2005 fourth quarter review & conference call February 17, 2006 the future is friendly 1
forward-looking statements This presentation and answers to questions contain forward-looking statements that require assumptions about expected future events including competition, financing, labour relations developments, and financial and operating results and 2006 targets that are subject to inherent risks and uncertainties. TELUS’ actual results, conditions, actions or events could differ materially from those expressed or implied by such statements. Assumptions for 2006 target purposes include: economic growth consistent with recent provincial and national estimates by the Conference Board of Canada that were available in 2005, including gross domestic product growth of 3. 1% in Canada; increased wireline competition in both business and consumer markets; a wireless industry market penetration gain similar to the approximately five percentage point gain in 2005; approximately $100 million restructuring and workforce reduction expenses; an effective tax rate of approximately 35%; no prospective significant acquisitions or divestitures; no change in foreign ownership rules; and maintenance or improvement of investmentgrade credit ratings. Factors that could cause actual results to differ materially include but are not limited to: competition; technology; regulatory developments; human resources; business integrations and internal reorganizations; process risks; financing and debt requirements; tax matters; health, safety and environment; litigation; business continuity events; economic growth and fluctuations; and other risk factors discussed herein and listed from time to time in TELUS’ reports and filings. For additional information on potential risk factors and assumptions, see TELUS’ 2004 Annual Report, updates in 2005 quarterly interim reports and other filings with securities commissions in Canada and the United States. 2 all dollars in C$ unless otherwise specified
the future is friendly 2005 fourth quarter review & conference call February 17, 2006 Darren Entwistle member of the TELUS team 3
2005 highlights § Demonstrated continued wireless excellence § Resilience of wireline despite labour disruption § Achieved strong TELUS consolidated 2005 results 7% § Revenue 7% § EBITDA 24% § Net income 13% § Free cash flow 4 All 2005 consolidated targets achieved / 88% in last 6 years
2005 highlights by segment § Wireless industry annual growth accelerated in Canada § Wireless segment continued excellent results § Revenue up 17% & EBITDA up 26% § Cash flow up 32% to $1. 0 billion § Wireline segment resilient despite labour disruption § Revenue up 1. 6% § data up 8% & long distance down 4% § EBITDA down 5%, up 2% normalizing for labour § Cash flow strong at $938 million 5 Q 4 product launches: EVDO & TELUS TV
Leading global telecom performance World Rankings* Growth 2003 2004 2005 2006 E Revenue top quartile No. 1 top quartile EBITDA top quartile No. 1 top quartile Cash flow** No. 1 No. 2 top half EPS nmf top quartile No. 2 No. 1 * Source: TD Securities data on major global incumbent telecoms ** EBITDA less capital expenditures 6 TELUS performs well relative to global telecom peers
Benefits of new collective agreement § § § Ratified 5 year collective agreement to Nov. 2010 All corporate objectives met without exception Return to work program – best in class Excellent employee engagement Allows management to productively run the business § outsourcing, consolidating, scheduling § Supports a performance culture § Work with TWU to have all legal proceedings dismissed 7 Enhances TELUS ability to focus on customers and to compete
