SaskTel today reported 2014 net income of $76.4 million and operating revenues of $1.231 billion, up $25.3 million from 2013.

The increase in revenues is a result of continued growth in wireless ($10.6 million), maxTV™, Internet and data ($20.7 million) segments due to increased data consumption from the advent of more advanced technologies offering higher speeds and capacity as well as increased penetration of smartphones, tablets and fibre deployment.

“SaskTel plays an important role in growing our province and keeping Saskatchewan strong,” Minister responsible for SaskTel Kevin Doherty said.  “SaskTel continues to invest in capital expansion and upgrades to its networks to provide a communications infrastructure that is vital to consumers and businesses in our growing economy.”

“SaskTel's net income has fallen over the last three years as we make the necessary capital investments to shift the company from being a traditional telephone company to an information technology and communications company based on the new technologies that are displacing the old digital telephone technology," SaskTel President and CEO Ron Styles said.  "At present, approximately 50 per cent of our revenues come from technologies, products, and services that we did not have in the market at the start of 2010 and this shift will continue over the next several years with a return to higher net income levels likely to occur later in the decade.  Industry trends together with a dramatically different regulatory environment will continue to negatively impact SaskTel's operations in the short term.  SaskTel continues to employ strong cost management and containment strategies to offset the impacts so that the company can remain successful and a vital contributor to Saskatchewan's economic growth.”

Financial Highlights:

• Net Income - $76.4 million;
• Revenues - $1.231 billion;
• EBITDA Margin – 24.8 per cent;
• Return on Equity – 10.5 per cent;
• Dividend of $83.7 million paid to Crown Investments Corporation (CIC) in 2014;
• Debt ratio of 52.8 per cent.

Operating Highlights:

Wireless Services:

• Wireless revenues increased by $10.6 million (2.2 per cent) from 2013, and have continued to grow consistently since 2010 due to an increased number of customers and increased average revenue per customer;
• Access counts increased 2,389 in 2014, due to organic growth and the continuation of wireless substitution, which refers to customers abandoning their traditional wireline services for a wireless alternative;
• Average revenue per customer has also increased as customers migrate to smartphones and the feature-rich data plans required to meet their desire to have rich multimedia content on their wireless devices, now made possible over SaskTel’s faster LTE network.  In 2014, smartphones made up 76 per cent of all phones (426,697), compared to 69 per cent in 2013 (381,864).

maxTV™, Internet and Data Services:

• maxTV™ surpassed 100,000 customers in 2013, and continues to attract and retain new customers with continued growth in 2014.  This customer growth, coupled with increases in average revenue per unit (ARPU), resulted in a year-over-year increase in revenues of $4.9 million.  Increases in average revenue per customer can be attributed to increased adoption of high definition services, and increased penetration of personal video recorders (PVR), as well as an increase in rates to offset the increased content costs;
• Internet and data services revenues are up $15.8 million in 2014.  Internet and data revenues increased as customers selected faster Internet service packages (High Speed Extreme, Advanced and Ultra) and adopted SaskTel’s fibre-based service infiNET as it became available in their community.  SaskTel customers are also enjoying the upgraded LANspan IP service, which is a private Internet protocol transport network service designed to interconnect local area networks (LANs) in two or more locations.  This service provides higher quality of service for VoIP and is also contributing to increased revenue per customer.

Local Access and Enhanced Services:

• Local access and enhanced service revenues declined to $242.6 million in 2014, down $10.2 million (4.0 per cent) from 2013.  This decline is due to a 6.5 per cent reduction in network accesses (2013 – 4.9 per cent) that occurred during the year as customers continued to replace their existing wireline and wireless services solely with a wireless alternative.  The legacy wireline services have been declining over the past five years, due to continued wireless substitution, OTT replacement services, and increasing market competition;
• SaskTel is proactively addressing the decrease in its legacy wireline services revenues by identifying new services. SaskTel’s ICT products and services offer end-to-end solutions for those customers looking to offload the tedious and daunting task of managing its IT operations.  Providing this service allows SaskTel’s customers to focus on their core business.

Long Distance:

• Long distance revenues declined to $53.2 million in 2014, down from $57.7 million in 2013, primarily due to loss of customers to substitute services such as social media, wireless, and VoIP, and customers moving to less expensive bundle plans.

