Canadian Telecommunications

1
Canadian Telecommunications
David Lee Jeremy Ma Raymond Xie Saurabh
Suryavanshi
2
Contents

• Canadian Telecommunications Industry
• Manitoba Telecom Services (MBT-T)
• Rogers Communications (RCI.NV.B-T)
• TELUS Corporation (T-T)

3
Industry Characteristics
Telecommunications Industry
4
Industry Overview

• Communications Services Industry
• Wired telecommunications (5171)
• Wireless telecommunications (5172)
• Resellers, Satellite, Other services (5173, 5174,
  5179)
• Cable and other program distribution (5175)
• Major companies
• Bell Canada Enterprise (BCE,)
• Aliant (AIT, 53 owned by BCE)
• Bell Nordiq (BNQ, 63 owned by BCE, IT)
• TELUS (T)
• Rogers Communications (RCI.NV.B, 86 owned by E.
  S. Rogers)
• Manitoba Telecom Services (MBT)

5
Industry Key Players
Wireless Paging 9.5 Bilion
Wired Line Long Distance Internet / Data 23.3
Billion
Wired Cable DTH/MDS 5.9 Billion
2004 Revenue 40.0 Billion
Communications
Resellers Others 1.3 Billion
6
Market SegmentRevenue, 1998-2004
7
Market SegmentSubscribers, 1998-2004
8
Industry Characteristics

• Large contribution to economy
• 40.0 billion (2004), 24.8 billion of revenue
  (1997 constant )
• 2.4 of total Canadian GDP
• Highly capital intensive
• Effective cap-ex management and allocation (Long
  term)
• Saturated market
• Increasing unit revenue ? Service development
  capability
• Reducing costs ?Organizational efficiency
• Market penetration ? Marketing as a key factor
• Blurred Boundaries with Cable industry
• Traditionally tough regulations greatly reduced
• Cablecos with VoIP vs.Telcos with IPTV ?
  Strategic position

9
Industry Characteristics
Wireline Communications Services
10
Wireline CommunicationsSegment Overview

• ILECs Incumbent Local Exchange Carriers
• Used to be regional monopoly with own network
• BCE, TELUS, MTS, SaskTel, Aliant, NorthwesTel
• CLECs Competitive Local Exchange Carriers
• Allowed in 1997, if registered with CRTC
• However, hard to compete with ILECs
• Allstream (acquired by MTS), Call-Net (Sprint),
  ExaTel, EastLink
• Resellers
• Rent networks from ILECs or CLECs
• Marketing with competitive rates more actively
  with Long Distance
• Competition between BCE TELUS
• Since 2000, TELUS expanding to eastern Canada to
  become No. 2
• BCE reacting to successfully expand to western
  Canada

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Wireline CommunicationsTelecommunications
Carriers

• TELUS to East / BCE to West since 2000

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Wireline CommunicationsCompetitive Landscape

• Wireline Local Services
• ILECs dominating the market 97.3
• CLECs not able to compete with ILECS
• Gradually declining due to
• Customer migration to wireless
• Reduced demand of 2nd phone line
• Wireline Long Distance Services
• ILECs monopoly eliminated in 1992
• CLECs and resellers effectively competing with
  over 26 share
• Rapidly shrinking with revenue 5.5 B in 2004
• Alternative communications replacing the service
• Wireless and text messaging (SMS)
• Email, Instance messaging Voice chatting
• Internet and cable telephony (VoIP)

13
Wireline CommunicationsLocal Long Distance
Revenue, 1993 - 2004
14
Wireline CommunicationsWired Access Lines, 1993
- 2004
15
Industry Characteristics
Wireless Communications Services
16
Wireless CommunicationsSegment Overview

• Dominated by Big 3
• Rogers Microcell 35.3
• TELUS Mobility 29.4
• Bell Mobility 27.2
• Profitability
• Extreme competition lead by Microcell until early
  2002
• With declining ARPU, industry recorded deficit in
  2000, 2001
• Rogers leading the market after its Microcell
  acquisition in 2004
• Spectrum Technology
• Most Spectrum auctioned in 2001 (1.5 B) ? BCE,
  Rogers, TELUS
• Most carriers completed 2.5G (1X CDMA or
  GSM/GPRS)
• Bell Rogers leading 3G transition ? Important
  for service development (Increased ARPU,
  marketing)

