Form 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of ____May__________ 2003
(Commission File No. 000-24876)
TELUS Corporation
(Translation of registrant's name into English)
21st Floor, 3777 Kingsway
Burnaby, British Columbia V5H 3Z7
Canada
(Address of principal registered offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:
X
Form 20-F _____ Form 40-F _____
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
X
Yes _____ No _____
This Form 6-K consists of the following:
Press Release dated April 30,2003 of First Quarter Results
TELUS Reports First Quarter Results
Strong wireless performance and continued wireline efficiency drive
earnings
VANCOUVER, April 30 /CNW/ - TELUS Corporation (TSX: T and T.A / NYSE: TU)
today reported for the first quarter of 2003 strong growth in earnings and
free cash flow. Operating earnings (EBITDA) was up 14% due to strong growth at
TELUS Mobility and continued cost structure improvements from the Operational
Efficiency Program (OEP) at TELUS Communications. Earnings per share for the
quarter were 26 cents compared to negative 1 cent a year ago. Earnings per
share in the quarter were significantly up year-over-year even excluding a
15 cent positive tax savings impact. Free cash flow was $376 million this
quarter, a $275 million improvement from a year ago.
Darren Entwistle, president and CEO, commented "the first quarter results
demonstrate that we are delivering on our strategy for profitable growth and
executing against our 2003 priorities. Notable was the continued strong
performance at TELUS Mobility, which reported increased revenue of 19% and an
improved 1.5% churn rate, which together drove increased EBITDA of 46%. Our
operational efficiency initiatives at TELUS Communications continue to be on
track with $95 million in incremental cost savings realized in the quarter.
With consolidated free cash flow of $376 million this quarter, we are
demonstrating the financial strength of TELUS. This quarter is a positive step
towards achieving our overall 2003 targets."
Robert McFarlane, executive vice president and CFO, stated that "strong
operational performance combined with below average capital expenditure
levels, produced free cash flow that allowed us to reduce net debt by
$195 million and continue to lower our key debt leverage ratio, net debt to
EBITDA, to 3.2 times as compared to 3.5 times a year ago. Given positive tax
saving developments, we have narrowed the original 2003 annual free cash flow
guidance set last December by $200 million to the high end of the range at
$500 to $600 million. This certainly bodes well for the likelihood of TELUS
achieving our 2003 year-end target net debt to EBITDA ratio of 3.0 times."
FINANCIAL HIGHLIGHTS
Rounded to nearest C$ Millions, except per share amounts
3 Months Ended
March 31
(unaudited) 2003 2002 % Change
-------------------------------------------------------------------------
Operating revenues 1,740.9 1,698.0 2.5
EBITDA (1) 670.8 589.3 13.8
Net income (loss) 91.2 (0.8) --
Common share & Non-Voting share Income (loss) 88.6 (3.3) --
Earnings (loss) per share (EPS) 0.26 (0.01) --
Capital expenditures 207.8 405.9 (48.8)
Free Cash Flow (2) 375.7 101.0 272
-------------------------------------------------------------------------
(1) Earnings Before Interest, Taxes, Depreciation and Amortization is
defined as Operating revenues less Operations expense and, as
defined, excludes Restructuring and workforce reduction costs
(2) Defined as EBITDA excluding Restructuring and workforce reduction
costs less Capital expenditures, cash interest, cash taxes and cash
dividends
OPERATING HIGHLIGHTS
TELUS Communications
Operating Earnings (EBITDA) up 6%, driven by Operational Efficiency
Program
- Total revenue of $1.2 billion in the quarter declined by 3% or $42
million due largely to price cap impacts, and lower long distance and
other revenues
- OEP related incremental cost savings of $95 million in the first
quarter resulted in a $66 million decrease in Operations expense, down
8% from a year ago
- EBITDA of $492 million, up $26 million or 6% from the same quarter a
year ago
- Underlying EBITDA growth is 10% when normalized for regulatory price
cap impacts of negative $22 million
- Capital expenditures in quarter reduced to $154 million from $309
million, down 50% from a year ago
- Cash flow, EBITDA less capital expenditures, was $339 million this
quarter, up $181 million or 115% from last year
