Telus Warns of Falling ARPU Due to Economic Downturn

Canada's Telus has warned that its first quarter wireless segment financial results are expected to be adversely impacted by lower than expected wireless net additions and average revenue per unit (ARPU). Wireless operating results are being impacted by a weak macro-economic environment, reflect the acceleration of a negative trend first observed in the fourth quarter of 2008, and are below TELUS' expectations.

Preliminary figures show that year over year gross additions were stable for the first quarter of 2009. Notwithstanding this, wireless subscriber net additions of 48,000 represented a 46% decline year over year.

Weakness in wireless net subscriber additions in the first quarter of 2009 is primarily attributable to the combination of a lack of customary growth in gross additions combined with an increase in deactivations. The deactivations were due to a larger subscriber base along with an increase in the churn rate amongst business customers impacted adversely by the current economic environment. The growth rate of 0.3% in wireless subscriber gross additions for the first quarter of 2009 compares to 4.8% and 17% growth, respectively, generated for the fourth quarter and year ended December 31, 2008.

The worsening trend is believed to be primarily due to the weakening Canadian economy including: lower consumer confidence and a resulting decrease in retail sales including customer deferral of buying decisions; lower and more cautious business spending; and lower employment levels.

Similarly, TELUS has experienced a 5.6% decline in ARPU.

Wireless ARPU is being impacted by: lower service revenue from their iDEN based " Mike" line of business; increased proportion and use of lower per minute rate plans including greater use of in-bucket minutes; and decreased roaming revenues. This can be attributed to the continued highly competitive market and the ongoing global economic recession increasingly being experienced in Canada, which is particularly acute for our Mike push-to-talk business-oriented service. Mike is commonly used in economically sensitive business sectors such as manufacturing, automotive, construction, transportation dispatch, and energy.

Posted to the site on 9th April 2009