17
Wireless CommunicationsRevenue ARPU, 1999 -
2004
Industry deficit
18
Wireless CommunicationsWireless Technology
Base 2.5G (Advanced Data Voice) 3G (348 kbps 2 Mbps)
Bell Canada CDMA 1XRTT (CDMA2000) 30 55 kpbs 1X EV-DO (urban area) Up to 700 kbps
TELUS CDMA 1XRTT (CDMA2000) 30 55 kpbs
Rogers GSM GSM/GPRS 20-40kbps Cover 93 population EDGE (July2004) Up to 130 kbps
Microcell GSM GSM/GPRS 20-40kbps
Aliant / MTS / Sasktel CDMA 1X network
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Industry Characteristics
Internet Data Services
20
Internet Data Services Segment Overview

• Large Telcos Cablecos
• Able to utilize existing telephone and cable line
• Telephone access line 20 million
• Wired cable line 10.7 million (76.5 households)
• Requires minor modification and modem
• CLECs and Resellers
• Usually provide services on rented network basis
• Compete based on the rate
• Offer additional services (web hosting, long
  distance service )
• Market Share Trend
• Dial-up 27.2
• Digital Subscriber Line (DSL) 34.4
• Cable line 39.4
• DSL Cable line consistently increasing
• Satellite and Wireless internet services starting
  to grow

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Internet Data Services Subscribers, 2000-2004
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Internet Data Services Market Share, 2003
No. 2
No. 3
No. 4
No. 1
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Industry Characteristics
Margin Network Investment
24
TelecommunicationsOperating Margin, 1997-2004
25
TelecommunicationsOperating Margin, Cap-Ex,
1998-2004
High speed Internet
2.5G
26
TelecommunicationsWired Wireless Subscribers,
1998-2004
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Industry Characteristics
Telcos (IPTV) vs. Cablecos (VoIP)
28
VoIP vs. IPTV Technology Overview

• VoIP Voice over Internet Protocol
• Stable technology with satisfactory Technology
• Requires relatively small bandwidth
• Uses public Internet network
• In service by major Cable companies (Shaw,
  Rogers)
• IPTV Internet Protocol Television
• New technology developed by Microsoft
• Requires broad bandwidth
• Technologically advanced compared to traditional
  digital TV
• Showing fast penetration (MTS 18 in less than 2
  years)
• Competitive Implication
• Telcos Cablecos compete head to head
• 20 25 of each market expected to be lost
• More impact on Telecoes than Cablecos

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VoIP vs. IPTV Impact on Competition between
Cablecos Telecos
Telcos Exposure
Cablecos Exposure
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Manitoba Telecom

• Jeremy Ma

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Table of Contents

• Company Overview
• Company Analysis
• Financial Analysis

• MTS Extensive fibre optic network spans more
  than 24,300 km.

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Company Overview

• Third largest telecommunication provider in
  Canada
• Operate through two divisions national and
  Manitoba division

Provide Voice, Data, Video to residential and
business customers in Manitoba.
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MTS History

• 1997 Manitoba Telecom Service became a public
  traded company
• 1999 Strategic alliance with Bell
• 2000 Initiate broadband service in Manitoba
• 2004 End strategic alliance with Bell in Western
  Canada
• 2004 Acquired Allstream (1.6 billion) and become
  the 3rd largest national telecom provider in
  Canada
• 2004 MTS Allstream strategic alliance with BT
  broaden its IP based technology service globally
• 2005 MTS Allstream acquired Delphi Solutions
  Corp.
• 2005 Pierre Blouin named new Chief Executive
  Officer of Manitoba Telecom Services Inc. and MTS
  Allstream Inc.

