Telus Valuation

Topics: Cash flow, Generally Accepted Accounting Principles, Asset Pages: 24 (6994 words) Published: October 11, 2010
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Table of Content
Executive Summary1
1.Introduction2
2.Communication market2
3.Profile of TELUS3
4.Profile of Rogers Communication Inc.4
5.Revenue Mix5
6.Financial Statement Analysis6
6.1.Income Statement6
6.2.Balance Sheet8
6.3.Statement of Cash Flow8
7.Financial Ratio Analysis8
7.1.Performance ratios8
7.2.Liquidity Ratios8
7.3.Solvency Ratios8
7.4.Profitability Ratios8
7.5.Asset Management Ratios8
7.6.Cash Management Ratios8
8.Recommendations and conclusion8
9.Additional consideration8
10.Appendices8
10.1.TELUS Income Statement8
10.2.Rogers Income Statement8
10.3.TELUS Balance Sheet8
10.4.Rogers Balance Sheet8
10.5.TELUS Cash Flow Statement8
10.6.Rogers Cash Flow Statement8

* Executive Summary
This paper investigates the financial performances of two Canadian public companies, TELUS and Rogers, using the latest audited statements in order to make an investment recommendation. As part of the study, the communication market was examined, financial statements were used for analysis and key financial ratios were compared between the two companies and to the market. This report ends by recommending Rogers as the better investment according to the following criteria: * Rogers’ revenues are growing at faster rate.

* Rogers exhibits a lower cost structure.
* Rogers has a better ROA than TELUS.
* Rogers P/E ratio is higher than that of TELUS.
* Globally, Rogers characterizes as an investment with greater potential than TELUS.

Introduction
Communications is a $50-billion-a-year industry in Canada, driving innovation, economic growth and connectedness across the country. It encompasses wired and wireless voice services, data services, broadcast distribution and forms of new media such as social networking and online video. Communication companies play a vital role in providing goods and services to customers of the Canadian marketplace. This report analyzes the financial statements of two major Communication companies, Rogers and TELUS, for comparative purposes with the objective of making a sound investment recommendation. Comprehensive corporative annual reports containing the balance sheet, income statement and statement of cash flow were used. This presentation focuses on the three aforementioned statements and the ratios derived from such statements.

Communication market
After weathering the telecoms bubble, the Canadian telecom market is experiencing significant changes, as the result of the emergence of the quadruple play service (QPS). QPS is a marketing term for providing high-speed internet, television and telephone over a single broadband connection to mobile devices. Rising broadband penetration continues to drive the telecom market, with around 75% of all Canadian households subscribing to broadband by early 2009. Due to the analogue signal slowly transitioning to digital, telecoms will increasingly compete for the quadruple play consumer with new products and services, such as Video on Demand (VoD) and High Definition services to mobile devices. Broadband penetration is also driving the migration from traditional telephone lines to Voice over Internet Protocol (VoIP) telephony.

Consolidation in the mobile phone segment has created a healthier market, with three leading operators competing for customers and expanding their network coverage. The current step seen is “Service Bundling” with operators partnering with or acquiring software development companies in order to make a play across technologies and solutions. This is seen as a way to increase the revenue per customer, reduce churn (the proportion of contractual customers leaving a supplier during a given period), and compete on relatively even terms.

The market is expected to continue consolidating across regions and customers...
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