TELUS Reports First Quarter 2011 Results

Strong 44% wireless data growth drives 3.7% wireless ARPU increase leading to  
6.5% increase in consolidated revenue and 19% growth in earnings
Quarterly dividend increase of 4.8% to 55 cents per share
Announcing guidance of semi-annual dividend increases of circa 10% annually to 2013

VANCOUVER, May 5 /PRNewswire-FirstCall/ - TELUS Corporation reported first quarter 2011 revenue of $2.5 billion, an increase of 6.5 per cent. This increase was generated by 11 per cent growth in wireless revenue and nearly two per cent growth in wireline revenues, both driven by strong data revenue growth.

The company added 52,000 new postpaid wireless subscribers, as smartphone loading continued to accelerate, while prepaid subscribers declined 20,000. As a result, wireless data revenue surged by 44 per cent causing wireless average revenue per unit (ARPU) growth of 3.7 per cent, the second consecutive quarter of year-over-year growth and the highest since mid-2006. In wireline, the company added 44,000 TV customers and 16,000 new high speed Internet subscribers due to the bundling success of the Optik brand and services, which helped generate wireline data service and equipment revenue growth of 11 per cent.

Consolidated first quarter earnings before interest, taxes, depreciation and amortization (EBITDA) of $986 million increased by 4.6 per cent due to the revenue growth, offset in part by costs to acquire and retain wireless customers and support Optik TV subscriber growth.

Reported net income and earnings per share (EPS) for the first quarter were $328 million and $1.01, representing year-over-year increases of 20 and 19 per cent, respectively. When excluding the four cent per share after-tax gain from the acquisition of control of a contact centre business, EPS increased by 14 per cent. EPS growth was higher than EBITDA growth due to lower depreciation and financing costs this quarter as compared to the year ago period.

Free cash flow this quarter decreased by $85 million due to the voluntary $200 million contribution to pension plans and higher capital expenditures, partially offset by lower cash taxes in 2011 and higher EBITDA.

"These quarterly results demonstrate the success of TELUS' strategy for driving data growth in our wireless and wireline businesses and providing a leading range of services and products for consumers and businesses alike," said Darren Entwistle, TELUS President and CEO. "Underpinned by our strategic network investments and TELUS' continued momentum in the market, we are generating accelerating sales of smartphones and continued strong Optik TV and High Speed Internet sales. This momentum drove 44 per cent revenue growth in wireless data and 11 per cent growth in wireline data."

"Based on our positive financial outlook and aligned with our dividend growth model, TELUS is pleased to increase the quarterly dividend by 2.5 cents or almost five per cent to 55 cents, which is the third increase in the past 12 months", noted Mr. Entwistle. "This reflects our continued confidence in our prospects for earnings and cash flow growth in 2011 and beyond."

"I am also pleased to report that after conferring with the Board, we are providing shareholders with additional clarity on our intentions regarding TELUS' dividend growth model," said Darren Entwistle. "Specifically, TELUS is targeting two dividend increases per year to 2013 in the range of circa 10 per cent annually.  Notwithstanding this, dividend decisions will continue to be subject to the Board's assessment and determination of the Company's financial condition and outlook on a quarterly basis."

"TELUS' strong operational performance, declining interest expense and robust financial position allows us to fund ongoing strategic capital investments, the dividend increase and in the first quarter a voluntary $200 million pension contribution," said Robert McFarlane, TELUS Executive Vice-President and CFO. "We continue to consider the interests of both equity and debt holders by adhering to our long-term financial policies including our dividend payout ratio guideline and debt leverage policy."

The consolidated and segmented annual guidance for 2011 has been reaffirmed. See section 9 of the first quarter 2011 MD&A.