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Company OverviewManagement Team

• Pierre Blouin CEO 2005
• a seasoned telecommunications executive, who
  spent 20 years at BCE Inc.
• 2003 2005 Group President, Consumer Markets,
  Bell Canada
• 2002 2003 CEO of BCE Emergis
• 2000 2002President and CEO of Bell Mobility
• Wayne S. Demkey, CA CFO 2001
• Joined MTS since 1996.
• 11 years as senior managers at KPMG
• Kelvin A. Shepherd, P.Eng. President, MTS
  (Manitoba) 2006
• CTO of MTS 2000 2005
• 20 years with Saskatchewan Telecom
• John A. MacDonald President, MTS (ALLSTREAM)
  2002
• CEO of Leitch Technology Corp.

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Compensation
36
Operation AnalysisRevenue Breakdown (2005)
37
Company Analysis
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MTS Manitoba
Leading telecom co. in ManitobaVoice, Data, and
Video
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Competitive Landscapein Manitoba
MTS Telus Rogers BCE Shaw
Home Phone O X O (Internet Phone) X O (Internet Phone)
Wireless O O O X X
TV O X X X O
Internet O X O X O
Bundle O X X X O
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MTS Manitoba

• MTS Manitoba continues to dominate Manitoba
  market even though it had faced competition from
  Rogers, Telus, and Shaw.
• How has MTS remained dominant?

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MTS ManitobaPreemption Strategy MTS Bundles

• Objectives
• Preempt cable triple play
• Increase subscriber spending
• Cross-selling
• Strategy
• Full service voice, data, and video
• Attractive pricing (Bundle Pricing)
• Competitive against cable

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Preemption Strategy
MTS
Strategy Offer triple play 3 years before cable telephony
Pricing 20 52/month Save 10 for two bundles Save 20 for 3 bundles
Content 23 basic channels 140 channels in 26 groups Games and VOD (Video On Demand)
Marketing Triple play Three Choices, Three Bucks, Three Charities. Choice
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Results

• Steadily gaining market share in wireless, TV,
  and high-speed internet.
• Increase its revenues and customer base by
  cross-selling
• Shaw Fight Back!
• Introduced its bundle packages in July 2005

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MTS Manitoba Operation Performance
Shaw launched bundle program
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MTS (Manitoba)
Phone Service
Wireless
Internet
TV
Data and Directory ?
Security Alarms ?
Overall
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History of Allstream

• 1846 Montreal and Toronto Magnetic Telegraph Co.
  established
• 1846 1992 merger acquisition ? Change name to
  Unitel
• 1992 Enter Long distance market
• 1996 Unitel ? ATT Canada Long Distance Services
• 1999 Enter IT service first to offer MPLS-IP
  VPNs in Canada
• 1999 Enter local phone service reached 100,000
  local business lines
• 2003 Allstream brand launched
• 2004 MTS acquired Allstream
• 2005 Acquire Delphi Solution Corp.

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Todays Allstream

• Core Business
• Provide specific or integrated e-Business
  solution to business clients
• Target market
• midsized to large size enterprise business, as
  well as the public sector
• Market Segment (by industry)
• Financial
• Government
• Manufacturing
• Healthcare
• High-Tech / Telecom
• Energy

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ALLSTREAM (National) DivisionProduct Portfolio
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Allstream Client Base

• .and many many more Canadian enterprises
• have chosen Allstream for e-business solution

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• Allstream E-business solution
• What is it?
• How does it work ?

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E-business Solution
Network Application Solution
Customer Solution
Configured for Customer
TRANSPORTATION Vertical Applications
for Community of Interest
HEALTHCARE Vertical Applications for Community of
Interest
REPEATABLE TECHNOLOGY (Tool Set)

• RFID
• XML Networking

• Voice Biometrics
• XOIP

• Grid Computing Storage
• Identity Management

Issues

• Clean IP Transport
• Ubiquitous High Speed Affordable Access
• Storage

• Security
• Write once, run everywhere Capability
• Quality of Service
• Web 2.0

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E-business SolutionRFID (Radio frequency
identification) Tag
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Solution InnovationRFID (Radio frequency
identification) Tag
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ALLSTREAM (National) DivisionRetail Application
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• Allstream positions itself as market leader in
• terms of its innovated IT technology

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Market Leader Sound Financial Results?

• NOT Necessary!!!

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Allstream Going Down!

