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Canadian Telecommunications. David Lee Jeremy Ma Raymond Xie Saurabh Suryavanshi . Contents. Canadian Telecommunications Industry Manitoba Telecom Services (MBT-T) Rogers Communications (RCI.NV.B-T) TELUS Corporation (T-T). Industry Characteristics. Telecommunications Industry.

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canadian telecommunications
Canadian Telecommunications

David Lee

Jeremy Ma

Raymond Xie

Saurabh Suryavanshi

contents
Contents
  • Canadian Telecommunications Industry
  • Manitoba Telecom Services (MBT-T)
  • Rogers Communications (RCI.NV.B-T)
  • TELUS Corporation (T-T)
industry characteristics
Industry Characteristics

Telecommunications Industry

industry overview
Industry Overview
  • Communications Services Industry
    • Wired telecommunications (5171)
    • Wireless telecommunications (5172)
    • Resellers, Satellite, Other services (5173, 5174, 5179)
    • Cable and other program distribution (5175)
  • Major companies
    • Bell Canada Enterprise (BCE,)
    • Aliant (AIT, 53% owned by BCE)
    • Bell Nordiq (BNQ, 63% owned by BCE, IT)
    • TELUS (T)
    • Rogers Communications (RCI.NV.B, 86% owned by E. S. Rogers)
    • Manitoba Telecom Services (MBT)
industry key players
Industry Key Players

Wireless & Paging

$9.5 Bilion

Wired Line

Long Distance

Internet / Data

$23.3 Billion

Wired Cable DTH/MDS

$5.9 Billion

2004 Revenue

$40.0 Billion

Communications

Resellers & Others

$1.3 Billion

industry characteristics8
Industry Characteristics
  • Large contribution to economy
    • $40.0 billion (2004), $24.8 billion of revenue (1997 constant $)
    • 2.4% of total Canadian GDP
  • Highly capital intensive
    • Effective cap-ex management and allocation (Long term)
  • Saturated market
    • Increasing unit revenue  Service development capability
    • Reducing costs Organizational efficiency
    • Market penetration  Marketing as a key factor
  • Blurred Boundaries with Cable industry
    • Traditionally tough regulations greatly reduced
    • Cablecos with VoIP vs.Telcos with IPTV  Strategic position
industry characteristics9
Industry Characteristics

Wireline Communications Services

wireline communications segment overview
Wireline CommunicationsSegment Overview
  • ILECs: Incumbent Local Exchange Carriers
    • Used to be regional monopoly with own network
    • BCE, TELUS, MTS, SaskTel, Aliant, NorthwesTel
  • CLECs: Competitive Local Exchange Carriers
    • Allowed in 1997, if registered with CRTC
    • However, hard to compete with ILECs
    • Allstream (acquired by MTS), Call-Net (Sprint), ExaTel, EastLink
  • Resellers
    • Rent networks from ILECs or CLECs
    • Marketing with competitive rates more actively with Long Distance
  • Competition between BCE & TELUS
    • Since 2000, TELUS expanding to eastern Canada to become No. 2
    • BCE reacting to successfully expand to western Canada
wireline communications telecommunications carriers
Wireline CommunicationsTelecommunications Carriers
  • TELUS to East / BCE to West since 2000
wireline communications competitive landscape
Wireline CommunicationsCompetitive Landscape
  • Wireline Local Services
    • ILECs dominating the market 97.3%
    • CLECs not able to compete with ILECS
    • Gradually declining due to
      • Customer migration to wireless
      • Reduced demand of 2nd phone line
  • Wireline Long Distance Services
    • ILECs monopoly eliminated in 1992
    • CLECs and resellers effectively competing with over 26% share
    • Rapidly shrinking with revenue $5.5 B in 2004
    • Alternative communications replacing the service
      • Wireless and text messaging (SMS)
      • Email, Instance messaging & Voice chatting
      • Internet and cable telephony (VoIP)
industry characteristics15
Industry Characteristics

