SaskTel made $134 million last year

July 19, 2017 8:07 am

SaskTel has reported 2016-17 net income of $134.8 million and operating revenues of $1,277.2 million. Net income, up $28.9 million from the same period in 2015-16, increased due to a 1.0 per cent growth in revenue and a 0.7 per cent decline in operating expenses. Revenues grew $12.4 million (1.0 per cent), mainly due to increases in wireless, maxTV™, Internet, data and managed and emerging revenues.

“In a highly competitive industry, SaskTel continues to evolve as an ICT company and remains committed to delivering world-class communications products and services to the people of Saskatchewan,” Minister Responsible for SaskTel Dustin Duncan said. “Our government continues to be committed to the priorities outlined in the Plan for Growth and SaskTel aligns itself to these priorities through prudent investments in infrastructure, the development of a skilled workforce, ensuring competitiveness and maintaining sound fiscal management.”

“Implementing state-of-the-art converged, intelligent communications networks is the foundation of SaskTel’s future success,” SaskTel Acting President and CEO Doug Burnett said. “Over the past year, SaskTel has kept its promise to deliver more than $300 million in capital spending here in Saskatchewan and now boasts the largest owner-operated LTE network in the province.”

SaskTel provides strong returns to the province of Saskatchewan by managing its cost structures, optimizing its legacy services, and introducing new competitive services into the market. Strong cost management coupled with revenue growth in key business segments, including wireless, maxTV™, Internet, data, and new and emerging products and services, resulted in SaskTel exceeding its net income budget by $30.6 million.

Financial Highlights 2016-17

Financial measures focused on shareholder value, revenue and gross margin growth, net income, and the intensity of capital investment. The key financial measures are concentrated on ensuring insight into the continuous improvement of SaskTel’s long-term financial performance. 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 its networks, operations, and service offerings.

SaskTel declared dividends of $30.0 million to Crown Investments Corporation during the fiscal year ending March 31, 2017, consistent with the previous fiscal period ended March 31, 2016. During the last five fiscal reporting periods, SaskTel paid a total of $323.5 million in dividends while maintaining a debt ratio within industry standards.

Operating Highlights

SaskTel’s revenues are composed primarily of wireless (40.8 per cent); maxTV™, Internet, and data (26.4 per cent); and local access, enhanced services, and long distance (20.1 per cent). SaskTel offers its customer increasing Internet bandwidth through improvements to its network infrastructure including FTTP, fusion and further expansions of 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 revenues increased by $24.7 million (5.0 per cent) from 2015-16. A large portion of this increase relates to the renegotiation of a wholesale contract with other carriers.
Wireless retail revenues continued to grow which was a result of strong ARPU growth and a modest increase in accesses. Year-over-year, smartphone penetration has increased by 3.0 per cent which has contributed to increased ARPU. ARPU growth is attributable to customers migrating to price plans that offer more data and features.
SaskTel is adapting to the changing wireless environment and has launched share MORE plans in 2016-17 to offer customers the ability to share data among all their devices and to choose the amount of data that suits their needs.
maxTV™, Internet and Data Services
maxTV™, Internet, and data services revenue increased by $11.0 million (3.4 per cent). In 2016-17, more customers are selecting faster Internet speeds to meet their increasing data demands.
SaskTel is meeting these demands by expanding the footprint of its fibre-based service, infiNET. SaskTel rolled out its DSL service to thirteen new communities and upgraded speeds in 38 communities, which has contributed to both ARPU and access growth.
infiNET connections have increased 35.3 per cent, which had a positive impact on ARPU.
Local Access and Enhanced Services
Local access and enhanced services declined by $16.8 million (7.3 per cent) from 2015-16. This decline is due to a 6.4 per cent reduction in network accesses (2015-16 – 7.4 per cent). Customers continue to replace their existing wireline services with a wireless alternative, a trend that SaskTel expects to continue.
Long Distance
Long distance revenues have decreased $4.6 million (9.9 per cent) from 2015-16. 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 revenues have decreased $9.0 million (13.0 per cent) from 2015-16. SaskTel continues to offer its customers consulting, design, training, and implementation services to ensure the right solution for their business. Equipment sales have declined and are reflective of the current market conditions. These declines are partially offset by increased revenues from wireless devices.
Advertising Services
Advertising services revenue decreased to $37.1 million in 2016-17, from $40.0 million in 2015-16, a decrease of $2.9 million (7.3 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 print directory revenue retention through its Mysask411 Solutions (bundling of print and digital products) and ability to prove total leads and return on investment (ROI) to its customers while continuing to diversify with ongoing product and service development.
Security Monitoring Services
Security monitoring revenues increased $1.7 million to $24.5 million in 2016-17, due to customer growth and increased use of value-added features. 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 $7.9 million in 2016-17, up $0.5 million from 2015-16, primarily due to higher software-related professional services abroad and increased maintenance and support fees, offset by lower software-related professional services and enhancement revenues.
Other Services
Other services revenues increased to $32.6 million in 2016-17, up $7.8 million (31.5 per cent) from 2015-16. SaskTel seeks out opportunities to replace declining legacy service revenues by growing its managed and emerging services portfolio. In 2016-17, this portfolio saw growth in new services including Integrated Business Communications, data centre service offerings and professional services.

Capital Spending
SaskTel invested an additional $316.1 million in capital expenditures during 2016-17 (2015-16 – $328.7 million) to improve our customers’ experience today and create opportunities to provide additional network enhancements and capabilities in the future. Of the $316.1 million, $259.3 million (2015-16 – $258.1 million) was spent on property, plant and equipment, including; FTTP, wireless networks (4G, LTE, and Wi-Fi), and Access Demand, while the remaining $56.8 million (2015-16 – $70.6 million) was spent on intangible assets such as customer support systems.

Significant Capital Programs included:
Fibre to the Premises (2016-17 - $54.9 million) The Fibre to the Premises program is a twelve year program to upgrade 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, LTE, and Wi-Fi (2016-17 - $47.4 million) The 4G, LTE, and Wi-Fi wireless networks require ongoing investment as customers abandon older wireless technologies. SaskTel’s wireless LTE network is the largest LTE network in Saskatchewan and now covers 99 per cent of residents in the province. SaskTel select WI-FI provides more than 4,200 access points in more than 2,000 locations spread across 23 communities in Saskatchewan, making it the largest Wi-Fi network available in the province.
Access Demand (2016-17 – $35.4 million) The Access Demand program is an on-going program to add infrastructure to new neighbourhoods and increase capacity in existing neighbourhoods so that customers may access all the services that SaskTel has to offer.
Tier III Data Centres (2016-17 – $27.1 million) Tier III data centres are outfitted with cutting-edge technology to deliver services with the security, availability and assurance that business customers demand from their technology partners. SaskTel added two Tier III data centres to its portfolio during 2016-17. SaskTel currently has a total of 51,000 square feet in eight different data centre locations with four locations in Regina, three in Saskatoon, and one east of Regina.
Other Network Improvements (2016-17 – $70.5 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 which will bring high speed bandwidth services to northern residents and businesses.