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the future is friendly
2005second quarter review & conference call
August 5, 2005
2 All dollars in C$ unless otherwise specified
forward-looking statementsThis presentation and answers to questions contain forward-looking statements about expected future events including competition, labour relations including duration and impact of current strike, 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.
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2005second quarter review & conference call
August 5, 2005
Darren Entwistlemember of the TELUS team
the future is friendly
4
Q2 2005 highlights
TELUS consolidated resultsRevenue 8%EBITDA 10%EBIT 24%Net Income 10% Net Income normalized 60%
Benefits of consistent growth strategy continue
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Q2 2005 highlights
TELUS Communications industry-leading performance
TELUS Mobility achieves record performancePositive update to 2005 wireless net additions
maintaining consolidated annual guidance
Maintaining guidance despite labour action
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TELUS measures* escalated pressure for settlement commenced implementing offer July 22
TWU responded with multiple legal challenges, work to rule and rotating strikes called full scale strike on July 21 TWU has not conducted votes on offer or this
strike 2005 legal decisions* have upheld TELUS actions and
largely dismissed TWU challenges
*see Appendices for chronological summary
TELUS moving to settlement thru collective bargaining process
Labour relations update
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Labour relations update Comprehensive contingency plans activated to minimize customer impacts meeting or exceeding call centre standards and ahead of expectations on field service
Significant and increasing numbers of Alberta union members coming to work
BC union members not being allowed to cross BC and AB court injunctions in place to allow facilities access and reduce intimidation
70% of TELUS employees on the job serving customers
8Offer is generous and shares TELUS’ ongoing financial success
TELUS’ Comprehensive Offer Top quality Offer for compensation, benefits and employment security
Lump sum and past payments, variable pay and certain benefit changes deferred until ratification Approx. $200M initial payment or avg. $16K per employee
Cost of Offer fully accrued Provides flexibility TELUS needs to compete on an even playing field with competitors
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2005second quarter review & conference call
August 5, 2005
George CopePresident & CEO, TELUS Mobility
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industry subscriber growth
5.1%4.4%Penetration gain
1.7M1.5MNet subscriber additions
32.0MPopulation 31.8M
15.6MCdn wireless market 13.9M
Q2-05Q2-04
48.9%43.8%Penetration
12ME
Source: Company reports, CWTA. Includes subscriber results for Bell Wireless Alliance,Rogers Wireless p.f. Microcell, and TELUS Mobility.
Canadian wireless market continues to grow at strong pace
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industry subscriber & EBITDA growth
1.7M
12ME Q2-05 net additions
Source: Company reports. EBITDA is sum of reported EBITDA for BCE, Rogers Wireless p.f. Microcell, and TELUS Mobility.
TELUSMobility
32%
Capturing disproportionate share of industry EBITDA growth
$814M
12ME Q2-05 EBITDA growth
TELUSMobility
42%
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Source: Company reports
TELUS Mobility Rogers Wireless1 BCE Wireless
$59
$48$50
$61
$51$50
Q2-04
Q2-05
1 Pro forma Microcell
TELUS Mobility maintaining 20% ARPU premium
industry ARPU’s
13
$3,100
$401
1.6%
13%
TELUS Mobility subscriber economics best in class
$2,700Lifetime revenue
$374COA per gross addition
1.91%Blended churn
BCERogers
profitable subscriber growth
COA / Lifetime revenue 14%
$4,500
$342
1.37%
TELUS
8%
Q2-05
14 North American leader in wireless cash flow yield
12%25%31%Cash flow yield (total rev.)
20%16%14%Capex intensity (total rev.)
