Telus 2010 Annual Report Download - page 7

TELUS 2010 annual report . 3
Delivering success
One year ago, I wrote that 2010 was a great opportunity
for improved performance and growth at TELUS. Our decisions
to pursue wireless and wireline broadband investments and
inno vative new services required courage as they were made
during the 2009 recession, at a time when many companies
were reducing capital expenditures. These strategic investments
strengthened our competitive position and helped attract new
customers. Accordingly, we generated strong performance
in 2010, and our 2011 targets show that we expect the trend
to continue.
TELUS’ consistent strategy, growth-oriented asset mix, high-
performing team and commitment to operational excellence were
evidenced by the company’s improved financial performance in
2010. This helped drive a 33 per cent increase in share price
and allowed us to deliver two dividend increases to shareholders
last year. In 2010, TELUS provided an excellent total shareholder
return of 40 per cent. By comparison, the Toronto Stock Exchange
provided a return of 18 per cent. Notably, over the past 11 years,
TELUS has delivered the highest cumulative total shareholder
return among global incumbent telcos.
2010 highlights
and 2011 outlook
Operational results
TELUS’ sizeable investments in wireless and wireline broadband
network expansions set the stage for improved operational
performance in 2010.
On the wireless side, revenue growth resumed, up seven
per cent, based on an increase in our customer base of seven
per cent and a much improved trend in average revenue per
customer, which was down only one per cent compared to
a seven per cent decline in 2009. With Canada’s fastest* coast-
to-coast HSPA+ wireless network, Clear & Simple® rate plans
and a wide array of compelling devices, we experienced
tremendous growth in smartphone loading, a trend we expect
to continue through 2011.
On the wireline side, we launched the OptikTM brand with
Microsoft Mediaroom, a revolutionary new suite of advanced
IP-based entertainment services for the home. The launch
sparked a tremendous acceleration in TV subscriptions, with
the customer base growing by 85 per cent to 314,000 in 2010.
This growth in Optik TV, combined with our ongoing operational
efficiency efforts, is helping to offset the decline in revenues
and operating earnings from our legacy services. We are again
expecting strong TV net additions in 2011, which will likely be
accompanied by further j-curve earnings dilution from introductory
promotions offered to customers. This is typical of the successful
ramping-up phase of a fast-growing business and reminds me
of our experience in wireless a decade ago.
Financial results
Consolidated revenue and earnings growth resumed in 2010.
Growth was primarily driven by increases in the number of
customer connections, the improving trend in wireless revenue
per customer and the benefits of ongoing operational efficiency
initiatives. Revenue grew by two per cent, operating earnings
(earnings before interest, taxes, depreciation and amortization or
EBITDA) by four per cent and earnings per share (EPS) by three
per cent. Adjusted for non-operating items, underlying EPS
growth was 15 per cent.
Particularly noteworthy for investors was the upswing in
free cash flow in 2010, up by 95 per cent to $947 million due to
improved operating earnings and reduced capital expenditures.
The strong cash flow position and prospects for continued
earnings growth allowed us to increase the dividend by 10.5 per
cent last year to a record high of $2.10 on an annual basis.
Notably,
TELUS has delivered seven dividend increases to share-
holders in as many years. The amount of dividends has tripled
from $210 million in 2003 to $642 million in 2010.
TELUS has considerable financial strength and a decade-
long track record of considering the interests of debt and
equity holders by adhering to consistent financial guidelines.
As a result, TELUS has been able to readily access the capital
markets and in mid-2010 completed a successful $1 billion
debt refinancing that will reduce future interest expenses.
To fulfill our philosophy to give where we live, TELUS is a
passionate supporter of many sponsorship events across Canada,
such as the World Police & Fire Games, at which Darren Entwistle
is pictured above, and the TELUS World Skins Game.