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May 3, 2006

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TELUS Reports First Quarter Results
Strong wireless and high-speed Internet results, reiterate 2006 guidance

Vancouver, B.C. – TELUS Corporation (TSX: T and T.NV / NYSE: TU) today reported for the first quarter of 2006 a five per cent increase in revenues to $2.1 billion from a year ago due to continued strong wireless performance and excellent high-speed Internet and wireless subscriber growth. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 1% due to strong wireless growth largely offset by decreased wireline profitability this quarter. Earnings per share (EPS) for the first quarter were 60 cents, compared to 67 cents for the same period a year ago. EPS for the first quarter of 2005 included favourable tax and regulatory recoveries totaling 17 cents per share. When normalizing for these items, EPS this quarter increased by approximately 20% over the same period last year due primarily to underlying EBITDA growth and lower financing costs. Free cash flow increased 13% to $640 million during the quarter, a $74 million increase primarily due to the receipt of a cash tax recovery.

FINANCIAL HIGHLIGHTS


C$ in Millions, except per share amounts
3 months ended
March 31
 
(unaudited)
2006
2005
% Change
Operating revenues
2,080.5
1,974.7
5.4
EBITDA(1)
862.7
856.2
0.8
Operating income
459.6
454.0
1.0
Income before income taxes and non-controlling interest
328.3
314.1
4.5
Net income(2)
210.1
242.2
(13.3)
Earnings per share (EPS), basic(2)
0.60
0.67
(10.4)
Capital expenditures
320.5
273.2
17.3
Cash provided by operating activities
673.1
728.4
(7.6)
Free Cash Flow (3)
640.1
566.6
13.0

(1)Earnings before interest, taxes, depreciation and amortization (EBITDA) is defined as Operating revenues less Operations expense less Restructuring and workforce reduction costs. See Section 11.1 of Management's discussion and analysis.
(2)Net income and EPS for the three month period in 2005 includes approximate favourable impacts of $54 million or 15 cents per share due to tax related adjustments, as well as $8 million or two cents per share for regulatory decisions.
(3)See Section 11.2 of Management's discussion and analysis.

Darren Entwistle, president and CEO, stated "Our first quarter results demonstrate the continued execution of our business strategy, focused on national data and wireless growth. TELUS achieved strong growth in high-speed Internet additions of 38,600 reflecting effective marketing programs and improved customer retention. This bolsters our platform for TELUS Future Friendly® Home initiatives like TELUS TV®. TELUS' 92,500 wireless subscriber net additions represent our best first quarter in five years, and increased average revenue per unit for the thirteenth consecutive quarter contributed to wireless revenue and EBITDA growth of 17%. During the first quarter, TELUS undertook a number of initiatives to drive improved competitiveness and financial growth going forward. This included implementing our landmark five-year collective labour agreement, merging our wireline and wireless operations into a single legal operating structure, and expanding our innovative portfolio of applications. This includes expanding our Wireless High Speed EVDO service to a dozen cities from five and launching TELUS Business One®, a powerful portfolio of technology tools for small businesses. Our national growth strategy continues to generate strong overall economic and operating growth for TELUS in a challenging wireline environment due to leading wireless and data performance."

Robert McFarlane, executive vice president and CFO, said "I am pleased to announce that TELUS continues to expect strong growth in 2006 as reflected by reiterating today all of our original public financial targets for 2006 as they remain consistent with our internal outlook. Noteworthy, again this quarter, TELUS returned significant capital to shareholders through a dividend, which is 37.5% higher versus the dividend for the same period one year ago, and the repurchase of 5.1 million shares for $232 million. With an expected $1.55 to $1.65 billion of free cash flow in 2006, and EPS growth of 22 to 33%, we are well positioned to continue returning capital to investors and enhancing shareholder value."