Returning significant capital to investors § Continued focus in 2005 and 2006 § December debt redemption $1. 6 billion § Share repurchases total $970 million to date § Second share repurchase program underway § Second step of dividend growth model § 37. 5% increase Jan 2006 8 Focus on sustainable value creation over the long-term
2006 priorities support national growth strategy § Advance TELUS’ leadership position in the Consumer market § Advance TELUS position in the Business market § Advance TELUS position in the Wholesale market § Drive improvements in productivity and service excellence § Strengthen the spirit of the TELUS team and brand, and develop the best talent in global communications industry 9 Continued on strategy execution for benefit of investors
2005 fourth quarter review & conference call February 17, 2006 Robert Mc. Farlane EVP & Chief Financial Officer 10
wireless segment financial results Q 4 -04 Q 4 -05 Revenue 756 877 16% EBITDA 285 326 14% EBITDA (normalized)1 285 329 15% Capex 123 144 17% Cash Flow (EBITDA less capex) 162 182 12% ($M) 1 11 Change Q 4 -05 EBITDA normalized to exclude $3 M net expense impact of labour disruption Excellent results despite EBITDA dilution from record gross adds
wireless segment subscriber results prepaid postpaid net additions 235 K total wireless subscribers 4. 5 M 0. 9 M 186 K prepaid 19% postpaid 81% Q 4 -04 Q 4 -05 12 3. 7 M Record fourth quarter net additions with stable postpaid and strong prepaid growth
wireless segment industry subscriber growth 2003 2004 2005 31. 7 M 32. 1 M 32. 4 M 1. 6 M 1. 8 M Cdn wireless market 13. 4 M 15. 0 M 16. 8 M Penetration 42. 3% 46. 7% 51. 8% 4. 1% 4. 4% 5. 1% Population Net subscriber additions Penetration gain Source: Company reports, CWTA 13 Canadian wireless market growth continues to accelerate
wireless segment industry ARPU $61 Q 4 -04 $63 Q 4 -05 $54 $49 TELUS $50 $51 Rogers Wireless 1 BCE Wireless Source: Company reports 1 Pro forma Microcell 14 Increased usage and data uptake driving ARPU growth
wireless segment profitable growth Q 4 -05 TELUS BCE Rogers ARPU $63 $51 $54 1. 42% 1. 5% 2. 04% Avg. lifetime revenue per sub $4400 $3400 $2600 Blended churn COA per gross add $409 $425 COA / lifetime revenue 15 $449 10% 12% 16% TELUS’ wireless marketing efficiency remains best in Canada
wireless cash flow yield 2005 TELUS EBITDA margin (total rev. ) Capex intensity (total rev. ) 16 12% Cash flow 1 yield (total rev. ) 1 44% 31% EBITDA less capex North American leader in wireless cash flow yield
wireless segment 2005 results comparison to original targets 2005 actual results met original 2005 or exceeded targets 1 Revenue $3. 30 B $3. 20 to $3. 25 B EBITDA $1. 44 B $1. 35 to 1. 40 B Capex $405 M $350 to 400 M 584 K 425 to 475 K Wireless Net Adds 1 Provided 17 December 17, 2004 Met or exceeded original wireless targets for revenue, EBITDA and net adds
wireless segment 2005 results comparison to guidance 2005 actual results met most recent or exceeded guidance 1 Revenue $3. 30 B $3. 275 to $3. 3 B EBITDA $1. 44 B $1. 425 to $1. 45 B Capex $405 M approx. $400 M 584 K >550 K Wireless Net Adds 1 Updated 18 December 16, 2005 Achieved updated wireless guidance across the board
wireline segment revenue profile Q 4 -04 Q 4 -05 change Voice – Local 534 537 0. 4% Voice – Long Distance 230 212 7. 7% Data 373 400 7. 2% Other 72 61 15% $1, 209 $1, 210 -% ($M) Total Revenue 19 Wireline revenue displays resilience despite labour disruption
wireline segment financial results Q 4 -04 Q 4 -05 change Revenue $1. 21 B - EBITDA $482 M $409 M 15% EBITDA (normalized)1 $502 M $494 M 1. 6% Capex $221 M $230 M 4. 3% Cash Flow (EBITDA less capex) $261 M $179 M 32% Normalized to exclude $20 M & $36 M in restructuring charges in Q 4 -04 and Q 4 -05, respectively. Q 4 -05 also normalized to exclude $49 M net expense impact of labour disruption 1 20 EBITDA decline due to labour disruption and higher restructuring costs