- Non-incumbent operations in Central Canada generated revenues of $141
million up 21% from the same quarter a year ago while negative EBITDA
of $15 million improved 60%
- High-speed Internet subscriber net additions of 32,100 to reach 442,100
total subscribers, a 66% increase
- Network access lines of 4.9 million, declined 0.7% from the same
quarter a year ago
TELUS Mobility
Industry leading ARPU and EBITDA growth of 46%
- Continued strong EBITDA growth of 46% to $179 million in the quarter,
due to an expanded subscriber base, improving ARPU and enhanced
operating efficiencies
- EBITDA margin of 36%, based on network revenue, representing a 7 point
year-over-year margin expansion
- One of the North American industry leading churn rates of 1.5%, a
significant improvement from 1.9% a year ago and 1.7% in the fourth
quarter of 2002
- Canadian industry leading average revenue per unit (ARPU) of $54, up $2
from a year ago
- Network service revenue increased $77 million, up 19% from same quarter
a year ago
- Capital expenditures reduced to $54 million, down 44% from
$97 million a year ago. Capital expenditures as a percentage of revenue
decreased to 10% from 22% a year ago.
- Cash flow, (EBITDA less Capital expenditures), of $124 million this
quarter or a $98.5 million improvement compared to $26 million in the
same quarter a year ago
- Net subscriber additions of 66,700 bringing total subscribers to
3.1 million, a 15% year over year increase
CORPORATE DEVELOPMENTS
TELUS' credit rating outlook upgraded to stable by Moody's
On April 16, Moody's Investors Services announced it had improved TELUS'
credit rating outlook, affecting approximately US$4.2 billion of debt, to
stable from negative. TELUS' credit rating with Moody's for its Senior
Unsecured debt remains unchanged at Ba1, one notch below investment grade. The
rating outlook change is the first since Moody's downgraded TELUS' rating in
July 2002.
Moody's highlighted a number of key strengths and positive developments
at TELUS that were key factors in their determination of the upgrade to TELUS'
outlook. These included:
- significantly improved free cash flow and low level of cash taxes due
to application of Clearnet tax losses
- our strong strategic position as the incumbent telephone company in
Western Canada
- successful execution of OEP
- strong improvement in TELUS Mobility's margin
This action is consistent to our view on the original rating by Moody's
last July as compared to investment grade ratings set by the other three
rating agencies, S&P, DBRS and Fitch. This development does reflect early
progress on our public priority to strengthen our credit ratings.
TELUS Quebec announces job creation program with Quebec government
On February 25, TELUS and the Quebec government jointly announced a job
creation program that based on our ongoing capital investments would result in
approximately $90 million of job creation tax exemptions for TELUS over a
10-year period. This relates to various government job creation programs for
up to 800 jobs split between Montreal and Rimouski. This assists TELUS Quebec
in continuing to develop our network and offering state-of-the-art services to
our customers while developing business potential in the major urban centres.
Improving customer service levels
One of TELUS' top six priorities for 2003 is to drive improved levels of
customer service.
TELUS' Operational Efficiency Program is focused on improving
productivity while maintaining service in the initial phase and improving
service in the longer term. With the majority of staff and facility location
reductions completed, the focus has turned to improving customer service by
eliminating bureaucracy, improving systems and processes, and empowering
employees who deal directly with our customers.
Despite significant staff reductions in 2002, overall, TELUS' service
levels have been maintained through the tremendous efforts of frontline
employees. TELUS currently meets or exceeds 88% of the CRTC's quality of
service indicators. TELUS is making progress in improving customer service
with a number of initiatives including: establishment of TELUS-wide priority
customer service measures, root cause analysis and issue resolution that
reduce inbound call volumes, a program to identify and eliminate errors at the
source, and process adjustments to anticipate and resolve potential customer
issues thereby reducing call volumes and shortening wait times.
