Telecom

1
Telecom Cable TV Fixed Income
Conference September 13, 2006 Robert
McFarlane EVP Chief Financial Officer
2
Forward-looking statements

• Presentations and answers to questions today
  contain forward-looking statements that require
  assumptions about expected future events
  including income trust conversion and timing,
  financing, financial and operating results, and
  2006 guidance that are subject to inherent risks
  and uncertainties. There is significant risk that
  predictions and other forward-looking statements
  will not prove to be accurate so do not place
  undue reliance on them.
• There are many factors that could cause actual
  results to differ materially. For a full listing
  and description of the potential risk factors and
  assumptions, please refer to the TELUS 2005
  annual report, updates in the 2006 quarterly
  reports, Sept. 11, 2006 income trust proposal
  news release and other filings with securities
  commissions in Canada and the United States.

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Agenda

• About TELUS
• TELUS wireless review
• TELUS wireline review
• TELUS consolidated review
• Credit profile
• QA
• Appendix
• Definitions

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About TELUS

• Executing national growth strategy focused on
  data, IP wireless
• Financial results (12ME June 30, 2006)
• Revenue 8.4B
• EBITDA 3.3B
• FCF 1.5B
• Enterprise value 26B (net debt 5.7B)
• Listings TSX T, T.A NYSE TU
• Reporting segments wireless and wireline

Best performing Canadian telco
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Leading the way with a proven strategy

• Focusing on growth markets of data wireless
• Building national capabilities
• Providing integrated solutions
• Investing in internal capabilities
• Partnering, acquiring and divesting as necessary
• Going to market as one team

Strategic intent to unleash the power of the
Internet to deliver the best solutions to
Canadians at home, in the workplace and on the
move.
Consistent strategy and execution 2000 ? 2006
5
6
Wireless-wireline merger rationale

• Advance our industry leading strategy
• Achieve meaningful commercial differentiation in
  the market
• Capitalize on technology convergence of wireless
  and wireline
• Drive continued operating efficiency and
  effectiveness

One team, united behind one strategy, defined by
one brand
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7
Strategic focus on data and wireless
Revenue
20062
20001
LD
Wireless Voice
LD
10
23
41
Wireless
18
Voice
Data
Voice
10
28
49
Wireline Data
Wireless Data
19
2
5.7B
8.4B
2 12 months ending June 2006
1 12 months ending June 2000
Data and wireless now represent 62 of revenue
7
8
Strategic focus on wireless generating cash flow
Cash Flow
20062
20001
(EBITDA less capex)
Wireless 22
Wireless 59
Wireline 41
Wireline 78
1.1B
1.9B
1 12 months ending June 2000
2 12 months
ending June 2006
Wireless now represents 59 of Cash Flow
8
9
Total subscriber connections
10.4
(millions)
9.9
9.4
Res NALs
Bus NALs
Dial-up Internet
High-speed Internet
Wireless
Q2-06
Q2-05
Q2-04
Connections increasing with strong wireless and
Internet growth
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10
TELUS subscriber trends
Change
Jun-06
Jun-04
3-year trend
31
?
4.7M
3.6M
Wireless subscribers
33
?
831K
624K
High-speed Internet
?
4.6M
(4)
4.8M
NALs
10
11
Wireless
12
Wireless segment financial results
Change
H1-06
H1-05
18
?
1,827M
1,555M
Revenue
19
?
837M
704M
EBITDA1
20
?
209M
174M
Capital expenditures
19
?
628M
530M
Cash flow (EBITDA less capex)
1 Includes 3M in restructuring workforce
reduction costs in H1-06
Excellent revenue, EBITDA and cash flow growth
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13
Increasing Canadian wireless penetration
review of operations
Dec-03
Dec-08E
Jun-06
42
65 - 68
53.5
Penetration
Source Industry analysts, CWTA
4 to 5 million net additions expected over next
2.5 years
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14
Wireless data ARPU growth
63.18
60.84
Data ARPU
4.45
2.30
Q2-05
Q2-06
ARPU growth led by 93 increase in wireless data
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15
Industry ARPU comparison
review of operations wireless
Q2-06 prepaid ARPU
Q2-06 postpaid ARPU
72
67
63
26
14
13
TELUS Wireless
Rogers Wireless
BCE Wireless
TELUS Wireless
Rogers Wireless
BCE Wireless
Significant ARPU premium over peers
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Staying ahead on wireless data

