July 11, 2018

SaskTel Reports Strong Financial Results for 2017-18

Today, SaskTel reported 2017-18 net income of $121.0 million and operating revenues of $1,253.2 million for the year ending March 31, 2018.

Revenues were down $29.6 million (2.3 per cent) from the same period in 2016-17 primarily due to the economic environment, regional wireless pricing, changing consumer behaviour, and increasing competition impacting SaskTel’s opportunities to offset revenue declines from legacy wireline services.

“SaskTel provides strong returns to the province of Saskatchewan by managing its costs, optimizing its legacy services, introducing new competitive services and revenue growth in key business segments, including retail wireless, maxTV™ service, internet, data, and new and emerging products and services,” Minister Responsible for SaskTel Don Morgan said.  “SaskTel’s commitment to continued investments in broadband infrastructure throughout the province, combined with its focus on customer experience, is providing the platform for SaskTel to be the best at connecting people to their world.”

“SaskTel has been proudly operating for the past 110 years and as the years have passed, our company has risen to the challenges posed by constantly changing technologies, and a marketplace that grows more sophisticated and demanding each year,” SaskTel Acting President and CEO Doug Burnett said.  “And, while SaskTel has continually adapted its operations to face these new realities, the one thing that’s always stayed the same is our focus on delivering exceptional customer experiences.”

Financial Highlights

2017-18 financial measures focused on shareholder value, revenue, net income, and the intensity of capital investment.  This focus is important given financial pressures that the province of Saskatchewan is experiencing; industry changes that are placing pressure on SaskTel’s revenues, costs, and profit margins; and the need to make significant investments in capital programs that are transforming our networks, operations, and service offerings.  SaskTel will seek new revenue sources from within the business market as we move toward our strategic goal of growing revenue and profit from the business market.  There will be a strong focus on continuous improvement of operational cost management.

SaskTel paid dividends of $89.9 million to Crown Investment Corporation during the fiscal year ending March 31, 2018, an increase of $59.9 million over the previous year.  During the last five fiscal years, SaskTel paid a total of $307.2 million in dividends while maintaining a debt ratio within industry standards.

Operating Highlights

SaskTel’s revenues are composed primarily of wireless (40.9 per cent); maxTV™ service, internet, and data (27.9 per cent); and local access, enhanced services, and long distance (18.7 per cent).  Legacy revenues continue to decline, but this is offset by revenue growth in wireless retail and broadband.  SaskTel offers its customers increasing internet bandwidth through improvements to its network infrastructure, including Fibre to the Premises (FTTP), Fusion interNET, 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 Information and Communications Technology (ICT) solutions, including managed cloud and Tier III Data Centre Services to its customers.

Wireless Services

Wireless revenues decreased by $14.0 million (2.7 per cent) from 2016-17.  This decrease relates to the one-time negotiation of a wholesale contract in 2016-17.  This was partially offset by continued growth in wireless retail revenues reflecting a growing postpaid consumer base and a higher blended Average Revenue per Unit (ARPU).  ARPU growth is attributable to an increase in smart phone penetration of 1.2 per cent and customers migrating to price plans that offer more data and features.  Prepaid access counts decreased year over year as a result of the Code division multiple access (CDMA) exit in July 2017, when a large number of inactive prepaid accounts were terminated.

maxTV™, Internet and Data Services

maxTV™  service, internet, and data services revenue increased by $11.9 million (3.5 per cent).  SaskTel’s fibre-based services like infiNET, saw increased access growth of 21.6 per cent as customers seek faster internet speeds.  SaskTel launched 34 new Fusion interNET towers to expand its coverage of fixed wireless high-speed service.  SaskTel upgraded high-speed internet service in 24 First Nations communities and expanded it to 14 new communities.  This has contributed to both ARPU and access growth.

Local Access and Enhanced Services

Local access and enhanced services declined by $16.9 million (7.9 per cent) from 2016-17.  This decline is due to a 6.9 per cent reduction in network accesses (2016-17 – 6.4 per cent).  Customers continue to replace their existing wireline services with a wireless alternative, a trend that SaskTel expects to continue.

Equipment and Professional Services

Equipment revenues have decreased by $10.4 million (17.3 per cent) from 2016-17.  SaskTel offers its customers consulting, design, training, implementation services, and equipment to ensure they receive the right solution for their business.  Equipment and professional services sales have declined and are reflective of the current market conditions.