TELUS is continuing to monitor our customer service levels and is making
a concerted effort to improve customer service to meet the standards of
excellence demanded by customers.
Regulatory Developments
In March, AT&T Canada's appeal to the federal Cabinet was denied. The
appeal sought to increase the 15 to 20% discounts, awarded in the 2002 price
cap decision, paid by competitive local exchange carriers for use of the
access network of incumbent carriers such as TELUS.
TELUS' own appeal made in January 2003, to the federal Cabinet on a
decision by the CRTC to reject an application to review and vary the 2001
rebanding decision, remains outstanding.
On April 10, the CRTC announced measures to address non-compliance by
incumbent telephone companies (ILECs) with CRTC decisions and the
Telecommunications Act. In a public notice entitled 'Measures with respect to
incumbent telephone company regulatory compliance'
(http://www.crtc.gc.ca/eng/whatsnew.htm), the CRTC gave notice that
inspections of ILEC companies' documents and records could begin any time
after June 9, 2003 (60 days following the public notice).
In response to this public notice, various operational areas within TELUS
Communications and TELUS Quebec are now reviewing processes and systems to
support the demonstration of our compliance.
While TELUS is disappointed that the CRTC found it necessary to take this
action, we will cooperate fully with any inspections ordered by the
Commission. Our strategic approach has always been to take very seriously and
support regulatory compliance, and TELUS will continue to do so going forward.
This is reflected in our code of ethics and day-to-day business practices.
Next generation wireless 1X expansion
TELUS Mobility continued the national expansion of its next generation 1X
wireless data network with the March announcement of 1X service availability
in new centres in the Atlantic Canada provinces of New Brunswick,
Newfoundland, Nova Scotia and Prince Edward Island.
Accomplished via a reciprocal roaming/resale agreement with Atlantic
wireless provider Aliant Mobility, the expansion adds 1X coverage for 500,000
potential clients in areas such as Sydney, on Cape Breton Island; St. John's,
Newfoundland; Fredericton, Saint John and Moncton in New Brunswick; and
Charlottetown, Prince Edward Island. TELUS Mobility 1X service is now
available to approximately 24 million Canadians, or 75 per cent of the
national population.
In February, TELUS Mobility introduced the Audiovox Thera Pocket PC
phone, which operates on the company's national 1X network. The Thera is a
powerful mobile office solution, combining digital wireless phone, Pocket PC
capability and business productivity and entertainment tools in a compact
wireless device.
Wireless Text Messaging: Cross-border capability
The reach and popularity of text messaging continues to grow both at
TELUS Mobility and across the wireless industry. In January, major Canadian
and U.S. wireless carriers announced the launch of cross-border text messaging
capability, which allows clients to send and receive text messages simply by
addressing messages to a recipient's 10-digit wireless phone number anywhere
in Canada or the continental United States.
The new service extends inter-carrier messaging capabilities introduced
in Canada in 2002. According to the Canadian Wireless Telecommunications
Association (CWTA), Canadians sent approximately 25 million text messages in
March alone, up from 21 million in December 2002 and a significant increase
from the 10 million sent in April 2002, when Canadian inter-carrier messaging
capability was introduced.
Wireless Text Messaging: Common Short Codes
Introduced to North America by Canada's major wireless carriers in April,
Common Short Codes are four, five or six-digit numbers to which a text message
can be sent in order to participate in interactive and automated applications
such as direct response marketing, contests or online shopping.
The first commercial user of Common Short Codes in North America was
Labatt Breweries of Canada, which introduced 24BLUE in April as part of its
marketing efforts around the National Hockey League playoffs. Hockey fans in
most provinces across Canada can use short codes to play the Labatt Blue / NHL
Cup Crazy Trivia Challenge on their wireless phones for a chance to win
tickets to a Stanley Cup finals game.
