We issued an updated research report on TELUS Corporation TU on Apr 10, 2015.
TELUS reported dismal fourth-quarter 2014 numbers with both the top line and the bottom line missing the Zacks Consensus Estimate. Heightened competition from national as well as regional players and prepaid subscriber churn are pressing issues that need to be addressed. Reflective of this, the company lost 8,000 prepaid customers in the fourth quarter.
TELUS exited the reported quarter with net debt of around $7,969.3 million compared with $6,984 million at the end of 2013. The net debt to EBITDA (excluding restructuring costs) ratio increased to 2.19 times from 1.84 times in the prior quarter. The figure also exceeds the company’s long-term target range of 1.5−2.0 times. The substantially high debt level may raise the company’s leverage ratio and impede its future expansion plans.
The demand for wireless data services is growing at an unprecedented rate and is expected to accelerate further driven by higher levels of broadband penetration, increased connectivity and networking, higher affordability of smartphones and Internet-only devices, rich multimedia services and applications, extensive wireless competition and unlimited data plans. With the rise in wireless data demand, subscriber data traffic will likely increase over the next few years. Increased subscriber demand will require more capital investments for network upgrades which will in turn impact its bottom line.
TELUS currently has a Zacks Rank #4 (Sell).
Stocks to Consider
Better-ranked stocks in this sector include Chunghwa Telecom Co., Ltd. CHT, Level 3 Communications, Inc. LVLT and Vonage Holdings Corporation VG. All these stocks sport a Zacks Rank #1 (Strong Buy).
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