• Recent Development
• Revenues from legacy services (such as long
  distance, local, frame relay, and private line
  data service) deteriorate as telecom technology
  continues to evolve.
• More and more business prefer much cheaper 2nd
  generation network and IP services.
• Allstreams ex-partner/shareholder, Rogers and
  ATT, turn against Allstream by pulling business
  out of Allstream.

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Allstream Going Down!
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Allstream

• No detailed information available to analyze its
  operation
• MTS has claimed that Allstream continues to gain
  market share in Canada IT service industry ?
  implies that Allstream gained market share by
  sacrificing its margins.
• Face competition from incumbent and new market
  entrants

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MTS AllstreamStrategies to Stop the Bleeding

• Allstream Focus more on profitable segments and
  IP data services which have solid profitability
  margins and significant growth potential.
• Transition Phase II, an aggressive program to cut
  costs, refine market focus and service portfolio
• Comprehensive CEO Business Review

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Financial Statements
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Financial StatementIncome Statement
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Financial StatementBalanced Sheet
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Cash Flow
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MTS Pro Forma Financial Performance
pro forma results, i.e.Assume Allstream
acqu. took place on Jan 2003
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Sustainability of Dividend PayoutAdjusted FCF
Forecast
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Retained Earnings
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Fishers Valuation Approach

• Superiority in production, marketing, research
  and financial skills less attractive
• Well-managed ?
• No cash RE ? quick ratio lt 1
• Satisfied production and services
• Marketing Strategy ?

• Investment characteristics of some businesses
  Moderate Attractive
• License requirements
• High entry barrier
• High competition

• The people factor Less Attractive
• Experts in integrated service
• strong in leading the technological innovations

• The price of investment Attractive
• low price now at 37.09
• 52 week range 36.61 49.90
• Dividend Yield 7.01

Recommendation Sell
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Stock Performance
Current Dividend Yield 7.01
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Recommendation

• Mad Money

Sell !!!
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ROGERS
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AGENDA

• Companys History
• Companys Structure
• Rogers Wireless
• Rogers Cable
• Rogers Media
• Rogers Telecom
• Management
• Financial Statements
• Stock performance companys strategy
• Recommendation

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History - The Beginning

• 1925 - Mr. Rogers, Sr. invented the worlds
  first alternating current (AC) radio tube.
• 1931 - Mr. Rogers, Sr. was awarded an
  experimental TV license.
• 1939 - Mr. Rogers, Sr. died at the young age of
  38. He left a widow, Velma, and a 5 year old son,
  Edward.

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The New Era - The Beginning

• 1956 - Ted Rogers earned his Bachelor of Arts
  from the University of Toronto.
• 1961 - Ted Rogers was awarded an LL.B. in 1961
  from Osgoode Hall Law School.
• 1961 62 - Mr. Rogers started Rogers Radio
  Broadcasting Limited
• 1967 - Awarded licenses for Cable business for
  areas in and around Toronto, Brampton and
  Leamington.

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The Growing ERA.!!!!

• 1974 - the first cable company to expand past 12
  channels
• 1979 - Mr. Rogers company, Rogers Cable TV
  Limited, acquired control of Canadian Cable
  systems Limited.
• 1980 - Rogers purchased Premier Communications
  Limited.
• 1979 to 1982 - Acquired and built a number of
  cable television systems in the United States.
• 1989 - Rogers Communications completed the sale
  of its U.S. cable television interests for CDN
  1.581 billion.
• 1989 - Rogers Communications Inc. acquired 40
  of Unitel Communications, formerly CNCP
  Telecommunications.

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The ERA of Diversification!!

• 2000 - Rogers Communications Inc. acquired the
  Toronto Blue Jays Baseball Club.
• 2001 - Rogers Media acquired Sportsnet, and
  renamed Rogers Sportsnet
• 2004 - Acquired Rogers Centre 2004 - Rogers
  acquired the 34 of Rogers Wireless owned by ATT
  Wireless Services Inc.
• 2004 - Rogers Wireless acquired Microcell
  Telecommunications Inc.
• 2004 05 - Rogers Communications repurchased the
  shares of Rogers Wireless.
• 2005, July Rogers introduces Rogers Home Phone
  voice-over-cable local telephony service
• 2005, July Rogers successfully completed the
  acquisition of Call-Net Enterprises Inc. (now
  Rogers Telecom Holdings Inc.), a national
  provider of voice and data communications
  services.