Wireless Communications Services

wireless communications segment overview
Wireless CommunicationsSegment Overview
  • Dominated by Big 3
    • Rogers & Microcell 35.3%
    • TELUS Mobility 29.4%
    • Bell Mobility 27.2%
  • Profitability
    • Extreme competition lead by Microcell until early 2002
    • With declining ARPU, industry recorded deficit in 2000, 2001
    • Rogers leading the market after its Microcell acquisition in 2004
  • Spectrum & Technology
    • Most Spectrum auctioned in 2001 ($1.5 B)  BCE, Rogers, TELUS
    • Most carriers completed 2.5G (1X CDMA or GSM/GPRS)
    • Bell & Rogers leading 3G transition  Important for service development (Increased ARPU, marketing)
industry characteristics19
Industry Characteristics

Internet & Data Services

internet data services segment overview
Internet & Data Services Segment Overview
  • Large Telcos & Cablecos
    • Able to utilize existing telephone and cable line
    • Telephone access line: 20 million
    • Wired cable line: 10.7 million (76.5% households)
    • Requires minor modification and modem
  • CLECs and Resellers
    • Usually provide services on rented network basis
    • Compete based on the rate
    • Offer additional services (web hosting, long distance service …)
  • Market Share & Trend
    • Dial-up: 27.2%
    • Digital Subscriber Line (DSL): 34.4%
    • Cable line: 39.4%
    • DSL & Cable line consistently increasing
    • Satellite and Wireless internet services starting to grow
industry characteristics23
Industry Characteristics

Margin & Network Investment

industry characteristics27
Industry Characteristics

Telcos (IPTV) vs. Cablecos (VoIP)

voip vs iptv technology overview
VoIP vs. IPTV Technology Overview
  • VoIP: Voice over Internet Protocol
    • Stable technology with satisfactory Technology
    • Requires relatively small bandwidth
    • Uses public Internet network
    • In service by major Cable companies (Shaw, Rogers)
  • IPTV: Internet Protocol Television
    • New technology developed by Microsoft
    • Requires broad bandwidth
    • Technologically advanced compared to traditional digital TV
    • Showing fast penetration (MTS 18% in less than 2 years)
  • Competitive Implication
    • Telcos & Cablecos compete head to head
    • 20 – 25% of each market expected to be lost
    • More impact on Telecoes than Cablecos
voip vs iptv impact on competition between cablecos telecos
VoIP vs. IPTV Impact on Competition between Cablecos & Telecos

Telcos’ Exposure

Cablecos’ Exposure

table of contents
Table of Contents
  • Company Overview
  • Company Analysis
  • Financial Analysis

MTS Extensive fibre optic network: spans more than 24,300 km.

company overview
Company Overview
  • Third largest telecommunication provider in Canada
  • Operate through two divisions: national and Manitoba division

Provide Voice, Data, Video to

residential and business

customers in Manitoba.

mts history
MTS History
  • 1997 Manitoba Telecom Service became a public traded company
  • 1999 Strategic alliance with Bell
  • 2000 Initiate broadband service in Manitoba
  • 2004 End strategic alliance with Bell in Western Canada
  • 2004 Acquired Allstream ($1.6 billion) and become the 3rd largest national telecom provider in Canada
  • 2004 MTS Allstream strategic alliance with BT: broaden its IP based technology service globally
  • 2005 MTS Allstream acquired Delphi Solutions Corp.
  • 2005 Pierre Blouin named new Chief Executive Officer of Manitoba Telecom Services Inc. and MTS Allstream Inc.
company overview management team
Company OverviewManagement Team

Pierre Blouin CEO 2005~

  • a seasoned telecommunications executive, who spent 20 years + at BCE Inc.
  • 2003 ~ 2005 Group President, Consumer Markets, Bell Canada
  • 2002 ~ 2003: CEO of BCE Emergis
  • 2000 ~ 2002President and CEO of Bell Mobility

