Telus Profits Drop 45%

by Jordan Richardson on February 15, 2010

While most Canadians are still celebrating Alexandre Bilodeau historic gold medal win on Sunday, Telus executives are probably not popping the cork over the weekend’s news that their fourth quarter profits for 2009 saw a 45% drop from last year’s fourth quarter.

The company reported profits of $156 million in the fourth quarter of 2009, marking a fairly significant dip down from the $285 million of last year.

Both the fourth quarter totals from 2009 and the totals from 2008 were down from the fourth quarter totals prior.

Operating revenue was down too, with decline in voice services the perpetrator in that declining profit sector.

Telus executives are saying that the rise in text messaging is hurting their overall business model. When customers are texting instead of placing traditional phone calls, companies like Telus don’t make as much money. On top of this, Telus chief financial officer Robert McFarlane said that most customers were “economizing” their phone bills.

In these tough financial times, profit dips are expected. Telus probably didn’t anticipate much out of the fourth quarter, frankly, but the 45% dunk still has to smart.

Other contributing factors to the Telus loss include the high subsidy costs of new phone models like the iPhone and BlackBerry Bold. Telus paid an average of $700 for an iPhone, but wound up selling the product for $200 to consumers. With the $200 obviously considered as revenue, the $500 “loss” on the sale of an iPhone chalks itself up in the company’s expense file.

Telus reported having a “record number of subscribers” making switches to some of the more advanced phone models, so this means that Telus’ payouts on subsidies would be fairly substantial.

With $190 million spent on corporate restructuring over 2009 ($77 million of that spent in the fourth quarter), it becomes clearer as to why and how Telus saw such a profit dip.

In the end, Telus executives aren’t overly happy with any plunge in profit. But it appears that they are tapping into the Olympic spirit of optimism and merriment, as they’ve already started referring to 2009 as a “growth year” for the company.

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