• Expanding EVDO high speed wireless service
• 24 major urban markets
• Cool new applications
• Music downloads and video games
• Watch 15 channels on Mobile TV
• TELUS Mobile Radio powered by XM Canada
• 5 times faster
• Ampd Powered by TELUS coming in 2007

Fostering continued wireless data growth
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Exclusive Ampd arrangement and investment

• Ampd Mobile responsible for marketing, freshest
  and exclusive entertainment content, and
  optimized handsets
• Targeting 18 to 35 age demographic and lifestyle
• TELUS responsible for managing sales and
  distribution, billing, client care, network
  options and pricing
• Exclusive licensing and service agreement not a
  traditional MVNO
• Ampd Mobile is a premium brand with high ARPUs
  focused on mobile media (not traditional voice)
  and postpaid
• TELUS Ventures invested US7.5M in US business of
  Ampd Mobile, Inc.

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Wireless industry economics comparison
Q2-06
BCE
Rogers
TELUS
51
55.951
63.18
ARPU
1.60
1.821
1.30
Blended churn
3188
3074
4860
Avg. lifetime revenue per sub
419
397
394
COA per gross add
13.1
12.9
8.1
COA / lifetime revenue
1Calculated using prepaid and postpaid metrics
due to non-disclosure by Rogers
TELUS subscriber economics compare favourably
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Staying ahead in North American performance
Q2 YTD cash flow yield1 of national wireless
companies ()
34
33
26
21
21
12
12
Sprint Nextel
TELUS Wireless
Rogers Wireless
T-Mobile
BCE Wireless
Verizon Wireless
Cingular
1 EBITDA less capex as a percentage of total
revenue. Source Company reports
Highest Q2 YTD cash flow yield in North America
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2006 wireless guidance
2006 guidance2
annual change
?
Revenue
3.8 to 3.875B
15 to 18
?
EBITDA
1.7 to 1.75B
18 to 21
?
approx. 450M
Capex
11
Wireless net adds
560 to 590K
flat
1 See forward looking statement caution
2 August 4, 2006
Solid wireless momentum
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Wireline
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Wireline segment financial results
Change
H1-06
H1-05
2.1
?
2.39B
2.44B
Revenue
9.3
?
923M
1,017M
EBITDA1
6.4
?
968M
1,034M
EBITDA (excl. restructuring)
12
?
570M
508M
Capital expenditures
31
?
353M
510M
Cash flow (EBITDA less capex)
1 Includes 17M and 45M in wireline
restructuring costs in H1-05 and H1-06
respectively
Results reflect challenging wireline environment
and increased restructuring
charges
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Year-over-year NAL declines
Trailing six quarters ended Q2-06

Q1
Q2
Q3
Q4
Q1
Q2
Source Merrill Lynch, company reports
2005
2006
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Future Friendly Home

• Suite of IP applications
• Home Networking (wireless LAN)
• HomeSitterTM
• TELUS TV targeted roll-outs in
• Edmonton and Calgary 2005/2006
• Vancouver lower mainland 2006/2007

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Expanding TELUS TV availability
financial review

• Offering customers differentiated entertainment
• Choice of 200 digital stations
• Customized channel packaging
• Interactive programming guide
• Video on demand
• myTELUS channel
• Call display

Targeted launches to continue
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Non-ILEC revenue EBITDA
EBITDA (M)
Revenue (M)
650-675
632
561
555
25-30
21
2004
2003
2005
2006E1
2004
2005
2006E1
2003
(22)
(29)
1 August 4, 2006 guidance. See forward looking
statement caution.
Continued focus on profitable, long-term growth
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2006 wireline guidance1
2006 guidance 2
annual change
Revenue
4.825 to 4.850B
0 to (1)
?
?
Non-ILEC Revenue
650 to 675M
3 to 7
?
EBITDA
1.8 to 1.85B
0 to (3)
?
Non-ILEC EBITDA
25 to 30M
18 to 42
?
approx. 1.15B
Capex
26
?
High speed net adds
gt 125K
gt52K
1 See forward looking statement caution
2 August 4, 2006
Guidance reflects challenging wireline environment
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Consolidated Review
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TELUS Consolidated
Change
H1-06
H1-05
5.6
?
4.22B
3.99B
Revenue
2.2
?
1,760M
1,721M
EBITDA
47M
17M
Restructuring costs
4.0
?
1,807M
1,738M
EBITDA (excl. restructuring)
16
?
706M
611M
EBIT
36
?
1.63
1.20
EPS (reported)
1 Normalized for tax-related adjustments,
retroactive regulatory decisions and and a BC Tel
bond litigation accrual, EPS in H1-05 H1-06,
would have been 1.06 and 1.29, up 22
Strong gains in revenue and EPS
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Strategic operating model
Growth opportunities
Challenges
Competitive Intensity
Technological Substitution
Non-ILEC Growth
Future Friendly Home
Organization Effectiveness
Price Cap Regulatory Framework




