About TELUS | Investors

2001 Comdex Canada West Conference

The following remarks were made by Darren Entwistle, president & CEO, at the 2001 Comdex Canada West Conference on March 13, 2001.

Eight months ago, we set out to create a new TELUS. A TELUS focused on translating data, IP and wireless technology into compelling solutions for our customers. A TELUS that rewards employees' innovation and commitment. A TELUS characterized by four values - one of which is a belief in spirited teamwork.

Going forward, we will be uncompromising in embracing these four values.

At TELUS, we stand together as a team. We work together as a team, and, ultimately, we share success as a team. Our desire to succeed and our performance orientation are producing a team of people who have the hunger and mental toughness to win in the marketplace ...and help our customers win in theirs.

Good morning. My name is Darren Entwistle and I am a member of the TELUS team. It's an honour to be at Western Canada's number one technology event. Given the fact this is a technology show, you may be wondering why I started my presentation talking about teamwork.

Much of the discussion surrounding the New Economy is focused on technology. But truth be known, people have never been more important to our success then they are right now. At the end of the day, it is people who make an organization succeed and this truth will be even more apparent in the New Economy.

Today, I'm going to share with you how we at TELUS are transforming from a well-established telecommunications provider into a high-growth, high-performance New Economy dynamo.

In today's 'Internet-speed' world, planning is important, but delivery is immediate. We are evolving quickly because that is what the market and our customers are demanding.

Today, we are well along in the execution of our plan to transform our company. We are not the same company we were even eight months ago.

Revenue is accelerating - up 18 per cent in the fourth quarter of 2000. Employee morale is rising, and, we have catapulted ourselves out of the pack of mobile players to become Canada's largest wireless company by completing the largest acquisition in Canadian telecommunications history with the $6.6 billion purchase of Clearnet.

Welcome to the new TELUS. Some changes you can see others you can simply feel. What you feel is the energy of change. The changes that have already started at TELUS and are now accelerating will continue to transform us through the months ahead.

We are a dynamic organization. Change is at the heart of who we are and what we do for our customers. We exploit new technologies to benefit our customers. We build strategic relationships with our customers, our suppliers and our partners. We help people communicate more effectively and we keep businesses growing. In the future, the advancements we bring to the world of communications will be even more profound and far-reaching.

In my presentation today, I will share with you our five-part strategic plan. The five components of our plan are:

our strategy for high-growth;
our culture for competitive advantage;
our customer-centric structure;
our people who will lead the way; and
our priorities that will provide the company with much needed focus for 2001.

Let us begin with our team strategy. As a first step in creating our strategy for high growth, the leadership team met regularly over a three-month period to analyze the landscape, map out the strategy and determine an implementation plan.

We analyzed the strategic context within which TELUS would operate, particularly our regulatory environment, the industry economics, our current and future customer requirements, the competitive landscape, and our core competencies.

Together, we quickly came to the conclusion that while we needed to harvest the 'voice' aspect of our business, TELUS' future lay in wireless, IP and data. Following passionate debate by the leadership team, we agreed on our strategic intent. We would unleash the power of the Internet to deliver the best solutions to Canadians at home, in the workplace and on the move.

No one will do it better or faster than TELUS. That is the commitment we make to all our customers. We will meet this commitment by delivering against our six strategic imperatives - the six things we believe we must do to be successful:

one, we will offer integrated solutions that anticipate and meet the evolving needs of our customers;
our solutions will exploit a highly fragmented marketplace where we face different competitors across a diverse set of products, markets and geographies;
only TELUS is in the right position to truly leverage the convergence phenomenon.

Let me illustrate this with some simple slides. This slide shows a sample of the usual suspects we come across when competing for business. As you can see, we've segmented the players in the Canadian market into three groups - incumbent local exchange carriers, competitive local exchange carriers and wireless providers.

Let us now remove those companies that do not have a national presence. Now, let us remove those companies that do not have a broad nor deep customer base to build off. Finally, let us remove any company that does not have a national wireless network.

As you can see, most of our competitors are niche players focusing on certain products, markets or geographies in a fragmented marketplace. Meeting our customers' call for convergence and turning singular voice, data, IP and mobility products into compelling solutions is without a doubt a challenge.

