1
the future is friendly
Investor meetingJune 8, 2005
Robert McFarlaneEVP & Chief Financial Officer
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leading the way with a proven strategy
Focusing on growth markets of data & wireless Building national capabilities Providing integrated solutions Investing in internal capabilities Partnering, acquiring and divesting as necessary 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.
Consistent strategy and execution 2000 2005
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corporate priorities for 2005
Enhance our leadership position in wireless Leverage investments in high speed Internet Accelerate wireline performance in Ontario and Quebec Grow brand value through superior customer experience Drive continual improvements in productivity Reach a new collective agreement
2005 priorities building off success from 2004
4
framework for medium term growth
Price Cap Regulatory Framework
Competitive Intensity
Technological Substitution + +
Non-ILEC Growth
Future Friendly
Home
Organization Effectiveness+ +
Strive to hold wireline EBITDA (before restructuring) flat over medium term
=
Growth in revenues and EBITDA from large exposure to wireless business
Continued improvements in consolidated results
Growth Opportunities Challenges
Short-term dilutive
Wireline
6
appendix
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Challenge is real and is not “US only” Canadian business leaders should embrace need for
comprehensive governance change Ethics at the top are critical TELUS advocates a top down “SOX smart” approach =
proactive, balanced risk-based approach No single checklist can provide good governance New guidance is taking us in the right direction in
Canada and needs constructive leadership
Corporate governance summary
[TELUS logo]With appropriate executive leadership, challenge can be met effectively in a manner that adds shareholder value
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$5.7B
strategic focus on data and wireless
2005
$7.8B
Voice
TELUS Mobility
Data31%
38%
19%
2000
12%LD
Significant exposure to data and wireless @ 57%
49%
18%
10%
LD
TELUS Mobility
Voice
23%
Data
Twelve months trailing to March 31
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Source: Company reports
TELUS Mobility Rogers Wireless1BCE Wireless
$57
$44$47
$58
$48$46
Q1-04
Q1-05
1 Pro forma Microcell
TELUS maintaining ~20% premium to competitors
ARPU comparison
Mobility segment
10 Achieving profitable subscriber growth
Mobility segment
TELUS achieving profitable subscriber growth
$936M182K
EBITDA
net adds
TELUSMobility
36%
$693M
cash flow1
1 EBITDA - Capex
Canadian national wireless carriers in Q1-05
44%
TELUSMobility
40%
TELUSMobility
Source: Company reports. Sum of reported results for BCE, Rogers Wireless pro forma Microcell, & TELUS Mobility
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TELUS Mobility EBITDA & cash flow growth
1 Pro forma acquisition of Clearnet 2 EBITDA (excluding restructuring) for 2001 & 2002
3 Mid-point of latest guidance announced May 4, 2005
(360)
173
815
200320001
356
20012
535
20022
1,142
2004
456
(288)
75
EBITDA
EBITDA less capex($M)
788
2005E3
~1,388
~988
Tremendous trend of value creation
Mobility segment
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EV-DO strategic rationale
3G Evolution Data Only (EV-DO) provides:1. Next necessary evolutionary step in CDMA technology
Follows transition adopted by major US carriers Potential future evolutionary path for voice Sprint-Nextel merger to adopt EV-DO as future PTT infrastructure
under-pinning
2. Increased wireless data speeds opens up new services potentials Average user download speeds of 400 – 500 kilobits per second and up
to 1 Megabit per second (with compression techniques)
3. Greater effectiveness of service models in the enterprise market4. New consumer service models drive consumer data revenue5. First strike advantage over Rogers wireless (and GSM platform)
TELUS playing catch-up to Rogers’ GSM technology and earlier introduction of Blackberry devices
EV-DO allows TELUS to leap-frog ahead of EDGE technology
