responsibly managing your cash

With robust cash flow, TELUS is in an enviable position of being able to invest in long-term growth in our core business while also returning cash to investors via increased dividends and a significant share repurchase program.

Setting targets for continued growth and investor clarity

At TELUS, we have a firm belief in clearly setting a comprehensive set of annual financial and operating targets and providing investors with updates throughout the year. Our track record for meeting and exceeding these targets is exemplary. Over the past six years, we have achieved 88 per cent of our consolidated financial targets. In 2006 alone, we met or exceeded four of five consolidated targets and seven of ten segment targets.

TELUS also has clear public long-term policies and guidelines for equity and debt holders, which are consistent with maintaining our targeted BBB+ to A- investment grade credit ratings:

• Dividend payout ratio of 45 to 55 per cent of sustainable net earnings - 46 per cent in 2006
• Net debt to EBITDA of 1.5 to 2.0 times - 1.7 at end of 2006
• Net debt to total capitalization of 45 to 50 per cent - 47.5 per cent at end of 2006.

The financial outlook for 2007 remains positive as shown. Revenue is expected to benefit from strong wireless growth in the range of 12 to 13 per cent. EBITDA is expected to benefit from an expected 11 to 14 per cent wireless increase, partially offset by slightly lower wireline profitability due to competitive impacts, new contracts and service initiatives. The underlying EPS target growth rate in 2007 is 16 to 24 per cent when adjusted to exclude the net $0.48 cents of positive tax impacts in 2006 and the non-cash charge for the settlement feature for options. This growth is driven by increasing EBITDA, lower financing costs and a decrease in shares outstanding.

To ensure continuation of this growth on a long-term basis, TELUS' capital expenditures are expected to increase moderately due to an increase in wireless spending. Wireline spending will remain cyclically high with investments in broadband infrastructure, IT systems consolidation, access infrastructure to serve strong housing growth in the West and implementing major contract wins.

Ongoing disclosure and governance excellence

We are committed to open and transparent financial reporting and pursuing best practices in corporate governance. Underlying our decisions is a fundamental belief in full and fair disclosure, the importance of excellence in corporate governance and high ethical standards.

As part of our commitment, we believe in regularly communicating with investors. In 2006, we held six conference calls with extensive question and answer sessions, all of which were webcast for instant access by shareholders. We also made nine presentations at conferences in Canada and the U.S. In addition, we conducted meetings with 183 institutional investors - 80 in Canada, 76 in the U.S. and 27 in Europe. These activities, coupled with our award-winning website and comprehensive written information, serve to ensure investors are kept up-to-date on our progress and how TELUS is addressing various issues.

In the past year, we successfully concluded the extensive documentation and testing of internal controls over financial reporting in order to certify the adequacy of such controls under Section 404 of the U.S. Sarbanes-Oxley Act. I am pleased to report that we are fully compliant with the new U.S. regulations for the year ended 2006 and have no material control deficiencies to report.

We continue to gain external recognition for our clear and comprehensive corporate reporting and disclosure. For example:

• The TELUS 2005 annual report was recognized as the best in the world, according to the Annual Report on Annual Reports by enterprise.com, the only international ranking of corporate annual reports
• TELUS earned the Award of Excellence for Corporate Reporting in the communications and media sector from the CICA for the 2005 annual report.

For more details on our efforts related to corporate reporting and governance, and external recognition TELUS has received in this regard, please visit the corporate reporting section of this report.

Growing together

We are pleased with our performance in 2006 and have confidence that we are on track to continue achieving positive financial performance in 2007 and beyond. With clear targets and a host of corporate reporting and governance best practices in place, we are working hard to continue growing together for the benefit of our investors, customers and team members.

Sincerely,

Original signed by,

Robert McFarlane
Executive Vice-President and Chief Financial Officer
February 23, 2007