TELUS financial results

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Q4 2008 TELUS investor conference call
Robert McFarlane EVP Chief Financial
Officer Darren Entwistle President CEO
February 13, 2009
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TELUS forward looking statements
Today's session and our answers to questions
contain statements about expected future events
and financial and operating results of TELUS that
are forward-looking. By their nature,
forward-looking statements require the Company to
make assumptions 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 results 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 2009 targets and share
purchases), qualifications and risk factors
referred to in our Managements discussion and
analysis in the 2007 annual report, the 2008
first, second and third quarter reports, and the
2008 fourth quarter Managements review of
operations, and in other TELUS public disclosure
documents and filings with securities commissions
in Canada (on www.sedar.com) and in the United
States (on EDGAR at www.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.
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Agenda

• Wireless and wireline segment review
• Consolidated financial review
• Updates
• Operating Efficiency Programs
• HSPA network build-out
• Business Solutions
• TELUS international
• Pensions
• 2009 corporate priorities
• Questions and Answers

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Wireless segment Q4 2008 financial results
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• EBITDA (as adjusted) excludes net-cash settlement
  feature recovery of 1M in Q4/07. Restructuring
  costs were nil and 6M in Q4/07 and Q4/08,
  respectively.

Margins compressed YoY due to higher costs Capex
reflects start of investment in new HSPA network
build
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Wireless subscriber results
Wireless subscribers
Net additions
prepaid
1.2M
162K
Prepaid 20
postpaid
148K
80
Postpaid 80
66
4.9M
Q4-08
Q4-07
6.1 million total
Postpaid net adds increased 11 over last year
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TELUS wireless subscriber additions
Gross additions (000s)
1,655
Net additions (000s)
1,434
1,293
Net digital additions (000s)
1,279
1,121
1,017
987
588
584
561
535
515
512
431
418
2002
2003
2004
2005
2006
2007
2008
Digital net adds were 588K, net of the impact
from the analogue network turndown of 27.6K
subscribers.
Record annual digital subscriber additions in
2008 up 14
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Wireless ARPU
Data
Voice
of ARPU
63.70
62.16
7.95
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11
11.17
18
Q4-08
Q4-07
Q4-08
Q4-07
Strong data growth partially offsets competitive
voice decline
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Smartphones driving data growth
BlackBerry Curve MIKE
BlackBerry Storm
New BlackBerry Storm and MIKE Curve
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Wireless data revenue (M)
of network revenue
203
181
159
147
131
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16
15
14
12.5
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
55 annualized data growth driven by smartphone
adoption
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Wireless marketing and retention
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Gross adds, COA / COR up YoY
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Next generation wireless network update

• Vendors Nokia Siemens Networks and Huawei
  Technologies
• Planning complete network build commenced
• HSPA mobile phone call, video telephony call and
  data call completed
• HSPA network investments boosted Q4 capex and
  included in 2009 consolidated capex target
• On track for launch and service by early 2010
• HSPA network overlay provides optimal path to 4G
  LTE

Joint next generation wireless network overlay on
track
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See forward looking statement caution
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Operating efficiency program (OEP) update

• Significant acceleration of restructuring costs
  in Q4-08
• 38M in Q4-08 compared to 6M in Q4-07
• 59M in 2008 compared to 20M in 2007
• Managing costs in legacy parts of our business to
  maintain performance and free up resources for
  growth areas of business
• Multiple OEP initiatives are continuing into
  2009
• Compensation frozen for management
• 2009 estimated restructuring costs of 50M to
  75M

Operating efficiency initiatives enhancing
operating performance and funding growth
investments
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See forward looking statement caution
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Wireline segment - revenue profile
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Revenue up due to strong growth in data
offsetting moderate declines in local and LD
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Wireline segment Q4 2008 financial results
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• EBITDA (as adjusted) excludes net-cash settlement
  feature exp of 2M in Q4/07. Restructuring costs
  were 6M and 32M in Q4/07 and Q4/08,
  respectively.

Underlying EBITDA up 2 when excluding
restructuring
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Internet subscribers
High-speed Internet net additions
Internet subscribers
124K
Dial-up 10
26K
19K
High-speed 90
1.1M
13K
1.2 million total
Q4-07
Q4-08
Q3-08
Net adds improved sequentially but down YoY
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Business Solutions wireline update

• TELUS selected by Government of Quebec to deliver
  and manage provinces next generation data
  network
• Up to 900M contract for a term of seven to 10
  years
• Network will provide connections to 160
  ministries and agencies and 350 health network
  institutions
• Dilutive to earnings and FCF upfront / typical J
  Curve investment
• Deployment planning underway
• TELUS Health Solutions progressing well
• Successful integration of Emergis
• 2009 Federal budget provides 500M to Canada
  Health Infoway for greater use of e.health
  records
• Budget goal is 50 of Canadians with e.health
  record by 2010
• TELUS well positioned to compete on this
  opportunity

Continued success of industry vertical strategy
and consultative customer approach
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Moderate Network Access Line losses vs. peers
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Other
-3.2
-3.6
-5.0
-6.6
-7.4
-8.1
Q4 2007
-9.3
Q4 2008
-9.7
1 Includes a weighted average of Bell, MTS and
Bell Aliant.
TELUS compares favourably to North American
peers due to business line growth
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Consolidated Q4 2008 financial results
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• EBITDA (as adjusted) excludes net-cash settlement
  feature expense of 1M in Q4/07. Restructuring
  costs were 6M and 38M in Q4/07 and Q4/08,
  respectively, or 0.02 and 0.08 per share.

