TELUS Reports Fourth Quarter 2011 Results

Strong wireless and wireline data growth generates earnings and cash flow growth
TELUS surpasses half a million TV subscribers milestone

VANCOUVER, Feb. 10, 2012 /PRNewswire/ - TELUS Corporation reported fourth quarter 2011 revenue of $2.7 billion, an increase of more than five per cent over the same period last year. The increase was generated by 6.5 per cent growth in wireless revenue and four per cent growth in wireline revenue, both driven by strong data growth.

The company closed the year with strong subscriber results across all major product lines. TELUS added 148,000 postpaid wireless customers in the fourth quarter as smartphone adoption continued to accelerate, causing wireless data revenue to increase by 43 per cent. This increase more than offset declining wireless voice revenues, resulting in wireless average revenue per unit (ARPU) growth of one per cent - the fifth consecutive quarter of year-over-year growth. In the wireline segment, the Company added 56,000 TV customers to bring its total subscriber base to 509,000. When combined with attracting 24,000 new high-speed Internet subscribers in the quarter, the Optik TV additions helped drive wireline data revenue growth of 15 per cent.

Consolidated fourth quarter earnings before interest, taxes, depreciation and amortization (EBITDA) of $874 million increased by four per cent due to revenue growth being offset in part by higher costs to acquire and retain wireless customers and to support customer growth in Optik TV and Internet services. Net income and earnings per share (EPS) for the fourth quarter were $237 million and $0.76, representing year-over-year increases of five and almost nine per cent, respectively.  

Free cash flow this quarter of $204 million was higher by $89 million or 77 per cent due primarily to lower capital expenditures, lower interest payments, and higher EBITDA.

FINANCIAL HIGHLIGHTS

In 2011, total customer connections increased by 475,000 (378,000 in 2010) to more than 12.7 million from continued growth in wireless subscribers including a 107,000 increase in total wireline customers. This represents the first annual increase in total wireline customers since 2004, a notable achievement reflecting success of TELUS' strategic investments in its broadband network.

Darren Entwistle, TELUS President and CEO said, "TELUS' fourth quarter and full year 2011 results reflect the success of our strategy of investing in our broadband technology and client experience across our wireless, TV and high-speed Internet services. As a result of this strategy, we substantially increased new customer connections in 2011 by 26 per cent to 475,000 additions. This generated excellent annual revenue and earnings growth, as we surpassed the $10 billion revenue milestone and expanded net income by 15.5 per cent to $1.2 billion. Moreover, our annual free cash flow of almost $1 billion supports our forward looking dividend growth model, which provided shareholders with a 10.5 per cent dividend increase in 2011."

"Our launch today of a 4G Long Term Evolution (LTE) network and service in major urban markets right across Canada demonstrates our ongoing commitment to provide the best wireless experience to TELUS customers," added Mr. Entwistle. "We have launched a well-tested network and three next generation devices that customers would expect - a Samsung LTE tablet, an LG LTE smartphone and a Novatel LTE mobile Internet key. We look forward to introducing more devices and expanding our 4G LTE network coverage to reach more than 25 million Canadians by the end of 2012."

Robert McFarlane, TELUS Executive Vice-President and CFO said, "TELUS' 2011 annual revenue and EBITDA increased by six and nearly four per cent, respectively. These results were generated by our strong growth in both wireless and wireline data revenues. The revenue and earnings reported today are consistent with our latest guidance issued in December. Notably, we met seven of the eight 2011 annual targets we initially set out more than a year ago."

Mr. McFarlane added, "Given our healthy financial position, we funded a $100 million discretionary pension contribution in January 2012 to maintain a strong pension funding position that is among the best in corporate Canada."

The 2012 consolidated and segmented targets announced in mid-December have been reaffirmed.

