Q4 2006 TELUS investor conference call Robert McFarlane EVP & Chief Financial Officer February 16,...

Q4 2006 TELUS investor conference call

Robert McFarlane • EVP & Chief Financial Officer

February 16, 2006

26%

106M144MCapital expenditures

33% 432M326MEBITDA1

16%$1.02B$877MRevenue

ChangeQ4-06Q4-05

Wireless segment – financial results

2006 – fourth quarter wireless review

Record fourth quarter EBITDA

1 Q4-06 includes $3M in restructuring & workforce reduction costs

2

Total wireless subscribers

Postpaid 81%

Prepaid 19%

Net additions

Total subscribers up 12% and strong postpaid mix

3

5.1 million total

4.1M

977K

Wireless subscriber results

Q4-05 Q4-06

130K143K

235K

182K

61%71%

92K

52K

Wireless ARPU growth

ARPU growth driven by 94% increase in data

4

Data ARPU

Q4-05 Q4-06

$62.54$64.50

$3.17$6.16

59.37 58.34

9 bps1.33%1.42%Blended churn

3.1%$64.50$62.54ARPU

ChangeQ4-06Q4-05

TELUS subscriber economics improving & remain best in class

Profitable growth strategy

5

$4850$4404Lifetime revenue

3.0%$436$449

COA

9.0%10.2%COA/lifetime revenue 120 bps

10%

2006 wireless results compared to original targets

approx. $450MCapex

EBITDA

Revenue

$1.75B

$3.86B

Met or exceeded three of four targets

6

2006 actual results

2006 originaltargets1

Wireless net adds > 550K

1 Provided on December 16, 2005

$1.7 to $1.75B

$3.775 to $3.825B

535K

$427M

met or exceeded

21%74M61MOther

8.8%435M400MData

6.7%198M212MVoice – Long Distance

1.7%$528M$537MVoice – Local

ChangeQ4-06Q4-05

External Revenue $1.21B $1.23B 2.0%

Wireline revenue profile

7

Solid data growth offsets erosion in local and LD

2006 – fourth quarter wireline review

1.1 million total

Total Internet subscribers

High-speed83%

Dial-up17%

High-speed Internet subscriber growth

27K

44K

High-speed Internet net additions

8

Q4-05 Q4-06

917K

194K

Continued strong net addition growth

34%309M230MCapital expenditures

9.2%447M409MEBITDA1

2.0%$1.23B$1.21BRevenue

ChangeQ4-06Q4-05

Wireline segment – financial results

9

1 Includes $36M and $5M in wireline restructuring costs in Q4-05 and Q4-06 respectively;

Q4-05 EBITDA includes $50M net expense impact of labour disruption.

34%309M230MCapital expenditures

Labour disruption impact

9.2%$447MEBITDA (reported)

% ChangeQ4-06Q4-05

Wireline EBITDA normalization

10

-

5M36M

$409M

Restructuring costs

50M

Adjusted EBITDA down 4.3%

EBITDA (adjusted for cost of sales related to FFH) 4.3%

EBITDA (subtotal)1 $494M $452M

Non-ILEC revenue and EBITDA

11

Central Canada Non-ILEC profitability continues to improve

Q4-05 Q4-06

165 172

Q4-05 Q4-06

7.111

EBITDARevenue($M)

12

Network access line results

Increased residential losses due to increased competition, partially offset by business line growth

% of network access lines lost, YoY

Q4-05

-2.4%

Q1-06

-2.7%

Q2-06

-2.6%

Q3-06

-2.8%

Q4-06

-3.0%

TELUS total subscriber connections

Connections increasing with strong wireless and Internet growth

13

Wireless

High-speed Internet

Dial-up Internet

Res NALs

Bus NALs

(millions)10.710.2

9.7

Q4-06Q4-05Q4-04

2006 wireline results compared to original targets

$25 to $40M

Capex

EBITDA

Revenue

$1.84B

$4.82B

Met original EBITDA and non-ILEC targets with significant outperformance in high speed Internet additions

14

2006 actual results


High-speed net adds

$1.05 to $1.1B


$1.8 to $1.85B

$4.825 to $4.875B

154K

$1.19B

met or exceeded

Non-ILEC Revenue $657M $650 to $700M

Non-ILEC EBITDA $32M

> 100K

20%$878M$734MEBITDA1

8.0%$2.25B$2.09BRevenue

ChangeQ4-06Q4-05

TELUS Consolidated

2006 – fourth quarter consolidated review

Strong growth in revenue driven by data and wireless

15

218% $0.70$0.22EPS

1 Q4-05 EBITDA includes $52M net expenses, excluding any revenue or indirect impacts, from labourdisruption

11% $415M$374MCapex


20%$878MEBITDA (reported)

% ChangeQ4-06Q4-05

Consolidated EBITDA normalization

16

-

8M36M

$734M

Restructuring costs

52M

Adjusted for acquisition costs, EBITDA up 6.1%

EBITDA (adjusted for (wireless/FFH) cost of sales) 6.1%

EBITDA (subtotal) 822M 886M


218%$0.70EPS (reported)

% ChangeQ4-06Q4-05

EPS (Adjusted)1 $0.39 $0.64 64%

EPS normalization

17

-

(0.06)

1 Adjusted further for restructuring costs, EPS would have been $0.46 and $0.66 for Q4-05 and Q4-06, respectively, up 43%

