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TELUS Reports Fourth Quarter ResultsStrong revenue and earnings growth based on strength in wireless and data
Vancouver, B.C. – TELUS Corporation (TSX: T and T.A / NYSE: TU) today reported for the fourth quarter of 2006 an eight per cent increase in revenues to $2.25 billion from a year ago due to continued strong wireless and data growth. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 20% due to strong wireless and wireline growth, aided by the absence of expenses from the labour disruption in the fourth quarter of 2005. Earnings per share (EPS) for the fourth quarter were 70 cents, compared to 22 cents for the same period a year ago. EPS this quarter included favourable tax related adjustments of six cents per share. When normalizing for tax, non-recurring financing charges and the labour disruption impacts, EPS this quarter increased 64% due primarily to EBITDA growth and lower financing costs.
TELUS achieved or exceeded four of five consolidated financial 2006 targets set more than a year ago. This result was largely driven by the national wireless business and wireline data growth, which included our non-incumbent operations in central Canada. The 2006 results were also generally consistent with the latest guidance update made last December. TELUS reported full year revenue growth of seven per cent and EBITDA growth of nine per cent. In 2006, TELUS generated strong free cash flow, up nine per cent to $1.6 billion, which funded increased dividends, which totaled more than $400 million, as well as $800 million of TELUS share repurchases in the year.
Darren Entwistle, president and CEO, said “we closed out the year with excellent financial results in the fourth quarter underpinned by wireless revenue growth of 16% and wireline revenue growth of 2%. The consistent and focused execution of our national growth strategy is resulting in a comparatively superior asset mix for global telecoms such that 46% of consolidated revenue is generated by wireless and 19% from wireline data. Wireless revenue is growing in part due to a 114% increase in the data component and wireline revenue is up due to a 9% increase in data. The robust earnings and cash flow being generated at TELUS are being used to invest in three areas for long-term value creation for investors. The first use is core business capital investments in both wireless and wireline. Second, are successive increases under our dividend growth model. Third, are substantial share buyback programs. Based on 2006 financial results, 2007 targets and investor friendly programs to return and invest capital, TELUS enters 2007 with considerable momentum.”
Robert McFarlane, executive vice president and CFO, said “TELUS has continued to demonstrate the advantage of its ongoing commitment to balancing the interest of equity and debt holders. In 2006, TELUS returned $1.2 billion in capital to shareholders through a combination of dividends and share repurchases while improving our credit rating. We repurchased 17.4 million shares in our second 12 month share buyback program and have renewed it for the purchase of up to 24 million shares by mid-December 2007. Since inception in December 2004, we have repurchased 39.4 million shares for $1.77 billion. TELUS enjoys a strong balance sheet providing TELUS with enviable financial strength and the lowest cost of capital in the Canadian telecom industry. Today we announced a replacement bank facility of $2.0 billion, which has an extended five year term as well as more favourable pricing and terms than the previous $1.6 billion facility. As a result, TELUS is well positioned to take advantage of the upcoming refinancing of the $1.5 billion of 7.5% debt coming due in mid-2007.”
TELUS wireless Profitable subscriber growth continues
TELUS wireline Strong data growth supports revenue growth
CORPORATE DEVELOPMENTS
TELUS income trust developments On September 11, 2006, TELUS proposed to reorganize in its entirety into an income trust. In light of the federal Minister of Finance's surprise announcement on October 31, 2006 of a new tax plan that would increase the level of taxation on income trusts, TELUS announced that it would re-evaluate its proposal. TELUS management and Board of Directors announced on November 24 that they believed that it was no longer in the best interests of the Company and its shareholders to proceed with the reorganization.
TELUS supports proposed local forbearance decision changes and CRTC directive In December 2006, the Minister of Industry issued a proposed order-in-council that would make significant changes to the April 2006 CRTC framework for forbearance from regulation of residential and business local exchange services. If enacted, it will simplify and significantly reduce the heavy regulation of local phone services where competition is determined to exist.
The proposed order would eliminate the current marketing restrictions on winbacks and most other promotions. It would also replace the CRTC’s market share loss test with a simpler competitive presence test: regulation of local phone services would no longer be required in markets where consumers have the choice of at least three carriers, or two in the case of enterprise services. In addition, it would reduce the number of competitor quality of service criteria that must be met as a precondition for forbearance.
The proposal is subject to a public comment period, following which the Federal Cabinet can implement the proposed framework in its present or revised form. This order must be issued by April 6, 2007. TELUS sees this as a positive development for the Company and Canadian consumers. If it comes into effect substantially as proposed, TELUS believes it will be in a position to achieve deregulation in most of its incumbent urban local exchanges in 2007.
