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TELUS investor conference call
Announcement of Income Trust conversion
September 11, 2006
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Forward looking statements
Reference Sept. 11, 2006 news release on proposal for reorganization
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This presentation and answers to questions today contain forward-looking statements that require assumptions about expected future events including income trust conversion, benefits and timing, financing, financial and operating results, and 2006 guidance that are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate so do not place undue reliance on them.
There are many factors that could cause actual results to differ materially. For a full listing and description of the potential risk factors and assumptions, please refer to the TELUS 2005 annual report, updates in the 2006 quarterly reports, Sept. 11, 2006 income trust proposal news release and other filings with securities commissions in Canada and the United States.
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TELUS investor conference call
Announcement of Income Trust conversion
Darren Entwistle • member of the TELUS team
Sept. 11, 2006
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Transaction overview
Conversion to increase cash distributions by 255 to 273%
Approved proposal for reorganization into income trust
Represents conversion of TELUS in its entirety
Via plan of arrangement under Business Corporations Act (B.C.)
Subject to approval of 2/3rds of each class of shares
To be one class of Fund Unit versus current dual class share structure
Conversion on 1 for 1 basis
Anticipate initial distributions of between $3.90 to $4.10 on annualized basis
compares to current $1.10 annualized dividend
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Strategic rationale for TELUS conversion into Income Trust
Transaction supports advancement of national growth strategy
optimizes ability to make future growth investments
Enhances tax efficiency at TELUS and significantly increases cash distributions to shareholders
Converting TELUS in its entirety ensures integrated businesses drive operational excellence and competitive differentiation
Avoids costs and governance complexity of a partial conversion
Increased liquidity from collapsing into single Unit class
Offers investors superior assets, strong predictable cash flow and prospect of growth with cash distribution growth model
Creating Canada’s premier income trust
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TELUS investor conference call
Announcement of Income Trust conversion
Robert McFarlane • EVP & Chief Financial Officer
Sept. 11, 2006
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Benefits of proposed conversion in January 2007 Tax efficiency as TELUS has fully utilized its tax assets as
of June 30, 2006 TELUS now generating current tax liability on go forward
basis
Status quo would entail paying cash taxes commencing in 2008
Optimal timing for TELUS as expect to be able to shelter 2006 tax liability on conversion in addition to ongoing tax efficiencies
Optimal timing for shareholders as taxable deemed disposition on conversion of shares for units generally not payable until April 2008
Beneficial to debt holders as increases future cash flow for debt servicing
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Initial cash distribution compared to dividends
Cash distribution more than 3.5 times dividend
1 See forward looking statement caution
Note: TELUS has also undertaken Normal Course Issuer Bids in 2004, 2005 and 2006 (August YTD), in the amounts of $78M, $892M, and $528M, respectively.
$ per share
Dividend paid
Income trust cash distribution
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2
3
4
0.60 0.600.80
3.90 to 4.10
1.10
2003 2004 2005 2006 2007E1
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1.7x
45 to 50%Net Debt : Capital
long term policy
1.5 to 2.0x Net Debt : EBITDA
Q2-06
45.5%
BBB+ BBB+ to A-Credit rating
~$1.5B >$1BMinimum liquidity
3 of 4
Conversion does not change TELUS debt targets / lessens risk profile
Long term financial policy targets
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2006 consolidated TELUS guidance
1 Sept. 11, 2006 guidance unchanged from August 4, 2006 and includes estimated $7M of expenses related to trust conversion. See forward looking statement caution
2 Including restructuring & workforce reduction costs of $54M in 2005 and up to $100M in 20063 Including 34 cents of positive tax-related adjustments in 2006
$1.55 to 1.65BFree Cash Flow
approx. $1.6BCapex
$2.90 to 3.10EPS3
annual change
EBITDA2
Revenue
2006 guidance1
$3.5 to 3.6B
$8.625 to 8.725B
6 to 13%
21%
48 to 58%
6 to 9%
6 to 7%
Annual consolidated financial guidance remains unchanged 2007 guidance planned for Dec. 2006
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Transaction time line
Notice of special meeting of TELUS shareholders Nov. 2006
Information circular mailing Dec. 2006
Special shareholder meeting Jan. 2007
Obtain regulatory and other approvals
Closing and conversion expected late Jan. 2007
See forward looking statement caution
To create Canada’s premier income trust
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investor relations1-800-667-4871
On income trust conversion
One question per person please
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EBITDA: Earnings, after restructuring and workforce reduction costs, before interest, taxes, depreciation and amortization
Free Cash Flow: EBITDA, adding Restructuring and workforce reduction costs, cash interest received and excess of share compensation expense over share compensation payments, subtracting cash interest paid, cash taxes, capital expenditures, and cash restructuring payments
Appendix
Definitions
TELUS definitions for non-GAAP measures
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