investor meetings march 2010. strategic overview 3 wireless developments 7 wireline developments...
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Investor MeetingsMarch 2010
Strategic overview 3 Wireless developments 7 Wireline developments 19Financial review 30Summary 37
AgendaAgenda
2
Slide
Strategic overview
Revenue $9.6B
$6.0B
2009120001
Wireless18%
Wireline Local
49%
Wireline LD23%
Data10%
28% 71%
WirelineData22%
Data9%
WirelessWirelineLocal and
22%
6%LD
1 12 months ending June 30, 2000 and Dec 31, 2009, respectively
Wireless
40%
Strategic focus on data and wirelessStrategic focus on data and wireless
TELUS revenues up 60% since 2000TELUS revenues up 60% since 2000
4
Wireline
other
$3.5B
20091
5
EBITDA evolutionEBITDA evolution
Executing strategy drives wireless growth,now 55% of operating profit
Executing strategy drives wireless growth,now 55% of operating profit
20001
$2.3B
Wireless17%
Wireline83%
Wireless55%
Wireline45%
1 12 months ending June 30, 2000 and Dec 31, 2009, respectively
Wireless
Voice - Network Access Lines
Data - Internet and TV
(millions)
65%Internet, TV and wireless
20001
6.0
12.0
20091
6
TELUS total customer connectionsTELUS total customer connections
Client connections doubled since 2000 Client connections doubled since 2000
24%
1 12 months ending June 30, 2000 and Dec 31, 2009, respectively
Wireless developments
TELUS to benefit from future global ecosystem, economies of scale and enhanced roaming revenues
TELUS to benefit from future global ecosystem, economies of scale and enhanced roaming revenues
8
TELUS launches Canada’s largest 3G+ networkTELUS launches Canada’s largest 3G+ network
HSPA network launched November 5, 2009
Service to more than 31 million Canadians
Enabling wireless applications with fast download speeds
Access to international roaming to more than 200 countries
Clear strategic and competitive advantages
Level playing field due to availability of latest smartphones
Data growth
International roaming revenues
3G+ coverage (West)3G+ coverage (West)
Comparing HSPA/HSPA+ national networks as of January 2010: “fastest” according to tests of data throughput speeds in large Canadian urban centres and “largest” based on geographic coverage and population covered.*Manufacturer rated peak data download speeds of up to 21 mbps (HSPA+) and up to 14 mbps (HSPA). Compatible device required. Actual speed may vary by device being used, topography and environmental conditions, network congestion, signal strength, and other factors.Coverage area are approximate as of November 2009. Actual coverage and network service can vary and are subject to change. Map does not indicate CDMA or Mike service coverage. Visit us at TELUS/mobility.com/coverage for our most recent coverage maps for all services.
Leapfrogged past Rogers to have the fastest and largest HSPA+ network
Leapfrogged past Rogers to have the fastest and largest HSPA+ network
3G+ coverage (East)3G+ coverage (East)
Comparing HSPA/HSPA+ national networks as of January 2010: “fastest” according to tests of data throughput speeds in large Canadian urban centres and “largest” based on geographic coverage and population covered.*Manufacturer rated peak data download speeds of up to 21 mbps (HSPA+) and up to 14 mbps (HSPA). Compatible device required. Actual speed may vary by device being used, topography and environmental conditions, network congestion, signal strength, and other factors.Coverage area are approximate as of November 2009. Actual coverage and network service can vary and are subject to change. Map does not indicate CDMA or Mike service coverage. Visit us at TELUS/mobility.com/coverage for our most recent coverage maps for all services.
19%
Wireless subscribers1
81%
Totalnet additions
6.5 million total
5.3M
1.2M
High quality postpaid net adds reflected 89% of subscriber mix compared to 80% a year agoHigh quality postpaid net adds reflected 89%
of subscriber mix compared to 80% a year ago
Q4-08
148K
11
Wireless subscriber resultsWireless subscriber results
Q4-09
122K
109K119K
Postpaid
Prepaid
1 Opening balances for postpaid and total wireless subscribers for Q4-09 were reduced by 11K to reflect prior period reporting adjustments.
