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the future is friendly

2005 second quarter review & conference call August 5, 2005. the future is friendly. forward-looking statements.

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the future is friendly

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  1. 2005 second quarter review & conference call August 5, 2005 the future is friendly

  2. forward-looking statements This presentation and answers to questions contain forward-looking statements about expected future events including competition, labour relations including duration and impact of current strike, and financial and operating results that are subject to risks and uncertainties. TELUS’ actual results, performance, or achievement could differ materially from those expressed or implied by such statements. For additional information on potential risk factors, see TELUS’ 2004 Annual Information Form, and other filings with securities commissions in Canada and the United States. TELUS disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

  3. 2005 second quarter review & conference call August 5, 2005 Darren Entwistle member of the TELUS team the future is friendly

  4. Q2 2005 highlights • TELUS consolidated results • Revenue 8% • EBITDA 10% • EBIT 24% • Net Income 10% • Net Income normalized 60%     

  5. Q2 2005 highlights • TELUS Communications industry-leading performance • TELUS Mobility achieves record performance • Positive update to 2005 wireless net additions • maintaining consolidated annual guidance

  6. Labour relations update • TELUS measures* escalated pressure for settlement • commenced implementing offer July 22 • TWU responded with multiple legal challenges, work to rule and rotating strikes • called full scale strike on July 21 • TWU has not conducted votes on offer or this strike • 2005 legal decisions* have upheld TELUS actions and largely dismissed TWU challenges *see Appendices for chronological summary

  7. Labour relations update • Comprehensive contingency plans activated to minimize customer impacts • meeting or exceeding call centre standards and ahead of expectations on field service • Significant and increasing numbers of Alberta union members coming to work • BC union members not being allowed to cross • BC and AB court injunctions in place to allow facilities access and reduce intimidation

  8. TELUS’ Comprehensive Offer • Top quality Offer for compensation, benefits and employment security • Lump sum and past payments, variable pay and certain benefit changes deferred until ratification • Approx. $200M initial payment or avg. $16K per employee • Cost of Offer fully accrued • Provides flexibility TELUS needs to compete on an even playing field with competitors

  9. 2005 second quarter review & conference call August 5, 2005 George Cope President & CEO, TELUS Mobility

  10. Q2-04 • Q2-05 • 12ME • Population • 31.8M • 32.0M • Net subscriber additions • 1.5M • 1.7M • Cdn wireless market • 13.9M • 15.6M • Penetration • 43.8% • 48.9% • Penetration gain • 4.4% • 5.1% industry subscriber growth Source: Company reports, CWTA. Includes subscriber results for Bell Wireless Alliance, Rogers Wireless p.f. Microcell, and TELUS Mobility.

  11. industry subscriber & EBITDA growth 12ME Q2-05 net additions 12ME Q2-05 EBITDA growth TELUS Mobility TELUS Mobility 32% 42% 1.7M $814M Source: Company reports. EBITDA is sum of reported EBITDA for BCE, Rogers Wireless p.f. Microcell, and TELUS Mobility.

  12. Source: Company reports industry ARPU’s Q2-04 $61 $59 Q2-05 $51 $50 $50 $48 TELUS Mobility Rogers Wireless1 BCE Wireless • 1 Pro forma Microcell

  13. profitable subscriber growth • TELUS • Rogers • BCE • Q2-05 • 1.37% • Blended churn • 1.91% • 1.6% • $342 • COA per gross addition • $374 • $401 • $4,500 • Lifetime revenue • $2,700 • $3,100 • 8% • COA / Lifetime revenue • 14% • 13%

  14. wireless cash flow yield • Q2-05 • TELUS • Other Cdn • US avg. • EBITDA margin (network rev.)1 • 49% • 42% • 35% • Capex intensity (total rev.) • 14% • 16% • 20% • Cash flow yield (total rev.) • 31% • 25% • 12% 1 TELUS Mobility EBITDA margin of 45.4% based on total revenue Source: Company reports. Merrill Lynch for US averages