OPERATING HIGHLIGHTS 

TELUS wireless

• External wireless revenues increased by $87 million or 6.5 per cent to $1.42 billion in the fourth quarter of 2011, compared to the same period a year ago. This growth was driven by an increased subscriber base and higher average revenue per customer driven by data.
• Data revenue increased by $140 million or 43 per cent to $466 million this quarter. Data ARPU increased by $5.64 or 35 per cent to $21.65. These increases were due to continued adoption of smartphones and related data plans, growth of mobile Internet devices and tablets, and higher roaming revenues.
• Blended ARPU increased by $0.60 or 1.0 per cent to $59.08 as 35 per cent data ARPU growth more than offset a 12 per cent voice ARPU decline. This is the fifth consecutive quarter of year-over-year blended ARPU growth.
• Wireless net additions of 129,000 were higher by 8.4 per cent year over year and included 148,000 postpaid subscribers and a loss of 19,000 lower-ARPU prepaid subscribers. Postpaid net additions were up 36 per cent from a year ago, despite approximately 10,000 deactivations this quarter from the loss of a low-ARPU federal service contract to a competitor. Total wireless subscribers of 7.3 million are up 5.3 per cent from a year ago and the proportion of high value postpaid subscribers increased 1.7 points to 83.5 per cent.
• Smartphones represented 74 per cent of postpaid gross additions in the fourth quarter, as compared to 46 per cent a year ago. Smartphone subscribers now represent 53 per cent of the total postpaid subscriber base as compared to 33 per cent a year ago.
• Cost of retention as a percentage of network revenue decreased by 60 basis points (bps) to 13.6 per cent as network revenue grew while retention costs remained relatively flat.
• Cost of acquisition per gross addition increased year over year by 8.5 per cent to $421, reflecting higher per-unit subsidies from more sales of more expensive smartphones and competitive dynamics.
• Blended monthly subscriber churn decreased 5 bps year over year to 1.67 per cent, reflecting lower churn on smartphones and the success of retention investments. Despite the loss of a federal government contract that contributed 7 bps to churn this quarter, the churn was unchanged from the third and second quarters of 2011 when, historically, churn increases in the second half of the calendar year.
• Wireless EBITDA of $500 million increased $29 million or 6.2 per cent. The EBITDA margin of 34.9 per cent was relatively flat compared to last year.
• Simple cash flow (EBITDA less capital expenditures) increased by $53 million to $332 million in the quarter due to EBITDA growth and decreased capital spending, despite LTE-related investments.

TELUS wireline

• External wireline revenues increased by $49 million or four per cent to $1.27 billion in the fourth quarter of 2011, when compared with same period a year ago. This growth was generated by increasing data revenues, partially offset by declines in local and long-distance revenues.
• Data service and equipment revenues increased by $89 million or 15 per cent, reflecting strong growth in TELUS TV services, Internet and enhanced data services including large enterprise deals as well as increased data equipment sales and higher managed workplace (call centre) revenues.
• TELUS TV quarterly additions of 56,000 were a record, an increase of 17 per cent over same period last year, due to the success of Optik TV. The TELUS TV subscriber base of 509,000 is up 62 per cent from a year ago.
• High Speed Internet net additions of 24,000 increased 33 per cent 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 3.9 per cent from a year ago to 3.6 million, which is the slowest rate of decline in nearly three years. Residential lines declined by 6.4 per cent, due to competition and wireless and Internet-based technological substitution. Residential NAL losses of 37,000 were unchanged from a year ago. Business NAL losses were 11,000 due to competition in the small and medium business market and conversion from legacy voice services to IP services.
• Wireline EBITDA of $374 million increased by $4 million or 1.1 per cent due to lower restructuring costs than a year ago, partially offset by ongoing declines in higher margin legacy voice services that were not fully offset by growth in lower margin data services. The EBITDA margin was 28.6 per cent, down 80 bps from last year.
• Simple cash flow increased to $30 million in the quarter primarily due to reduced capital spending.

CORPORATE AND BUSINESS DEVELOPMENTS

TELUS launches 4G LTE wireless services across Canada
In early February, TELUS launched 4G LTE services across the major cities of Canada. LTE service is now available in Vancouver, Calgary, Edmonton, Toronto and the GTA, Kitchener, Hamilton, Waterloo, Guelph, Belleville, Ottawa, Montreal, Québec City, Halifax and Yellowknife. TELUS customers can experience the power of TELUS' 4G LTE network with the popular Samsung Galaxy Tab 8.9 LTE tablet, the LG Optimus LTE smartphone or the Novatel Ovation MC679 4G LTE Mobile Internet Key. The 4G LTE-capable Samsung Galaxy Note will also be available on February 14.