35%42%49%EBITDA margin (network
rev.)1
US avg.Other CdnTELUS
wireless cash flow yield
Q2-05
1 TELUS Mobility EBITDA margin of 45.4% based on total revenue Source: Company reports. Merrill Lynch for US averages
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2005second quarter review & conference call
August 5, 2005
Robert McFarlaneEVP & Chief Financial Officer
16 Continued strong revenue, earnings & cash flow growth
21%252208Cash Flow (EBITDA less capex)
46%11578Capex
28%367286EBITDA1
19%802677Revenue
ChangeQ2-05Q2-04
1 Earnings before interest, taxes, depreciation and amortization
($M)
Mobility segment
financial results
17Outstanding quarter with record net adds on 10% in COA
10%$342$381COA per gross add
5 bps1.37%1.32%Blended churn
3.4%$61$59ARPU
15%131K114KNet additions
ChangeQ2-05Q2-04
profitable growth
Mobility segment
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subscriber results
Net adds & total subscribers up 15% with strong postpaid focus
net additions
Q2-04 Q2-05
114K131K
4.1 M
total wireless subscribers
postpaid82%
prepaid18%
3.4 M
0.7 M
Mobility segment
postpaid
prepaid
19Solid YTD results lead to net adds guidance increase to > 525K
wireless net additions
Mobility segment
Q2-04 Q2-05
114131
YTD Q2-04
YTD Q2-05
190
211(000s)
20Best LD growth since 1999 merger plus strong data growth led to 4th straight quarter of YoY wireline growth
7.9%6571Other
9.9%380346Data
-229229Voice – Long Distance
0.2%543544Voice – Local
ChangeQ2-05Q2-04
Total Revenue $1,189 $1,217
($M)
Communications segment
revenue profile
2.3%
21EBITDA up 2% when normalized for restructuring, acquisitions, and regulatory decisions
11%$205M$231MCash Flow (EBITDA less capex)
9.8%$294M$268MCapex
-$499M$499MEBITDA1
2.3%$1.22B$1.19BRevenue
ChangeQ2-05Q2-04
1 Earnings before interest, taxes, depreciation and amortization
financial results
Communications segment
2219% revenue growth and 3rd straight quarter of positive EBITDA
non-ILEC revenue & EBITDA
Communications segment
Q2-04 Q2-05
131156
Q2-04
Q2-05
(14)3.5
EBITDArevenue($M)
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high-speed Internet subscriber growth
High-speed Internet base up 17% YoY in seasonally slow quarter
high-speed Internet net additions
Q2-04 Q2-05
19K 17K
990K
total Internet subscribers
high-speed 74%
dial-up26%
729K
261K
Communications segment
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Q2-04 Q3-04 Q4-04 Q1-05
-1.4%-1.2% -1.3% -1.1%
NALs impacted by various competitive offerings, large wholesale business account loss & ongoing wireless substitution
% of network access lines lost, YoY
network access line results
Communications segment
Q2-05
-1.8%
-1.5%
25 Strong increases in revenue and earnings
$409M$346MCapex
10%$0.53$0.48EPS1
10%$865M$785MEBITDA
8.2%$2.02B$1.87BRevenue
ChangeQ2-05Q2-04
financial results
1 Including favourable impacts for tax settlements on EPS of $0.13 in Q2-04 & nil in Q2-05
TELUS consolidated
18%
26Communication and consolidated capital intensity down YTD
capital intensity
TELUS consolidated
Mobility
YTD Q2-04
YTD Q2-05
10% 11%
Communications
YTD Q2-04
YTD Q2-05
22%20%
Consolidated
YTD Q2-04
YTD Q2-05
18%17%
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$132M or 88% of $150M convertible debentures converted into 3.3M non-voting shares prior to redemption Remaining debentures redeemed for $17.9M Difference between redemption value & book
value treated as expense, a pre-tax charge of approx $0.9M
Options & warrant exercises resulted in 2.2M share issue
repurchased 6.5M shares under normal course issuer bid (NCIB)
1.0M net reduction to 357.4M shares outstanding
convertible debentures & shares outstanding
28TELUS has repurchased 50% of shares permitted under NCIB
share buy back updateNo. of
Shares
Repurchase
d Q2-05
No. of
Shares
Repurchase
d Since
Inception
Total
Authorized
%
Repurchased
vs. Auth.
