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TELUS (TU) IoT Plans & New Tie-Ups Bode Well, Risks Stay


On Oct 12, we issued an updated research report on leading Canadian telecom service provider TELUS Corporation TU. The company is actively pursuing new deals and alliances and aims to consolidate its foothold in the Internet of Things (IoT) market.

Growth Prospects

TELUS continues to benefit from the increased adoption of smartphones, higher average revenue per unit, accelerating wireless data services and growing wireline fiber optic networks. The company anticipates balanced growth for its wireless and wireline businesses owing to investments in high-speed broadband technology and services along with its Customer First strategy. Also, with the IoT platform paving its way into Canada, TELUS aims to consolidate its foothold in the space. It has also introduced the TELUS Global IoT Connectivity platform to deliver seamless connectivity and simplified billing across 200 networks globally.

The company is also focusing on its PureFibre network business. The company aims to provide a glimpse into the future which will see homes connected to a state-of-the art fibre optic network. TELUS has also collaborated with technology leaders such as Samsung, Nokia Corporation NOK and International Business Machines Corporation IBM to achieve the same.

Recent Developments

Recently, TELUS entered into an alliance with Digi International, a maker of machine-to-machine (M2M) and IoT solutions for providing Canadian businesses with an automated food-temperature monitoring solution – Digi Honeycomb

TELUS and the Telecommunications Workers Union also signed a collective deal wherein almost 10,800 TELUS employees will be covered nationally.

In Aug 2016, the board of directors at TELUS announced plans to reward shareholders with a quarterly dividend of C$0.46 per share on the issued and outstanding common shares, at the closure of business as on Sep 9, 2016. The dividend will be paid on Oct 3, 2016.

Segmental Risks

TELUS faces fierce competition both in the wireless and wireline segments.

At the wireless segment, the company competes against the likes of Rogers Communications Inc. RCI and BCE Inc.’s BCE subsidiary Bell Canada and small regional carriers like MTS in Manitoba and SaskTel in Saskatchewan. Such intense competitive pressure has resulted in reduced subscriber addition. In the second quarter of 2016, postpaid customer net addition was 61,000, down 19.7% year over year whereas prepaid customer net loss was 21,000, up 61.5% year over year. Moreover, Shaw Communications’ decision to venture into the Canadian wireless market with the WIND Mobile acquisition raises competition for TELUS.

The wireline segment also faces threat from cable TV operators such as Shaw Communications Inc. SJR and requires regular capital investments in the broadband infrastructure to lure business and residential customers.

TELUS currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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