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George Cope President & CEO, TELUS Mobility May 6, 2004 Technology Conference
George CopePresident & CEO, TELUS Mobility
May 6, 2004
Technology Conference
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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’ 2004 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 legal disclaimer
All dollars in C$ unless otherwise specified
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about TELUS
Canada’s 2nd largest telco - only national pure-play, facilities-based, full-service telecom provider
Executing national growth strategy focused on data, IP & wireless
2004E Revenues $7.45 to 7.55B, 4 to 6%
EBITDA $2.95 to 3.05B, 5 to 8%
FCF $1.1 to 1.2B, 33 to 46%
Operating segments: Communications: wireline
Mobility: wireless
Enterprise value: ~$16B (equity ~ $8.0B)
Daily trading1: 1.5M shares
1 recent 3 month average. TSX: T, T.A; NYSE: TU
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Focus on growth markets of data & wireless
$5.7B
2004
$7.2B
2000
Local Voice
Wireless
Data30%
34%
19%4%Other
13%LD
43%
18%
10%6%
Other
LD
Wireless
Local Voice
23%
Data
12 months ended June 30
consolidated revenue profile evolution
Data & wireless revenues from 28% to 53% in 3.5 yrs
12 months ended March 31
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TELUS consolidatedChange
1 Includes restructuring & workforce reduction costs of $15.9M & $6.5M for Q1-04 & Q1-03, respectively2 Free Cash Flow defined as: EBITDA (including restructuring & workforce reduction costs) less capex, net
cash interest, net cash taxes, cash restructuring payments, and excess share compensation expense over share compensation payments.
.
13%$101M$90MNet Income
8%$0.28$0.26EPS
4%$1.80B$1.74BRevenue
9%$721M$664MEBITDA1
Q1-04Q1-03
Earnings and profitability continue to improve
66%$443M$268MFree Cash Flow2
2004 – first quarter review
TELUS Mobility
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Source: Industry analysts
2003
42%
2007E
55-58%
2004
~46%
13.4Msubs
18-19Msubs
~15Msubs
4 million or more net adds expected over next 3 yrs
Canadian wireless penetration growth prospects
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about TELUS Mobility
31.7M: Cdn. PopulationLicensed POPs:
29.5M (93%)Network coverage:
Verizon Wireless & NextelStrategic relationships:
best in North AmericaSpectrum position:
only one in Canada (Nextel in US)iDEN Mike network:
coast to coast 1XCDMA footprint:
$1.0B to 1.05BEBITDA (2004E)1 :
$2.65 to 2.7BRevenue (2004E)1 :
3.5MSubscribers:
leading Canadian national wireless provider
1 Guidance as per May 5, 2004 update
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TELUS Mobility EBITDA growth
$173M
$815M
20032000 EBITDA
$356M
2001
$535M
2002
56% compounded EBITDA growth rate over four years
$1.0 to 1.05B1
2004E1 Guidance as per May 5, 2004 update
TELUS Mobility Q1 results
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Net additions
Net additions up 14%, with 49% postpaid growth
Q1-03
67k
Q1-04
Prepaid
Postpaid
76k
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Network revenue growth
Network revenue up record $100M or 20%
Q1-03
$492M
Q1-04
$592M
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ARPU increasing
Fifth consecutive quarter of YoY ARPU increases
Q1-03
$54
Q1-04
$57
Average Revenue Per Unit ($/month)
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TELUS Mobility Rogers WirelessBCE Wireless
$54
$44$45
Source: Company reports
$57
$47$47
Microcell
$37 $36
ARPU - continued industry leadershipQ1-03
Q1-04
20% premium with positive industry-wide trend
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Price changes continue to roll through the base per minute billing - Jul-02 evening & weekend clock change - Jun-03 others to come in 2004
minutes of use up 21% in 2003, 15% in Q1-04 roaming/resale agreements Verizon’s preferred Canadian PCS roaming partner iDEN roaming with Nextel in U.S. expanding data offering (intercarrier SMS, 1X)
ARPU drivers
16Continued focus on retention evident with postpaid churn down to 1.17%
Churn low & stable
Q1-03 Q1-04
1.53% 1.49%
blended monthly churnQ1-03 Q1-04
1.33%1.17%
postpaid-only churn
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3 year contracts improved coverage
significant improvement in drop call rate expanded national footprint
better phones grandfathered rate plans dedicated retention team excellent customer care levels
Churn reduction drivers
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10%12%COA/ Lifetime revenue
1.5%1.5%Blended churn
$57ARPU $54
$383COA $425
Q1-04Q1-03
$3,800
-
$3,500Lifetime revenue
Subscriber economics improving
profitable subscriber growth
19 EBITDA growth of 39% & EBITDA margin of 42%
EBITDA growth & margin expansion
Wireless EBITDA ($) Q1-04
$179M
36%
42%
$248M EBITDA margin1
(network revenue)
Q1-03
1 EBITDA on total revenue 33% and 39%
20 TELUS achieving profitable subscriber growth
$650M1.5M
12ME Q1-04 EBITDA growth
12ME Q1-04subscriber growth
Source: Company reports. Sum of reported net adds & wireless EBITDA for BCE, Rogers Wireless, Microcell, TELUS Mobility
TELUSMobility
45%29%
TELUSMobility
Profitable subscriber growth strategy
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Wireless capex ($)
8%
Capex intensity(total revenue)
Q1-04
$54M
10%
$50M
Q1-03
Capex & capex intensity declining
Continued improvement in capex intensity
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Leading spectrum position - minimal cell splitting CDMA/1X roaming/resale agreements in Central &
Eastern Canada Network digitization largely complete 1X network implemented, voice capacity improvement Mike (iDEN) network largely built out
Capex drivers
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Wireless cash flow ($) Q1-04
$124M
$198M
Q1-03
Cash flow (EBITDA less capex)
Cash flow increased by more than $73 million or 59%
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13%Capex intensity1
EBITDA margin (total revenue) 37-38%
Cash flow yield2 24-25%
2004E
1 Capex as % of total revenue2 EBITDA less capex, as a % of total revenue
EBITDA margin (service revenue) 40%
8%
39%
31%
Q1-04
42%
operating cash flow yield
Attractive wireless cash flow yield well above plan
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31%
21%16% 15% 15% 15% 15%
6%
TELUSNex
tel
Cingular
Verizo
n
US Avg
PCSRogers
AWE
Q1 cash flow yield - North America
Source: Company reports
EBITDA less Capex / Total Revenue
Cash flow yield target of 25% in 2004 best in class
what’s new?
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Text messaging
2002 2003
350M
# of text messages sent & received in Canada
174M
350M text messages sent in 2003 – double 2002’s 174M!
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Picture messaging
award-winning marketing campaign
significant share of sales by end of 2004
early usage stats encouraging
Worldwide 29 billion digital images
captured this year 2003: One in six wireless
phones sold had digital camera
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Download delights
Disney Hockey
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1X US data roaming
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North American iDEN Direct Connect
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BlackberryNew devices, US roaming on both iDEN & PCS
Blackberry 7750Blackberry 7510 - iDEN
Pushto
Talk
Colourscreen
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Network rev. growth 20% $100M ARPU $57 $3 Churn 1.5% 4 bpts COA $383 10% EBITDA growth 39% $69M EBITDA margin 42% 5.5 pts Cash flow yield 31% 7.8 pts Cash flow ($) $198M $73M
TELUS Mobility results creating significant shareholder value
TELUS Mobility is a North American leader & premium Canadian wireless operator
Conclusion
questions?
