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Entertainment, Media & Telecommunications Conference. Robert McFarlane EVP & Chief Financial Officer January 11, 2005. forward-looking statement. - PowerPoint PPT Presentation
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Robert McFarlaneEVP & Chief Financial Officer
January 11, 2005
Entertainment, Media & Telecommunications Conference
2
forward-looking statement
This presentation and answers to questions contain forward-looking statements about expected future events including a normal course issuer bid, dividends 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.
all dollars in Cdn$ unless otherwise specified
3
Executing national growth strategy focused on data, IP & wireless
2nd largest Canadian telco
2004 guidance1:
Revenues $7.5 to 7.575B
EBITDA2 $3.05 to 3.1B
FCF $1.25 to 1.3B
Dividend per share 20¢ per quarter
Enterprise value: $19B (~70% equity)
Average daily trading: 1.5M
Listings: TSX: T, T.NV; NYSE: TU
Operating segments: wireline: TELUS Communicationswireless: TELUS Mobility
1 Per update on December 17, 2004. 2EBITDA defined as earnings before interest, taxes, depreciation & amortization, after restructuring and workforce reduction costs.
about TELUS
4
ILEC: full service in W. Canada and E. Quebec non-ILEC: data & IP for businesses in Central Canada
2004 guidance1:
Revenue $4.725 to 4.775B
Non-ILEC Revenue $545 to 555M
EBITDA $1.925 to 1.95B
Total Internet Subscribers ~975K (687K high-speed)
Network Access Lines 4.8M
Fibre IP backbone national Next Generation Network (NGN)
1 Per guidance as at December 17, 2004.
TELUS Communications segment
5
31.8M: Cdn. PopulationLicensed POPs
29.7M (93% of POPs)Network coverage
55 MHz in major marketsSpectrum position
only one in Canada (Nextel in US)iDEN Mike network
coast to coast 1X (CDMA)National footprint
$1.125 to 1.15BEBITDA
$2.775 to 2.8BRevenue
3.85 to 3.9M Subscribers
leading Canadian national wireless provider
1 Per guidance as at December 17, 2004.
TELUS Mobility segment
2004 guidance1:
6
strategic imperatives 2000-2005
Go to market as one team
Provide integrated solutions
Partner, acquire & divest as necessary
Invest in internal capabilities
Build national capabilities
Focus on growth markets
consistent strategy
7
build national capabilities
TELUS’ infrastructure - 2000
8
build national capabilities
TELUS’ infrastructure - 2004
9 delivering growth focused on data & wireless
$5.7B
43%
18%
10%
6%Other
12ME Q3-04
$7.4B
Local Voice
Wireless
Data29%
36%
19%
4%Other
LD
Wireless
12ME Q2-00
Local Voice
23%
Data
12%LD
TELUSCommunications
TELUSCommunications
TELUSMobility
TELUSMobility
focus on growth marketsconsolidated revenue profile
10
focus on growth markets - cash flow profile
Mobility as % of total consolidated
Mobility expected to represent >50% of TELUS’ consolidated cash flow in 2005
37%
29%
42%
2004E2003 2005E
44%
29%
53%
2004E2003 2005E
EBITDA EBITDA less capex
TELUS Communications
12
0 to 5%$950 to 1,000MCapex
(5) to (2)%
change1
EBITDA (after restruc.)2
Revenue
2005 targets
$1.85 to 1.9B
$4.7 to 4.75B
1 Variance calculated based on midpoint of latest 2004 guidance2 Includes $100M in restructuring & workforce reduction costs
(1) to 0%
2005 targets reflect competitive wireline markets
2005 Communications targets summary
9 to 18%non-ILEC Revenue $600 to 650M
$0 to 10Mnon-ILEC EBITDA 23 to 33M
13
EBITDA (before restructuring)
EBITDA essentially flat before restructuring costs
1.975 to 2.00 1.95 to 2.00
2004E 2005E
EBITDA (before restructuring costs1, $B)
Communications segment
1 Excludes restructuring & workforce reduction costs of $50M in 2004E & $100M in 2005E
14
545 to 555
2004E
600 to 650
2005E
9 to 18% non-ILEC growth in Central Canada focused on recurring data and IP revenues in the business market
Communications segment
non-ILEC revenue target
Revenue ($M)
15
(20) to (25)(29)
2003 2004E
2005E
targeting positive non-ILEC EBITDA in 2005
non-ILEC EBITDA target
Communications segment
0 to 102002
(107) EBITDA ($M)
16
152
~787
562
2003 2004E
~100Subscriber base
Net additions
(000s)
~125
~687
2005E
Communications segment
100K target reflects obtaining continuing majority share of net adds in a maturing market
2005E Total Internet subs.