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ROGERS COMMUNICATIONS INC
ROGERS WIRELESS
ROGERS CABLE
ROGERS MEDIA
ROGERS TELECOM

• Blue Jays Hold co Inc.
• Rogers Broadcasting Business
• Rogers Publishing Limited

• Formerly Call-Net enterprises.
• Rogers Telecom.

• Rogers Wireless.
• FIDO Inc.
• FIDO Solutions Inc.
• Rogers Wireless Alberta Inc.
• Wireless payment Services (33.33)

• Rogers Cable Communication Inc.

Subsidiaries
Investments

• Inukshuk Internet Inc.

• 16.5 in Cogeco Cable Inc.
• 21 in COGECO Inc.

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Revenue Operating Profit!!
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ROGERS WIRELESS

• Provides Wireless voice and data communication
  services.
• Largest Canadian Wireless Communications Service
  provider.
• Canadas only carrier operating on the world
  standard GSM/GPRS technology platform.
• Provides Coverage to approximately 93 of
  Canadas population.
• Customer base of 6.138 million wireless voice
  and data subscribers.
• Wireless penetration rates among the lowest in
  the developed world.
• 1.3 million subscribers added through the
  acquisition of MICROCELL.

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Sources of Revenue

• Post paid voice and data
• Monthly Fees
• Airtime and long distance charges
• Optional Services charges
• System access fees
• Roaming Charges
• Prepaid revenues generated principally from
  charges for airtime, long distance and text
  messaging.
• One way messaging or paging Monthly fees and
  usage charges.
• Sale of hardware and accessories and equipment
  activation fees.

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Expenses

• Cost of equipment sales.
• Sales and marketing expenses.
• Advertisements
• Commissions
• Remuneration and benefits to employees.
• Operating, general and administrative expenses.
• Expense to service existing relationships.
• Retention costs.
• Inter-carrier payments.
• Long distance carrier payments.

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Risks

• Fierce and Substantial Competition
• Price War could affect churn rate and revenue
  growth.
• Since Technology dependent, may not meet the
  expectations.
• Changes in the Wireless Communications Industry.
• Risks attached with the acquisition of
  MICROCELL.
• Inability to enhance systems or a system breach
  in future
• Dependent on infrastructure and handset vendors.
• High Capital requirements.
• Restriction on the use of wireless handsets
  while driving.
• Business subject to government regulations.

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ROGERS CABLE

• Largest cable television company in Canada.
• Services include
• Analog and Digital Cable
• Residential and Commercial internet services
• Data and Internet products to business
  customers.
• Rogers Video DVD, Video Cassette, Video Games
• Distribution network includes extensive network
  including wireless independent dealer networks,
  wireless stores, Rogers video, retail chains like
  RadioShack, Future Shop Best buy.
• Ontario comprises for 90 of the total cable
  subscribers.
• New step into voice over cable telephony.

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REVENUES

• Core Cable
• Analog Cable Service Basic Cable Services
• Digital Cable Service Digital Service Channel
  fees
• Internet Residential and Commercial Internet
  Services.
• Rogers Video Sale and Rental of DVD,
  Cassettes.
• Agents Rogers Video acts as an agent for
  Rogers Wireless.

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Expenses

• Cost of Rogers Video stores
• Sales and Marketing Expense
• Operating, general and administrative expenses.
• Customer Care Expenses.
• Technological Disturbance Expenses

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Risks

• Acceptance of new products and failures.
• Substantial Competition.
• The increasing programming costs.
• High Government regulation.
• High technological dependence.
• Increasing royalty rates.
• Reliance on Suppliers.

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ROGERS MEDIA

• Media holds radio and television broadcasting
  operations, our consumer and trade publishing
  operations and our televised home shopping
  service.
• Media Broadcasting
• 43 Radio Stations
• 2 Multicultural television Stations in Ontario.
• Specialty Sports television service across
  Canada(Rogers Sportnet)
• The only nationally televised shopping service.

