Transcript Q1 2005 Presentation Slides

2005
first quarter review & conference call
May 5, 2005
the future is friendly
1
forward-looking statements
This presentation and answers to questions contain forwardlooking statements about expected future events including
competition, labour relations developments and financial
and operating results that are subject to risks and
uncertainties. TELUS’ actual results, performance, or
achievement could differ materially from those expressed or
implied by such statements. For additional information on
potential risk factors, see TELUS’ 2004 Annual Information
Form, and other filings with securities commissions in
Canada and the United States.
TELUS disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result
of new information, future events or otherwise.
2
all dollars in C$ unless otherwise specified
2005
first quarter review & conference call
May 5, 2005
Robert McFarlane
EVP & Chief Financial Officer
the future is friendly
3
TELUS consolidated
financial results
Q1-04
Q1-05
Change
Revenue
$1.80B
$1.98B
 9.5%
EBITDA1
$721M
$856M
 19%
$0.28
$0.67
 139%
Capex
$310M
$273M
 12%
Free Cash Flow3
$443M
$567M
 28%
EPS2
1
Earnings before interest, taxes, depreciation and amortization
Including favourable impacts for tax settlements on EPS of $0.04 in Q1-04 & $0.15 in Q1-05
3 EBITDA, adding Restructuring and workforce reduction costs, cash interest received and excess of
share compensation expense over share compensation payments, subtracting cash interest paid,
cash taxes, capital expenditures, and cash restructuring payments
2
4
Strong increases in revenue and profitability
TELUS consolidated
tax normalization
 15 cent impact on EPS in Q1-05 versus 4 cents in Q1-04
 reflects change in tax estimates for available temporary
differences, other tax adjustments, and related interest
income on settlements
5
TELUS consolidated
regulatory update
CDNS
 35% of TELUS ILEC local voice revenue regulated
 Feb-05, Competitive digital network services (CDNS) decision
 Positive consolidated impact of $25M in 2005
 unfavourable ILEC impacts effectively offset by mandated
price reductions accrued in deferral account
 expense reductions for non-ILEC & Mobility
Portable Subsidy
 TELUS Quebec benefited from decision on portable subsidy
retroactive to 2003 & 2004
 positive impact of $10M in 2005
6
positive regulatory impacts
TELUS consolidated
EPS continuity
EPS reported
Income tax settlement
Retroactive impacts of TQ,
CDNS regulatory decisions
EPS normalized
7
Q1-04
Q1-05
$0.28
$0.67
($0.04)
($0.15)
-
($0.01)
$0.24
$0.51
Normalized quarterly EPS increase of $0.27
Change

139%

113%
TELUS consolidated
free cash flow
Q1-04
Q1-05
EBITDA
$721
$856
Capex
(310)
(273)
(53)
(12)
(9)
(7)
5
4
88
(1)
Free Cash Flow
Share Issuance (non-public)
Cash Dividends
Acc. Rec. Securitization Program Reduction
$443
27
(42)
(150)
$567
88
-
Working Capital/Other
Cash avail. for debt reduction & share redemp.
Net change in LTD & share repurchase
Net change in cash
(4)
$274
(7)
$267
(145)
$510
(159)
$351
($M)
Cash Restructuring Payments (in excess of expense)
Net Cash Interest
Non-Cash Share Based Compensation
Net Cash Tax Recovery
8
Mobility segment
financial results
Q1-04
Q1-05
External Revenue
633
753
 19%
EBITDA1
248
337
 36%
50
60
 19%
198
278
 41%
($M)
Capex
Cash Flow (EBITDA less capex)
1
9
Change
Earnings before interest, taxes, depreciation and amortization
Continued strong revenue, earnings & cash flow growth
Mobility segment
subscriber results
net additions
76K
total wireless subscribers
4.0M
0.7M
80K
prepaid
17%
postpaid
83%
Q1-04 Q1-05
10
Continued strong postpaid mix
3.3M
Mobility segment
ARPU comparison
$57
Q1-04
$58
Q1-05
$48
$44
$47
$46
TELUS Mobility Rogers Wireless1 BCE Wireless
Source: Company reports
1 Pro forma Microcell
11
TELUS maintaining ~20% premium to competitors
Mobility segment
profitable growth strategy
Q1-04
Q1-05
Change
Net additions
76K
80K
 5.4%
ARPU
$57
$58
 1.8%
1.49%
1.45%
 4 bps
383
355
 7.3%
Blended churn
COA
12
Continued strong operating metrics
Mobility segment
TELUS achieving profitable subscriber growth
Canadian national wireless carriers in Q1-05
net adds
EBITDA
TELUS
Mobility
TELUS
Mobility
44%
TELUS
Mobility
44%
36%
182K
$936M
cash flow1
TELUS
TELUS
Mobility
Mobility
40%
40%
$693M
1 EBITDA - Capex
Source: Company reports.
