Q2 2012 TELUS investor conference call
August 3, 2012
Robert McFarlane
EVP & Chief Financial Officer
Joe Natale
EVP & Chief Commercial Officer
Darren Entwistle
President & Chief Executive Officer
TELUS Forward Looking Statement
Today's presentation and answers to questions contain statements about expected
future events and financial and operating performance of TELUS that are forwardlooking. By their nature, forward-looking statements require the Company to make
assumptions and predictions 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 performance 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 2012 annual targets), qualifications and risk
factors (including the potential for a future share consolidation proposal and
restrictions on non-Canadian ownership of TELUS Common shares, the ability over
time to sustain dividend growth of circa 10% per annum with semi-annual dividend
increases to 2013, and CEO three year goals for EPS and free cash flow growth
excluding spectrum costs to 2013) referred to in the Management’s discussion and
analysis in the 2011 annual report, and in the 2012 first and second quarter reports.
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 guidance.
2
Agenda
 Wireless and wireline segment review
 Consolidated financial review
 Updates
 2012 guidance
 TELUS foreign ownership position
 CRTC arbitration decision on TV service negotiations
 Operational highlights
 Questions and Answers
3
Q2 2012 wireless financial results
($M)
Q2-11
Q2-12
Revenue (external)
1,333
1,428 
7.1%
565
636 
13%
42.1%
44.2% 
2.1 pts
Capex
107
194 
81%
EBITDA less capex
458
442

(3.5)%
EBITDA1
EBITDA margins2
(total revenue)
change
1 EBITDA
2
before restructuring costs in Q2-12 and Q2-11 were $640 and $566 million, respectively.
Margins on network revenue in Q2-12 and Q2-11 were 47.9% and 45.7%, respectively.
Strong double digit EBITDA growth and margin expansion
Capex higher for LTE network investments
4
Wireless subscriber results
Total
net adds
Postpaid
net adds
Wireless
subscribers
112K
94K
86K
1.1M
prepaid
15%
92K
7.4M
total
Q2-11 Q2-12
Q2-11 Q2-12
6.3M
postpaid
85%
Postpaid net adds growth of 22% year-over-year
Smartphones now 59% of postpaid base, up from 42% a year ago
5
Marketing and retention
Q2-11
Q2-12
447
394

(12)%
1.67%
1.39%

(0.28) pts
$370
$404

9.2%
COA expense
$165M
$159M

(3.6)%
Retention expense
$149M
$143M

(4.0)%
Lifetime revenue
$3,526
$4,337

23%
Gross adds (000s)
Blended churn1
COA per gross add
1
change
Q2-12 and Q2-11 blended churn of 1.37% and 1.51% when normalized for loss of Government of Canada contract.
Lowest churn rate in over 5 years combined with
ARPU growth leads to 23% increase in lifetime revenue
6
Blended ARPU analysis
Data
$58.88
19.25
$60.29
23.32
Voice
% of ARPU
33%
39%
39.63
36.97
67%
61%
Q2-11
Q2-12
Q2-11
Q2-12
ARPU increase of 2.4% led by data ARPU growth of 21%
Voice ARPU decline moderated to -6.7%
7
Wireless data revenue
$512M
$402M
$270M
Q2-10
Q2-11
Q2-12
Q2 data revenue growth of 27% year-over-year
Data now represents 39% of network revenue
8
Q2 2012 wireline financial results
($M)
Q2-11
Q2-12
Revenue (external)
1,221
1,237

1.3%
385
362

(6.0)%
30.5%
28.3%

(2.3) pts
349
354

1.4%
36
8

(78)%
EBITDA1
EBITDA margins
(total revenue)
Capex
EBITDA less capex
change
1
Q2-12 adjusted EBITDA excludes a $9 million pre-tax gain on land contributed to the TELUS Garden residential
real estate project, and equity losses of $1 million for the residential real estate partnership.
Wireline revenue growth reflects good TV and HSIA subscriber results
EBITDA and margin down due to declines in high margin legacy services
9
TELUS TV customer growth
TELUS TV
net additions*
TELUS TV
subscribers*
595K
403K
46K
43K
Q2-11
Q2-12
Q2-11
Q2-12
Momentum continues with TV net adds of 43K
Total TV subscribers up 48% year-over-year
*
Includes both IP TV and TELUS Satellite TV subscribers
10
TELUS high-speed Internet customer growth
High-speed
net additions
High-speed
subscribers
20K
1.2M
Q2-12
Q2-11
1.28M
13K
Q2-11
Q2-12
High-speed Internet net adds increased 54%
Total subscriber base up 81,000 or 6.8% year-over-year
11
TELUS network access line losses
Residential
Q2-11 Q2-12
Business
7K
Q2-12
Q2-11
-14K
-31K
-36K
Residential and Business lines impacted
by renewed price-based competition
12
Q2 2012 consolidated financial results
($M, except EPS)
Q2-11
Q2-12
change
Revenue (external)
2,554
2,665