High Speed
Dial-up
> 1M
high-speed Internet net additions target
17
Geographic expansion
Refocused on high quality, recurring, IP-based revenues in non-ILEC to
leverage Next Generation Network (NGN) leadership
Bundling & price increases
bundling strategy protects legacy revenues
LD plan administration charge increased
“Future Friendly” home
continuing high-speed Internet growth
Home Networking and HomeSitterTM
IPTV over ADSL trials since April 2004
other new applications to come
revitalizing wireline growth
Communications segment
business:
consumer:
TELUS Mobility
20
0 to 14%$350 to 400MCapex
19 to 23%
change
EBITDA
Revenue
2005 targets
$1.35 to 1.4B
$3.2 to 3.25B 15 to 17%
2005 targets reflect continuing profitability increases
2005 Mobility targets summary
21
Mobility segment
15 to 17% revenue growth driven by continued strong subscriber growth & premium ARPU
2.775 to 2.803.20 to 3.25
2004E 2005E
Revenue ($B)
revenue target
22
(000s)
3,424
418425 to 475
3,850 to 3,900Subscriber base
Net additions
2005E2003 2004E
4,300 to 4,350
Target425 to 475Knet adds
2005 net additions consistent with 2004E
Mobility segment
subscriber net additions target
23
19 to 23% EBITDA growth driven by strong revenue growth and continued cost containment
Mobility segment
EBITDA target
1.125 to 1.15
1.35 to 1.40
2004E 2005E
EBITDA ($B)
24
$0 to 50M$350 to 400MCapex
change2005 target
2004E 2005E
~13%11 to 12%
Capex intensity1
1 Ratio of capex to total revenues
Mobility cash flow increasing by 27% to ~$1B
Mobility segment
capex target
25
TELUS Mobility EBITDA & cash flow growth
51% compounded EBITDA growth rate over five years
1 Pro forma acquisition of Clearnet. 2 EBITDA (excluding restructuring) for 2001 & 2002
3 Per guidance mid-points announced December 17, 2004
173
815
200320001
356
20012
535
20022
~1,138
2004E3
(360)
455
(288)
75
EBITDA
EBITDA less capex($M)
Mobility segment
~788
2005E3
~1,375
~1,000
26
11 to 12%Capex intensity2
EBITDA margin (total revenue) 42 to 43%
Cash flow yield3 ~31%
2005E
1 Per guidance as at December 17, 20042 Capex as % of total revenue3 EBITDA less capex, as a % of total revenue
~13%
~40%
~28%
2004E1
operating cash flow yield
Attractive wireless cash flow yield
Mobility segment
27
31%
24%19%
22%
15%
6%
TELUS
Nexte
l
Rogers
Verizo
n
PCS
Cingula
r1
North America comparison – cash flow yield
1 Includes AT&T WirelessSource: Morgan Stanley estimates
EBITDA less Capex / Total Revenue
targeted cash flow yield of 31% in 2005 is best in class
Mobility segment
(6)%
T-Mobile
28 4 million net adds expected over next 3 years
Source: Industry analysts
2003
42%
2007E
55-59%
Q3-2004
45%
13.4Msubs
18-19Msubs
14.4Msubs
Canadian wireless penetration growth prospects
Mobility segment
29
data revenue expanding exponentially
Data revenue growth driven by expanding number of applications
Mobility segment
text & picturemessaging
mobilebrowser
downloadsmobilecomputing& other applications
RIM
wireless Internet (1X cards)
wireless databusiness
& consumer
TELUS Consolidated
32
0 to 8%$1.3 to 1.4BCapex
8 to 21%$1.65 to 1.85EPS
4 to 7%
change
EBITDA1
Revenue
2005 targets
$3.2 to 3.3B
$7.9 to 8.0B
1 Includes $100M in restructuring & workforce reduction costs