Wayne S. Demkey, CA CFO 2001~

  • Joined MTS since 1996.
  • 11 years as senior managers at KPMG

Kelvin A. Shepherd, P.Eng. President, MTS (Manitoba) 2006~

  • CTO of MTS 2000 ~ 2005
  • 20 years with Saskatchewan Telecom

John A. MacDonald President, MTS (ALLSTREAM) 2002 ~

  • CEO of Leitch Technology Corp.
  • Executive Vice President, CTO, COO, President of Bell Canada 1994 ~ 1999
mts manitoba
MTS Manitoba

Leading telecom co. in Manitoba:Voice, Data, and Video

mts manitoba40
MTS Manitoba
  • MTS Manitoba continues to dominate Manitoba market even though it had faced competition from Rogers, Telus, and Shaw.
  • How has MTS remained dominant?
mts manitoba preemption strategy mts bundles
MTS ManitobaPreemption Strategy: MTS Bundles

Objectives

  • Preempt cable triple play
  • Increase subscriber spending
  • Cross-selling

Strategy

  • Full service: voice, data, and video
  • Attractive pricing (Bundle Pricing)
  • Competitive against cable
results
Results
  • Steadily gaining market share in wireless, TV, and high-speed internet.
  • Increase its revenues and customer base by cross-selling

Shaw Fight Back!

  • Introduced its bundle packages in July 2005
mts manitoba operation performance
MTS Manitoba Operation Performance

Shaw launched

bundle program

history of allstream
History of Allstream
  • 1846 Montreal and Toronto Magnetic Telegraph Co. established
  • 1846~ 1992 merger & acquisition  Change name to Unitel
  • 1992 Enter Long distance market
  • 1996 Unitel  AT&T Canada Long Distance Services
  • 1999 Enter IT service; first to offer MPLS-IP VPNs in Canada
  • 1999 Enter local phone service; reached 100,000 local business lines
  • 2003 Allstream brand launched
  • 2004 MTS acquired Allstream
  • 2005 Acquire Delphi Solution Corp.
today s allstream
Today’s Allstream

Core Business

  • Provide specific or integrated e-Business solution to business clients

Target market

  • midsized to large size enterprise business, as well as the public sector

Market Segment (by industry)

  • Financial
  • Government
  • Manufacturing
  • Healthcare
  • High-Tech / Telecom
  • Energy
allstream client base
Allstream Client Base

….and many many more Canadian enterprises

have chosen Allstream for e-business solution

slide51
Allstream E-business solution:

What is it?

How does it work ?

e business solution

Customer

Solution

Customer

Solution

Customer

Solution

Customer

Solution

E-business Solution

Network + Application = Solution

Customer

Solution

HEALTHCARE

Vertical Applications for

Community of Interest

TRANSPORTATION

Vertical Applications for

Community of Interest

Configured for Customer

REPEATABLE TECHNOLOGY (Tool Set)

  • RFID
  • XML Networking
  • Grid Computing + Storage
  • Identity Management
  • Voice Biometrics
  • XOIP

Issues

  • Clean IP Transport
  • Ubiquitous High – Speed Affordable Access
  • Storage
  • Security
  • “Write once, run everywhere” Capability
  • Quality of Service
  • Web 2.0
slide56
Allstream positions itself as market leader in

terms of its innovated IT technology

allstream going down
Allstream Going Down!

Recent Development

  • Revenues from legacy services (such as long distance, local, frame relay, and private line data service) deteriorate as telecom technology continues to evolve.
  • More and more business prefer much cheaper 2nd generation network and IP services.
  • Allstream’s ex-partner/shareholder, Rogers and AT&T, turn against Allstream by pulling business out of Allstream.
allstream
Allstream
  • No detailed information available to analyze its operation
  • MTS has claimed that Allstream continues to gain market share in Canada IT service industry  implies that Allstream gained market share by sacrificing its margins.
  • Face competition from incumbent and new market entrants
mts allstream strategies to stop the bleeding
MTS AllstreamStrategies to Stop the Bleeding
  • Allstream: Focus more on profitable segments and IP data services “which have solid profitability margins and significant growth potential.”
  • Transition Phase II, an aggressive program to cut costs, refine market focus and service portfolio
  • Comprehensive CEO Business Review
mts pro forma financial performance
MTS Pro Forma Financial Performance

*pro forma results,

i.e.Assume Allstream acqu.

took place on Jan 2003

fisher s valuation approach
Superiority in production, marketing, research and financial skills – less attractive

Well-managed: ?