wireline segment non-ILEC revenue & EBITDA ($M) revenue EBITDA 165 156 3. 7 Q 4 -04 Q 4 -05 21 7. 1 Q 4 -04 Q 4 -05 Continued revenue and profitability growth in Central Canada
wireline segment high-speed Internet subscriber growth high-speed Internet additions total Internet subscribers 1. 0 M dial-up 24% 35 K 27 K Q 4 -04 Q 4 -05 22 236 K high-speed 76% 763 K High-speed net adds slowed by labour disruption TELUS now has 1 M Internet subs with 76% on high-speed
wireline segment network access line results % of network access lines lost, Yo. Y Q 4 -04 -1. 3% Q 1 -05 Q 2 -05 Q 4 -05 -2. 2% -2. 4% -1. 1% -1. 8% 23 Q 3 -05 NAL results impacted by labour disruption & increased competition from cable telephony
wireline segment 2005 results comparison to original targets 2005 actual results original 2005 or exceeded met targets 1 $4. 85 B $4. 70 to 4. 75 B $632 M $600 to $650 M EBITDA $1. 85 B $1. 85 to 1. 90 B Non-ILEC EBITDA Capex $21 M $914 M $0 to 10 M $950 to 1, 000 M 73 K approx. 100 K Revenue Non-ILEC Revenue High-Speed Net Adds 1 24 Provided on December 17, 2004 Exceeded original wireline revenue and Non-ILEC EBITDA targets
wireline segment 2005 results comparison to guidance most recent or exceeded met guidance 1 2005 actual results $4. 85 B $4. 825 to $4. 85 B $632 M $625 to $635 M EBITDA $1. 85 B $1. 84 to $1. 865 B Non-ILEC EBITDA Capex $21 M $914 M $15 to $20 M approx. $900 M 73 K > 65 K Revenue Non-ILEC Revenue High-Speed Net Adds 1 25 Updated on December 16, 2005 Achieved updated wireline guidance
TELUS Consolidated financial results Q 4 -04 Q 4 -05 change Revenue $1. 96 B $2. 09 B 6. 2% EBITDA $767 M $734 M 4. 2% $0. 38 $0. 22 42% $343 M $374 M 8. 9% EPS Capex 26 Profitability significantly impacted by labour disruption and onetime debt redemption charge
TELUS Consolidated EBITDA - normalized ($M) Q 4 -04 Q 4 -05 change 767 734 4. 3% 20 36 Consol. EBITDA (bef. restruc. ) 787 770 Net labour disruption impacts - 52 787 822 Consol. EBITDA (reported) Restruc. & w. r. costs Consol. EBITDA (normalized) 27 Normalized consolidated EBITDA growth of 4. 4% 2. 2% 4. 4%
TELUS Consolidated EPS continuity Q 4 -04 EPS reported Restr. & workforce reduction Labour disruption impact Early bond redemption Q 4 -05 change $0. 38 $0. 22 42% $0. 04 $0. 07 - $0. 10 Other (0. 02) $0. 06 - Tax related matters (0. 07) $0. 01 $0. 33 $0. 46 EPS normalized 28 Strong normalized EPS growth at 40%
free cash flow Q 4 -04 Q 4 -05 EBITDA Capex $767 (343) $734 (374) Net Cash Interest (290) (306) ($M) Cash Restruct. Payments (in excess of expense) Non-Cash Share Based Compensation Net Cash Tax Recovery Free Cash Flow Share Issuance (non-public) Cash Dividends A/R securitization Payment Received from Verizon Working Capital/Other Cash avail. for debt reduction & share redemp. 29 (15) 5 6 3 (2) 47 $122 $110 77 (113) - 19 (97) 148 350 - 116 (30) $351 $352
TELUS Consolidated return of capital – share buy back § Repurchased 5. 1 M shares for $229 M under both NCIB programs in Q 4 -05 § Repurchased 20. 8 M shares for $892 M during 2005 under both NCIB programs § Current 24 million share (7% of outstanding) NCIB effective Dec. 20, 2005 to Dec. 19, 2006 § 5% completed in 7 trading days in Dec-05 30 TELUS committed to share repurchases
TELUS Consolidated return of capital – continued § Completed $1. 6 B early debt redemption of 7. 5% Series CA Notes on Dec. 1, 2005 § Funded by cash on hand, $350 M increase in A/R securitization program and $142 M in bank facilities § Incurred $33. 5 M loss on redemption & settlement of interest rate hedges § Interest savings benefit in Dec-05 and 2006 § Previously announced a 38% quarterly dividend increase to 27. 5 cents per share, for Jan. 1, 2006 payment § Consistent with dividend payout ratio guideline of 45 to 55% of sustainable net earnings 31 TELUS has strong track record for returning capital to investors