OPERATING HIGHLIGHTS 

TELUS wireless

• External wireless revenues increased by $131 million or 11% to $1.31 billion in the first quarter of 2011, compared to the same period a year ago, driven by the combined impact of a 6.5% increase in the subscriber base and higher revenue per customer.
• Data revenue growth accelerated this quarter, increasing by $112 million or 44% to $366 million, while data ARPU increased by $4.57 or 35% to $17.71. These increases were due to accelerated adoption of smartphones, growth of mobile Internet devices and tablets and the use of related data plans and applications, as well as higher roaming revenues.
• Blended ARPU per month increased by 3.7% to $57.89. This is the second consecutive quarter of year-over-year growth in quarterly ARPU and the highest since mid-2006. Data ARPU growth of 35% exceeded the voice ARPU decline of 5.8%.
• Postpaid subscriber growth this quarter of 52,000 was offset by 20,000 prepaid losses.  Net subscriber additions of 32,000 declined by 37% from a year ago, reflecting the loss of a federal wireless service contract to a competitor (approximately 16,000 postpaid subscribers in the quarter), as well as increased competitive marketing intensity from new entrants and new incumbent brands not in, or fully in, the market one year ago.
• Smartphones represented 54% of postpaid gross additions in the first quarter, as compared to 33% in the same period last year. Smartphone subscribers now represent 38% of total postpaid subscribers compared to 22% a year ago.
• Cost of acquisition per gross addition increased year over year by 8% to $348, reflecting the higher per-unit subsidy from more smartphones sales.
• Cost of retention of $147 million increased by 20%, primarily reflecting higher retention volumes and equipment subsidy costs from increased migrations to higher cost smartphones, partly offset by revenues from the recently launched Clear and Simple Device Upgrade program.
• Blended monthly subscriber churn increased by 15 basis points to 1.70%, reflecting the loss of the federal contract, an increased number of competitors as compared a year ago and more price-based promotions in the market.
• Wireless EBITDA of $551 million increased by $56 million or 11% due to 6.5% subscriber growth and increased network revenues, while maintaining stable EBITDA margins of 41.8%.
• Simple cash flow (EBITDA less capital expenditures) increased by $39 million to $475 million in the quarter due to strong EBITDA growth partially offset by increased capital spending.

TELUS wireline

• External wireline revenues increased by $23 million or 2% to $1.22 billion in the first quarter of 2011, when compared with the same period in 2010, driven by growth in data revenues, as well as a non-cash gain from the call centre acquisition partially offsetting continued declines in traditional voice local and long-distance revenues.
• Data revenues increased by $61 million or 11%, reflecting growth in Internet and enhanced data services, strong TELUS TV growth, increased data equipment sales and rentals, and two months of consolidated revenues from Transactel.
• TELUS TV net additions of 44,000 increased by 52% over the same period last year, due to the ongoing success of the Optik TV brand, increased installation capabilities, enhanced features, and expanded service coverage. The TELUS TV subscriber base of 358,000 is up 80% over last year.
• Optik High Speed Internet net additions of 16,000 increased by 13,000 from a year ago due to the pull through effect of Optik TV sales, as well as continued broadband service expansion.
• Total network access lines (NALs) declined 5.1% to 3.7 million from a year ago due to competition and wireless substitution. Residential NAL losses of 33,000 were 17,000 lower than a year ago, reflecting the pull through effect of bundling offers with Optik services. Business NALs increased by 2,000 reflecting increased wholesale lines, partially offset by competition in the small and medium business market.
• Wireline EBITDA of $435 million decreased by $13 million or 2.9% due to increased costs associated with the expansion of Optik services and external labour costs to support a larger customer base, while wireline EBITDA last year included one-time benefits totaling $10 million. EBITDA adjusted for the $16 million non-cash gain on Transactel decreased by 6.5% to $419 million.
• Adjusted simple cash flow decreased by $110 million to $86 million due to an $81 million increase in capital spending and lower adjusted EBITDA.

