Transcript Document

TELUS
George Cope, President & CEO
TELUS Mobility
BMO Nesbitt Burns Telecom
Conference
Sept. 16, 2003
Forward-Looking Legal Disclaimer
This presentation contains 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, see TELUS’
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.
All dollars in C$ unless otherwise specified.
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about TELUS
 Canada’s 2nd largest telco - only national pure-play,
facilities-based, full-service telecom provider
 Executing national growth strategy focused on data, IP &
wireless
 2003E
Revenues
$7.1 to 7.2B
EBITDA
$2.75 to 2.85B
FCF
$800M to 1.0B
Operating segments:
Communications: wireline
Mobility: wireless
 Enterprise value:
 Daily trading1:
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1
~$17B (equity ~ $9B)
1.1M shares
recent 3 month average. TSX: T, T.A; NYSE: TU
about TELUS
consolidated revenue profile evolution
12ME Q2-03
12ME Q2-00
TELUS
Mobility
LD
23%
Wireless
18%
Data
Local Voice
43%
10%
Other
6%
TELUS
Communications
$5.7B
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TELUS
Mobility
LD
14%
Wireless
31%
Local Voice
31%
Data
Other
19%
5%
TELUS
Communications
$7.1B
revenues from wireless & data have grown from 28%
to 50% of total revenue in 3 years
about TELUS
2003 YTD review – consolidated
Revenue
EBITDA1
YTD Q2-03 change
$3.51B
 2.0%
$1.21B
$1.39B
 15%
Net Income
$18M
$166M
 148M
EPS
$0.04
$0.46
 $0.42
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YTD Q2-02
$3.45B
Excludes restructuring & workforce reduction costs
significant growth in profitability driven by excellent
wireless performance & wireline efficiencies
about TELUS
2003 YTD review – consolidated
Capex
YTD Q2-02
$955M
YTD Q2-03
$513M
Capex Intensity1
28%
15%
Free Cash Flow2
($161M)
$445M
3.6X
3.0X
Net Debt: EBITDA
change
 46%
 13pts
 $606M
 0.6X
1
Ratio of capex to total revenues
2 EBITDA less capex, cash interest, cash taxes, cash dividends; excludes restructuring & workforce
reduction cash costs of $193M
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over $600M improvement in free cash flow generation
& 2003 deleveraging target achieved six months early
TELUS Mobility
wireless industry update
penetration growth
2002
2003E
2006E
38%
41-42%
49-54%
12M
subs
13-13.2M
subs
16-17M
subs
Source: Industry analysts
3 million or more net adds expected over next 3 yrs
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wireless industry update
total industry EBITDA1
YTD Q2-02
TELUS
Mobility
$903M
YTD Q2-03
TELUS
Mobility
$1,213M
Source: Company reports.
1 Sum of reported wireless EBITDA for BCE, Rogers Wireless, Microcell and TELUS Mobility
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continued significant industry EBITDA growth,
34% YTD to $1.2B
wireless industry update
net additions
Q2-03 YTD net addition market share
TELUS
Mobility
39%1
Source: Company reports, and analyst estimates
1 Includes Microcell subscriber losses
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TELUS Mobility continues to capture healthy share of
industry net additions
subscribers
102.6K
Q2-02
net additions steady
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102.8K
Q2-03
ARPU
$55
Q2-02
$56
Q2-03
Average Revenue Per Unit ($/month)
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ARPU increase contributed to 16% network revenue
growth, exceeding 14% subscriber growth
ARPU
continued industry leadership
Q2-02
$55 $56
Q2-03
$46
$48
$45
$47
$41
TELUS Mobility BCE Wireless Rogers AT&T
$39
Microcell
Source: Company reports
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significant premium to competitors maintained
ARPU
drivers
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per minute billing - Jul-02
evening & weekend clock change - Jun-03
minutes of use up 18% YTD
roaming/resale agreements
expanded distribution
Verizon’s preferred Canadian PCS roaming partner
iDEN roaming with Nextel in U.S.
expanding data offering (intercarrier SMS, 1X)
churn
strong sequential improvement
2.0%
1.7%
1.7%
1.5%
1.3%
Q2-02
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Q3-02
Q4-02
Q1-03
Q2-03
intense focus on retention has yielded material
improvement in churn rate
churn
leading North American performance
3.3% 3.0%
2.6%
2.4%
2.2% 2.2%
1.7%
1.6%
1.4% 1.3%
Microcell T-Mobile Cingular Sprint
PCS
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AT&T Rogers Verizon Nextel BCE
TELUS’ Q2 churn rate is best-in-class
TELUS
churn reduction
drivers
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3 year contracts
improved coverage
 significant improvement in drop call rate
 expanded national footprint
better phones
grandfathered rate plans
dedicated retention team
improved customer care levels
profitable subscriber growth
Q2-02
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ARPU
$55
Churn
2.0%
 1.3%
COA (excl. retention)
$420
 $428
$2,800
 $4,300
Lifetime revenue
COA/ Lifetime revenue
18
Q2-03
15%