TELUS consolidated credit ratings & financial policy targets Previous Rating Current Rating Date of Change Moody’s Baa 3 (stable) Baa 2 (stable) June 27 S&P BBB (positive) BBB+ (stable) Sept 27 Fitch BBB (positive) BBB+ (stable) Oct 18 DBRS BBB (stable) BBB high (stable) Oct 24 target 1 Long-term financial policy target Net Debt : EBITDA Net Debt : Total Cap 1 32 1. 5 to 2. 0 x 45 to 50% Net debt to EBITDA target updated November 10, 2005 All four rating agencies upgraded TELUS in 2005 Q 4 -05 Met 1. 7 x 45. 7%
TELUS Consolidated 2005 results versus analyst estimates 2005 consensus estimates 1 2005 original targets 2 Revenue $7. 84 B $7. 9 to 8. 0 B EBITDA $3. 25 B $3. 2 to 3. 3 B $1. 80 $1. 65 to 1. 85 Capex $1. 35 B $1. 3 to 1. 4 B Free Cash Flow $1. 20 B $1. 2 to 1. 3 B EPS 1 Analyst 2 33 consensus estimates for TELUS, as at Nov 30/04, preceding 2005 targets provided Dec 17/04 Provided December 17, 2004 Original targets challenging as compared to analyst estimates
TELUS Consolidated 2005 results comparison to original targets 2005 actual results original 2005 targets 1 met or exceeded Revenue $8. 14 B $7. 9 to 8. 0 B EBITDA 2 $3. 30 B $3. 2 to 3. 3 B $1. 96 $1. 65 to $1. 85 Capex $1. 32 B $1. 3 to 1. 4 B Free Cash Flow $1. 47 B $1. 2 to $1. 3 B EPS 1 2 34 Provided December 17, 2004 Includes actual restructuring costs of $54 M versus original restructuring costs of approx. $100 M TELUS achieved original 2005 financial targets on the back of solid wireless results despite labour disruption
TELUS Consolidated 2005 results comparison to guidance 2005 actual results most recent guidance 1 met or exceeded Revenue $8. 14 B $8. 10 to 8. 15 B EBITDA 2 $3. 30 B $3. 275 to 3. 325 B $1. 96 $1. 90 to 2. 00 Capex $1. 32 B approx. $1. 3 B Free Cash Flow $1. 47 B $1. 4 to 1. 5 B EPS 1 2 35 Updated December 16, 2005 Actual 2005 results include restructuring costs of $54 M Consolidated results consistent with December 2005 guidance
TELUS Consolidated Pension plans – update § Strong investment performance in Q 4 -05 and lower discount rate for 2006 § In aggregate, TELUS pension funds are 98% funded § Approx. $165 M in cash contributions expected in 2006 (DB & DC plans) § Discount rate assumption for 2006 lowered to 5. 0% (vs. 5. 25% guidance on Dec. 16, 2005, and 6. 0% in 2005) § TCI defined benefit pension plans ceased accepting new management employees 36 Lower discount rate offset by strong investment performance
TELUS Consolidated 2006 Consolidated targets summary 2006 targets change Revenue $8. 6 to 8. 7 B 6 to 7% EBITDA 1 $3. 5 to 3. 6 B 6 to 9% EPS $2. 40 to 2. 60 22 to 33% Capex $1. 50 to 1. 55 B 14 to 18% Free Cash Flow $1. 55 to 1. 65 B 6 to 13% 1 Including 37 restructuring & workforce reduction costs of $54 M in 2005 and approx. $100 M in 2006 targets build upon track record of strong operational execution
TELUS Consolidated Summary § Solid quarterly and annual consolidated results despite one-time labour disruption impact and increasingly competitive environment § Continued strong profitable wireless growth § Reached 5 -year collective agreement allowing for increased flexibility § Generating significant cash flow § Strong 2006 revenue, earnings and cash flow growth outlook 38 Continued execution into a future friendly 2006
questions? 2005 fourth quarter review investor relations 1 -800 -667 -4871 TELUS. com ir@telus. com 39
appendix definitions § 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 40 TELUS definitions for non-GAAP measures
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