robert mcfarlane evp & chief financial officer
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Robert McFarlane
EVP & Chief Financial Officer
May 14, 2010
RBC Capital Markets Telecommunications & Media Fixed Income Conference
2TELUS 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, 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 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 2010 guidance), qualifications and risk factors referred to in the Management’s discussion and analysis in the 2009 annual report and in the 2010 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.
Successful and strategic transformation
strategic focus on data and wireless 3
Revenue
$6.0B
201012000
$9.6B
Data & Wireless
28%
Local & Long
Distance72%
Data &Wireless
72%28%
Local &Long
Distance
Simple cash flow returning to more historical levels in 2010 following peak capital investments in 2009
cash flow by segment 4
20011
2002 2003 2004 2005 2006 2007 20081
0.1
Wireline
Wireless
1 Wireless excludes payment for wireless spectrum of $356M in 2001 and $882M in 20082 See forward looking statement – midpoint of 2010 guidance
0.3
1.61.8
2.0 2.0 2.0 1.9
EBITDA less capex ($billions)
1.4
2009
1.9
2010E2
strategic investment in new 3G+ wireless network
HSPA network launched November 5th, 2009
Provides service to more than 31 million or 93% of Canadians
Enabling wireless applications with faster download speeds
Access to international roaming to more than 200 countries
Access to latest smartphones
5
Generating strategic and competitive benefits
BlackBerry Bold
Q1 wireless metrics 6
Wireless KPIs demonstrated significant improvement in Q1
Q1-09 Q1-10 change
Net adds (000s) 48 51 6.3%
Postpaid net adds (000s) 44 65 48%
ARPU $58.39 $55.80 (4.4)%
Churn 1.62% 1.55% (7) pts
COA per gross add $336 $322 (4.2)%
business and residential NALs 7
Stable business NAL losses. Residential NAL decline reflects aggressive price competition from cable-TV competitor
Q1-10
-50K-44K
-8K
Q1-09Q1-10Q1-09
-9K
Business*NAL losses
Residential*
NAL losses
* Historic NALs restated for prior periods starting in 2007 as a result of a periodic subscriber measurement review and correction.
strategic investment in wireline broadband
1.8 million homes now passed with Fibre to the node in AB and BC
Expect 90% coverage of top 48 communities in AB/BC by end of 2010
Cost effective upgrade to VDSL2 underway with speeds up to 30Mbps
Continuing fibre to the home in new residential developments
Fibre to the building (ethernet to the suite) in multi dwelling units
8
Continued increases in broadband coverage to 1.8 million homes
building TELUS TV momentum
Launched Microsoft Mediaroom in February 2010
Exclusive provider of PVR Anywhere in Western Canada
Launched TELUS Satellite TV in mid-2009
9
TELUS TV is available to over 90% of homes in Alberta and BC
TELUS TV customers (000s)
Q12009
41
98
199
Q12010
Q12008
focus on operational efficiency 10
Domestic telecom staff count down 8% in 2009$135M in annual EBITDA savings expected in 2010
Total restructuring costs and savings ($M)
20
190
59
2007 2008 2009 2010E
75
335
2007-2010E
135EBITDA savings
Restructuring
TELUS’ strong balance sheet and credit policies 11
Long term policies & guidelines
Q1-10 Met
Net debt to EBITDA(excluding restructuring)
1.5 to 2.0X 2.0X √
Minimum available liquidity $1 billion $1.7 billion √
Credit Rating BBB+ to A-BBB+/A–,
stable trend√
Decade long track record of prudent financial policies
New dividend payout ratio is 55 to 65% of sustainable net earnings
2010 annual guidance* 12
2010 guidance confirmed on May 5, 2010
* 2010 guidance as at May 5th 2010. See forward looking statement caution
($B, excl. EPS) 2010 guidance12 Change
Revenue $9.8 to $10.1 2 to 5%
EBITDA $3.5 to $3.7 flat to 6%
EPS1 $2.90 to $3.30 3 to 17%
Capex Approx $1.7 (19)%
Expect 50% or greater increase in 2010 free cash flow
long-term debt maturities 14
Average term to maturity of debt is 4.8 years
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021+
C$ millions
81
2,065
795
300700 622 690
989616
2020
Deferred FX Hedge Liability
defined benefit pension plans 15
99% funded on accounting basis
2009 2010E*
Discount rate 7.25% 5.85%
Long-term expected return 7.25% No change
Pension expense ($M) $18 $28
Pension funding ($M) $179 $143
* See forward looking statement caution.
IFRS changeover update 16
Fulsome changeover plans and status in section 8.2 in MD&A
Beginning Q1/10, TELUS began preparing Canadian GAAP to IFRS for internal use
Starting January 1, 2011 TELUS will prepare and report interim and annual 2011 financial statements
The company has completed its initial identification, evaluation and selection of accounting policies necessary to change over to IFRS
Q1 2010 consolidated financial results 17
Growth in earnings and free cash flow resulting from expense control and reduced capital expenditures
($M excl. EPS) Q1-09 Q1-10 change
Revenue (external) 2,375 2,375 -
Operating expenses 1,441 1,429 (0.8)%
Restructuring costs 28 6 n.m.
EBITDA 906 940 3.8%
EPS 1.01 0.84 (17)%
EPS – excluding tax adj. 0.81 0.83 2.5%
Capex 474 311 (34)%
Free cash flow 125 246 97%
Q1 free cash flow
2010Q1
2009Q1
C$ millions
EBITDA 906 940
Capex (474) (311)
Net Employee Defined Benefit Plans Expense (Recovery) 4 7
Employer Contributions to Employee Defined Benefit Plans (53) (45)
Interest expense paid (includes income tax interest income) (49) (36)
Cash Income Taxes and Other (214) (251)
Non-cash portion of share-based compensation 13 8
Restructuring payments (net of expense) (1) (49)
Donations and securitization fees included in other expense (3) (10)
Free Cash Flow (before share-based compensation payment) 129 253
Share Based Compensation Paid (4) (7)
Free Cash Flow (per current public guidance methodology) 125 246
Proceeds from sale of property and other assets (Acquisitions)
(151) (151)Dividends - 3
Working Capital and Other 12 (42)
Funds Available for debt redemption (14) 77
A/R Securitization - (100)
Net Issuance (Repayment) of debt 75 28
Increase (Decrease) in cash 61 5
Issuance of non-voting shares* 0 21
* Non-voting share issuance from treasury for shareholders in the DRIP
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