Darren Entwistle Member of the TELUS Team October 5, 2004 Communacopia XIII Conference
Jan 12, 2016
Darren EntwistleMember of the TELUS Team
October 5, 2004
Communacopia XIII Conference
2
This presentation and answers to questions contain forward-looking statements about expected future events and financial and operating results that are subject to risks and uncertainties. TELUS’ actual results, performance, or achievement could differ materially from those expressed or implied by such statements. For additional information on potential risk factors including those associated with the potential completion of the Microcell bid, see TELUS’ Annual Information Form, the Offers to Purchase and Circular, and other filings with securities commissions in Canada and the United States.
TELUS disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
All dollars in C$ unless otherwise specified.
forward-looking statement
leading the way
…consistent strategy
4
As at August 4, 2004
Note: TELUS data based on 2003 results & mid-point of 2004 guidance Other estimates provided by Bloomberg, company and analyst reports
projected EBITDA % growth rates
75 4 4
2 2
(4)(6) (7)
(30)
0.10.51
5
(0.2)(2) (2)
TELUS FT DT BCE Sprint Telstra BT VZ Aliant KPN
Nippon PCCW SBC Telia MTS BLS AT&T
2004E global telecom performance
5
As at August 4, 2004
Note: TELUS data based on 2003 results & mid-point of 2004 guidance Other estimates provided by Bloomberg, company and analyst reports
10 10
65
4
1
(4) (5) (5)
(9)
(17)
(25)
(0.6)(2)
(1)(0.5)
9
TELUS Sprint Aliant BCE VZ FT Telstra
SBC Nippon DT Telia PCCW BT BLS KPN MTS AT&T
projected Cash Flow (EBITDA - Capex) % growth rates
2004E global telecom performance
6
about TELUS
financial update
strategy
corporate priorities
investor considerations
agenda
7
2nd largest Canadian telco executing national growth strategy focused on data, IP &
wireless from position of financial strength
2004E1: Revenues $7.45 to 7.55B
EBITDA2 $2.975 to 3.075B
FCF $1.15 to 1.25B
Enterprise value: $16.5B (~ $9B equity)
Listings: TSX: T, T.A; NYSE: TU
Daily Trading3 1.1 million shares
Operating segments: wireline: TELUS Communicationswireless: TELUS Mobility
1 Updated guidance on August 6, 2004 2 Earnings before interest, taxes, depreciation & amortization, after restructuring & workforce reduction costs. 3 Recent 6 month average
about TELUS
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about TELUS Mobility
31.8M: Cdn. PopulationLicensed POPs:
29.7M (93%)Network coverage:
best in North AmericaSpectrum position:
only one in Canada (Nextel in US)iDEN Mike network:
coast to coast 1XCDMA footprint:
$1.05B to 1.1B 29 to 35%EBITDA (2004E)1 :
$2.675 to 2.725B 13 to 16%Revenue (2004E)1 :
3.6MSubscribers:
leading Canadian national wireless provider
1 Updated guidance on August 6, 2004
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ILEC: full service in W. Canada and E. Quebec non-ILEC: data & IP for businesses in Central Canada
Revenue (2004E)1 $4.7 to 4.8B -2 to 0%
EBITDA (2004E)1 $1.925 to 1.975B -4 to -1%
Ntwk access lines 4.8M
Internet subs 925K total / 624K high-speed
Fibre IP backbone national
1 Updated guidance on August 6, 2004
about TELUS Communications
10 Voice focused balanced growth
$5.7B
43%
18%
10%
6%Other
12ME Q2, 2004
$7.3B
Local Voice
Wireless
Data29%
35%
19%
4%Other
LD
Wireless
12ME Q2, 2000
Local Voice
23%
Data
13%
LD
TELUSCommunications
TELUSCommunications
TELUSMobility
TELUSMobility
consolidated revenue profile evolution
28% 54%
} }
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financial update
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$274M$163MNet Income
$0.76$0.46EPS2
4.4%$3.67B$3.51BRevenue
$1.51B$1.38BEBITDA1
YTD Q2, 2004 change YTD Q2, 2003
1 After restructuring & workforce reduction costs of $17M & $ 10M for YTD Q2-04 & YTD Q2-03, respectively.2 Incl. impacts of tax settlements & related interest of approx. $0.17 & $0.15 in YTD Q2-04 & YTD Q2-03,
respectively.
significant earnings & free cash flow generation
$340M$673M$333MFree Cash Flow3
3 Defined as EBITDA, adding Restructuring and workforce reduction costs, cash interest received and excess of share compensation expense over share compensation payments, subtracting cash interest paid, cash taxes, capital expenditures, and cash restructuring payments.