However, while convergence is never easy in any circumstance - whether we're talking about voice and data, wireless and wireline or, indeed, younger men and older woman; the reward, we suspect, is ultimately satisfying.

In this analogy, Dustin Hoffman represents voice. His world is changing dramatically and he is exceedingly anxious about what might unfold, but nevertheless, he has great potential. Anne Bancroft, or Mrs. Robinson, represents data - cool, sophisticated and on top of things but nevertheless desirous of making a voice connection.

When I worked in Europe, Cisco and 3Com were encouraging their people to get voice experience. That's because experience with campus-based LAN solutions does not necessarily mean you are ready for providing complex, integrated voice services to customers who already have high expectations.

Now, let me move on to our second strategic imperative. We will build national capabilities across data, IP, voice and mobility by leveraging the skills, resources and customer relationships in our home markets of Western Canada and Quebec. We will use these strategic advantages as a springboard to attack the business market in Central Canada. The market opportunity in Central Canada is key to our growth strategy. Customers are demanding national services and scale is essential to be competitive.

A good example of how we will do this is our newly constructed, cross-Canada IP backbone. We will make some further announcements about our national network later this month. It will serve both wholesale customers on a national basis and significantly enhance our retail capability. Our network will then span the nation from Vancouver to Quebec City, through Edmonton, Calgary, Winnipeg, Toronto, Ottawa and Montreal.

We also had our Central Canadian customers' needs in mind when we decided to open two world-class Internet hosting centres. These centres, which we will open this summer, will be located on our national fibre backbone and will provide Canadian businesses with Internet hosting capabilities that will be second to none. They will be located in Toronto and Calgary and will provide the extreme reliability, security, scalability and high-performance demanded by our customers for their mission-critical e-business solutions.

In Toronto, we have 150,000 square feet of server space. In Calgary, we have 130,000 square feet of server space. These premier Internet hosting centres will form the new "switching fabric" upon which the business of the new millennium will be based. In addition, we will be able to provide to our customers advanced Internet services such as load balancing, audio and video streaming, and content caching.

Our third strategic imperative is to partner, acquire and divest where appropriate to accelerate the implementation of our strategy and focus our limited resources on core business.

It is not feasible to own and/or build all of our capabilities given the acceleration of technologies, increased competition, and the global nature of our industry. For example, encouraged by the enthusiastic and unanimous support of our Board of Directors, we struck a bold $6.6 billion deal to buy Clearnet Communications last autumn.

Overnight, we became the leading wireless provider in the country, according to a number of key attributes. Not the least of which is barnyard animals, through the adoption of the duck and frog.

The new TELUS Mobility leads the Canadian mobile industry with the highest revenue growth; the highest revenue per customer; and the most wireless spectrum in North America.

As I said earlier, we made history with this purchase. It was the largest acquisition ever in Canadian telecommunications - conceived, negotiated, marketed, financed and closed in a record time of 70 days.

How is that for moving in Internet time?

More recently, we acquired the data network and facilities management business of NWD Systems. NWD provides LAN monitoring, virtual private networking, Web hosting and client server consulting.

And because we are financially responsible, our acquisition activities are complemented by a divestiture program that is expected to deliver roughly one billion dollars in 2001. For example, we have exited from the real estate business.

Finally, for an example of a strong partnership, we need look no further than our relationship with the University of British Columbia. We have partnered with UBC to offer a Certificate in Internet Marketing through MyBC.com and our other portals, Alberta.com and MyTO.com. As an aside, our network of portals register the second highest number of pageviews in Canada. This is the first university certificate program to be available on a Canadian Internet portal network.

Interestingly, it's predicted that more than two million Canadian students will participate in Web-based learning courses by 2002.

Our fourth strategic imperative is to focus relentlessly on the growth markets of data, IP and wireless with the objective of building scale and differentiation by integrating our services into compelling solutions for our customers.

Over the next three years, Canada's wireless and data markets are expected to grow 17 per cent and 31 per cent per annum respectively.

I see our data and IP strategy in three distinct tiers:

our Wide Area Network;
our Local Area Network; and
our IP Applications.

Let's look at each one briefly.

First, our Wide Area Network plans or, what we call bandwidth: backbone and access. This includes traditional and newer data services, such as DSL and IP VPN. In a converged voice and data world, extending the reach of our network gives TELUS the cost base to be competitive because we are reducing lease payments to our competitors.

