management's discussion & analysis
3. key performance drivers
Corporate priorities in place for 2005 and planned for 2006
To advance our strategy, focus on the near term opportunities and challenges, and create value for shareholders, TELUS sets corporate priorities each year. A report on the progress against 2005 priorities is described below.
3.1 Corporate priorities for 2005 – reporting back
Progress against 2005 corporate priorities
Enhancing TELUS’ leadership position in wireless
- Generated a record number of subscriber net additions at 584,300, representing 34% of the net additions of the three national competitors, while obtaining 36% of the EBITDA and 39% of EBITDA less capital expenditures
- Launched a new wireless high-speed network called EVDO for business in five major cities across Canada
- Introduced real-time access of live television programming to wireless phones in 2005 with the August launch of TELUS mobile TV service
- Continued to lead the Canadian industry with the highest average revenue per subscriber unit per month (ARPU) of $62, while maintaining one of the lowest churn rates in North America at 1.39%. With significant EBITDA growth, EBITDA less capital expenditures increased to a record $1,038.2 million or 33.9% of Network revenue, as compared with $788 million or 30.3% of 2004 Network revenue.
Leveraging investments in high-speed Internet technology through Future Friendly Home services in B.C., Alberta and Eastern Quebec
- Starting in May, promoted two additional varieties of high-speed Internet:
- TELUS High-Speed Enhanced Internet service offers much more speed than TELUS’ regular high-speed Internet service and is ideal for online gaming and downloading large files
- TELUS High-Speed Lite Internet service offers speeds five times faster than dial-up Internet, but is not as fast as TELUS’ regular high-speed Internet, and is suitable for surfing the Internet and accessing e-mail
- In November, started a phased neighbourhood roll-out in Edmonton and Calgary of TELUS TV, an innovative all-digital television service.
Accelerating wireline performance in Ontario and Quebec business markets
- Non-ILEC revenue of $632 million increased by 12.6% when compared with 2004
- Full-year non-ILEC EBITDA became positive for the first time in 2005 at $21 million
- Gained a number of new large multi-year customers including Hamilton Health Sciences and the Government of Quebec.
Growing brand value by delivering a superior customer experience via leading IP solutions and excellence in customer care
- Launched three new TELUS IP security solutions:
- Intrusion Prevention Service (a hardware-based solution, which continuously monitors customer network traffic for anomalies and destroys them before they affect legitimate users’ services)
- Secure Socket Layer virtual private network (VPN) (a turn-key solution that insulates a network environment against external attacks)
- Distributed Denial of Service (eliminates the need for client software deployment, costly maintenance and desktop support by utilizing the Internet’s capacity for data transportation)
- Launched TELUS Telecommuting, a suite of communications services that allow business clients to work out of their homes. The services – high-speed Internet, VPN, a variety of phone options, and collaboration services such as web, audio and video conferencing – allow workers to create virtual offices at home
- TELUS and Telephony@Work partnered to offer Canada’s first fully integrated on-demand hosted contact centre service, CallCentreAnywhere™.
Driving continual improvements in productivity across TELUS
- A number of smaller efficiency initiatives were undertaken in 2005, facilitated by $54 million in Restructuring and workforce reduction costs, with many activities delayed by the four-month work stoppage.
Reaching a collective agreement
- A positive outcome for TELUS and team members was the ratification of a new five-year collective agreement on November 18, 2005. For a summary of labour relations activity in 2005 and the new contract, see Reaching a collective agreement that follows.
Reaching a collective agreement
A labour disruption that began on July 21, 2005 was settled on November 18, 2005, following the ratification of a new five-year collective agreement covering approximately 14,000 employees located predominantly in TELUS’ western incumbent region in B.C. and Alberta. The new agreement merges six previously separate collective agreements into one and applies to all unionized team members in B.C. and Alberta represented by the Telecommunications Workers Union (TWU), as well as TELUS Mobility team members in Central Canada who were included in the scope of the bargaining unit by Canada Industrial Relations Board (CIRB) Decisions 1088 and 278.
