Building on our strategic imperatives

Since 2000, six strategic imperatives have been guiding our winning strategy and performance. The following discussion covers our key accomplishments and plans going forward.

Focusing on data and wireless

The execution of TELUS' national growth strategy has resulted in a distinct shift in our revenue streams from our mature voice businesses toward our higher-growth wireless and data businesses. Notably, wireless and data revenues have grown from $1.6 billion to $5.5 billion today. These services now represent 63 per cent of overall TELUS revenue, compared to just 28 per cent six years ago.

In 2006, wireless revenue and EBITDA advanced 17 and 21 per cent, respectively. This was due to 12 per cent subscriber growth, as we attracted 535,000 wireless customers, our second highest number of net additions since 2000, and higher average revenue per customer. The wireless data component of this average revenue increased by 89 per cent. We now serve 5.1 million wireless subscribers from coast to coast and expect to surpass 5.6 million by the end of 2007.

The wireline side of the business was largely resilient to the competitive dynamics typical of the industry due to our seven per cent growth in data revenue. TELUS' fastest-growing customer base is high-speed Internet subscribers, which increased by 154,000, or 20 per cent, to more than 900,000 in 2006. We expect to surpass one million customers in 2007.

The outlook for Canadian wireless industry growth remains bright with wireless penetration expected to increase from 56 per cent today to approximately 70 per cent in 2009.The potential for robust growth remains with approximately five mil- lion net new subscribers expected over the next three years. Owing to an industry-leading churn rate of 1.33 per cent, TELUS is positioned to win a fair portion of this expanding business through excellence in customer loyalty programs and innovative wireless solutions.

We significantly expanded our wireless high-speed (EVDO) network in 2006. EVDO provides consumer and business clients mobile access to the Internet, e-mail and other data at speeds similar to basic broadband Internet access. TELUS now provides wireless high-speed service to approximately 50 regions across Canada, covering two-thirds of the population, and roaming to 230 U.S. cities.

TELUS is positioned favourably for the implementation of Canadian wireless number portability in the spring of 2007, which will enable clients to maintain their phone numbers if they switch providers. This represents a challenge for TELUS, but also a meaningful opportunity in Central Canada where we have relatively low business market share.

Partnering, acquiring and divesting

Leveraging TELUS' wireless high-speed network platform, in the second quarter of 2007, we will launch our exclusive partnership with Amp'd Mobile. This will enable Canadian subscribers to access personalized content on their mobile handsets including 3D gaming, live sports and concert video streaming, and other unique features. TELUS will manage sales and distribution, billing, client support, network operations and pricing on behalf of the partnership.

We further strengthened our information technology (IT) capabilities in April by acquiring Assurent Secure Technologies, a world-leading Canadian IT security services and research company. Online security threats are increasing for businesses and TELUS is leveraging Assurent's reputation and expertise to provide solutions that help customers protect their assets, identities and information.

Providing integrated solutions

Robust competition from cable-TV companies, voice over IP providers and multiple wireless brands pushes us to perform. We continue improving customer service, developing innovative new solutions and implementing operational efficiencies.

TELUS is continuing to increase high-speed Internet access in our consumer markets. We also rolled out TELUS TV into additional neighbourhoods in B.C. and Alberta, delivering a fully digital television experience. In addition, we expanded high-speed Internet service to more than 100 rural areas in Quebec, increasing access to approximately 75 per cent of the market. This facilitates more growth and the launch of TELUS TV in 2007.

Recognizing that our broadband network represents a platform for sustainable growth, in 2006, we invested approximately $190 million in broadband enhancements and upgrades. In fact, since we launched high-speed Internet service in 1997, we have invested approximately $1 billion in our broad- band programs.

Delivering more bandwidth and speed to our Internet customers continues to be both a challenge and an opportunity. Issues that must be closely managed include evolving broadband technology, capital investment, staffing and speed of deployment. By investing in new broadband technology, TELUS' enhanced platform will provide more exciting services, such as high-definition TV, and increased market coverage. Accordingly, we have announced an additional $600 million investment to further enhance our broadband infrastructure and expand network coverage across B.C., Alberta and Eastern Quebec from 2007 to 2009.