  15. 2005 second quarter review & conference call August 5, 2005 Robert McFarlane EVP & Chief Financial Officer

  16. Mobility segment financial results • Q2-04 • Q2-05 • Change ($M) • Revenue • 677 • 802 •  • 19% • EBITDA1 • 286 • 367 •  • 28% • Capex • 78 • 115 •  • 46% • Cash Flow (EBITDA less capex) • 208 • 252 •  • 21% 1 Earnings before interest, taxes, depreciation and amortization

  17. Mobility segment profitable growth • Q2-04 • Q2-05 • Change • Net additions • 114K • 131K •  • 15% • ARPU • $59 • $61 •  • 3.4% • Blended churn • 1.32% • 1.37% •  • 5 bps • COA per gross add • $381 • $342 •  • 10%

  18. Mobility segment subscriber results net additions total wireless subscribers prepaid 4.1 M 131K postpaid 114K 0.7 M prepaid 18% postpaid 82% 3.4 M Q2-04 Q2-05

  19. Mobility segment wireless net additions 211 (000s) 190 131 114 Q2-04 Q2-05 YTD Q2-04 YTD Q2-05

  20. Communications segment revenue profile • Q2-04 • Q2-05 • Change ($M) • Voice – Local • 544 • 543 •  • 0.2% • Voice – Long Distance • 229 • 229 • - • Data • 346 • 380 •  • 9.9% • Other • 71 • 65 •  • 7.9% •  Total Revenue $1,189 $1,217 • 2.3%

  21. Communications segment financial results • Q2-04 • Q2-05 • Change  • Revenue • $1.19B • $1.22B • 2.3% • EBITDA1 • $499M • $499M • -  • Capex • $268M • $294M • 9.8% • Cash Flow (EBITDA less capex) • $231M • $205M •  • 11% 1 Earnings before interest, taxes, depreciation and amortization

  22. Communications segment non-ILEC revenue & EBITDA revenue EBITDA ($M) 156 131 3.5 (14) Q2-04 Q2-05 Q2-05 Q2-04

  23. Communications segment high-speed Internet subscriber growth high-speed Internet net additions total Internet subscribers 990K 261K 19K 17K dial-up 26% high-speed 74% 729K Q2-04 Q2-05

  24. Communications segment network access line results % of network access lines lost, YoY Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 -1.5% -1.1% -1.2% -1.3% -1.4% -1.8%

  25. TELUS consolidated financial results • Q2-05 • Change • Q2-04 • Revenue • $1.87B • $2.02B •  • 8.2% • EBITDA • $785M • $865M •  • 10% • EPS1 • $0.48 • $0.53 •  • 10% •  • $346M • 18% • Capex • $409M 1 Including favourable impacts for tax settlements on EPS of $0.13 in Q2-04 & nil in Q2-05

  26. TELUS consolidated capital intensity Mobility Communications Consolidated 22% 20% 18% 17% 11% 10% YTD Q2-04 YTD Q2-05 YTD Q2-04 YTD Q2-05 YTD Q2-04 YTD Q2-05

  27. convertible debentures & shares outstanding • $132M or 88% of $150M convertible debentures converted into 3.3M non-voting shares prior to redemption • Remaining debentures redeemed for $17.9M • Difference between redemption value & book value treated as expense, a pre-tax charge of approx $0.9M • Options & warrant exercises resulted in 2.2M share issue • repurchased 6.5M shares under normal course issuer bid (NCIB)

  28. share buy back update

  29. TELUS consolidated EPS continuity • Q2-04 • Q2-05 • Change • $0.53 • EPS reported • $0.48 •  • 10% • Provision for BCTel bond redemption litigation, & convertible deb. redemption expense • - • $0.03 • Income tax settlement • $(0.13) • - •  • $0.56 • 60% • EPS normalized • $0.35