4.3%
EBITDA1
950
998

5.1%
EPS (basic)
0.99
1.01

2.0%
Capex
456
548

20%
EBITDA less capex
494
450

(8.9)%
Free cash flow
286
284

(0.7)%
1
Q2-12 adjusted EBITDA excludes a $9 million pre-tax gain on land contributed to the TELUS Garden residential
real estate project, and equity losses of $1 million for the residential real estate partnership.
Consolidated revenue and EBITDA growth driven by wireless
Strong free cash flow remains stable
13
EPS continuity analysis
$0.10
$0.99
Q2-11
reported
($0.03)
2011
Tax
Adj.
$0.02
($0.03)
($0.02)
($0.01)
$1.02
$0.02
($0.03)
Higher
Pension
Q2-12
Adj.
TELUS
Garden
2012
Tax Adj.
$1.01
$0.96
Q2-11
Adj.
Higher
Lower
Higher
Normalized Financing Dep
EBITDA1
Costs
& Amort
Incr in
Tax Exp.
Q2-12
reported
Adjusted EPS growth of 6.3% from $0.96 to $1.02 when
excluding tax adjustments and TELUS Garden impacts
1
Normalized EBITDA excludes net $0.01 positive impact of TELUS Garden and Pension costs.
14
2012 segmented guidance
Wireless
Revenue (external)
EBITDA

Wireline
2012 guidance
y/y change
$5.75 to 5.9B
No change
5 to 8%
$2.4 to 2.5B

2012 guidance
10 to 14%
y/y change
Revenue (external)

$5.0 to 5.15B

1 to 4%
EBITDA

$1.5 to 1.55B

(6) to (3)%
Wireless EBITDA range up $100 million
Wireline revenue range up $50 million, EBITDA top end down $50 million
15
2012 consolidated guidance
2012 guidance
y/y change
Revenue (external)

