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February 13, 2009 Q4 2008 TELUS investor conference call Robert McFarlane EVP & Chief Financial Officer Darren Entwistle President & CEO.

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Presentation on theme: "February 13, 2009 Q4 2008 TELUS investor conference call Robert McFarlane EVP & Chief Financial Officer Darren Entwistle President & CEO."— Presentation transcript:

1 February 13, 2009 Q4 2008 TELUS investor conference call Robert McFarlane EVP & Chief Financial Officer Darren Entwistle President & CEO

2 TELUS forward looking statements Today's session and our answers to questions contain statements about expected future events and financial and operating results of TELUS that are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the forward- looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results and events to differ materially from that expressed in the forward-looking statements. Accordingly our comments are subject to the disclaimer and qualified by the assumptions (including assumptions for 2009 targets and share purchases), qualifications and risk factors referred to in our Management’s discussion and analysis in the 2007 annual report, the 2008 first, second and third quarter reports, and the 2008 fourth quarter Management’s review of operations, and in other TELUS public disclosure documents and filings with securities commissions in Canada (on and in the United States (on EDGAR at Except as required by law, TELUS disclaims any intention or obligation to update or revise forward-looking statements, and reserves the right to change, at any time at its sole discretion, its current practice of updating annual targets and

3 Agenda  Wireless and wireline segment review  Consolidated financial review  Updates  Operating Efficiency Programs  HSPA network build-out  Business Solutions  TELUS international  Pensions  2009 corporate priorities  Questions and Answers 3

4 Wireless segment – Q4 2008 financial results ($M) Q4-07Q4-08Change Revenue1,1111,1886.9% EBITDA (as adj. excl. restr. costs) 1 4914981.4% Capital expenditures13523675%  Margins compressed YoY due to higher costs Capex reflects start of investment in new HSPA network build 1EBITDA (as adjusted) excludes net-cash settlement feature recovery of $1M in Q4/07. Restructuring costs were nil and $6M in Q4/07 and Q4/08, respectively. 4  

5 Prepaid 20% Wireless subscribers Postpaid 80% Net additions 6.1 million total 4.9M 1.2M Wireless subscriber results prepaid postpaid Postpaid net adds increased 11% over last year 66% Q4-07 Q4-08 148K 162K 80% 5

6 TELUS wireless subscriber additions 6 Gross additions (000s) Net additions (000s) 1,017 987 1,121 1,279 1,293 1,434 418 431 512 584 535 515 200220032004200520062007 Record annual digital subscriber additions in 2008 up 14% 1,655 588 2008 * Digital net adds were 588K, net of the impact from the analogue network turndown of 27.6K subscribers. 561* Net digital additions (000s)

7 Wireless ARPU Data Q4-08 $62.16 Voice $63.70 Q4-07 Strong data growth partially offsets competitive voice decline 7 Q4-08Q4-07 11% % of ARPU 11.17 7.95 12% 18%

8 Smartphones driving data growth 8 New BlackBerry Storm and MIKE Curve BlackBerry Storm BlackBerry Curve MIKE

9 Wireless data revenue ($M) 55% annualized data growth driven by smartphone adoption 9 Q4-07Q1-08Q2-08Q3-08Q4-08 131 147 159 181 203 12.5 14 15 16 18 % of network revenue

10 Wireless marketing and retention Q4-07Q4-08change Gross adds421K441K4.8% Churn1.59%1.62%3 bps COA per gross add$352$38810% COA expense$148M$172M16% Retention expense$89M$98M10%   Gross adds, COA / COR up YoY 10   

11 Next generation wireless network update*  Vendors: Nokia Siemens Networks and Huawei Technologies  Planning complete & network build commenced  HSPA mobile phone call, video telephony call and data call completed  HSPA network investments boosted Q4 capex and included in 2009 consolidated capex target  On track for launch and service by early 2010  HSPA network overlay provides optimal path to 4G LTE 11 Joint next generation wireless network overlay on track * See forward looking statement caution

