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the future is friendly

2005 first quarter review & conference call May 5, 2005. the future is friendly. forward-looking statements.

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the future is friendly

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  1. 2005 first quarter review & conference call May 5, 2005 the future is friendly

  2. forward-looking statements This presentation and answers to questions contain forward-looking statements about expected future events including competition, labour relations developments 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, see TELUS’ 2004 Annual Information Form, 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.

  3. 2005 first quarter review & conference call May 5, 2005 Robert McFarlane EVP & Chief Financial Officer the future is friendly

  4. TELUS consolidated financial results • Q1-05 • Change • Q1-04 • Revenue • $1.80B • $1.98B •  • 9.5% • EBITDA1 • $721M • $856M •  • 19% • EPS2 • $0.28 • $0.67 •  • 139% • Capex • $310M • $273M •  • 12% •  • $443M • $567M • 28% • Free Cash Flow3 1 Earnings before interest, taxes, depreciation and amortization 2 Including favourable impacts for tax settlements on EPS of $0.04 in Q1-04 & $0.15 in Q1-05 3 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

  5. TELUS consolidated tax normalization • 15 cent impact on EPS in Q1-05 versus 4 cents in Q1-04 • reflects change in tax estimates for available temporary differences, other tax adjustments, and related interest income on settlements

  6. TELUS consolidated regulatory update CDNS • 35% of TELUS ILEC local voice revenue regulated • Feb-05, Competitive digital network services (CDNS) decision • Positive consolidated impact of $25M in 2005 • unfavourable ILEC impacts effectively offset by mandated price reductions accrued in deferral account • expense reductions for non-ILEC & Mobility Portable Subsidy • TELUS Quebec benefited from decision on portable subsidy retroactive to 2003 & 2004 • positive impact of $10M in 2005

  7. TELUS consolidated EPS continuity • Q1-04 • Q1-05 • Change • EPS reported • $0.28 • $0.67 •  • 139% • Income tax settlement • ($0.04) • ($0.15) • Retroactive impacts of TQ, CDNS regulatory decisions • - • ($0.01) •  • $0.51 • 113% • EPS normalized • $0.24

  8. TELUS consolidated free cash flow • Q1-04 • Q1-05 • ($M) • EBITDA • $721 • $856 • Capex • (310) • (273) • Cash Restructuring Payments (in excess of expense) • (53) • (12) • Net Cash Interest • (9) • (7) • Non-Cash Share Based Compensation • 5 • 4 • Net Cash Tax Recovery • 88 • (1) • Free Cash Flow • $443 • $567 • Share Issuance (non-public) • 27 • 88 • Cash Dividends • (42) • - • Acc. Rec. Securitization Program Reduction • (150) • - • Working Capital/Other • (4) • (145) • Cash avail. for debt reduction & share redemp. • $274 • $510 • Net change in LTD & share repurchase • (7) • (159) • Net change in cash • $267 • $351

  9. Mobility segment financial results • Q1-04 • Q1-05 • Change ($M) • External Revenue • 633 • 753 •  • 19% • EBITDA1 • 248 • 337 •  • 36% • Capex • 50 • 60 •  • 19% • Cash Flow (EBITDA less capex) • 198 • 278 •  • 41% 1 Earnings before interest, taxes, depreciation and amortization

  10. Mobility segment subscriber results net additions total wireless subscribers 4.0M 0.7M 80K 76K prepaid 17% postpaid 83% 3.3M Q1-04 Q1-05

  11. Source: Company reports Mobility segment ARPU comparison Q1-04 $58 $57 Q1-05 $48 $47 $46 $44 TELUS Mobility Rogers Wireless1 BCE Wireless • 1 Pro forma Microcell

  12. Mobility segment profitable growth strategy • Q1-04 • Q1-05 • Change • Net additions • 76K • 80K •  • 5.4% • ARPU • $57 • $58 •  • 1.8% • Blended churn • 1.49% • 1.45% •  • 4 bps • COA • 383 • 355 •  • 7.3%

