Telus (T, $21.81): Attention to customer experience is starting to bear fruit
Some key performance indicators emerged from the quarterly results of telecommunications services company Telus, released on November 8.
"First, we see a stabilization in the company's revenue growth for its fixed-rate data plans following significant pricing pressures in Western Canada," notes Scotiabank analyst Maher Yaghi.
The latter also notes that Telus is the company that has lost the least market share to Quebecor since the latter relaunched the Freedom Mobile brand last year.
"Given the intense competition, Telus is able to generate mid-single-digit earnings before interest, taxes, depreciation and amortization (EBITDA) growth, which allows it to enhance its dividend," he adds.
He expects the Vancouver-based company to be able to grow its EBITDA by 4% in 2025, which will allow it to further increase its dividend payments.
On the mobile telephony side, Telus added 130,000 subscribers during the third quarter, or 23% of all subscriptions in Canada during the period, behind Rogers at 194,000 (25%) and Quebecor at 132,000 (23.6%), but far ahead of BCE at 102,000 (18%).
“Churn rate during the quarter remained high at 1.09%, up 6 basis points year-on-year. This is not surprising given the intensity of promotional activities that are challenging all providers in the country,” he said.
The Scotiabank analyst also noted a 3.4% decline over one year in average revenue per user, which compares to the decline observed in the previous quarter.
"As we approach Black Friday and the holiday season, we believe Telus' average revenue per user is approaching a floor. The company launched prepaid services before its competitors last year and was able to adjust its prices more quickly," he believes.
Maher Yaghi believes Telus can't escape the competitive pressures across Canada, but management's decision to focus on good customer service makes a big difference.
Prices have declined in both mobile and landline services. "However, Telus is the only Canadian company we cover that is still generating organic revenue growth in landline telephony.
The analyst maintains his “outperform” recommendation on Telus shares, and his one-year target price of $24.