questions
& answers

Competition is nothing new for the TELUS Consumer Solutions team, which supports the mobility and residential services market in Canada. For us, the main issue is not increased competition but the regulatory restrictions that impede our team from responding to the changing market dynamics. That being said, progress was made in the second half of 2006 and we believe the regulatory environment is likely to improve during 2007.

With the integration of our wireline and wireless businesses starting in late 2005, we are creating a greater focus on our clients' needs and enhancing our productivity. For example, a number of improvements have been made to the strategy and execution capabilities of our Future Friendly Home portfolio. Our high-speed Internet, local phone and long distance service results improved as we progressed through 2006, which was gratifying given that competitive pressures intensified over the same period of time.

The following is a brief summary of our 2006 highlights:

• Launched two generations of Home Solutions Bundles, which have assisted materially in reducing churn, gaining new clients and increasing winback success
• Increased direct marketing and channel activities to ensure clients are on the best plan for their needs and, wherever possible, have the full suite of TELUS services
• Introduced new higher-speed Internet services, made wireless networking part of our standard offer and doubled the speed of our TELUS High-speed Lite Internet service. These changes resulted in the highest net additions since 2002 and the lowest churn ever experienced with this service
• Expanded TELUS TV coverage into certain areas of Vancouver as well as additional neighbourhoods in Calgary and Edmonton. Growth was managed to ensure clients received a high-quality experience while maximizing the productivity of our field teams
• Increased customer service transaction quality scores by 25%, reflecting the sharing of best practices and management between the formerly separate wireline and wireless businesses.

While we are concerned with the level of local and long distance revenue losses experienced during 2006, we are positively encouraged by our performance versus the telco peer group and the success of our marketing and sales activities in the latter half of 2006. Our approach is focused on the delivery of a superior level of service, features and execution, which is much more difficult for competitors to match than simple price reductions or price matching.

We learned a great deal about what worked and what didn't last year, which allows us to evolve and build on our strategy going forward. We have a number of new ideas to bring to market to further support the momentum created last year.

Opportunities for 2007 include:

• Continuing to raise the bar on client service, through an organization-wide focus on end-to-end process quality and execution
• Incrementally investing in field technical resources to ensure alignment between demand and supply during peak volume periods
• Encouraging regulatory reform that allows greater flexibility in responding more quickly to competitors' actions
• Leveraging the experience of our team to drive better client insight and opportunities
• Implementing our new billing and client care systems to accelerate productivity and quality enhancements
• Continuing the roll-out of TELUS TV to more neighbourhoods in B.C., Alberta and Eastern Quebec. In addition, introducing new services such as high-definition TV
• Increasing market share in the multi-billion dollar mobile and Future Friendly Home entertainment industry - an exciting, key growth area for TELUS in the years to come.

TELUS is positioned to leverage the potential of advanced wireline services with our wireless consumer offerings. Through continued investments in our networks, the strength of our brand and marketing, and ongoing enhancements to our customer service systems, TELUS can increasingly offer integrated and differentiated services to our customers. Stay tuned!

John Watson
Executive Vice-President and
President, Consumer Solutions
Member of the TELUS Team