TELUS 4G LTE network offers customers quick mobile Internet download speeds ranging between 12 and 25 megabits per second (Mbps) (manufacturer's rated peak download speeds of up to 75 Mbps). TELUS customers using TELUS' 4G LTE services can now experience faster download times when surfing the web, reading emails, storing the latest songs, or watching movies without additional charges. Importantly, if TELUS customers travel outside of the 4G LTE network coverage areas, they will move seamlessly from 4G LTE to 4G HSPA+ with no disruption of service. TELUS will continue to expand its' 4G LTE coverage areas to reach more than 25 million Canadians by the end of 2012 and introduce new 4G LTE-capable devices as they become available.

TELUS' Optik TV expands into more communities with more channels and new features
Optik TV continues to expand into more communities, adding new channels, and launching new services.

TELUS customers in Kamloops and Penticton had their first chance to discover Optik TV when the service arrived in their communities in October and December, respectively. In December, Optik got even better with a selection of new IPTV applications, including TumbleBooks TV, which allows parents and their young children to watch, learn and enjoy interactive storytelling with a child-friendly, easy to use video playback of books. In addition, TELUS introduced Black's Photo on Optik TV, which allows customers to share digital photos with friends and family on their TV. Several new channels also premiered on Optik TV in the quarter, including FX Canada, Hollywood Suite HD, The Food Network HD, HGTV HD, History HD, Mendhi HD, Bollywood Times HD, and the ever popular Firelog HD.

TELUS is taking further steps to deliver on the promise of IPTV (Internet Protocol-based TV) to transform the TV viewing experience and create a truly connected home through new technologies. In February, TELUS launched two new features for Optik TV: gesture and voice control for Optik TV on Xbox + Kinect and Optik on the go. TELUS is the first TV provider in the world to offer voice and gesture navigation on both live and recorded TV, via an advanced version of Optik TV for Xbox 360, which takes advantage of Xbox's Kinect sensor. In addition, TELUS' Optik TV subscribers can now experience a new application called Optik on the go. This feature allows customers to view a selection of TV On Demand shows and movies on their mobile devices, tablets and laptops, at home and on the move. 

National Defence extends network services contract with TELUS to 2016
In early 2012, the Department of National Defence (DND) exercised its option to extend the Global Defence Network Services contract with TELUS by four years to June of 2016. The contract extension is valued at more than $250 million. TELUS provides managed telecommunications services including voice, data, video and IP solutions to DND in Canada and internationally.

TELUS extends wireless communications infrastructure into rural B.C.
In the fourth quarter, TELUS invested $6.9 million for eight new wireless sites to bring 4G wireless voice and high-speed Internet services to rural British Columbia communities and significant wireless coverage to stretches of highways. These projects are the result of the 10-year $1 billion Connecting British Columbia telecommunications contract signed with the Province of B.C. in mid-2011. Under the terms of the contract, TELUS will connect more than 1,700 kilometres of highway with wireless service over the next five years and run fibre optic cable directly to nearly 450 B.C. schools.

2011 TELUS-Rotman IT security study finds hacks increasingly sophisticated
In October, TELUS and the Rotman School of Management unveiled their fourth annual study on Canadian IT security. The survey revealed that while overall security breach numbers are down, a rise of mobile computing and sophistication of attacks bring new concerns with one-in-three IT security attacks seeking financial gain. The study surveyed more than 600 Canadian IT professionals across government, public and private sectors, providing TELUS and Rotman enhanced clarity on the Canadian security landscape, especially as it relates to emerging trends in breaches, threats and preparedness.

Huawei, TELUS and Carleton University open cloud computing research centre
In January, the Huawei-TELUS Innovation Centre for Enterprise Cloud Services opened at Carleton University in Ottawa. The centre was created through a $1.4 million investment made by Huawei and TELUS. The centre, located in Carleton's new engineering building, is a venue for cutting-edge research in cloud computing. Students, faculty and industry will research real-world problems associated with enterprise clouds including management of computing, on demand storage and network resources, data-centre networking, scalability, business continuity, and security.

