Post on 08-Jan-2018
description
transcript
Robert McFarlaneEVP & Chief Financial Officer
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agenda
2002 highlights Quarter 1, 2003 review 2003 guidance Summary
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These Annual Meeting presentations and answers to questions contain forward-looking 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’ 2003 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.
forward-looking disclaimer
all dollars in C$ unless otherwise specified
2002 highlights
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2002 highlights – consolidated
Challenging telecom & regulatory environment Met or exceeded analyst expectations on key
profitability measures Operating earnings before restructuring costs was
flat despite negative regulatory impacts Capex reduction drove significant improvement in
cash flow Successfully completed an equity offering and
concurrent debt repurchase
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2002 highlights – consolidated
1 Normalized for regulatory impacts (contribution and price cap decisions)2 Excludes restructuring & workforce reduction costs
2001 2002 changeRevenue $7.1B $7.0B 1.0%Revenue1 (normalized) $7.1B $7.4B 5.0%
EBITDA2 $2.53B $2.52B 0.4%EBITDA1,2 (normalized) $2.53B $2.79B 10%
negative regulatory impacts mask underlying revenue & EBITDA growth of 5% & 10%, respectively
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2002 highlights – consolidated
1 Restructuring & workforce reduction costs2 After-tax income resulting from sale of Directory Operations
2001 2002 changeRestructuring costs1 $198M $570M 187%Disc. Operations2 $592M ($2.0M) $594M
Net Income/(Loss) $454M ($229M) $683MEPS $1.51 ($0.75) $2.26
2002 net income declined due to restructuring costs from operational efficiency program
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2002 highlights – consolidated
1 Includes $356M and $4.6M in spectrum purchases for 2001 and 2002, respectively2 Ratio of capex to total revenues3 EBITDA less capex
2001 2002 changeCapex1 $2.6B $1.7B 35%
Capex Intensity2 37% 24% 13pts
Cash Flow3 ($76M) $821M $897M
significant reduction in capex drove dramatic cash generation increase
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2002
original target
target met?
Revenue ($B) 7.01 7.35 to 7.451
EBITDA ($B) 2.52 2.475 to 2.525 EPS2 ($) 0.43 0.15 to 0.20 Capex ($B) 1.7 2.1 to 2.2
2002 highlights – consolidatedperformance vs. original public targets
1 Post accounting classification change in order to comply with EITF 01-9 which resulted in costs specific to Mobility & Internet operations being reclassified to offset revenues
2 Normalized for after-tax restructuring costs
achieved key profitability targets despite revenue shortfall
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(26)
(1,354)
2001 2002($M)
1 EBITDA less capex, cash interest, cash taxes, cash dividends; excludes restructuring & workforce reduction costs
2002 highlights – consolidated free cash flow1
$1.3 billion increase in free cash flow
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2002 highlights improved financial position
Credit agencies “raised the bar” TELUS credit fundamentals improved Renewed bank credit facility Implemented low-cost accounts receivable
securitization program Successfully completed $337M equity offering
and concurrent $410M debt repurchase Reduced debt leverage Maintained strong liquidity position
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2002 highlights Communications segment
Significant negative regulatory impacts from contribution and price cap decisions
Revenue shortfall offset by Operational Efficiency Program progress ahead of plan & favourable tax settlement
Gained considerable hi-speed Internet market share Consecutive quarters of improved non-
incumbent profitability in Ontario & Quebec Disciplined 23% annual reduction in capex Cash flow1 increased $178M
1 EBITDA less capex
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2002 highlights – Communications segmentOEP savings since inception
operational efficiency improvements exceed targets in 2002 setting stage for significant future savings
2002 2003E 2004E
$150M
~$550M
~$450M
$245M1
Q1
1 Aggregated cost base reduction since inception of OEP
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Dial-Up High Speed
216
497
1998
313
1999 2000 2001
2002 highlights – Communications segmenttotal Internet customers (000s)
91%
2002
670
802
14%
195,000 ADSL net adds/increased share
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Successful merger integration 418K net subscriber adds Maintained industry leadership in ARPU Customer churn lowered to industry best Strong revenue & excellent profitability growth EBITDA up 50% and capex down 54%1
Cash flow2 increased $719M
2002 highlights Mobility segment
1 Includes $4.6 million and $356 million in spectrum purchases for 2002 and 2001, respectively
2 EBITDA less capex
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963
2,160
1998
1,6861
1999 2000 2001
2002 highlights – Mobility segmenttotal wireless subscribers (000s)
2002
2,578
2,996
16%
418,000 wireless net adds/increased share
1 Proforma 587K subscribers following Clearnet acquisition
2003 Q1 review
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2003 Q1 review – consolidatedQ1-02 Q1-03 change
Revenue $1.70B $1.74B 2.5%
EBITDA1 $589M $671M 14%
Net Income/(Loss) ($0.8M) $91M $92M
EPSEPS normalized for tax savings
($0.01)
($0.01)
$0.26$0.11
$0.27
$0.12
