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Darren Entwistle,Member of the TELUS Team
RBC Capital MarketsEurope Investor MeetingsMarch 9 - 12, 2004
2
table of contents
about TELUS 4
strategy 7
2003 corporate priorities 26
2004 corporate priorities 37
investor considerations 41
3
This presentation contains forward-looking statements about expected future events 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’ 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.
All dollars in C$ unless otherwise specified.
forward-looking legal disclaimer
4
about TELUS
Canada’s 2nd largest telco
Executing national growth strategy focused on data, IP & wireless
2004 estimate1: Revenues $7.45 to 7.55 billion
EBITDA2 $2.95 to 3.05 billion
EPS $1.05 to 1.25
Net Income $370 to 440 million
Free Cash Flow $1.13 to 1.23 billion
Operating segments: wireline: TELUS
Communications
wireless: TELUS Mobility
Enterprise value: $16.4 billion
Daily trading3: 1.1 million shares1 Targets announced December 18, 2003 2 Earnings before interest, taxes, depreciation & amortization
3 Recent 3 month average. TSX: T, T.A; NYSE: TU
5
TELUS Communications segment
ILEC: full service in W. Canada and E. Quebec Non-ILEC: data & IP for business in Central Canada
Revenue (2004 est.)1 $4.8 to 4.85 billion
EBITDA (2004 est.)1 $1.975 to 2.025 billion
Network Access Lines 4.9 million
Total Internet Subscribers 881,000 (562,000 high-speed)
Fibre IP backbone national
Strategic alliance Verizon Communications
1 Targets announced December 18, 2003
6
TELUS Mobility segment
31.7 million: Cdn. PopulationLicensed POPs
29.9 million (93%)Network coverage
Verizon Wireless & NextelStrategic relationships
best in CanadaSpectrum position
only one in Canada (Nextel in US)iDEN Mike network
coast to coast 1XCDMA footprint
$975 million to 1.025 billionEBITDA (2004 est.)1
$2.65 to 2.7 billionRevenue (2004 est.)1
3.4 millionSubscribers
leading Canadian national wireless provider
1 Targets announced December 18, 2003
7
evolving our businessdelivering on our strategy
8
tracking against strategic imperatives 20002004
1. provide integrated solutions
2. partner, acquire & divest as necessary
3. invest in internal capabilities
4. build national capabilities
5. focus on growth markets of data & wireless
6. going to market as one team
… to unleash the power of the Internet to deliver the best solutions to Canadians at home, in the workplace and on the move.
9
4. build national capabilities
TELUS’ infrastructure – 2000
10
Mobility Jan 2000 Dec 2003
PoPs covered (millions) 7 29.9
Mike (iDEN) (millions) - 24
Generation 1G 2.5G
Communications Ont/Que cities 3 38
Co-locations 2 88
Customer POPs 5 213
Fibre lit (km) 0 11,800
Platform Stentor TELUS
Network Circuit-based Next Generation (NGN)
national transformation
11
build national capabilities
TELUS’ national infrastructure - 2003
12
TELUS NGN IP applications in market today
TD Bank Financial Group win Oct. 2003
$160 million, 7-year contract for managed data solution – largest network migration in Canada
NGN with IP VPN security & enhanced services cannot be matched by competitors
IP-One launched Nov. 2003
first carrier-grade hosted and managed telephony application for business in Canada
full suite of IP-based advanced services integrating voice-mail, e-mail, data & images via secure online Web portal
13
NGN application IP-One
“Telus Corp. yesterday leapfrogged larger rival Bell Canada…”
Dave Ebner, Globe & Mail, Nov. 18, ’03
“TELUS positioned to ride IP wave, Bell is years behind its western rival in IP telephony…” Andrew Wahl, Toronto Star, Nov. 24, ’03
14
TELUS IP-One achieves recognition
recent winner of “2003 Product of the Year” award from Technology Marketing Corporation (TMC) Communication Solutions
recognized as “Top National Advanced Technology Solution” by Cisco Networks
15
Revenue (mil.)
EBITDA (mil.)
TELUS wireline operations in Ont. & Que. have significant scale & are generating profitable growth
1 Includes TELUS Quebec & TELUS non-ILEC operations except 2000
Central Canadian wireline1 growth
~$900$845
~$145$119
2003 2004E
$4
Jan. 2000
16
$5.7B
2003
$7.1B
20001
Local Voice
Wireless
Data30%
33%
19%4%Other
14%LD
data & wireless revenues from 28% to 52% in 3.5 yrs.