Equipment:

• Equipment revenues have increased marginally to $54.9 million in 2014, from $52.5 million in 2013.  Although the mix of products being sold continues to change each year, this line of business remains a stable revenue source for SaskTel;
• In 2014, SaskTel began to further promote its professional services for the installation and maintenance of customer premises equipment and therefore saw a revenue increase of $2.4 million.

Advertising Services:

• Advertising services revenue decreased to $41.9 million in 2014, from $43.3 million in 2013, a decrease of $1.4 million (3.2 per cent), which demonstrates strong performance in an industry experiencing double-digit declines in revenue.  SaskTel’s strategy is to focus on the online, mobile and print advertising business through its mysask411 solutions to offset the impact of declining revenues.

Security Monitoring Services:

• Security monitoring revenues increased $2.2 million to $22.9 million in 2014, due to a large acquisition of customers in December 2013.  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 decreased to $6.2 million in 2014, down $1.1 million (15.1 per cent) from 2013, primarily due to lower sales of customized software and consulting services.

Capital Spending:

• SaskTel operates the largest ICT network in Saskatchewan, a result of investing in Saskatchewan for over 100 years.  SaskTel invested an additional $282.7 million in capital expenditures during 2014 (2013 – $355.8 million) to improve our customers’ experience today and create opportunities to provide additional enhancements and capabilities in the future.  Of the $282.7 million, $230.0 million (2013 – $278.2 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 $52.6 million (2013 – $77.6 million) was spent on intangible assets such as customer support systems and spectrum.

Significant Capital Programs included:

• Fibre to the Premises ($50.4 million) - FTTP is a ten-year program to upgrade SaskTel’s copper-based Digital Subscriber Line (DSL) broadband facilities and bring infiNET, SaskTel’s new Fibre Optic Network, right to our 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 ($43.9 million) - SaskTel invested to increase capacity of its 4G, 4G/LTE and LTE-TDD networks, resulting in increased data speeds, and positively impacting the customer experience.  Investment in the 4G/LTE networks will be ongoing as customers abandon older wireless technologies like CDMA, which has slower data speeds, for newer 4G/LTE technologies that 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.  Focused on rural Saskatchewan and launched in the south-eastern part of the province, SaskTel’s High Speed Fusion Internet Service (Fusion) is based on SaskTel’s new fixed wireless LTE-TDD service, and replaced the existing Wireless Broadband Internet (WBBI) service. Fusion provides download speeds of up to five Mbps and is available to customers within range of the 59 sites, 47 of which were enabled in 2014.
• Access Demand ($46.9 million) - 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 ($49.4 million) - SaskTel has invested in other areas of its network to increase capacity and modernize key components to meet the needs of Saskatchewan residents and businesses and continue to support the growing economy.
• Wireless Delivery Environment ($16.6 million) - Wireless Delivery Environment (WDE) is one of SaskTel’s high-priority programs and involves replacing the current wireless billing and sales applications with a new converged platform.
• 700MHz Spectrum ($7.6 million) - Industry Canada held a 700MHz spectrum auction in early 2014.  SaskTel continues to bid and acquire wireless spectrum to ensure that it can meet the quality, capacity and speed of service required by its customers.

Awards and Recognition – 2014:

• SaskTel received its third consecutive J.D. Power Award for Highest in Customer Satisfaction with Canadian Full-Service Wireless Carriers.
• For the second year in a row, SaskTel won the J.D. Power Western Region Awards for Highest in Customer Satisfaction with Television for maxTV and Highest in Customer Satisfaction with Internet Service Providers for High Speed Internet.
• SaskTel won numerous MediaCorp awards, including recognition as one of Canada’s Top Employers for the 15th year in a row and one of Saskatchewan’s Top Employers for the 8th straight year.
• SaskTel was named one of Canada’s Greenest Employers, one of Canada’s Best Diversity Employers, and Top Employer for both Young People and Workers over 40.

For more information, contact:

Michelle Englot
SaskTel
Regina
Phone: 306-777-4476
Email: michelle.englot@sasktel.com
Cell: 306-539-0691