2003 guidance update & 2004 targets Investor Conference Call & Webcast Robert McFarlane EVP & Chief...

2003 guidance update &2004 targets

Investor Conference Call & Webcast

Robert McFarlaneEVP & Chief Financial Officer

December 18, 2003

2

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

3

2003 consolidated outlook

on-track?

$1.2 to 1.25BCapex

$900M to 1B

$0.85 to $0.95

$2.8 to 2.85B

$7.1 to 7.2B

Oct-03 guidance1

Free Cash Flow3

EPS

EBITDA2

Revenue

1 Guidance given on October 31, 2003 2 Earnings before Interest, Taxes, Depreciation and Amortization - excludes est. $25M in restructuring costs

3 EBITDA less: capex, cash interest, cash taxes and cash dividends

latest outlook consistent with previous guidance

high end

4

2003 TELUS Communications outlook

Oct-03 guidance1

on-track?

Revenue $4.8 to 4.85B

Non-ILEC approx. $575M approx. $555M2

EBITDA $2.025 to 2.05B Non-ILEC2 approx. ($30M) Capex $850 to 875M high end

High-speed net adds approx. 150K

wireline outlook approximates previous guidance

1 Guidance given on October 31, 20032 Note: 2003 impact of divestitures - approx. $20M and $6M on revenue and EBITDA, respectively.

close / low-end

5

2003 TELUS Mobility outlook

on-track?

$350 to 375MCapex

approx. 400K

$775 to 800M

$2.3 to 2.35B

Oct-03 guidance1

wireless net adds

EBITDA

Revenue

wireless outlook at top-end of previous guidance

1 Guidance given on October 31, 2003

high end

6

2003 TELUS corporate priorities

Delivering operational efficiency

Enhancing wireless performance

Improving Central Canada profitability

Strengthening financial position

Improving levels of customer service

Reaching a collective agreement

On track?

deferred Feb/04

on-going

7

First TimeTrouble Resolution

77%

System stabilization

2003 TELUS corporate priorities improving customer service

0%

20%

40%

60%

80%

100%CRTC Standard = 80%

Even with staff reduction, servicelevels improvedby 30%

Over achieving CRTC standard

New trouble management system introduced

Natural Disasters(Fires, Floods, Power Outage)

Trinity Cable Cut

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Repair answer (611) - % calls answered < 20 sec.

Repair AnswerContact Centres

4to2

Repair AnswerStaff

22%

8

0%

20%

40%

60%

80%

100%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Operator Services - % calls answered < 20 sec.

High volume in other care call centres

Forest Fires in BC/AB

Even with staff reduction TELUS still over achieved on CRTC standard.

CRTC Standard = 80%


Contact Centres19 to 5

Staff

30%40%

increase in productivity

9

4 of 19 CRTC indicators below standard in September

November results demonstrate strong upward trend

YTD results generally improved compared to 2002


Service Indicator 2002Sept

2003

Nov

2003Trend Standard

Access to Business Office 72% 60% 82% 80%

Urban Out of Service Cleared 24 hrs

Rural Out of Service Cleared 24 hrs

75%

67%

64%

68%

72%

71%

80%

Urban Repair Appointments Met

Rural Repair Appointments Met

90%

85%

84%

75%

91%

78%

90%

Access to Repair Bureau 78% 68% 90% 80%

10

Process Nov. 14 early Feb. 2004

working with federal conciliators

TELUS abiding by info blackout until Jan. 12 (subject to responding, as appropriate, to developments)

next meeting on Jan. 5

TWU announced plan to seek strike mandate in Jan.

Legal work disruption not possible until after Feb. 2

2003 TELUS corporate priorities

labour relations

2004 priorities & targets

12

key priorities for 2004

Reach collective agreement reflecting competitive dynamics

Ensure sustainment and enhancement of OEP benefits

Preserve and grow brand value by demonstrating superiority in customer service and reliability

Excel in delivery of national deals (e.g. TD Bank)

Drive towards a leadership position in Internet access

Continue to develop building blocks for accelerating growth in IP Solutions

Maintain leadership position in Mobility

13

economic growth consistent with Conference Board of Cda

no workforce disruption

continued softness in wireline demand

high-speed Internet industry sub growth of 15%

wireless penetration growth of 3.5 to 4.0%

$45M of stock compensation expense for stock options & Restricted Share Units (RSUs)

$30M of restr. & workforce reduction costs

average tax rate of ~35%

average shares outstanding 354M

2004 guidance considerations

14

$1.05 to 1.25EPS

implied change12004 target

revenue & earnings growth driven by strong wireless performance

2004 consolidated targets – revenue & earnings

7%

5%

EBITDA2

Revenue

$2.95 to 3.05B

$7.45 to 7.55B

1 Calculated as mid-point estimates for 2003 versus 2004

2 Includes $30M in restructuring & workforce reduction costs ($25M in 2003) and $45M in stock compensation expense for stock options and RSUs, in 2004.

