Telus Corp. emerged from a year of wireless industry tumult to issue a rosy projection for the next 12 months - even though the company knows it will end in a fresh bout of competition.
Although several new wireless companies launched services in late 2009 and throughout 2010, Vancouver-based Telus saw big gains as it drew more subscribers to a new network that supports smart phones, such as the iPhone. And 2011 looks much the same, the company said on Tuesday, as it forecast revenue to grow as much as 4 per cent and earnings per share to rise as much as 22 per cent (both in line with analysts' expectations).
The final quarter of next year, however, will see Telus's Calgary-based rival, cable company Shaw Communications Inc., finally launch its new wireless network.
"We expect to see an impact when Shaw launches - I think it would be naive not to," Robert McFarlane, Telus's chief financial officer, said in an interview. "We always view them as a serious competitor."
Shaw's move into wireless will come as Telus's earnings suffer dilution from pushing Optik TV. Telus is using the Internet-based television service to counter Shaw's forays into Telus's lines of business, including broadband Internet and home phones.
Competition aside, Mr. McFarlane is optimistic about the coming year. The huge surge in customers using smart phones, tablets and mobile broadband data sticks has driven data revenue growth into the double digits each quarter, even as the bottom line felt a pinch from the subsidies needed to draw customers using expensive smart phones.
Even if prices for wireless voice services are dropping because of competition from discount providers such as Wind Mobile, Mr. McFarlane said there is still the chance data growth will offset those declines.
While many industry analysts remain bullish on Telus, both as a company and as an investment opportunity, others point to weak spots for the wireless giant. Its large base of residential and business land-line phone customers continues to drop, for example, and shows little signs of slowing. Telus's guidance forecasts lower revenue for its land-line side (essentially home phone, TV and Internet customers) than some analysts had been expecting.
There is also the hefty dilution coming from the rollout of the Optik TV service, which can be offered only where Telus has extended its expensive wired network infrastructure. The cost of luring subscribers from Shaw, as well as installation and equipment costs, puts a damper on immediate returns from Telus's TV venture, which is a crucial one as more companies "bundle" and sell multiple services to customers.
"We're looking for [land-line]margins to continue to deteriorate - it's deteriorating pretty dramatically," said Jeff Fan, an analyst with Scotia Capital.
While Shaw is pushing into high-growth wireless, Mr. Fan noted that Telus is moving into the TV distribution business, where returns are less assured. "Telus is spending a lot of money and I don't see the returns," he said. "It's more of a defensive move. Let's not turn this around and make it an offensive game that Telus is undertaking here."