Free Cash Flow $1.2 to 1.3B
5 to 6%
2005 targets reflect solid revenue & earnings growth
2005 consolidated targets summary
-
33
2005E($M)
20Add back: option & RSU expense less RSU cash paid
(10)Net cash income tax
~(625)Net cash interest paid
(1,300 to 1,400)Capital expenditures
$3,200 to 3,300EBITDA (after rest. & workforce reduction costs)
~1,200 to 1,300Free Cash Flow (per public guidance methodology)
(35)Cash restructuring pmts (in excess of 2005 expense)
free cash flow generation remains strong
2005 consolidated targets – Free Cash Flow
34
<2.2x2.2x 2.7x3.3xNet Debt : EBITDA
53.7%
2003
49.7%
Sept. 30 2004
Net Debt : Capital
Long-term Policy
2002
45 to 50%57.1%
Current leverage within long-term policy
2005 consolidated targets – leverage
35
quarterly dividend 33% to 20¢ for Jan. 1, 2005
new dividend payout ratio guideline of 45 to 55% of net earnings
Normal Course Issuer Bid for 25.5M TELUS shares
effective Dec 20, 2004
purchased 2.2M shares in December for $78M
measures to restrict issue of TELUS shares
Verizon transaction increased liquidity
recent shareholder value enhancing initiatives
balanced approach to stakeholder interests
36
Enhance our leadership position in wireless
Grow brand value through superior customer experience (via leading IP services and customer care)
Embrace continual improvement in productivity
Leverage our investments in high speed Internet through Future Friendly home services
Accelerate non-ILEC performance in Central Canada
Reach a new collective agreement that reflects competitive industry
corporate priorities for 2005
2005 priorities consistent with 2004
37
framework for medium term growth
Regulatory Framework
Technology Substitution
Competitive Intensity + +
Non-ILEC Growth
Future Friendly
Home
Organization Effective-
ness+ +
Tip the scales and strive to hold EBITDA (before restructuring) flat over medium term for wireline business
=
Growth in revenues and EBITDA from large exposure in wireless business
Continued improvements in consolidated results
Wireline Growth Opportunities _________Risks_________
Short-term dilutive
38
e.ComReport Watch
ranked 9th globally by Corporate Essentials, “Annual Report of Annual Reports”
1st in Canada; 2nd in North America ranked #1 in world for “strategy, objectives & outlook”
10 years of disclosure excellence in corporate reporting awards by Canadian Institute of Chartered Accountants, Canadian Investor Relations Institute and Toronto Society of Financial Analysts.
2003 annual report rated best in Canada
IR website ranked 3rd among global telcos by IR Web Report
member of DJSI for 4 consecutive years – only N. American telco
recognized as Canada’s Best Environmental Corporate Citizen
disclosure excellence @ TELUS
39
great exposure to wireless drives consolidated growth
full suite of wireline & wireless product/service offerings provides competitive advantage
strong EPS growth
continued strong cash flows and attractive FCF yield
strong balance sheet with continued de-leveraging to boost future earnings growth
shareholder value focus reflected by recent initiatives to increase return of capital to shareholders
why invest in TELUS?
questions?