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Darren EntwistleMember of the TELUS Team
New YorkSeptember 29, 2003
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This presentation and answers to questions contain 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 statement
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about TELUS
Leading Canadian pure-play, facilities-based, full-service telecom provider
2nd largest Canadian telco
2003E1: Revenues $7.1 to 7.2BEBITDA $2.75 to 2.85BFCF $800M to 1B
Enterprise value: ~$17B (equity ~$9B)
Listings: TSX: T, T.A; NYSE: TU
Operating segments: Communications = wirelineMobility = wireless
Daily trading2: 1.3M shares1 July 29, 2003 guidance
2 recent 3 month average for common and non-voting shares
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Communications segment
ILEC: full service in W. Canada and E. Quebec Non-ILEC: focus on data & IP for business in Central Canada
Revenue (2003E)1 $4.85 to 4.9B
EBITDA (2003E)1 $2.0 to 2.075B
POPs covered 7.5M
Network Access Lines 4.9M
Local/LD Market Share 96%/78%
Total Internet Subscribers 821K (469K high-speed)
Fibre IP backbone national
Strategic alliance Verizon Communications
1July 29,2003 guidance
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Mobility segment
31.5M: Cdn. PopulationLicensed POPs
28.3M (90%)Network coverage
Verizon Wireless & NextelStrategic relationships
best in CanadaSpectrum position
only one in CanadaiDEN Mike network
coast to coast 1XCDMA footprint
$750 to 775MEBITDA (2003E)1
$2.25 to 2.3BRevenue (2003E)1
3.2MSubscribers
Leading Canadian national wireless provider
1July 29,2003 guidance
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evolving our businessdelivering on our strategy
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tracking against strategic imperatives 2000-2003
Provide integrated solutions
Partner, acquire & divest as necessary
Invest in internal capabilities
Build national capabilities
Focus on growth markets
Going to market as one team
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build national capabilities
TELUS’ infrastructure – 2000
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national transformationJan 2000 Jun 2003
TELUS Communications
Ont/Que cities 3 29
Co-locations 2 87
Customer POPs 5 165
Kms lit fibre 0 11,800
Platform Stentor TELUS
Network Circuit-based Next Generation
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Ap
psAIN
Applications
IP Internetworking
SONET GE
Ap
p.
Serv
ices
Man
ag
ed
IP In
tern
et
Vid
eo
Voic
e
VP
Ns
SONETATM
Voic
e
Vid
eo S
wit
ched
D
ata
Cir
cuit
Data
Managed
IP IP
Inte
rnet
TDM
IP
DWDM/FiberDWDM/Fiber
Switching
transforming to NGN architecture
stovepipe solutions being replaced by applications riding on ubiquitous IP Infrastructure
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national transformation
TELUS Mobility
PoPs covered 7M 28M
Mike (iDEN) - 24M
Generation 1G 2.5G
Jan 2000 Jun 2003
TELUS Communications
Ont/Que cities 3 29
Co-locations 2 87
Customer POPs 5 165
Kms lit fibre 0 11,800
Platform Stentor TELUS
Network Circuit-based Next Generation
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build national capabilities
TELUS’ national infrastructure - 2003
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12ME Q2-03
TELUSCommunications
$7.1B
Local voice
Wireless
Data31%
31%
19%5%Other
14%LD
TELUSMobility
wireless & data revenues from 28% to 50% in 3 years
focus on growth markets
consolidated revenue profile evolution
12ME Q2-00
TELUSMobility
TELUSCommunications
$5.7B
43%
18%
10%
6%Other
LD
Wireless
Local voice
23%
Data
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going to market as one team
strong brand identity established
consistent branding across TELUS
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16
17
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TV advertising
corporate priorities2003
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2003 corporate priorities
Delivering operational efficiency
Driving improved levels of customer service
Enhancing wireless performance
Improving Central Canada profitability
Reaching a collective agreement
Strengthening financial position
On track?