This news release contains statements about expected future events and financial and operating results of TELUS that are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results and events to differ materially from that expressed in the forward-looking statements. Accordingly this news release is subject to the disclaimer and qualified by the assumptions (including assumptions for 2006 targets), qualifications and risk factors referred to in the Management's discussion and analysis – May 03, 2006.

OPERATING HIGHLIGHTS

TELUS wireless
Strong subscriber, revenue and EBITDA growth

  • Revenues increased by $129 million or 17% to $882 million in the first quarter of 2006, when compared with the same period in 2005

  • EBITDA increased by $59 million over the first quarter of 2005 representing 17% growth, despite higher gross additions and cost of acquisition expenses

  • ARPU (average revenue per subscriber unit per month) improved by $2 to $60. The data component of ARPU increased by 86% to $3.71 as compared to a year ago  

  • Cost of acquisition (“COA”) per gross addition increased 21% in the quarter to $429 due to increased promotional and intense competitive activity

  • Quarterly net subscriber additions of 92,500, up 15% from the first quarter of 2005, driven by strong prepaid growth, and postpaid additions of 70,400

  • Blended monthly churn this quarter improved to 1.33% from 1.45% a year ago. Postpaid churn was 0.99%

  • Cash flow (EBITDA less capital expenditures) increased by $57 million or 20% to $334 million in the first quarter due to higher EBITDA and stable capital expenditures



TELUS wireline
Excellent high-speed Internet subscriber growth and increased data revenues temper increased wireline competition

  • Revenues decreased 1.8% when compared to the first quarter of 2005 amid increasing competitive pressures and technological substitution, and due to a one time regulatory recovery a year ago

  • Data revenues increased 4.2% driven by increased Internet and enhanced data service revenues

  • Long-distance revenue declined 8.2% to $208 million, reflecting industry wide trends of lower volumes and strong price competition and technological substitution

  • EBITDA declined 10%, due to lower revenues combined with higher wireline expenses partly attributable to increased high-speed internet additions, and efforts to successfully clear backlogs and improve customer service

  • Non-incumbent revenue in Central Canada increased 2.9% over the first quarter of 2005.

  • High-speed Internet net adds were 38,600, up 74% from a year ago bringing TELUS’ total Internet subscriber base to more than one million

  • Network access lines declined by 28,000 in the quarter, down 2.7% from a year ago reflecting residential line losses as result of ongoing competitive activity and wireless substitution

  • Cash flow (EBITDA less capital expenditures) was down 32% to $208 million, compared to the first quarter of 2005, due to lower EBITDA and higher capital expenditures from investments deferred into 2006 as a result of the extended labour disruption in 2005.



CORPORATE DEVELOPMENTS

TELUS continues share repurchases
During the quarter, TELUS continued to purchase shares under its Normal Course Issuer Bid. TELUS repurchased a total of 5.1 million shares (1.8 million common and 3.3 million non-voting), for a total outlay of $232 million in the first quarter.

TELUS commenced its most recent Normal Course Issuer Bid program on December 20, 2005 with the intention, if it is 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, or approximately 7% of the issued and outstanding shares of each class, respectively.

Since this program commenced, a total of 6.4 million shares have been repurchased, for an outlay of $289 million, representing 27% of the 24.0 million shares authorized under the program. Under its previous program completed in December 2005, TELUS repurchased approximately 22 million shares, or 85% of the authorized amount, for $913 million. TELUS believes that such purchases are in the best interest of TELUS and constitute an attractive investment opportunity and desirable use of company funds that should enhance the value of the remaining shares.

Telecom industry regulatory developments
There were several regulatory developments in the first quarter including the release of the Telecom Policy Review report to the federal government, and the Canadian Radio-television and Telecommunications Commission's (CRTC) decision on forbearance from regulation of retail local exchange services. See section 10.1 Regulatory in Management's discussion and analysis below for more detail on these and other decisions.