Darren Entwistle honoured with Fraser Institute's T. Patrick Boyle Founder's Award
In November, Darren Entwistle, TELUS President and CEO, was honoured with the Fraser Institute's T. Patrick Boyle Founder's Award. Darren was commended on his exemplary leadership of TELUS. TELUS was recognized for its award-winning brand, impressive share performance, dedication to healthcare transformation and the company's passion and commitment to its 'we give where we live' philosophy. The Fraser Institute, an independent Canadian economic and social research and educational organization, presents the award annually to a Canadian business leader in recognition of outstanding achievements in entrepreneurship, the promotion of free markets and philanthropic support for private sector, non-profit enterprises.

TELUS vice-president Strategy Magazine's Marketer of the Year
In December, Anne-Marie LaBerge, TELUS vice-president, Brand & Consumer Marketing Communications, was named Strategy Magazine's Marketer of the Year. The award was presented to Anne-Marie for demonstrating outstanding leadership, creativity and innovation, and taking the TELUS brand to new heights. Strategy Magazine said Anne-Marie has helped build a brand with a unique identity and an undeniable emotional connection with Canadians, while delivering on TELUS' future friendly brand promise. She was also honoured as one of 10 winners of the 2011 Quebec Women in Business award. Presented by the Quebec Business Women's Network, these awards honour outstanding women who have contributed significantly to the growth of Quebec society.

CICA hands TELUS top award for corporate reporting
In December, the Canadian Institute of Chartered Accountants (CICA) presented TELUS with the top overall disclosure award at the 2011 Corporate Reporting Awards. TELUS was awarded this honour for the second year in a row and has won the Overall Award of Excellence award four of the past five years. The Company also collected two other honours from the CICA, capturing Honourable Mention for Sustainable Development Reporting and winning the Communications and Media category award.

TELUS takes multiple honours for training and being a top employer
In the fourth quarter, TELUS received a BEST award, the American Society of Training and Development's (ASTD) highest recognition for leadership in enterprise learning. Only 32 companies around the world are presented with this honour annually, and TELUS is the only Canadian organization to win the award more than twice and one of only six companies worldwide to earn the award six times. The ASTD BEST awards are the training industry's most rigorous and coveted honour, granted to companies that demonstrate enterprise-wide success through employee learning and development that are clearly aligned with business goals that drive execution on strategy.

Also in the quarter, TELUS was named one of Canada's Top 100 Employers for 2012. For the third consecutive year, TELUS received top marks for the company's programs and initiatives in training and skills development, community involvement, team member engagement, and benefits and compensation. The editors of Canada's Top 100 Employers also placed TELUS on the list of Canada's Top Employers for Young People for 2012 based on eight criteria for exceptional workplaces.

Workforce Management Magazine presents TELUS with 2011 Optimas Award
North America's leading HR publication, Workforce Management Magazine, awarded TELUS the 2011 Optimas Award in December. TELUS is the first Canadian telecommunications company to receive this honour. The award was presented to TELUS for implementing a new Workforce Management system that is transforming the company's delivery capabilities for its Future Friendly Home service. TELUS was recognized in the Competitive Advantage category for instituting change that enabled the company to support the growing demands for Optik TV service. The award acknowledges the value TELUS places on finding solutions that continue to drive exceptional service for customers and deliver a best-in-class customer experience.

TELUS lands Gold Stevie Award for CSR communications
In December, TELUS received a prestigious 2011 Gold Stevie Award and two Stevie Honourable Mentions for the company's internal communications that highlight the TELUS 'we give where we live' philosophy and TELUS International's corporate social responsibility efforts. TELUS was awarded the Gold Stevie for the TELUS Day of Giving Manila video in the Internal/Employee Communications category; Honourable mention for the TELUS Day of Giving Latin America video in the Internal/Employee Communications category; and Honourable mention in the Motivational category for the TELUS Inspire to Give video. Since 2002 the Gold Stevie Awards have been awarded for achievement in business to organizations and individuals in more than 60 nations.