CORPORATE AND BUSINESS DEVELOPMENTS

TELUS and TWU reach agreement in principle

In April, TELUS and the Telecommunications Workers Union (TWU) agreed to the terms of a tentative collective agreement, covering approximately 11,200 active TELUS employees nationally. The agreement is to be presented to the TWU membership for a ratification vote, with a recommendation of acceptance by the TWU. The ratification vote is expected to be complete in June 2011. The terms of the previous collective agreement remain in effect until the new terms have been ratified.

Highlights of the five-year tentative agreement to December 31, 2015, include wage increases of 1.5 per cent on July 1, 2011, 2.0 per cent on July 1, 2012, 2013 and 2014, and 2.5 per cent on July 1, 2015. On ratification, lump sum payments of $400 for full-time employees and $200 for part-time employees are payable. A potential cost of living adjustment for inflation of up to 1% could be payable on January 1, 2015.

TELUS investing in next generation wireless networks

Following a network enhancement, in March 2011 TELUS began offering services on dual-cell technology (DC-HSPA+) on its national 4G wireless HSPA+ network in select cities across Canada. DC-HSPA+ enables manufacturer-rated peak data download speeds of up to 42 megabits per second (Mbps)*. Dual-cell capable devices available to TELUS' customers include the Sierra Wireless AirCard 319U 4G Internet Key and the Huawei E372 Mobile Internet Key. TELUS' investment in HSPA+ technologies have been made to provide an optimal transition to long-term evolution (LTE) technology.

In April, TELUS announced plans to launch its next generation wireless 4G+ LTE network in 2012. LTE technology supports manufacturer-rated peak download speeds of up to 150 Mbps and upload speeds of up to 70 Mbps*. This initiative is the latest technology evolution in the wireless network upgrade path made possible by the launch in 2009 of Canada's fastest** coast-to-coast HSPA+ wireless network, that today covers more than 95 per cent of the Canadian population. Construction on TELUS' next generation, 4G+ LTE network will begin in the latter half of 2011 in major urban markets. TELUS' LTE network will operate on the Advanced Wireless Services (AWS) spectrum that TELUS purchased for $882 million in Industry Canada's spectrum auction in 2008.

The launch of 4G+ over AWS spectrum is the first stage in the upgrade to LTE. While services expected to be offered in 2012 will begin the evolution to LTE in major urban centres, the potential rollout into rural Canada will be dependent on TELUS having an equitable opportunity to bid and acquire 700 MHZ spectrum in the Industry Canada auction expected in late 2012.

A LTE rollout across Canada would allow TELUS to play a leading role in bridging the digital divide between urban and rural Canada such that Canadians can benefit from broadband wireless LTE technology. TELUS believes the magnitude of this rural build can only be realized with a wireless provider of TELUS' scale, operational capabilities and geographic reach and excellent track record of delivering successive technology platforms to Canadians throughout the country.

The investment in the 4G+ LTE urban build is consistent with TELUS' consolidated capital expenditure targets for 2011.

TELUS expands Optik TV footprint, introduces new channels and a Facebook application

TELUS continued its expansion of Optik TV in the quarter, adding 44,000 new customers, introducing the service in Quebec, adding new South Asian channels, and launching new services including providing customers' access to Facebook on their TVs. Facebook on Optik TV is a first in Canada, enabling customers to view Facebook photographs in large format on their screen, share what they are watching on their Facebook wall, and browse through updates while watching their favourite TV shows. TELUS added 11 new South Asian channels, expanding the Optik TV South Asian line-up to 19 channels, which is the largest selection available from any service provider in Western Canada. These channels offer programming in languages including Hindi, Punjabi, Urdu, Tamil, and English.

In the quarter, TELUS announced it is hiring 250 new customer care agents and technicians in Calgary, 100 new customer care agents in Prince George, and 70 new team members in Quebec. These positions will support growth services including the expansion of Optik TV.

