Darren Entwistle Member of the TELUS Team Victoria Financial Investment Forum Victoria, BC Jan. 10,...
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Transcript of Darren Entwistle Member of the TELUS Team Victoria Financial Investment Forum Victoria, BC Jan. 10,...
Darren EntwistleMember of the TELUS Team
Victoria Financial Investment Forum
Victoria, BCJan. 10, 2004
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
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 $950M to 1.05 billion
Operating segments: wireline: TELUS
Communications
wireless: TELUS Mobility
Enterprise value: ~$17 billion
Daily trading3: 1.2 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
4
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 Lines2 4.9 million
Local/LD Market Share 96%/78%
Total Internet Subscribers2 850,000 (516,000 high-speed)
Fibre IP backbone national
Strategic alliance Verizon Communications (largest US telco)
1 Targets announced December 18, 2003
2 As at September 30, 2003
5
Mobility segment
31.5 million: Cdn. PopulationLicensed POPs
29.1 million (92%)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
3.3 millionSubscribers2
Leading Canadian national wireless provider
1 Targets announced December 18, 2003
2 As at September 30, 2003
6
evolving our businessdelivering on our strategy
7
tracking against strategic imperatives 20002003
Provide integrated solutions
Partner, acquire & divest as necessary
Invest in internal capabilities
Build national capabilities
Focus on growth markets of data & wireless
Going to market as one team
… to unleash the power of the Internet to deliver the best solutions to Canadians at home, in their workplace and on the move.
8
build national capabilities
TELUS’ infrastructure – 2000
9
national transformation
TELUS Mobility Jan 2000 Sep 2003
PoPs covered (millions) 7 29
Mike (iDEN) (millions) - 24
Generation 1G 2.5G
10
TELUS Mobility Jan 2000 Sep 2003
PoPs covered (millions) 7 29
Mike (iDEN) (millions) - 24
Generation 1G 2.5G
TELUS Communications
Ont/Que cities 3 35
Co-locations 2 86
Customer POPs 5 205
Fibre lit (km) 0 11,800
Platform Stentor TELUS
Network Circuit-based Next Generation
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 for over 1,200 branches Canada wide
NGN with IP VPN security & enhanced services cannot be matched by competitors
IP-One (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
Revenue (mil.)
EBITDA (mil.)
TELUS wireline operations in Ont. & Que. have significant scale & are generating profitable growth
1 Includes TELUS Quebec & non-ILEC operations except 2000
build national capabilities
Central Canadian wireline1 growth
~$900~$840
~$145~$115
2003E 2004E
$4
Jan. 2000
15
investing in our western franchise High-speed Internet launched in 208 communities in BC & AB
1X wireless data launched as complete overlay on digital network
$1.8B investment to enhance BC network infrastructure
No other private sector company has made such a substantial investment in infrastructure
16
$5.7B
12ME Q3-03
$7.1B
12ME Q2-00
Local Voice
Wireless
Data31%
32%
19%4%Other
14%LD
data & wireless revenues from 28% to 51% in ~3 years
focus on growth markets of data & wireless
consolidated revenue profile evolution
43%
18%
10%
6%Other
LD
Wireless
Local Voice
23%
Data
17
410
215
~560
2002 2003E2001
131
195
~150
Subscriber base
Net additions(000s)
market share increases from 10% to 38%
(ADSL) high-speed Internet net additions targets
~125
~685
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
~400
~3,395Subscriber base
Net additions
2002 2003E2001 2004E
~3,770 to 3,820
375 to 425
1,236
2000
151
19
wireless growth & performance
TELUS Mobility continues to capture healthy share of industry net additions
Source: Company reports, and analyst estimates 1 Includes Microcell subscriber losses
TELUSMobility
34%1
YTD Q3-03 market share of wireless net additions1
BCE Mobility
Rogers Wireless
Microcell
20
Source: Company reports
20% premium with positive industry-wide trend
