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SaskTel Reports Net Income of $127.4 million

SaskTel Reports Net Income of $127.4 million

July 8, 2019

SaskTel today reported 2018/19 net income of $127.4 million and operating revenues of $1,279.6 million for the year ending March 31, 2019*. SaskTel’s strong net income is a result of increased wireless adoption, a resurgence in internet growth as customers opt for services delivered over SaskTel’s fibre network, and growth in the managed and emerging services portfolio. The economic environment, regional wireless pricing, changing consumer behavior, increasing competition, and revenue declines from legacy wireline services continue to be challenges impacting SaskTel’s overall growth.

“SaskTel is working diligently to ensure that Saskatchewan residents have access to a world-class communications infrastructure by continuing to invest in advanced and comprehensive broadband networks throughout the province,” said Don Morgan, Minister Responsible for SaskTel. “SaskTel will continue to implement state-of-the-art network capabilities and enhance coverage across Saskatchewan to provide both rural and urban customers with consistent and high-quality broadband connections to service their ever-increasing bandwidth consumption.”

“As Saskatchewan’s leading information and communications technology (ICT) company, we’ve embraced a digital transformation strategy that sees us continue to modernize our systems, reduce costs, and find new ways to serve our customers better,” said Doug Burnett, SaskTel President and CEO. “To remain successful, SaskTel will focus on delivering an outstanding customer experience, evolving our existing products, developing new IP-based products and managed services, and providing professional services that will help customers implement solutions for their ICT requirements.”

Financial Highlights

The 2018/19 financial measures highlight SaskTel’s achievement of our targets for shareholder value, revenue, net income, and capital intensity. All of our key financial measures are focused on ensuring insight into the continuous improvement of SaskTel’s long-term financial performance. This focus is important given industry changes that are placing pressure on SaskTel’s revenue, costs, and profit margins, and the need to make significant investments in capital programs that are transforming our networks, operations, and service offerings.

Financial Measure 2017/18 Actual 2018/19 Target 2018/19 Actual
Excluding IFRS 15
2018/19 Actual
Including IFRS 15

Financial Measure

Return on Equity

2017/18 Actual

11.9%

2018/19 Target

13.7%

2018/19 Actual
Excluding IFRS 15

12.7%

2018/19 Actual
Including IFRS 15

11.0%

Financial Measure

Debt Ratio

2017/18 Actual

46.2%

2018/19 Target

51.3%

2018/19 Actual
Excluding IFRS 15

48.3%

2018/19 Actual
Including IFRS 15

46.6%

Financial Measure

Total Revenues

2017/18 Actual

$1,253.2M

2018/19 Target

$1,317.8M

2018/19 Actual
Excluding IFRS 15

$1,256.0M

2018/19 Actual
Including IFRS 15

$1,279.6M

Financial Measure

Net Income

2017/18 Actual

$121.0M

2018/19 Target

$133.0M

2018/19 Actual
Excluding IFRS 15

$136.8M

2018/19 Actual
Including IFRS 15

$127.4M

Financial Measure

Capital Intensity

2017/18 Actual

24.1%

2018/19 Target

22.8%

2018/19 Actual
Excluding IFRS 15

22.5%

2018/19 Actual
Including IFRS 15

21.0%

SaskTel paid dividends of $116.3 million to Crown Investment Corporation during the fiscal year ending March 31, 2019, an increase of $26.4 million over the previous year. During the last five fiscal years, SaskTel paid a total of $349.9 million in dividends while maintaining a debt ratio within industry standards.

Operating Highlights
(Excluding impacts of IFRS 15 for year over year comparability)

SaskTel’s revenue is composed primarily of wireless (41.4%); maxTV service, internet, and data (28.8%); local access, enhanced services, and long distance (17.2%). Legacy revenue continues to decline but this is offset by revenue growth in fixed and wireless broadband. SaskTel offers its customers increasing internet bandwidth through improvements to its network infrastructure, including Fibre to the Premises (FTTP), fusion, and further expansions of Digital Subscriber Line (DSL) internet and wireless broadband to rural communities. SaskTel continues to grow its managed and emerging services portfolio by offering innovative ICT solutions, including managed cloud and Tier III Data Centre services to its customers.

Wireless Services
Wireless revenue increased by $7.0 million (1.4%) in 2018/19, reflecting growth in the postpaid subscriber base and increased average revenue per user (ARPU) from customers selecting the price plans with larger data buckets and features. Our focus on customer-first initiatives and our leading network quality, resulted in decreased postpaid churn and an increase in year over year net subscriber additions of 2,503 or 0.4%

maxTV, Internet and Data Services
maxTV service, internet, and data services revenue increased by $12.1 million (3.5%). This is driven by increased activations in our expanded FTTP footprint, richer retail offerings, and increased customer demand for our high speed internet services. SaskTel’s infiNET services saw increased access growth of 18.0% and has contributed to increased ARPU growth.

Equipment and Professional Services
Equipment revenue increased by $7.0 million (14.0%), due to increased sales of SaskTel’s business-grade communications systems and professional services, and increased sales of higher-priced smartphones.