TELUS Garden future real estate development in Vancouver

In March, TELUS announced that it is partnering with Westbank, a leading developer, and engaged Henriquez Partners, as the architect, in a residential, retail and commercial real estate redevelopment project in downtown Vancouver, called TELUS Garden, which will transform a city block that includes the Company's current national headquarters. The commercial and residential buildings will be built to Leadership in Energy and Environmental Design (LEED) Platinum and Gold standards, respectively, and incorporate green initiatives that are expected to reduce energy consumption.

Pending zoning approval and finalization of agreements, construction is expected to begin in the fall of 2011 and be completed in 2015. TELUS plans to invest in the project predominantly through contribution of its existing real estate holdings on this city block, coupled with project debt. The project includes assembling third party real estate on the city block with TELUS-owned real estate and building on them a residential tower, an office tower and renovating TELUS' current eight-storey headquarters into leasable office and retail space. TELUS plans to lease space in the new office tower. This project is an opportunity for TELUS to monetize a portion of its real estate holdings. The Company does not plan on maintaining an ownership position in the residential tower aside from some retail space after the construction and sale of condominium units.

TELUS introduces Canada's Fastest Smartphone, Samsung Galaxy S Fascinate 4G

TELUS launched many highly anticipated devices in the first part of 2011, including Canada's first 4G smartphone, the Samsung Galaxy S Fascinate 4G with manufacturer-rated peak data download speeds of up to 21 megabits per second (Mbps)*. The Samsung Galaxy S Fascinate 4G is available only at TELUS and has a manufacturer rated peak download speed that is approximately 50 per cent faster than the manufacturer rated speed of any other smartphone in Canada, allowing users to download, browse and stream video faster than ever before.

Other recently launched devices include the HTC HD Desire, the rugged Motorola Defy with MOTOBLUR, the Samsung Nexus S, the Motorola Xoom tablet, and in April Research in Motion's Playbook tablet.

TELUS' Health Vault expands its reach, partnering with electronic health record providers

TELUS announced another milestone in its commitment to help evolve healthcare in Canada, signing agreements with three leading electronic medical record (EMR) providers in British Columbia, Alberta, Ontario and Québec to connect their solutions to the TELUS health space platform. With the integration of EMRs, patients and service providers are able to securely access and share health information electronically over any Internet connection from any location and at any time.

TELUS also launched bant, an iPhone based application to help adolescents improve diabetes self-management by capturing, analyzing, and sharing their blood glucose data. The new app is being tested by teenagers at The Hospital for Sick Children Diabetes Clinic in Toronto. The pilot program is assessing the impact that social networking and rewards that encourage and reinforce self-management behaviours for young teens as they become more independent in managing their diabetes.

TELUS achieves milestone in providing credit card security for customers

TELUS recently achieved a key milestone in keeping its customers' credit card information secure. In March, the Payment Card Industry (PCI), an association to which credit card companies Visa, MasterCard and American Express belong, certified TELUS for having met or exceeded all of the control standards specified in the association's global best practices guidelines. Companies such as TELUS, who process a high volume of credit card transactions, are required to meet these rigorous standards.

This achievement concludes a five-year cross-company initiative to systematically assess and enhance internal controls and data security over all aspects of our customer credit card processing and data. More than 100 applications were upgraded to meet stringent standards recognized as global best practices.

TELUS CEO Darren Entwistle receives Canadian Business Leader Award

TELUS President and CEO Darren Entwistle received the University of Alberta's 30^th Canadian Business Leader Award (CBLA) in March. Since 1982, recipients of the CBLA have been leaders, entrepreneurs, and pioneers of progress in the business world. They are recognized for their outstanding achievements and business acumen, and are selected by the 34-member international Business Advisory Council of the Alberta School of Business at the University of Alberta.

TELUS CFO Robert McFarlane recognized with Kathleen Beaumont Hill Award

Robert McFarlane, TELUS' chief financial officer, was recognized in April with the 2011 Kathleen Beaumont Hill Award from Queen's University for his outstanding service and advocacy that have contributed to the country's continued prosperity and growth in business, education and community development. This award celebrates the dedication and generosity of Queen's alumna Kathleen (Beaumont) Hill to her alma mater and community for more than 50 years. This award was created in 2009 by Queen's University and is presented annually to the individual who best exemplifies her outstanding service, passionate advocacy, dedicated support, and contributions to the betterment of Queen's University and Canada.