Wireless Web content enhancements
TELUS Mobility continues to grow its roster of online content and
alliances, including images and ringtones - including exclusive content from
Disney, Lord of the Rings and Warner Bros. - downloadable by users of its next
generation 1X network.
An agreement with the National Hockey League, announced at the beginning
of the NHL playoffs, allows clients to access real-time playoff statistics,
team and player profiles, images such as team crests, online games and more.
Clients can even play Canada's famed hockey theme - often called "Canada's
second national anthem" - as their wireless phone ringtone.
In March, TELUS Mobility teamed up with MasterCard to create the first
mobile ATM Locator. Available to PCS and Mike clients across the country, the
MapInfo-powered locator enables users to find more than 35,000 MasterCard,
Maestro or Cirrus ATMs directly on their mobile phones.
TELUS Mobility clients can now have more peace of mind on the road with
the company's new Roadside Assistance program. The service is linked to a
client's phone so they can receive help for almost any vehicle they're
travelling in. Roadside Assistance offers spare tire installation, towing and
winching, emergency gas delivery, battery boost and lockout services
throughout Canada and the U.S., 24 hours a day, seven days a week.
TELUS Mobility's Info on Demand services allow clients to customize the
information they want delivered directly to their wireless phones. New Info on
Demand content providers announced in 2003 include The Weather Network, for
Canadian, U.S. and international weather forecasts; MedReminder, which
provides recurring medical-appointment and other health reminders; Pocket Box
Office, for real-time sports updates, including alerts from Associated Press;
execuGo Media, providing general business information, such as vocabulary-
building lessons, inspirational quotations and executive lifestyle hints; and
CricInfo, which delivers cricket scores and real-time event updates.
TELUS Mobility ranked No. 1 in Canada again
Thanks to its excellent churn and subscriber growth numbers in the fourth
quarter of 2002, TELUS Mobility was rated the top wireless carrier in Canada
in the newest industry survey by wireless analyst Jeffrey Hines of N. Moore
Capital Ltd. Released in March, the study places TELUS Mobility third in North
America, behind only its U.S. strategic partners Nextel and Verizon.
Dividend Declaration
The Board of Directors has declared a quarterly dividend of 15 cents
($0.15) per share on outstanding Common Voting and Non-Voting Shares payable
on July 1, 2003 to shareholders of record on the close of business on June 10,
2003.
For further information: Media Relations: Nick Culo, (780) 493-7236,
nick.culo@telus.com, Investor Relations: John Wheeler, (780) 493-7310,
ir@telus.com, Shafiq Jamal, (604) 488-1100, Robert Mitchell, (416)
279-3219
==============================================================================
TELUS Management Discussion and Analysis
First Quarter 2003
==============================================================================
Forward-Looking Statements
This document and the management discussion and analysis contain
statements about expected future events and financial and operating results of
TELUS Corporation ("TELUS" or the "Company") that are forward-looking and
subject to risks and uncertainties. TELUS' actual results, performance or
achievement could differ materially from those expressed or implied by such
statements. Such statements are qualified in their entirety by the inherent
risks and uncertainties surrounding future expectations and may not reflect
the potential impact of any future acquisitions, mergers or divestitures.
Factors that could cause actual results to differ materially include but are
not limited to: general business and economic conditions in TELUS' service
territories across Canada and future demand for services; competition in
wireline and wireless services, including voice, data and Internet services
and within the Canadian telecommunications industry generally; re-emergence
from receivership of newly restructured competitors; levels of capital
expenditures; corporate restructurings; success of operational and capital
efficiency programs including maintenance of customer service levels; success
of integrating acquisitions; network upgrades, billing system conversions, and
reliance on legacy systems; implementation of new customer relationship
management software; realization of tax savings; the impact of credit rating
changes; availability and cost of capital including renewal of credit
facilities; financial condition and credit risk of customers affecting
collectibility of receivables; ability to maintain an accounts receivable
securitization program; adverse regulatory action; attraction and retention of
key personnel; collective labour agreement negotiations and outcome of
conciliation efforts; future costs of retirement and pension obligations and
returns on invested pension assets; technological advances; the final outcome
of pending or future litigation; the effect of environmental, health and
safety concerns and other risk factors discussed herein and listed from time
to time in TELUS' reports, comprehensive public disclosure documents,
including the Annual Information Form, and in other filings with securities
commissions in Canada and the U.S.
