Transcript Presentation Slides

Investor meeting
June 8, 2005
Robert McFarlane
EVP & Chief Financial Officer
the future is friendly
1
leading the way with a proven strategy
strategic intent… to unleash the power of the Internet
to deliver the best solutions to Canadians at home,
in the workplace and on the move.
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Focusing on growth markets of data & wireless
Building national capabilities
Providing integrated solutions
Investing in internal capabilities
Partnering, acquiring and divesting as necessary
Going to market as one team
Consistent strategy and execution 2000  2005
corporate priorities for 2005
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Enhance our leadership position in wireless
Leverage investments in high speed Internet
Accelerate wireline performance in Ontario and Quebec
Grow brand value through superior customer experience
Drive continual improvements in productivity
Reach a new collective agreement
2005 priorities building off success from 2004
framework for medium term growth
Growth Opportunities
Non-ILEC
Growth
+
Future
Friendly
Home
+
Wireline
Organization
Effectiveness
Technological
Substitution
Challenges
+
Competitive
Intensity
+
Price Cap
Regulatory
Framework
Short-term dilutive
Strive to hold wireline EBITDA (before restructuring) flat
over medium term

Growth in revenues and EBITDA from large exposure to
wireless business
=
Continued improvements in consolidated results
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questions?
investor relations
1-800-667-4871
telus.com
[email protected]
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appendix
6
Corporate governance summary
 Challenge is real and is not “US only”
 Canadian business leaders should embrace need for
comprehensive governance change
 Ethics at the top are critical
 TELUS advocates a top down “SOX smart” approach =
proactive, balanced risk-based approach
 No single checklist can provide good governance
 New guidance is taking us in the right direction in
Canada and needs constructive leadership
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With appropriate executive leadership, challenge can be met
[TELUS logo]
effectively in a manner that adds shareholder value
strategic focus on data and wireless
2000
2005
LD
23%
LD
TELUS
Mobility
38%
TELUS
Mobility
12%
Data
Voice
Data
31%
19%
18%
Voice
49%
10%
$5.7B
$7.8B
Twelve months trailing to March 31
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Significant exposure to data and wireless @ 57%
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
9
TELUS maintaining ~20% premium to competitors
Mobility segment
TELUS achieving profitable subscriber growth
Canadian national wireless carriers in Q1-05
net adds
EBITDA
cash flow1
TELUS
Mobility
TELUS
Mobility
TELUS
Mobility
44%
36%
40%
182K
$936M
$693M
1 EBITDA - Capex
Source: Company reports.
Sum of reported results for BCE, Rogers Wireless pro forma Microcell, & TELUS Mobility
10
Achieving profitable subscriber growth
Mobility segment
TELUS Mobility EBITDA & cash flow growth
~1,388
EBITDA
1,142
EBITDA less capex
($M)
~988
815
788
535
456
356
173
75
20001
20012
20022
2003
2004
2005E3
(288)
(360)
1 Pro
forma acquisition of Clearnet
3 Mid-point
11
2
EBITDA (excluding restructuring) for 2001 & 2002
of latest guidance announced May 4, 2005
Tremendous trend of value creation
Mobility segment
EV-DO strategic rationale
3G Evolution Data Only (EV-DO) provides:
1. Next necessary evolutionary step in CDMA technology
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Follows transition adopted by major US carriers
Potential future evolutionary path for voice
Sprint-Nextel merger to adopt EV-DO as future PTT infrastructure
under-pinning
2. Increased wireless data speeds opens up new services potentials