TELUS Mobility RogersBCE Wireless
$55
$45$46
YTD Q3-02 YTD Q3-03
$57
$47$47
continued leadership in rev. per customer (ARPU)
wireless growth & performance
21
BCE Cingular
2.6%
2.4%
1.4%
2.0% 1.9%
1.4% 1.4%
TELUSVerizonAT&T Rogers Nextel
3.1%
SprintPCS
Microcell
3.1%2.7%
T-Mobile
TELUS’ YTD churn rate remains best-in-class in NA
YTD Q3-03 churn (monthly deactivations)
wireless growth & performance
22
TELUS Mobility is Canada’s premium wireless operator Revenue growth 17% ARPU $57 Churn 1.4% EBITDA growth 54% EBITDA margin 36% Cash flow2 $398M
TELUS Mobility results creating significant shareholder value
Leader in
North America
1 YTD Q3-032 Defined as EBITDA less capex
wireless growth & performance
23
going to market as one team
Strong brand identity across TELUS
Dedicated to Community Investment
24
TELUS Mobility TV ad
25
TELUS Community Investment
TELUS is an
$10M donated in each of 2002 & 2003
Community Investment Programs in BC receive $4M each year
we believe we have the ability and responsibility to positively influence the quality of economic, social and physical life in communities we serve
26
Focus areas include: Education / youth – Kits for Kids, Koats for Kids Emergency aid – Fire Aid in Okanagan Social justice – feeding & supplying hygiene for
homeless Health – supporting many hospitals and programs
(BC Children’s Hospital, Courage to Come Back)
Arts – Victoria Opera, VSO, etc. Crime prevention – 9-1-1 Call simulator program &
Rock Solid
Environment – TELUS named Canada’s most environmentally friendly company
TELUS Community Investment
27
TELUS supports
28
TELUS supports
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TELUS supports
Carmanah Forestry Society
LOAVES AND FISHES FOOD BANK FOUNDATION
FIREFIGHTERS' BURN FUND OF GREATER
VICTORIA
Victoria Epilepsy and Parkinson's
Centre Society
30
Our Values in Action - video
corporate priorities2003
32
2003 TELUS corporate priorities
Enhancing wireless performance
Improving Central Canada profitability
Delivering operational efficiency
Improving levels of customer service
Reaching a collective agreement
Strengthening financial position
On track?
deferred Feb/04
33
$300M target for incremental savings in 2003
$279M / 93% realized at Q3 YTD
$100M target for incremental savings in 2004
Cumulative annual savings target of $450M in 2003, and $550M in 2004
on track to deliver targeted efficiency savings
2003 priority
delivering operational efficiency
2002/03E
6,5006,050
Staff Reductions
Sep 2003Actual
6,000
34
delivering operational efficiency
efficiency gains in both business segments result in overall 29% productivity improvement
$190K
$90K
Communications ConsolidatedMobility
$128K$108K
$125K
$97K
Q3-02 Q3-03 Q3-02 Q3-03 Q3-02 Q3-03
annualized EBITDA per full time equivalent employees ($ 000s)
48%
20% 29%
35
First TimeTrouble Resolution
77%
System stabilization
2003 priority improving levels of 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%
36
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
improving levels of customer service
37
4 of 19 CRTC indicators below standard in September
Nov. & Dec. results demonstrate strong upward trend
YTD results generally improved compared to 2002
Service Indicator 2002Sept
2003
Nov
2003
Current
TrendStandard
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%
improving levels of customer service
38
Process November 14 early February 2004
working with federal conciliators
TELUS abiding by media info blackout until January 12 (subject to responding, as appropriate, to developments)
TWU seeking strike mandate by end of January
TELUS intends to table final offer by end of January
legal work disruption not possible until February
2003 priority reaching a collective agreement
objective is to improve flexibility & productivity to better meet customer needs
39
2003 priority strengthening financial position
strong profit expansion evident across both business segments
EBITDA Profit Margin (total revenue) YTD Q3-03