The Company disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
==============================================================================
Management's Discussion and Analysis
The following is a discussion of the consolidated financial condition and
results of operations of TELUS Corporation for the three-month periods ended
March 31, 2003 and 2002. This discussion contains forward-looking information
that is qualified by reference to, and should be read together with, the
Company's discussion regarding forward-looking statements (see "Forward-
Looking Statements" above). The following should also be read together with
the interim consolidated financial statements of TELUS. The interim
consolidated financial statements have been prepared in accordance with
Canadian Generally Accepted Accounting Principles (GAAP), which differ in
certain respects from U.S. GAAP. See Note 19 to the interim consolidated
financial statements for a summary of the principal differences between
Canadian and U.S. GAAP as they relate to TELUS.
Management's discussion and analysis is comprised of the following:
1. Vision, Core Business and Strategy
2. Capability to Deliver Results
3. Results and Key Performance Indicators
4. Risks and Uncertainties
1. Vision, Core Business and Strategy
TELUS will continue to be guided by its six strategic imperatives
established in 2000. TELUS is focusing and moving forward on the following
priorities in 2003:
Continuing to deliver on our efficiency improvement objectives.
- Communications segment operating costs were significantly reduced,
thirteen customer contact centres were consolidated and staff were
reduced by 600 in the first quarter of 2003, as discussed in detail in
"Results and Key Performance Indicators";
- The Company disposed of a non-core property for $19.3 million of cash
proceeds.
Improving customer service.
Process and system changes that are having a positive impact, include:
- TELUS-wide priority customer service measures;
- Root cause analysis and issue resolution reducing inbound call volumes;
- Errors being identified and eliminated at their source; and
- Available staff being aligned with peak service periods.
Enhancing our leadership position in the North American wireless
industry.
During the quarter, TELUS Mobility built on performance which was
industry leading in the second half of 2002 on a number of key indicators.
First quarter Earnings Before Interest Taxes Depreciation and Amortization
(EBITDA) excluding Restructuring and workforce reduction costs increased by
46% compared to the same quarter a year ago. Mobility's industry-leading
average revenue per subscriber unit per month (ARPU) increased by $2 in the
first quarter of 2003 compared to the first quarter a year ago. TELUS Mobility
also enjoys an industry-leading 83% proportion of higher value postpaid
subscribers in its mix of postpaid and pre-paid subscribers. In the area of
building value by retaining customers, in the first quarter of 2003 TELUS
Mobility's churn rate was further reduced to 1.53%, or by 35 basis points as
compared to 1.88% in the first quarter of 2002. For more details please see
"Key operating indicators - Mobility segment".
Strengthen our financial position, based on improved operating
performance.
- Moody's Investor Services changed its outlook for TELUS senior
unsecured debt to 'Stable' from 'Negative', prior to the release of
TELUS first quarter 2003 results; and
- TELUS reduced net debt and improved its financial ratios in the first
quarter of 2003.
Achieving a settlement with our unionized employees.
In 2000, TELUS commenced collective bargaining with the
Telecommunications Workers Union for a new collective agreement replacing the
legacy agreements from BC TEL and Alberta-based TELUS. Following the Clearnet
acquisition and subsequent transactions, the Mobility business assumed
responsibility for separate negotiations for its unionized operations in
British Columbia and Alberta. This is the first round of collective bargaining
since the merger of BC TELECOM and TELUS Alberta and the Company's aim is to
replace the multiple legacy collective agreements with a single collective
agreement for the new bargaining unit.
