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SaskTel Reports 2015/16 Net Income of $126.7 million

SaskTel Reports 2015/16 Net Income of $126.7 million

SaskTel today reported 2015/16 net income of $126.7 million and operating revenues of $1,574.4 million. Net income increased due to a 2.2% growth in revenue, a 0.6% decline in operating expenses, and an additional three operating months as a result of a change in SaskTel’s year end from December 31 to March 31. Revenues grew $26.7 million (2.2%) mainly due to increases in maxTV™, Internet and data revenues; increased equipment sales, and continued wireless growth.

“SaskTel continues to deliver on its commitment to deploy next-generation technologies including increased bandwidth and cellular infrastructure, broadband upgrades and fibre to the home,” said Jim Reiter, Minister Responsible for SaskTel. “SaskTel has been integral to the growth and development of the province and Saskatchewan people are connected like never before with the ability to use technology to keep in touch with family and friends, as well as conduct business.”

“As changes to customer demands, technology, competition, data traffic and regulations continue their rapid advance, we are extremely pleased to report a higher than anticipated net income,” said Ron Styles, SaskTel President and CEO. “SaskTel responded to these challenges by continuing with its cost containment strategy, optimizing on its legacy services, and introducing new competitive services into the market and the corporation is beginning to see the results of these strategies in its 2015/16 net income.”

Strong cost management coupled with continued revenue growth in key business segments, including wireless, maxTV, Internet, data, equipment, and new and emerging products and services, resulted in SaskTel exceeding its net income target by $20.9 million. SaskTel continues to invest heavily in new infrastructure in order to position itself as the leading facilities-based digital service provider and enabler to the people and businesses of Saskatchewan. This investment is being completed to both facilitate the increased demand for data consumption, and realize cost savings through operational efficiencies.

Financial Highlights

During the twelve months ended December 31, 2015, SaskTel’s Board of Directors approved a change in SaskTel’s year end from December 31 to March 31. SaskTel’s transition period is the fifteen months ended March 31, 2016.

Financial Measure 2014 Actual Dec. 31, 2015 Mar. 31, 2016
Return on Equity 10.5% 10.5% 16.8%
Debt Ratio 52.8% 51.3% 51.9%
Total Revenues $1,231.0M $1,257.7M $1,574.4M
Managed and emerging services revenues N/A $10.1M $13.1M
Net Income $76.4M $97.7M $126.7M
Capital Intensity 21.2% 21.7% 21.8%

SaskTel paid dividends of $30.0 million to CIC during the fifteen months ending March 31, 2016, a decrease of $53.7 million from the year ended December 31, 2014. During the last five fiscal years, SaskTel paid a total of $403.4 million in dividends while maintaining a debt ratio within industry standards.

Operating Highlights

The operating highlights below are comparing the twelve-month period ending December 31, 2015, with the twelve-month period ending December 31, 2014.

Wireless Services

  • Wireless revenues increased by $10.1 million (2.1%) from 2014. Steady growth in wireless has typically been a result of increased accesses and ARPU.
  • In 2015, the wireless market is showing signs of saturation and, as a result, increases in ARPU are driving wireless revenue growth. ARPU increases are due to customers migrating to price plans that offer more data and features that enable customers to use their device to its full potential on SaskTel’s LTE network. •
  • In addition, further postpaid penetration of smart phones to 80% (2014 – 76%) has contributed to wireless revenue growth.

maxTV, Internet and Data Services

  • maxTV, Internet, and data services revenues increased by $18.4 million, mainly due to continued growth in average revenue per customer and accesses in all three lines of business.
  • In 2015, SaskTel rolled out SaskTel’s Digital Subscriber Line service to an additional six communities and Advanced high speed to an additional twelve communities in 2015/16 which also pushed ARPU’s higher.
  • Internet ARPU’s are increasing as customers are continuing to select faster Internet and enhanced TV service packages over SaskTel’s fibre-based service, infiNET, now with over 60,000 connections, as it is rolled out to their communities.

Local Access and Enhanced Services

  • Local access and enhanced services decreased to $234.2 million in 2015, down $8.5 million (3.5%) from 2014. The decline is due to a 7.4% reduction in network accesses (2014 – 5.8%) that occurred during the year as customers continued to replace their existing wireline and wireless services solely with a wireless alternative, a trend that has continued over the past five years.

Long Distance

  • Long distance revenues have decreased $5.4 million (10.2%) from 2014. The decrease is primarily due to loss of customers to substitute services such as social media, wireless and VoIP, as well as customers moving to less expensive bundle plans.

Equipment

  • Equipment revenues have increased by $10.9 million from 2014, due to increases in customer-premises equipment, professional services, and wireless device sales. SaskTel continues to offer its customers consultation, design, training, and implementation services to ensure the right solution for their business.

Advertising Services

  • Advertising services revenues decreased to $40.5 million in 2015, from $41.9 million in 2014, a decrease of $1.4 million (3.3%). These results continue to exceed the traditional directory industry that has experienced significant financial pressures and ongoing revenue declines since its peak in 2008.
  • SaskTel’s strategy is to maintain its industry-leading print directory revenue retention through its mysask411 solutions (bundling of print and digital products) and ability to prove total leads and ROI to its customers, while continuing to diversify with ongoing product and service development including the launch of marketing services in 2015.