Perhaps more importantly, however, it allows us to offer the quality of service guarantees that customers want by ensuring that the voice packets are carried on our network, from beginning to end.

The new TELUS national network connects into Genuity's IP backbone in the Seattle-Vancouver and Detroit-Windsor corridors, providing us with a resilient ring and direct connection to Genuity's Tier One IP backbone in the U.S.

As you may know, Genuity has the largest IP network in the United States. With Genuity as our partner, TELUS achieves costless peering as well as enhanced service quality.

Our advancements in Wide Area Networks will be done through organic investment. A very aggressive high-speed Internet rollout plan is a cornerstone of our data bandwidth strategy. We are investing $500 million over the next five years in high-speed Internet technology. This year alone, we are investing $190 million.

We will build DSL-capable facilities in 38 major communities in Alberta and B.C. This will provide more than 95 per cent of all homes and businesses in these 38 communities access to TELUS high-speed Internet service.

The second tier of our data and IP strategy is providing managed Local Area Network solutions. Here, TELUS will custom-design and manage private networks for customers. This is a key component of our thrust into Central Canada.

The LAN is where we see an important area of convergence, as wireless networks evolve to become complementary distribution platforms for data and IP applications. Information that was previously relegated to the desktop will now be able to reach our customers on the move.

TELUS' advancement in the LAN area will be fuelled by organic investments and selective acquisitions to improve our reach and capabilities.

Let us look at one of our most seasoned salespeople trialing a futuristic wireless application for one of our more demanding customers. I am sure you will agree that these advanced features on a future wireless product would improve a customer's reach and efficiency and truly deliver a solution in a box.

Finally, the third tier of our data strategy is our IP applications set, which includes Web hosting, e-commerce, m-commerce, voice-over IP applications and e-enabling our customers' businesses.

In addition, with our national IP backbone, Internet hosting centres, and software and professional services, we are positioning TELUS as Canada's leading application service provider. We are also working with our partner, Nuance Communications, to speech-enable Internet access which is an emerging trend in how we access the Internet in the future.

In a similar vein, we are developing a speech recognition interface for one of our customers, Credential Services. It will allow Credential's customers to get the current prices of more than 18,000 stocks - simply by saying the name of the stock.

TELUS' advancements in this area will be complemented by selective acquisitions and partnerships. This is where our relationship with Genuity is crucial because we can tap into partnerships they have with content owners.

This combination of offering holistic WAN/LAN/IP converged solutions is what will differentiate TELUS in the marketplace.

Our fifth imperative is to attack the market as a united team, under one brand. A single identity in the market is essential to our approach of providing customers with solutions rather than stand-alone products. This single identity contrasts well against the confusing corporate structures and brand proliferation inflicted upon customers by our competitors.

Our mantra at TELUS is "One Team, One Brand, One Strategy." In fact, that is the theme of our annual report, which is on the presses as I speak. "One Team, One Brand, One Strategy" succinctly describes our plan and how we will execute it over the coming year.

We will go to market as TELUS and we will not duplicate resources and expertise. For example, the conversion of Clearnet to TELUS Mobility will be fully implemented by April of this year.

We began running our first television commercials for the new TELUS Mobility in January. They blend the fresh and friendly Clearnet legacy with the strength and quality of the TELUS brand.

Finally, our sixth strategic imperative is to invest in internal capabilities - most particularly, our people. We will support and encourage personal growth and development because we believe this is a fundamental right of every member of Team TELUS. For example, the outstanding performance and extraordinary results of teams and individuals will be rewarded through our innovative recognition program called the TELUS Team Machine.

I will talk more about this world-class program and other initiatives in a few minutes.

In addition to investing in our people, we are working to give them the tools they need and we view IT as a key business enabler. Our IT architecture is designed to deliver the following benefits:

one, a cost base that is competitive;
two, information and intelligence for premium decision-making; and
three, enhanced functionality that will differentiate us from the competition.

For example, work is well underway to Web-enable TELUS. Virtually every aspect of life at TELUS is being moved to the Web. Today, TELUS people have access to a wide range of tools to stay connected, serving our customers, while in the office or on the move.