No cash; RE ↓; quick ratio < 1

Satisfied production and services

Marketing Strategy: ?

Investment characteristics of some businesses – Moderate Attractive

License requirements

High entry barrier

High competition

Fisher’s Valuation Approach

The people factor – Less Attractive

  • Experts in integrated service
  • strong in leading the technological innovations

The price of investment – Attractive

  • low price now at $37.09
  • 52 week range: 36.61 ~ 49.90
  • Dividend Yield: 7.01%

Recommendation: Sell

stock performance
Stock Performance

Current Dividend Yield: 7.01%

recommendation
Recommendation

MadMoney

Sell

!!!

slide73

AGENDA

  • Company’s History
  • Company’s Structure
      • Rogers Wireless
      • Rogers Cable
      • Rogers Media
      • Rogers Telecom
  • Management
  • Financial Statements
  • Stock performance & company’s strategy
  • Recommendation
slide74

History - The Beginning

  • 1925 - Mr. Rogers, Sr. invented the world’s first alternating current (AC) radio tube.
  • 1931 - Mr. Rogers, Sr. was awarded an experimental TV license.
  • 1939 - Mr. Rogers, Sr. died at the young age of 38. He left a widow, Velma, and a 5 year old son, Edward.
slide75

The New Era - The Beginning

  • 1956 - Ted Rogers earned his Bachelor of Arts from the University of Toronto.
  • 1961 - Ted Rogers was awarded an LL.B. in 1961 from Osgoode Hall Law School.
  • 1961 – 62 - Mr. Rogers started Rogers Radio Broadcasting Limited
  • 1967 - Awarded licenses for Cable business for areas in and around Toronto, Brampton and Leamington.
slide76

The Growing ERA….!!!!

  • 1974 - the first cable company to expand past 12 channels
  • 1979 - Mr. Rogers’ company, Rogers Cable TV Limited, acquired control of Canadian Cable systems Limited.
  • 1980 - Rogers purchased Premier Communications Limited.
  • 1979 to 1982 - Acquired and built a number of cable television systems in the United States.
  • 1989 - Rogers Communications completed the sale of its U.S. cable television interests for CDN $1.581 billion.
  • 1989 - Rogers Communications Inc. acquired 40% of Unitel Communications, formerly CNCP Telecommunications.
slide77

The ERA of Diversification!!

  • 2000 - Rogers Communications Inc. acquired the Toronto Blue Jays Baseball Club.
  • 2001 - Rogers Media acquired Sportsnet, and renamed Rogers Sportsnet
  • 2004 - Acquired Rogers Centre 2004 - Rogers acquired the 34% of Rogers Wireless owned by AT&T Wireless Services Inc.
  • 2004 - Rogers Wireless acquired Microcell Telecommunications Inc.
  • 2004 –05 - Rogers Communications repurchased the shares of Rogers Wireless.
  • 2005, July – Rogers introduces Rogers Home Phone voice-over-cable local telephony service
  • 2005, July – Rogers successfully completed the acquisition of Call-Net Enterprises Inc. (now Rogers Telecom Holdings Inc.), a national provider of voice and data communications services.
slide78

ROGERS COMMUNICATIONS INC

ROGERS

WIRELESS

ROGERS

CABLE

ROGERS

MEDIA

ROGERS

TELECOM

  • Blue Jays Hold co Inc.
  • Rogers Broadcasting Business
  • Rogers Publishing Limited
  • Formerly Call-Net enterprises.
  • Rogers Telecom.
  • Rogers Wireless.
  • FIDO Inc.
  • FIDO Solutions Inc.
  • Rogers Wireless Alberta Inc.
  • Wireless payment Services (33.33%)
  • Rogers Cable Communication Inc.

