Canadian Telecommunications David Lee Jeremy Ma Raymond Xie
Saurabh Suryavanshi
Slide 2
Contents Canadian Telecommunications Industry Manitoba Telecom
Services (MBT-T) Rogers Communications (RCI.NV.B-T) TELUS
Corporation (T-T)
Slide 3
Industry Characteristics Telecommunications Industry
Slide 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)
Slide 5
Industry Key Players Wired Cable DTH/MDS $5.9 Billion Wireless
& Paging $9.5 Bilion Wired Line Long Distance Internet / Data
$23.3 Billion Resellers & Others $1.3 Billion 2004 Revenue
$40.0 Billion Communications
Slide 6
Market Segment Revenue, 1998-2004
Slide 7
Market Segment Subscribers, 1998-2004
Slide 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
Slide 9
Industry Characteristics Wireline Communications Services
Slide 10
Wireline Communications Segment 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
Slide 11
Wireline Communications Telecommunications Carriers TELUS to
East / BCE to West since 2000
Slide 12
Wireline Communications Competitive 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 2 nd 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)
Slide 13
Wireline Communications Local & Long Distance Revenue, 1993
- 2004
Industry Characteristics Wireless Communications Services
Slide 16
Wireless Communications Segment 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)
Slide 17
Wireless Communications Revenue & ARPU, 1999 - 2004
Industry deficit
Slide 18
Wireless Communications Wireless Technology Base2.5G (Advanced
Data & Voice) 3G (348 kbps 2 Mbps) Bell CanadaCDMA1XRTT
(CDMA2000) 30 55 kpbs 1X EV-DO (urban area) Up to 700 kbps
TELUSCDMA1XRTT (CDMA2000) 30 55 kpbs RogersGSMGSM/GPRS 20-40kbps
Cover 93% population EDGE (July2004) Up to 130 kbps
MicrocellGSMGSM/GPRS 20-40kbps Aliant / MTS / Sasktel CDMA1X
network
Slide 19
Industry Characteristics Internet & Data Services
Slide 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
Slide 21
Internet & Data Services Subscribers, 2000-2004
Slide 22
Internet & Data Services Market Share, 2003 No. 1 No. 2 No.
3 No. 4
Slide 23
Industry Characteristics Margin & Network Investment
Slide 24
Telecommunications Operating Margin, 1997-2004
Slide 25
Telecommunications Operating Margin, Cap-Ex, 1998-2004 High
speed Internet 2.5G
Industry Characteristics Telcos (IPTV) vs. Cablecos (VoIP)
Slide 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
Slide 29
VoIP vs. IPTV Impact on Competition between Cablecos &
Telecos Telcos ExposureCablecos Exposure
Slide 30
Manitoba Telecom Jeremy Ma
Slide 31
Table of Contents Company Overview Company Analysis Financial
Analysis MTS Extensive fibre optic network: spans more than 24,300
km.
Slide 32
Company Overview Third largest telecommunication provider in
Canada Operate through two divisions: national and Manitoba
division National e-business / communication solution provider
Provide Voice, Data, Video to residential and business customers in
Manitoba.
Slide 33
MTS History 1997Manitoba Telecom Service became a public traded
company 1999Strategic alliance with Bell 2000Initiate broadband
service in Manitoba 2004End strategic alliance with Bell in Western
Canada 2004Acquired Allstream ($1.6 billion) and become the 3 rd
largest national telecom provider in Canada 2004 MTS Allstream
strategic alliance with BT: broaden its IP based technology service
globally 2005MTS Allstream acquired Delphi Solutions Corp.
2005Pierre Blouin named new Chief Executive Officer of Manitoba
Telecom Services Inc. and MTS Allstream Inc.
Slide 34
Company Overview Management 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. Executive Vice
President, CTO, COO, President of Bell Canada 1994 ~ 1999
Slide 35
Compensation
Slide 36
Operation Analysis Revenue Breakdown (2005)
Slide 37
Company Analysis
Slide 38
MTS Manitoba Leading telecom co. in Manitoba: Voice, Data, and
Video
Slide 39
Competitive Landscape in Manitoba MTSTelusRogersBCEShaw Home
Phone OXO (Internet Phone) XO (Internet Phone) Wireless OOOXX TV
OXXXO Internet OXOXO Bundle OXXXO
Slide 40
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?
Slide 41
MTS Manitoba Preemption 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
Slide 42
Preemption Strategy MTS StrategyOffer 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
Slide 43
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
Slide 44
MTS Manitoba Operation Performance Shaw launched bundle
program
Slide 45
MTS (Manitoba) Phone Service Wireless Internet TV Data and
Directory ? Security & Alarms ? Overall
Slide 46
Slide 47
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
AT&T 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.
Slide 48
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
Slide 49
ALLSTREAM (National) Division Product Portfolio
Slide 50
Allstream Client Base .and many many more Canadian enterprises
have chosen Allstream for e-business solution
Slide 51
Allstream E-business solution: What is it? How does it work
?
Slide 52
Customer Solution Configured for Customer Customer Solution
Customer Solution TRANSPORTATION Vertical Applications for
Community of Interest Customer Solution Customer Solution
HEALTHCARE Vertical Applications for Community of Interest RFID XML
Networking Voice Biometrics XOIP E-business Solution Issues Clean
IP Transport Ubiquitous High Speed Affordable Access Storage
Security Write once, run everywhere Capability Quality of Service
Web 2.0 Grid Computing + Storage Identity Management REPEATABLE
TECHNOLOGY (Tool Set) Network + Application = Solution
Slide 53
E-business Solution RFID (Radio frequency identification)
Tag
Slide 54
Solution Innovation RFID (Radio frequency identification)
Tag
Slide 55
ALLSTREAM (National) Division Retail Application
Slide 56
Allstream positions itself as market leader in terms of its
innovated IT technology
Slide 57
Market Leader = Sound Financial Results? NOT Necessary!!!