Long Distance

Long distance revenues have decreased by $4.8 million (11.4 per cent) from 2016-17, reflecting fewer minutes as a result of wireline access erosion, technology substitution to wireless, and internet-based services.

Marketing Services

Marketing services revenue decreased to $33.7 million in 2017-18, from $37.1 million in 2016-17, a decrease of $3.4 million (9.2 per cent).  These results continue 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 industry-leading marketing services revenue through its Mysask411 Solutions (bundling of print and digital products) and ability to prove total leads and return on investment to its customers while continuing to diversify with alternative marketing services.

Security Monitoring Services

Security monitoring revenues increased $2.3 million to $26.8 million in 2017-18, due to customer growth and increased use of value-added features.  In 2017-18, SaskTel launched SaskTel smartHOME, a new home automation product that enables features such as smart lights, locks, thermostats, video cameras, and more.  SaskTel continues to actively seek out business growth both organically and through customer account acquisitions.

International Software Solutions and Consulting

Software and consulting services revenues increased to $8.9 million in 2017-18, up $1.0 million from 2016-17, primarily due to increased professional services, partially offset by lower maintenance and support fees.

Other Services

Other services revenues increased to $37.3 million in 2017-18, up $4.7 million (14.4 per cent) from 2016-17.  In 2017-18, this portfolio saw growth in new services in the Integrated Business Communications (IBC) and Data Centre Service offerings.

Capital Spending

SaskTel invested an additional $302.0 million in capital expenditures during 2017-18 to improve our customer’s experience today and create opportunities to provide additional enhancements and capabilities in the future.  Of the $302.0 million, $250.8 million (2016-17 – $259.3 million) was spent on property, plant and equipment, including; Fibre to the Premises, wireless networks (Long Term Evolution (LTE) and Wi-Fi), access demand, and SaskTel facility renovation; while the remaining $51.2 million (2016-17 – $56.8 million) was spent on intangible assets such as customer support systems and inventory management systems.

Significant Capital Programs included:

Financial Measure	2016/17 Actual	2017/18 Target	2017/18 Actual
Return on Equity	15.4%	13.6%	11.9%
Debt Ratio	47.9%	51.2%	46.2%
Total Revenues	$1,282.8M	$1,320.5M	$1,253.2M
Revenue from Telco Business Market	$340.2M	$373.9M	$331.1M
Net Income	$134.8M	$122.1M	$121.0M
Capital Intensity	24.6%	22.9%	24.1%

 

• Fibre to the Premises (2017-18 – $56.4 million) The Fibre to the Premises program is a 12-year program to upgrade broadband facilities and bring SaskTel infiNET service, our new fibre optic network, right to our customers’ doors in Saskatchewan’s nine major centres: the Battlefords, Estevan, Moose Jaw, Prince Albert, Regina, Saskatoon, Swift Current, Weyburn and Yorkton.
• 4G, LTE, and Wi-Fi (2017-18 – $31.4 million) SaskTel’s wireless LTE network is the largest LTE network in Saskatchewan and covers 99 per cent of the residents in the province.  SaskTel select Wi-Fi provides more than 5,000 access points to more than 2,000 locations spread across 25 communities in Saskatchewan, making it the largest Wi-Fi network available in Saskatchewan.
• Access Demand (2017-18 – $30.5 million) The Access Network Demand program is an ongoing program to add infrastructure to new neighbourhoods and increases capacity in existing neighbourhoods.
• Other Network Improvements (2017-18 – $77.8 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 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, which will bring high-speed bandwidth services to northern residents and businesses.
• SaskTel Facility Renovation (2017-18 – $21.3 million) SaskTel facilities are a vital part of SaskTel’s network. These facilities host a large amount of critical network equipment used to provide 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 and provide greater energy efficiency.
  
  About SaskTel
  SaskTel is the leading ICT provider in Saskatchewan, with more than $1.2 billion in annual revenue and approximately 1.4 million customer connections including 607,000 wireless accesses, 361,000 wireline network accesses, 279,000 internet accesses and 110,000 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 3,900 full-time equivalent employees (FTEs).  Visit SaskTel at www.sasktel.com.