For example, we can now bring new members onto the team quickly with our online orientation site which went live just two weeks ago. As we look to expand the skills of our workforce, online learning is quickly becoming the standard.

For our customers, we are streamlining the way we do business online and in January, we launched our new online store which will allow our customers to source TELUS services at their convenience. Building on our popular eBill services, we are working hard to put expanded account information online for our customers.

Furthermore, each quarter, we are adding new, personalized services that make the online experience faster and easier.

We are also using the Web to automate the way we work with our suppliers and business partners to drive significant efficiencies in our supply chain. We are targeting benefits of more than one hundred million dollars thanks to this initiative. As well, we are implementing an information technology roadmap that we believe will be a key tool in transforming our business.

Today, our company runs on about 1,000 systems. By the end of this project, we will have streamlined this number to just 144.

Are we going to spend a lot of time building our own proprietary software? The answer is no. Gone are the days when smart telcos do their own software development. It is not one of our core competencies.

Instead, we will be looking to buy off-the-shelf systems, to shorten implementation time through rapid application design and by re-engineering our processes to marry up these off-the-shelf systems and further expedite implementation.

As you can see, our strategy for high-growth is well thought out; detailed and based on a careful analysis of our strategic environment.

Now, let's look at the kind of high-performance culture we are creating at TELUS. We believe our culture is our competitive advantage in an industry characterized by fierce competition. Growth depends on performance, individually and collectively.

At TELUS, a high-performance, decisive and fast-on-its-feet culture is at the heart of our growth strategy. To develop this growth culture, our shared values underpin how we will work at TELUS and, by extension, what we will achieve in the marketplace.

Developed through the participation of 600 members of Team TELUS, our values govern the behaviours we believe are essential to our success. We live these values each day and continually assess our actions against these desired behaviours.

What are our values? Well, at TELUS:

we embrace change and initiate opportunity;
at TELUS, we have a passion for growth;
at TELUS, we believe in spirited teamwork;
at TELUS, we have the courage to innovate.

Our next challenge was to embed these values into the management community and the organization. For those of you in the audience looking to engender a high-performance culture in your business, you may find the sequence of events we followed at TELUS useful.

To create our performance culture, we started with the senior leadership team. I met with each of them to recruit them as leaders of change and we wrote the values into their objectives and posted these contractual obligations on the internal website for all employees to see.

Furthermore, a key determinant of the remuneration and the career progression of each manager is based on how they live and champion the values. Next, we spread the word. The leadership team embarked on a cross-Canada roadshow to sell the urgent need for change.

A massive, company-wide communications program called 'Igniter' sessions was undertaken to explain the strategy, culture and new structure so that these enormous changes could be absorbed, discussed and bought into by every member of the TELUS team. By the end of April, almost all 26,000 employees will have participated in the Igniter sessions. As you can see, the feedback has been amazingly positive.

Furthermore, last year, our employee survey showed dramatic improvements in how our employees view the effectiveness of our leadership team. Our next step was to make it real. We aligned wealth creation for the company with wealth creation for the individual.

In a relatively rare move, we offered stock options to all employees. According to the Conference Board of Canada, only 6.5 per cent of mid- to large-sized businesses in Canada provide universal employee stock options.

At TELUS, we believe our competitiveness in this marketplace is determined by those people closest to the customer, fighting day in and day out to retain existing business and to exploit new opportunities. That's exactly the group of people this plan is intended to reach.

True to our value of spirited teamwork, this action was evidence of our belief in the importance of our people, and the difference each and every employee can make to the success of TELUS. At the same time, we pushed management options deeper to retain people with hot skills in scarce supply.

Clearly, as a nation, we in Canada need to stem the brain drain that is hurting our country's competitiveness.

Our next step in embedding the new culture was to reinforce our new values. To recognize outstanding performance, extraordinary efforts and exceptional results of teams and individuals who exemplify the TELUS values, we introduced a new incentive, recognition and reward program.

Highly innovative, TELUS Team Machine is expected to become one of the most progressive recognition programs in North America. Just as we reward people for embracing the values, we will also send a clear message to those employees who reject our values and by extension, our culture, by refusing to tolerate this behaviour on Team TELUS.

