TELUS CORP. (Toronto symbols T $53 and T.A $51; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 352.9 million; Market cap: $18.7 billion; Price-to-sales ratio: 1.7; Dividend yield: 4.2%; TSINetwork Rating: Above Average; www.telus.com) continues to expand its wireless business. As a result, it now gets 52% of its earnings from its 7.1 million wireless subscribers across Canada.
The company gets the remaining 48% of its earnings from its traditional phone business, which has 3.7 million customers in B.C., Alberta and eastern Quebec. Telus also has 1.2 million Internet subscribers.
The company continues to profit from rising demand for smartphones and wireless data. Smartphones now account for 42% of its wireless users under long-term contracts, up from 25% a year earlier.
In the three months ended June 30, 2011, Telus added 94,000 new wireless subscribers, net of deactivations. That’s down 24.2% from 124,000 new subscribers a year earlier, mainly because Telus lost a federal government contract. Still, 61% of these new customers are smartphone users.
Rising demand for wireless and high-speed Internet services helped push up Telus’ revenue by 6.4% in the quarter, to $2.6 billion from $2.4 billion a year earlier.
Earnings rose 7.3%, to $324 million from $302 million. Earnings per share rose 4.3%, to $0.98 from $0.94, on more shares outstanding.
For all of 2011, Telus plans to spend $1.8 billion on network upgrades. This will mainly involve improving the speed and capacity of its networks in big cities. Telus’ likely 2011 cash flow of $3 billion will easily cover these costs.
The company will probably earn $3.79 a share in 2011. The stock trades at 14.0 times that estimate (13.5 times for the non-voting “A” shares). The $2.20 dividend yields 4.2% (4.3% for the “A” shares).
Telus is a buy. The cheaper class “A” non-voting shares are the better choice.
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