Telus (TSX:T) is No. 1. Again.
For the second year in a row, the Vancouver-based telecommunications company has taken the top spot on Business in Vancouver’s 100 Most Profitable Companies list, which is based on net income.
In 2013, Telus ranked third, behind two mining companies: First Quantum Minerals (TSX:FM) and Teck (TSX:TCK.B).
It hasn’t been a smooth ride for Telus over the past two years. After 15 years at the helm, Darren Entwistle stepped down as CEO in March 2014. Just a little over a year later he was back, following the resignation of his successor, Joe Natale.
Despite increased Telus revenue in the third quarter, Entwistle recently announced the company would lay off 1,500 employees.
He said “economic softness” in the Canadian economy, especially in Alberta, affected the company’s third-quarter performance.
On the upside, the company opened a new office tower in downtown Vancouver and plans to invest $2 billion to provide faster Internet in Vancouver and Edmonton.
Those big investments contrasted with major layoffs are indicative of the disrupted space Telus and other Canadian telecoms are playing in, said Mark Goldberg, a telecommunications consultant and analyst.
Telecoms have weathered enormous change as consumers switch from landline telephone infrastructure to Internet and wireless communications. It’s a competitive business with thin margins, but Goldberg said companies must also devote major investments to continue to expand their infrastructure.
“Telus has pursued a different strategy that so far has been very successful.”
Goldberg said Telus has done three things right: it has adapted quickly to embrace new business opportunities; it has put a lot of work into improving customer service; and, unlike Bell (TSX:BCE), Shaw (TSX:SJR.B) and Rogers (TSX:RCI.B), Telus does not have a television media component, a business that is also weathering severe market challenges.
Its new business areas include Telus’ focus on health care and services to help business clients adapt to technological change.
“A lot of businesses need help with the solutions – if you’re an auto body shop, you don’t necessarily have the expertise to create your web presence.”
Goldberg added that transforming its business model has given Telus a product to offer to business customers.
“You can see where companies like Telus are going out and saying, ‘We’ve improved the way we operate; let’s take the group that did our internal business transformation and offer that as a service to our customers,’” Goldberg said.
“There are a lot of reasons to do that. Why not leverage that expertise and make some money from it? but, No. 2, it gets you a lot closer to those customers and improves your relationship with those customers because now you’re providing them not just with the commodity services, but with the value-added services.”
- With files from Tyler Orton