Transcript YTD Q3-04 - About TELUS

Telecom & Tech 2005
George Cope
President & CEO, TELUS Mobility
November 10, 2004
forward-looking statement
This presentation and answers to questions contain forwardlooking 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, facilitiesbased, full-service telecom provider
 Executing national growth strategy focused on data, IP & wireless
 2004E
Revenues
$7.5 to 7.575B,  5 to 6%

EBITDA
$3.025 to 3.075B,  7 to 9%
FCF
$1.25 to 1.3B,  48 to 54%
EPS
$1.40 to 1.50,  52 to 63%
Operating segments:
Communications: wireline
Mobility: wireless
 Enterprise value:
 Daily trading1:
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1
~$18B (equity ~$11B)
1.2M shares
trailing 12 month average. TSX: T, T.A; NYSE: TU
shareholder value enhancing initiatives

Quarterly dividend increased 33% to 20¢ for Jan. 1,
2005 payment

Targeting dividend payout ratio guideline of 45 to 55%
of net earnings

Approval for Normal Course Issuer Bid for up to 10%
of public float or ~25.5M shares

Changes to Dividend Reinvestment Plan
 discontinue 3% discount – in line with peers
 to begin open market purchases in 2005
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about TELUS
Consolidated revenue profile evolution
12ME Q3-04
12ME Q2-00
TELUS
Mobility
TELUS
Mobility
Wireless
LD
LD
23%
Wireless
36%
12%
18%
Data
Local Voice
43%
10%
Local Voice
29%
Other
Other
6%
TELUS
Communications
$5.7B
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Data
TELUS
Communications
19%
4%
$7.4B
Data & wireless revenues from 28% to 55% in 4 yrs
TELUS consolidated - YTD review
YTD Q3-03 YTD Q3-04
Revenue
$5.32B
$5.62B
 6%
EBITDA1
$2.13B
$2.32B
 9%
Net Income
$277M
$430M
 56%
EPS
$0.79
$1.20
 52%
$773M
$1,175M
 52%
Free Cash Flow2
1
2
Change
Includes restructuring & workforce reduction costs of $12M & $33M for YTD Q3-03 & Q3-04, respectively
Free Cash Flow defined as: EBITDA (including restructuring & workforce reduction costs) less capex, net
cash interest, net cash taxes, cash restructuring payments, and excess share compensation expense over
share compensation payments.
.
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Excellent revenue, profitability & free cash flow growth
about TELUS Mobility
leading Canadian national wireless provider
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Revenue (2004E)1 :
$2.775 to 2.8B ( 18 to 19%)
EBITDA (2004E)1 :
$1.1B to 1.125B ( 35 to 38%)
Subscribers:
3.75M
CDMA footprint:
coast to coast 1X
iDEN Mike network:
only one in Canada (Nextel in US)
Spectrum position:
55 MHz in major markets
Licensed POPs:
31.8M: Cdn. Population
Network coverage:
29.7M (93%)
Strategic relationships:
Verizon Wireless & Nextel
1 Guidance
provided October 29, 2004
Canadian subscriber growth accelerating
12ME
Q3-03
Q3-04
Population
31.5M
31.8M
1.3M
1.5M
Cdn wireless market
12.8M
14.4M
Penetration
40.7%
45.2%
4.0%
4.5%
Net subscriber additions
Penetration gain
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Canadian wireless penetration growth prospects
2003
2004YTD
2007E
42%
45%
55-59%
13.4M
subs
14.4M
subs
18-19M
subs
Source: Industry analysts
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4 million or more net adds expected over next 3 yrs
total industry EBITDA1
YTD Q3-03
TELUS
Mobility
32%
$1,954M
YTD Q3-04
TELUS
Mobility
33%
$2,626M
Source: Company reports.
1 Sum of reported wireless EBITDA for BCE, Rogers Wireless, Microcell and TELUS Mobility
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Industry EBITDA up 34% YTD
TELUS Mobility EBITDA & cash flow growth
EBITDA
$1,100 to 1,125
EBITDA less capex
($M)
$815
$535
$455
$356
$173
$750 to 775
$75
2000
2001
2002
2003
2004E1
$(288)
$(360)
1 Guidance
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provided October 29, 2004
56% compounded EBITDA growth rate over four years
Net additions
326K
Postpaid
270K
Prepaid
YTD Q3-03
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YTD Q3-04
Net additions up 21% YTD, with 41% postpaid growth
Network revenue growth
$1,904M
$1,596M
YTD Q3-03
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YTD Q3-04
Network revenue up 19% on strong subscriber & ARPU growth
ARPU - continued industry leadership
YTD Q3-03
$59
$57
YTD Q3-04
$50
$47
$49
$47
$41
$38
TELUS Mobility Rogers Wireless BCE Wireless
Microcell
Source: Company reports
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significant premium with positive industry-wide trend
prepaid ARPU
Q3-04
$26
TELUS
Mobility
$12
$11
BCE
Wireless
Rogers
Wireless
Source: Company reports
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prepaid ARPU double that of closest national competitor
postpaid ARPU
$70
Q3-04
$63
TELUS
Mobility
$62
BCE
Rogers
Wireless Wireless
Source: Company reports
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premium ARPU across all subscriber categories
ARPU drivers






