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George CopePresident & CEO, TELUS Mobility
November 10, 2004
Telecom & Tech 2005
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
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about TELUS
Canada’s 2nd largest telco - only national pure-play, facilities-based,
full-service telecom provider
Executing national growth strategy focused on data, IP & wireless
2004E Revenues $7.5 to 7.575B, 5 to 6%
EBITDA $3.025 to 3.075B, 7 to 9%
FCF $1.25 to 1.3B, 48 to 54%
EPS $1.40 to 1.50, 52 to 63%
Operating segments: Communications: wireline
Mobility: wireless
Enterprise value: ~$18B (equity ~$11B)
Daily trading1: 1.2M shares
1 trailing 12 month average. TSX: T, T.A; NYSE: TU
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Quarterly dividend increased 33% to 20¢ for Jan. 1, 2005 payment
Targeting dividend payout ratio guideline of 45 to 55% of net earnings
Approval for Normal Course Issuer Bid for up to 10% of public float or ~25.5M shares
Changes to Dividend Reinvestment Plan
discontinue 3% discount – in line with peers
to begin open market purchases in 2005
shareholder value enhancing initiatives
5 Data & wireless revenues from 28% to 55% in 4 yrs
$5.7B
43%
18%
10%
6%Other
12ME Q3-04
$7.4B
Local Voice
Wireless
Data29%
36%
19%
4%Other
LD
Wireless
12ME Q2-00
Local Voice
23%
Data
12%LD
TELUSCommunications
TELUSCommunications
TELUSMobility
TELUSMobility
about TELUS
Consolidated revenue profile evolution
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TELUS consolidated - YTD review
Change
1 Includes restructuring & workforce reduction costs of $12M & $33M for YTD Q3-03 & Q3-04, respectively2 Free Cash Flow defined as: EBITDA (including restructuring & workforce reduction costs) less capex, net
cash interest, net cash taxes, cash restructuring payments, and excess share compensation expense over share compensation payments.
.
56%$430M$277MNet Income
52%$1.20$0.79EPS
6%$5.62B$5.32BRevenue
9%$2.32B$2.13BEBITDA1
YTD Q3-04YTD Q3-03
Excellent revenue, profitability & free cash flow growth
52%$1,175M$773MFree Cash Flow2
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about TELUS Mobility
31.8M: Cdn. PopulationLicensed POPs:
29.7M (93%)Network coverage:
Verizon Wireless & NextelStrategic relationships:
55 MHz in major marketsSpectrum position:
only one in Canada (Nextel in US)iDEN Mike network:
coast to coast 1XCDMA footprint:
$1.1B to 1.125B ( 35 to 38%)EBITDA (2004E)1 :
$2.775 to 2.8B ( 18 to 19%)Revenue (2004E)1 :
3.75MSubscribers:
leading Canadian national wireless provider
1 Guidance provided October 29, 2004
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Canadian subscriber growth accelerating
4.5%4.0%Penetration gain
1.5M1.3MNet subscriber additions
31.8MPopulation 31.5M
14.4MCdn wireless market 12.8M
Q3-04Q3-03
45.2%40.7%Penetration
12ME
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Source: Industry analysts
2003
42%
2007E
55-59%
2004YTD
45%
13.4Msubs
18-19Msubs
14.4Msubs
4 million or more net adds expected over next 3 yrs
Canadian wireless penetration growth prospects
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$2,626M$1,954M
YTD Q3-04YTD Q3-03
TELUSMobility 32%
TELUSMobility 33%
Source: Company reports. 1 Sum of reported wireless EBITDA for BCE, Rogers Wireless, Microcell and TELUS Mobility
Industry EBITDA up 34% YTD
total industry EBITDA1
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TELUS Mobility EBITDA & cash flow growth
56% compounded EBITDA growth rate over four years
1 Guidance provided October 29, 2004
$173
$815
20032000
$356
2001
$535
2002
$1,100 to 1,125
2004E1
$(360)
$455
$(288)
$750 to 775
$75
EBITDA
EBITDA less capex($M)
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Net additions
Net additions up 21% YTD, with 41% postpaid growth
YTD Q3-03
270K
YTD Q3-04
Prepaid
Postpaid
326K
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Network revenue growth
Network revenue up 19% on strong subscriber & ARPU growth
YTD Q3-03
$1,596M
YTD Q3-04
$1,904M
14
TELUS Mobility BCE WirelessRogers Wireless
$57
$47$47
Source: Company reports
$59
$49$50
Microcell
$38$41
ARPU - continued industry leadership
YTD Q3-03
YTD Q3-04
significant premium with positive industry-wide trend
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TELUSMobility
RogersWireless
BCEWireless
$26
Source: Company reports
$11$12
prepaid ARPU
prepaid ARPU double that of closest national competitor
Q3-04
16
TELUSMobility
RogersWireless
BCEWireless
$70
Source: Company reports
$62$63
postpaid ARPUQ3-04
premium ARPU across all subscriber categories
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Price changes continue to roll through the base per minute billing - Jul-02 evening & weekend clock change - Jul-03 select calling features - Jul-04
minutes of use up 21% in 2003, 12% YTD Q3-04 expanding data offering (intercarrier SMS, 1X & RIM) roaming/resale agreements Verizon’s preferred Canadian PCS roaming partner iDEN roaming with Nextel in U.S.