TELUS and Alberta School of Business establish Westbury Family Awards in Philanthropy

In March, TELUS and the Alberta School of Business announced the establishment of the Westbury Family Awards in Philanthropy. The award is named in honour of Dr. Bob and Marilyn Westbury and their family, recognizing their contribution to encouraging and supporting philanthropy in building communities in Edmonton and across Canada. TELUS and members of the Edmonton business community donated $150,000 to create the award.

Two Westbury Family Awards in Philanthropy will be distributed each year. The first award will be bestowed upon an undergraduate in their third or fourth year at the Alberta School of Business at the University of Alberta who has a demonstrated interest in activities that help build their communities through philanthropic means. The second award will be granted to an individual from the non-profit sector who is returning to school to acquire business management skills. This award will be open to both full and part time students of the Alberta School of Business Master of Business Administration (MBA) and Executive MBA programs.

TELUS named one of the Best Employers for New Canadians

In March, TELUS was named one of the Best Employers for New Canadians in an annual competition that recognizes the nation's leaders in assisting recent immigrants make the transition to a new workplace and life in Canada. This year's list paid tribute to 40 organizations.  Launched in 2007, the Best Employers for New Canadians competition is managed by the editors of Canada's Top 100 Employers in partnership with ALLIES, a joint initiative of The Maytree Foundation and the J.W. McConnell Family Foundation.

TELUS introduces tenth Community Board in Quebec City

TELUS created its tenth TELUS Community Board in Quebec City, which is managing an annual budget of $400,000 to support local charitable projects that help local grassroots charities and non-profit organizations. The Community Board will be chaired by Marc Coulombe, president and director of Alex Coulombe Ltd. and a well-known Quebec City philanthropist. Other influential business and community leaders on the board include Jacques Tanguay, vice-president and CEO of Ameublement Tanguay, Denis Brière, rector of Université Laval, and Pierre Harvey, Olympic medallist and engineer with Services Precicad.

Since the first TELUS Community Board was launched in 2005, these innovative boards have allocated $25 million to local charities and non-profit organizations and supported 1,800 community projects across Canada.  The other boards are in Victoria, Vancouver, Edmonton, Calgary, Toronto, Ottawa, Montreal, Rimouski and Atlantic Canada.

TELUS supports local programs and charities through Optik TV and smartphone sales

In select markets across Canada, TELUS is donating $100 towards a local charity on behalf of every customer who signs up for Optik TV. Local charities being supported include the Rotary Park's new family splash park in Whitecourt, Alberta, the David Foster Foundation in Victoria, B.C. and the expansion of Kelowna General Hospital in Kelowna.

In addition, for a limited time, TELUS customers can support worthy causes when they upgrade to a new smartphone from TELUS in select markets. Charities being supported with donations on behalf of new customers include $100 to Edmonton's Campaign for Prostate Health; $25 to the Saskatchewan Cancer Agency to support Saskatchewan's children and youth in their fight against cancer; and $25 to CancerCare Manitoba for the diagnosis and treatment of cancer in children. For a second year in a row, TELUS will support Opération Enfant Soleil, donating $25 for every wireless device or Internet key sold in Quebec between March 15 and May 15. The money raised will support development of pediatric care for children in Quebec.

TELUS and its team members support relief efforts in Japan

When disaster struck in Japan on March 11, TELUS immediately offered its support towards the relief efforts. TELUS offered customers free long distance calls to Japan until April 30 on their wireless devices and home phones. TELUS also made TV Japan available on a free preview channel for TELUS Optik TV customers, so they could stay up-to-date on news and information from Japan. Additionally, TELUS and its team members are donating $100,000 to the Red Cross, Salvation Army and UNICEF to assist in the earthquake relief efforts in Japan. TELUS will also match funds raised by its own team members in Canada.