Data growth of 20% driven by continued smartphoneadoption and to be enhanced with HSPA smartphonesData growth of 20% driven by continued smartphone
adoption and to be enhanced with HSPA smartphones12
Q4-08
$203M
Wireless data revenue Wireless data revenue
Q4-09
$243M
$131M
Q4-07BlackBerryBold
Q4-08 Q4-09 Change
Gross adds (000s) 441 431 (2.3)%
Churn 1.62% 1.60% (0.02) pts
COA per gross add ($) 372 380 2.2%
COA expense ($M) 164 163 (0.6)%
Retention expense ($M) 105 133 27%
Increased investments in retention focused on continued smartphone adoption
Increased investments in retention focused on continued smartphone adoption
13
Wireless marketing and retentionWireless marketing and retention
Note: Measurement of costs of acquisition and retention refined in 2009. Prior year comparisons restated.
Smartphone subscriber base increased 61% and expected to be a positive factor for future ARPU
Smartphone subscriber base increased 61% and expected to be a positive factor for future ARPU
14
Q4 smartphone mixQ4 smartphone mix
Smartphone subscribers represent 20% of postpaid base compared to 13% a year ago
Post HSPA network & device launch on November 5: More than 40% of gross postpaid loading came from
smartphones More than 100% increase in retention subscriber
upgrades to smartphones
TELUS launched iPhone 3GSTELUS launched iPhone 3GS
15
Running on Canada’s fastest and largest 3G+ networkRunning on Canada’s fastest and largest 3G+ network
Comparing HSPA/HSPA+ national networks as of January 2010: “fastest” according to tests of data throughput speeds in large Canadian urban centres and “largest” based on geographic coverage and population covered.
Fewer and simpler rate plans introduced Nov. 2009 Clear Choice™ suite of consumer rate plans Clear and Simple™ business rate plans
Designs based on feedback from CanadiansConsistent with TELUS’ future friendly brand promiseNo SAF or carrier 911 feesGeneral rate plan increase of $5 with basic voicemail 3Expect loading, churn and cost efficiency benefits
16
TELUS’ simple and clear wireless pricingTELUS’ simple and clear wireless pricing
Simplified rate plan structure supports focus on AMPU Simplified rate plan structure supports focus on AMPU
TELUS’ simple and clear wireless pricingTELUS’ simple and clear wireless pricing
2008 launch expanded mall distribution 103 Koodo kiosks and growing
Realising 77% awareness nationally 93% in core demographic
Earning industry recognition from J.D. Power and Associates:
“Highest in customer satisfaction with postpaid wireless service”
17
Strengthening wireless distributionStrengthening wireless distribution
Providing flexibility to serve various customer needsProviding flexibility to serve various customer needs
In 2009, acquired 113 retail stores across Canada Most in premium mall locations 72% are Ontario based
265323 27
0245327 32
0 54730
2670
180
400
300
50
BritishColumbia
Alberta
Saskatchewan
Manitoba
Ontario
Québec
Newfoundland
NewBrunswick
Nova Scotia
P.E.I.