During the fourth quarter of 2002, the Company's application to the
Federal Minister of Labour, as provided for under the Canada Labour Code,
requesting the appointment of a federal conciliator was granted. While the
conciliation process is underway, the Canada Labour Code prohibits a strike or
lock out.
In January 2003, the Company and the TWU signed a Maintenance of
Activities agreement, as required by federal legislation. This agreement
ensures the continuation of services to 911 emergency, police, fire, ambulance
hospitals and coast guard, with provisions to cover other potential emergency
services necessary to prevent immediate and serious danger to the health or
safety of the public, in the event of a work stoppage.
Also in January 2003, the Company and the TWU agreed to an extension of
the conciliation process to include a global review of all outstanding issues
and a subsequent 60-day conciliation period; conciliation dates are currently
scheduled through the third quarter of 2003. If the outstanding issues are not
resolved at the end of the 60-day period, the parties may agree to extend this
phase or, alternatively, following a 21 day cooling off period, a legal work
stoppage may occur.
Should a new collective agreement not be reached, there is the risk of a
labour disruption. As a labour disruption could occur in multiple forms, the
operational and financial impacts of a labour disruption on the Company are
not practicably determinable currently.
2. Capability to Deliver Results
Changes to the Competitive Environment
The level of competitive rivalry is expected to remain intense in 2003 as
certain competitors restructured their operations. AT&T Canada completed its
restructuring process in April 2003, which eliminated all its debt, and
Microcell Telecommunications Inc. has received creditor and court approval for
the restructuring of its debt and capital in March 2003.
Regulatory updates
Price Cap Decision 2002-34
In 2002, AT&T Canada Inc. petitioned the federal Cabinet to increase
competitor discounts from those provided for in Decision 2002-34. On March 25,
2003 the federal Cabinet upheld Decision 2002-34 thereby denying the petition.
Telecom Public Notice 2003-4, April 10, 2003
The Canadian Radio-television and Telecommunications Commission (CRTC)
announced measures to address what it considers to be non-compliance issues by
Incumbent Local Exchange Carriers (ILECs). The Commission has decided to step
up proactive enforcement powers it is already granted under the
Telecommunications Act. The Company believes this decision has no immediate
material impact on TELUS.
3. Results and Key Performance Indicators
Financial Statement Presentation and Disclosure Changes
Guarantees
In the normal course of its operations, the Company enters into
obligations which GAAP may consider to be guarantees. Effective for reporting
periods ending after December 31, 2002, Canadian GAAP requires the disclosure
of these guarantees and their maximum, undiscounted amounts, even when the
likelihood of the Company having to make any payments under the guarantees is
slight. See Note 2(a) and Note 15(c) to the interim consolidated financial
statements.
Asset Retirement Obligations
Commencing with the Company's 2004 fiscal year, the new recommendations
of the CICA for accounting for asset retirement obligations (CICA Handbook
Section 3110) will apply. The new section focuses on the recognition and
measurement of liabilities for statutory, contractual or legal obligations,
normally when incurred, associated with the retirement of property, plant and
equipment when those obligations result from the acquisition, construction,
development or normal operation of the assets. The obligations are measured
initially at fair value (using present value methodology) and the resulting
costs capitalized into the carrying amount of the related asset. In subsequent
periods, the liability is adjusted for the accretion of discount and any
changes in the amount or timing of the underlying future cash flows. The
capitalized asset retirement cost is depreciated on the same basis as the
related asset; discount accretion is included in determining the results of
operations. The Company is currently evaluating the impact of this standard on
its financial statements.
Financial Impact of Price Cap Decisions
On May 30, 2002 and July 31, 2002, the CRTC announced its decisions on
the Regulatory Framework for the Second Price Cap Period for the ILECs, or
CRTC Decision 2002 34 and CRTC Decision 2002 43, which established the
framework for regulation of ILECs, including TELUS. These decisions cover a
four-year period beginning June 2002 for TELUS Communications Inc. and
beginning August 2002 for TELUS Communications (Quebec) Inc. The impact of
these decisions on TELUS was a $23.0 million decrease in Communications
segment Operating revenues and a $21.9 million decrease in Communications
segment EBITDA for the first quarter of 2003, when compared to the same period
one year earlier.
