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Financials |
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Cash used by investing activities increased substantially in 2000 due to the acquisition of Clearnet ($1.86 billion net of cash acquired), QuébecTel ($584 million net of cash acquired) and capital expenditures increases of $242 million.
TELUS Communications capital expenditures decreased from 1999 due to lower license fees for certain third-party services and the completion of several projects in 1999 including billing systems integration, readiness for local number portability and local competition. This was partly offset by the purchase of billing integration software assets and building renovations in 2000.
TELUS Mobility capital expenditures were higher due to $55.4 million of capital expenditures by Clearnet from October 20, and $4.2 million at QuébecTel Mobilité since June 1. Slightly offsetting this was lower spending in western operations due to harmonization of capital investment plans with Clearnet. On a pro forma basis including 12 months results from Clearnet and QuébecTel Mobilité, TELUS Mobility's capital expenditures were $533.7 million in 2000 as compared to $545.9 million in 1999.
Capital spending in Advanced Communications increased to support more rapid rollout of ADSL high-speed Internet services and TELUS.net, interactive commerce initiatives, internetworking services and the acquisition of the assets of a data services company.
Other capital expenditure increases included $111.0 million that was directed to expansion of TELUS' national network (inter-city transport, access, real estate), and seven months of QuébecTel Communications capital expenditures ($32.9 million).
In May 2000, TELUS Communications Inc. redeemed $150 million of notes and financed the redemption with a $110 million withdrawal of sinking fund assets and the balance with cash from operations.
In June 2000, TELUS Communications (B.C.) Inc. issued $200 million of extendible medium-term notes with an initial maturity of 2003. Other than this single transaction, no additional medium-term notes were issued from the Company's $2.4 billion authorized program ($1.0 billion at TELUS Corporation and $700 million at each of TELUS Communications Inc. and TELUS Communications [B.C.] Inc.). Additional cash needs throughout the year for operating and general corporate purposes including the acquisition of QuébecTel in June were provided by issues from the aggregate $1.5 billion authorized commercial paper programs which were fully backed by committed bank lines of credit.
In October 2000, a $7.7 billion senior secured bank credit facility was placed between TELUS Corporation and a number of Canadian, U.S. and offshore banks to finance the Clearnet acquisition and provide ongoing liquidity lines. This facility consisted of three components: (1) a $5.0 billion tranche established as a 364-day bridge facility had approximately $4.0 billion drawn down as at December 31, 2000; (2) a $1.25 billion 364-day revolving line of credit provided a liquid reserve for general corporate purposes; and (3) a $1.45 billion single purpose tranche established to provide funds to the Company in the event that an offer to purchase certain Clearnet notes was triggered upon the change of control of Clearnet. This latter tranche did not have to be used and was cancelled by the Company in December 2000, leaving $6.25 billion of the facility remaining.
As part of the Clearnet acquisition, TELUS assumed $2.6 billion book value of Clearnet debt. In December, Clearnet long-term debt with a face value of $1.3 billion was redeemed for $1.4 billion cash including prepayment premiums of $99.8 million. These repayments were comprised of $484 million for Senior Discount notes scheduled to mature in 2005, $658 million for a secured vendor financing facility and $295 million for a secured bank financing facility.
Subsequent to year-end, TELUS completed the compulsory acquisition of remaining Clearnet Class A non-voting shares outstanding. In addition, TELUS successfully completed exchange offers for 98.7% of the outstanding Clearnet 6.75% Convertible Debentures, and 99.6% of the outstanding Clearnet Warrants. These were exchanged for TELUS Corporation 6.75% Convertible Debentures and TELUS Warrants. TELUS completed compulsory acquisition procedures to acquire the balance of Clearnet 6.75% Convertible Debentures and Warrants in February, 2001.
Credit Facilities
TELUS credit facilities at December 31, 2000, consist of a $6.25 billion Senior Bank Credit Facility, comprised of a $5.0 billion bridge facility with a 364-day term ($4.0 billion drawn and $1.0 billion available) and a $1.25 billion 364-day revolving facility (undrawn) that matures on October 19, 2001; and other bank facilities with an aggregate commitment of approximately $200 million.
With the acquisitions of QuébecTel and Clearnet, TELUS' net debt to total capitalization ratio and net debt to EBITDA ratio both significantly increased. EBITDA interest coverage decreased due to higher net interest expense from acquisition related debt levels.
At year-end 2000, the former TELUS Communications Inc. and TELUS Communications (B.C.) Inc. were amalgamated with TELUS Mobility Cellular Inc. into a new entity now known as TELUS Communications Inc. (TCI).
Early in 2000, CBRS/DBRS ratings for TELUS Corporation long-term debt (debentures and medium-term notes) were "A" and "A" respectively while commercial paper ratings were A-1 and R-1(middle) respectively. The CBRS/DBRS ratings for TCI commercial paper were A-1 and R-1(middle). TCI debentures and medium-term notes were rated A(high) and preferred shares as P-2(high) by CBRS while DBRS had also rated TCI debentures and medium-term notes as A(high) and TCI preferred shares as pfd-2(high).
The credit ratings of TELUS Corporation and TCI came under review with the acquisition of Clearnet. DBRS downgraded TELUS Corporation's commercial paper and long-term debt to R-2(high) and BBB(high) and TCI's commercial paper and long-term debt to A(low) and R-1(low), all with stable trends. CBRS assigned a BBB+ rating to the corporate rating and A-1(low) to the commercial paper of TELUS Corporation. All of the ratings for TCI were placed on CBRS' Credit Watch List with Negative Implications pending a full review. CBRS was subsequently acquired by Standard and Poor's and are in the process of harmonizing credit ratings. The ratings table above reflects assigned ratings to date with other assignments pending as the harmonization process proceeds to completion.
