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Telus says its bundled services helping stem residential phone losses

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Telus Corp. boosted its fourth-quarter profit by 13 per cent with growth in mobile phone, TV and Internet customers while also stemming losses among home phone subscribers.

The Vancouver-based telecom's profit increase beat its rivals, BCE and Rogers, who saw their profits shrink in the same quarter.

"Indeed, for the fourth quarter Telus led the industry in TV and high-speed Internet additions and did so for the full year of 2013," CEO Darren Entwistle told financial analysts Thursday.

The rate of mobile phone customers leaving Telus for competitors in the quarter was just under one per cent, its lowest rate in seven years and beat Bell and Roger for customer retention in the quarter.

Entwistle said he expects 2014 to be another strong year for Telus.

Canaccord Genuity analyst Dvai Ghose said Telus's results met and in some cases surpassed expectations.

"In our view, Telus remains best positioned in the sector due to solid wireless fundamentals, strong wireline growth and cash flow recovery, industry leading dividend growth and the strongest balance sheet in the sector," he wrote in a research note.

Telus also said its strategy of bundling TV and high-speed Internet is keeping customers and slowing down the loss of landlines as mobile phones become a substitution.

The last of the big three telecoms to report its fourth-quarter earnings, Telus said that its Internet-based TV, called Optik, is also bringing back old customers.

"People look at it and say if I can get a reasonable price for the triple play, I will keep all three services with Telus," chief commercial officer Joe Natale said in an interview.

Natale said 83 per cent of Optik TV customers added either home phone or high-speed Internet or both when they signed up for the TV service. Optik is available in British Columbia, Alberta and eastern Quebec.

"It's helping us moderate home phone losses," he said.

Telus (TSX:T) said residential line losses were down seven per cent compared with last year, reflecting continuing wireless and Internet substitution and competition.

Bell has said that 80 per cent of its new Fibe TV customers also took high-speed Internet and home phone service.

Big telecom and cable company Rogers, Calgary-based Shaw as well as Quebec's Videotron and Cogeco Cable, available in parts of Ontario and Quebec, also offer bundled services aimed at keeping customers.

Telus said it added 38,000 TV customers in the quarter, 3,000 fewer than it added in the same quarter of 2012. The total number of TV subscribers as of Dec. 31 was 815,000, up 20 per cent from the year before.

The Vancouver-based company added 21,000 Internet customers, 2,000 fewer than it added in the same quarter in 2012. But total Internet subscribers reached 1.4 million, up five per cent from 2012.

In its wireless division, Telus said it added 113,000 post-paid customers, who pay their bills monthly, usually on lucrative smartphone contracts.

By comparison, BCE (TSX:BCE) added 119,520 post-paid customers and Rogers (TSX:RCI.B) added 34,000 in their respective fourth quarters.

Entwistle noted Telus is participating in the 700 megahertz spectrum auction to expand its high-speed wireless network. He said spending on radio waves in the auction won't affect the company's ability to pursue its share buyback and dividend strategy.

"It's good positioning to go into a spectrum auction with a very strong balance sheet," he told financial analysts. "I also think it's prudent to come out of an auction with a very strong balance sheet."

In its financial results, Telus said revenue from its wireless network revenue rose 4.1 per cent to $1.43 billion and wireless data revenue, driven by smartphone users, was up 14 per cent to $648 million.

Telus said it had $301 million of adjusted net income in the final three months of 2013, up 12.7 per cent from a year earlier. Adjusted earnings per share were 49 cents, meeting analysts' expectations. That compared with 40 cents adjusted EPS a year earlier.

Net income at Telus was $290 million or 47 cents per share, up 10.3 per cent from a year earlier.

Overall revenue increased 3.4 per cent to $2.95 billion.

Revenue from wireline services such as home phones, Internet and television grew by 3.4 per cent to $1.36 billion.

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