28%

15

~2,8251

2,950 to

3,050

incremental change

~2,800

20

42

217 to 317

1 Mid-point of 2003 guidance range, excludes restructuring & workforce reduction costs

2003E 2004E2003Eadj.

growth &

productivity

price cap

equity comp.

2004 consolidated targets – EBITDA continuity

5

25

restr.costs

restr.costs

($M)

16

~0.901

1.05 to 1.25

incremental change

~0.70

0.07 0.05

0.23 to 0.43

1 Mid-point of $0.85 to $0.95 guidance range

2003E 2004E2003Enormal.

EBITDA growth

Dep’n & amort.

Financing costs &

other

2004 consolidated targets – EPS continuity

~0.20

Settlement of tax

matters in ‘03

($)

17

($M) ~$405M

~$315M

2003E 2004E

net income (implied from mid point EPS)

significant and rising net income

29%

18

2%

implied change

Capex

2004 target

approx. $1.225B

2001A1 2003E

Capex intensity2

32%

~17%

2002A

24%

1 2001A capex excludes $356M for spectrum, 37% if included2 Ratio of capex to total revenues

downward trend in capex intensity ratio continues

2004 consolidated targets - capex

2004E

~16%

19

2004 consolidated targets – free cash flow2004E($M)

$750 to 850Cash avail. for net debt & A/R secur. reduction

950 to 1,050

35

~(200)Working capital/other

Free Cash Flow (2004 target)

~(180)Cash dividends

105Net cash tax recovery

~(650)Net cash interest

~(1,225)Capex

$2,950 to 3,050EBITDA (incl. rest. & workforce reduction costs)

Stock compensation (non-cash portion)

~(85)Cash restructuring pmts (in excess of 2004 expense)

1,000 to 1,100Free Cash Flow (2003 target methodology)

20

<2.5x in Dec ’04<2.7x 3.3x3.4xNet Debt : EBITDA1,2

56.6%

2002

~53%

2003E

Net Debt : Capital1

new targets

200145 to 50% long-term55.5%

revised leverage policy targets reflect even greater leverage drop than previously expected

2004 consolidated targets – leverage

<2.2x long-term

1 2004+ net debt reflects the adoption of new accounting rules for the classification of convertible debentures as debt

2 2004+ EBITDA inclusive of restructuring & workforce reduction costs and stock compensation

21

(26)

1,080940

650

~1,300

191

2002 2003E 2004E

TELUS

BCE

TELUS vs. BCE free cash flow1

TELUS generating similar FCF as Bell on ~1/3 of the revenue, implying superior TELUS yield

1 EBITDA excluding restructuring, less: capex, cash interest, cash taxes and cash dividendsSource: Midpoints of TELUS' 2003E and 2004E guidance. Analyst estimates for 2003 & 2004 BCE.

Incl. Bell

West put

~1,300($M)

22

14.5%

8.77.7

5.0 4.9 4.8

0.9 0.7 0.3

(1.1)(2.3) (2.4)

(4.7)

(12.6)

3.0

8.6

TELUS FT BCE MTS Telstra DT Nippon BT BLS Aliant KPN

global telecom performance

As at December 10, 2003

Notes: TELUS data based on midpoint of 2003 guidance & 2004 targets Other 2003 & 2004 estimates provided by Bloomberg and analyst reports

Sprint Telia VZ SBC

projected 2004E Cash Flow (EBITDA - Capex) % growth rates

AT&T

23

1%

-

implied change

EBITDA1

Revenue

2004 target

$1.975 to 2.025B

$4.8 to 4.85B

operational efficiencies offsets include share compensation and price cap impact

2004 Communications segment

revenue & EBITDA targets

1 Includes ~$30M in restructuring & workforce reduction costs

24

10%approx. $610MNon-ILEC revenue

implied change 2004 target

continued non-ILEC growth in Central Canada focused on data and IP in the business market

2004 Communications segment non-ILEC targets

527 ~5551

335

2001A 2002A 2003E

~610

2004E

($M)

