(Adds CEO comments, updates stock price)
By Susan Taylor and Wojtek Dabrowski
OTTAWA, Feb 15 (Reuters) - Fourth-quarter profit at Telus Corp (T.TO) got a big boost from a tax adjustment, Canada’s No. 2 telephone company said on Friday, but results from its typically fast-growing wireless unit hit a speed bump.
Net income rose 66 percent to C$400.1 million, or C$1.22 per diluted share, from C$240.5 million, or 70 Canadian cents per share, a year earlier.
That included a tax adjustment of about C$143 million, or 44 Canadian cents a share, compared with C$20 million, or 6 Canadian cents a share, in the same period in 2006. Earnings also benefited from lower financing charges and a smaller number of shares outstanding, Telus said.
Excluding tax-related adjustments and a share option charge, earnings rose 17 percent to C$258 million, or 79 Canadian cents a share. That trailed the mean analyst estimate for a profit of 84 Canadian cents before one-time items, according to Reuters Estimates.
Revenue was 3.4 percent higher at C$2.33 billion from C$2.25 billion a year earlier. This compares with analyst expectations of C$2.36 billion.
Wireless revenue rose 8.8 percent to C$1.1 billion as data sales jumped 43 percent, but net subscriber additions of 161,400 were down 11 percent, and postpaid additions of 106,400 fell 18 percent.
Also, the average revenue per user declined 1.2 percent to C$63.70 and subscriber churn rose to 1.59 percent from 1.33 percent.
“Wireless maturity clearly remains the market’s main concern,” National Bank Financial analyst Greg MacDonald wrote in a note to clients.
“Though these results did not beat estimates and continue to demonstrate evidence that wireless ARPU (average revenue per user) and churn remain a challenge, subscriber growth was reasonable.”
In a conference call with analysts, Telus Chief Executive Darren Entwistle said a combination of wireless number portability, competition and “Telus’s own execution shortfalls” led to higher retention costs and wireless customer churn.
“Clearly, this aspect of Telus’s performance is one that I am less than satisfied with,” Entwistle said.
He declined to comment regarding speculation that Telus could switch its technology to make its CDMA network compatible with the GSM format used by many carriers outside North America.
Asked about acquisitions, Entwistle said Telus doesn’t need one in order to execute its strategy, adding there are currently very few “quality” opportunities to pursue in Canada.
Telus was interested in acquiring BCE Inc (BCE.TO), Canada’s largest telecom company, but walked away from bidding last June, citing “inadequacies” in the bid process.
BCE later agreed to a C$34.8-billion buyout by a private-equity group led by Ontario Teachers’ Pension Plan.
Telus’s wireline revenue dropped 1.1 percent to C$1.2 billion as data growth was more than offset by declines in local and long distance revenue.
The Vancouver, British Columbia-based company said it added 26,000 high-speed Internet subscribers in the quarter for a total of more than 1 million customers.
Network access lines declined by 39,000, down 3.2 percent from a year ago, as competition and wireless substitution continued eroding residential line demand.
Shares in Telus were down 8 Canadian cents to C$41.90 on the Toronto Stock Exchange. They are down about 27 percent in the last 12 months.
$1=$1.00 Canadian Editing by Peter Galloway