$56
10%
marketing cost as % of lifetime revenue declining
EBITDA growth & margin expansion
$201M
38%
EBITDA margin
(network revenue)
$119M
26%
Q2-02
Q2-03
Wireless EBITDA ($)
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industry leading EBITDA growth of 69% & significant
year-over-year margin enhancement
EBITDA flow-through
Q2-03
+
$76M
Operating Revenue
Growth
20
$(6)M
$83M EBITDA
growth
Expense
decline
113% of Q2 network revenues flowed to EBITDA line
capex
$141M
Capex intensity
(total revenue)
29%
$78M
14%
Q2-02
Q2-03
Wireless capex ($)
21
significant reduction in capital intensity
EBITDA less capex
$123M
Q2-02
Q2-03
$(22)M
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$145M cash flow improvement
operating cash flow yield
Q2-03
1
2
3
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EBITDA Margin1
38%
Capex Intensity2
14%
FCF Yield3
21%
EBITDA margin based on network revenue. EBITDA Margin based on total revenue was 35%
for Q2-03
Capex as % of total revenue
EBITDA less capex, as a % of total revenue
attractive wireless FCF yields improving
how does TELUS Mobility measure up?
TM 2003
guidance
Cdn Avg
2003
US Avg
2003
EBITDA / network rev.
Annual EBITDA growth rate
37%
43%
32%
28%
33%
18%
Capex intensity1
(EBITDA – Capex) / tot. rev2
No. of carriers in market
Penetration gain/carrier3
16%
17%
1.2%
17%
8%
3 to 4
0.9%
21%
10%
6 to 8
0.5%
Sources: Cdn. Statistics - Company Reports; US Statistics - Morgan Stanley. TELUS estimates.
1 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
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best-in-class North American operating performance
2003 guidance
TELUS Mobility
2003
guidance
YoY
Change
$2.25 to 2.3B

11 to 13%
Net additions
350 to 375K
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~50K
Churn rate
1.8% or less
Revenue
better
EBITDA
$750 to 775M

40 to 45%
Capex
$350 to 400M

13 to 24%
EBITDA-capex
$350 to 425M
 $275 to 350M
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2003 guidance reflects continued relentless focus on
profitable subscriber growth
what’s new / what’s coming
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camera phones
continued line-up of cool phones
data services (SMS, 1X)
Mike nationwide Direct Connect
new distribution
conclusion
TELUS Mobility executing to plan
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Capturing solid share of industry growth
Leading ARPU & 16% network revenue growth
Dramatic improvement in churn
Financial discipline - cost containment
EBITDA growth in excess of 40% & margin
expansion
Mobility significant contributor to consolidated FCF
TELUS Mobility is a premium operator in
fundamentally strong Canadian wireless market
questions?
investor
relations
1-800-667-4871
telus.com
[email protected]