5. focus on growth markets of data & wireless
43%
18%
10%
6%Other
LD
Wireless
Local Voice
23%
Data
consolidated revenue profile evolution
1 12 months ended June 30, 2000
17
410
215
562
2002 20032001
131
195
152
Subscriber base
Net additions(000s)
market share grew from 10% to 38% at the end of 2003
high-speed Internet growth
~125
~687
2004E
84
2000
58
18
(000s)
increase of 2.2 million subscribers in last 3 years
wireless subscriber net additions targets
2,996
2,578
1,342
418
431
3,424Subscriber base
Net additions
2002 20032001 2004E
3,800 to 3,850
375 to 425
1,236
2000
151
19
$630M1.4M
EBITDA growth subscriber growth
TELUS achieves profitable subscriber growth
executing our strategy for profitable growth
Source: Company reports. Sum of reported net adds & wireless EBITDA for BCE, Rogers Wireless, Microcell, TELUS Mobility
TELUSMobility
45%30%
TELUSMobility
2003 wireless industry
20
TELUS Mobility Rogers WirelessBCE Wireless
$55
$45$47
ARPU
continued industry leadership
Source: Company reports
2002
2003
$57
$47$48
industry ARPU up year over year
Microcell
$40$38
21
BCE AWE
2.7%2.6%
1.6%
2.0%1.8%
1.5% 1.4%
TELUSVerizonSprintPCS
Rogers Nextel
3.2%
CingularMicrocell
3.0%1
2.7%
T-Mobile
TELUS’ 2003 churn rate remains top-quartile
wireless growth & performance
1 T-Mobile USA Q3-03 YTD churn rate
2003 churn rates
22
generating cash flow growth
($M)
746
1,136
20032002
Communications
significant in YoY cash flow (EBITDA less capex)
52%
75
456
20032002Mobility
508%
23
6. going to market as one team
Strong brand identity across TELUS
24
strong brand awareness
25
TELUS advertising top ranked
Leger Marketing national poll - Jan 2004
• No. 1 in awareness
• No. 3 in likeability
2003 corporate priorities
27
2003 TELUS corporate priorities
enhancing wireless performance
improving Central Canada profitability
improving levels of customer service
delivering operational efficiency
reaching a collective agreement
strengthening financial position
On track?
2004
28
delivering on operational efficiency program
Cumulative1
Cum.1 Targets2
44 43
33 33
TELUS Communications
7,500 7,3003
Savings ($M) - 2003 454 450
1 Refers to the duration of the Operational Efficiency Program, June 2001 through December 2003.2 As disclosed in management's discussion and analysis in the 2002 TELUS Annual Report.3 800 in 2001; 6,500 in 2002 & 2003.
