CEO letter to investors

Growing financial performance

Our financial momentum accelerated in 2011 with revenue growth that exceeded our initial expectations based on strong gains in new customer connections of 475,000, which was split between wireless, TV and high-speed Internet services. Consolidated revenue increased by six per cent, EBITDA grew by 3.5 per cent and earnings per share (EPS) increased by 15 per cent. Adjusted for certain unusual items, underlying EPS growth was a healthy 10 per cent.

Free cash flow continued along an upward trajectory in 2011, up six per cent to just under $1 billion primarily due to improved earnings and reduced interest and cash taxes. These factors were partially offset by higher capital expenditures and a voluntary $200 million contribution made to maintain an excellent funding position in our pension plans, which is amongst the best in corporate Canada.

Our financial momentum accelerated in 2011 with revenue growth that exceeded our initial expectations based on strong gains in new customer connections.

This operating and financial strength gave TELUS and our Board of Directors the opportunity to provide investors with clarity on our dividend growth model. This was particularly beneficial for shareholders experiencing volatility in the stock markets related to global economic uncertainty. In May 2011, we announced plans to continue with two dividend increases per year to 2013 and are targeting the increases to be in the range of circa 10 per cent annually. Consistent with this plan, we announced two dividend increases in 2011. Of course, quarterly dividend decisions will continue to be subject to the Board's assessment of the Company's financial situation and outlook.

We also have a solid track record of attaining the targets we set publicly each year. In the past decade, we have met or exceeded 77 per cent of our 52 consolidated financial targets, including three out of four in 2011. The outlook for 2012 is positive as we target growth in the mid-single digits for revenue, EBITDA and EPS. We also expect strong double-digit growth in free cash flow, which underpins the affordability of future dividends. These targets are based on assumptions, as noted in the caution statement on the inside front cover.

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

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