The new agreement provides TELUS and its team members the flexibility to compete on a level playing field and supports TELUS’ leadership position in data, IP and wireless. After ratification, substantially all regular team members were recalled and working by the first week of December. The terms and conditions of the new collective agreement are effective from November 20, 2005 to November 19, 2010.
The following are highlights of the new contract:
- One-time lump sum payments in lieu of retroactive wage adjustments were provided for the period from the expiry of the previous collective agreements to the effective date of the ratified agreement (January 1, 2001 to November 20, 2005).
- Total compensation increases, consistent with earlier guidance, for the majority of employees include base pay increases of a minimum of 2% per year with additional variable pay increasing over the term of the contract from 3 to 5% per year. Base pay harmonization between similar jobs in B.C. and Alberta is provided.
- Terms and conditions related to contracting out, scheduling of hours of work, paid time off the job, benefits, etc., are in line with competitive telecom benchmarks and are believed to provide TELUS with the required flexibility to effectively compete.
- A foundation now exists for a renewed, constructive union-management relationship. For example, the parties agreed to work together to withdraw a number of cases currently before the CIRB, Federal Court of Appeal and other courts or administrative bodies, to enable the parties to put an end to previous disputes. In addition, Common Interest Forums will involve executives from both the union and TELUS for ongoing constructive dialogue on issues.
- The proposed settlement of a long-standing pay equity complaint with respect to employees in British Columbia includes the establishment of a $10 million pay equity fund by TELUS, subject to acceptance by the Canadian Human Rights Commission.
- By March 2006, team members currently working in TELUS National Systems (TNS) and TELUS solutions de soutien will be included in the bargaining unit. In addition, the parties have agreed that team members employed in TELUS Mobility’s directly owned retail store operations are to remain excluded from the bargaining unit.
- Transition options, including the offer of a voluntary departure package, are available for approximately 700 team members affected by three offices that were closed in February 2006 and the outsourcing of non-core functions. In addition, TELUS made a commitment that several remaining call centres in B.C. will remain open for the term of the contract.
3.2 Corporate priorities for 2006
TELUS developed new corporate priorities for 2006 to: advance its industry-leading strategy; achieve meaningful commercial differentiation in the markets; capitalize on the technology convergence of wireless and wireline; and drive continued operating efficiency and effectiveness.
2006 corporate priorities across wireline and wireless
Advance TELUS’ leadership in the consumer market through:
- TELUS’ future friendly suite of data applications for customers at home and on the move
- Best-in-class customer loyalty through cost-effective customer experience
- Expanding TELUS’ channel partner relationships to strengthen its distribution.
Advance TELUS’ position in the business market through:
- Innovative solutions that enhance the competitiveness of TELUS’ customers and deepen their loyalty to TELUS
- Increasing the Company’s share in the business market by leveraging TELUS’ mobile solutions such as high-speed data
- Improving delivery of managed solutions to small business customers.
Advance TELUS’ position in the wholesale market through:
- Strengthening the Company’s North American reach through innovative IP solutions
- Establishing creative and preferred partnerships to grow TELUS’ national customer base
- Optimizing the use of partner networks to complement TELUS’ network investments.
Drive improvements in productivity and service excellence by:
- Realizing efficiencies from the integration of wireline and wireless operations
- Driving improvements in enterprise-wide productivity and customer service excellence to increase competitiveness
- Capturing value from TELUS’ investments in technology and innovation to streamline operations.
Strengthen the spirit of the TELUS team and brand, and develop the best talent in the global communications industry by:
- Continuing to leverage best practices across the Company
- Cultivating a business ownership culture that embraces a philosophy of “our business, our customers, our team, my responsibility”
- Capitalizing on TELUS’ reputation as a progressive, high-performance Company to attract and retain the best team in Canada
- Providing team members innovative opportunities for growth, development and employment options.