Marketing Services
Marketing services revenue decreased to $30.2 million in 2018/19, from $33.7 million in 2017/18, a decrease of $3.5 million (10.4%). Profits and cash flows remain strong while continuing to exceed the traditional directory industry, which has experienced significant financial pressures and ongoing revenue declines since its peak in 2008. SaskTel’s strategy is to maintain its Saskatchewan leading marketing services product suite through its advertising bundles (print and digital media products), continued growth of its new Digital Out of Home billboard media line of business, and new product diversification supported by an ability to prove solid return on investment to its customers.

Security Monitoring Services
Security monitoring revenue increased $1.8 million to $28.6 million in 2018/19, due to customer growth and increased use of value-added features, such as SaskTel’s smartHOME security that provides security and automation technology for residential and business consumers. SaskTel continues to actively seek out business growth both organically and through customer account acquisitions.

International Software Solutions and Consulting
Software and consulting services revenue decreased to $6.6 million in 2018/19, down $2.3 million from 2017/18, primarily due to lower enhancements and decreased maintenance and support fees, partially offset by increased professional services.

Other Services
Other services revenue was consistent with 2017/18. In 2018/19, this portfolio saw growth in new services in the Integrated Business Communications and Data Centre Service offerings, offset by fewer customer contributions in larger commercial projects.

Capital Spending
The 2018/19 capital expenditures numbers reflect the impacts of IFRS 15 in which $14.4 million in expenditures made on customer accounts or intangible assets were reclassified from capital expenditures to cost to obtain.

SaskTel operates the most extensive networks in Saskatchewan and is a result of investing in Saskatchewan for 110 years. SaskTel invested an additional $268.2 million in capital expenditures during 2018/19 (2017/18 – $288.2 million) to improve our customers’ experience today and create opportunities to provide additional enhancements and capabilities in the future. Capital expenditures excluding IFRS 15 impacts were $282.6 million in 2018/19 and $302.0 million in 2017/18.

Significant Capital Programs included:

Fibre to the Premises (2018/19 – $62.5 million)
The Fibre to the Premises program is an ongoing program to upgrade broadband facilities and bring infiNET service, SaskTel’s fibre optic network, right to our customers’ doors in the following Saskatchewan locations: Emerald Park, Estevan, Humboldt, Martensville, Melfort, Melville, Moose Jaw, Nipawin, Prince Albert, Regina, Rosthern, Saskatoon, Swift Current, The Battlefords, Tisdale, Warman, Weyburn, White City, and Yorkton.

The fibre network, which includes over 300,000 fibre-ready premises, can deliver download speeds up to 300 Mbps, upload speeds up to 80 Mbps, high-definition, and feature-rich media services to seven high-definition televisions simultaneously, the ability to record up to four shows at once, while lowering ongoing customer delivery costs.

LTE and Wi-Fi (2018/19 – $34.7 million)
SaskTel’s wireless LTE network is the largest LTE network in Saskatchewan and covers 99% of the residents in the province. SaskTel customers enjoy access to SaskTel’s selectWI-FI, which provides them with unlimited free data in over 2,400 locations spread across 30 communities in Saskatchewan, making it the largest Wi-Fi network available in Saskatchewan. These ongoing investments result in increased data speeds and improved coverage that positively impacts customer experience and provides the speed and capabilities needed to travel the internet, watch, and listen to multimedia content and access cloud-based services on smartphone devices without delay.

Access Network Demand (2018/19 – $35.1 million)
The Access Network Demand program is an ongoing program to add infrastructure to new neighbourhoods and increased capacity in existing neighbourhoods so that customers may access all the services that SaskTel has to offer.

Other Network Improvements (2018/19 – $59.5 million)
SaskTel has invested in other areas of its network to increase capacity and modernize key components so that it may meet the needs of Saskatchewan residents and businesses. 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, which will bring high speed bandwidth services to northern residents and businesses.

SaskTel Facility Renovation (2018/19 – $16.4 million)
SaskTel facilities are a vital part of SaskTel’s network. These facilities host a large amount of critical network equipment used to provide telecommunications services to SaskTel customers. The current facility renovation program includes replacing end-of-life electrical equipment, which will provide greater capacity, reliability, and maintainability. Building upgrades will protect the critical site’s infrastructure from air and water penetration and provide greater energy efficiency.

*During the year, SaskTel adopted IFRS 15, a new International Financial Reporting Standard, that changes the financial reporting for certain revenues and costs. SaskTel’s financial results for 2017/18 have not been restated and continue to be reported based on the standards in effect at that time. Throughout SaskTel’s annual report, SaskTel has identified the impacts of IFRS 15, but for discussion purposes has ignored these impacts in order to assist the reader in understanding the changes to its business year over year. SaskTel’s 2018/19 net income and operating revenue, excluding the impacts of IFRS 15 are $136.8 million and $1,256.0 million respectively. For further details with respect to this change See Note 2 of SaskTel’s Audited Consolidated Financial Statements. View the full 2018/19 Annual Report at sasktel.com/about-us/company-info/financial-reports.

About SaskTel

SaskTel is the leading Information and Communications Technology (ICT) provider in Saskatchewan, with over $1.2 billion in annual revenue and approximately 1.35 million customer connections including 609,000 wireless accesses, 338,000 wireline network accesses, 282,000 internet accesses and 112,000 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 3,700 full-time equivalent employees (FTEs). Visit SaskTel at www.sasktel.com.

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