February 11, 2016 / 11:25 AM / 3 years ago

Telus says Alberta weakness, competition hurt fourth-quarter profit

TORONTO (Reuters) - Telus Corp (T.TO), one of Canada’s three big telecom providers, reported a 16 percent drop in fourth-quarter profit on Thursday, hurt by increased wireless competition and sagging demand, partly due to economic weakness in the oil-producing province of Alberta.

But the company said it was expecting earnings growth of between 3 percent and 6 percent for both its wireless and fixed-line units in 2016 and planned to increase its dividend payout by 10 percent, likely split between rises in May and November.

Shares in the Vancouver-based company were down 1.2 percent at C$39.37 in early afternoon trade.

Telus said it would increase capital expenditures by 3 percent to C$2.65 billion this year, after spending heavily in the fourth quarter to improve and expand its broadband network.

“We can afford to make these investments, we’ve got a strong balance sheet and I think it’s a smart use of our ability to absorb leverage,” Telus Chief Executive Officer Darren Entwistle said on a conference call with analysts.

Telus, which competes for wireless customers across the country against Rogers Communications Inc (RCIb.TO) and BCE Inc (BCE.TO), said it added 62,000 net postpaid wireless customers, a key metric, 56,000 fewer than a year ago.

An average Telus wireless customer paid C$63.74 a month in the fourth quarter for service, a 0.6 percent increase from a year earlier.

The decrease reflects the economic slowdown, particularly in Alberta, increased competition, and higher handset prices causing slower demand, Telus said.

In the same period, market leader Rogers said it added 31,000 such customers and BCE signed up 91,000, with both companies noting intensifying competition.

RBC Capital Markets analyst Drew McReynolds wrote in a note that the results and guidance point to “revenue headwinds but stronger margins.”

Telus also competes against Shaw Communications Inc (SJRb.TO) for landline Internet, television and telephone subscribers in Western Canada.

Shaw will soon add wireless services to its offerings after agreeing to pay C$1.6 billion to buy Wind Mobile.

Telus added 22,000 Internet connections and 25,000 TV subscriptions in the quarter.

Fourth-quarter net income fell to C$261 million ($186.58 million), or 44 Canadian cents per share, from C$312 million, or 51 Canadian cents per share, a year earlier. Revenue rose 2.8 percent to C$3.22 billion.

Excluding one-time items including costs associated with a sharp reduction in staff, the company earned 54 Canadian cents per share.

Reporting by Ankur Banerjee in Bengaluru and Alistair Sharp in Toronto; Editing by Shounak Dasgupta and Alan Crosby

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