Sum of reported results for BCE, Rogers Wireless pro forma Microcell, & TELUS Mobility
13
Achieving profitable subscriber growth
Mobility segment
2005 guidance summary
original 2005
targets1
Revenue
$3.2 to 3.25B
no change
EBITDA
$1.35 to 1.4B
$1.375 to 1.4B
Capex
$350 to 400M
approx. $400M
425 to 475K
475 to 525K
Wireless Net Adds
1
Provided on December 17, 2004
May 4, 2005
2 Updated
14
updated 2005
guidance2
Positive revisions to guidance
Communications segment
financial results
Q1-04
Q1-05
Change
External Revenue
$1.17B
$1.22B
 4.4%
EBITDA1
$474M
$519M
 9.6%
Capex
$259M
$214M
 18%
Cash Flow (EBITDA less capex)
$214M
$305M
 43%
1
15
Earnings before interest, taxes, depreciation and amortization
Strong gains in profitability & cash flow
Communications segment
revenue profile
Q1-04
Q1-05
Change
Voice – Local
529
553
 4.5%
Voice – Long Distance
230
226
 1.4%
Data
340
378
 11%
Other
73
65
 10%
$1,171
$1,222
 4.4%
($M)
External Revenue
16
3rd straight quarter of year over year wireline revenue growth
driven by data
Communications segment
revenue - normalized
($M)
Reported external revenue
TQ portable subsidy
External revenue (normalized)
Acquisitions
External revenue (organic)
17
Q1-04
Q1-05
Change
1,171
1,222
 4.4%
-
(7)
1,171
1,216
-
(19)
1,171
1,197
 3.8%
 2.2%
Normalized revenue growth 3.8%, organic revenue growth 2.2%
Communications segment
local and data revenue - normalized
Q1-04
Q1-05
Change
529
553
 4.5%
TQ portable subsidy
-
(7)
CDNS - def. account
-
(18)
Local revenue (normalized)
529
528
 0.2%
Data revenue (reported)
340
378
 11%
Acquisitions
-
(19)
CDNS impact - data
-
18
340
377
($M)
Local revenue (reported)
Data revenue (normalized)
18
Normalized local revenue flat & data growth of 11%
 11%
Communications segment
network access line results
% of network access lines lost, YoY
Q4-03
Q1-04
Q2-04
-1.3%
-1.2%
Q3-04
Q4-04
Q1-05
-1.3%
-1.1%
-0.8%
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-1.4%
Strongest NAL result in 5 quarters despite growing competition
Communications segment
EBITDA - normalized
($M)
Comm. EBITDA (reported)
Restruc. & w. r. costs
Comm. EBITDA (bef. restruc.)
Regulatory impacts (retroactive)1
Comm. EBITDA (normalized)
Acquisitions
Comm. EBITDA (organic)
1
20
Q1-04
Q1-05
Change
474
519
 9.6%
16
9
490
528
-
(7)
490
521
-
(3)
$490M
$518M
Retroactive regulatory impacts include TQ portable subsidy and CDNS
Normalized Communications EBITDA growth of 5.7%
 7.8%
 6.3%
 5.7%
Communications segment
non-ILEC revenue & EBITDA ($M)
Revenue
EBITDA
21
145
156
160
128
131
(9)
(14)
(3)
4
8
Q1-04
Q2-04
Q3-04
Q4-04
Q1-05
~$3-4M
Positive trend with record revenue; 2nd quarter of positive
EBITDA benefited in part from non-recurring items
run rate
Communications segment
high-speed Internet subscriber growth
high-speed Internet
net additions
total Internet subscribers
982K
44K
270K
dial-up
28%
22K
high-speed
72%
Q1-04 Q1-05
22
712K
High-speed Internet base up 18% in maturing market
Communications segment
revitalizing wireline growth
Business
 Geographic expansion
 building high quality, recurring revenues in non-ILEC leveraging
IP network & application leadership
 $245M long-term contract with Gov’t of B.C.
