because of smartphones,” chief financial officer Robert McFarlane said Friday, after the company reported a 45 drop in fourth-quarter earnings compared with a year ago.
This kind of growth will offset the decline in revenue from voice calling, he said in an interview.
“That’s the strategy really.”
McFarlane is also looking ahead to e-readers and tablet computers like Apple’s iPad that will allow users to read books and newspapers, listen to music and watch movies to help boost data revenue.
In the highly competitive wireless industry, Telus is going head-to-head with Bell (TSX:BCE) and Rogers (TSX:RCI.B) which also have advanced wireless networks, and well as new players like Wind Mobile and others.
Telus said it earned $156 million or 49 cents per share of net income in the final three months of 2009. That’s down from $285 million or 89 cents a year earlier.
Analysts had been predicting earnings per share of 55 cents, according to a poll of 16 analysts by Thomson Reuters.
Operating revenue slipped less than one per cent to $2.44 billion from $2.45 billion in the fourth quarter of 2008 — in line with analyst expectations.
McFarlane said restructuring costs increased by about $40 million and the company had higher pension expenses.
Telus also had about a $20-million increase in the amount of subsidies it provided to new or existing customers to buy Apple’s iPhone and Research In Motion’s Blackberry, McFarlane said.
“We have a very large subsidy that we incur on the sale of those products. Hopefully over time they generate higher revenue and you make up for it.”
The subsidies allow consumers to purchase an iPhone, for example, for a little as $99 on a three-year contract instead of paying $599 with no contract for the same phone.
Data revenue growth for the fourth quarter increased by 20 per cent, year-over-year, to reach $243 million, McFarlane said.
“We remain bullish with respect to the prospects for future wireless data growth, given the increasing penetration of smartphones with in our subscriber base.”
Smartphone subscribers represent about 20 per cent of Telus’s base of postpaid subscribers, up from 13 per cent a year ago, McFarlane told analysts.
Technology research firm IDC has said smartphone penetration among consumers and businesses is about 25 per cent in Canada.
McFarlane noted that average revenue per user, a key measure for the wireless business, was down 7.7 per cent, year-over-year, amounting to about $56, due to new competition.
“What influences our pricing decision is what Rogers and Bell are doing in the marketplace, not what one niche competitor who is launching in one or two cities is doing.”
Overall, McFarlane said the total subscriber base was up 6.4 per cent, year-over-year, to 6.5 million wireless customers.
Desjardins Securities analyst Maher Yaghi noted that the results weren’t as “impressive” as last week’s BCE results, but were mainly in line with expectations.
“We continue to believe Telus is attractively valued and will soon begin capitalizing on investments made in wireless (HSPA network, smartphones) and wireline, which should help the resumption of regular dividend increases and share buybacks in late 2010 and into 2011,” Yaghi wrote in a research note.
Yaghi said earnings per share were lower than expected mostly due to refinancing costs associated with early debt repayment, which should be treated as a one-time item, as well as higher-than-expected restructuring costs.
For the full year, Telus said it earned $1 billion, compared with $1.1 billion in 2008. Operating revenues were $9.61 billion, a drop from $9.65 billion.
Telus shares closed down 26 cents to $33.54 Friday on the Toronto Stock Exchange.