Q1 2012 TELUS investor conference call
May 9, 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 TELUS proposed share consolidation and foreign ownership
levels, 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 quarter report. 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
 Share conversion proposal update
 Wireless and wireline segment review
 Consolidated financial review
 Updates
 Spectrum auction and foreign direct
investment policies
 Operational highlights
 Questions and Answers
3
Mason Capital
 Despite Mason having one twentieth of the economic interest of
our employees, they hold four times the voting power
 Executive Director of CCGG condemns ‘empty voting’ and fully
supports one share – one vote
 Leading independent proxy advisors, ISS and Glass Lewis
supported the proposal four times
4
Share consolidation benefits
 Enhances TELUS’ leading good corporate governance
practices
 Enhances marketability of TELUS shares
 Enhances liquidity of common shares
 Listing on New York Stock Exchange
One share – one vote
5
Significant share value appreciation
since announcement
Feb. 21 – May 8
 Common Shares:
4.0%
 Non-Voting:
5.9%
 Toronto Stock Exchange Index:
(7.3)%
 MSCI Global Telecom Index:
(0.7)%
Since announcement, TELUS’ market value
has increased circa $1 billion
6
Our commitment to our shareholders
 TELUS Board and Management fundamentally agree this is
the right proposal and in the best interest of our company
and long-term shareholders
 We will pursue other actions to convert our share structure
to a single class
 Conversion on one-to-one basis is the right model
TELUS continues to build upon our company’s
operational and financial momentum
7
Q1 2012 wireless financial results
($M)
Q1-11
Q1-12
Revenue (external)
1,308
1,383 
5.7%
551
622 
13%
41.8%
44.7% 
2.9 pts
EBITDA margins2
(total revenue)
Capex
EBITDA less capex
76
151

99%
475
471

EBITDA1
change
(0.8)%
1 EBITDA
2
before restructuring costs in Q1-12 and Q1-11 were $626 and $551 million, respectively.
Margins on network revenue in Q1-12 and Q1-11 were 48.3% and 45.8%, respectively.
Record EBITDA with growth of 13% and margin improvement
Cash flow strong while continuing LTE investments
8
Wireless subscriber results
Total
net adds
Postpaid
net adds
Wireless
subscribers
63K
52K
16%
7.4M
total
32K
22K
Q1-11 Q1-12
1.2M
prepaid
Q1-11 Q1-12
6.2M
postpaid
84%
Postpaid net adds growth of 21% y/y
Smartphones now 56% of postpaid base, up from 38% in prior year
9
Marketing and retention
Q1-11
Q1-12
388
363

(6.4)%
1.70%
1.55%

(0.15) pts
$348
$362

4.0%
COA expense
$135M
$131M

(3.0)%
Retention expense
$148M
$139M

(5.8)%
Lifetime revenue
$3,405
$3,798

12%
Gross adds (000s)
Churn1
COA per gross add
1
change
Q1-12 and Q1-11 churn of 1.52% and 1.62% when normalized for loss of Government of Canada contract.
Industry leading churn combined with
lower acquisition and retention expenses
10
Blended ARPU analysis
Data
Voice
% of ARPU
$57.89
$58.87
17.71
22.83
31%
39%
40.18
36.04
69%
61%
Q1-11
Q1-12
Q1-11
Q1-12
ARPU increase of 1.7% led by data
Sixth consecutive quarter of ARPU growth
11
Wireless data revenue
$498M
$366M
$254M
Q1-10
Q1-11
Q1-12
Industry leading data revenue growth of 36%
Q1 data increased to 39% of network revenue
12
Q1 2012 wireline financial results
($M)
Q1-11
Q1-12
Revenue (external)
1,223
1,248

2.0%
435
387

(11)%
34.4%
30.0%

(4.4) pts
Capex
333
290

(13)%
EBITDA less capex
102
97

(4.9)%
EBITDA1
EBITDA margins
(total revenue)
change
1
Q1-12 adjusted EBITDA of $388M excludes a $1M equity loss for residential component of TELUS Garden real
estate joint venture and Q1-11 adjusted EBITDA of $419M excludes a $16M non-cash gain on Transactel.
Wireline revenue growth reflects strong TV and HSIA subscriber growth
Cash flow stable as lower EBITDA offset by reduced capex
13
Adjusted wireline EBITDA
435
387
(11)%
419
388
(7.4)%
33.6%
30.1%
(3.5) pts
98 
14%
(16)
Equity loss for residential
component real estate J.V.
Adjusted EBITDA1
Adjusted EBITDA margin
Adjusted EBITDA less capex
1 Adjusted
change

Gain on Transactel acquisition
Q1-12

EBITDA
Q1-11

($M)
1
86
EBITDA before restructuring costs in Q1-12 and Q1-11 were $397 and $423 million, respectively, down 6.5%.
Adjusted wireline EBITDA lower by 7.4%
14
TELUS TV customer growth
TELUS TV
net additions*
TELUS TV
subscribers*
553K
358K
44K
44K
Q1-11
Q1-12
Q1-11
Q1-12
Momentum continues with TV net adds of 44K
Total subscribers up 54% surpassing 550,000
15
*
Includes both IP TV and TELUS Satellite TV subscribers
TELUS high-speed Internet customer growth
High-speed
net additions
16K
16K
Q1-11
Q1-12
High-speed
subscribers
1.18M
1.26M
Q1-11
Q1-12
Stable growth in HSIA despite competitive environment
Total subscriber base up 6.3%
16
TELUS network access line losses
Residential
Q1-11 Q1-12
Business
2K
Q1-12
Q1-11
-10K
-33K
-47K
Residential line losses impacted from price-based competition
Business line losses reflects competition, and wholesale adds in Q1/11
17
Q1 2012 consolidated financial results
($M, except EPS)
Q1-11
Q1-12
change
Revenue (external)
2,531
2,631