Since
Inception
Common 3.0M 5.8M 14.0M 42%
Non-Voting 3.5M 7.0M 11.5M 61%
Total 6.5M 12.8M 25.5M 50%
Total cost $272M $508M
29 Normalized EPS increase of 21 cents, up 60%
EPS continuity
$0.03- Provision for BCTel bond redemption litigation, & convertible deb. redemption expense
10%$0.53$0.48EPS reported
ChangeQ2-05Q2-04
EPS normalized $0.35 $0.56 60%
TELUS consolidated
-$(0.13) Income tax settlement
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$112(86)(48)
$230
81
(286)
(346)
$785
Q2-04
$18161
(144)
$208
20
(275)
(409)
$865
Q2-05
Cash avail. for debt reduction & share redemp.Working Capital/OtherCash Dividends
Free Cash Flow
Net Cash Tax Recovery
Net Cash Interest
Capex
EBITDA
($M)
(9) (1)Cash Restructuring Payments (in excess of expense)
6 7Non-Cash Share Based Compensation
17 56Share Issuance (non-public)
$84 $(106)Net change in cash8 (15)Funds for redemption of debt
free cash flow
TELUS consolidated
- (272)Purchase of shares for cancellation (NCIB)(36) -Redemption of Preferred Shares
31 Maintaining guidance despite TWU strike
2005 consolidated guidance
1 Provided on May 4, 20052 Updated August 5, 20053 Including ~$100M in restructuring & workforce reduction costs4 Including favourable impacts for tax settlements of $0.15 in Q1-05
$1.25 to 1.35BFree Cash Flow
approx. $1.4BCapex
$1.85 to 2.05EPS4
updated 2005 guidance2
EBITDA3
Revenue
previous 2005 guidance1
$3.250 to 3.325B
$7.950 to 8.050B
no change
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Appendices
Summaries: Chronology of collective bargaining events Chronology of legal decisions Definitions
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Apr 13 - Company tabled Offer to the TWU Apr 18 – Company declared negotiations to be at an
impasse and delivered first notice of lockout to TWU Apr 21 - terms and conditions of the Offer communicated
to bargaining unit team members Apr 25 – Company began implementing numerous soft
lockout measures May to July – TELUS continued escalating lockout
measures; TWU responded with overtime ban and work-to-rule campaign
Jun 14 – TELUS provided addendum to offer, which provided additional benefits
Jun 22 – TWU tabled its counter proposal
Labour Relations – summary of events
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Jun 24 – TELUS rejected counter proposal July – TWU began rotating strike activity (“study
sessions”) to which Company normally imposed short lockouts to participants
Jul 12 – TELUS informed TWU, it would commence implementation of its comprehensive offer on July 22 - TWU further escalated rotating strike activity
Jul 21 – TWU initiated full scale strike and Company implemented contingency plan
Jul 22 – Phase I of Company’s Offer implemented
Labour Relations - summary of events (cont’d)
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Labour relations - 2005 legal ruling summary Feb 2 - CIRB ruled in TELUS favour and overturned its year old ruling ordering TELUS into binding arbitration.
Apr 22 - TWU allegations challenging TELUS’ ability to implement lockout measures dismissed by Federal Court of Appeal (FCA)
Apr 24 - TWU application at CIRB seeking to prevent TELUS from implementing its lockout measures on Apr 25 dismissed
July 21 – CIRB dismissed TWU allegations regarding improper lockout and company communications
July 23 – BC Court grants sweeping injunction against TWU impeding access to Company and customer locations
July 25 – TWU loses appeal to FCA to overturn Feb. CIRB ruling that returned both sides into collective bargaining process
July 27 – AB Court grants TELUS injunction on posting website images and TWU impeding access to Company and customer locations
July 29 – BC Court grants TELUS injunction on posting website images, TWU intimidation, and blocking entrances by pickets
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EBITDA: Earnings, after restructuring and workforce reduction costs, before interest, taxes, depreciation and amortization
Capital intensity: capex divided by total revenue
Cash flow: EBITDA less capex
Free Cash Flow: 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
definitions
appendix
TELUS definitions for non-GAAP measures
