Darren Entwistle President & CEO Investor Meetings Toronto, ON March 12-13, 2009
TELUS forward looking statements Today's presentation and answers to questions contain statements about expected future events and financial and operating results of TELUS that are forward-looking. By their nature, forwardlooking statements require the Company to make assumptions and predictions about future events, 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 referred to in TELUS 2008 annual Management s discussion and analysis including capital expenditures, share purchases and operational efficiency initiatives), qualifications and risk factors referred to in TELUS 2008 annual Management s discussion and analysis (including those associated with operational efficiency, funding and share repurchases, technology and network build, large client deals), and other risk factors discussed herein and listed from time to time in TELUS reports and other public disclosure documents including its annual report, annual information form, and other filings with securities commissions in Canada (on www.sedar.com) and in the United States (on EDGAR at www.sec.gov). For further information, see Financial and operating targets and Risks and risk management, in Sections 1.5 and 10 respectively of TELUS 2008 annual Management s discussion and analysis. 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.
Strategic overview Building on efficiency and long-term growth
Strategic focus on wireless $6.0B Revenue $9.7B Wireless 18% Wireless 48% 2000 12 mo. June 2008 Executing strategy drives wireless growth, now 48% of revenue 3
Strategic focus on data $6.0B Revenue $9.7B Voice Data 10% Voice Data 29% 2000 12 mo. June 2008 Executing strategy drives data growth, now 29% of total revenue 4
Our strategic imperatives and intent Strategic imperatives Focusing on growth markets of data and wireless Building national capabilities Partnering, acquiring and divesting as necessary Providing integrated solutions Investing in internal capabilities Going to market as one team Strategic intent to unleash the power of the Internet to deliver the best solutions to Canadians at home, in the workplace and on the move. 5 Consistent strategy and successful execution 2000 2009
TELUS 2009 priorities Execute on TELUS broadband strategy, leveraging our investments in leading wireline and wireless networks to deliver winning solutions for our customers Increase the efficiency of our operations to improve TELUS cost structure and economic performance Outpace the competition and earn the patronage of clients through an engaged TELUS team 6 Achieved 83% of 40 public consolidated financial targets over the past 8 years
Investing in operational efficiency
Investing in operational efficiency Restructuring charges since 2002 ($ millions) 50 75 902 927 68 20 54 53 28 570 59 852 Included 25% or 6500 net reduction (~ 8,000 gross) in wireline positions 2002 2008 2009E EBITDA savings help offset strategic near-term dilutive investments 8
Total active employees Wireless International Emergis Wireline 8,600 8,100 5,200 6,900 7,700 5,400 5,700 6,300 3,300 4,900 6,700 7,900 1,100 25,500 20,400 19,000 19,500 19,600 19,300 19,400 19,000 2001 2002 2003 2004 2005 2006 2007 2008 Wireline positions flat despite incumbent growth in HSIA and TTV and national growth in large clients deals 9
Total connections 10.7 11.1 11.6 (millions) Res NALs 6.0 Bus NALs Dial-up Internet High-speed Internet Wireless 1999 2006 2007 2008 Since 1999, connection per employee increased by 15% 10
Accelerating operational efficiency External supplier and consultant rationalization Simplification of products and processes Operation-wide expense control Employee positions and compensation optimization Business process outsourcing Accelerated efficiency initiatives in Q4 and into 2009 11
Analysis of active employees 2008 2007 Chg Wireline (ex TI and Emergis) 19,000 19,400 (400) TELUS International (TI) 7,900 6,700 1,200 Emergis (Added Jan 2008) 1,100 0 1,100 Total Wireline 28,000 26,100 1,900 Wireless 8,600 8,100 500 Total 36,600 34,200 2,400 12 Wireline positions down 2% due to efficiency initiatives and flexibility in new collective agreement
Investing in our business
TELUS funding position Solid operating performance and prudent financial policies and guidelines Sustainable cash flow, strong balance sheet, and ample liquidity NCIB lever can be toggled contingent on cash and investment opportunities Significant discretionary capex focused on long-term growth Strong balance sheet and cash flow generation gives TELUS the opportunity to reinvest in our business and return cash to shareholders 14