Short-term dilutive
Strive to hold wireline EBITDA (before
restructuring) flat over medium term
?
Growth in revenues and EBITDA from wireless
business

Continued improvements in consolidated results
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Push to implement the Telecom Policy Report

• Supporting TPR panel and Industry Canadas
  thought leadership

Other CRTC developments

• 2005 VoIP decision re-affirmed by CRTC
• Re-assessing aspects of local forbearance
  decision
• Mobile TV broadcasting not regulated
• Third local price cap proceeding underway for
  2007

Opportunity for positive regulatory and policy
change
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2006 consolidated guidance summary
annual change
2006 guidance1
Revenue
8.625 to 8.725B
? 6 to 7
EBITDA2
3.5 to 3.6B
? 6 to 9
2.90 to 3.10
EPS3
? 48 to 58
approx. 1.6B
Capex
? 21
1.55 to 1.65B
Free Cash Flow
? 6 to 13
1 September 11, 2006 guidance (unchanged from Aug
4/06), and reflects est. 7M of expenses in 2006
related to trust conversion. See forward looking
statement caution 2 Including restructuring
workforce reduction costs of 54M in 2005 and up
to 100M in 2006 3 Including 34 cents of positive
tax-related adjustments in 2006
Annual consolidated financial guidance remains
unchanged 2007 guidance planned for December 2006
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Income trust transaction overview

• Sept. 11/06 announced approved proposal for
  reorganization into income trust
• Represents conversion of TELUS in its entirety
• Via plan of arrangement under Business
  Corporations Act (B.C.)
• Subject to approval of 2/3rds of each class of
  shares
• To be one class of Fund Unit vs current dual
  class share structure
• Anticipate initial distributions of between 3.90
  to 4.10 on annualized basis
• Compares to current 1.10 annualized dividend

Conversion entails increase in cash distributions
by 255 to 273
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Strategic rationale for TELUS conversion into
Income Trust

• Transaction supports advancement of national
  growth strategy
• Optimizes ability to make future growth
  investments
• Enhances tax efficiency at TELUS and
  significantly increases cash distributions to
  shareholders
• Ensures integrated operations drive customer
  service excellence and competitive
  differentiation
• Avoids costs and governance complexity of a
  partial conversion
• Offers investors high quality assets, strong
  predictable cash flow and prospect of growth

Creating Canadas premier income trust
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Benefits of proposed conversion in January 2007

• Tax efficiency as TELUS has fully utilized its
  tax assets as of June 30, 2006
• TELUS now generating current tax liability on go
  forward basis
• Status quo would entail paying cash taxes
  commencing in 2008
• Optimal timing for TELUS as expect to be able to
  shelter 2006 tax liability on conversion, in
  addition to ongoing tax efficiencies
• Optimal timing for shareholders as taxable deemed
  disposition on conversion of shares for units
  generally not payable until April 2008
• Beneficial to debt holders as increases future
  cash flow for debt servicing

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Return of capital pre and post conversion
per share
3.90 to 4.10
Normal Course Issuer Bid
4
Dividends paid
3.38 2,3
3.30
Income trust cash distribution
3
2.62 1
2
0.82
1
0.60
2003
2004
2005
2006
2007E3
1 Total Cash per Share annualized 2006
dividend, plus YTD NCIB as at Aug 30, 2006
2 Total Cash per Share annualized 2006
dividend, plus YTD NCIB as at Aug 30, 2006
annualized
36
3 See forward looking statement caution
37
Transaction time line1

• Notice of special meeting of TELUS shareholders
  Nov. 2006
• Information circular mailing Dec. 2006
• Special shareholder meeting Jan. 2007
• Obtain regulatory and other approvals
• Closing and conversion expected late Jan. 2007

1 See forward looking statement caution
To create premier income trust in Canada
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Credit Profile
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Debt overview

