Q3 2013
investor conference call
November 8, 2013
Darren Entwistle
President & Chief Executive Officer
Joe Natale
EVP & Chief Commercial Officer
John Gossling
EVP & Chief Financial Officer
TELUS forward looking statement
2
Today's presentation and answers to questions contain statements about financial and operating performance of TELUS and future events, including with respect to future dividend increases and normal course issuer bids to 2016 and the annual 2013 guidance, 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 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 2013 annual guidance, CEO three-year goals to 2013 for EPS and free cash flow growth excluding spectrum costs, semi-annual dividend increases to 2016, ability to sustain and complete multi-year share purchase programs to 2016), qualifications and risk factors referred to in the first, second and third quarter Management’s discussion and analysis and in the 2012 annual report, and in other TELUS public disclosure documents and filings with securities commissions in Canada (on SEDAR at sedar.com) and in the United States (on EDGAR at sec.gov). 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.
Agenda
CEO Introduction
Q3 operational highlights
Q3 financial results
Questions and Answers
3
Reporting solid Q3 results driven by wireless and wireline
Returning significant capital to shareholders
Furthering our strategy with Public Mobile transaction
Delivering a differentiated customer service experience
CEO introduction
4
TELUS demonstrating strong results and executing on shareholder friendly initiatives
Robust postpaid net additions
5
Postpaid net adds (000s)
Q3-12
116
Q3-13
Solid postpaid net adds with postpaid base up 5% y/y
Wireless subscribers
7.8M total
1.1Mprepaid
86%
14%
6.7Mpostpaid
106
Strong smartphone adoption and ARPU growth
6
Q3-11 Q3-12 Q3-13
6.0 6.4 6.7
Postpaid subscribers (millions)
Smartphone % of postpaid
$61.42 $62.49$60.52
Voice ARPU
Data ARPU
Q3 smartphone penetration up 12 points to 75% of postpaid base supporting ARPU growth of 1.7%
Q3-11 Q3-12 Q3-13
20.90
39.62
24.51
36.91
27.72
34.7748%
63%75%
Industry leading wireless churn
7
1.44%
Q3-12
1.36%
Q3-13
Blended Postpaid
1.10%
Q3-12
0.99%
Q3-13Q3-11Q3-11
1.67%
1.33%
Industry-leading churn resultsPostpaid down 11 basis points to reach lowest level in over six years
Industry leading lifetime revenue per susbcriber1
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Q3-12 Q3-13
$4,595$4,265
1 Lifetime revenue derived by dividing ARPU by blended churn rate
Q3-11
$3,624
Customers First focus generating industry-leading lifetime revenue per subscriber
Healthy TV and Internet growth
9
776637
22%
TELUS TV (000s) High-speed Internet (000s)
1,3741,3035.4%
453
1,218
Continued healthy Internet and TV subscriber growthbalanced with focus on enhanced profitability
Q3-12 Q3-13Q3-11 Q3-12 Q3-13Q3-11
Q3 2013 wireless financial results
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($M, except margins) Q3 2013 Change
Revenue (external) 1,563 4.1%
Network revenue 1,443 5.2%
EBITDA1 680 6.6%
EBITDA excluding restructuring & other like costs 684 7.0%
EBITDA margin2 46.8% 0.6 pts
EBITDA margin excluding restructuring & other like costs 47.0% 0.8 pts
Capital expenditures 194 11%
TELUS delivers another solid quarter of wireless results
1 EBITDA does not have any standardized meaning prescribed by IFRS-IASB. For definition and explanation, see Section 11.1 in the 2013 third quarter Management’s discussion and analysis (MD&A).2 EBITDA as percentage of total network revenue
Wireless data revenue ($M)
Q3-12
546
Q3-13
637
444
Q3-11
Strong Q3 data revenue growth of 17% year-over-yearData now 44% of wireless network revenue, up 4 points
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Q3 2013 wireline financial results
($M, except margins) Q3 2013 Change
Revenue (external) 1,311 3.0%
EBITDA 355 0.8%
EBITDA excluding restructuring & other like costs 366 3.4%
EBITDA margin1 26.2% (0.5) pts
EBITDA margin excluding restructuring & other like costs 27.0% 0.1 pt
Capital expenditures 361 22%
Strong revenue growth driven by DataEBITDA excluding restructuring up 3.4%
121. EBITDA as percentage of total revenue.
Wireline data revenue ($M)
Q3-12
737
Q3-13
801
644
Q3-11
Data revenue growth of 8.7% driven by TV and InternetData revenue 61% of external revenue, up 3 points
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Q3 2013 consolidated financial results
($M, except EPS) Q3 2013 Change
Revenue (external) 2,874 3.6%
EBITDA 1,035 4.6%
EBITDA excluding restructuring & other like costs 1,050 5.7%
EPS (basic) 0.56 14%
Adjusted EPS1 0.58 18%
Capital expenditures (capex) 555 18%
Simple cash flow (EBITDA less capex) 480 (7.5%)
Strong growth in revenue and profitabilityContinued capex investments to support sustainable growth
141. Adjusted EPS does not have any standardized meaning prescribed by IFRS-IASB. See appendix for definition.
EPS continuity analysis
Strong double digit EPS growth
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Q3-12 EBITDA Depr &Amort
Lower O/S shares
Q3-13Higher financing
costs
Higher income tax
$0.02 $0.56
2013 guidance changes1
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($B)2013 guidance
changesY/Y change
Wireless revenue (external) $6.1 to 6.2 4 to 6%
Consolidated capex Approx $2.0
All other segmented and consolidated targets remain unchanged and reaffirmed today.
1. See forward looking statement caution and assumptions in Section 9 of the Q3-13 Managements Discussion and Analysis. Revised guidance excludes any impacts of the proposed Public Mobile acquisition.
2013 targets for profitability remain unchanged
investor relations1-800-667-4871telus.com/[email protected]
2012 2013 Q3 Q3
EBITDA 990 1,035
Capital expenditures (471) (555)
Net employee defined benefit plans expense 24 27
Employer contributions to employee defined benefit plans (14) (7)
Interest expense paid, net (55) (62)
Income taxes paid, net (58) (88)
Share-based compensation 13 21
Restructuring costs net of cash payments (2) (6)
Other (1) -
Free Cash Flow 426 365
Cash payments for spectrum licences - (67)
Purchase of shares for cancellation - (762)
Dividends (198) (222)
Cash payments for acquisitions and related investments (7) (3)
Real Estate joint ventures - (5)
Working capital and other 56 242
Funds available for debt redemption 277 (452)
Net issuance (repayment) of debt (304) 212
Increase (decrease) in cash (27) (240)
Appendix – Q3 2013 free cash flow comparison
Adjusted EPS does not have any standardized meaning prescribed by IFRS-IASB. This term is defined in this presentation as excluding (after income taxes): 1) Restructuring and other like costs; 2) unfavourable income tax-related adjustments. For further analysis of the aforementioned items see Section 1.3 in the 2013 third quarter MD&A.
Glossary
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