TELUS International hosts Day of Giving and launches Community Board in El Salvador
In November, TELUS International held its third annual TELUS Day of Giving in El Salvador, with more than 1,200 team members building classrooms and improving a local school. The Company also launched the TELUS El Salvador Community Board chaired by Carlos Quintanilla Schmidt, former vice-president of El Salvador. Starting in 2012, the board will provide $100,000 in funding annually to local organizations that support youth-oriented projects and community initiatives to improve living conditions, provide access to education, and foster employment opportunities by encouraging entrepreneurship.

Canadian youth charities benefit from TELUS Community Boards
In December, TELUS announced that grassroots, youth-focused, charities in Vancouver, Calgary, Edmonton and Ottawa received much-needed financial boosts this year from their respective TELUS Community Boards. Collectively, in 2011, those four Community Boards gave $2.2 million to support more than 150 local organizations who work to educate and empower youth to reach their full potential.

TELUS Community Boards are an innovative model that put decision-making in the hands of local leaders who know their communities best. Eleven TELUS Community Boards are making a positive impact across Canada from coast-to-coast in Victoria, Vancouver, Edmonton, Calgary, Toronto, Ottawa, Montreal, Rimouski, Quebec City, Atlantic Canada and the most recently launched board in the Thompson Okanagan region of B.C. Since their inception in 2005, the Community Boards have contributed $30 million to grassroots charitable organizations and supported more than 2,300 community projects.

TELUS gives where we live with Pink campaign, Phones for Good and TV for Good
In October, TELUS kicked off its Go Pink campaign to raise money for the Canadian Breast Cancer Foundation (CBCF). TELUS contributed $25 to CBCF on behalf of every customer buying a new pink BlackBerry Curve and an additional $5 with each purchase of select pink phone accessories. Canadians could also go online to TELUS' Facebook page to create their own Pink Network, an online, shareable photo gallery of their best friends. For every new photo gallery created, TELUS contributed an additional $1 to CBCF. The campaign ran until year end and raised $400,000.

TELUS' Phones for Good and TV for Good programs continue to support local grassroots community initiatives on behalf of new TELUS customers. In the fourth quarter, TELUS launched programs of six months' duration that donate $100 for new Optik TV or smartphone customers to local charities in communities. In Abbotsford, TELUS and its new Optik TV customers are raising funds for Canuck Place Children's Hospice and the families they serve throughout the Fraser Valley; in Victoria, The David Foster Foundation, in support of families with children in need of organ transplants; and in Lethbridge, the Lethbridge Public Library's bookmobile project. For every new customer who activates a smartphone in the following communities, TELUS will contribute $100 to support: in Cranbrook, the East Kootenay Foundation for Health and its "A Clear View" digital mammography campaign; in Trail, the KBRH Health Foundation's Digital Mammography "Let's be Clear" Campaign; and in Chilliwack, the building of the Sardis Library.

Dividend Declaration
The Board of Directors has declared a quarterly dividend of fifty-eight cents ($0.58) Canadian per share on the issued and outstanding Common shares and fifty-eight cents ($0.58) Canadian per share on the issued and outstanding Non-Voting shares of the Company payable on April 2, 2012 to holders of record at the close of business on March 9, 2012.

This quarterly dividend is the same as the previous quarter, but represents a 5.5 cent or 10.5 per cent increase from the 52.5 cents paid a year earlier in April 2011.

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/February2012/10/c9828.html

TELUS' fourth quarter conference call is scheduled for February 10, 2012 at 11:00 am EST and will feature a presentation followed by a question and answer period with analysts. Interested parties can access the webcast at: telus.com/investors. A telephone playback will be available on February 10 until February 24 (1-855-201-2300, reservation no. 695606#). An archive of the webcast will also be available at: telus.com/investors and 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 $10.4 billion of annual revenue and 12.7 million customer connections including 7.3 million wireless subscribers, 3.6 million wireline network access lines and 1.3 million Internet subscribers and more than 500,000 TELUS TV customers. Led since 2000 by President and CEO, Darren Entwistle, TELUS provides a wide range of communications products and services including wireless, data, Internet protocol (IP), voice, television, entertainment and video.

In support of our philosophy to give where we live, TELUS, our team members and retirees have contributed more than $260 million to charitable and not-for-profit organizations and volunteered 4.2 million hours of service to local communities since 2000. Eleven 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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