Telus managed to grow its revenue slightly in the second quarter, but the company’s profits were down by nearly 40 per cent
Telus Corp. managed to grow its revenue slightly in the second quarter, but the company’s profits were down by nearly 40 per cent, as the Canadian economy was battered by the COVID-19 pandemic.
The company boasted that it managed to grow its subscriber base, and pointedly emphasized that its financial metrics are more favourable than rival Rogers Communications Inc., which posted declines in nearly every metric when the company reported its earnings last week.
But Telus also saw year-over-year revenue declines of $152 million in its wireless division, even though the company picked up new customers.
Wireless revenue and profits were down partly because people are mostly staying home during the pandemic, which means that overage fees and roaming charges have largely dried up.
One of the reasons why Telus was able to eke out a 3.6 per cent increase in overall revenue was because of new money coming in from Berlin-based Competence Call Centres (CCC), a $1.3 billion acquisition that Telus announced last December.
In an interview with the Financial Post, Telus chief financial officer Doug French downplayed some of the concerns that have been nagging telcos during the pandemic.
French said that Telus has ended its policy of not suspending customers for missed payments, and was now trying to collect on overdue accounts.
“The customers we had that were late paying, as a percentage of our base, is the same now, at the end of July, as they were pre-COVID,” French said, while also adding that the company is trying not to be heavy-handed.
“We’ve been setting up deferred payment plans as required. It isn’t the same old collection processes. It is definitely customer friendly.”
But French said that he’s still concerned about subscribers not being able to pay in the months ahead.
“I do think there will still be an elevated risk on that front,” he said. “I think the business market is going to rebound a little bit slower, and we will be there to be patient and stand with our small business.”
Maher Yaghi, an equity analyst with The Desjardins Group, said that a lot of factors might go into explaining why Telus wasn’t battered quite as hard as Rogers. “It’s hard to pinpoint the outperformance in wireless to one thing in particular,” Yaghi said.
“When it comes to geography, Western Canada was not as badly hit, let’s say, because of COVID compared to Ontario or Quebec which are down pretty hard.”
Yaghi said that roaming and overage fees might be a big part of the story, because those revenue sources are typically very high margin for telcos.
As the economic downturn persists, and the disruptions caused by COVID-19 extend into the rest of the year, Yaghi said that Telus may need to cut costs.
“I think that’s something in the fall and late this year that we can start seeing discussion and moves by the telcos to reduce costs — unfortunately that could entail some employee reductions.”
In terms of how long the pandemic disruptions are likely to last, Telus said this week that employees will continue to work from home until the end of the year, at least.
French said that was partly because the company has managed the transition to remote-work well. He said that in some ways, the change will likely be permanent.
“We will probably never go back,” French said.
“It’ll be a hybrid, and we’re going to learn a lot from the resiliency we’ve shown during COVID.”