Also in December 2006, the federal government issued a directive to the CRTC to rely on market forces to the maximum extent feasible, to ensure technological and competitive neutrality, to be as minimally intrusive as possible, maintain its own performance standards and explore process streamlining.
TELUS enhances bank facilities and extends accounts receivable securitization program TELUS has received commitments from a syndicate of 18 financial institutions that will result in a new $2 billion credit facility being established, subject to completion of documentation and normal conditions precedent. This new facility will replace the $1.6 billion of existing credit facilities, which consist of an $800 million facility expiring in May 2008 and an $800 million facility expiring in May 2010. The new credit facility has more favourable terms and will mature in 2012. The use of proceeds is for general corporate purposes and may be used to back-up commercial paper issuance, which could be part of the refinancing of the $1.5 billion of Notes coming due in June 2007.
Separately, TELUS has also extended the term of its revolving-period, accounts receivable securitization agreement by one year to July 18, 2008.
TELUS continues share repurchases During the fourth quarter, TELUS continued to purchase shares under its Normal Course Issuer Bids. Repurchases totaled approximately 3.6 million shares for a total outlay of $200 million. Under the Normal Course Issuer Bid completed on December 19, 2006, TELUS repurchased 17.4 million shares, 73% of the total authorized amount, for $848 million. TELUS renewed its Normal Course Issuer Bid program on December 20, 2006 with the intention, if considered advisable, to purchase and cancel, over a 12-month period, up to 12 million of its outstanding common shares and 12 million of its outstanding non-voting shares on the Toronto Stock Exchange. This represents approximately 6.7% of the common and 7.5% of the non-voting outstanding public float of each class of shares in mid-December. Under this third program in the last seven trading days of 2006, a total of 186,000 shares were repurchased, for a total cost of $9.8 million. Since December 2004, TELUS has repurchased a total of 39.4 million shares for an outlay of $1.77 billion under three share repurchase programs. TELUS believes that such purchases are in the best interest of the Company and constitute an attractive investment opportunity and desirable use of company funds that should enhance the value of the remaining shares. Five year Best Buy contract TELUS signed a five-year, multi-million dollar contract with Best Buy Canada to connect all of its Canadian stores through a private IP network. The secure next generation network will enable Best Buy to enhance its communication capabilities, meeting customer demands through advanced applications designed to improve efficiencies, support sales staff and deliver a unique shopping experience to Canadians.
GPS-enabled handset and in-vehicle tracking capabilities for the business market TELUS expanded its mobile tracking services in November, making the GPS-based services affordable for the small and mid-sized business market. TELUS GPS gives customers access to real-time mobile tracking over wireless handsets and in-vehicle modems. Hosted by TELUS and running over TELUS’ 1X and Mike wireless networks, the service gives small and mid-sized businesses the benefits of GPS technology without the usual intensive capital costs.
South Asian wireless content TELUS partnered with India’s largest integrated telecommunications service provider, Reliance Communications, to introduce authentic South Asian mobile content to its customers. The Apna Des content site brings customers North America’s largest catalogue of wireless Bollywood content, news, cricket updates, entertainment and cultural information direct from South Asia.
Cool new phones TELUS continues to expand its suite of cool new products with the introduction of eight wireless devices. Celebrating the 10th anniversary of the Mike network, TELUS also launched the multimedia push-to-talk Motorola i880 in November. TELUS is the exclusive Canadian provider of two music boxes - the LG Chocolate music box featuring the LG Chocolate (LG 8500) and the Sweet Jam music box featuring the Samsung A720. TELUS was the first Canadian provider to offer the Nokia 6165i Instant Talk phone. TELUS also expanded its suite of data devices with the introduction of the new BlackBerry 8703e.
TELUS TV development The development of TELUS TV continued in the quarter with the addition of Pay Per View service, giving customers front row seats to special entertainment and sporting events. TELUS TV’s neighbourhood-by-neighbourhood rollout in Calgary, Edmonton and Vancouver continues.
Wireless high-speed extension With the launch of TELUS wireless high-speed EVDO service into the South Okanagan Valley, more than half of all Canadians can access the service in more than 35 communities. The Okanagan Valley launch means customers in Osoyoos, Okanagan Mountain Provincial Park, Oliver, Peachland, Penticton and Summerland have access to broadband-like wireless connection.
TELUS also extended the service to more than 230 U.S. cities in the fourth quarter, making it fast and simple for business and consumer customers traveling in the U.S. to wirelessly access Internet, e-mail and other multimedia applications at broadband-like download speeds.
TELUS and Dell announced a strategic relationship that will see TELUS wireless high-speed technology embedded in select Dell LATITUDE and XPS notebooks and Dell PRECISION mobile workstations. Customers can wirelessly access broadband-like download Internet speeds without the need for an additional aircard or wireless handset.