Subsidiaries

Investments

  • 16.5% in Cogeco Cable Inc.
  • 21% in COGECO Inc.
  • Inukshuk Internet Inc.
slide81

ROGERS WIRELESS

  • Provides Wireless voice and data communication services.
  • Largest Canadian Wireless Communications Service provider.
  • Canada’s only carrier operating on the world standard GSM/GPRS technology platform.
  • Provides Coverage to approximately 93% of Canada’s population.
  • Customer base of 6.138 million wireless voice and data subscribers.
  • Wireless penetration rates among the lowest in the developed world.
  • 1.3 million subscribers added through the acquisition of MICROCELL.
slide82

Sources of Revenue

  • Post paid voice and data
      • Monthly Fees
      • Airtime and long distance charges
      • Optional Services charges
      • System access fees
      • Roaming Charges
  • Prepaid revenues generated principally from charges for airtime, long distance and text messaging.
  • One way messaging or paging – Monthly fees and usage charges.
  • Sale of hardware and accessories and equipment activation fees.
slide83

Expenses

  • Cost of equipment sales.
  • Sales and marketing expenses.
      • Advertisements
      • Commissions
      • Remuneration and benefits to employees.
  • Operating, general and administrative expenses.
      • Expense to service existing relationships.
      • Retention costs.
      • Inter-carrier payments.
      • Long distance carrier payments.
slide85

Risks

  • Fierce and Substantial Competition
  • Price War could affect churn rate and revenue growth.
  • Since Technology dependent, may not meet the expectations.
  • Changes in the Wireless Communications Industry.
  • Risks attached with the acquisition of MICROCELL.
  • Inability to enhance systems or a system breach in future
  • Dependent on infrastructure and handset vendors.
  • High Capital requirements.
  • Restriction on the use of wireless handsets while driving.
  • Business subject to government regulations.
slide86

ROGERS CABLE

  • Largest cable television company in Canada.
  • Services include:
      • Analog and Digital Cable
      • Residential and Commercial internet services
      • Data and Internet products to business customers.
      • Rogers Video – DVD, Video Cassette, Video Games
  • Distribution network includes extensive network including wireless independent dealer networks, wireless stores, Rogers video, retail chains like RadioShack, Future Shop & Best buy.
  • Ontario comprises for 90% of the total cable subscribers.
  • New step into voice over cable telephony.
slide87

REVENUES

  • Core Cable:
        • Analog Cable Service – Basic Cable Services
        • Digital Cable Service – Digital Service Channel fees
  • Internet – Residential and Commercial Internet Services.
  • Rogers Video – Sale and Rental of DVD, Cassettes.
  • Agents – Rogers Video acts as an agent for Rogers Wireless.
slide88

Expenses

  • Cost of Rogers Video stores
  • Sales and Marketing Expense
  • Operating, general and administrative expenses.
  • Customer Care Expenses.
  • Technological Disturbance Expenses
slide90

Risks

  • Acceptance of new products and failures.
  • Substantial Competition.
  • The increasing programming costs.
  • High Government regulation.
  • High technological dependence.
  • Increasing royalty rates.
  • Reliance on Suppliers.
slide91

ROGERS MEDIA

  • Media holds radio and television broadcasting operations, our consumer and trade publishing operations and our televised home shopping service.
  • Media Broadcasting
      • 43 Radio Stations
      • 2 Multicultural television Stations in Ontario.
      • Specialty Sports television service across Canada(Rogers Sportnet)
      • The only nationally televised shopping service.
slide92

