CEO letter to investors

A passion for growth

TELUS is delivering on our proven growth strategy. The benefits of our strategic investments, underpinned by an excellent financial position, are continuing to grow shareholder value. Our passion for growth is driving our success and differentiated performance in the face of economic and competitive challenges, today and into the future.

Growing momentum

For TELUS, 2011 was an exceptional year as we experienced positive momentum across the key areas of our business. Despite economic challenges and intense competition, we are in a position of tremendous strength and leadership.

Your Company is realizing the benefits of its strategic investments in broadband technology and services, which are driving our success now and into the future. Indeed, in many cases, we are outpacing our competition. We have reached a number of significant milestones including $10 billion in revenue, seven million wireless customers and 500,000 TELUS TV subscribers. Throughout 2011, we remained focused on our proven growth strategy and achieving our corporate priorities. Notably, we are beginning to see meaningful progress on our number one priority — to elevate the customer experience.

Our customer-friendly approach, championing fairness and transparency for Canadians through our enhanced Clear & Simple rate plans and many associated initiatives, is setting your Company apart from the competition.

Our capital investments, growth-oriented asset mix and commitment to operational excellence and innovation provide a solid foundation for further progress. This was demonstrated by the industry-leading operational and financial results we achieved in 2011, which helped raise our share price by 26 per cent and deliver a total return to shareholders of 32 per cent including dividends. For the past two years, the total return has been a remarkable 85 per cent, the best performance among our global peers as measured by the MSCI World Telecom Services Index. Moreover, since 2000, TELUS has delivered the highest cumulative total shareholder return among incumbent telcos globally.

In both wireless and wireline, we made significant progress in 2011, ending the year in our best position ever.

Wireless remains a key growth driver of our business, and we are increasingly outperforming our peers in this market. Our customer-friendly approach, championing fairness and transparency for Canadians through our enhanced Clear & Simple rate plans and many associated initiatives, is setting your Company apart from the competition.

Darren Entwistle and his family help prepare and serve food at the Union Gospel Mission in Vancouver as part of the sixth annual TELUS Day of Giving.

Discover how TELUS continued to realize the benefits of its strategic investments and generated positive financial performance in 2011.

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The competitive pressures within our industry remain fierce. In particular, in the basic voice segment of the market, we face substitution from email and text messaging, as well as intense price competition from new wireless entrants and flanker brand services of established carriers. Notwithstanding this, the pressure on pricing has been more than offset by the acceleration in smartphone adoption, which is driving significant growth in data revenue. This has helped generate a nine per cent increase in wireless revenue and eight per cent growth in EBITDA (earnings before interest, taxes, depreciation and amortization).

On the wireline side, we are experiencing tremendous success in the home entertainment market as TELUS TV continues to help drive growth. Customers are responding to the superior attributes of this product, and we now have more than half a million TV clients and that number is steadily growing. As a result, TELUS is one of the few established telcos globally that has realized positive total wireline revenue growth in 2011.

In the public and large enterprise area, significant progress has been made on the implementation of both the City of Montreal and Province of Quebec contracts, and those contracts are now contributing to revenue and soon EBITDA. As well, major contract renewals have also been negotiated, including with the B.C., Ontario and federal governments.