Investing $2.05 billion in our business in 2009 2009 represents a peak year in capital spend Excellent track record of investments in core business in domestic market Focused on broadband growth investments: Broadband Wireless Broadband Wireline Investment in TELUS International ~1% of capex / ~2% opex / EBITDA + Investment in large client deals and Emergis ~ 5% capex Investments are focused on strategic imperatives and long-term growth 15
Reinvesting $2.05 billion in our business 2009E TELUS International Sustainment and volume related non discretionary Wireline and wireless customer growth Sustainment Sustainment Verticals* Efficiency Broadband Strategic growth - discretionary *Verticals includes large client deals (LCDs) and Emergis Investments focused on strategic imperatives & long-term growth 16 16
TELUS capital intensity and historical average 25% 20% 15% 10% Wireline Wireless Consolidated 20% 22% 19% 14% 5% 0% 17 2002 2003 2004 2005 2006 2007 2008 2009E consolidated capital intensity at similar historical average levels despite major broadband builds 2009E
Returning cash to shareholders 5 consecutive annual dividend increases 5.6% increase - $1.90 for 2009 20% increase - $1.80 36% increase - $1.50 38% increase - $1.10 33% increase - $0.80 5 consecutive NCIB totaling $2.8B 1,204 1,212 1,271 ($millions) NCIB Dividends 5.5B 2.8B 2.7B 864 327 249 312 412 521 584 600 2004 2005 2006 2007 2008 2009E Cumulative Total return of $5.5 billion to shareholders over past 6 years 18
Total Return TELUS vs. global incumbent peers 19 1 TELUS 40% 2 BCE 10% 3 Singapore Tel 9% 4 Telefonica -8% 5 Portugal Tel -8% 6 AT&T -15% 7 Verizon -18% 8 Swisscom -23% 9 Telstra -27% 10 Hellenic Tel -32% 11 New Zealand Tel -50% 12 Royal KPN -71% 13 Telecom Italia -72% 14 France Telecom -75% 15 NTT Corp -75% 16 Deutsche Telekom -80% 17 BT Group PLC -81% 18 PCCW -95% *Source: Thomson Reuters. Total return based on share price change and reinvested dividends from Dec 31, 1999 to December 31, 2008
Investing in Future Friendly Home
Moderate Network Access Line losses vs. peers Wireline challenges: Wireless substitution Other 1 VoIP competition -3.2% -3.6% Second lines declining Long distance declining 2007 2008-5.0% -6.6% -7.4% -9.7% -8.1% -9.3% 1 Includes a weighted average of Bell, MTS and Bell Aliant. 21 TELUS consistently compares favourably to North American peers due to business line growth
Expanding and enhancing broadband footprint Balanced approach including FTTx rollout Target appropriate technology based on demand and geography Brownfield (existing homes) - shortening loops, ADSL 2+, VDSL 2 Building out FTTP in MDUs and new Greenfield developments 100 Mbps GPON market trials for costs, demand, technical viability Enabling TELUS TV offerings HDTV, PVR, HD Video on Demand Enables new ADSL offerings 15 Mbps Turbo Internet service 22 Increasing speed and capacity of broadband to enhance TELUS TV and core Internet speed and offerings
TELUS TV 2008 highlights Mass market in Edmonton / Calgary in 2008 Approx 90% HD footprint in Edmonton Positive subscriber momentum / demand Continued rollout in AB, BC and Quebec HDTV in 2008 up to 33 HD Channels Introduced PVR capabilities (up to 60 hours) Introduced HD Video on Demand Up to three simultaneous channels of switched video 23 Seeing strong demand with increased traction in subscriber loading
TELUS TV benefits Subscription based model month to month, 1 year, 2 year, 3 year Promotions vary with length of contract term (i.e. PVR rental only on 3 yr) All new TELUS TV set top box rentals are HD capable Flexibility for customer to choose programming bundles / a la carte Positive customer feedback in terms of video quality TTV enabling multiple service solutions local, long distance, Internet, TV 24 Bundling services results in enhanced customer loyalty and retention
Investing in enterprise
Key industry verticals enterprise segment Established Verticals Public Sector Healthcare Finance Sector Energy Sector 26 Building scale economies to secure leadership position in key markets in Canada
Benefits of large client deals Superior value proposition - next generation IP solutions are world class Success based capex and opex - after winning multiple-year client contracts Cash flow positive and contribute to financial strength over long term Depth of J-curve can depend on length of contract Low churn, non contract growth and high customer renewal Winning large clients deals is key to advancing national growth strategy 27
Major contract wins across Canada Quebec Government up to $900 million over 10 years Department of National Defence $200 million over 5 years TD Bank $180 million contract over 5 years Government of Ontario $140 million contract over 5 years Yellow Pages Group $90 million over long term Ville de Montreal $87 million over 10 years Hamilton Health Sciences - $137 million over 15 years Co-operators - $66 million over 6 years Excellent progress in Canadian business market 28
