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Q2 2005 investor conference call - Darren Entwistle presentation

Thanks, John. Good morning and thank you for joining us today.

This is my 20th conference call for quarterly results with the TELUS organization and it would be fair to say it's been an interesting five-year period. Once again this quarter, shareholders are benefiting from the solid execution of our strategy focused on wireless and data growth. Encouragingly, thanks to the efforts of our team members, TELUS has again surpassed estimates. This consistent operating performance is being recognized with investor support that is translating into share price appreciation this year such that we have recently hit a six-year high. Let's start by reviewing these excellent second quarter results just released as shown on the next slide.

At a consolidated level we delivered strong revenue growth at 8 percent and EBITDA growth of 10 percent, versus the second quarter of last year. With stable depreciation and amortization, we had an excellent increase this quarter in operating income or EBIT of 24 percent. Focusing on the all important bottom line, net income was up 10 percent. When adjusted for nonrecurring tax and legal items however, it was up an impressive 60 percent year over year.

Turn to slide 5, it is encouraging that our success is not limited to just the wireless business segment. Importantly, TELUS Communications is producing industry-leading performance including four quarters of sequential revenue growth. This achievement was again driven in the second quarter by data growth of 10 percent and a revenue increase of 19 percent in our central Canada non-ILEC operations. Also noteworthy was our stable long distance revenue. Year over year for the second quarter this year it was stable compared to the same period last year. This achievement was our best performance in six years and a reflection of our differentiated approach to pricing and bundling compared to our peers and competitors. EBITDA was also stable this quarter at TELUS Communications. This comes despite the additional costs TELUS is experiencing due to labor relations activities and emergency operations procedures. TELUS Mobility continues to exceed expectations by delivering value-added services to our customers. The second quarter was again indicative of the strength of our wireless operations with a record level of revenue and EBITDA being generated. The strong growth being produced is evident in the 131,000 customer additions which helped drive an increase in wireless revenue of 18 percent and an increase in EBITDA of 28 percent. Based on the strong result that TELUS Mobility and TELUS Communications, and notwithstanding the current labor situation, we are continuing to provide annual guidance. Indeed, we are raising our wireless additions target for 2005 and reconfirming our 2005 guidance in all of the other 14 financial and operating metrics at TELUS Corporation.

Turning to slide 6, let me recap for investors about labor-related events in recent months. After more than four and a half years we are determined to bring our collective bargaining process to a positive conclusion in a reasonable time frame. In February, the Canadian Industrial Relations Board rendered a decision to return the parties to the collective bargaining process. This development has allowed us to move forward decisively on this key corporate priority by bringing pressure to bear to expedite the resolution of this important matter. In the past few months, TELUS re-tabled our comprehensive offer of settlement and implemented this offer on July 22nd. We also implemented an array of lock-out measures from April to July to bring pressure to bear on our Union. Unfortunately, the TWU remains unwilling to deal realistically with our offer or to submit it to their membership for a vote. Instead the TWU responded to our initiatives by bringing new legal challenges, a work to rule campaign, and rotating strikes. This culminated on the 21st of July with the TWU's call for a full-scale strike by the approximately 13,000 person bargaining unit across Canada. The TWU has consistently mounted legal actions to TELUS' actions before the CIRB and the Federal Court of Appeal. The TWU has repeatedly sought third-party intervention to replace the process of free collective bargaining. Fortunately, TELUS has won a long string of legal decisions over the course of the 2005 financial year that confirm established labor principles which underpin the negotiations process in Canada. We realize that the many labor events and legal challenges can be difficult to absorb. For those interested we have summarized these developments in two appendices at the end of today's slide package.

Let's now move to slide 7. Our highest priority during the strike is to ensure that we continue to provide quality customer service. To this end we have fully activated our robust emergency operations procedures that have been four years in the making. Managers have been deployed to pre-assigned roles for which they first received training in 2004 and refresher training earlier this year. The results to date are indeed very encouraging. Customer service metrics show that TELUS and TELUS Mobility are keeping service levels in many areas at the same level or better relative to where they were prior to the strike. This is due in part to TELUS' operations being highly automated with approximately 80 percent of service work being done without a visit required to a customer location. For example, TELUS is answering calls faster on average now than before the strike. We are also exceeding our targets in other automated service work such as ADSL quick installations and repairs. Moreover, we have made tremendous headway in reducing work that requires a truck and a crew to be sent to a site. At this time, the repair queue of non-automated work resulting from the strike is cleared in Alberta and is declining rapidly in British Columbia. Where new orders are involved, we are prioritizing the work to ensure our customers' health and safety is protected and for business customers who require service to continue their operations.

It's significant that our efforts to maintain customer service have been supported by the large number of unionized team members still coming to work. The number of employees in Alberta choosing to work is increasing each day and currently stands at circa 50 percent of our unionized employees choosing to come to work, serve our customers and demonstrate their commitment to their fellow colleagues and TELUS. It should also be noted that unionized team members in central Canada are also on the job at TELUS mobility. In addition, TELUS Quebec is not impacted by the current situation and union team members continue to work in the province of Quebec. At present, TELUS is not allowing BT union members to cross the picket lines. TELUS was also quick to apply for, and win court injunctions in both breath tissue Columbia and Alberta over the past two weeks that limit picket line activity. These injunctions guarantee unfettered ingress and egress from not only our own facilities but also to the facilities of our customers and suppliers. Additionally, they prohibit intimidation of managers and unionized team members who choose to work. While the TWU ordered a full general strike this has not transpired. About 70 percent of our 28,700 TELUS employees remain at work. And east of British Columbia, about two-thirds of our unionized team members remain on the job. Through team members' hard work and desire to serve our customers, TELUS remains fully operational and this will not change regardless of the duration of the work stoppage.

Moving to the next slide, slide 8, let me reiterate that the offer to the TWU and our unionized team members is a comprehensive, high quality and generous offer. It will make our bargaining unit the best paid telecommunications workers in Canada. The offer also contains a broad provision for guaranteed employment security. Please note that the initial major outlay of cash payments to unionized team members will not occur until the offer is ratified. As previously communicated, we estimate that the past payments and lump sums payable on ratification are approximately $200 million. To put this in perspective, this represents an initial average payment of $16,000 per employee upon signing and ratification of our proposed collective agreement. Importantly, we have fully accrued for this offer and there will not be a one-time charge to the income statement. At the end of the day, TELUS' offer provides the flexibility we need to compete on an even playing field against our competitors and continue our track record of financial and operational success that we've established. TELUS is resolved to stay the course and have our unionized team members understand, vote on and accept the excellent offer we have made to the TWU and to them. Let me now turn things over to George and to Bob to more fully brief you on the excellent operational and financial results that continue to be generated by the TELUS team.

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Q2 2005 investor conference call - presentations

John Wheeler, vice-president, investor relations
Darren Entwistle, president and chief executive officer
George Cope, president and chief executive officer, TELUS Mobility
Robert McFarlane, executive vice-president and chief financial officer
Question period
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