Mobility segment
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CDMA 2000 evolutionary roadmap (data)
1995 2005 2007
Effective end-user characteristics (excluding compression)
2009+2001
RTT = Round Trip Delayunderscores = advancement from previous standard
Download channel characteristics (excluding compression)
300-500 kbpsAsymmetric300ms RTT
40-60 kbpsSymmetric400ms RTT
EV-DO+1xRTT EV-DO
400-600 kbpsSymmetric70 ms RTT
IS-95
NO packet datacapability
14.4 kbps circuit
3G-nX
400-600 kbps timesn carriersSymmetric70 ms RTT
153.1 kbps 2.4 mbps 3.2 mbps 3.2 mbps times n carriers
IS-95b 1x rev a EV-DV
300-500 kbpsAsymmetric300ms RTT
Limited Deployment or abandoned commercial standards
Contracted upgrade
80-120 kbpsAsymmetric400ms RTT
38 kbpsCircuit switched
Korea only
Mobility segment
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CDMA vs. 3GSM (Rogers Wireless) data evolution
300-500 kbpsAsymmetric300ms RTT
50-80 kbpsSymmetric400ms RTT
EV-DO+1xRTT EV-DO
400-600 kbpsSymmetric70 ms RTT
3G-nX
400-600 kbps timesn carriersSymmetric70 ms RTT
2005 2007
Effective end-user characteristics (excluding compression)
2009+
500-700 kbpsAsymmetric70ms RTT
GPRS EDGE
10-30 kpbsSymmetric400ms RTT
80-100 kpbsSymmetric400ms RTT
UMTSHSDPA
UMTSHSUPA
2002 2003 2004 2006
700-900 kbpsSymmetric70ms RTT
Major evolutionary
change
UMTSRel. 99
Mobility segment
153rd straight quarter of year over year wireline revenue growth driven by data
10%6573Other
11%378340Data
1.4%226230Voice – Long Distance
4.5%553529Voice – Local
ChangeQ1-05Q1-04
External Revenue $1,171 $1,222
($M)
Communications segment
revenue profile
4.4%
16 Normalized local revenue flat & data growth of 11%
Q1-04 Q1-05 Change
Local revenue (reported) 529 553 4.5%
TQ portable subsidy - (7)
CDNS - def. account - (18)
Local revenue (normalized) 529 528 0.2%
Data revenue (reported) 340 378 11%
Acquisitions - (19)
CDNS impact - data - 18
Data revenue (normalized) 340 377 11%
($M)
Communications segment
local and data revenue - normalized
17
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05
long distance revenues
Communications segment
Canadian industry quarterly CAGR comparison
TELUS
Bell
MTS/Allstream
TELUS has adopted a differentiated approach to LD pricing
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-10.0%
-5.0%
0.0%
5.0%
10.0%
Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05
data revenues
Communications segment
TELUS
Bell
MTS/Allstream
Canadian industry quarterly CAGR comparison
Industry and TELUS data growth evident in last few quarters
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Q1-04 Q2-04 Q3-04 Q4-04 Q1-05
-1.3% -1.4%-1.2% -1.3% -1.1%
Strongest NAL result in 5 quarters despite growing competition
% of network access lines lost, YoY
network access line results
Q4-03
-0.8%
Communications segment
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-4.2
-3.7-3.9
-4.3 -4.3
-1.2-1.4
-4.2-4.4
-3.6
-4.3
-4.6
-3.8
-1.1
-0.8-0.8-1.0
-1.3
-3.9
-1.0
-4.2
-4.0
-3.6
-0.9
-1.3
TELUS SBC Verizon BellSouth BCE
Year over Year NAL declines
Source: Morgan Stanley (April 2005), company reports
Trailing five quarters ended Q4-04
%
Q4 Q1 Q2 Q3 Q4
2003 2004
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Why is TELUS NAL loss experience < US: Proportionately less 2nd lines Less wireless substitution Strong economic growth in AB/BC US regulatory framework – UNE-P losses & now
reversal Cable telephony launches in their infancy in Canada
Gaining lines out-of-region TELUS non-ILEC gains offset competitive ILEC losses
Network Access Lines (NALs)
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8(3)(14) 4(9)
Q1-04 Q2-04 Q3-04 Q4-04 Q1-05
128145
131156 160
Positive trend with record revenue; 2nd quarter of positive EBITDA benefited in part from non-recurring items
Revenue
EBITDA
non-ILEC revenue & EBITDA ($M)
~$3-4M run rate
Communications segment
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Business
Geographic expansion building high quality, recurring revenues in non-ILEC leveraging
IP network & application leadership
$245M long-term contract with Gov’t of B.C.