Underlying EBITDA up 1.6, excluding
restructuring costs Capex increase represents
investments for l-t growth
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EPS continuity
1.23
0.44 Tax Adj.
0.90
? 0.04
? 0.03
? 0.03
0.10 Tax Adj.
?(0.06)
?(0.03)
0.80 Excl. Tax Adj.
0.79 Excl. Tax Adj.
Q4-08 Reported
Q4-07 Reported
Lower o/s shares Depn and Amort
Lower 2008 Tax Rates
Financing costs other
EBITDA (excl restr. costs)
Restr. costs
Underlying EPS up slightly
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2008 consol. results compared to original targets
ü
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1 Provided on December 13, 2007
Plus achieved 3 of 4 wireless and wireline
segmented targets
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2009 consolidated guidance unchanged
Provided on December 16, 2008 / See forward
looking statement caution
2009 consolidated and segmented targets unchanged
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TELUS international update

• Opening call centre in Nevada in Q2-09 to support
  call centre and business process outsourcing
  services to U.S. based clients
• Adds Spanish language capability, which is
  increasingly prerequisite for U.S. accounts
• Provides geographic diversity
• Complements TELUS recent minority investment in
  other Spanish/English call centre operations in
  three Central American countries
• Investments provide ability to serve U.S.
  corporate customers in multiple languages and in
  multiple time zones

Investments meet needs of U.S. corporate customers
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TELUS funding position

• Committed 2B credit facility does not expire
  until May 2012
• Extended 700M 364-day bank facility to 2010
• Strong position with sustainable cash flows and
  ample liquidity
• Could term-out some existing short-term financing
  if conditions become advantageous
• Strong investment grade credit ratings (BBB/A-)
  with stable outlook
• Set the industry standard for capital structure
  optimization

TELUS strong balance sheet a result of
longstanding commitment to prudent financial
policies
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Pension assumptions update
Minor year-end updates to 2009 pension
assumptions Pension funding fully tax deductible
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See forward looking statement caution
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Q4 summary

• Consolidated revenue growth driven by wireless
  and wireline data
• Postpaid net adds increased 11 and represented
  80 of net adds
• Continued wireline business traction with large
  public sector contracts and health opportunities
• As promised, demonstrated cost control
  accelerated wireless and wireline restructuring
  investments
• Capex increase due to HSPA and broadband
  investments
• Extended 364-day bank facility to 2010 /
  liquidity 1B maintained
• Strong balance sheet and longstanding adherence
  to prudent financial policies underpins credit
  ratings
• No change to 2009 consolidated and segmented
  guidance

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2009 corporate priorities

• Execute on TELUS broadband strategy, leveraging
  our investments in leading wireline and wireless
  networks to deliver winning solutions for our
  customers
• Increase the efficiency of our operations to
  improve TELUS cost structure and economic
  performance
• Outpace the competition and earn the patronage of
  clients through an engaged TELUS team

Building on strength to create future growth and
value
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Questions?
investor relations 1-800-667-4871 telus.com
ir_at_telus.com
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Appendix Free cash flow
C millions
2008 Q4
2007 Q4
EBITDA
953
937
Capex
(472)
(631)
Interest expense paid (includes income tax
interest income)
(138)
(192)
Cash income taxes and other
120
(2)
Non-cash portion of share based compensation
11
13
Restructuring payments (net of expense)
3

30
Net employee defined benefit plans expense
(recovery)
(23)
(27)
Employer contributions to employee defined
benefit plans
(25)
(26)
(9)
(8)
Donations and securitization fees included in
other expense
Free Cash Flow (before share based comp payment)
420
94
Share based compensation paid
(41)
(33)
Free Cash Flow
379
61
(147)
Purchase of shares for cancellation (NCIB)
(5)
(270)
Dividends
(144)
17
(8)
Working Capital and Other
Funds Available for debt redemption
(21)
(96)
A/R Securitization
(50)
50
Net Issuance (Repayment) of debt
90
14
Increase (Decrease) in cash
19
(32)
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Appendix - definitions

• EBITDA earnings, after restructuring and
  workforce reduction costs, before interest,
  taxes, depreciation and amortization
• Capital intensity capex divided by total revenue
• Cash flow EBITDA less capex
• Free cash flow EBITDA, adding Restructuring and
  workforce reduction costs, net employee defined
  benefit plans expense, cash interest received and
  excess of share compensation expense over share
  compensation payments, subtracting cash interest
  paid, cash taxes, capital expenditures, cash
  restructuring payments, employer contributions to
  employee defined benefit plans, and cash related
  to Other expenses such as charitable donations
  and securitization fees
• Cost of retention (COR) total costs to retain
  existing subscribers, often presented as a
  percentage of network revenue

TELUS definitions for non-GAAP measures