I’ve been making an effort to spend less time on my smartphone.
I’ve turned off many of the most distracting notifications. My phone no longer chirps when I get a social media mention or when a restaurant app wants to tell me about the latest deal. Most emails can wait at least a couple of hours, so I don’t have those notifications turned on, either. The only time my phone plays a noise is when I get a call or text.
This has helped, but I’m still fighting a losing battle. I still find myself mindlessly scrolling social media or playing some silly game on a regular basis. I can’t help it. My smartphone is just too addictive.
It turns out I’m not the only person who’s a slave to my phone. Collectively, we all are. According to a recent U.K. study, the average smartphone user between the ages of 18 and 24 spent approximately 80 hours per month — or nearly three hours per day — on their phones. It decreases slightly in users from 25 to 34, but not much. They’re still spending more than 70 hours a month staring at that little screen.
And that study was from 2017, too. I bet it’s crept even higher since.
As an investor, I don’t really care about the sociological implications of such a trend. All I care about is making money off it, which is why I’m happy I hold shares in Telus (TSX: T)(NYSE: TU).
Wireless king
I’m not sure the average investor realizes just how dominant Canada’s Big Three telecom providers are.
Approximately 90% of Canadian wireless subscribers are connected to one of the Big Three’s network. While all three operate nationally, Telus’s market share is stronger out west. Further expansion into Ontario, Quebec, and the Maritime provinces could provide a nice bit of growth going forward.
Telus has been focused on cutting down wireless churn, a metric that measures how often a customer bolts for the competition. It has consistently posted churn rates of under 1% versus closer to 2% for its peers. It might not seem like much, but it’s important to keep customers for a subscription-based business.
Growth has been solid lately as well. In its most recent quarter, Telus reported nearly 150,000 new wireless customers, its best quarterly showing since 2010.
Television growth
Despite some of its competitors posting consistent subscriber loss, Telus has managed to turn television into a growth industry.
Part of the reason why is Telus is a relatively new player in the industry. It has just 1.1 million TV subscribers after adding some 18,000 subscribers in the latest quarter. This translates into 5-6% annual growth in television, which is a nice result in today’s world of cord cutting.
A focus on great businesses
One of the things I like best about Telus is how the company sticks to telecom.
Compare that to its two largest competitors, who have big media divisions. Media isn’t such a bad business, but it pales in comparison to the core wireless and wireline businesses. Media offers lower margins, tepid growth, and is more sensitive to the underlying economy.
I believe Telus deserves a higher valuation because it doesn’t have any exposure to this lesser business.
Shareholder-focused management
Since 2011, Telus has raised its dividend an astounding 16 times, or an average of twice per year. The annual payout has grown from $1 per share to 2019’s projected dividend of $2.18 per share. That’s simply astounding for a stock that isn’t really viewed as a growth opportunity.
Telus spends most of its excess cash flow on dividends, but it has also been an active repurchaser of its own shares. After peaking at 655 million shares outstanding in 2012, the company has spent millions to reduce the share count to under 600 million.
The bottom line
I’m bullish on the smartphone industry in general, especially the wireless providers. We’re addicted to those tiny screens, and in Canada using Telus is one of the few ways we can connect it to the rest of the world. That’s a powerful investing trend that’s likely to stick around for a long time.
