TELUS Corporation (TU) has announced the repurchase of 5,332,000 shares through private agreements with third party sellers. The share repurchase is part of the company’s buyback plan of 16.0 million common shares for a maximum aggregate purchase price of $500 million as announced on Dec 12, 2013. We believe TELUS’ plan of maximising share holder return stems from a strong earnings results in the fourth quarter as well as solid free cash flows.
TELUS adjusted earnings per ADS of 45 cents (49 Canadian cents per share), increased 17.5% from 40 Canadian cents (ADS of 43 cents) per share registered in the year-ago quarter. Further, adjusted earnings for the year also rose 15.6% year over year to C$2.16 (approximately $1.99).
In addition, TELUS generated free cash flow of C$1.05 billion ($1.03 billion) in 2013, despite the 7.3% rise in capital expenditure.
We believe the company’s financial growth is backed by its constant addition of wireless subscribers, deeper penetration of smartphones, improving churn (customer switch), increasing average revenue per unit, accelerating wireless data services and growing wireline fiber optic networks. The company expects balanced growth for its wireless and wireline businesses owing to its investments in high speed broadband technology and services.
By 2015, the company expects earnings to continue to improve on lower financing costs, and incremental EBITDA of $250 million. In addition, Telus expects free cash flow growth to improve on reduced cash taxes and employer pension contributions, despite continued investments in the expansion of both wireline and wireless services.
The company is also expected to benefit from the launch of various rate plans, in particular the high-end post-paid plans. Telus launched its new SharePlus rate plans under their Clear and Simple program that comes with an unlimited talk and text option along with shared data alternative for individual subscribers and small business customers. Notably, customer complaint received against the company has declined for the second successive quarter, thanks to its continued efforts to deliver exceptional service to its customers.
TELUS currently has a Zacks Rank #4(Sell).