  13. Mobility segment TELUS achieving profitable subscriber growth Canadian national wireless carriers in Q1-05 net adds EBITDA cashflow1 TELUS Mobility TELUS Mobility TELUS Mobility TELUS Mobility TELUS Mobility 44% 40% 44% 36% 40% $936M 182K $693M 1 EBITDA - Capex Source: Company reports. Sum of reported results for BCE, Rogers Wireless pro forma Microcell, & TELUS Mobility

  14. Mobility segment 2005 guidance summary • original 2005 targets1 • updated 2005 guidance2 • Revenue • $3.2 to 3.25B • no change • EBITDA • $1.35 to 1.4B • $1.375 to 1.4B • Capex • $350 to 400M • approx. $400M • Wireless Net Adds • 425 to 475K • 475 to 525K 1 Provided on December 17, 2004 2 Updated May 4, 2005

  15. Communications segment financial results • Q1-04 • Q1-05 • Change  • External Revenue • $1.17B • $1.22B • 4.4% • EBITDA1 • $474M • $519M •  • 9.6%  • Capex • $259M • $214M • 18% • Cash Flow (EBITDA less capex) • $214M • $305M •  • 43% 1 Earnings before interest, taxes, depreciation and amortization

  16. Communications segment revenue profile • Q1-04 • Q1-05 • Change ($M) • Voice – Local • 529 • 553 •  • 4.5% • Voice – Long Distance • 230 • 226 •  • 1.4% • Data • 340 • 378 •  • 11% • Other • 73 • 65 •  • 10% •  External Revenue $1,171 $1,222 • 4.4%

  17. Communications segment revenue - normalized ($M)

  18. Communications segment local and data revenue - normalized ($M)

  19. Communications segment network access line results % of network access lines lost, YoY Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 -0.8% -1.1% -1.2% -1.3% -1.3% -1.4%

  20. Communications segment EBITDA - normalized ($M) 1 Retroactive regulatory impacts include TQ portable subsidy and CDNS

  21. Communications segment non-ILEC revenue & EBITDA ($M) Revenue EBITDA 160 156 145 128 131 ~$3-4M run rate (9) (14) (3) 4 8 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05

  22. Communications segment high-speed Internet subscriber growth high-speed Internet net additions total Internet subscribers 982K 44K 270K dial-up 28% 22K high-speed 72% 712K Q1-04 Q1-05

  23. Communications segment revitalizing wireline growth 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

  24. Communications segment restructuring and workforce reduction costs ($M)

  25. Communications segment 2005 guidance summary • original 2005 targets1 • updated 2005 guidance2 • Revenue • $4.7 to 4.75B • $4.75 to 4.8B • Non-ILEC Revenue • $600 to 650M • $625 to 650M • EBITDA3 • $1.85 to 1.9B • $1.875 to 1.925B • Non-ILEC EBITDA • $0 to 10M • $15 to 20M • Capex • $950M to 1B • approx. $1B • High-Speed Net Adds • approx. 100,000 • no change 1 Provided on December 17, 2004 2 Updated May 4, 2005 3 Includes ~$100M in restructuring & workforce reduction costs

  26. labour relations update • collective bargaining with TWU resumed, Feb. 16 • 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. 21 • CIRB dismissed application by TWU for interim relief, Apr. 25 • lock-out measures implemented, Apr. 25 • business remains as usual

  27. share buy back update

  28. renewed bank credit facilities • 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 2008 • Facilities 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

  29. 2005 consolidated guidance summary • original 2005 targets1 • updated 2005 guidance2 • Revenue • $7.9 to $8.0 B • $7.95 to $8.05B • EBITDA3 • $3.2 to $3.3B • $3.25 to $3.325B • EPS4 • $1.65 to $1.85 • $1.85 to $2.05 • Capex • $1.3 to $1.4B • approx. $1.4B • Free Cash Flow • $1.2 to $1.3B • $1.25 to $1.35B 1 Provided on December 17, 2004 2 Updated May 4, 2005 3 Includes ~$100M in restructuring & workforce reduction costs 4 Updated guidance includes $0.15 in 2005 for favourable settlement of tax matters

  30. questions? 2005 first quarter review

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