4.0%
EBITDA1
986
1,009

2.3%
EPS (basic)
1.01
1.07

5.9%
Capex
409
441

7.8%
EBITDA less capex
577
568

(1.6)%
Free cash flow
162
358

121%
1
Q1-12 adjusted EBITDA of $1,010M excludes a $1M equity loss for residential component of TELUS Garden real
estate joint venture and Q1-11 adjusted EBITDA of $970M excludes a $16M non-cash gain on Transactel.
FCF growth driven by lower discretionary defined benefit
pension contributions, increased EBITDA and lower financing costs
18
EPS continuity analysis ($)
1.01
0.13
0.04
-0.06
0.97
Excl.
Trans.
gain
Q1-11
reported
1.07
Higher
Normalized
EBITDA1
Lower
Financing
costs2
Higher
Dep &
Amort
- 0.02
Higher
Pension
- 0.02
Higher
Restructure
& other
1.04
Excl.
Tax Adj.
Q1-12
reported
EPS growth reflects EBITDA growth and lower financing costs partly
offset by higher D&A, pension and restructuring costs
1
2
Normalized EBITDA excludes $0.04 combined for restructuring and pension costs.
Financing costs excludes $0.02 of interest on income tax refunds in Q1/12.
19
Industry Canada sets spectrum auction
and telecom foreign ownership policies
 Spectrum cap of 10 MHz for prime 700 MHz auction and 40 MHz for
2.5 GHz auction
 700 MHz prime spectrum divided into 4 paired blocks of 10 MHz
 2.5 GHz spectrum cap means TELUS should be eligible to
obtain up to 40 MHz of spectrum
 Auctions delayed to H1 2013 for 700 MHz and H1 2014 for 2.5 GHz
 Foreign ownership restrictions to be lifted for carriers with less than
10% national market share
 TELUS encourages government to continue to work towards full
liberalization to ensure level playing field
Policy announcement on spectrum auctions consistent
with TELUS’ proposed recommendations to Government
20
2012 guidance confirmed
2012 guidance
Revenue (external)
EBITDA
EPS (basic)
Capex
y/y change
$10.7 to 11.0B

3 to 6%
$3.8 to 4.0B

1 to 6%
$3.75 to 4.15

0 to 10%
Approx $1.85B
2012 consolidated and segmented guidance confirmed
21
Q1 2012 summary
 Strong consolidated revenue growth driven by data
 Record consolidated EBITDA
 Great wireless metrics across the board (e.g. EBITDA, ARPU,
churn, lifetime revenue, postpaid net adds, COA/COR)
 Continued Optik TV and high-speed Internet subscriber growth
 Strong FCF growth aided by lower discretionary defined
benefit pension contributions, higher EBITDA, and lower
financing costs
Better than expected beginning to 2012 with strong free cash flow
generation supporting an even stronger balance sheet
22
Strong smartphone adoption, ARPU growth continue
Postpaid subscribers (millions)
Wireless Data ARPU
Smartphone % of postpaid
5.4
5.8
$22.83
6.2
$17.71
$13.14
56%
38%
22%
Q1-10
Q1-11
Q1-12
Q1-10
Q1-11
Q1-12
1Q 2012 Smartphone base up 63% to 3.5 million year over year
Data ARPU expansion driven by 36% growth in data revenue
23
Future friendly home – continued strength in Optik
High-speed Internet
TELUS TV
Residential NALs
60K
16K
60K
16K
50K
38K
44K
44K
-50K
-43K
-33K
-47K
-30K
Q1-10
Q1-11
32K
3K
29K
-39K
Q1-12
TV and High-Speed Internet loading exceeding
residential NAL losses for seventh consecutive quarter
24
Continued new innovations for Optik TV
Twitter app for Optik TV
 Tweet what watching Optik TV, follow what
others saying about favourite shows through
‘TV Tweets’
Optik TV for Xbox 360
 TELUS Optik TV first in world to offer customers
gesture & voice control ability with Kinect
Optik on the go
 View select TV On Demand content on your
mobile device, anywhere in Canada
25
Appendix – free cash flow
C$ millions
2011
Q1
2012
Q1
Adjusted EBITDA1
Capex
970
(409)
1,010
(441)
(9)
(1)
(235)
(116)
Interest expense paid, net
(61)
(55)
Income taxes received (paid), net
(66)
(48)
(5)
7
(23)
162
17
54
2
358
(169)
(60)
(168)
(188)
(32)
(15)
(62)
(164)
61
170
(39)
6
22
Net Employee Defined Benefit Plans Expense (Recovery)
Employer Contributions to Employee Defined Benefit Plans
Share-based compensation
Restructuring payments (net of expense)
Free Cash Flow
Common and Non-voting shares issued
Dividends reinvested (DRIP)
Dividends
Acquisitions
Real estate joint venture
Working Capital and Other
Funds Available for debt redemption
Net Issuance (Repayment) of debt
Increase in cash
1
-
Q1-12 and Q1-11 adjusted EBITDA excludes a $1 million equity loss for residential component of TELUS Garden real
estate joint venture and a $16 million non-cash gain on Transactel, respectively.
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