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• Rogers Publishing
• Well known consumer magazines such as Macleans,
  Chatelaine, Flare, Lactualite, Canadian Business
  and is the leading publisher of a number of
  industry, medical and financial publications.
• Effective Jan 1, 2005 All sports entertainment
  Assets will be a part of Rogers Media.
• Sports Entertainment Assets include
• The Toronto Blue Jays baseball team
• Rogers Centre, Canadian largest sports and
  entertainment facility

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Revenue

• Advertising Revenues
• Circulation and subscription revenues.
• Retail product Sales.
• Ticket Sales at Rogers Centre
• Revenue from home games.
• Revenue sharing Agreement with Major league
  baseball league.

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Expenses

• Cost of sales.
• Cost of retail product at The Shopping Channel.
• Sales and marketing expenses
• Operating, general and administrative expenses
• Programming Costs
• Production Costs
• Circulation expenses.
• Team costs
• Players salaries.
• Scouting and stadium operations

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Risks

• Advertisement, a major source of revenue. A
  decrease in advertisement demand.
• Increased Competition.
• Increase in the paper prices, printing costs or
  postage.
• Change in regulatory policies.
• Media business sensitive to external events and
  economic conditions.
• Introduction of new technology and products.

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ROGERS TELECOM

• Sprint Canada and Call-Net name changed to
  Rogers Telecom after the successful acquisition
  of Call-Net.

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MANAGEMENT
99

• A true pioneer in the communications industry
• Man behind the success from the beginning.
• Education
• Doctorate of Science, Clarkson University of
  Potsdam, New York, 1989
• Doctorate of Law, University of Victoria, BC,
  June 1990
• Doctorate of Law, York University, Ont., June
  1994
• Doctorate of Law, York University, Ont., June
  1994
• Doctorate of Law, University of Western Ontario,
  Ont. 1996
• Doctor of Sacred Letters, Trinity College,
  University of Toronto, 1997
• Doctor of Letters, University of New Brunswick,
  October 2001

Edward S. Rogers, O.CPresident and CEO
100
Alan D. Horn, V.P, Finance and C.F.O
H. Garfield Emerson Chairman
Philip B. Lind Vice Chairman

• Joined Rogers' group in 1990 as President and
  COO, Rogers Telecommunications Limited.
• Tax partner with KPMG from 1984 to 1987
• C.A.
• Honors B.Sc. (Mathematics)

• Joined RCI as Programming Chief in 1969
• Director of RCI since 1979.
• B.Sc. (Political Science Sociology)
• Doctor of Law, UBC.

• Joined RCI as Director, RCI, Nov, 1989
• Chairman of the Board since March 1993.
• Honors B.A. (History)
• LL.B., University of Toronto

101
FINANCIAL STATEMENTS
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5 YEAR Stock Chart
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2 YEAR Stock Chart
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BUSINESS STRATEGY

• Diverse set of portfolio across Business
  Channels.
• Bundled product and service offering.
• Sharing Infrastructure, corporate services and
  distribution channels.
• Grow bigger and Biggest.
• New technology, I am the first one.
• Strong OLD Management.
• Growth through Acquisitions.
• Acquisitions
• Acquisitions..

MTS
SHAW
????
110
FISHER SAYS..

• Peoples Factor
• Attractive
• Price of Investment
• Moderate Attractive
• Superiority in Products and Reach
• High To Moderate Attractive
• Investment characteristics of business
• Attractive

111
Recommendation BUY
112
Source

• Rogers Website
• www.sedar.com
• FP Infomart.
• Financial Statements of Rogers

113

• Company Overview
• Company History
• Company Management
• Products and Services
• Business Forecasts
• Operating Risks
• Financial Analysis
• Fisher Valuation Approach

114
TELUS Overview 1

• Leading incumbent Canadian telecommunications
  provider to Western Canada, and Eastern Quebec
• A national provider of data, IP and voice
  solutions focusing on the business market.
• 3rd largest ISP in Canada
• Two major segments
• Wireline, TELUS Communications
• Wireless, TELUS Mobility

115
TELUS Overview 2

• Business Units
• Consumer Solutions
• Business Solutions
• Partner Solutions
• Wireless Solutions
• TELUS Québec

