Telus Launches Satellite TV

Telus kick-starts satellite TV services in Western Canada

Telus Corporation (TU - Analyst Report) has officially launched its new satellite TV services in Alberta and British Columbia through a joint-venture with Bell Canada, a subsidiary of BCE Inc (BCE - Analyst Report). In May 2009, the company entered into an agreement with BCE, which provided it the right to distribute Bell Canada's satellite TV services to customers in Western Canada under the Telus brand.

With this launch, Telus has further enriched its entertainment portfolio that includes the digital TV ("Telus TV") service offered over the broadband Internet. Telus's satellite TV service effectively complements the Telus TV offering, which currently has more than 100,000 subscribers covering around 10% of households across Alberta and British Columbia.

However, Telus remains significantly challenged by the weakening Canadian economy and the intensely competitive domestic market. The company continues to lose local phone access lines (both business and residential) to competitors, and these losses have accelerated in the recent times as local cable TV operators such as Shaw Communications Inc (SJR - Analyst Report) are aggressively promoting cheaper services like Voice over Internet Protocol (VoIP), which enable delivery of voice communication over the Internet.

Decline in fixed-access lines have propelled in the most recent quarter with a reported loss of 51,000 lines, down 31% from the year ago quarter and 42% sequentially. In its latest earning release, Shaw Communications reported a net addition of over 54,600 new local phone subscribers, mostly contributed by Telus's declining wireline business. Under this scenario, the launch of satellite TV service represents an appropriate means to counter burgeoning cable competition.

The new satellite TV service has enabled Telus to offer a "Quadruple-Play" bundled service (fixed-line, mobile, Internet and video) at attractive price plans for more than 90% of the households across the two Canadian provinces. This will help the company offset losses from its landline business in these markets.

Moreover, inclusion of satellite TV has also broadened the coverage of Telus' TV services in urban areas as well as low-penetration rural markets. We maintain our Hold recommendation for Telus as we remain cautious about the recent operational slowdown across the company's business segments.