0.01

$0.22

Tax related adjustments

0.10

Adjusted EPS up 64%

-0.06Early bond redemption

Tremendous growth evident in underlying EPS, led by EBITDA18

$0.22

Q4-05

$0.17

2005 lab. dis. costs

$0.10

$0.01

$0.08

$0.07

$0.02$0.03

$0.70

Lower depr’n & amortiz’n

Lowerfinancing

costs

Tax- related

adjustments

Decr. in avgo/s

shares

OtherEBITDA growth

Q4-06

EPS continuity

2006 consolidated results compared to original targets

$2.40 to $2.60

Capex

EBITDA2

Revenue

$3.59B

$8.68B

TELUS achieved 4 out of 5 original targets driven by wireless

19

2006 actual results


Free cash flow

$1.5 to $1.55B


$3.5 to $3.6B

$8.6 to $8.7B

$1.60B

$1.62B

met or exceeded

EPS3 $3.27

$1.55 to $1.65B

2 Original targets included restructuring & workforce reduction costs of approx. $100M, vs. actual

3 2006 EPS includes $0.48 of positive tax-related adjustments 2006 results of $68M

Share repurchase programs

Total cost ($M) $78

Track record of share repurchases leading to 6% reduction in shares outstanding

20

2004

$1,770

1 Twelve month 25.5 million share repurchase program to Dec. 19, 2005

2 Twelve month 24 million share repurchase program to Dec. 19, 2006

Total shares (M) 2.2 39.4

% of total program

2005 2006 Total

$892 $800

20.8 16.4

85%1 73%2 79%

Total end of period shares outstanding (M) 358.5 20.6350.1 337.9

21

1

2

3

4

2003 2004 2005 2006 2007E1,2

0.60

3.30 3.43

Dividends

Share repurchases

$ per share

1 Annualized dividend, plus share repurchases in 2006 as estimate for 2007. Assumes lower average shares outstanding of 330 million to 335 million in 2007.

0.82

Strong record of returning capital

0.801.10

1.50

3.90

2 See forward looking statement caution. Assumes continuation of share repurchase program

0.60

2.33

0.22

2.50

2.40

Cash settled options program update

22

Introducing cash settlement for vested options Mitigates share dilution by avoiding treasury issuanceExpect non-recurring, non-cash pre-tax operating

expense of $150M to $200M in Q1-07 $120M to $150M in wireline, $30M to $50M in wireless

Reported EPS impact of $0.30 to $0.40Cash payments deductible for tax purposes when

options exercised and cash paid outCash tax savings of up to $70M over 3 years

Shareholder friendly initiative

Strong investment performance in 2006 In aggregate, TELUS pension funds are now in going

concern surplus Expect to make $112M in cash contributions in 2007

(DB plans) Major pension assumptions unchanged

Discount rate of 5.0% Long term rate of return of 7.25%

TELUS pension plans fully funded in aggregate

23

Pension update

TELUS has commitments from 18 financial institutions for new $2 billion credit facility

More favourable terms and extends maturity to 2012 Can be utilized to back up CP issuance Replaces $1.6 billion of existing credit facilities

$800 million facility expiring May 2008$800 million facility expiring May 2010

Accounts receivable securitization agreement extended by one year to July 18, 2008

Current plan for $1.5B 2007 note refinancing is through combination of L-T debt issuance and new CP program

TELUS liquidity position remains very strong

24

Financing update

Corporate governance update

25

Stock option issuance practices, backdating Voluntary internal audit of stock option and long term

incentive practices resulted in a “well controlled” rating

Sarbanes-Oxley Have completed all work required for SOX 404 compliance

90 processes and 740 key controls addressed Ready to certify compliance with SOX 404 on internal

control over financial reporting for Dec. 31, 2006 audited financial statements

Leading the way in corporate governance

2007 Consolidated targets summary

approx. $1.75BCapex

Revenue $9.175 to 9.275B

2007 targets reflect healthy performance expected in wireless

26

2007 targets change

8%

6 to 7%

Normalized EBITDA1 $3.725 to 3.825B 4 to 7%

Normalized EPS1,2 $3.25 to 3.45 16 to 24%

1 Excluding $150M to $200M of non-recurring, non-cash expenses associated with cash settlement of options, EPS impact of $0.30 to $0.40

2 Year over year growth rate normalized for $0.48 of positive tax-related adjustments in 2006

investor relations1-800-667-4871

[email protected]

$124

350

$110

47

(306)

(374)

$734

Q4-05

$20

150

$233

5

(218)

(415)

$878

Q4-06

Funds avail. for debt redemption

Accounts Receivable Securitization

Free cash flow

Net Cash Tax Recovery

Net Cash Interest

Capex

EBITDA

($M)

5 (6)Cash Restructuring Payments (in excess of expense)

3 (10)Non-Cash Share Based Compensation

(97) (127)Dividends

19 22Share Issuance (non-public)

($1,313) $14Net change in cash

(1,437) (6)Funds applied to redemption of debt

Free cash flow

Appendix

Working capital & other (30) (58)

28

(229) (200)Purchase of shares for cancellation (NCIB)

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

Appendix

Definitions

TELUS definitions for non-GAAP measures

Q4 2006 TELUS investor conference call Robert McFarlane EVP & Chief Financial Officer February 16,...

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