Consumer
“Future Friendly” home continued high-speed Internet growth launched suite of IP applications
Home Networking, HomeSitterTM launched in 2004 IPTV employee trials continue
Bundling bundling strategy protects legacy revenues
revitalizing wireline growth
Communications segment
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TELUS Service Development Roadmap
NewSolutions
Existing Solutions
2003
Games/Music
2004 2005
mytelus.com +
VoIP+
Possible TTV Launch
+IP Messaging
+HomeSitter
+Home
Networking+
Internet+
Wireless
Local/LD/PCMSBundle
2006
Future Friendly Home
IP Messaging
+HomeSitter
+ Home
Networking+
TTV Trial+
Games/Music
+InternetWireless
Local/LD/PCMSBundle
Internet
Wireless
Local/LD/PCMSBundle
Home Portal +
Remote Access
+VoIP
+Possible TTV
Launch+
IP Messaging+
HomeSitter+
Home Networking
+Internet
+Wireless
Local/LD/PCMSBundle
16 Mbps
Ba
nd
wid
thR
eq
uir
em
en
ts
1.5 Mbps
7 Mbps
ADSL @ 2200 m
ADSL2+ @ 1500 m
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strategic rationale of potential IPTV offering Grow new sources of revenue and expand share of wallet of
Alberta and BC consumers
Protect TELUS high value customers and increase customer loyalty through introduction of key entertainment services
Offer “Quadruple Play” bundle of voice, high-speed data, mobility and video
Provide an alternative to Shaw cable and Bell’s ExpressVu satellite systems
Decrease Shaw’s ability to erode traditional voice services with its “Triple Play” bundle
Offer differentiated services
26 Positive changes reflect Q1 momentum and tax settlement
2005 consolidated guidance summary
1 Provided on December 17, 20042 Updated May 4, 20053 Includes ~$100M in restructuring & workforce reduction costs4 Updated guidance includes $0.15 in 2005 for favourable settlement of tax matters
$1.2 to $1.3BFree Cash Flow
$1.3 to $1.4BCapex
$1.65 to $1.85EPS4
updated 2005 guidance2
EBITDA3
Revenue
original 2005 targets1
$3.2 to $3.3B
$7.9 to $8.0 B
$1.25 to $1.35B
approx. $1.4B
$1.85 to $2.05
$3.25 to $3.325B
$7.95 to $8.05B
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Effective May 4, 2005, TELUS entered into new credit facilities totaling $1.6 billion $800M five-year revolving term expiring May 2010$800M three-year revolving term expiring May 2008Facilities mature subsequent to 06/07 debt
maturities Will replace TELUS’ existing $1.6B committed facilities Favourable changes to pricing & extended terms
reinforce strong liquidity position
Renewal of credit facilities reflect strong financial position
renewed bank credit facilities
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Collective bargaining with TWU resumed, Feb. 10 Tabled comprehensive offer to TWU, Apr. 13 Declared impasse and delivered notice of lockout measures,
Apr. 18 Presented the comprehensive offer to employees, Apr. 21
cash impact of offer would be up to approx. $200M Federal Court of Appeal denied TWU application challenging
TELUS, Apr. 22 CIRB dismissed application by TWU for interim relief, Apr. 24 Lock-out measures implemented, Apr. 25, May 12 & June 2
labour relations update
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TWU appeal to CIRB on unfair labour practice regarding TELUS’ tabling of comprehensive offer directly to employees
Heard late May 2005
TWU application to Federal Court of Appeal seeking to overturn CIRB’s reconsideration decision, and restore order of binding arbitration
Heard May 31 – June 1, 2005
TELUS Mobility application to Supreme Court of Canada for leave to appeal CIRB decision regarding automatic sweep in of TELUS Mobility East team members
No decision on application
labour relations update
Actions not affecting business operations
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CRTC VoIP decision ILECs subject to regulation for VoIP
Phase II costing – prices can differ from local Expedited, 10-day confidential tariff process 12 month winback period extended
Cablecos are CLECs and deregulated for VoIP
TELUS issues with decision Canada is unique in regulating retail rates Fails to adapt to disruptive technology Gives regulatory head start to some competitors Disadvantages Canadian telephone companies
Decision as expected, but missed opportunity