CEO letter to investors

Strong performance in 2005 bodes well for 2006

Your company generated excellent financial and operating results in 2005. For the third consecutive year, TELUS shares were one of the best-performing telecom stocks in the world. In 2005, our common share price increased by 32 per cent, compared to a 12 per cent decrease for telecom stocks globally. Indeed, an investment in TELUS five years ago is worth 82 per cent more than a similar investment in our global peers.

For the third year in a row, TELUS produced top-quartile results among our global telecom peers in growth of revenue, operating earnings (EBITDA), cash flow and earnings per share. Revenue and EBITDA were up seven per cent, and net income was up 24 per cent to $700 million. Free cash flow also increased by 13 per cent to $1.5 billion. These results were achieved despite the four-month labour disruption.

Greater exposure to wireless revenue growth at TELUS was an important driver of this performance in 2005. In fact, 42 per cent of TELUS’ revenue in the fourth quarter of 2005 was derived from wireless services. Growth in the wireless segment is expected to continue, particularly since the penetration rate for wireless phones across Canada, which stood at 52 per cent at year-end, accelerated in 2005. It should be noted that Canada’s wireless penetration rate is one of the lowest in the world, leaving ample growth opportunities for years to come.

Consistent with increased competition, especially from cable telephony, network access lines continued to erode and long distance revenue declined in 2005 as expected. However, TELUS wireline revenue was resilient in 2005, increasing slightly due to growth in data services and our national expansion into the Ontario and Quebec business markets.

The notable financial performance in TELUS’ wireline business, in the face of competitive intrusion, a restrictive regulatory environment and an extended labour disruption, allowed TELUS to reflect the full strength of our significant exposure to wireless in our consolidated financial results.

Our leading share price performance is also a product of our ongoing and public commitment to return cash to investors. The company undertook the following initiatives in 2005, returning cash to shareholders by:

Increasing the quarterly dividend for January 2006 by 37.5 per cent
Repurchasing 20.8 million shares for $892 million
Announcing a second share repurchase program for up to 24 million shares by December 2006
Redeeming $1.6 billion of debt six months ahead of schedule.

Our excellence in financial disclosure and corporate governance was externally recognized in 2005 by many organizations, including the Canadian Institute of Chartered Accountants.