12 Operating efficiency program (OEP) update  Significant acceleration of restructuring costs in Q4-08  $38M in Q4-08 compared to $6M in Q4-07  $59M in 2008 compared to $20M in 2007  Managing costs in legacy parts of our business to maintain performance and free up resources for growth areas of business  Multiple OEP initiatives are continuing into 2009:  Compensation frozen for management  2009 estimated restructuring costs of $50M to $75M* 12 Operating efficiency initiatives enhancing operating performance and funding growth investments * See forward looking statement caution

13 Wireline segment - revenue profile ($M) Q4-07Q4-08Change Voice – Local505480(5.0)% Voice – Long Distance179173(3.4)% Data46652813% Other698523% External Revenue1,2191,2663.9%      Revenue up due to strong growth in data offsetting moderate declines in local and LD 13

14 Wireline segment – Q4 2008 financial results ($M) Q4-07Q4-08Change Revenue1,2191,2663.9% EBITDA (as adj. excl. restr. costs) 1 4694771.7% Capital expenditures33739517%  14 Underlying EBITDA up 2% when excluding restructuring   1EBITDA (as adjusted) excludes net-cash settlement feature exp of $2M in Q4/07. Restructuring costs were $6M and $32M in Q4/07 and Q4/08, respectively.

15 1.2 million total Internet subscribers Dial-up 10% High-speed Internet net additions Q4-07Q4-08 1.1M 124K Internet subscribers 26K 19K 15 High-speed 90% Net adds improved sequentially but down YoY Q3-08 13K

16 Business Solutions wireline update Continued success of industry vertical strategy and consultative customer approach 16  TELUS selected by Government of Quebec to deliver and manage province’s next generation data network  Up to $900M contract for a term of seven to 10 years  Network will provide connections to 160 ministries and agencies and 350 health network institutions  Dilutive to earnings and FCF upfront / typical J Curve investment  Deployment planning underway  TELUS Health Solutions progressing well  Successful integration of Emergis  2009 Federal budget provides $500M to Canada Health Infoway for greater use of records  Budget goal is 50% of Canadians with record by 2010  TELUS well positioned to compete on this opportunity

17 Moderate Network Access Line losses vs. peers 17 -3.2% -5.0% -7.4% -3.6% -9.7% Q4 2007 Q4 2008 Other 1 Includes a weighted average of Bell, MTS and Bell Aliant. TELUS compares favourably to North American peers due to business line growth 1 -8.1% -9.3% -6.6%

18 Consolidated – Q4 2008 financial results ($M excluding EPS) Q4-07Q4-08Change Revenue2,3302,4545.3% EBITDA (as adj. excl. restr. costs) 1 9609751.6% EPS (reported) 1.230.90(27)% EPS (excl. income-tax related impacts) 0.790.801.3% Capital Expenditures47263134%   Underlying EBITDA up 1.6%, excluding restructuring costs Capex increase represents investments for l-t growth 18    1EBITDA (as adjusted) excludes net-cash settlement feature expense of $1M in Q4/07. Restructuring costs were $6M and $38M in Q4/07 and Q4/08, respectively, or $0.02 and $0.08 per share.

19 $1.23  $0.04  $0.03  ($0.06)  ($0.03) $0.90 Lower 2008 Tax Rates Q4-07 Reported Lower o/s shares & Dep’n and Amort Restr. costs Financing costs & other $0.10 Tax Adj. $0.80 Excl. Tax Adj. EPS continuity Underlying EPS up slightly Q4-08 Reported 19 $0.44 Tax Adj. $0.79 Excl. Tax Adj.  $0.03 EBITDA (excl restr. costs)

20 2008 consol. results compared to original targets ($B except EPS) 2008 original targets 1 2008 results result Revenue9.6 to 9.89.653 EBITDA3.8 to 3.953.779 EPS (excl income-tax related impacts) 3.50 to 3.803.37 CapexApprox. 1.91.859 20  1 Provided on December 13, 2007  Plus achieved 3 of 4 wireless and wireline segmented targets