The March recommendations to the Minister of Industry for telecom reform were encouraging with proposals that were innovative and responsive to the need to modernize Canada's public policy framework for the telecommunications sector. Key points included:

  • An end to the presumption that telecom services must be regulated and shift to reliance on market forces

  • A proposal to have government direct the CRTC to act as if the reports major recommendations are in effect, pending the necessary legislative changes 

  • A recommendation that foreign ownership restrictions should be liberalized.



TELUS was generally satisfied with the proposals and publicly urged the government to move quickly to implement the major recommendations. Our view is that implementation would help transform the telecom industry and afford customers the innovation and choice that only a truly competitive environment can bring.

The April CRTC decision on regulatory forbearance for local exchange services was seen by TELUS as complex, with built in processes that will unnecessarily delay deregulation. The one immediate positive aspect was the relaxation of winback restrictions, reducing the period that incumbent telcos are prevented from contacting customers lost to competitors.

Key points of the decision included:

  • No contact period for winbacks immediately rolled back to 90 days from one year

  • Market share loss threshold of 25% (in contrast to 5% test for cable TV operators) applied to large geographic areas

  • Once the 25% threshold is reached, a lengthy and cumbersome process follows before forbearance is granted.



TELUS' view is that the CRTC forbearance decision clearly underscores the need for the reforms proposed in the Telecom Policy Review.

CONSUMER SOLUTIONS
TELUS TV® set for continued roll-out this fall, employee trials expand to BC
Set for targeted commercial roll-out in select cities later this year, TELUS TV will provide consumers in BC and Alberta with 100 per cent digital television service, television services with hundreds of video and audio stations, flexible channel packages, on-screen caller ID and the convenience of time shifting and Video on Demand.

TELUS also announced that team members in BC's Lower Mainland are set to begin trialing the innovative IP-based TELUS TV service with access to more than 200 channels (which should grow to more than 300 channels within a year) and Video on Demand with a large library of blockbuster movies. TELUS TV is already available in certain neighbourhoods in Calgary and Edmonton.

TELUS TV is part of the TELUS Future Friendly® Home strategy, designed to bring our clients IP and wireless-based services to make their lives richer and simpler with phone, Internet and TV over a single line and on a single bill.

Wireless High Speed expands to more cities
TELUS continues to roll-out its Wireless High Speed service out to more Canadian cities, offering business and consumer clients access to the fastest mobile data network in the country. Wireless High Speed, or EVDO, offers consumer and business clients' access to the Internet, e-mail servers and other data at speeds similar to broadband desktop – typically 400 to 700 kilobits per second.

Since January this year, TELUS has launched Wireless High Speed service in seven more centres: including Hamilton, Ontario's Golden Horseshoe region, Ottawa, Quebec City, fast-growing Alberta oiltown Fort McMurray and the resort centres of Whistler, Mont-Tremblant and Saint-Jovite; the company now serves 12 centres having already introduced service in Vancouver, Calgary, Edmonton, Toronto and Montreal. TELUS expects to continue to expand Wireless High Speed to other urban centres throughout 2006.

High-speed music downloads from Canada's broadest catalogue
TELUS Mobile Music ™ offers clients across the country access to Canada's largest full-track mobile music catalogue and the only one offering selections from all the world's biggest record labels – EMI Music, SonyBMG, Universal Music Group and Warner Music Group.

With the unique and easy-to-navigate TELUS Mobile Music Storefront, clients can browse, preview and download from hundreds of thousands of songs to their wireless phones and desktop computers.

The introduction of TELUS Mobile Music is part of the new TELUS SPARK™ line-up of mobile entertainment, information and messaging services for consumers. SPARK also includes TELUS Mobile TV™, multimedia messaging, downloadable images, ringtones, videos and games, and new Web browser features, including search tools and a broad range of new online content.