2004 YTD review - consolidated
9.1%
65%
68%
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Mobility’s share of TELUS’ EBITDA & cash flow
28%
36%
Q2Q2EBITDA
30%
47%
Q2Q2 EBITDA less capex
Mobility generating ~ ½ of consolidated cash flow in Q2
2003
2004
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2004 guidance implies significant improvement in profitability, cash flow & leverage
approx. 1.3B$1.25BCapex
$1.15B to 1.25B
$1.30 to 1.50
$2.975 to 3.075B
$7.45 to 7.55B
current 2004 guidance1
$845M
$0.92
$2.82B
$7.15B
2003 actuals
EPS
Free Cash Flow
EBITDA
Revenue
< 2.3x2.6xNet Debt : EBITDA
change
0.3x
4%
36 to 48%
41 to 63%
6 to 9%
4 to 6%
1 Updated guidance on August 6, 2004
2004 financial outlook - consolidated
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strategy
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strategic imperatives 2000-2004
Provide integrated solutions
Invest in internal capabilities
Going to market as one team
Partner, acquire & divest as necessary
Build national capabilities
Focus on growth markets
… 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
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strategic journey highlights purchase of Quebec Tel
purchase of national wireless operator Clearnet
divestiture of non-core assets
completion of national IP backbone & fibre network
first in N.A. to launch Next Generation Network, enabling offer of IP-based solutions to customers
won landmark national managed data solutions contract with IBM Canada for TD Bank
# 1 ranked North American wireless company
2000
2004
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build national capabilities
TELUS’ infrastructure - 2000
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build national capabilities
TELUS’ infrastructure - 2004
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corporate priorities
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2004 six corporate priorities
Reaching a collective agreement
Growing brand value through superior customer service
Embracing continual cost efficiency
Revitalizing wireline growth
Driving towards leadership in high-speed Internet
Enhancing our leadership position in wireless
22
Operational Efficiency Program (OEP) phases I to III during 20012004
on track for cumulative annual savings of ~$550M for 2004 & onwards
incremental savings of ~$100M in 2004 with $50M achieved June 30 YTD
7,550 net staff reductions
combining Business & Client Solutions into one business unit to improve efficiency & effectiveness under leadership of Joe Natale (H2 2004)
rationalizing IT systems over 2-3 years
view successful 2001-2004 OEP as platform for
embedding ongoing improvements
embracing continual cost efficiency
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geographic expansion
high quality, recurring, IP-based revenues in Central Canada
leverage technological leadership and service differentiation that TELUS Next Generation Network (NGN) provides
bundling & price increases
TELUS bundling strategy protects legacy revenues
LD: bundled with high-speed Internet and increased system access fee
home communication solutions
continuing high-speed Internet growth
TELUS future friendly home
revitalizing wireline growth
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driving towards leadership in high-speed Internet 2004 target of 125,000 new subscribers
on track in H1-04 with 63,000
first to market with new services
Spam Control
anti-virus
ad Block
PureradioTM
PuretracksTM
security bundles
driving towards leadership in high-speed Internet
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Total Internet subscribers
67%
High Speed
33%Dial-up
925K
continued market share growth
35%
30%
39%
TELUS high-speed market share1
Q2-03Q2-02 Q2-04
1 In ILEC operating areas
driving towards leadership in high-speed Internet
26 4 to 5 million net adds expected over next 3.5 yrs
Source: Industry analysts
2003
42%
2007E
55-59%
2004YTD
44%
13.4Msubs
18-19Msubs
13.9Msubs
Canadian wireless penetration growth prospects
27TELUS achieving profitable subscriber growth
$737M1.5M
12ME Q2, 2004 Industry EBITDA growth
12ME Q2, 2004Industry subscriber growth
Source: Company reports. Sum of reported net adds & wireless EBITDA for BCE, Rogers Wireless, Microcell, TELUS Mobility
TELUSMobility
40%31%
TELUSMobility
profitable subscriber growth strategy
enhancing our leadership position in wireless
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TELUS Mobility BCE WirelessRogers Wireless
$55
$46$45
Source: Company reports
$58
$48$49
Microcell
$38 $39
continued leadership in ARPU
YTD Q2, 2003
YTD Q2, 2004
significant premium with positive industry-wide trend
enhancing our leadership position in wireless
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leading performance in churn
BCE T-Mobile
2.7%
2.3%
1.4%
1.8%1.6%
1.3% 1.3%
TELUSNextelSprint PCS
Rogers Verizon
3.5%
CingularMicrocell
3.4%2.8%
AT&T
TELUS’ Q2 churn rate is best-in-class
enhancing our leadership position in wireless
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lifetime revenue1 per customer improvement
YTD Q2-03
$2,800
YTD Q2-04YTD Q2-02
$3,900$4,100
TELUS subscriber economics continue to improve
1 ARPU / Churn
enhancing our leadership position in wireless
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North American iDEN Direct Connect
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how does TELUS Mobility measure up?
