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    Telus sales miss estimate  
    Toronto Star  

Chris Sorensen

    November 03, 2007  

Telus Corp. bounced back from a weak second quarter with a 28 per cent rise in third-quarter earnings, but investors appeared spooked by a 1.3 per cent drop in average monthly cellphone bills among Telus subscribers – the first time the key measure has fallen at Telus in more than four years.

Vancouver-based Telus blamed the falling average revenue per user, or ARPU, on increased competition for traditional voice-calling services following a change in industry regulations earlier in the year that allowed cellphone users to keep their phone numbers when switching carriers.

The declines failed to offset a 56 per cent jump in wireless data revenue, a growth category for the entire industry, as more customers opted to pay for extras such as music downloads and text messaging.

Investors pushed down Telus shares by $1.69 to close at $54.91 on the Toronto Stock Exchange.

CEO Darren Entwistle attempted to draw a link between slumping revenue for voice services and Telus's argument that Ottawa should refrain from taking steps to bolster competition by altering the rules of an upcoming spectrum auction.

"Ongoing, declining voice ARPU demonstrates clearly the competitive intensity of the Canadian wireless market," Entwistle told analysts during a conference call.

But critics say a three-way oligopoly between Telus, BCE Inc. and Rogers Communications Inc. means there's little incentive to lower wireless prices – which include so-called system access, long distance, roaming and voicemail among other fees– despite studies that suggest Canadians could be paying more for wireless services than people living in some developing countries.

They argue that Ottawa needs to level the playing field by setting aside wireless airways for new entrants.

An open auction, they say, would favour the deep-pocketed incumbents who could afford to pay vast amounts to keep others from entering the market.

Amit Kaminer, an analyst at SeaBoard Group, said one quarter of declining ARPU over the last 18 reporting periods does not necessarily signal increasing competition in the Canadian telecom industry.

"We all know that voice is a declining revenue source. Some day it will be data application."

Overall, Telus said its earnings picture improved during the quarter as the company overcame a rocky integration of four different customer-billing services in Alberta that was blamed for a 29 per cent drop in second-quarter profit.

Telus said net income climbed to $410 million, or $1.23 a share, from $319.6 million, or 92 cents, in the year-earlier period.

Sales, meanwhile, were up 4.5 per cent to $2.31 billion, but missed average analysts estimates. Monthly dividends were hiked by 20 per cent to 45 cents a share, an increase of 7.5 cents.

Entwistle said Telus's third-quarter performance was still "not to the standards I expect," but stressed lessons had been learned from the integration debacle. Executive vice-president Joe Natale, president of Telus's business solutions division, said a similar project is scheduled for next year in B.C.


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