In addition, TELUS and Lenovo announced that select versions of Lenovo ThinkPad notebook computers would offer embedded access to our wireless high-speed service.
Connecting rural communities TELUS continued connecting rural communities to broadband and wireless infrastructure. In British Columbia, the partnership with GwaiiTel saw last mile broadband connections made to seven communities on the Queen Charlotte Islands in November. TELUS also connected four central coast communities and Rogers Pass to wireless service.
TELUS launches online photo community TELUS launched a photo archiving and sharing community on its web portal mytelus.com. Customers can upload up to one gigabyte of personal photos to the TELUS photo community for sharing with loved ones or the entire Internet community. They can also create personalized greeting cards using their photos, participate in themed photo contests, vote in contests, and post comments about photographs.
TELUS enhances wholesale IP services TELUS enhanced its IP network to give wholesale customers around the world seamless access to their Canadian clients. A new suite of services allows telecommunications carriers purchasing wholesale services from TELUS to securely manage their own secure connections on TELUS’ Canadian network as they would on their home networks. Carriers can prioritize traffic and offer services such as managed virtual private networks and a single IP connection for voice and data, effectively extending their operations to virtually anywhere in Canada.
Three TELUS executives among Canada’s most powerful women The Women's Executive Network recognized three TELUS leaders at the 2006 Canada's Most Powerful Women Top 100 awards luncheon. Karen Radford, president of TELUS Québec and Partner Solutions; Janet Yale, executive vice-president of Corporate Affairs; and Judy Shuttleworth, executive vice-president of Human Resources, were selected for their career successes as well as their dedication to bettering their communities. This is the third consecutive year Ms. Radford and Ms. Yale have been awarded this honour and the second year for Ms. Shuttleworth.
TELUS directory assistance service Canada’s best For the fourth consecutive time TELUS’ directory assistance service was ranked the best in Canada. The Paisley Group, a directory assistance and operator services company which conducts semi-annual reviews of the industry, found TELUS scored top marks in all measurements including the critical “passed calls” measure – the percentage of directory assistance calls where the customer receives accurate information and is cared for professionally.
For the first time, TELUS’ wholesale directory assistance services provided to several U.S. telecommunications companies were measured in the same survey, placing second in the rating of third party directory assistance providers in the United States.
TELUS recognized for IP leadership and innovation in public safety Computer Dealer News awarded TELUS’ Emergency Management Operating System (EMOS) three international Channel Elite awards: Gold for Solution Provider of the Year, Gold for Best On-Line Solution, and Silver for Best Enterprise Solution for demonstrating innovation in product development. TELUS’ EMOS is the only fully integrated safety solution of its kind in North America.
EMOS is part of the TELUS SafetyNet portfolio, a comprehensive set of safety solutions that protects communities, individuals and assets while providing coordination and response communications for mass emergency situations. IT security product certified TELUS’ AssureLogic IT security product was awarded the NSS Approved status from the NSS group, a premiere independent security testing facility based in the U.K. AssureLogic protects online customer transactions such as Internet banking. Of many tested, AssureLogic is currently the only Web Application Firewall (WAF) product in the world to achieve this certification. In the WAF category products are evaluated on performance and reliability, security and effectiveness, and usability.
Fighting Internet child exploitation TELUS and other large Canadian Internet service providers (ISPs) joined forces with Cybertip.ca, Canada’s child sexual exploitation tipline, in the battle against online child sexual abuse. The initiative, Project Cleanfeed Canada, will see participating ISPs install sophisticated new filters designed to protect their customers from inadvertently visiting foreign websites featuring child pornography. Cybertip.ca will establish and maintain a list of blocked sites.
TELUS donated $100,000 towards the Stanley Park Tree Fund following a series of devastating storms that battered the Vancouver landmark. Working with partner Global TV, TELUS volunteers applied their call centre expertise to keep a telethon for the fund going, raising an additional $50,000. TELUS is also matching employee donations to the fund up to $50,000.
Dividend declarationThe Board of Directors declared a quarterly dividend of thirty-seven and a half cents ($0.375) per share on outstanding Common and Non-Voting Shares payable on April 1, 2007 to shareholders of record on the close of business on March 9, 2007. This represents a 36% increase from the twenty-seven and a half cent quarterly dividend paid in 2006.
For more information, please contact: Media relations:Allison Vale(416) 629-6425allison.vale@telus.com Investor Relations:Robert Mitchell(416) 279-3219ir@telus.com Certain products and services named in this release are trade-marks. The symbols ™ and indicate those owned by TELUS Corporation or its subsidiaries. All other trade-marks are the property of their respective owners.