Phones for multimedia music and messaging
Alongside TELUS Mobile Music, the company also introduced the new LG 8100, an ultimate mobile entertainment phone operating on the TELUS Wireless High Speed network. Exclusive to TELUS, the LG 8100 features a built-in MP3 player with external controls, stereo speakers for superior sound quality, TELUS Mobile TV access, video recorder functionality, a 1.3 megapixel camera, Bluetooth wireless technology for use with hands-free headsets, car kits and modems and an optional 1GB mini SD memory card for storing a wide range of music, video, photo and other files.

TELUS also introduced the exclusive Samsung SPHA840, a compact flip phone that comes in a choice of two flashy colour schemes – black and pink or black and silver – and cool features such as the ability to create and send personalized postcards, a built-in digital camera, dual displays, internal antenna and speakerphone. Wireless postcard allows clients to overlay photos and text to make personalized postcards, then to send them to friends and family using TELUS' multimedia messaging services (MMS).

TELUS takes a byte out of spam with second security layer
TELUS introduced a new e-mail security system, powered by BorderWare Technologies, that is greatly reducing the volume of spam and virus e-mails received by TELUS Internet subscribers. The system acts as an initial screen in front of TELUS' existing security systems, using several methods to delete the most obvious problem e-mails before the reach the core security layer.

The new technology is housed in TELUS' e-mail servers, meaning clients do not need to download or install it on to their computers. TELUS has experienced a five-fold increase in the number of e-mails received on its network since it first introduced spam control three years ago, putting a strain on current security systems. More than 80 per cent of those e-mails had been spam and viruses.

Expanded e-mail service
TELUS launched Business Inbox, a secure, two-way e-mail service that offers mobile professionals instantaneous access to critical corporate information from their mobile devices. Powered by Visto Mobile, Business Inbox operates on several TELUS handsets, works with both IBM Lotus Domino and Microsoft Exchange, and is available for clients ranging from individual users up to national enterprise clients. TELUS continues to expand its mobile e-mail service portfolio with sophisticated wireless applications, allowing business users of all kinds to stay connected and visible, anytime, anywhere.

BUSINESS SOLUTIONS
TELUS launches Business One, simplifying communications and IT for small business
In March, TELUS introduced TELUS Business One, the only technology package in Canada that combines voice and high speed Internet with powerful Internet applications customized exclusively for small business. TELUS Business One combines telecommunications and high-speed Internet services with business tools such as customized email, desktop backup, website hosting, virus protection and Conference on Demand at no extra cost. TELUS Business One gives small business customers access to these IP-based tools for one price, on one simple bill, and with one dedicated technical support number for all services.

Consumer Impact Marketing selects TELUS IP-One®
Also in March, TELUS announced it had signed Consumer Impact Marketing (CIM) to a five-year contract that will see one of the largest third party outsourcers in North America use TELUS IP-One to increase productivity and reduce costs. TELUS IP-One uses Internet protocol technology to merge voice, data and video applications into one communications solution, allowing businesses to easily manage features such as call forwarding and contact lists, to access voice-mail as they would e-mail, or conduct ad hoc multi-party conferences. The service also allows business customers the flexibility to shift employees and workstations without having to reconfigure network and telephony services.

TELUS acquires Assurent Secure Technologies
In April, TELUS announced the acquisition of Assurent Secure Technologies, a Toronto-based electronic security provider. This is consistent with TELUS' strategy of making "tuck-under" acquisition to augment capabilities in the growth areas of data, wireless and IP. Assurent's 55 employees are now a key part of our Business Resiliency Services within TELUS Business Solutions.

Assurent's core business includes security software, vulnerability research, and related engineering and consulting services. Growing rapidly since 2002, the company has approximately 90 customers, including many Fortune 500 companies in Canada, the U.S., Europe and Asia.

TELUS signs five-year hosting contract with Coast Hotels & Resorts
In February, Coast Hotels & Resorts signed a $1.6 million, five-year contract with TELUS to host its new central reservations and property management system at TELUS' Calgary Intelligent Data Centre. Hosting important customer information with TELUS frees Coast Hotels and Resorts from this critical but non-core function, allowing them to focus on their core operation while giving them access to cutting-edge data centre technology a mid-sized business would otherwise be unable to afford. The system began rolling out to 10 Coast locations in Western Canada in March, and is being extended to its entire 34-hotel network.