116
TELUS Overview 3

• Corporate Strategy
• Enhancing our leadership position in wireless
• Growing brand value through superior customer
  services
• Revitalizing wireline growth through innovation
  and national expansion
• Driving towards leadership in high-speed Internet
  solutions
• Embracing continual cost efficiency

117
Company History BC Tel

• 1998
• BC TEL merged with TELUS.
• 1993
• The Company was renamed BC TEL. BC TEL
  reorganized under a holding company this year.
• 1923
• British Columbia Telephone Company was
  established under the federal charter.
• 1904
• British Columbia Telephone Company was formed by
  the Vernon and Nelson Telephone Company by
  changing name
• 1880
• 45 Small phone companies in BC.
• 1878
• BCs first telephone line on Vancouver Island.

118
Company History - TELUS

• TELUS history 2004
• Verizon Communications, who own 20.5 minority
  interest, announced its plan to sell its shares.
• 2001
• TELUS completed several acquisition of several
  small data and Internet companies, including
  Williams Communications, PSINet NWD Systems
• 2000
• TELUS Acquired Clearnet and Quebec Tel.
• 1998TELUS Corporation and BC TELECOM announce a
  proposed merger.
• 1991The Province of Alberta sold its
  remaining ownership interest in TELUS for 870
  million. 1990TELUS Corporation established. It
  went IPO for 896 Million.1982Canada's first
  cellular telephone system introduced to serve
  Alberta resource industries. 1906The Province
  of Alberta commenced operation of the provincial
  phone system after acquiring the Alberta assets
  of the Bell Telephone Company. 1885Alberta's
  first telephone call, between Fort Edmonton and
  the St. Albert mission.

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TELUS Management 1

• Age 42. MBA (Finance) McGill University 1988
• Prior to 2000, President with Cable and Wireless
  UK
• Executive with Mercury Communications UK
• Executive with Bell Cablemedia PLC
• Shareholding 22,000CS/106,316NV
• Options 150,000CS/490,000NV
• Annual Compensation 1.5 Million CAD

• Honorary Doctorate in Technology, BCIT 1997
• Appointed to Order of British Columbia 1998
• 47 years with BC TEL
• Member of the board of directors of Terasen Gas,
  Suncor Energy and the TSX.
• Shareholding 9,718CS/5,509NV
• Options 80,000CS/74,000NV
• Compensation mainly based on options plus
  200,000CAD

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Executive Option Granted for 2005 and 2004
2005
2004
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Executive retirement benefits
As of the end of 2004
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TELUS - Products and Services
123
Products and Services Communications Segment

• Voice local and long distance phone service,
  personal call management services
• Data Web hosting, network management
• Internet Dial-up and high speed Internet
• IP-based TELUS IP-ONE Innovation provide
  business solutions with ability to integrate
  voice mail, email, data and video through a web
  portal
• TELUS Future Friendly Home integrated
  networking solutions to family. Home monitoring
  etc

124
Wireline Segment

• Consistent growth for the High-speed Internet
  services (Avg growth 10)
• Decreased in net additions due to the labor
  strike for 2005Q4
• Dial-up is decreasing changing of consumer
  preference
• Launched a new wave of marketing campaign

125
Products and Services Mobility Segment

• Digital Voice PCS CDMA, PTT, Mike.
• Mobile Internet Wireless Web, text, picture and
  video message, ring tone, image and game
  downloads
• Data packet data. BlackBerry Service.
• Roaming agreement with Verizon Wireless and
  partnership with Nextel.
• Around 40 of revenue from this segment

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Wireless

• Continued demands for wireless service to boost
  the revenue from this segment
• Strong increase in the net additions of wireless
  subscription. Average 13 annual growth.