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Price changes continue to roll through the base
 per minute billing - Jul-02
 evening & weekend clock change - Jul-03
 select calling features - Jul-04
minutes of use up 21% in 2003, 12% YTD Q3-04
expanding data offering (intercarrier SMS, 1X & RIM)
roaming/resale agreements
Verizon’s preferred Canadian PCS roaming partner
iDEN roaming with Nextel in U.S.
Churn low & stable
1.4%
1.4%
1.2%
YTD Q3-03 YTD Q3-04
blended monthly churn
18
1.1%
YTD Q3-03 YTD Q3-04
postpaid-only churn
Continued focus on retention evident with postpaid churn
down to 1.05% in Q3
Churn control & retention drivers






19
3 year contracts
improved coverage
 significant improvement in drop call rate
 expanded national footprint
better phones
grandfathered rate plans
dedicated retention team
excellent customer care levels
profitable subscriber growth strategy
YTD Q3-03
ARPU

$59
Blended churn
1.4%
-
COA
$420
 $379
$4,100
 $4,300
Lifetime revenue
COA/ Lifetime revenue
20
$57
YTD Q3-04
10%
Subscriber economics continue to improve

1.4%
9%
EBITDA growth & margin expansion
$858M
$625M
EBITDA margin1
(network revenue)
45%
39%
YTD Q3-03
YTD Q3-04
Wireless EBITDA
1 EBITDA
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margin on total revenue 36% YTD Q3-03, and 41% YTD Q3-04
EBITDA growth of 37% YTD & EBITDA margin of 45%
achieving profitable subscriber growth
12ME Q3-04
subscriber growth
TELUS
Mobility
31%
12ME Q3-04
EBITDA growth
TELUS
Mobility
35%
1.5M
$832M
Source: Company reports.
Sum of reported net adds & wireless EBITDA for BCE, Rogers Wireless, Microcell, TELUS Mobility
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TELUS achieving strategy of profitable subscriber growth
Capex intensity declining
$228M
$232M
13%
11%
YTD Q3-03
YTD Q3-04
Wireless capex
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Continued improvement in capex intensity
Capex intensity
(total revenue)
Capex drivers





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excellent spectrum position - minimal cell splitting
CDMA/1X roaming/resale agreements in Central &
Eastern Canada
Network digitization largely complete
Mike (iDEN) network largely built out
1X network implemented, voice capacity improvement
Cash flow (EBITDA less capex)
$625M
$398M
YTD Q3-03
YTD Q3-04
Wireless cash flow
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Cash flow increased by $228 million or 57% YTD
Operating cash flow yield
YTD Q3-04
EBITDA margin (network revenue)
45.0%
42-43%
EBITDA margin (total revenue)
41.4%
39-40%
Capex intensity2
11.2%
13%
Cash flow yield3
30.2%
26-27%
1
2
3
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2004E1
Based on guidance provided October 29, 2004
Capex as % of total revenue
EBITDA less capex, as a % of total revenue
Attractive wireless cash flow yield above plan YTD
YTD cash flow yield - North America
EBITDA less Capex / Total Revenue
30%
21%
19%
18%
13%
10%
6%
(24)%
Source: Company reports
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YTD results & implied cash flow yield of 26 to 27% in 2004 is
best in class
what’s new?
text messaging
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
Canadians are sending more than
2 million text messages a day, up
100% year over year

By 2006, an estimated one billion
messages will be sent worldwide
every day
Canadians now send more than 60M text messages per month
Fastap


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TELUS Mobility exclusive
World’s first phone and full
keypad
picture messaging

continued focus of awardwinning marketing campaign

significant share of sales in
2004
five camera phones in
current line-up


Canada’s first megapixel
camera phone launched Oct.

new phones with higher
quality cameras and flashes
1.3 megapixel
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4X zoom,
built-in flash
Blackberry
Good traction, US roaming on both iDEN & PCS
Colour
screen
Push
to
Talk
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Blackberry 7510 - iDEN
Blackberry 7750
data revenue expanding exponentially
wireless Internet
(1X cards)
RIM
text & picture
messaging
wireless data
business
& consumer
mobile
computing
& other applications
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mobile
browser
downloads
Data revenue growth driven by expanding number of
applications
North American iDEN Direct Connect
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Mike’s Talk Around
i325
35
i315
conclusion
Attractive industry fundamentals
 Canadian wireless penetration accelerating
 Industry consolidation to 3 national wireless carriers
 Wireless data market exploding
 ARPU up, churn down across industry
 Margins in excess of 40%
 Free cash flow yields expanding
TELUS Mobility is the most profitable wireless carrier in
North America
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questions?
investor relations
1-800-667-4871
telus.com
[email protected]