Consumer
 “Future Friendly” home
 continued high-speed Internet growth
 launched suite of IP applications
Home Networking, HomeSitterTM launched in 2004
 IPTV employee trials continue
 Bundling
 bundling strategy protects legacy revenues
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Communications segment
restructuring and workforce reduction costs
Programs
Programs prior
initiated in 2005
to 2005
Total
-
$70.7
$70.7
7.9
1.5
9.4
Cash payments
(0.6)
(21.1)
(21.7)
Total liability
$7.3
$51.1
$58.4
($M)
Beginning period liability
Restructuring and
workforce reduction
costs
24
Expected additional restructuring costs of $91M for Q2 to Q4-05
Communications segment
2005 guidance summary
original 2005
targets1
updated 2005
guidance2
Revenue
Non-ILEC Revenue
$4.7 to 4.75B
$600 to 650M
$4.75 to 4.8B
$625 to 650M
EBITDA3
Non-ILEC EBITDA
$1.85 to 1.9B
$0 to 10M
$1.875 to 1.925B
$15 to 20M
Capex
$950M to 1B
approx. $1B
High-Speed Net Adds approx. 100,000
no change
1
Provided on December 17, 2004
May 4, 2005
3 Includes ~$100M in restructuring & workforce reduction costs
2 Updated
25
Positive revisions to guidance
labour relations update
 collective bargaining with TWU resumed, Feb. 16
 tabled comprehensive offer to TWU, Apr. 13
 declared impasse and delivered notice of lockout measures,
Apr. 18
 presented the comprehensive offer to employees, Apr. 21
 cash impact of offer would be up to approx. $200M
 Federal Court of Appeal denied TWU application challenging
TELUS, Apr. 21
 CIRB dismissed application by TWU for interim relief, Apr. 25
 lock-out measures implemented, Apr. 25
 business remains as usual
26
Negotiations continue
share buy back update
No. of Shares
No. of Shares
% of Auth.
Repurchased
Repurchased
Total
Repurchased
This Quarter
Since
Authorized
Since
Inception
Common
2.1M
2.8M
14.0M
20%
Non-Voting
2.0M
3.5M
11.5M
30%
Total
4.1M
6.3M
25.5M
25%
$158M
$236M
Total cost
27
Inception
TELUS has repurchased 25% of shares permitted under NCIB
renewed bank credit facilities
 Effective May 4, 2005, TELUS entered into new credit
facilities totaling $1.6 billion
 $800M five-year revolving term expiring May 2010
 $800M three-year revolving term expiring May 2008
 Facilities mature subsequent to 06/07 debt
maturities
 Will replace TELUS’ existing $1.6B committed facilities
 Favourable changes to pricing & extended terms
reinforce strong liquidity position
28
Renewal of credit facilities reflect strong financial position
2005 consolidated guidance summary
original 2005
targets1
updated 2005
guidance2
Revenue
$7.9 to $8.0 B
$7.95 to $8.05B
EBITDA3
$3.2 to $3.3B
$3.25 to $3.325B
EPS4
$1.65 to $1.85
$1.85 to $2.05
Capex
$1.3 to $1.4B
approx. $1.4B
Free Cash Flow
$1.2 to $1.3B
$1.25 to $1.35B
1
Provided on December 17, 2004
May 4, 2005
3 Includes ~$100M in restructuring & workforce reduction costs
4 Updated guidance includes $0.15 in 2005 for favourable settlement of tax matters
2 Updated
29
Positive changes reflect Q1 momentum and tax settlement
questions?
2005
first quarter review
30