Sources: TELUS estimates. Cdn. Statistics - Company Reports; US Statistics - Morgan Stanley1 Projected capex as a % of forecast total revenue. 2 Projected EBITDA less projected Capex divided by projected total revenues
3 Projected wireless penetration gain divided by # of carriers in market. For TELUS, projected net adds divided by projected covered POPs
Penetration gain/carrier3
No. of carriers in market
Mkt penetration (cov. POPs)
Cash flow yield2
Capex intensity1
Annual EBITDA growth rate
EBITDA margin
0.5%
6 to 8
58%
12%
19%
27%
32%
US Avg
2004E
1.0%
3 to 4
46%
21%
16%
31%
37%
Cdn Avg
2004E
1.3%
-
13%
27%
13%
32%
40%
TELUS 2004 guidance
TELUS Mobility is best-in-class in fundamentally
stronger 3 to 4 player Canadian wireless industry
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TELUS Mobility ranked #1 in North America
#1. TELUS Mobility
2. Verizon Wireless
3. Nextel
4. Alltel
5. Bell Mobility
6. Alamosa PCS
7. Nextel Partners
8. AirGate PCS
9. Sprint PCS
10. T-Mobile (USA)
11. Rogers Wireless
12. Western Wireless
13. US Cellular
14. Cingular
15. US Unwired
16. Ubiquitel
17. MetroPCS
18. AT&T Wireless
19. Leap Wireless
20. Dobson
21. Triton PCS
22. Microcell
Source: N. Moore Capital, Value Metric Rankings, Q2-04
enhancing our leadership position in wireless
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investor considerations
35
continue EBITDA growth
Regulatory Pressure
Competitive Intensity
Technology Substitution + +Digital Home
Non-ILEC Growth
Organization Effective-
ness+ +
Tip the scales and hold EBITDA flat for the wireline business
=Growth in revenues and EBITDA from the wireless business
Continued improvements in revenues and EBITDA for TELUS
≥
investor considerations
36
TELUS Mobility high proportion of consolidated revenue & cash
flow most profitable wireless carrier in North America
TELUS Communications good results relative to peers robust revenue composite with small exposure to
LD
continued material debt & leverage reduction
generating significant cash & earnings growth
pure play telecom operating company with strong
growth profile
leading the way…
why invest in TELUS
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improving free cash flow
2001 2002
2003
$(1.14)B
$(140)M
$1.15B to 1.25B
2004E
$845M
investor considerations
TELUS subscriber economics continue to improvestrong track record of FCF generation: ~40% in 2004
38
projected EPS % growth rates
As at August 4, 2004
Notes: TELUS data based on 2003 results & mid-point of 2004 guidance Other estimates provided by Bloomberg and company reports
136%
100
4943 42
28
(3) (3) (5) (5)
(46) (46)
(78)
71015
52
Nippon FT TELUS MTS Telia DT KPN PCCW Telstra BCE
SBC BLS VZ Aliant BT Sprint AT&T
2004E global telecom performanceinvestor considerations
39
excellence in corporate governance ranked 9th by Corporate Essentials, “Annual Report of Annual
Reports” – only global ranking of ARs
1st in Canada; 2nd in North America
ranked #1 in world for “strategy, objectives & outlook”
nine years of disclosure excellence in corporate reporting awards by Canadian Institute of Chartered Accountants
IR website ranked 3rd in both Canada and among global telecom companies by IR Web Report
member of DJSI for four consecutive years – only North American telecommunications company listed
recognized as Canada’s Best Environmental Corporate Citizen
e.ComReport Watch
questions?