Presentation - About TELUS

Report
Q4 2013 and 2014 targets
investor conference call
February 13, 2014
Darren Entwistle
President & Chief Executive Officer
Joe Natale
EVP & Chief Commercial Officer
John Gossling
EVP & Chief Financial Officer
TELUS forward looking statement
Today's presentation and answers to questions contain statements about financial and
operating performance of TELUS (the Company) and future events, including with respect to
future dividend increases and normal course issuer bids to 2016 and the 2014 annual targets
that are forward-looking. By their nature, forward-looking statements require the Company to
make assumptions and predictions and are subject to inherent risks and uncertainties. There is
significant risk that the forward-looking statements will not prove to be accurate. Readers are
cautioned not to place undue reliance on forward-looking statements as a number of factors
could cause actual future performance and events to differ materially from that expressed in
the forward-looking statements. Accordingly, our comments are subject to the disclaimer and
qualified by the assumptions (including assumptions for the 2014 annual targets, semi-annual
dividend increases through 2016, ability to sustain and complete multi-year share purchase
programs through 2016), qualifications and risk factors referred to in the fourth quarter
Management’s review of operations and Management’s discussion and analysis in the other
2013 quarterly reports, in the 2012 annual report, and in other TELUS public disclosure
documents and filings with securities commissions in Canada (on SEDAR at sedar.com) and in
the United States (on EDGAR at sec.gov). Except as required by law, TELUS disclaims any
intention or obligation to update or revise forward-looking statements, and reserves the right to
change, at any time at its sole discretion, its current practice of updating annual targets and
guidance.
2
Agenda
 CEO Introduction
 Q4 operational highlights
 Q4 financial results
 2014 annual targets and key assumptions
 Questions and Answers
3
CEO introduction
 Executing on our strategy focused on wireless and data
 Building on momentum – 2014 targets
 Investing for future sustainable growth
 Delivering our 2014 corporate priorities
TELUS demonstrating strong results
and executing on shareholder friendly initiatives
4
2014 Corporate Priorities
1. Delivering on TELUS’ future friendly brand promise by putting
customers first and pursuing global leadership in the likelihood of our
clients to recommend our products, services and people
2. Elevating our winning culture for a sustained competitive advantage
3. Strengthening our operational reliability, including our speed and
resiliency
4. Increasing our competitive advantage through reliable and clientcentric technology leadership
5. Driving TELUS’ leadership position in its chosen business and public
sector markets
6. Advancing TELUS’ leadership in healthcare information management
5
Healthy postpaid net additions
Wireless
subscribers1
Postpaid net adds (000s)
123
113
1.06M
prepaid
14%
7.8M
total
Q4-12
Q4-13
6.75M
postpaid
86%
Healthy postpaid net adds with postpaid base up 3% y/y
1. Wireless
subscribers excludes 222K prepaid subscribers from Public Mobile at December 31, 2013.
6
Industry-leading wireless churn
Blended
Postpaid
1.67%
1.51%
1.41%
1.23%
Q4-11 Q4-12 Q4-13
1.12%
0.97%
Q4-11 Q4-12 Q4-13
Industry-leading low churn results
Postpaid down 15 basis points to reach lowest level in seven years
7
Smartphone & data adoption driving ARPU growth
6.1
6.5
6.8
77%
$59.08
$60.95
$61.86
21.65
25.29
28.17
35.66
33.69
Q4-12
Q4-13
66%
53%
Q4-11
37.43
Q4-12
Q4-13
Q4-11
Postpaid subscribers (millions)
Voice ARPU
Smartphone % of postpaid
Data ARPU
Q4 smartphone penetration up 11 points to 77% of postpaid base
supporting data ARPU growth of 11%
8
Industry-leading lifetime revenue per susbcriber1
$4,036
$4,387
$3,538
Q4-11
Q4-12
Q4-13
Customers First focus generating
industry-leading lifetime revenue per subscriber
1
Lifetime revenue derived by dividing ARPU by blended churn rate
9
Strong Future Friendly Home subscriber growth
TELUS TV
High-speed Internet
50K
Residential NALs
34K
53K
59K
44K
34K
38K
19K
21K
31K
16K
13K
(34)K
(32)K
(33)K
Q1-13
Q2-13
Q3-13
(25)K
Q4-13
Combined TV and high-speed Internet net additions exceeded
residential NAL losses by 2.4 times – best ratio in over 2 years
10
Continued Optik TV innovations
Now offering Optik on the go with live TV
11
Q4 2013 wireless financial results
Q4 2013
Change
Revenue (external)
1,585
3.4%
Network revenue
1,434
4.1%
592
4.4%
604
6.0%
40.9%
0.1 pts
41.7%
0.6 pts
213
11.5%
($M, except margins)
EBITDA1
EBITDA excluding restructuring & other like costs1
EBITDA margin2
EBITDA margin excluding restructuring & other like
costs2
Capital expenditures
TELUS delivers another solid quarter of wireless results
1
2
EBITDA does not have any standardized meaning prescribed by IFRS-IASB. See appendix for definition.
EBITDA as percentage of total network revenue.
12
Wireless data revenue ($M)
648
570
466
Q4-11
Q4-12
Q4-13
Strong Q4 data revenue growth of 14% year-over-year
Data now 45% of wireless network revenue, up 4 points
13
Q4 2013 wireline financial results
($M, except margins)
Revenue (external)
EBITDA
EBITDA excluding restructuring & other like costs
EBITDA margin1
EBITDA margin excluding restructuring & other like
costs
Capital expenditures
Q4 2013
Change
1,363
3.4%
359
2.1%
380
3.5%
25.6%
(0.3) pts
27.0%
No change
364
10.3%
Strong revenue growth driven by Data
EBITDA excluding restructuring up 3.5% and stable margin of 27%
1.