On March 18, 2003, the CRTC issued Telecom Decision CRTC 2003-11, which
finalized for the industry the assignment of tariffed services to the service
baskets established in Regulatory framework for the second price cap period.
Also on March 18, 2003, the CRTC released Telecom Decision CRTC 2003-18, TELUS
Communications Inc. - 2002 Annual price cap filing, in which it approved, on a
final basis, the majority of the applications filed in 2002 by TELUS proposing
rate changes pursuant to Decision 2002-34. The financial impact of these two
decisions is consistent with TELUS' financial assumptions for 2002 and 2003.
Results of Operations
Highlights
Quarter ended March 31 2003 2002 Change %
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($ in millions except per share amounts)
Operating revenues 1,740.9 1,698.0 42.9 2.5
EBITDA(1) 670.8 589.3 81.5 13.8
Restructuring and workforce
reduction costs 6.5 12.5 (6.0) (48.0)
Income taxes (recovery) (5.9) 16.5 (22.4) (135.8)
Net income (loss) 91.2 (0.8) 92.0 -
Common Share and 88.6 (3.3) 91.9 -
Non-Voting Share income (loss)
Earnings (loss) per share (EPS) 0.26 (0.01) 0.27 -
Capital expenditures - general 207.8 405.9 (198.1) (48.8)
Free cash flow (2) 375.7 101.0 274.7 272.0
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(1) Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA) is defined as Operating revenues less Operations expense and, as
defined, excludes Restructuring and workforce reduction costs.
The Company has issued guidance on and reports EBITDA because it is a key
measure used by management to evaluate performance of business units and it is
utilized in measuring compliance with debt covenants. The Company also
believes EBITDA is a measure commonly reported and widely used by investors as
an indicator of a company's operating performance and ability to incur and
service debt. The Company believes EBITDA assists investors in comparing a
company's performance on a consistent basis without regard to depreciation and
amortization, which are non-cash in nature and can vary significantly
depending upon accounting methods or non-operating factors such as historical
cost; and without regard to Restructuring and workforce reduction costs, which
are transitional in nature. EBITDA is not a calculation based on Canadian or
U.S. Generally Accepted Accounting Principles and should not be considered an
alternative to Net income in measuring the Company's performance or used as an
exclusive measure of cash flow because it does not consider the impact of
working capital growth, capital expenditures, debt principal reductions and
other sources and uses of cash which are disclosed in the Consolidated
Statements of Cash Flows. Investors should carefully consider the specific
items included in TELUS' computation of EBITDA. While EBITDA has been
disclosed herein to permit a more complete comparative analysis of the
Company's operating performance and debt servicing ability relative to other
companies, investors should be cautioned that EBITDA as reported by TELUS may
not be comparable in all instances to EBITDA as reported by other companies.
(2) Free cash flow is defined as EBITDA excluding Restructuring and
workforce reduction costs less Capital expenditures, cash interest, cash taxes
and cash dividends. This measure is used to provide an indication of
underlying cash flows in the business for the items identified. As defined,
free cash flow excludes Restructuring and workforce reduction costs, working
capital changes and other sources and uses of cash, which are disclosed in the
consolidated statements of cash flows.
Significant changes included in the first quarter 2003 financial results,
when compared with the first quarter of 2002, were:
- Communications segment revenues decreased by $42.4 million. This
reduction included price cap decision impacts of $23.0 million, lower
voice equipment sales of $14.3 million, and lower long distance
revenues of $14.3 million from erosion of long distance minutes and
prices;
- Communications segment EBITDA improved by $25.5 million as the decrease
in revenues was more than offset by a $66.4 million decrease in
operations expense. The decrease in operations expense was primarily a
result of $95 million of incremental savings resulting from the
Operational Efficiency Program. Total staff for the Communications
segment were reduced by approximately 600 since December 31, 2002,
bringing cumulative staff reductions to approximately 5,800 since
December 31, 2001, and approximately 6,600 since the inception of the
Operational Efficiency Program. Savings in operations expense have
aggregated $245 million from the start of the Operational Efficiency
Program.
