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Telus eyes lucrative future with greater smartphone adoption

People pass by a Telus store in Toronto on June 3, 2012.

Michelle Siu/The Globe and Mail

Telus Corp. expects that nearly 100 per cent of its lucrative postpaid subscriber base will upgrade to smartphones over the next five years.

Darren Entwistle, chief executive officer of Canada's third-largest wireless carrier, predicts Canadians' enduring love affair with wireless gadgets, coupled with a more diverse range of smartphones at different price points, will fuel more adoption.

"It is not going to be in 2013 or 2014, but I would say over the next five years we're going to be near ubiquity of smartphones within our postpaid base," Mr. Entwistle said in an interview Friday after the Vancouver-based company announced that its fourth-quarter financial results got a boost from a 7.7-per-cent increase in wireless revenue.

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"The thing that is helping that is that there's now quite an elegant stratification of smartphones … from iconic, high-end, full-functionality, sexy form-factor-type devices through to more-affordable smartphones," he said, noting the selection "has really opened up the market availability of smartphones to consumers across Canada who are showing an unstoppable, insatiable appetite for consuming data services and applications."

Telus, which has 7.67 million wireless subscribers across the country, said 85 per cent of its subscriber base falls into the lucrative postpaid category, where consumers pay their bills at the end of the month, rather than prepaying for service.

Smartphone subscribers, meanwhile, represented 66 per cent of that top-end customer base during the final quarter of 2012, up from 53 per cent during the same 2011 period. At the top end of the Telus product lineup, devices such as Apple Inc.'s iPhone 5 and the Samsung Galaxy S III are already keeping customers hooked on wireless data and loyal to the Telus brand.

"So, when you think about smartphone penetration going to be 100 per cent of our postpaid base and you're looking at some of the products that have the most pull with clients, within the Android and Apple domain," there are promising possibilities, said Mr. Entwistle, noting that users of those top-end models are extremely loyal.

Telus saw its fourth-quarter profit climb to $291-million, up 23 per cent from $237-million in the same period a year earlier. Quarterly share profit rose to 89 cents from 76 cents, and revenue climbed 6 per cent to $2.85-billion. For the full 12 months of 2012, the company earned $1.32-billion, up from its $1.22-billion profit in 2011.

During the fourth quarter, Telus posted a monthly churn rate of 1.12 per cent, the lowest among the big three carriers for the key metric indicating how many customers leave.

Traditionally that quarter is the most active one for carriers due to the holiday shopping season.

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As for customers who begin with less costly smartphones, the carrier sees a marketing opportunity to upgrade them and consequently coax increases in their data consumption down the road.

"I think penetration could go past 100 per cent when we are in a world where we've got SIM cards and the portability of the SIM card between a multiplicity of smartphone devices for a single user," Mr. Entwistle said.

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More

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