• Simplified debt structure with 86 of total debt
  now at TELUS Corporation
• Average term to maturity is 5.0 years (at June
  30, 2006)
• Fixed to floating ratio currently 99 fixed
• 3.7B of existing debt denominated in US and
  fully hedged
• No long-term debt maturities until 2007 when
  US1.2B TELUS Notes and 70M TCI Medium Term
  Notes mature

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Credit profile
Current debt structure
TELUS Corporation Maturity Bank1 - 3
Year 0.8B revolver May 2008
- 5 Year 0.8B revolver May
2010 US 7.5 Notes C1.5B June 2007 US 8.0
Notes C3.0B June 2011 C 5.0
Notes C0.3B June 2013
100

• TELUS Communications Inc.
• Maturity
• Mortgage Bonds 0.030B July 2010
• MTNs 0.070B Feb 2007
• Debentures 0.799B 2010 to
  2025
• Net Sr. Notes to TC 2.5B

1 Canadian dollars or U.S. dollar equivalent.
At June 30, 2006, 74M in borrowings existed
under the Bank credit facilities. TCI may also
borrow on the bank credit facility.
86 of total debt at TELUS Corporation
40
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Credit profile
Current debt structure - maturities

Process of refinancing 2007 maturity already begun
41
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TELUS US1.2B Notes maturing in 2007

• TELUS US1.2B 7.50 Notes mature June 1, 2007
• At time of issue, swapped into C1.8B liability
  with yield of 8.109
• Notes are redeemable at any time in whole or in
  part at the US Treasury yield plus 25 basis
  points
• TELUS may consider early redeeming a portion of
  notes
• TELUS has already taken two steps to refinance
  notes
• Interest rates locked for 500M of future fixed
  rate debt through forward starting interest rate
  swaps
• In May 2006 TELUS issued 300M 5 7 year Note to
  repay a portion of the foreign exchange liability

May 2006 300M 7-year note offering met strong
demand
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Committed credit facilities

• Total committed credit facilities of 1.6B
• 3-year 800M credit facility due in May 2008
• 5-year 800M term facility due in May 2010
• Term of facilities extend beyond the maturity
  date of TELUS' June 2007 public note maturity
• Reinforces TELUS' strong liquidity position

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Consolidated leverage
Jun-06
Jun-04
Jun-05
Jun-03
7,223
6,096
Net debt (M)
5,740
9,120
51.9
46.0
Net debt Capital
45.5
55.7
1.7x
1.8x
2.4x
3.0x
Net debt EBITDA
16
23
FCF1 Net debt
27
4
1 12-month trailing Free cash flow
Strong leverage improvement / credit enhancement
44
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Credit ratings

• All four rating agencies upgraded TELUS ratings
  in 2005
• Moodys reiterated rating, changed outlook to
  positive May/06
• DBRS rating under review Sep/06
• Moodys affirmed rating, with a developing
  outlook Sep/06

Credit rating changes in 2005 2006
Credit rating overview for TELUS Corporation
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Long term financial policy targets
long term policy
Q2-06
45 to 50
Net Debt Capital
45.5
?
1.7x
1.5 to 2.0x
Net Debt EBITDA
?
gt1B
Minimum liquidity
1.5B
?
? 3 of 4
BBB to A-
Credit rating
BBB
Conversion does not change TELUS debt targets /
lessens risk profile
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Recognized leader in disclosure

• Annual Report on Annual Reports
• TELUS 2005 Annual Report ranked BEST in world
• Canadian Institute of Chartered Accountants
  (CICA)
• Best Corporate Governance Disclosure in Canada
• 2004 Annual Report received Award of Excellence
• 11 consecutive years of recognition
• IR Magazine (Canada) awards
• 2006 Best annual report disclosure policy
• Member of 2007 Dow Jones Sustainability Index
• only North American telco in global index

e.Com Report Watch
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Why invest in TELUS?

• Premium asset mix - high wireless exposure
• Offer investors high quality assets, strong
  predictable cash flow and prospect of growth
• Orderly refinancing of 2007 notes already
  underway
• Significant gt1B of annual free cash flow
  generation pre-trust conversion
• Trust conversion announced
• Increases cash flow and lessens TELUS risk
  profile
• Beneficial to debt holders as increased future
  cash flow for debt servicing
• TELUS has met or exceeded all leverage targets
• Excellence in reporting, transparency and
  governance

Track record of delivering on commitments to
investors
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investor relations 1-800-667-4871 telus.com ir_at_tel
us.com
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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
• Cash flow yield EBITDA less capex, divided by
  total revenue
• 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

TELUS definitions for non-GAAP measures