EBITDA as percentage of total revenue.
14
Wireline data revenue ($M)
770
851
680
Q4-11
Q4-12
Q4-13
Data revenue growth of over 10% driven by TV and Internet
Data revenue 62% of external revenue, up 4 points
15
Q4 2013 consolidated financial results
Q4 2013
Change
2,948
3.4%
951
3.6%
984
5.0%
0.47
17.5%
0.49
22.5%
Capital expenditures (capex)
577
10.7%
Simple cash flow (EBITDA less capex)
374
(5.8)%
($M, except EPS)
Revenue
EBITDA
EBITDA excluding restructuring & other like costs
EPS (basic)
Adjusted EPS1
Strong growth in revenue and profitability
Continued capex investments to support sustainable growth
1.
Adjusted EPS does not have any standardized meaning prescribed by IFRS-IASB. See appendix for definition.
16
EPS continuity analysis
$0.40
Q4-12
(as reported)
$0.02
$0.05
EBITDA
(ex. Public
Mobile)
Depr &
Amort
$0.02
($0.01)
Lower O/S
shares
Financing
& Other
($0.01)
$0.47
Public
Mobile
Q4-13
(as reported)
Strong double digit EPS growth
17
2014 targets
and key assumptions
See forward-looking statement in
TELUS fourth quarter 2013 and
2014 targets news release
2014 segmented targets1,2
Wireless ($B)
Network revenue (external)
EBITDA
2014 targets
Targeted change
$5.9 to $6.0B
5 to 7%
$2.725 to $2.825B
4 to 8%
$5.45 to $5.55B
3 to 5%
$1.425 to $1.525B
1 to 8%
Wireline ($B)
Revenue (external)
EBITDA
Segmented targets building on our
strong momentum achieved in 2013
forward looking statement caution and assumptions in Section 1.5 of fourth quarter 2013 Management’s
review of operations.
2 2014 wireless targets and growth rates exclude Public Mobile.
1 See
19
2014 consolidated targets1,2
$B, except EPS
Revenue
EBITDA
EPS
Capital expenditures
2014 targets
Targeted change
$11.9 to $12.1
4 to 6%
$4.150 to $4.350
3 to 8%
$2.25 to $2.45
11 to 21%
Approx. $2.2
Targets demonstrate benefits of ongoing network and service-related
investments, combined with customer-focused operational execution
forward looking statement caution and assumptions in Section 1.5 of fourth quarter 2013 Management’s
review of operations.
2 2014 consolidated targets and growth rates exclude Public Mobile.
1 See
20
2014 key assumptions1
 Pension accounting discount rate of 4.75%
 Defined benefit pension expense of approx. $87M (approx. $85M in
operating expenses and $2M in financing costs)
 Defined benefit pension plan cash funding of approx. $105M
 Restructuring and other like costs of approx. $75M
 Cash taxes in the range of $540 to $600M
 Statutory income tax rate of 26.0 to 26.5%
Integration of Public Mobile is expected to negatively impact consolidated
and wireless EBITDA by approx. $40M and EPS by approx. 6 cents
Key assumptions and sensitivities listed in section 1.5
in Q4 Management’s review of operations
forward looking statement caution and assumptions in Section 1.5 of fourth quarter 2013 Management’s
review of operations
1 See
21
Our balance sheet strength
 Long-term net debt to EBITDA ratio of 1.8x at year end 2013
 Excellent debt maturity schedule with average maturity at 9.4
years and average cost of debt at approx. 5%
 Over $2 billion of available liquidity
 Investment grade credit ratings providing ready access to
capital market funding
Strong balance sheet supporting broadband investments,
spectrum purchases and returning capital to shareholders
22
investor relations
1-800-667-4871
telus.com/investors
[email protected]
Appendix – Q4 2013 free cash flow comparison
EBITDA
Capital expenditures (excluding spectrum licenses)
Net employee defined benefit plans expense
Employer contributions to employee defined benefit plans
Interest expense paid, net
Income taxes paid, net
Share-based compensation
Restructuring costs net of cash payments
Free Cash Flow
Non-voting shares issued
Dividends
Cash payments for acquisitions and related investments
Real estate joint ventures
Working Capital and other
2012
Q4
918
(521)
26
(28)
(108)
(13)
(20)
9
263
1
(199)
(6)
(5)
(68)
2013
Q4
951
(577)
27
(27)
(113)
(120)
(22)
17
136
(213)
(229)
(8)
33
Funds available for debt redemption
(13)
(281)
76
62
585
304
Net issuance of debt
Increase in cash
Appendix - Glossary
 EBITDA does not have any standardized meaning prescribed
by IFRS-IASB. We have issued guidance on and report EBITDA
because it is a key measure used to evaluate performance at a
consolidated level and the contribution of our two segments. For
definition and explanation, see Section 7.1 in the 2013 fourth
quarter Management’s review of operations.
 Adjusted EPS does not have any standardized meaning
prescribed by IFRS-IASB. This term is defined in this
presentation as excluding (after income taxes): 1) Restructuring
and other like costs; 2) favourable income tax-related
adjustments. For further analysis of the aforementioned items
see Section 1.3 in the 2013 fourth quarter Management’s review
of operations.
25

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