TELUS

annual report 2004

management's discussion & analysis

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management's discussion & analysis
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introduction

The following is a discussion of the consolidated financial condition and results of operations of TELUS Corporation for the years ended December 31, 2004 and 2003, and should be read together with TELUS' audited Consolidated financial statements. This discussion contains forward-looking information that is qualified by reference to, and should be read together with, the discussion regarding forward-looking statements.

TELUS' audited Consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP), which differ in certain respects from U.S. GAAP. See Note 21 to the audited Consolidated financial statements for a summary of the principal differences between Canadian and U.S. GAAP as they relate to TELUS. The audited Consolidated financial statements and Management's discussion and analysis were reviewed by TELUS' Audit Committee on February 15, 2005 and approved by TELUS' Board of Directors on February 16, 2005. All amounts are in Canadian dollars unless otherwise specified.

The Company has issued guidance on and reports on certain non-GAAP measures that are used by management to evaluate performance of business units and segments. On a consolidated basis, non-GAAP measures are used in measuring compliance with debt covenants. Because non-GAAP measures do not have a standardized meaning, securities regulations require that non-GAAP measures be clearly defined and qualified, reconciled with their nearest GAAP measure and given no more prominence than the closest GAAP measure. For the readers' reference, the definition, calculation and reconciliation of consolidated non-GAAP measures is provided in Reconciliation of non-GAAP measures and definition of key operating indicators.

management’s discussion and analysis – contents

1. Overall performance A summary of 2004 consolidated results and a description of performance against annual targets set for 2004
2. Core business, vision and strategy A discussion of TELUS' core business, vision and strategy, including examples of TELUS' activities in support of its six strategic imperatives
3. Key performance drivers Corporate priorities for 2004 and 2005
4. Capability to deliver results A description of factors that affect the capability to execute strategies, manage key performance drivers, and deliver results
5. Results from operations A detailed discussion of operating results for 2004
6. Financial condition A discussion of significant changes in the balance sheet for the full year
7. Liquidity and capital resources A discussion of cash flow, liquidity, credit facilities, off-balance sheet arrangements and other disclosures
8. Critical accounting estimates and accounting policy developments A description of accounting estimates, which are critical to determining financial results, and changes to accounting policies
9. Looking forward to 2005 A discussion of the 2005 outlook, operational and financial targets, financing plans, and key assumptions
10. Risks and uncertainties A description of risks and uncertainties facing TELUS
11. Reconciliation of non-GAAP measures and definition of key operating indicators A description, calculation and reconciliation of certain measures used by management