Slide 58
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 AT&T, turn against Allstream by pulling business out of
Allstream.
Slide 59
Allstream Going Down!
Slide 60
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
Slide 61
MTS Allstream Strategies 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
Slide 62
Financial Statements
Slide 63
Financial Statement Income Statement
Slide 64
Financial Statement Balanced Sheet
Slide 65
Cash Flow
Slide 66
MTS Pro Forma Financial Performance *pro forma results,
i.e.Assume Allstream acqu. took place on Jan 2003
Slide 67
Sustainability of Dividend Payout Adjusted FCF Forecast
Slide 68
Retained Earnings
Slide 69
Fishers Valuation Approach Superiority in production,
marketing, research and financial skills less attractive
Well-managed: ? No cash; RE ; quick ratio < 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
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.
Slide 75
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.
Slide 76
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.
Slide 77
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 AT&T 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.
Slide 78
ROGERS COMMUNICATIONS INC ROGERS WIRELESS ROGERS CABLE ROGERS
MEDIA ROGERS TELECOM Rogers Wireless. FIDO Inc. FIDO Solutions Inc.
Rogers Wireless Alberta Inc. Wireless payment Services (33.33%)
Rogers Cable Communication Inc. Blue Jays Hold co Inc. Rogers
Broadcasting Business Rogers Publishing Limited Formerly Call-Net
enterprises. Rogers Telecom. Subsidiaries Inukshuk Internet Inc.
16.5% in Cogeco Cable Inc. 21% in COGECO Inc. Investments
Slide 79
Revenue & Operating Profit!!
Slide 80
Slide 81
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. ROGERS WIRELESS
Slide 82
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.
Slide 83
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.
Slide 84
Slide 85
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.
Slide 86
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. ROGERS CABLE
Slide 87
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.
Slide 88
Expenses Cost of Rogers Video stores Sales and Marketing
Expense Operating, general and administrative expenses. Customer
Care Expenses. Technological Disturbance Expenses
Slide 89
Slide 90
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.
Slide 91
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. ROGERS MEDIA
Slide 92
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:
Slide 93
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.
Slide 94
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
Slide 95
Slide 96
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.
Slide 97
Sprint Canada and Call-Net name changed to Rogers Telecom after
the successful acquisition of Call-Net. ROGERS TELECOM
Slide 98
MANAGEMENT
Slide 99
Edward S. Rogers, O.C President and CEO 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, 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
Slide 100
Joined RCI as Director, RCI, Nov, 1989 Chairman of the Board
since March 1993. Honors B.A. (History) LL.B., University of
Toronto Alan D. Horn, V.P, Finance and C.F.O H. Garfield Emerson
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) Philip B. Lind Vice Chairman Joined
RCI as Programming Chief in 1969 Director of RCI since 1979. B.Sc.
(Political Science & Sociology) Doctor of Law, UBC.
Slide 101
FINANCIAL STATEMENTS
Slide 102
Slide 103
Slide 104
Slide 105
Slide 106
Slide 107
5 YEAR Stock Chart
Slide 108
2 YEAR Stock Chart
Slide 109
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.. MTSSHA W ????
Slide 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
Slide 111
Recommendation BUY
Slide 112
Source Rogers Website www.sedar.com FP Infomart. Financial
Statements of Rogers
Slide 113
Company Overview Company History Company Management Products
and Services Business Forecasts Operating Risks Financial Analysis
Fisher Valuation Approach
Slide 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. 3
rd largest ISP in Canada Two major segments: Wireline, TELUS
Communications Wireless, TELUS Mobility
Slide 115
TELUS Overview 2 Business Units: Consumer Solutions Business
Solutions Partner Solutions Wireless Solutions TELUS Qubec
Slide 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
Slide 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.
Slide 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. 1998 TELUS Corporation and BC TELECOM announce a
proposed merger. 1991 The Province of Alberta sold its remaining
ownership interest in TELUS for $870 million. 1990 TELUS
Corporation established. It went IPO for $896 Million. 1982
Canada's first cellular telephone system introduced to serve
Alberta resource industries. 1906 The Province of Alberta commenced
operation of the provincial phone system after acquiring the
Alberta assets of the Bell Telephone Company. 1885 Alberta's first
telephone call, between Fort Edmonton and the St. Albert
mission.
Slide 119
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
Slide 120
Executive Option Granted for 2005 and 2004 2005 2004
Slide 121
Executive retirement benefits As of the end of 2004
Slide 122
TELUS - Products and Services
Slide 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
Slide 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
Slide 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
Slide 126
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.
Slide 127
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%
Slide 128
Operating Risks Labor Issues Licensing and Regulatory Issues
Competitions
Slide 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
Slide 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.
Slide 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
Slide 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
Slide 133
Stock Performance Last Trade(T-TSX): CAD$43.25 Last
Trade(TU-NYSE): Trade Time: Feb 24, 2006 Prev Close: CAD$43.34
Open:CAD$43.25 Day's Range: CAD$43.02-43.50 52wk Range:
CAD$36.61-49.99 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%)
Slide 134
Financial Analysis Selected Quarterly Data
Slide 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
Slide 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
Slide 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
Slide 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
Slide 139
Financial Analysis Income Statement
Slide 140
Financial Analysis Balance Sheet
Slide 141
Slide 142
TELUS - Valuation
Slide 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
Slide 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