Leading Canadian telecom operator TELUS Corp. (TU - Free Report) reported mixed financial results in the third quarter of 2016 wherein revenues outpaced the Zacks Consensus Estimate while earnings lagged the same.
This Zacks Rank #4 (Sell) company competes with the likes of Rogers Communications Inc. (RCI - Free Report) , Shaw Communications Inc. (SJR - Free Report) and BCE Inc. (BCE - Free Report) in the Canadian telecom market. While both Rogers Communications and BCE carry a Zacks Rank #3 (Hold), Shaw Communications carries a Zacks Rank #4. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
GAAP net income was approximately $272.3 million, down 2.7% year over year. GAAP earnings per share were 59 cents, compared with 61 cents in the year-ago quarter. Third-quarter adjusted earnings per share were 50 cents, below the Zacks Consensus Estimate of 51 cents.
Total revenue came in at approximately $2,483 million, up 2.9% year over year and ahead of the Zacks Consensus Estimate of $2,441 million. Service revenues were $2,335.5 million, up 3.8% year over year. Equipment revenues totaled $138.1 million, down 13% year over year while other revenues were $9.97 million, down 7.1% year over year.
Quarterly operating income was $472.5 million, up 3.2% year over year. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $905.8 million, up 5.5% year over year. Quarterly adjusted EBITDA margin was 36.5% versus 35.5% in the year-ago quarter.
Cash Flow & Liquidity
During the third quarter of 2016, TELUS generated approximately $791.5 million of cash from operations, up 0.7% year over year. Free cash flow, in the reported quarter, was around $75.2 million, down a significant 68.4% year over year.
TELUS exited the third quarter of 2016 with $314.5 million of cash & marketable securities and $8,900.3 million of outstanding debt compared with $171.04 million and $8,576.6 million, respectively, at the end of 2015. At the end of the reported quarter, the debt-to-capitalization ratio was 0.32, flat with the end-2015 figure.
Wireless revenues increased 2.8% year over year to approximately $1,405.9 million in the reported quarter. Wireless network revenues rose 4.9% year over year to roughly $1,287.8 million. Equipment and Other revenues declined 18.2% to around $103.5 million. Intersegment network revenues were $11.5 million, down 6.3% year over year.
Blended ARPU inched up 3.8% year over year to around $66.67. The monthly blended subscriber churn rate improved to 1.18% from 1.28% in the year-ago quarter. Postpaid customer churn rate was 0.94% compared with 0.97% in the year-ago quarter.
Net wireless subscriber gain in the reported quarter was 80,000. Postpaid customer net addition was 87,000, up 26.1% year over year. Prepaid customer net loss was 7,000. As of Sep 30, 2016, TELUS had 8.507 million wireless subscribers, up 1.0% year over year. Postpaid users were 7.463 million, up 2.4% while the prepaid user count was 1.044 million, down 7.7%.
Wireline revenues increased 2.5% year over year to approximately $1,125.9 million. Data service & equipment revenues came in at $786.2 million, up 7.9%. Voice revenues were $256.9 million, down 10.2%. Other services and equipment revenues were $39.1 million, down 3.8% and other operational revenues were nearly $6.9 million, down 25%. Intersegment revenues grossed around $36.8 million, up 9.1% year over year.
During the reported quarter, TELUS added 14,000 TV subscribers, reaching a total count of 1,043,000 customers (up 6.4% year over year). High-speed Internet subscriber addition was 1,631,000, up 5.6% year over year. Residential NALs were down 25,000, reaching 1.396 million (down 6.4% year over)