TELUS 2Q13 presentation final nn

Report
Q2 2013
TELUS investor conference call
August 8, 2013
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 and future events, including with respect to future normal
course issuer bids, 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 2013 annual guidance,
CEO three-year goals to 2013 for EPS and free cash flow growth to 2013 excluding spectrum
costs, semi-annual dividend increases to 2016, ability to sustain and complete multi-year share
purchase programs to 2016), qualifications and risk factors referred to in the first quarter and
second quarter Management’s discussion and analysis and 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
 Q2 operational highlights
 Q2 financial results
 Questions and Answers
3
CEO introduction
 Welcoming competition – advocating for a level playing field
 Reporting solid Q2 results – wireless and wireline
 Returning value to shareholders through NCIB, dividends and
efficiency
TELUS demonstrating strong results
and executing on shareholder friendly initiatives
4
Robust postpaid net additions
Wireless
subscribers
Postpaid net adds (000s)
112
92
100
1.1M
prepaid
14%
7.7M
total
Q2-11 Q2-12 Q2-13
6.6M
postpaid
86%
Solid postpaid net adds with postpaid base up 5.1% y/y
5
Strong smartphone adoption and ARPU growth
5.9
6.3
6.6
71%
$58.88
$60.29
$61.12
19.25
23.32
26.44
36.97
34.68
59%
42%
Q2-11
39.63
Q2-12
Q2-13
Q2-11
Q2-12
Postpaid subscribers (millions)
Voice ARPU
Smartphone % of postpaid
Data ARPU
Q2-13
Smartphone penetration up 12 points to 71% of postpaid base
supporting ARPU growth of 1.4% in Q2
6
Industry leading wireless churn
Blended
1.67%
1.39%
Postpaid
1.40%
1.34%
1.00%
Q2-11 Q2-12 Q2-13
1.03%
Q2-11 Q2-12 Q2-13
Blended and postpaid churn low and stable
7
Industry leading lifetime revenue per susbcriber1
$4,337
$4,366
$3,526
Q2-11
Q2-12
Q2-13
Customer First focus generating leading
lifetime revenue per subscriber
1
Lifetime revenue derived by dividing ARPU by blended churn rate
8
New innovative SharePlus rate plans
 Latest TELUS innovation in evolution of Clear and Simple
customer approach
 Features include unlimited nationwide talk and text, and ability
to share data with your family or small business
 Anticipated positive impact on subscriber economics
 Churn benefits from shared plans and consolidation of households
 More-for-more value proposition
 Enhanced simplicity supports efficiency
Next evolution of Clear and Simple
supports leading subscriber economics
9
Healthy TV and Internet growth
TELUS TV (000s)
743
High-speed Internet (000s)
25%
1,196
1,277
1,355
6.1%
595
403
Q2-11
Q2-12
Q2-13
Q2-11
Q2-12
Q2-13
Continued healthy Internet and TV subscriber growth
balanced with focus on enhanced profitability
10
Q2 2013 wireless financial results
($M, except margins)
Revenue (external)
EBITDA1
EBITDA excl. restr. & other like costs
EBITDA margin2
EBITDA margin excl. restr. & other like costs
Capital expenditures
Q2 2013
Change
1,510
5.9%
666
5.1%
676
6.0%
47.4%
0.1 pts
48.1%
0.5 pts
171
(12)%
TELUS delivers another good quarter of wireless results
despite increased competitive intensity
1
EBITDA does not have any standardized meaning prescribed by IFRS-IASB. For definition and explanation, see Section 11.1
in the 2013 second quarter Management’s discussion and analysis (MD&A).
2 EBITDA as percentage of total network revenue
11
Wireless data revenue ($M)
601
512
402
Q2-11
Q2-12
Q2-13
Strong Q2 data revenue growth of 17% year-over-year
Data now 43% of wireless network revenue, up 4 points
12
Q2 2013 wireline financial results
($M, except margins)
Revenue (external)
EBITDA
Normalized EBITDA1
EBITDA margin2
Normalized EBITDA margin
Capital expenditures
Q2 2013
Change
1,316
6.3%
332
(1.4)%
361
7.3%
24.5%
(1.8) pts
26.6%
0.3 pts
340
(3.9)%
Strong revenue growth driven by Data
Normalized EBITDA up 7.3%
1.