deferred Feb/04
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Achieved $199M in OEP savings YTD 2003
Cumulative annual savings of $349M to June 30, 2003
On track for cumulative savings of $450M in 2003
Cumulative 2004 estimated annual target of $550M
June 2003Actual
2002/03E
6,500
6,050
Staff Reductions
driving $300M in incremental cost reductions in 2003
delivering operational efficiency (OEP)
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enhancing wireless performance
Source: Company reports
significant premium to closest competitor maintained
TELUS Mobility
Rogers AT&T
BCE Wireless
Microcell
$54
$39$44$45
YTD Q2-02
YTD Q2-03 $55
$46$46
$38
continued leadership in ARPU
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enhancing wireless performance
BCE Cingular
2.4%
2.2%
1.6%
2.2%1.7%
1.4% 1.3%
TELUSVerizonAT&T Rogers Nextel
3.3%
SprintPCS
Microcell
3.0%2.6%
T-Mobile
TELUS’ Q2 churn rate is best-in-class
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YTD market share of wireless net additions1
Bell
Rogers AT&T
TELUS Mobility39%
Other
TELUS Mobility continues to capture healthy share of industry net additions
Aliant
1 Includes Microcell subscriber lossesSource: Company reports, and analyst estimates
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9%
3 to 4
Canada versus US wireless comparison
Sources: TELUS estimates. Cdn. Statistics - Company Reports; US Statistics - Morgan Stanley1 Projected capex as a % of forecast total revenue. 2 Projected EBITDA less projected Capex divided by projected network revenues
3 Projected wireless penetration gain divided by # of carriers in market.
Penetration gain/carrier3
No. of carriers in market
Mkt penetration/cov. POPs
(EBITDA – Capex) / net. rev2
Capex intensity1
Annual EBITDA growth rate
EBITDA margin
0.5%
6 to 8
53%
11%
21%
18%
31%
US Avg 2003
Canadian wireless industry is comparatively stronger
0.9%
41%
17%
28%
30%
Cdn Avg 2003
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how does TELUS Mobility measure up?
Sources: TELUS estimates. Cdn. Statistics - Company Reports; US Statistics - Morgan Stanley1 Projected capex as a % of forecast total revenue. 2 Projected EBITDA less projected Capex divided by projected network revenues
3 Projected wireless penetration gain divided by # of carriers in market. For TELUS, projected net adds divided by projected covered POPs
Penetration gain/carrier3
No. of carriers in market
Mkt penetration (cov. POPs)
(EBITDA – Capex) / net. rev2
Capex intensity1
Annual EBITDA growth rate
EBITDA margin
0.5%
6 to 8
53%
11%
21%
18%
31%
US Avg 2003
0.9%
3 to 4
41%
9%
17%
28%
30%
Cdn Avg 2003
TELUS Mobility is best-in-class operating in fundamentally stronger 3+ player Canadian wireless industry
1.2%
-
12%
19%
16%
43%
34%
TELUS 2003 guidance
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non-ILEC traction with 7 consecutive quarters of EBITDA improvement
improving Central Canada profitability
17 16 2031 38
60
105
133117 123
136152
141 139
(6)(23)(30)(36)(37)
(11)(24) (28) (33) (35) (36) (38) (18) (15)
Q1-00 Q2-00 Q3-00 Q4-00 Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03
Revenue EBITDA
non-ILEC
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reaching a collective agreement
Federal conciliators announced conclusion of global review between TELUS & the TWU on July 16
60-day negotiating period to begin with exchange of written proposals on Nov. 14
If agreement not reached at end of 60-day period, 21-day ‘cooling off’ period will follow
Process not expected to conclude until early Feb. 2004
TELUS committed to reaching agreement that balances the needs of all parties
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strengthening financial position
significant growth in profitability driven by excellent wireless performance & wireline efficiencies
1 Excludes YTD payments under restructuring & workforce reduction initiatives of $202M & $77M for 2003 and 2002, respectively
148M$166M$18MNet Income
$0.42
$0.46$0.04EPS
2.0%$3.51B$3.45BRevenue
15%$1.39B$1.21BEBITDA1
YTD Q2-03 changeConsolidated review YTD Q2-02