Rogers Publishing

      • Well known consumer magazines such as Maclean’s, Chatelaine, Flare, L’actualite, Canadian Business and is the leading publisher of a number of industry, medical and financial publications.
  • Effective Jan 1, 2005 – All sports entertainment Assets will be a part of Rogers Media.
  • Sports Entertainment Assets include:
    • The Toronto Blue Jays baseball team
    • Rogers Centre, Canadian largest sports and entertainment facility:
slide93

Revenue

  • Advertising Revenues
  • Circulation and subscription revenues.
  • Retail product Sales.
  • Ticket Sales at Rogers Centre
  • Revenue from home games.
  • Revenue sharing Agreement with Major league baseball league.
slide94

Expenses

  • Cost of sales.
  • Cost of retail product at The Shopping Channel.
  • Sales and marketing expenses
  • Operating, general and administrative expenses
      • Programming Costs
      • Production Costs
      • Circulation expenses.
  • Team costs
  • Players salaries.
  • Scouting and stadium operations
slide96

Risks

  • Advertisement, a major source of revenue. A decrease in advertisement demand.
  • Increased Competition.
  • Increase in the paper prices, printing costs or postage.
  • Change in regulatory policies.
  • Media business sensitive to external events and economic conditions.
  • Introduction of new technology and products.
slide97

ROGERS TELECOM

  • Sprint Canada and Call-Net name changed to Rogers Telecom after the successful acquisition of Call-Net.
slide99

A true pioneer in the communications industry

  • Man behind the success from the beginning.
  • Education
    • Doctorate of Science, Clarkson University of Potsdam, New York, 1989
    • Doctorate of Law, University of Victoria, BC, June 1990
    • Doctorate of Law, York University, Ont., June 1994
    • Doctorate of Law, York University, Ont., June 1994
    • Doctorate of Law, University of Western Ontario, Ont. 1996
    • Doctor of Sacred Letters, Trinity College, University of Toronto, 1997
    • Doctor of Letters, University of New Brunswick, October 2001

Edward S. Rogers, O.CPresident and CEO

slide100

H. Garfield Emerson Chairman

Alan D. Horn, V.P, Finance and C.F.O

Philip B. Lind Vice Chairman

  • Joined Rogers' group in 1990 as President and COO, Rogers Telecommunications Limited.
  • Tax partner with KPMG from 1984 to 1987
  • C.A.
  • Honors B.Sc. (Mathematics)
  • Joined RCI as Programming Chief in 1969
  • Director of RCI since 1979.
  • B.Sc. (Political Science & Sociology)
  • Doctor of Law, UBC.
  • Joined RCI asDirector, RCI, Nov, 1989
  • Chairman of the Board since March 1993.
  • Honors B.A. (History)
  • LL.B., University of Toronto
slide109

BUSINESS STRATEGY

  • Diverse set of portfolio across Business Channels.
  • Bundled product and service offering.
  • Sharing Infrastructure, corporate services and distribution channels.
  • Grow bigger and Biggest.
  • “New technology, I am the first one”.
  • Strong OLD Management.
  • Growth through Acquisitions.
  • Acquisitions
  • Acquisitions………..

MTS

SHAW

????

slide110

FISHER SAYS…..

  • People’s Factor :
  • Attractive
  • Price of Investment:
  • Moderate Attractive
  • Superiority in Products and Reach:
  • High To Moderate Attractive
  • Investment characteristics of business:
  • Attractive
slide112

Source

  • Rogers Website
  • www.sedar.com
  • FP Infomart.
  • Financial Statements of Rogers
slide113
Company Overview
  • Company History
  • Company Management
  • Products and Services
  • Business Forecasts
  • Operating Risks
  • Financial Analysis
  • Fisher Valuation Approach
telus overview 1
TELUS Overview 1
  • Leading incumbent Canadian telecommunications provider to Western Canada, and Eastern Quebec
  • A national provider of data, IP and voice solutions focusing on the business market.
  • 3rd largest ISP in Canada
  • Two major segments:
    • Wireline, TELUS Communications
    • Wireless, TELUS Mobility
telus overview 2
TELUS Overview 2

Business Units:

  • Consumer Solutions
  • Business Solutions
  • Partner Solutions
  • Wireless Solutions
  • TELUS Québec
telus overview 3
TELUS Overview 3

Corporate Strategy

  • Enhancing our leadership position in wireless
  • Growing brand value through superior customer services
  • Revitalizing wireline growth through innovation and national expansion
  • Driving towards leadership in high-speed Internet solutions
  • Embracing continual cost efficiency
company history bc tel
Company History – BC Tel

1998

BC TEL merged with TELUS.