Actual Results
Customer contact centres closed or consolidated
Communicationsphone store closures
met or exceeded all OEP targets
- 2004 N/A 550
Net staff reductions
29
reaching a collective agreement Feb. 16, CIRB-imposed deadline: TELUS filed CIRB
application for reconsideration of Jan. 17, 21, 26 and 28 rulings
imposed communications blackout on TELUS
required TELUS to offer binding arbitration to union with no
time limitations on process
disagree that communications violated accepted practices and
labour laws
TELUS has requested reconsideration
TELUS also filed appeal with Federal Court of Appeal
arbitration discussions with union and federal mediators continue
30
strengthen our financial position
significant increase in earnings & cash flow
2002 2003 Change
Revenue $7.0B $7.15B 2.0%
EBITDA1 $2.52B $2.84B 13%
Net Income $(229)M $332M $561M
EPS $(0.75) $0.92 $1.67
Capex $1.7B $1.3B 26%
1 EBITDA excluding restructuring & workforce reduction costs
31
improving free cash flow1
FCF leading to significant debt reduction
2001 2002
2003
$(1.14)B
$(140)M
$1.13B to 1.23B
2004E
$845M
1 EBITDA, adding Restructuring & 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.
32
2003 – deleveraging
45 to 50% long term
53.0%56.6%Net Debt : Capital
Q4-03 guidanceQ4-02
significant increase in free cash flow results in deleveraging well ahead of targets
<3.0X (original)
2.6X3.3XNet Debt : EBITDA
<2.2X(long term)
33
credit rating update
Mar. 2/04 – Moody’s upgrade to ‘investment grade’
Dec. 18/03 – Moody’s rating review for ‘possible upgrade’
Sep. 12 – Moody’s outlook to ‘positive’ from ‘stable’
Aug. 8 – S&P outlook to ‘stable’ from ‘negative’
June 16 – DBRS trend to ‘stable’ from ‘negative’
May 28 – Fitch outlook to ‘stable’ from ‘negative’
April 16 - Moody’s outlook to ‘stable’ from ‘negative’
credit ratings are lagging indicators of strengthened financial position
34
TELUS bond performance (Jul 24/02 – Mar 2/04)
$40
$60
$80
$100
$120
Jul-0
2
Au
g-0
2
Se
p-0
2
Oct
-02
No
v-0
2
De
c-0
2
Jan
-03
Fe
b-0
3
Ma
r-0
3
Ap
r-0
3
Ma
y-0
3
Jun
-03
Jul-0
3
Au
g-0
3
Se
p-0
3
Oct
-03
No
v-0
3
De
c-0
3
Jan
-04
Fe
b-0
4
C$ 7.5% 2006
US$ 7.5% 2007
US$ 8.0% 2011
Feb 14Q4 results
Apr 16Moody's outlook
upgrade to stable
Apr 30Annual General
Meeting & Q1 results
May 28Fitch outlook upgrade
to stable
Jun 16DBRS trend
upgrade to stable
Aug 8S&P outlook
upgrade to stable
Jul 29Q2 results
Sep 12Moody's outlook
upgrade to positive
Oct 31Q3 results
Dec 182004 Targets call
Dec 18Moody's puts TELUS under review for possible upgrade
Dec 162003 Targets call
Nov 4Q3 results
Sep 12Equity offering &
debt buyback
Jul 25Moody's
downgrade
Mar 2Moody's upgrades
TELUS to investment grade
Feb 13Q4 results
35
21
16
13
8
(2)(3)
(5)(6)
(14)
(18)
(2)
1314
2 1
(0.3)
3
Telia FT DT KPN TELUS MTS Telstra Nippon BCE
%
PCCWBT VZAliant SBCSprint
2003 global telecom performance
EBITDA1 % growth rates
AT&T
As at March 1, 2004
Notes: 1 Excluding restructuring TELUS data based on 2002 & 2003 results Other results provided by Bloomberg, company, and analyst reports
13
BLS
36
94
63
29
19 17
4 4 3
(4)
(16)
(24)
(0.1)
1 1
20
7
46
TELUS FT Telia DT MTS FON BCE KPN Aliant Nippon BLS Telstra PCCW
2003 global telecom performanceCash Flow (EBITDA1 - Capex) % growth rates
SBC
As at March 1, 2004
Notes: 1 Excluding restructuring TELUS data based on 2002 & 2003 results Other results provided by Bloomberg, company, and analyst reports
AT&TVZBT
%
Sprint
2004 corporate priorities and targets
38
2004 priorities
reaching a collective agreement
growing brand value through superior customer service
revitalizing wireline growth
driving towards leadership in high-speed Internet
enhancing our leadership in wireless
embracing continual cost efficiency
… leading the way into 2004
39
2%approx. $1.225BCapex
14 to 36%$1.05 to 1.25EPS
5 to 8%
change
EBITDA1
Revenue
2004 targets
$2.95 to 3.05B
$7.45 to 7.55B
2004 targets reflect strong earnings & cash flow growth
2004 consolidated targets summary
1 Includes ~$30M in restructuring & workforce reduction costs in 2004 compared to $28.3M in 2003. 2 EBITDA, adding Restructuring & 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.
34 to 46%Free Cash Flow2 $1.13 to 1.23B
4 to 6%
40
continuing operational execution
2004 targets reflect:
healthy wireless & high-speed Internet growth
good EBITDA growth despite regulatory impacts
strong ~25% EPS growth
global telecom-leading cash flow growth
continued strong debt reduction
delivering on our consistent and robust strategy since 2000
investor considerations
42
why invest in TELUS delivering focused telecom growth strategy in Canada
track record of achieving public targets
leading national wireless provider
incumbent wireline generating robust cash flow
technology leadership in IP
Central Canada expansion increasingly profitable
global leader in earnings & cash flow growth
43
7 6
5 43
3
(2)
(3)
(7)
(16)
122
6
0.1 0.1 0
TELUS DT FT BCE MTS Aliant Telstra PCCW BT Telia KPN BLS Nippon
2004E global telecom performance
projected EBITDA % growth rates
As at March 1, 2004
Notes: TELUS data based on 2003 results & mid-point of 2004 targets Other estimates provided by Bloomberg, company and analyst reports
%
AT&TSBCVZ Sprint
44
14
11
75 5 4
1
(1)(3)
(4)
(6)
(11)
(16)
(0.4)
3
8
TELUS Aliant Telia MTS BCE Telstra BLS PCCW DT Nippon
2004E global telecom performanceprojected Cash Flow (EBITDA - Capex) % growth rates
AT&T
%
BT VZ KPN SBC
As at March 1, 2004
Notes: TELUS data based on 2003 results & mid-point of 2004 targets Other estimates provided by Bloomberg, company and analyst reports
FT Sprint0
46
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