38%
Communications ConsolidatedMobility
27%
36%
41% 40%
36%
Q3-02 Q3-03 Q3-02 Q3-03 Q3-02 Q3-03
40
2003 consolidated outlook
2003 guidance implies significant improvement in profitability, cash flow & leverage
~$1.25B$1.7BCapex
$0.85 to 0.95
$2.8 to 2.85B
$7.1 to 7.2B
updated 2003 guidance1
($0.75)
$2.5B
$7.0B
2002 actuals
EPS
EBITDA
Revenue
1 Re-affirmed on Dec. 18, 2003
2 Calculated on midpoint of guidance
change2
~$450M
$1.65
12%
2%
41
20
15
12
9
5
(3) (4) (4) (5)(6)
(16)(18)
3.5
(0)
22
13
Telia FT DT TELUS KPN MTS BCE Telstra Nippon
2003E global telecom performance
As at December 30, 2003
Notes: TELUS data based on 2002 actual results & average of 2003 guidance Other 2003 estimates provided by Bloomberg and analyst reports
%projected EBITDA % growth rates
BT PCCW VZ AT&TSBCAliant Sprint BLS
42
92
61
28
1814
4 4 3 2
(1)
(9) (10) (11)
(18)
27.6
7
57
TELUS Telia FT DT BCE Sprint MTS Aliant Nippon BLS Telstra KPN
2003E global telecom performance
As at December 30, 2003
Notes: TELUS data based on 2002 actual results & average of 2003 guidance Other 2003 estimates provided by Bloomberg and analyst reports
%
BT PCCW VZ AT&TSBC
projected Cash Flow (EBITDA - Capex) % growth rates
43
2001 2002
2003E
$(1.42)B
$(275)M
$950M to 1.05B
improving free cash flow (FCF)1
improving FCF leading to significant debt reduction
2004E
$615 to 665M
1 EBITDA (incl. restructuring & workforce reduction costs) less capex, cash interest, cash taxes, cash dividends, & cash restructuring payments and consistent with CICA recommendations, 2004 EBITDA further includes the non-cash stock compensation expense applied on a go-forward basis. Free Cash Flow only includes cash paid for non-cash stock compensation expense.
44
2003 credit rating update
Dec.18 – Moody’s rating review for ‘possible upgrade’
Sept. 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
45
28%$1.05 to 1.25EPS
7%
implied change
EBITDA2
Revenue
2004 targets
$2.95 to 3.05B
$7.45 to 7.55B
2004 targets reflect strong earning & cash flow growth
2004 consolidated targets summary1
1 Targets announced on December 18, 20032 Includes ~$30M in restructuring & workforce reduction costs 3 EBITDA less: capex, cash interest, cash taxes, cash dividends, cash restructuring & stock compensation
56%Free Cash Flow3 $950M to 1.05B
5%
Telecom leader in
North America
46
TELUS v. North American Wireless & World Telcom Equity Indices(Assuming $100 invested January 8, 2002 for 24 months)
25
50
75
100
125
Jan-
02
Mar
-02
May
-02
Jul-0
2
Sep
-02
Nov
-02
Jan-
03
Mar
-03
May
-03
Jul-0
3
Sep
-03
Nov
-03
Jan-
04
S&P Supercomposite Wireless Index
MSCI World Telecom Index
TELUS
MSCI World Telecom Index
-12%
S&P Wireless Index -17%
TELUS+18%
share price performance
Jan 8/2002 Jan 8/2004
$118
$88$83
Note: MSCI = Morgan Stanley Capital International World Telecom Index
investor considerations
48
8.6
7.1 6.9
3.4 3.42.2
(0.5)(1.1) (1.1)
(2.1) (2.5)
(6.6)
(11.5)
6.9
2.10.8
0.2
Telstra TELUS DT FT BCE MTS Telia BT PCCW Nippon
2004E global telecom performance
As at January 5, 2004
Notes: TELUS data based on average of 2003 guidance & 2004 targets Other estimates provided by Bloomberg and analyst reports
%
projected EBITDA % growth rates
BLS SprintAliant VZ KPN AT&TSBC
49
14.5
7.7
5.0 5.0 4.6
2.6
0.7 0.7
(2.5)(3.4)
(4.1)
(6.1)(7.3)
(12.4)
0.8
6.2
TELUS Telstra MTS BCE FT Nippon DT BLS Aliant Sprint
2004E global telecom performanceprojected Cash Flow (EBITDA - Capex) % growth rates
As at January 5, 2004
Notes: TELUS data based on average of 2003 guidance & 2004 targets Other estimates provided by Bloomberg and analyst reports
%
BT TeliaVZ KPN AT&TSBC
50
continuing operational execution
2003 outlook for earnings and cash flow on-track1
2004 targets reflect:
healthy wireless & high-speed Internet growth
good EBITDA growth despite regulatory impacts
strong 28% EPS growth
global telecom-leading cash flow growth
continued strong debt reduction
delivering on our strategy
1 As confirmed on December 18, 2003
questions?