Wireless distribution augmented by Koodo launch and acquisition of Black’s
Building TELUS’ wireless distributionBuilding TELUS’ wireless distribution
National distribution outlets doubled to 1,616National distribution outlets doubled to 1,616
2000 points of distribution2009 points of distribution
18
Wireline developments
Supporting Future Friendly Home services with ongoing wireline broadband capital investments
Satellite TV service launched mid-2009
Investing in operational efficiency
review of operations – wireless
20
Wireline investmentsWireline investments
Supporting efficiency and new TELUS servicesSupporting efficiency and new TELUS services
21
Broadband build updateBroadband build update
21
Continued ramp-up in broadband coverageContinued ramp-up in broadband coverage
Expanded FTTN coverage to > 75% of households in top 48 communities in Western Canada at YE 2009
Greater Vancouver coverage increased to >70% in Q4
Expect coverage of up to 90% of households in top 48 communities in Western Canada by YE 2010
Cost effective upgrade to VDSL2 technology underway
Provides data download speeds of up to 30 Mbps
Enables expanded IPTV coverage and features
Continuing FTTH to new developments and FTTB to MDU’s
TELUS TV net additions1
Q4-08 Q4-09
15K
33K
22
TTV continues to show strong results with net adds up 120% and total subscriber base up 118%
TTV continues to show strong results with net adds up 120% and total subscriber base up 118%
TELUS TV subscribersTELUS TV subscribers
Q4-08 Q4-09
78K
170K
TELUS TV subscribers1
1 Includes both TELUS IP TV and TELUS Satellite TV subscribers
23
In Q4/09 TELUS TV and Internet loading exceeded residential NAL losses
In Q4/09 TELUS TV and Internet loading exceeded residential NAL losses
Stabilized residential NAL lossesStabilized residential NAL losses
Q3-09
-41K-41K-41K
Q2-09Q1-09Q4-08
-42K
Q4-09
-41K
44K
31K20K
34K34K
TELUS TV & high-speed Internet
Residential NAL’s
24
-4.7%-5.5%
-3.6%
-9.7% -9.8%
2008
2009
Other
-9.3%-10%
-4.5%
Network Access Line losses vs. peers
Best performance by an incumbent in North AmericaBest performance by an incumbent in North America
Resilient network access line lossResilient network access line loss
25
Our opportunity - the future of TELUS TVOur opportunity - the future of TELUS TV
25
Microsoft Mediaroom launched Feb. 2010 across various B.C. and Alberta communities
PVR Anywhere – record and watch on any connected TV
Multiple TV’s in a home with multiple HD streams
Superior picture quality
Enhanced channel guide with picture in picture display
Instantaneous channel changing
Faster Internet speeds
Introduced innovative new features that differentiates against cable-TVIntroduced innovative new features that differentiates against cable-TV
Investing in and focusing on key industry verticals Public sector Financial services Energy Healthcare Wholesale
Implementation track record led to contract winsImplementation track record led to contract wins
Our opportunity on large enterprise dealsOur opportunity on large enterprise deals
NationalDefence
26
TELUS #1 Healthcare IT Company in Canada by Branham Group
2009 Canadian HealthCare Transformation Award (ITAC Health)
Emergis purchased January 2008
Electronic Health Records for 5 million Canadians
4.1 million Emergis Assure drug cards covering 8.5 million Canadians
3,000+ pharmacies using our pharmacy management software
Exclusive partner to host and operate Microsoft HealthVault in Canada
Enhancing our leadership position in healthcareEnhancing our leadership position in healthcare
Leading the evolution of healthcare delivery in CanadaLeading the evolution of healthcare delivery in Canada
27
Investing in operational efficiencyInvesting in operational efficiency
2002-2010E*
$1.2B$1.1B
Cumulative Restructuring
costs
28
Efficiency initiatives result in ~11K position net reductionsEBITDA savings help offset near term dilution of strategic initiatives
Efficiency initiatives result in ~11K position net reductionsEBITDA savings help offset near term dilution of strategic initiatives
2002-2010E*
Cumulative annual EBITDA savings
Restructuring
costs
2002
2003 28
2004 53
542005
682006
202007
592008
1902009
570
$M
752010E*
* See forward looking statement caution
1,117Total
Operating efficiency - domestic FTE reductionsOperating efficiency - domestic FTE reductions
Q1-09
500
Q2-09
400
700550
Q3-09 Q4-09
Approx.1,000
2010E*
2,150 domestic FTE reduction in 2009Targeting approx. 1,000 FTE reduction in 2010
2,150 domestic FTE reduction in 2009Targeting approx. 1,000 FTE reduction in 2010
* See forward looking statement caution 29
2009
2,150
Financial review
TELUS forward looking statementsTELUS forward looking statements
This slide deck and our answers to questions contain statements about expected future events and financial and operating performance of TELUS that are forward-looking. By their nature, forward-looking statements require the Company to make assumptions 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 2010 targets), qualifications and risk factors (including those associated with the deployment and operation of the new national high-speed packet access network and associated introduction of new products, services and systems) referred to in the Management’s discussion and analysis in the 2008 annual report, and in the 2009 quarterly 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.
Fourth Quarter 2009 TELUS Confidential 32
1 Normalized EBITDA excludes ($0.28) and ($0.25) for restructuring and pension costs, respectively, as these are identified separately.2 Normalized Financing expense excludes ($0.22) for debt redemption costs identified separately.