1 Adjusted to reflect $20M revenue impact of divestitures

25

$35Mapprox. $5MNon-ILEC EBITDA

implied change 2004 target

non-ILEC to achieve positive EBITDA in 2004

2004 Communications segment non-ILEC targets

~(30)

(146)

(107)

2001A 2002A 2003E

2004E

~5

($M)

26

~$900M~$840M

~$145M~$115M

2003E 2004E

Revenue

EBITDA

Central Canadian wireline operations1

TELUS ILEC & non-ILEC operations in Ont. & Que. generating profitable growth

1 Includes TELUS Quebec & non-ILEC operations

27

1%$1.1 to 1.15BEBITDA - Capex

-approx. $875MCapex


capex intensity being maintained below 20%

2004 Communications segment capex targets

30%

2001A 2002A 2003E 2004E

24%

~18% ~18%

Capex intensity1

1 Ratio of capex to total revenues

28

410

215

~560

2002A 2003E2001A

131

195

~150

Subscriber base

Net additions

(000s)

125K target reflects reduced market growth & majority share of net adds

2004 Communications segment high-speed Internet net additions targets

~125

~685

2004E

29

15%

implied change

Revenue

2004 target

$2.65 to 2.7B

revenue growth driven by continued strong subscriber growth & premium ARPU

2004 Mobility segment revenue targets

30

(000s)

wireless subscriber base growth of 11 to 12%

2004 Mobility segment subscriber net additions targets

2,996

2,578

418 418

~400

~3,395Subscriber base

Net additions

2002A 2003E2001A 2004E

~3,770 to 3,820

375 to 425

31

27% $975M to 1.025BEBITDA

15%

implied change

Revenue

2004 target

$2.65 to 2.7B

significant EBITDA growth driven by strong revenue growth and disciplined cost containment

2004 Mobility segment

EBITDA targets

32

North American wireless comparison 2004E EBITDA Growth

Source: Bloomberg & analyst reports, except TELUS (midpoint of 2004 targets)

27%

17

15 13

119

5

3

15

9

TELUSMobility

CDN Avg BellMobility

Nextel VerizonWireless

Sprint PCS RogersWireless

US Avg AT&TWireless

Cingular

33

North American wireless comparison2004E EBITDA Margins (%)


39%

36 35

33 31

28 28

38 37

28

Nextel BCEWireless

TELUSMobility

CDN Avg VerizonWireless

RogersWireless

US Avg Cingular Sprint PCS AT&TWireless

34

58%$625 to 675MEBITDA - Capex 7%approx. $350MCapex


substantial cash flow generation from strong EBITDA growth and continued capex discipline

2004 Mobility segment

capex targets

2001A1 2002A 2003E 2004E

34%

23%

~16%~13%

Capex intensity1

1 Ratio of capex to total revenues 2 Excludes $356M for spectrum

35 Source: Bloomberg & analyst reports, except TELUS (midpoint of 2004 targets)

North American wireless comparison2004E capex intensity (%)

18%

17 16 16

15 15

13

17

15

VerizonWireless

Cingular RogersWireless

US Avg AT&TWireless

Sprint PCS CDN Avg Nextel TELUSMobility

361 EBITDA less capex divided by total revenue


North American wireless comparison2004E cash flow yield1 (%)

24% 24

17 16

1312

11

18

12

Nextel US Avg VerizonWireless

RogersWireless

CDN Avg Sprint PCS AT&TWireless

CingularTELUSMobility

37

2%approx. $1.225BCapex

28%$1.05 to 1.25EPS

7%

implied change

EBITDA1

Revenue

2004 targets

$2.95 to 3.05B

$7.45 to 7.55B

2004 targets reflect strong earning & cash flow growth

2004 consolidated targets summary

1 Includes ~$30M in restructuring & workforce reduction costs 2 EBITDA less: capex, cash interest, cash taxes, cash dividends, cash restructuring & stock compensation

56%Free Cash Flow2 $950M to 1.05B

5%

38

2003 outlook for earnings and cash flow on-track

2004 targets reflect:

healthy wireless & high-speed Internet subscriber expansion

good EBITDA growth despite negative accounting & regulatory impacts

strong EPS growth

global telecom-leading cash flow growth

new leverage policy targets & continued strong leverage reduction

summary

questions?

investor relations

1-800-667-4871telus.com [email protected]

2003 guidance update & 2004 targets Investor Conference Call & Webcast Robert McFarlane EVP & Chief...

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