TELUS growth in enterprise segment 2000 Leverage investment in 2008 national Next Generation Network Virtually unknown in large corporate market outside Western Canada Excellent reputation for innovation, transition and operations of large client deals Opportunity Customer dissatisfaction with incumbents Potential IP platform to drive strategic solutions Need to convert to IP platform Support western base Leverage IP technology Challenge Customer risk aversion Migration fears Few reference clients Outcome Top score for client satisfaction Cumulative $2.6B in contract value won Anchor clients in key verticals Non-contract growth Low churn and high renewal rates 29
Enhancing leadership position in healthcare Health care vertical an area of strategic importance in Canada Acquisition of Emergis complemented TELUS strong presence in this area Leveraged partnership to win a significant number of new client relationships $500M in 2009 Federal Budget to enable e.health records 2008 Health Company of the Year 30 TELUS is well positioned to participate in evolution of healthcare delivery in Canada
Investing in wireless
Technology roadmap at TELUS 2007 2008 2009 2010 2011 2012 2013 HSPA 7 30 Mbps LTE* 50 Mbps+ EVDO Rev A 3.2Mbps GSM/UMTS Ecosystem CDMA 2000 Ecosystem * Theoretical. Standards in progress Future proofing our technology roadmap 32
Wireless technology evolution at TELUS National next generation wireless network build Using High Speed Packet Access (HSPA) technology Launching service by early 2010 / 2009 peak capex year Optimal transition to 4G, long term evolution (LTE) Vendors: Nokia Siemens Networks and Huawei Technologies HSPA mobile phone call, video telephony call and data call completed TELUS benefits from network sharing agreement with Bell Lowering costs and increasing speed of national build Offering widest national coverage by early 2010 Using existing 850/1900 MHz wireless spectrum 33 Joint next generation wireless network overlay for 2010
Canadian wireless industry sustaining growth Population penetration gain Population penetration 52% 47% 42% 5.1% 4.4% 4.1% 56% 4.6% 61% 4.9% 65% 4.6% 2003 2004 2005 2006 2007 2008 Canadian wireless revenues grew by 11% in 2008 34
TELUS multi brand strategy Premium brand Smartphone focused Full service brand Subscription model High ARPU with data Low churn Growth market Basic brand Limited handsets Talk and text No contract model Lower ARPU Lower cost structure Growth market Vertical brand Business focussed Push to talk centric Subscription model Solid metrics Low capex Mature market 35 Goal for multi-brand strategy to provide similar EBITDA flow through
Industry net additions and share of net adds Net additions / share of net adds 408K 26% 515K 33% 351K 23% 588K* 38% 651K 604K 41% 39% 2007 Source: Company reports 2008 * Digital net additions excluding analogue turndown TELUS increased share of net additions by 5 points to 38% 36
Wireless ARPU Data Voice $63.56 7.02-1.3% $62.73 9.84 $63.70 7.95-2.4% $62.16 11.17 2007 2008 Q4-07 Q4-08 37 Q4 ARPU decline impacted by Mike & economic slowdown Exiting 2008 with lower ARPU growth in worsening economy
Building on wireless data growth Growing wireless data usage through smartphone adoption Data revenue growth of 55% in 2008 Partially offsetting wireless voice declines data revenue ($million) Data rev. as % of network rev $446 $690 16% $280 $131 11% 4% 5% 2005 2006 2007 2008 55% data revenue growth driven by smartphone adoption 38
2008 Wireless marketing efficiency ARPU $63 $64 $54 Data revenue % of total ARPU 16% 17.5% 13% Churn 1 1.52% 1.47% 1.60% Avg. customer tenure (months) 64 68 63 Lifetime revenue per customer $4,145 $4,333 $3,394 COA&COR per gross addition $590 $730 $550 COA&COR % lifetime revenues 14% 17% 16% 1 Churn excludes turndown of analogue network Source: Company reports and TELUS estimates TELUS is a leader in marketing efficiency 39
2008 Wireless profitability EBITDA Margins 1 (% of total wireless revenues) 43.0% 44.4% 39.5% EBITDA growth 1 3.9% 9.0% 7.9% Network revenue flow thru to EBITDA 1 20.8% 33.8% 45.6% CAPEX intensity 11.8% 14.7% 11.0% Cash flow yield 1,2 31.3% 29.7% 28.5% 1 TELUS and Rogers EBITDA as adjusted excludes non-cash expenses associated with cash settlement of options 2 Cash flow yield is defined as EBITDA (as adjusted) less capex divided by total wireless revenue Source: Company reports and TELUS estimates 40 Initial costs relating to Koodo rollout impacted EBITDA growth 2009 focus on efficiency to improve EBITDA flow through
Questions? John Wheeler Vice President, Investor Relations (604) 697-8154 john.wheeler@telus.com Robert Mitchell Director, Investor Relations (416) 279-3219 robert.mitchell2@telus.com