Average user download speeds of 400 – 500 kilobits per second and up
to 1 Megabit per second (with compression techniques)
3. Greater effectiveness of service models in the enterprise market
4. New consumer service models drive consumer data revenue
5. First strike advantage over Rogers wireless (and GSM platform)
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TELUS playing catch-up to Rogers’ GSM technology and earlier
introduction of Blackberry devices
EV-DO allows TELUS to leap-frog ahead of EDGE technology
Mobility segment
CDMA 2000 evolutionary roadmap (data)
Download channel characteristics (excluding compression)
153.1 kbps
2.4 mbps
3.2 mbps
IS-95
1xRTT
EV-DO
EV-DO+
NO packet data
capability
14.4 kbps circuit
40-60 kbps
Symmetric
400ms RTT
300-500 kbps
Asymmetric
300ms RTT
400-600 kbps
Symmetric
70 ms RTT
3.2 mbps times n carriers
3G-nX
400-600 kbps times
n carriers
Symmetric
70 ms RTT
Contracted upgrade
IS-95b
1x rev a
38 kbps
Circuit switched
Korea only
80-120 kbps
Asymmetric
400ms RTT
EV-DV
300-500 kbps
Asymmetric
300ms RTT
Limited Deployment or
abandoned commercial
standards
Effective end-user characteristics (excluding compression)
1995
13
2001
2005
2007
RTT = Round Trip Delay
underscores = advancement
from previous standard
2009+
Mobility segment
CDMA vs. 3GSM (Rogers Wireless) data evolution
GPRS
EDGE
10-30 kpbs
Symmetric
400ms RTT
80-100 kpbs
Symmetric
400ms RTT
Major
evolutionary
change
UMTS
Rel. 99
UMTS
HSDPA
500-700 kbps
Asymmetric
70ms RTT
UMTS
HSUPA
700-900 kbps
Symmetric
70ms RTT
1xRTT
EV-DO
EV-DO+
3G-nX
50-80 kbps
Symmetric
400ms RTT
300-500 kbps
Asymmetric
300ms RTT
400-600 kbps
Symmetric
70 ms RTT
400-600 kbps times
n carriers
Symmetric
70 ms RTT
Effective end-user characteristics (excluding compression)
2002
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2003
2004
2005
2006
2007
2009+
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
15
3rd straight quarter of year over year wireline revenue growth
driven by data
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
($M)
Local revenue (reported)
Data revenue (normalized)
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Normalized local revenue flat & data growth of 11%
 11%
Communications segment
long distance revenues
Canadian industry quarterly CAGR comparison
5.0%
TELUS
0.0%
-5.0%
Bell
-10.0%
MTS/Allstream
-15.0%
-20.0%
-25.0%
-30.0%
Q4-03
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Q1-04
Q2-04
Q3-04
Q4-04
Q1-05
TELUS has adopted a differentiated approach to LD pricing
Communications segment
data revenues
Canadian industry quarterly CAGR comparison
TELUS
10.0%
5.0%
Bell
0.0%
MTS/Allstream
-5.0%
-10.0%
Q4-03
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Q1-04
Q2-04
Q3-04
Q4-04
Q1-05
Industry and TELUS data growth evident in last few quarters
Communications segment
network access line results
% of network access lines lost, YoY
Q4-03
Q1-04
Q2-04
-1.3%
-1.2%
Q3-04
Q4-04
Q1-05
-1.3%
-1.1%
-0.8%
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-1.4%
Strongest NAL result in 5 quarters despite growing competition
Q4 Q1 Q2 Q3 Q4
Year over Year NAL declines
2003
Trailing five quarters ended Q4-04
%
TELUS
SBC
Verizon
BellSouth
-0.8
-0.8
-1.2
-1.3
-1.3
-1.4
-3.7
-4.2-4.3
-4.0
-4.2-4.3
-4.3 -4.2
-4.4
-4.6
-3.9
-3.9
Source: Morgan Stanley (April 2005), company reports
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BCE
-3.6-3.6
-3.8
-0.9
-1.0 -1.0
-1.1
2004
Network Access Lines (NALs)
Why is TELUS NAL loss experience < US:
 Proportionately less 2nd lines
 Less wireless substitution
 Strong economic growth in AB/BC
 US regulatory framework – UNE-P losses & now
reversal
 Cable telephony launches in their infancy in Canada
Gaining lines out-of-region
 TELUS non-ILEC gains offset competitive ILEC losses
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Communications segment
non-ILEC revenue & EBITDA ($M)
Revenue
EBITDA
22
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
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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TELUS Service Development Roadmap
ADSL2+ @ 1500 m
16 Mbps
ADSL @ 2200 m
7 Mbps
Internet
IP Messaging
+
HomeSitter
+
Home
Networking
+
TTV Trial
+
Games/Music
+
Internet
Wireless
Wireless
mytelus.com
+
VoIP
+
Possible TTV
Launch
+
IP Messaging
+
HomeSitter
+
Home
Networking
+
Internet
+
Wireless
Local/LD/PCMS
Bundle
Local/LD/PCMS
Bundle
Local/LD/PCMS
Bundle
Local/LD/PCMS
Bundle
2004
2005
2006
1.5 Mbps
Bandwidth
Requirements
Games/Music
2003
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Home Portal
+
Remote
Access
+
VoIP
+
Possible TTV
Launch
+
IP Messaging
+
HomeSitter
+
Home
Networking
+
Internet
+
Wireless
Future Friendly Home
New
Solutions
Existing
Solutions
strategic rationale of potential IPTV offering
 Grow new sources of revenue and expand share of wallet of
Alberta and BC consumers
 Protect TELUS high value customers and increase customer
loyalty through introduction of key entertainment services
 Offer “Quadruple Play” bundle of voice, high-speed data,
mobility and video
 Provide an alternative to Shaw cable and Bell’s ExpressVu
satellite systems
 Decrease Shaw’s ability to erode traditional voice services with
its “Triple Play” bundle
 Offer differentiated services
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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
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Positive changes reflect Q1 momentum and tax settlement
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
27
Renewal of credit facilities reflect strong financial position
labour relations update
 Collective bargaining with TWU resumed, Feb. 10
 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. 22
 CIRB dismissed application by TWU for interim relief, Apr. 24
 Lock-out measures implemented, Apr. 25, May 12 & June 2
28
labour relations update
TWU appeal to CIRB on unfair labour practice regarding
TELUS’ tabling of comprehensive offer directly to employees
 Heard late May 2005
TWU application to Federal Court of Appeal seeking to
overturn CIRB’s reconsideration decision, and restore order of
binding arbitration
 Heard May 31 – June 1, 2005
TELUS Mobility application to Supreme Court of Canada for
leave to appeal CIRB decision regarding automatic sweep in
of TELUS Mobility East team members
 No decision on application
29
Actions not affecting business operations
CRTC VoIP decision
 ILECs subject to regulation for VoIP
 Phase II costing – prices can differ from local
 Expedited, 10-day confidential tariff process
 12 month winback period extended
 Cablecos are CLECs and deregulated for VoIP
TELUS issues with decision
 Canada is unique in regulating retail rates
 Fails to adapt to disruptive technology
 Gives regulatory head start to some competitors
 Disadvantages Canadian telephone companies
30
Decision as expected, but missed opportunity