We are upgrading our rating to Buy for Telus Corp., the second largest telecommunications provider in Canada. Operating results demonstrate strong wireless and high-speed Internet subscriber growth, effectively offsetting declines in its legacy fixed-line business. Notably, recent net wireless subscriber additions outpaced retention efforts made by the company's closest peers, leading to a second-quarter record.
We are encouraged by Telus wireless business prospects given its strong brand value, expanding product/service portfolio and ongoing technology upgrade initiatives, as we account for the potential of a more competitive landscape in the Canadian wireless market.
Moreover, we are impressed by management's favorable outlook for 2008 and commitment to return enhanced value to shareholders through continued share buyback programs and attractive dividend payouts.
Further, we expect 3G wireless high-speed data services and increased penetration of smartphone devices to sustain and improve Average Revenue Per User (ARPU) moving forward.
Although recent news surrounding the potential new competitors in the Canadian wireless market (due to AWS spectrum auctions) may have weighed in on cautious investment sentiment, Telus continued commitment in maximizing shareholder return through attractive dividend payouts, and share repurchases provide reasonable support that may limit downside risk.
