Transcript 12ME Q2-03 - About TELUS

TELUS
George Cope, President & CEO
TELUS Mobility
CIBC World Markets
Frontenac Institutional Investor
Conference
September 19, 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
TELUS
Mobility
LD
14%
Wireless
31%
Local voice
31%
Data
Other
19%
5%
TELUS
Communications
$7.1B
wireless & data revenues from 28% to 50% in 3 years
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about TELUS
2003 YTD review – consolidated
YTD Q2-02
Revenue
$3.45B
$3.51B
 2.0%
EBITDA1
$1.21B
$1.39B
 15%
Net Income
$18M
$166M
 148M
EPS
$0.04
$0.46
 $0.42
1
5
YTD Q2-03 change
Excludes restructuring & workforce reduction costs
significant growth in profitability driven by excellent
wireless performance & wireline efficiencies
about TELUS
2003 YTD review – consolidated
YTD Q2-02
change
$955M
$513M
 46%
Capex Intensity1
28%
15%
 13pts
Free Cash Flow2
($161M)
$445M
3.6X
3.0X
Capex
Net Debt: EBITDA
1
2
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YTD Q2-03
 $606M
 0.6X
Ratio of capex to total revenues
EBITDA less capex, cash interest, cash taxes, cash dividends; excludes restructuring & workforce
reduction cash costs of $193M
over $600M improvement in FCF 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
continued industry growth, 34% YTD to $1.2B
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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
102.8K
Q2-02
Q2-03
net additions steady
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ARPU
$55
$56
Q2-03
Q2-02
Average Revenue Per Unit ($/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
significant premium to competitors maintained
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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
AT&T Rogers Verizon Nextel BCE
TELUS’ Q2 churn rate is best-in-class
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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
Q2-03

ARPU
$55
Churn
2.0%
 1.3%
COA (excl. retention)
$420
 $428
$2,800
 $4,300
Lifetime revenue
COA/ Lifetime revenue
15%

$56
10%
marketing cost as % of lifetime revenue declining
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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
+
$76M
$(6)M
Operating Revenue
Growth
$83M EBITDA
growth
Expense
decline
113% of Q2 network revenues flowed to EBITDA line
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capex
$141M
Capex intensity
(total revenue)
29%
$78M
14%
Q2-02
Q2-03
Wireless capex ($)
significant reduction in capital intensity
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EBITDA less capex
$123M
Q2-02
Q2-03
$(22)M
$145M cash flow improvement
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operating cash flow yield
Q2-03
1
2
3
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
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best-in-class North American performance
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TM 2003
guidance
Cdn Avg
2003
US Avg
2003
EBITDA / network rev.
37%
32%
33%
Annual EBITDA growth rate
43%
28%
18%
Capex intensity1
16%
17%
21%
(EBITDA – Capex) / tot. rev2
17%
8%
10%
No. of carriers in market
-
3 to 4
6 to 8
Penetration gain/carrier3
1.2%
0.9%
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
2003 guidance
TELUS Mobility
2003
guidance
$2.25 to 2.3B

11 to 13%
Net additions
350 to 375K

~50K
Churn rate
1.8% or less
Revenue
25
YoY
Change
better
EBITDA
$750 to 775M

40 to 45%
Capex
$350 to 400M

13 to 24%
EBITDA-capex
$350 to 425M
$275 to 350M
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]