Finally, we invested in our people. By the end of this month, all 26,000 people at TELUS will have a customized development plan. Jointly developed by the individual working with their line manager, the plan starts with enhanced performance in the current role -- defining what high performance looks like and the means to achieve it.

Plans include a range of development activities that help team members achieve higher performance on the job as well as their desired career progression. The personal development plan is measurable and marries the aspirations of the individual with the direction of the organization.

Now let's move on to the third component of our five-part plan, our new customer-centric structure. We are in the solutions business and our new structure allows us to better deliver on that philosophy by anticipating and proactively addressing the needs of our customers. More than ever before we will team up with customers to create the right combination of products and services to meet their needs.

Our structure is built for agility by empowering the people closest to our customers, markets and technology. Our executive leadership team is now positioned across Canada, demonstrating that TELUS is truly a national company. As we consolidate and enhance our position in Western Canada, we will aggressively pursue market share in Central Canada.

To deliver the solutions our customers are seeking, we have structured ourselves around six market-facing business units. These serve the needs of retail customers including consumers and large businesses, and wholesale customers such as other telecommunications companies.

These business units will be supported by our leading-edge business cpabilities and shared services groups.

Those of you in the audience searching for venture capital will be interested in the TELUS Ventures business unit, which is targeting start-up businesses and emerging technology ventures. We have set aside $100 million to fund innovative, start-up businesses and emerging technology ventures.

Ironically, I am not a proponent of restructuring. Structural change is often the last refuge of a CEO who does not have a more insightful plan for the organization. It tends to avoid the real issues and frequently is brutal in its impact.

Restructuring is expensive, not least in terms of lost momentum and time. Moreover, while you were genuflecting, the market and your competitors are moving forward.

While we were acutely aware of the adverse consequences of restructuring, it was obvious the existing TELUS structure - built on a product-centric model - was antiquated and totally opposed to our chosen strategy of providing customer-based solutions.

To those of you in the audience leading businesses today, when you feel compelled to make structural changes in your organization, the following parameters might help.

One, timely and regular communications is crucial. At TELUS, I instituted a weekly e-mail letter from me to all staff. We beefed up our employee intranet with top stories, breaking news, events of interest and employee roadshows, and we instituted an advanced leadership briefing process.

Two, never break the chain of command. If people do not know who their boss is because you have shuffled the organization, expect to experience real-time performance deterioration.

Three, while ultimately benefiting customers, the outside world should be unaffected by internal changes. Adjustments should be transparent. At its worst, this period should be business as usual for your customers.

In the end, if restructuring does not enhance your competitive advantage, it was wasted effort.

Four, start with the top. Make the necessary changes to the leadership team first. Get a strong, new team in place and engage them in driving the change.

Five, speed is essential. Promote action over perfection. You will make mistakes. Accept it. Neutralize the perfectionists. They are the champions of intransigents and will only slow you down.

Now, let us move on to the fourth component - the one that will make or break a good strategy - people. People have never been more important to the success of TELUS than they are today. We are working in an environment where the demand for talent outstrips supply. It is people who discover the technology solutions that mean competitive advantage for our customers. To attract, retain and develop those scarce resources, you need a culture that nurtures people.

Our future lies in recruiting, training and retaining the best talent available. Our executive leadership team has been designed for optimal strength, diversity and balance. The composition of the leadership team is crucial to transforming the business and implementing the new strategy. It?s not a case of out with the old and in with the new, but it is important to get the right mix.

Today, our executive leadership team is comprised of:

incumbents contributing experience and continuity;
external appointments bringing fresh experience and perspective; and
internal promotions nurturing resident talent within Team TELUS.

We have pulled together what is, in my opinion, a great senior leadership team. But do not take my word for it. Here is what Jeremy Burge of TD Securities says:

"Leadership and depth in management is key and we feel TELUS has both."

The Irish playwright, George Bernard Shaw once said, "People are always blaming their circumstances for what they are, I do not believe in circumstances. The people who get on in this world are the people who get up and look for the circumstances they want, and if they cannot find them, they make them." Team TELUS would have impressed Shaw.

Throughout the last six months, we have continued to demonstrate our eagerness and ability to create our own destiny, despite the difficulties we encountered along the way. We were told that under the circumstances, we would not be able to cut the Clearnet deal in 70 days -- but we did.