OTHER DEVELOPMENTS
TELUS recognized for excellence
In January, KPMG announced TELUS had again made the annual list of Canada's most respected companies. Of the eight performance categories the survey measures, TELUS received high marks in the category of ‘Innovation and Product/Service Development.'

TELUS was one of only 22 Canadian companies recognized for global leadership in corporate sustainability practices by Canadian Business Magazine in February. The magazine highlighted TELUS' environmental reporting, approach to sustainability, and a number of key initiatives such as recycling mobile phones and a pilot project integrating hybrid vehicles into its fleet.

In April, TELUS was awarded three Gold Quill Awards from the International Association of Business Communicators for excellence in corporate communications. TELUS' 2004 annual report took an award in the publications category while TeamVision, an internal news broadcast, took awards for communications management and communications skills. TELUS' annual report has a long legacy of excellence, receiving awards from organizations including the Canadian Institute of Chartered Accountants, Corporate Essentials, and IR Magazine.

TELUS executive honoured for contribution to her community
In March, the Women's Business Network of Ottawa named TELUS executive Janet Yale the top businesswoman of the year in their corporate category for her outstanding contributions in business and the community. Yale, TELUS' executive vice-president of Corporate Affairs, leads a national team responsible for public policy, regulation, government relations, law, corporate governance, and corporate communications. The award also recognized Ms. Yale's involvement in Ottawa organizations, noting she serves on the boards of Ashbury College, Ottawa Centre for Research and Innovation, Great Canadian Theatre Company, the Ottawa Hospital, and the Information Technology Association of Canada; chairs the United Way/Centraide Ottawa's board of directors. She is also involved in national organizations including the Council for Business and the Arts in Canada and the Canadian Film Centre.

Leadership excellence
In May, Karen Radford, President of TELUS Québec and Partner Solutions, was named to Canada's Top 40 Under 40 for 2005. Each year the program recognizes 40 Canadians from the private, public and not-for-profit sectors who have reached a significant level of success and who are not yet 40 years of age. Recipients were selected by an independent advisory board of business leaders across Canada from more than 1,400 nominees. Those named to the list were chosen for their achievements in five key areas: vision and leadership, innovation and achievement, impact, community involvement and contribution as well as strategy for growth.

Creating future friendly communities
TELUS continues to make significant investments in the communities where its members live, work, and serve. TELUS is committed to becoming Canada's premier corporate citizen and taking a leadership role in supporting Canadians by leveraging funding, technology and expertise to help make a difference.

TELUS supported numerous community programs and organizations this quarter including the B.C. High School Boys' Basketball Association with a four-year, $260,000 sponsorship agreement announced in January. The sponsorship will support the association's annual provincial tournament and includes annual scholarships.

In February, TELUS announced the launch of an innovative new program for not-for-profit directors – 'Governance Essentials: A Program for Not-for-Profit Directors'. This is made possible by a partnership between ICD Corporate Governance College (a partnership between the Institute of Corporate Directors (ICD) and the University of Toronto's Joseph L. Rotman School of Management) and TELUS. The program will be offered through the ICD Corporate Governance College partner universities beginning with the Rotman School in Toronto on May 7 and thereafter in 2006 in Edmonton, Calgary, Montreal, Ottawa and Vancouver.

Dividend declaration
The Board of Directors declared a quarterly dividend of twenty-seven and a half cents ($0.275) per share on outstanding Common and Non-Voting Shares payable on July 1, 2006 to shareholders of record on the close of business on June 9, 2006.

For more information, please contact:
External Communications:
Allison Vale
(416) 629-6425
allison.vale@telus.com

Investor Relations:
Robert Mitchell
(416) 279-3219
ir@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.


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