  30. TELUS consolidated free cash flow • Q2-04 • Q2-05 • ($M) • EBITDA • $785 • $865 • Capex • (346) • (409) • Net Cash Interest • (286) • (275) • Cash Restructuring Payments (in excess of expense) • (9) • (1) • Non-Cash Share Based Compensation • 6 • 7 • Net Cash Tax Recovery • 81 • 20 • Free Cash Flow • $230 • $208 • Share Issuance (non-public) • 17 • 56 • Cash Dividends • (48) • (144) • Working Capital/Other • (86) • 61 • Cash avail. for debt reduction & share redemp. • $112 • $181 • Purchase of shares for cancellation (NCIB) • - • (272) • Redemption of Preferred Shares • (36) • - • Funds for redemption of debt • 8 • (15) • Net change in cash • $84 • $(106)

  31. 2005 consolidated guidance • previous 2005 guidance1 • updated 2005 guidance2 • Revenue • $7.950 to 8.050B • EBITDA3 • $3.250 to 3.325B • EPS4 • $1.85 to 2.05 • no change • Capex • approx. $1.4B • Free Cash Flow • $1.25 to 1.35B 1 Provided on May 4, 2005 2 Updated August 5, 2005 3 Including ~$100M in restructuring & workforce reduction costs 4 Including favourable impacts for tax settlements of $0.15 in Q1-05

  32. questions? 2005 second quarter review investor relations 1-800-667-4871 TELUS.com ir@telus.com

  33. AppendicesSummaries: Chronology of collective bargaining events Chronology of legal decisions Definitions

  34. Labour Relations – summary of events • Apr 13 - Company tabled Offer to the TWU • Apr 18 – Company declared negotiations to be at an impasse and delivered first notice of lockout to TWU • Apr 21 - terms and conditions of the Offer communicated to bargaining unit team members • Apr 25 – Company began implementing numerous soft lockout measures • May to July – TELUS continued escalating lockout measures; TWU responded with overtime ban and work-to-rule campaign • Jun 14 – TELUS provided addendum to offer, which provided additional benefits • Jun 22 – TWU tabled its counter proposal

  35. Labour Relations - summary of events (cont’d) • Jun 24 – TELUS rejected counter proposal • July – TWU began rotating strike activity (“study sessions”) to which Company normally imposed short lockouts to participants • Jul 12 – TELUS informed TWU, it would commence implementation of its comprehensive offer on July 22 - TWU further escalated rotating strike activity • Jul 21 – TWU initiated full scale strike and Company implemented contingency plan • Jul 22 – Phase I of Company’s Offer implemented

  36. Labour relations - 2005 legal ruling summary • Feb 2 - CIRB ruled in TELUS favour and overturned its year old ruling ordering TELUS into binding arbitration. • Apr 22 - TWU allegations challenging TELUS’ ability to implement lockout measures dismissed by Federal Court of Appeal (FCA) • Apr 24 - TWU application at CIRB seeking to prevent TELUS from implementing its lockout measures on Apr 25 dismissed • July 21 – CIRB dismissed TWU allegations regarding improper lockout and company communications • July 23 – BC Court grants sweeping injunction against TWU impeding access to Company and customer locations • July 25 – TWU loses appeal to FCA to overturn Feb. CIRB ruling that returned both sides into collective bargaining process • July 27 – AB Court grants TELUS injunction on posting website images and TWU impeding access to Company and customer locations • July 29 – BC Court grants TELUS injunction on posting website images, TWU intimidation, and blocking entrances by pickets

  37. appendix definitions • EBITDA: Earnings, after restructuring and workforce reduction costs, before interest, taxes, depreciation and amortization • Capital intensity: capex divided by total revenue • Cash flow: EBITDA less capex • Free Cash Flow: EBITDA, adding Restructuring and workforce reduction costs, cash interest received and excess of share compensation expense over share compensation payments, subtracting cash interest paid, cash taxes, capital expenditures, and cash restructuring payments

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