On Oct 8, 2014, we issued an updated research report on Telus Corporation (TU).

The company has delivered positive earnings surprises in all four quarters last year, with an average beat of 5.39%. Also, the first-quarter 2014 results showed strength with both the top and bottom line outpacing the Zacks Consensus Estimate.

Telus is a leading player in the Canadian telecom industry, spearheading the deployment of the three fastest wireless networks — high-speed packet access plus (HSPA+), HSPA+ Dual and Long Term Evolution (:LTE). The company is also continuously expanding its 4G LTE network, which presently covers 81% of the population while 4G HSPA+ boasts a 99% penetration.

This, in turn, is fueling data and roaming revenues, thus offsetting the weakness in the voice business. Moreover, with the launch of Apple Inc.’s (AAPL) new iPhone 6 and its Plus version, the company is set to boost its subscriber growth further.

Telus also launched PTT service in Canada under the brand Telus Link, which allows walkie-talkie voice communications over the carrier’s HSPA and LTE networks. Notably, Telus Link is the only PTT that is compatible with all major smartphones and also supports Wi-Fi.

On the downside, Telus faces intense wireless competition from Rogers Communications Inc. (RCI) and BCE Inc. (BCE), both of which enjoy national coverage in Canada and have built 3G networks. There is also competition emanating from two small regional carriers, MTS in Manitoba and SaskTel in Saskatchewan. Competitive pressure has also substantially impeded the company’s subscriber growth.

Meanwhile, Telus exited the second quarter of 2014 with $8.69 billion debt as compared with $6.984 billion at the end of 2013. Likewise, the net debt to EBITDA ratio (excluding restructuring costs) increased to 2.21 times from 1.71 times in the prior quarter and has also exceeded the company’s long-term target range of 1.5−2 times. The substantially high debt level may raise the company’s leverage ratio and hurt its future expansion strategies.

Currently, Telus carries a Zacks Rank #4 (Sell).

Read the Full Research Report on TU
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Read the Full Research Report on BCE
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