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strong margin expansion evident across both business segments
strengthening financial position
38%
26%
34%
41% 40%35%
June YTD EBITDA Margin (total revenue)
Communications ConsolidatedMobility2002 2003 2002 2003 2002 2003
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strengthening financial position
1 Ratio of capex to total revenues
2 EBITDA less capex, cash interest, cash taxes, cash dividends; excludes YTD payments under restructuring & workforce reduction initiatives of $202M & $77M for 2003 and 2002, respectively
over $600M improvement in free cash flow generation
$606M$445M($161M)Free Cash Flow2
13pts15%28%Capex Intensity1
46%$513M$955MCapex
YTD Q2-03 changeConsolidated review YTD Q2-02
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deleveraging
Q2-02 Q2-03 Target
Net Debt : Capital 58.7% 55.1% 50% long term
Net Debt : EBITDA 3.6X 3.0X 3.0X in Dec 2003
<2.8X in Dec 2003
revised net debt : EBITDA guidance <2.8X
revised:
2003 deleveraging guidance achieved 6 months early
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credit rating update – changes in 2003
April 16 – Moody’s outlook to ‘stable’ from ‘negative’
May 28 – Fitch outlook to ‘stable’ from ‘negative’
June 16 – DBRS trend to ‘stable’ from ‘negative’
August 8 – S&P outlook to ‘stable’ from ‘negative’
Sept. 12 – Moody’s outlook to ‘positive’ from ‘stable’
credit ratings lagging indicators of improvement
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revised 2003 financial outlook – consolidated
2003 guidance implies significant improvement in profitability, cash flow & leverage
$1.2 to 1.3B$1.7BCapex
$800M to 1.0B
$0.80 to 0.90
$2.75 to 2.85B
$7.1 to 7.2B
updated 2003 guidance1
($26M)
($0.75)
$2.5B
$7.0B
2002 actuals
EPS
Free Cash Flow
EBITDA
Revenue
1 July 29, 2003
change
$400 to 500M
$826M to 1.0B
$1.55 to 1.65
9 to 13%
1 to 3%
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strengthening financial position
debt reduction ahead of plan($M) original 2003
targets3
revised 2003 guidance4
EBITDA1 $2,700 to 2,800 $2,750 to 2,850
Capex ~(1,500) (1,200 to 1,300)
Cash Interest ~(700) ~(630)
Net Cash Tax Recovery (25) to 175 ~165
Cash Dividends ~(175) ~(185)
Free Cash Flow $300 to 600 $800 to 1,000
Working Capital/Other ~0 ~220
Share Issuance2 (non-public) ~70 ~80
Cash Restructuring Costs ~(275) ~(300)
Cash available for debt reduction $100 to 400 $800 to 1,000
1 Before restructuring and workforce reduction costs 3 Dec. 16, 20022 Dividend reinvestment & employee share plans 4 July 29, 2003
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1 EBITDA less capex, cash interest, cash taxes, cash dividends; excludes restructuring & workforce reduction costs
2 FCF Yield based on top end of range
2001 2002
2003E
$(1.35)B
$(26)M
$800 to 1,000M
improving free cash flow1
2003E FCF yield2 is 11.6% on common shares &12.4% on non-voting shares
investor considerations
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2003 outlook leading N.A. telecom performance
11% 5%
3%
(18)%
(13)%
TELUS BCE
Sprint
MTS
SBC AT&TAliant
(5)%
VerizonBell
South
Projected 2003 EBITDA Growth Rates
Notes: TELUS data based on 2002 actual results & average of 2003 guidance Other 2003 estimates provided by Bloomberg and analyst estimates
(5)%
As at September 29, 2003
(3)% (4)%
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0%
SBC
Projected 2003 Cash Flow (EBITDA - Capex) Growth Rates
12% 9% 9%
21%
(14)%
(9)%
2%
89%
TELUS BCE SprintMTS BellSouth
Verizon AT&T
Aliant
Notes: TELUS data based on 2002 actual results & average of 2003 guidance Other 2003 estimates provided by Bloomberg and analyst estimates
2003 outlook
leading N.A. telecom performance
As at September 29, 2003
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continuing operational execution
TELUS Communications – improving efficiencies – non-ILEC on-track
TELUS Mobility – executing ahead of plan
Improved 2003 cash flow & earnings outlook
Generating significant cash flow improvement
Continued material debt & leverage reduction
delivering on our strategy
questions?