TELUS customers can also be a part of the relief efforts and donate funds through text to donate on their mobile devices:

• text "QUAKE" to 45678 to donate $10 to The Salvation Army in Canada
• text "ASIA" to 30333 to donate $5 to The Canadian Red Cross Society
• text "GIVE" to 45678 to donate $5 to UNICEF

TELUS has a history of stepping up to help when disasters strike. Since 2000, TELUS has donated more than $1 million to Canadian registered charities in support of humanitarian relief efforts in Haiti, Chile, Philippines, Newfoundland, and Kelowna, British Columbia.

Dividend Declaration and announcement on TELUS dividend growth model to 2013

The Board of Directors has declared a quarterly dividend of 55 cents ($0.55) Canadian per share on the issued and outstanding Common shares and 55 cents ($0.55) Canadian per share on the issued and outstanding Non-Voting shares of the Company payable on July 4, 2011 to holders of record at the close of business on June 10, 2011.

This quarterly dividend represents a 2.5 cent or 4.8 per cent increase from the $0.525 quarterly dividends paid on January 4 and April 1, 2011 and a five cent or 10 per cent increase from the fifty cents paid a year earlier on July 2, 2010.

TELUS is providing shareholders with additional clarity on its intentions regarding TELUS' dividend growth model. Specifically, the Company plans to continue with two dividend increases per year to 2013, normally declared in May and November, and expects the increase to be in the range of circa 10 per cent annually. Notwithstanding this, dividend decisions will continue to be subject to the Board's assessment and determination of the Company's financial situation and outlook on a quarterly basis.

* Speed may vary due to channel size, the device being used, network congestion, distance from the cell site, local conditions and other factors.

** Based on TELUS' tests of data throughput speeds in large Canadian urban centres available from national HSPA+ service providers. Internet access speed provided by the network operator may vary due to the device being used, network congestion, distance from the cell site, local conditions and other factors. Speed on the Internet is beyond the wireless network operator's control and may vary with your configuration, internet traffic, website server and management policies, and other factors.

Access to Quarterly results information

Interested investors, the media and others may review this quarterly earnings news release, management's discussion and analysis, quarterly results slides, audio and transcript of investor webcast call, supplementary financial information and our full 2010 annual report on our website at telus.com/investors.

Full quarterly earnings release available at: http://www.newswire.ca/en/releases/archive/May2011/05/c8509.html

TELUS first quarter conference call is scheduled for May 5, 2011 at 3:00 pm ET and will feature a presentation about our first quarter results followed by a question and answer period with analysts. Interested parties can access the webcast at: telus.com/investors. Also, a recording will be available on May 5 until May 15, 2011 at: telus.com/investors or by telephone (1-403-699-1055 or 1-877-353-9587, reservation no. 541096#). A transcript will be posted on the website within several business days.

About TELUS

TELUS (TSX: T, T.A; NYSE: TU) is a leading national telecommunications company in Canada, with $9.9 billion of annual revenue and 12.3 million customer connections including 7 million wireless subscribers, 3.7 million wireline network access lines and 1.2 million Internet subscribers and more than 350,000 TELUS TV customers. Led since 2000 by President and CEO, Darren Entwistle, TELUS provides a wide range of communications products and services including data, Internet protocol (IP), voice, entertainment and video.

In support of our philosophy to give where we live, TELUS, our team members and retirees will, by year-end 2011, have contributed $245 million to charitable and not-for-profit organizations and volunteered 4.1 million hours of service to local communities since 2000. Ten TELUS Community Boards across Canada lead TELUS' local philanthropic initiatives. TELUS was honoured to be named the most outstanding philanthropic corporation globally for 2010 by the Association of Fundraising Professionals, becoming the first Canadian company to receive this prestigious international recognition.

For more information about TELUS, please visit telus.com.

SOURCE TELUS Corporation

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