Security Monitoring Services

  • Security monitoring revenues stayed flat at $22.8 million in 2015. SaskTel continues to actively seek out business growth both organically through existing customers and externally through customer account acquisitions.

International Software Solutions and Consulting

  • Software and consulting service revenues increased to $7.4 million in 2015, up $1.2 million from 2014, primarily due to higher sales of customized software and consulting services.

Capital Spending (2015/16 – 15 Month Period)

  • SaskTel invested an additional $378.0 million in capital expenditures during 2015/16 (2014 – $282.7 million) to improve our customer’s experience today and create opportunities to provide additional network enhancements and capabilities in the future. Of the $378.0 million, $301.2 million (2014 – $230.0 million) was spent on property, plant and equipment, including Fibre to the Premises (FTTP), wireless networks (4G, LTE & LTE-TDD), and Access Demand, while the remaining $76.8 million (2014 – $52.6 million) was spent on intangible assets such as customer support systems and spectrum.

Significant Capital Programs included:

  • Fibre to the Premises (2015/16 – $69.9 million) - FTTP is a twelve-year program to upgrade broadband facilities and bring infiNET™, SaskTel’s new Fibre Optic Network, right to customers’ doors in Saskatchewan’s nine major centres: Saskatoon, Regina, Moose Jaw, Prince Albert, Weyburn, Estevan, Swift Current, Yorkton, and North Battleford.
  • 4G, 4G/LTE & LTE-TDD (2015/16 – $36.6 million) – The 4G, LTE and LTE-TDD wireless networks require ongoing investment as customers abandon older wireless technologies. SaskTel 4G LTE customers can reach download speeds of up to 150 Mbps. SaskTel’s LTE network currently covers 59% of Saskatchewan’s population, while SaskTel’s 4G network currently covers 98% of Saskatchewan’s population. These ongoing investments result in increased data speeds and improved coverage that positively impact customer experience and provide the speeds and capabilities to travel the Internet, watch and listen to multi-media content, and access cloud-based services on their smartphone devices without delay.
  • Access Demand (2015/16 – $49.3 million) – Access Demand is an on-going program to add infrastructure to new neighbourhoods and increase capacity in existing neighbourhoods so customers can access all the services that SaskTel has to offer. Economic growth in Saskatchewan has been strong for several years, and, as such, there has been a continuous demand for new land developments in many centres across the province.
  • Other Network Improvements (2015/16 – $85.1 million) – SaskTel has invested in other areas of its network to increase capacity and modernize key components so that it can meet the needs of Saskatchewan residents and businesses and continue to support the growing economy. These improvements include capacity improvements to our wireline and wireless networks; improvements to our rural transport infrastructure to accommodate rural growth of fixed and mobile voice, video and data services; and expansion of northern fibre facilities that will bring high-speed bandwidth services to northern residents and businesses.
  • AWS-1 Spectrum (2015/16 – $35.2 million) - During July 2015, Industry Canada approved the spectrum licence transfer of 2 blocks of prime AWS-1 spectrum from WIND Mobile to SaskTel. SaskTel successfully deployed the prime AWS-1 spectrum and significantly increased the capacity and speed of its 4G LTE network in Regina, Saskatoon, Prince Albert, Moose Jaw, Yorkton, Swift Current, North Battleford, Estevan, and Weyburn. The new spectrum deployed will allow for an increase of 4G LTE speeds from the current maximum speed of up to 110 Mbps to 150 Mbps. Going from SaskTel’s previous 15 MHz wide LTE carrier to the current 20 MHz represents the maximum bandwidth possible on a LTE carrier.

Awards and Recognition – 2015:

  • SaskTel was named one of Canada’s Best Diversity Employers for the sixth consecutive year.
  • Named one of Saskatchewan’s Top Employers for the tenth straight year.
  • Recognized as one of Canada’s Top Employers for Canadians over 40 for the sixth time.
  • Named one of Canada’s Greenest Employers for the seventh consecutive year.
  • Recognized as one of Canada’s Top Employers for Young People for the fourth time.

About SaskTel

SaskTel is the leading Information and Communications Technology (ICT) provider in Saskatchewan, with over $1.2 billion in annual revenue and over 1.4 million customer connections including over 618,000 wireless accesses, 437,000 wireline network accesses, 258,000 Internet accesses and over 103,000 maxTV™ subscribers. SaskTel and its wholly-owned subsidiaries offer a wide range of ICT products and services including competitive voice, data and Internet services, wireless data services, maxTV services, data centre services, cloud-based services, security monitoring services, advertising services, and international software and consulting services. SaskTel and its wholly-owned subsidiaries have a workforce of approximately 4,000 full-time equivalent employees (FTEs). Visit SaskTel at sasktel.com.

For more information, please contact:

Michelle Englot, SaskTel Director of External Communications
Phone: 306.777.4476
E-mail: michelle.englot@sasktel.com