Normalized EBITDA does not have any standardized meaning prescribed by IFRS-IASB. This term is defined in this presentation as EBITDA
excluding restructuring and other like costs, and the gain net of equity losses related to TELUS Garden residential real estate partnership.
2. EBITDA as percentage of total revenue.
13
Wireline data revenue ($M)
689
792
635
Q2-11
Q2-12
Q2-13
Strong data revenue growth of 15% driven by TV and Internet
Data revenue 60% of external revenue, up 4 points
14
Q2 2013 consolidated financial results
Q2 2013
Change
2,826
6.1%
998
2.9%
1,037
6.5%
0.44
(4.4)%
0.54
12.5%
Capex
511
(6.6)%
Simple cash flow (EBITDA less capex)
487
15%
($M, except EPS)
Revenue (external)
EBITDA
Normalized EBITDA1
EPS (basic)
Adjusted EPS2
Strong growth in revenue, earnings and simple cash flow
1. Normalized
EBITDA does not have any standardized meaning prescribed by IFRS-IASB. This term is defined in this presentation as EBITDA
excluding restructuring and other like costs, and the gain net of equity losses related to TELUS Garden residential real estate partnership.
2. Adjusted EPS does not have any standardized meaning prescribed by IFRS-IASB. See appendix for definition.
15
Analysis of Adjusted EPS
($ per share)
Q2 2012
Q2 2013
Basic EPS
0.46
0.44
(0.01)
-
0.01
0.04
-
0.03
Income tax-related adjustments
0.02
0.03
Adjusted EPS
0.48
0.54
TELUS Garden1
Restructuring and other like costs
Long-term debt prepayment premium
Change
(4.4)%
12.5%
Adjusted EPS up 12.5% y/y
1
After-tax gain net of equity losses related to TELUS Garden residential real estate partnership.
16
Adjusted EPS continuity analysis
$0.07
$0.01
($0.01)
($0.01)
$0.54
$0.48
Q2-12
Adjusted
Normalized
EBITDA1
Depr &
Amort
Higher Blended
Statutory Tax
Rates
Normalized
Financing
costs2
Q2-13
Adjusted
Adjusted EPS growth driven by strong EBITDA growth
1
Normalized EBITDA excludes restructuring and other like costs and after-tax gain net of equity losses related to TELUS
Garden residential real estate partnership.
2 Normalized financing excludes long-term debt prepayment premium.
17
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1-800-667-4871
telus.com/investors
[email protected]
Appendix – Q2 2013 free cash flow comparison
2012
Q2
2013
Q2
970
998
(548)
(511)
Simple Cash Flow (EBITDA less Capital expenditures)
422
487
Net employee defined benefit plans expense (recovery)
26
28
Employer contributions to employee defined benefit plans
(15)
(130)
Interest expense paid, net
(106)
(128)
Income taxes received (paid), net
(31)
(82)
9
13
Restructuring payments net of cash payments
(13)
4
Deduct gain net of equity losses related to TELUS Garden
(8)
-
Free Cash Flow
284
192
-
(238)
Dividends
(189)
(209)
Cash payments for acquisitions and related investments
(11)
(3)
Real Estate joint venture
(5)
(6)
Working capital and other
(19)
(8)
59
(272)
(55)
522
4
250
EBITDA
Capital expenditures
Share-based compensation
Purchase of shares for cancellation
Funds available for debt redemption
Net issuance (repayment) of debt
Increase (decrease) in cash
Glossary
 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) Gain net of
equity losses related to TELUS Garden residential real estate
partnership; 2) Restructuring and other like costs; 3) Long-term
debt pre-payment premium; and 4) Income tax-related
adjustments. For further analysis of the aforementioned items
see Section 1.3 in the 2013 second quarter Management’s
discussion and analysis.
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