ARPU drivers
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Continued focus on retention evident with postpaid churn down to 1.05% in Q3
Churn low & stable
YTD Q3-03 YTD Q3-04
1.4% 1.4%
blended monthly churn
YTD Q3-03 YTD Q3-04
1.2%1.1%
postpaid-only churn
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3 year contracts improved coverage
significant improvement in drop call rate expanded national footprint
better phones grandfathered rate plans dedicated retention team excellent customer care levels
Churn control & retention drivers
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9%10%COA/ Lifetime revenue
1.4%1.4%Blended churn
$59ARPU $57
$379COA $420
YTD Q3-04YTD Q3-03
$4,300
-
$4,100Lifetime revenue
Subscriber economics continue to improve
profitable subscriber growth strategy
21EBITDA growth of 37% YTD & EBITDA margin of 45%
EBITDA growth & margin expansion
Wireless EBITDA
YTD Q3-04
$625M
39%
45%
$858M EBITDA margin1
(network revenue)
YTD Q3-03
1 EBITDA margin on total revenue 36% YTD Q3-03, and 41% YTD Q3-04
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achieving profitable subscriber growth
TELUS achieving strategy of profitable subscriber growth
$832M1.5M
12ME Q3-04 EBITDA growth
12ME Q3-04subscriber growth
Source: Company reports. Sum of reported net adds & wireless EBITDA for BCE, Rogers Wireless, Microcell, TELUS Mobility
TELUSMobility
35%31%
TELUSMobility
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Wireless capex
11%
Capex intensity(total revenue)
YTD Q3-04
$228M
13%
$232M
YTD Q3-03
Capex intensity declining
Continued improvement in capex intensity
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excellent spectrum position - minimal cell splitting CDMA/1X roaming/resale agreements in Central &
Eastern Canada Network digitization largely complete Mike (iDEN) network largely built out 1X network implemented, voice capacity improvement
Capex drivers
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Wireless cash flowYTD Q3-04
$398M
$625M
YTD Q3-03
Cash flow (EBITDA less capex)
Cash flow increased by $228 million or 57% YTD
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13%Capex intensity2
EBITDA margin (total revenue) 39-40%
Cash flow yield3 26-27%
2004E1
1 Based on guidance provided October 29, 20042 Capex as % of total revenue3 EBITDA less capex, as a % of total revenue
EBITDA margin (network revenue) 42-43%
11.2%
41.4%
30.2%
YTD Q3-04
45.0%
Operating cash flow yield
Attractive wireless cash flow yield above plan YTD
27
30%
21%19% 18%
13%10%
6%
TELUS
Nexte
l
Rogers
Verizo
n
PCS
Cingula
r
AWE
YTD cash flow yield - North America
Source: Company reports
EBITDA less Capex / Total Revenue
YTD results & implied cash flow yield of 26 to 27% in 2004 is best in class
(24)%
Microcell
what’s new?
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text messaging
Canadians are sending more than 2 million text messages a day, up 100% year over year
By 2006, an estimated one billion messages will be sent worldwide every day
Canadians now send more than 60M text messages per month
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Fastap
TELUS Mobility exclusive
World’s first phone and full keypad
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picture messaging continued focus of award-
winning marketing campaign
significant share of sales in 2004
five camera phones in current line-up
Canada’s first megapixel camera phone launched Oct.
new phones with higher quality cameras and flashes
1.3 megapixel 4X zoom, built-in flash
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BlackberryGood traction, US roaming on both iDEN & PCS
Blackberry 7750Blackberry 7510 - iDEN
Pushto
Talk
Colourscreen
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text & picturemessaging
mobilebrowser
downloadsmobilecomputing& other applications
RIM
wireless Internet (1X cards)
data revenue expanding exponentially
Data revenue growth driven by expanding number of
applications
wireless databusiness
& consumer
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North American iDEN Direct Connect
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Mike’s Talk Around
i325 i315
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Attractive industry fundamentals Canadian wireless penetration accelerating Industry consolidation to 3 national wireless carriers Wireless data market exploding ARPU up, churn down across industry Margins in excess of 40% Free cash flow yields expanding
TELUS Mobility is the most profitable wireless carrier in North
America
conclusion
questions?