We were told that under the circumstances, we would not be able to restructure TELUS to a market-facing structure in 90 days, but we did. We were told that under the circumstances, the new executive team would reflect the past, not the future. But it doesn't.

In each of these instances, members of the TELUS team have taken control of their destiny and have created their own circumstances to deliver the desired result on behalf of the company and its customers.

I know there are naysayers who do not believe an ILEC can make the jump to data and IP, including creating an entrepreneurial culture, but I strongly advise them not to bet against us - given our circumstances.

Now, to the final component of our five-part plan.

If you are not exceedingly anxious about what you have decided not to do, you are not focused enough. In the telecommunications industry, resources are scarce. We need to focus and make the hard choices. Clear focus leaves you with the headroom you need to act quickly and exploit emerging threats and opportunities.

This year at TELUS, our key priorities are as follows:

Our number one priority is developing our Mobility business. We will extend our leadership position in the Canadian wireless market by successfully integrating our eastern and western operations, offering the best wireless solutions for businesses and consumers. Are we making progress? Do not take my word for it.

Let us look at what The Street has to say. Murray Leith of Odlum Brown says, "TELUS is in a position of strength. In our opinion, TELUS is now the most attractive telecom company in Canada, by a wide margin."

Our second priority is Data and IP. We will seize the leadership position in advanced communications services, expanding aggressively our data and Internet capabilities.

Look again at what the financial community has to say. Robert Goff of Credit Suisse First Boston says, "We maintain our original thesis that investors will be rewarded by TELUS' aggressive plans to expand out-of-region into the high growth data, IP sector..."

Our third priority is positioning ourselves in the market as a Growth Company. We will deliver 17 to 19 per cent revenue growth next year, and earnings growth of greater than 13 per cent over the next three years. Nick Strube of Canaccord Capital says, "TELUS is the best-positioned national group. TELUS is the only company that has national capability combined with a national wireless platform and a broad customer base."

Let me wrap up by summarizing the change model at TELUS; by reflecting the lessons you may find useful driving positive change in your companies. Our most recent experience at TELUS shows that successfully leading change is not just about what to do, it is about how to do it.

So, what are the lessons of change? They are:

One, speed is of the essence. Set the pace of change through action. Move boldly. Act quickly. Communicate widely. Execute with passion and precision. If you wait, your strategy will be outdated by the time you announce it. Think your strategy through, but then act with confidence and commitment.

Two, culture is key. The right culture delivers competitive advantage in the New Economy. Your culture has to support your strategy. Your culture must be real and concrete to employees. The management team has to buy into it, communicate it and live it in the decisions they make, and the steps they take.

Three, restructure quickly. If you must reorganize to drive strategy, do it quickly and openly. Tell employees where you are going, what you are doing and the steps in the process. Along the way, consciously work ahead of the rumour mill. Provide timely and pertinent information. Your goal is to tell the story. Do not, by default, let others tell it for you.

Four, remember strategy drives structure, which drives talent. A structure compromised to accommodate incumbents' or personal agendas will rarely work. Design a structure appropriate to your strategy. Then choose or hire the best people for the job. This may mean showing old friends and colleagues the door, which is undeniably hard. But as hard as it might be, it is far better than distorting your management structure and setting everyone up for failure.

Five, make the case for change and position it as urgent. Moving slowly and without effective communications seeds ambiguity and uncertainty. The tendency for employees, when left to form their own conclusions in times of change, is to think the worst. Rather than understand corporate context and what it means to the individual, employees experience dissonance and a lack of motivation. The situation can be costly as top talent start to look around for more appreciative opportunities outside your organization.

While not rocket science, these five lessons are fundamental to changing an organization with the least disruption and the most acceptance from employees, customers and ultimately shareholders.

As I said when I began, we are transforming our company into a high-growth, high-performance dynamo. Will we be successful? There is no doubt in my mind we will because nothing succeeds like the will to succeed.

Last year at TELUS we were concerned with defining our strategy and selecting our leaders. This year, you will benefit from the execution of our strategy. This year, we will unleash the power of the Internet to deliver the best solutions to you at home, at work and on the move.

Does this sound challenging? You bet. Mission Impossible? No way!

It's nothing more than a brisk stroll in the park for the best damn telecommunications company in North America.