21 2009 consolidated guidance unchanged ($B except EPS)2009 targets*Change Revenue$10.025 to 10.2754 to 6% EBITDA$3.75 to 3.9up to 3% EPS (excl. income-tax related adj.) $3.40 to $3.70up to 10% CapexApprox. $2.0510% * Provided on December 16, 2008 / See forward looking statement caution 21 2009 consolidated and segmented targets unchanged

22 TELUS international update  Opening call centre in Nevada in Q2-09 to support call centre and business process outsourcing services to U.S. based clients  Adds Spanish language capability, which is increasingly prerequisite for U.S. accounts  Provides geographic diversity  Complements TELUS’ recent minority investment in other Spanish/English call centre operations in three Central American countries  Investments provide ability to serve U.S. corporate customers in multiple languages and in multiple time zones 22 Investments meet needs of U.S. corporate customers

23 TELUS’ funding position TELUS’ strong balance sheet a result of longstanding commitment to prudent financial policies 23  Committed $2B credit facility does not expire until May 2012  Extended $700M 364-day bank facility to 2010  Strong position with sustainable cash flows and ample liquidity  Could term-out some existing short-term financing if conditions become advantageous  Strong investment grade credit ratings (BBB+/A-) with stable outlook  Set the industry standard for capital structure optimization

24 Pension assumptions update* Minor year-end updates to 2009 pension assumptions Pension funding fully tax deductible 24 Defined Benefit (DB)2008A2009E Discount rate5.5%7.25% Long-term expected return7.25%no change Pension expense/(recovery)$(100M)$18M Pension funding $102M$211M * See forward looking statement caution

25 Q4 summary  Consolidated revenue growth driven by wireless and wireline data  Postpaid net adds increased 11% and represented 80% of net adds  Continued wireline business traction with large public sector contracts and health opportunities  As promised, demonstrated cost control & accelerated wireless and wireline restructuring investments  Capex increase due to HSPA and broadband investments  Extended 364-day bank facility to 2010 / liquidity > $1B maintained  Strong balance sheet and longstanding adherence to prudent financial policies underpins credit ratings  No change to 2009 consolidated and segmented guidance 25

26 2009 corporate priorities  Execute on TELUS’ broadband strategy, leveraging our investments in leading wireline and wireless networks to deliver winning solutions for our customers  Increase the efficiency of our operations to improve TELUS’ cost structure and economic performance  Outpace the competition and earn the patronage of clients through an engaged TELUS team 26 Building on strength to create future growth and value

27 Questions? investor relations 1-800-667-4871

28 Appendix – Free cash flow 2008 Q4 2007 Q4 C$ millions EBITDA 953937 Capex (472)(631) Interest expense paid (includes income tax interest income) (138)(192) Cash income taxes; and other 120(2) Non-cash portion of share based compensation 1113 Restructuring payments (net of expense) 3 30 Net employee defined benefit plans expense (recovery) (23)(27) Employer contributions to employee defined benefit plans (25)(26) Donations and securitization fees included in other expense (9)(8) Free Cash Flow (before share based comp payment) 42094 Share based compensation paid (41)(33) Free Cash Flow 379 61 Purchase of shares for cancellation (NCIB) (147) (5) Dividends (270) (144) Working Capital and Other 17(8) Funds Available for debt redemption (21)(96) A/R Securitization (50)50 Net Issuance (Repayment) of debt 9014 Increase (Decrease) in cash 19(32)

29  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, net employee defined benefit plans expense, cash interest received and excess of share compensation expense over share compensation payments, subtracting cash interest paid, cash taxes, capital expenditures, cash restructuring payments, employer contributions to employee defined benefit plans, and cash related to Other expenses such as charitable donations and securitization fees  Cost of retention (COR): total costs to retain existing subscribers, often presented as a percentage of network revenue Appendix - definitions TELUS definitions for non-GAAP measures

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