Telus 2010 Annual Report Download - page 47

TELUS 2010 annual report . 43
MANAGEMENT’S DISCUSSION & ANALYSIS: 1
The following key assumptions were made at the time the 2010 targets were announced in December 2009.
Assumptions for 2010 original targets Result or expectation for 2010
Ongoing wireline and wireless competition in both business and
consumer markets
Confirmed by frequent promotional offers by the primary cable-TV
competitor in Western Canada (Shaw Communications), a new
brand launch (Chatr) by an incumbent wireless competitor (Rogers
Communications), and a brand re-launch (Solo) by an incumbent
wireless competitor (Bell Canada).
Canadian wireless industry market penetration gain of approximately
four percentage points for the year (approximately 3.6 percentage
points in 2009)
The Company’s estimate is a gain of approximately 4.4 percentage
points in industry market penetration for 2010, with an increasing
proportion from postpaid subscribers associated with growing data
usage and smartphone adoption.
Increased wireless subscriber loading in smartphones Smartphones represented 46% of postpaid gross additions in the
fourth quarter of 2010, compared to 25% in the fourth quarter of 2009.
Smartphones represent 33% of the postpaid subscriber base at the
end of 2010 compared to 20% at the end of 2009.
Reduced downward pressure on wireless ARPU Confirmed by the 1.9% year-over-year increase in wireless ARPU in the
fourth quarter of 2010 and 1.4% decrease for the full year of 2010, as
compared to decreases of 7.7% and 6.8%, respectively, in the fourth
quarter and full year of 2009.
New competitive wireless entry in early 2010 following one competitive
launch in December 2009
After its initial launch in Calgary and Toronto in December 2009, Globalive
(Wind brand) launched in Edmonton and Ottawa in the first quarter of
2010, and Vancouver in the second quarter, and announced that it expects
to launch in Victoria in 2011.
Other new entrants began launching services in the second quarter
of 2010. Mobilicity launched services in the Toronto area in the second
quarter, in Edmonton, Vancouver and Ottawa in the fourth quarter, and
in Calgary in early 2011. Public Mobile turned up services in the Toronto
and Montreal areas. Quebecor (Videotron brand) launched its services
in September 2010, initially in Montreal and Quebec City. Videotron
previously offered wireless services in Quebec as a mobile virtual network
operator. Shaw Communications stated it expects to begin launching
wireless services in early 2012.
In addition, during the third quarter of 2010, one incumbent national
competitor launched a new brand and the other incumbent national
competitor re-launched one of its brands.
In wireline, stable residential network access line losses and
continued competitive pressure in small and medium business
market from cable-TV and voice over IP (VoIP) companies
Residential access line losses moderated in the second half of 2010
when compared to the same period in 2009, due to improved bundle
and retention offers. Residential access lines decreased by 8.0% in
2010, resulting from promotional activity by the primary Western cable-TV
competitor Shaw for voice and Internet services, particularly in the first
half of 2010. Business line losses were 2.9% in 2010 due to increased
competition in the small and medium business market and conversion
of voice lines to more efficient IP services. See Section 5.4.
Continued wireline broadband expansion See Section 2: Core business and strategy.
Significant increase in cost of acquisition and retention expenses
for smartphones and TELUS TV loading
Wireless cost of acquisition (COA) per gross subscriber addition was
$350 in 2010, an increase of 3.9% from 2009. Retention spending as
a percentage of growing network revenue was 11.6% in 2010, up from
10.9% in 2009.
TELUS TV loading was 144,000 in 2010, an increase of 57% from
2009. TELUS TV programming and other costs have increased, as well,
due to the 85% increase in total TV subscribers compared to 2009.
EBITDA savings of approximately $135 million from efficiency initiatives Savings of approximately $134 million were realized in 2010.
Approximately $75 million of restructuring expenses ($190 million
in 2009)
Restructuring charges were $74 million.