1 2
TELUS 2009 consolidated EPSTELUS 2009 consolidated EPS
$3.52
($0.28)
($0.25)
($0.22)
($0.09)($0.02) $0.06 $0.02
$3.14
2009 as
Reported
Restr.
Pension Costs
Debt Redemption Other
2008 as
Reported
Normalized EBITDA
Norm. Financing
Lower Tax Rates and
O/S Shares$2.59 Excl.
Tax Adj.
$0.55 Tax Adj.$3.37
Excl. Tax Adj.
$0.15 Tax Adj.
2009 EPS impacted primarily by restructuring, pension costs and debt redemption
2009 EPS impacted primarily by restructuring, pension costs and debt redemption
33
TELUS capital expenditure historyTELUS capital expenditure history
Over $16.9 B invested into core businesses in CanadaOver $16.9 B invested into core businesses in Canada
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Wireline
Wireless
$1.75 B
$2.25 B
$1.69 B
$1.25 B $1.32 B $1.32 B
$1.62 B$1.77 B
$1.86 B$2.1 B
2010*
Expected 2010
$1.7 B
* See forward looking statement
34
* See forward looking statement.
2009 - impacted by increased capex, pension and restructuring costs, and start of cash taxes
Free cash flow after spectrum purchases ($M)
Wireless spectrum purchased ($M)
TELUS generating strong free cash flowTELUS generating strong free cash flow
1,443
2003
776
2004
1,167
2006 2007
1,388
2002
2009
500
2008
361
1,243
(910)
2001
(1,266)
2005
1,345
1,336
(249)
2000
144
34
2010E*
750 to 950
2010 - impacted by reduced capex and restructuring costs, partially offset by higher cash taxes
5.5B
Returning cash to TELUS shareholdersReturning cash to TELUS shareholders
Total return of $5.1 billion to shareholders over past 5 years or approx. $16 per shareTotal return of $5.1 billion to shareholders
over past 5 years or approx. $16 per share35
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
NCIB
Dividends
$340 M $330 M
$140 M $170 M
$330 M
$1.20 B $1.21 B$1.27 B
$860 M
$602 M
TELUS refinancing update TELUS refinancing update
In December, successfully issued $1B senior unsecured notes 5.05% 10 year notes, maturing December 2019
Proceeds used to fund partial redemption of notes due in June 2011 Redeemed US$577M (Cdn$607M) of 8% US$1.925B notes Paid $315M to terminate associated cross-currency interest
rate swaps As expected, recorded pre-tax charge of $99M for early partial
redemption and associated swaps After-tax impact of $69M or 22 cents per share
Completed successful $1B debt issue in DecemberCompleted successful $1B debt issue in December
36
Summary
SummarySummary
Invested strategically in 2009 for enhanced competitiveness and future growth Launched 3G+ wireless network Expanded wireline broadband reach Improved organizational cost efficiency through accelerating OEP
initiatives to address J-curve dilution and recessionary impacts Benefits from strategic investments in 2010*
Leverage 3G+ wireless network to accelerate data and roaming growth Leverage enhanced broadband network and Mediaroom for TV growth Lower cost structure with estimated EBITDA savings of $135M Targeting $400M reduction in capital spending Estimating 50%+ growth in free cash flow due to decrease in capex,
despite peak year of cash taxes
38
Expect significant FCF growth in 2010Expect significant FCF growth in 2010
* See forward looking statement caution
2010 TELUS corporate priorities2010 TELUS corporate priorities
Capitalize on the full potential of TELUS’ leading wireless and wireline broadband networks
Enhance TELUS’ position in the Small and Medium Business (SMB) market
Deliver on our future friendly brand promise to clients
Continue to improve TELUS’ operational efficiency to effectively compete in the market and fund future growth
Invigorate TELUS Team engagement and continue to drive the philosophy of “Our Customers, Our Business, Our Team, My Responsibility
39
Opportunity to build value fromstrategic investments made in 2009
Opportunity to build value fromstrategic investments made in 2009
Investor relations1 800 667 4871telus.comir@telus.com
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