$10.75 to 11.05B

3 to 6%
EBITDA

$3.9 to 4.05B

3 to 7%
$3.75 to 4.15
No change

0 to 10%
Approx $1.95B

Approx 6%
EPS (basic)
Capex

Updated guidance reflects our latest and
generally favourable outlook for balance of year
16
TELUS files foreign ownership position with CRTC
 In July, TELUS responded to CRTC about misleading allegations by Globalive
concerning TELUS’ foreign ownership levels
 As of June 29, 32.59% of TELUS’ voting shares held by non-Canadians, below
federal limit of 33.3%
 Mason Capital has made foreign ownership allegations very similar to
Globalive's in an attempt to frustrate TELUS’ plans to consolidate its dual-class
share structure on 1-for-1 basis
 Globalive and Mason both used reports from Broadridge not intended for
determination of foreign ownership levels
 TELUS’ long-established systems to monitor and control foreign ownership of
its voting shares have kept TELUS compliant with Canada’s foreign ownership
restrictions for communication companies
TELUS continues to be fully compliant
with Canada’s foreign ownership restrictions
17
CRTC arbitration decision - TELUS vs Bell Media
 CRTC released decision on final offer arbitration between TELUS and
Bell Media on renewal agreement for distribution of Bell Media
specialty TV services
 Pleased CRTC selected TELUS’ final offer in arbitration, which means
 consumers continue to enjoy choice provided by TELUS’ theme
pack model
 TELUS not required to move TSN to basic Essentials package
 Bell was seeking a “minimum penetration level” for TSN, which
significantly exceeded actual consumer take-up of the service in Optik
TV’s sports pack
 Impact of new agreement consistent with previous expense accruals
CRTC decision is a win for TELUS and consumers
and reinforces the Commission’s vertical integration framework
18
Q2 2012 highlights
 Robust revenue and earnings growth generated by continued
excellent wireless revenue and EBITDA results, and wireline
data revenue
 Focus on Customers First leads to lowest blended wireless
churn rate in five years
 Continued Optik TV and high-speed Internet subscriber growth
offsetting residential line losses
 Increased guidance reflects year-to-date results and positive
outlook
Pleased with overall strong results in Q2 and first half of 2012
19
Strong smartphone adoption, ARPU growth continues
Postpaid subscribers (millions)
Wireless Data ARPU
Smartphone % of postpaid
5.5
5.9
$23.32
6.3
$19.25
$13.80
59%
42%
25%
Q2-10
Q2-11
Q2-12
Q2-10
Q2-11
Q2-12
Q2 smartphone base up 54% to 3.7 million y/y
Data ARPU growth driven by 27% increase in data revenue
20
Low and improving churn
Impact of loss of Govt. of Canada contract
1.72% 1.70%
1.54%
Wireless Churn Rate
1.67% 1.67% 1.67%
1.62%
1.58%
1.55%
1.60%
1.51%
1.52%
1.39%
1.37%
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Low wireless churn rate best since Q1-07
Supports industry leading lifetime revenue per subscriber
21
Future friendly home – continued strength in Optik
High-speed Internet
TELUS TV
Residential NALs
59K
13K
20K
50K
38K
46K
43K
32K
3K
29K
63K
-51K
-43K
-31K
Q2-10
Q2-11
-36K
Q2-12
TV and High-Speed Internet loading exceeding
residential NAL losses for eighth consecutive quarter
22
Continued Optik TV innovations
 Re-architected theme pack offering
 Enhanced Video on Demand storefront
 Launched Multi-View
 Allows viewing of up to 4 channels at once
 Introduced The Weather Network App
Expanding line-up of innovative new services supports premium,
differentiated customer experience and ongoing momentum
23
Appendix – free cash flow
C$ millions
2011
Q2
2012
Q2
Adjusted EBITDA1
Capex
950
(456)
990
(548)
(7)
(2)
(15)
(15)
(145)
(106)
(50)
(31)
5
9
4
286
2
(13)
284
(170)
(51)
(241)
(189)
(5)
(31)
(174)
59
172
(55)
(2)
4
Net Employee Defined Benefit Plans Expense (Recovery)
Employer Contributions to Employee Defined Benefit Plans
Interest expense paid, net
Income taxes received (paid), net
Share-based compensation
Restructuring payments (net of expense)
Free Cash Flow
Common and Non-voting shares issued
Dividends
Acquisitions
TELUS Garden real estate project
Working Capital and Other
Funds Available for debt redemption
Net Issuance (Repayment) of debt
Increase in cash
1
-
Q2-12 adjusted EBITDA excludes a $9 million pre-tax gain on land contributed to the TELUS Garden residential
real estate project, and equity losses of $1 million for the residential real estate partnership.
Appendix – definitions
 EBITDA: Earnings before interest, taxes, depreciation and amortization
 Capital intensity: capital expenditures divided by total revenue
 Cash flow: EBITDA less capex
 Free cash flow: EBITDA, adding Restructuring costs, net employee defined
benefit plans expense, cash interest received and excess of share-based
compensation expense over share-based compensation payments,
subtracting the non-cash gain on Transactel, cash interest paid, cash taxes,
capital expenditures, restructuring payments and employer contributions to
employee defined benefit plans.
 Cost of retention (COR): total costs to retain existing subscribers, often
presented as a percentage of network revenue
Appendix – 2012E free cash flow
($M)
2011
2012E
EBITDA1
$3,761
$3,900 to 4,050
Capex
(1,847)
~(1,950)
Net cash interest
(377)
~(350)
Net cash tax payment2
(150)
(150) to (200)
(60)
~(45)
Free Cash Flow
(before dividends and spectrum)
1,327
1,380 to 1,530
Cash pension contribution
(including DB pension recovery)4
(330)
~(180)
Free Cash Flow
(before dividends and spectrum)
997
1,200 to 1,350
Other3
1 2011
EBITDA excludes $17M Transactel gain
used to calculate 2012E FCF range
3 Includes restructuring payments (net of expense), and share based compensation (net of expense)
4 2012 and 2011 includes cash pension contributions and pension recovery included in reported in EBITDA
2 Midpoint
27