strong EBITDA & tax savings drive significant profitability improvement ahead of expectations
1 Excludes restructuring & workforce reduction costs
$0.15 dividend per share declared for July 1, 2003
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2003 Q1 review – consolidated
1 Ratio of capex to total revenues2 EBITDA less capex, cash interest, cash taxes, cash dividends;
excludes restructuring & workforce reduction costs
Q1-02 Q1-03 changeCapex $406M $208M 49%
Capex Intensity1 24% 12% 12pts
Free Cash Flow2 $101M $376M $275M
$275M improvement in free cash flow generation
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2003 Q1 review – consolidatedQ1-02 Q1-03 Target
Net Debt : Capital 58.0% 55.7% 50% long term
Net Debt : EBITDA 3.5X 3.2X 3.0X in Dec 2003
<2.7X in Dec 2004
significant credit enhancement underway
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($M) Q1-02 Q1-03 changeExternal Rev.1 1,251 1,209 3.4%
EBITDA 467 492 5.5%Capex 309 154 50%Cap. Intensity2 24% 13% 11pts
Cash Flow3 158 339 115%
2003 Q1 review – Communications segment
1 Excludes intersegment revenues2 Ratio of capex to total revenues3 EBITDA less capex
operational & capital efficiency gains driving improved cash flow
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Q1-03 6th consecutive quarter of improving profitability
2003 Q1 review – Communications segmentnon-ILEC revenue and EBITDA
17 16 2031 38
60
105
133117 123
136152
141
(23)(30)(36)(37)(11)
(24) (28) (33) (35) (36) (38) (18) (15)Q1-00 Q2-00 Q3-00 Q4-00 Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03
Revenue EBITDA
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(000s) Q1-02 Q1-03 changeNetwork Access Lines 4,946 4,913 0.7%
ADSL Subscribers 267 442 66%
ADSL net adds 52 32 39%
Total Employees 25.2 19.7 22%
2003 Q1 review – Communications segment
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2003 Q1 review – Mobility segment($M) Q1-02 Q1-03 changeRevenue 447 532 19%
EBITDA1 123 179 46%
Capex 97 54 44%
Capex Intensity2 22% 10% 12pts
Cash Flow3 26 124 $99M
significant profitability & cash flow growth
1 Q1-02 includes $21.0M clarification of provincial sales tax legislation related to wireless equipment subsidies
2 Ratio of capex to total revenues3 EBITDA less capex
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2003 Q1 review – Mobility segmentQ1-02 Q1-03 change
Subscribers 2.7M 3.1M 15%
Net adds (000s) 91 67 26%
ARPU $52 $54 3.8%
Churn 1.88% 1.53% 35pts
focus on profitable growth & quality of service yields outstanding ARPU & Churn
2003 targets & guidance
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2003 financial targets – consolidated
2002 actualoriginal 2003
target
changeRevenue $7.01B $7.2 to 7.3B 3 to 4%
EBITDA $2.52B $2.7 to 2.8B 7 to 11%
EPS ($0.75) $0.35 to 0.55 $1.10 to 1.30
Capex $1.7B approx. $1.5B $200M
FCF ($26M) $300 to 600M $326 to 626M
targeting significant EPS & FCF growth
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2003 targets – revised guidanceoriginal 2003
target1revised 2003
guidance3
Consolidated
EPS $0.35 to 0.55 $0.50 to 0.70
Free Cash Flow $300 to 600M $500 to 600M2
Mobility
Mobility Subs 400 to 450K approx. 350K
Mobility EBITDA $625 to 650M approx. $675 to 700M
1 December 16, 2002 2 Revised on April 8, 2003 3 April 30, 2003
securities price performance
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share price performance comparison
Wireless$80
Telecoms$92
Relative Price Performance of $100 Invested One Year Ago North American Wireless & World Telcom Equity Indices
(April 30, 2002 - April 25, 2003)
25
50
75
100
125
Apr
-02
May
-02
Jun-
02
Jul-0
2
Aug
-02
Sep
-02
Oct
-02
Nov
-02
Dec
-02
Jan-
03
Feb-
03
Mar
-03
S&P Supercomposite Wireless Index MSCI World Telecom Index
World Telecom Index$91.81
Wireless Index$80.31
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share price performance comparison
TELUS$122
Telecom$92
Wireless$80
Relative Price Performance of $100 Invested One Year Ago TELUS Voting Stock vs. North American Wireless & World Telcom Equity Indices
(April 30, 2002 - April 25, 2003)
25
50
75
100
125
Apr
-02
May
-02
Jun-
02
Jul-0
2
Aug
-02
Sep
-02
Oct
-02
Nov
-02
Dec
-02
Jan-
03
Feb-
03
Mar
-03
S&P Supercomposite Wireless Index MSCI World Telecom Index TELUS
World Telecom Index$91.81
Wireless Index$80.31
TELUS$121.93
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bond price performanceTELUS Corporation Bonds
Daily Price Performance(April 30, 2002 - April 25, 2003)
$40
$55
$70
$85
$100
$115
Apr
-02
May
-02
Jun-
02
Jul-0
2
Aug
-02
Sep
-02
Oct
-02
Nov
-02
Dec
-02
Jan-
03
Feb-
03
Mar
-03
C$ 7.5% 2006 US$ 7.5% 2007 US$ 8.0% 2011
May 31 - Jul 11Credit ratings under
review:DBRS (May 31)
Moody's (Jun 14)S&P (Jul 11) Jul 29
Q2 results & increased disclosure
Nov 4Q3 results
Sep 12Equity offering & debt buyback
Dec 162003 targets release
Feb 14/03Q4 results
Jul 25Moody's downgrade
Apr 16/03Moody's outlook upgrade to stable
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announcement – credit facility renewal 364-Day revolving credit facility renewed Combined bank facility now $2.1B No material changes to terms New maturity date May 2004 Renewal evidences strong capital market support
building on our financial strength
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summary
TELUS Communications – improving efficiencies TELUS Mobility – excellent results Significantly reducing capex intensity Significant cash flow generation Reducing debt & leverage = enhanced credit profile Positive 2003 earnings outlook
delivering on our strategy