Landlines going the way of horse and buggy: SaskTel annual report

Horses gave way to cars, and landlines are giving way to wireless. That’s been a continual trend for SaskTel, which released its annual report.

In 2019-20, SaskTel’s net income came in at $119.8 million and the company’s operating revenues were $1,283.7 million, with a year-over-year revenue growth of $5.8 million, said the report, released on July 8.

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There was a reflection of continued wireless adoption and increased revenue from wireline growth services. But there’s also been a significant number of “cord cutters” each year.

 “I'm astounded by the number of people that have cut they're all landlines but I think it's will be made up for in other services that are being provided,” said Don Morgan, the minister responsible for SaskTel

“What we have seen over the last three four years is almost a straight line of cord cutters on the legacy side,” added Doug Burnett, the Crown corporation’s president, noting landlines have seen about $20 million a year of lost revenue.

The Crown corporation takes that into account every year in terms of its plans, and has been successful in replacing that revenue with other managed and emerging technologies, including internet and wireless, in particular.

“We are forecasting and planning for the fact that we will continue to see that decline, and that we will need to continue to find new managed and emerging technologies and ways to replace that revenue through internet growth,” Burnett said.

That transition is shown in the breakdown of revenue streams. SaskTel’s revenue is composed primarily of wireless network services and equipment revenue (44.9 per cent), maxTV service, internet and data (29.4 per cent), and local access, enhanced services, and long distance (15.2 per cent).

“Data use on cellular is growing at a rate of 20 per cent, per year which is huge” Burnett said. “While one service is certainly on the decline, others are very much still on a growth trajectory.”

Asked about how Canadian data rates are higher than other places in the world, and if they would be coming down for SaskTel, Burnett said competition would be the big factor. He noted there is some pressure from the federal government, which sent a federal mandate letter to the big three players – Telus, Rogers and Bell, but not SaskTel – to reduce bills by 25 per cent over the next three years.

“I suspect that you're going to see competition and regulation continue to regulate prices and drive prices down,” he said.

Morgan said, “Throughout the year, SaskTel invested approximately $263 million in capital improvements across the province to continue to prepare its networks for future demand and to deliver a quality user experience for the people of Saskatchewan.”

“As we enter a new decade, we find ourselves on the cusp of monumental change in our industry as digital, web-based, and emerging technologies continue to reshape the way we operate and interact with our customers, vendors and other partners,” Burnett said. “We recognize that we must evolve our business to support customers’ shifting expectations and to continue providing exceptional service in a digital world.  Digital transformation continues to be the main driver reshaping customer and employee experiences across our business.”

SaskTel’s return on equity (ROE) is below the target of 11.1 per cent, due to the recognition of an impairment loss in the fourth quarter of fiscal 2019-20 and its resulting impact on net income.  Excluding the impairment loss that was primarily related to impacts of COVID-19, ROE would have been on target at 11.1 per cent.

“The COVID-19 pandemic highlighted the importance of digital and data driven communications and reaffirmed SAS tells focus on enhancing broadband connectivity in the province,” Morgan said, noting that SaskTel is estimating $10.7 million impact due to the pandemic (much of which occurred after the  March 31 fiscal year end). 

As many as 90 per cent of SaskTel’s own employees were working from home during the lockdown this past spring.  

“The pandemic has undoubtedly had a very significant impact on SaskTel and in a number of ways, so as the minister indicated, it is clearly going to have a financial impact on us,” Burnett said. “The exact amount is a little uncertain still but you know it will depend on the duration of the pandemic, and the impact that it has on the broader economy in the province of Saskatchewan, and of course, customers spending.”

He added other impacts for SaskTel include having to manage a network where many of its customers have moved from their business office to their residence and ensuring that it could meet the demands for data and conference calling.

“I'm very proud to say that we did, I think an outstanding job of continuing to provide essential services and at that time,” Burnett said.

“We have, as was mentioned earlier, foregone some significant revenue in favor of doing our best to protect some of the more vulnerable customers in our customer base by waiving things like data overages and deferring interest payments and those types of initiatives.”

The waiving of data overage fees resulted in roughly a $600,000 hit per month. That waiver ended in early June.  

SaskTel paid dividends of $107.2 million to the Crown Investment Corporation during the fiscal year ending March 31, 2020, a decrease of $9.1 million from the previous year.  During the last five fiscal years, SaskTel paid a total of $373.4 million in dividends while maintaining a debt ratio within industry standards.

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