1993

The Company was renamed BC TEL. BC TEL reorganized under a holding company this year.

1923

British Columbia Telephone Company was established under the federal charter.

1904

British Columbia Telephone Company was formed by the Vernon and Nelson Telephone Company by changing name

1880

45 Small phone companies in BC.

1878

BC’s first telephone line on Vancouver Island.

company history telus
Company History - TELUS

TELUS history2004

Verizon Communications, who own 20.5% minority interest, announced its plan to sell its shares.

2001

TELUS completed several acquisition of several small data and Internet companies, including Williams Communications, PSINet NWD Systems

2000

TELUS Acquired Clearnet and Quebec Tel.

1998TELUS Corporation and BC TELECOM announce a proposed merger.

1991The Province of Alberta sold its remaining ownership interest in TELUS for $870 million. 1990TELUS Corporation established. It went IPO for $896 Million.1982Canada's first cellular telephone system introduced to serve Alberta resource industries. 1906The Province of Alberta commenced operation of the provincial phone system after acquiring the Alberta assets of the Bell Telephone Company. 1885Alberta's first telephone call, between Fort Edmonton and the St. Albert mission.

telus management 1
TELUS Management 1
  • Age: 42. MBA (Finance) McGill University 1988
  • Prior to 2000, President with Cable and Wireless UK
  • Executive with Mercury Communications UK
  • Executive with Bell Cablemedia PLC
  • Shareholding: 22,000CS/106,316NV
  • Options: 150,000CS/490,000NV
  • Annual Compensation: 1.5 Million CAD
  • Honorary Doctorate in Technology, BCIT 1997
  • Appointed to Order of British Columbia 1998
  • 47 years with BC TEL
  • Member of the board of directors of Terasen Gas, Suncor Energy and the TSX.
  • Shareholding: 9,718CS/5,509NV
  • Options: 80,000CS/74,000NV
  • Compensation mainly based on options plus $200,000CAD
executive retirement benefits
Executive retirement benefits

As of the end of 2004

products and services communications segment
Voice – local and long distance phone service, personal call management services

Data – Web hosting, network management

Internet – Dial-up and high speed Internet

IP-based – TELUS IP-ONE Innovation provide business solutions with ability to integrate voice mail, email, data and video through a web portal

TELUS Future Friendly Home – integrated networking solutions to family. Home monitoring etc…

Products and Services – Communications Segment
wireline segment
Wireline Segment
  • Consistent growth for the High-speed Internet services (Avg growth: 10%)
  • Decreased in net additions due to the labor strike for 2005Q4
  • Dial-up is decreasing – changing of consumer preference
  • Launched a new wave of marketing campaign
products and services mobility segment
Digital Voice – PCS CDMA, PTT, Mike.

Mobile Internet – Wireless Web, text, picture and video message, ring tone, image and game downloads

Data – packet data. BlackBerry Service.

Roaming agreement with Verizon Wireless and partnership with Nextel.