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Wireless High ARPU Low Churn Rate

• Average revenue per subscriber unit
• An important benchmark to compare wireless
  customers spending
• 2005 ARPU is 62, highest in the TELUS history
• 20 ARPU premium over Canadian wireless
  competitors
• Reflecting TELUSs ability to attracting
  high-value customers and keeping them
• Indicating the overall voice and data usage
  continue to climb
• Focus on customer care and having the low
  monthly churn rate (deactivation) of 1.4

128
Operating Risks

• Labor Issues
• Licensing and Regulatory Issues
• Competitions

129
Risks - Labor Issues

• 2005 Labor strike affect the 2005 Q4 result
  significantly
• New Collective agreement
• Ratified 5 yr agreement to 2010
• To supports a performance culture
• Both parties to dismiss all legal proceedings
• Improve employee engagement

130
Risks - Licensing and Regulatory Issues

• Price cap regulation
• 2002, CRTC establish new lower prices for some
  telecom services
• Increase the competitions
• Terms of access
• Power pole access 1999 2003
• Will result in higher access costs
• 2003 - 7 year term on TELUS broadcasting
  distribution and video on demand.

131
Risks - Competitions

• Wireline voice and data
• VoIP as alternative
• Calling card
• Wireline Internet access
• Voice over Internet protocol (VoIP)
• Shaw, 3 cents a minute for long distance calls
• Rogers Call-net
• Wireless
• Rogers acquired Fido, making Telus more difficult
• Continue to intensify

132
Business Forecasts Value Drivers

• Demonstrated wireless excellence
• Strong revenue despite of labor strike
• Strong 2005 financial results
• Revenue EBITDA up 7
• Net Income up 24
• Free Cash Flow up 13

• New products and contracts
• New wireless high speed network and devices
• TELUS TV the Future Friendly Home
• Plan to offer VOIP Service
• TELUS signed a 137 million deal with Hamilton
  Health Sciences

133
Stock Performance
Last Trade(T-TSX) CAD43.25
Last Trade(TU-NYSE)
Trade Time Feb 24, 2006
Prev Close CAD43.34
OpenCAD43.25
Day's Range CAD43.02-43.50
52wk Range CAD36.61-49.99
Avg Vol (3m) TSX 829,664
Market Cap 13 billion
P/E (ttm) 22.6 (Industry PE 17.6)
EPS (ttm) 25.96
Div Yield 0.875 (2.02)
134
Financial Analysis Selected Quarterly Data
135
Financial Analysis - TELUS

• Strong operating cash flow
• Cash was spent on the stock repurchase and
  repayment of long-term debt
• Net Income, Free Cash Flow, ROE, EPS increasing
• CAPEX/Revenue decreasing
• High leverage debt structure

136
Financial Analysis

• High leverage business
• Debt Structure
• Short-term Revolving Facility 1.67 billion
• Long-term Debt Facility 4.6 billion
• Repayment of debt will result in reduce in
  earning and decrease in dividend per share

137
Financial Analysis

• High leverage business
• Strong 2005 financial results
• Revenue EBITDA up 7
• Net Income up 24
• Free Cash Flow up 13
• Conclusion Strong Financial Position

138
TELUS Management 2

• MBA, University of Western Ontario 1985
• CFO since 2000
• Reorganize the TELUS finance department
• Quarterbacked the completion of the merger with
  BC TEL.
• Annual compensation CAD615K

• BS (EE), University of Waterloo 1987
• EVP since 2003
• KPMG Consulting
• Former country leader for Canada
• Strong industry ties
• Annual compensation CAD 690K

139
Financial Analysis Income Statement
140
Financial Analysis Balance Sheet
141
Financial Analysis Balance Sheet
142
TELUS - Valuation
143
Fishers Valuation Approach

• Superiority in production, marketing, research
  and financial skills Moderate Attractive
• Well managed company
• Strong financials but with high leverage
• Satisfied production and services
• Marketing Strategy Focus (business solutions
  and high ARPU customers)

• Investment characteristics of some businesses
  Moderate Attractive
• License requirements
• Difficult barrier to entry
• High competition

• The people factor Less Attractive
• Experts in post-merger management
• Weak in leading the technological innovations
• Possible future union problems

• The price of investment Less Attractive
• High price now at 43
• Near the historic high of 49
• Year end P/E at historic high of 25.96

Recommendation Sell
144
Sources of Information

• TELUS AR 2004
• TELUS 2005 Information Circular
• TELUS 2006 Quarterly Result News Release
• www.telus.com
• www.sedar.com
• Mergent Online.
• Fidelity Online.
• Yahoo Finance.
• Bigcharts.com