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Telus CEO says customer loyalty is a big edge in competitive wireless market

Pedestrians walk by a Telus store in Toronto, on August 15, 2013. THE CANADIAN PRESS/Galit Rodan

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Pedestrians walk by a Telus store in Toronto, on August 15, 2013. THE CANADIAN PRESS/Galit Rodan

TORONTO - Telus Corp.'s second-quarter profit jumped 33 per cent to $381 million in net income, as it added tens of thousands of subscribers to its wireless, TV and Internet services.

Meanwhile, its retention of wireless customers improved — with the rate of "churn" from departing contracted subscribers matching an eight-year record low of 0.90 per cent. "Blended churn", including pre-paid customers without contracts, fell to a relatively low 1.2 per cent — a competitive advantage for Telus.

"To put that in a broader context, our competitors would have to find many more customers before we even have to find one," Telus chief executive Joe Natale said Thursday in an interview after the Vancouver-based company released its second-quarter results.

During the quarter, Telus added 58,000 wireless customers (78,000 additional postpaid less 20,000 fewer prepaid), 23,000 subscribers for its television services and 15,000 high-speed Internet customers during the three months ended June 30.

At the end of the quarter, Telus had about 7.88 million post-paid and pre-paid subscribers to its Telus and Koodo-branded wireless services, up 2.2 per cent from 7.7 million a year earlier. Average revenue per user was $62.51, up 2.2 per cent from a year earlier.

"We've lead the industry in our share of new postpaid wireless customers, among the large national carriers, and we've lead now for four out of the five last quarters. So, that's a broad way of saying we're taking (market) share from our competitors," said Natale, who became Telus chief executive in May, succeeding Darren Entwistle who is now executive chair of the board.

By comparison, Montreal-based BCE Inc. (TSX:BCE) had about 7.80 million post- and pre-paid customers on its wireless services, up 1.1 per cent from 7.7 million a year earlier, according to results issued Thursday. Bell Wireless had average revenue per user of $59.49, up 4.6 per cent from $56.85 a year earlier.

Toronto-based Rogers Communications — which got a new chief executive, Guy Laurence, in December — continues to have Canada's largest base of wireless subscribers. It reported last month that it had 8.1 million postpaid and 1.32 million prepaid wireless customers, generating average revenue of $59.18, down from $59.30 a year earlier.

Canada's three big national wireless carriers represent about 90 per cent of the country's total subscribers — despite the federal government's efforts to increase competition in the sector since at least 2008. Some analysts have concluded that the Big Three's profits could be under pressure if another national carrier emerges.

Natale said Telus and Ottawa share many of the same interests, such as having a wireless industry that's committed to a level of investment that provides Canada with some of the best wireless services in the world. He also noted that Telus, which moved to the national stage in wireless when it bought Clearnet in 2000, was a newcomer when he joined the company.

"We've never shied away from competition," Natale said. "The best safeguard against competition is having service capabilities that customers demand and having a reputation for customer service that is held in high esteem. And I think we have both those traits in this organization."

Telus said its overall net income for the three months ended June 30 amounted to 62 cents per share, compared to $286 million or 44 cents per share a year ago. On an adjusted basis, its profit was equal to 63 cents per share, up from 54 cents.

Operating revenue from all services grew 4.4 per cent to $2.95 billion from $2.83 billion. Wireless services contributed $1.61 billion to the total and wireline services, which include residential and business phones, Internet and residential TV services, contributed $1.39 billion of revenue.

At the end of the quarter, Telus had a total of 3.2 million network access lines — split almost evenly between residential and business customers, down 3.3 per cent from a year earlier as 19,000 residential customers left. That was offset by growth in Internet subscribers, which totalled 1.45 million as of June 30 — up 5.1 per cent — and growth in TV subscription, which totalled 865,000 at the end of the quarter, up 16.4 per cent.

Overall subscriber growth was slightly better than expected, said RBC Capital Markets analyst Drew McReynolds in a note.

McReynolds wrote that Telus's wireless division was helped by having more customers switch to higher-priced two-year contracts for their smartphones, rather than the three-year plans that were the industry standard before rule changes by regulators.

Telus shares were ahead 11 cents to $38.07 in afternoon trading on the Toronto Stock Exchange.

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