Cash used by investing activities increased substantially in 2000 due to the acquisition of Clearnet ($1.86 billion net of cash acquired), QuébecTel ($584 million net of cash acquired) and capital expenditures increases of $242 million.
TELUS Communications capital expenditures decreased from 1999 due to lower license fees for certain third-party services and the completion of several projects in 1999 including billing systems integration, readiness for local number portability and local competition. This was partly offset by the purchase of billing integration software assets and building renovations in 2000.
TELUS Mobility capital expenditures were higher due to $55.4 million of capital expenditures by Clearnet from October 20, and $4.2 million at QuébecTel Mobilité since June 1. Slightly offsetting this was lower spending in western operations due to harmonization of capital investment plans with Clearnet. On a pro forma basis including 12 months results from Clearnet and QuébecTel Mobilité, TELUS Mobility's capital expenditures were $533.7 million in 2000 as compared to $545.9 million in 1999.
Capital spending in Advanced Communications increased to support more rapid rollout of ADSL high-speed Internet services and TELUS.net, interactive commerce initiatives, internetworking services and the acquisition of the assets of a data services company.
Other capital expenditure increases included $111.0 million that was directed to expansion of TELUS' national network (inter-city transport, access, real estate), and seven months of QuébecTel Communications capital expenditures ($32.9 million).
In May 2000, TELUS Communications Inc. redeemed $150 million of notes and financed the redemption with a $110 million withdrawal of sinking fund assets and the balance with cash from operations.
In June 2000, TELUS Communications (B.C.) Inc. issued $200 million of extendible medium-term notes with an initial maturity of 2003. Other than this single transaction, no additional medium-term notes were issued from the Company's $2.4 billion authorized program ($1.0 billion at TELUS Corporation and $700 million at each of TELUS Communications Inc. and TELUS Communications [B.C.] Inc.). Additional cash needs throughout the year for operating and general corporate purposes including the acquisition of QuébecTel in June were provided by issues from the aggregate $1.5 billion authorized commercial paper programs which were fully backed by committed bank lines of credit.
In October 2000, a $7.7 billion senior secured bank credit facility was placed between TELUS Corporation and a number of Canadian, U.S. and offshore banks to finance the Clearnet acquisition and provide ongoing liquidity lines. This facility consisted of three components: (1) a $5.0 billion tranche established as a 364-day bridge facility had approximately $4.0 billion drawn down as at December 31, 2000; (2) a $1.25 billion 364-day revolving line of credit provided a liquid reserve for general corporate purposes; and (3) a $1.45 billion single purpose tranche established to provide funds to the Company in the event that an offer to purchase certain Clearnet notes was triggered upon the change of control of Clearnet. This latter tranche did not have to be used and was cancelled by the Company in December 2000, leaving $6.25 billion of the facility remaining.
As part of the Clearnet acquisition, TELUS assumed $2.6 billion book value of Clearnet debt. In December, Clearnet long-term debt with a face value of $1.3 billion was redeemed for $1.4 billion cash including prepayment premiums of $99.8 million. These repayments were comprised of $484 million for Senior Discount notes scheduled to mature in 2005, $658 million for a secured vendor financing facility and $295 million for a secured bank financing facility.
Subsequent to year-end, TELUS completed the compulsory acquisition of remaining Clearnet Class A non-voting shares outstanding. In addition, TELUS successfully completed exchange offers for 98.7% of the outstanding Clearnet 6.75% Convertible Debentures, and 99.6% of the outstanding Clearnet Warrants. These were exchanged for TELUS Corporation 6.75% Convertible Debentures and TELUS Warrants. TELUS completed compulsory acquisition procedures to acquire the balance of Clearnet 6.75% Convertible Debentures and Warrants in February, 2001.
Credit Facilities
TELUS credit facilities at December 31, 2000, consist of a $6.25 billion Senior Bank Credit Facility, comprised of a $5.0 billion bridge facility with a 364-day term ($4.0 billion drawn and $1.0 billion available) and a $1.25 billion 364-day revolving facility (undrawn) that matures on October 19, 2001; and other bank facilities with an aggregate commitment of approximately $200 million.
With the acquisitions of QuébecTel and Clearnet, TELUS' net debt to total capitalization ratio and net debt to EBITDA ratio both significantly increased. EBITDA interest coverage decreased due to higher net interest expense from acquisition related debt levels.
At year-end 2000, the former TELUS Communications Inc. and TELUS Communications (B.C.) Inc. were amalgamated with TELUS Mobility Cellular Inc. into a new entity now known as TELUS Communications Inc. (TCI).
Early in 2000, CBRS/DBRS ratings for TELUS Corporation long-term debt (debentures and medium-term notes) were "A" and "A" respectively while commercial paper ratings were A-1 and R-1(middle) respectively. The CBRS/DBRS ratings for TCI commercial paper were A-1 and R-1(middle). TCI debentures and medium-term notes were rated A(high) and preferred shares as P-2(high) by CBRS while DBRS had also rated TCI debentures and medium-term notes as A(high) and TCI preferred shares as pfd-2(high).
The credit ratings of TELUS Corporation and TCI came under review with the acquisition of Clearnet. DBRS downgraded TELUS Corporation's commercial paper and long-term debt to R-2(high) and BBB(high) and TCI's commercial paper and long-term debt to A(low) and R-1(low), all with stable trends. CBRS assigned a BBB+ rating to the corporate rating and A-1(low) to the commercial paper of TELUS Corporation. All of the ratings for TCI were placed on CBRS' Credit Watch List with Negative Implications pending a full review. CBRS was subsequently acquired by Standard and Poor's and are in the process of harmonizing credit ratings. The ratings table above reflects assigned ratings to date with other assignments pending as the harmonization process proceeds to completion.
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