The second largest Canadian telecommunications company, Telus Corporation (TU), slashed its international roaming voice and data rates, to be effective June 27.
The move was made after the Organization for Economic Co-operation and Development revealed in a report that Canadian wireless carriers are charging the highest rates for sending and receiving wireless data outside their home country.
Telus has been trying to reduce its international roaming rates since the launch of the high-speed packet access plus (HSPA+) technology in 2009. The company has negotiated cheaper rates with international carriers to lessen its roaming charges in more than 200 agreements.
Telus will reduce data roaming charges by 60% to $10 per megabyte (MB) for most destinations outside the U.S. Voice roaming charges will be slashed by 25–50% to $1.50 per minute in Western Europe, Mexico and Oceania (including Australia and New Zealand). Voice roaming rates in the Middle East, the Carribean and Latin America, China, India and Africa will also be trimmed down to $2.50 per minute.
Despite the reduction in roaming call rates, Telus expects its 2011 results to be driven by continuous wireless subscriber growth, accelerated wireless data services, increased smartphone sales, growing wireline network as well as lesser financing costs due to lower interest rates.
We are impressed by Telus’ prospects in wireless data growth given new devices, technology upgrades, strong adoption of smartphones, deployment of HSPA+ Dual Cell technology and the expected launch of Long-Term Evolution (LTE) network in 2012, which are all expected to fuel wireless revenue growth.
In addition, popular smartphones like BlackBerry and iPhone (launched in late 2009) will provide Telus a competitive advantage over other dominant players such as Rogers Communication (RCI) and BCE Inc. (BCE).
On the wireline side, the company’s continued investments to widen the footprint of its Optik TV and High Speed Internet services will boost profitability. Moreover, the company remains committed to deliver attractive returns to shareholders in the form of higher dividend payouts.
Hence, we are currently maintaining our long-term Outperform rating for the long term. The company has a Zacks # 2 Rank (Buy) for the short term.
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