Around 40% of revenue from this segment

Products and Services – Mobility Segment
wireless
Wireless
  • Continued demands for wireless service to boost the revenue from this segment
  • Strong increase in the net additions of wireless subscription. Average 13% annual growth.
wireless high arpu low churn rate
Wireless – High ARPU & Low Churn Rate
  • Average revenue per subscriber unit
  • An important benchmark to compare wireless customer’s spending
  • 2005 ARPU is $62, highest in the TELUS history
  • 20% ARPU premium over Canadian wireless competitors
  • Reflecting TELUS’s ability to attracting high-value customers and keeping them
  • Indicating the overall voice and data usage continue to climb
  • Focus on customer care and having the low monthly churn rate (deactivation)of 1.4%
operating risks
Operating Risks
  • Labor Issues
  • Licensing and Regulatory Issues
  • Competitions
risks labor issues
Risks - Labor Issues
  • 2005 Labor strike affect the 2005 Q4 result significantly
  • New Collective agreement
  • Ratified 5 yr agreement to 2010
  • To supports a performance culture
  • Both parties to dismiss all legal proceedings
  • Improve employee engagement
risks licensing and regulatory issues
Risks - Licensing and Regulatory Issues
  • Price cap regulation
    • 2002, CRTC establish new lower prices for some telecom services
    • Increase the competitions
  • Terms of access
    • Power pole access 1999 & 2003
    • Will result in higher access costs
  • 2003 - 7 year term on TELUS’ broadcasting distribution and video on demand.
risks competitions
Risks - Competitions
  • Wireline voice and data
    • VoIP as alternative
    • Calling card
  • Wireline Internet access
  • Voice over Internet protocol (VoIP)
    • Shaw, 3 cents a minute for long distance calls
    • Rogers Call-net
  • Wireless
    • Rogers acquired Fido, making Telus more difficult
    • Continue to intensify
business forecasts value drivers
Demonstrated wireless excellence

Strong revenue despite of labor strike

Strong 2005 financial results:

Revenue & EBITDA up 7%

Net Income up 24%

Free Cash Flow up 13%

New products and contracts

New wireless high speed network and devices

TELUS TV & the Future Friendly Home

Plan to offer VOIP Service

TELUS signed a $137 million deal with Hamilton Health Sciences

Business Forecasts & Value Drivers
financial analysis telus
Financial Analysis - TELUS
  • Strong operating cash flow
  • Cash was spent on the stock repurchase and repayment of long-term debt
  • Net Income, Free Cash Flow, ROE, EPS increasing
  • CAPEX/Revenue decreasing
  • High leveragedebt structure
financial analysis
High leverage business

Debt Structure

Short-term Revolving Facility: 1.67 billion

Long-term Debt Facility: 4.6 billion

Repayment of debt will result in reduce in earning and decrease in dividend per share

Financial Analysis
financial analysis137
High leverage business

Strong 2005 financial results:

Revenue & EBITDA up 7%

Net Income up 24%

Free Cash Flow up 13%

Conclusion: Strong Financial Position

Financial Analysis
telus management 2
TELUS Management 2
  • MBA, University of Western Ontario 1985
  • CFO since 2000
  • Reorganize the TELUS finance department
  • Quarterbacked the completion of the merger with BC TEL.
  • Annual compensation: CAD615K
  • BS (EE), University of Waterloo 1987
  • EVP since 2003
  • KPMG Consulting
  • Former country leader for Canada
  • Strong industry ties
  • Annual compensation: CAD 690K
fisher s valuation approach143
Superiority in production, marketing, research and financial skills – Moderate Attractive

Well managed company

Strong financials but with high leverage

Satisfied production and services

Marketing Strategy – Focus (business solutions and high ARPU customers)

Investment characteristics of some businesses – Moderate Attractive

License requirements

Difficult barrier to entry

High competition

Fisher’s Valuation Approach

The people factor – Less Attractive

  • Experts in post-merger management
  • Weak in leading the technological innovations
  • Possible future union problems

The price of investment – Less Attractive

  • High price now at $43
  • Near the historic high of $49
  • Year end P/E at historic high of 25.96

Recommendation: Sell

sources of information
Sources of Information
  • TELUS AR 2004
  • TELUS 2005 Information Circular
  • TELUS 2006 Quarterly Result News Release
  • www.telus.com
  • www.sedar.com
  • Mergent Online.
  • Fidelity Online.
  • Yahoo Finance.
  • Bigcharts.com