- Mobility segment Revenue improved by $85.3 million or 19.1%. This was a
result of strong average revenue per subscriber unit per month (ARPU)
and subscriber growth;
- Mobility segment EBITDA improved $56.0 million or 45.7%. This was a
result of strong revenue and subscriber growth, cost containment, and
to the economies of scale recognized through efficiencies resulting
from the successful national integration of TELUS Mobility's
operations;
- Consolidated Financing costs decreased by $19.8 million because of
lower debt balances and receipt of interest income for tax-related
matters;
- Income taxes included a recovery of $47.0 million in 2003 for
settlement of tax-related matters;
- Consolidated cash flow (EBITDA excluding Restructuring and workforce
reduction costs less Capital expenditures) increased by $279.6 million
to $463.0 million;
- Consolidated free cash flow (EBITDA excluding Restructuring and
workforce reduction costs less Capital expenditures, cash interest,
cash taxes and cash dividends) increased by $274.7 million to $375.7
million, and exceeded current quarter cash payments under Restructuring
and workforce reduction initiatives of $153.9 million; and
- Net debt was reduced by $195 million in the current quarter.
The discussion below for Operating revenues, Operations expense, EBITDA
and Capital expenditures is presented on a segmented basis. All other
discussion is presented for the consolidated interim financial results.
Operating revenues -Communications segment
Quarter ended March 31 2003 2002 Change %
------------------------------------------------------------------------
($ in millions)
Voice local (net of 2003 price cap of
$12.7 million) 522.9 524.9 (2.0) (0.4)
Voice contribution 15.9 18.5 (2.6) (14.1)
Voice long distance 251.1 265.4 (14.3) (5.4)
(net of 2003 price cap of $1.0 million)
Data (net of 2003 price cap of $9.0
million) 342.8 340.7 2.1 0.6
Other (net of 2003 price cap of $0.3
million) 75.8 101.4 (25.6) (25.2)
-------------------------------------------------------------------------
External operating revenue 1,208.5 1,250.9 (42.4) (3.4)
Intersegment revenue 23.4 21.9 1.5 6.8
-------------------------------------------------------------------------
Total operating revenue 1,231.9 1,272.8 (40.9) (3.2)
-------------------------------------------------------------------------
Voice local revenue is generated from monthly access charges and enhanced
services. Local access revenue decreased by $5.3 million in the first quarter
of 2003, when compared with the same period last year, due to price cap
decision impacts of $12.7 million and fewer access lines than one year ago,
partly offset by growth in non-ILEC business. Increased local enhanced
services revenue of $3.3 million partly offset the decline in local access
revenues. Excluding the negative price cap impacts, voice local revenue
increased by $10.7 million or 2.0% in 2003 as compared to 2002.
Network access lines decreased by approximately 26,000 consumer lines and
7,000 business lines in the twelve-month period ended March 31, 2003. During
the first quarter of 2003, business lines increased by 4,000, while consumer
lines decreased by 2,000. ILEC consumer lines continued to decrease due to
removal of second lines as a result of Internet services migrating from dial-
up to high-speed, technological substitution including migration to other
forms of wireline services as well as wireless services, and losses to
competitors. ILEC business line losses resulting from technological
substitution to more efficient Integrated Services Digital Network (ISDN)
services and from economic factors were 28,000 over twelve months and 3,000
during the current quarter. Partly offsetting this was a net line competitive
gain of 21,000 over twelve months and 7,000 during the current quarter as
growth in Central Canada non-ILEC business lines exceeded ILEC business line
losses. The combined ILEC business and local consumer market share was
estimated to be 96.7% at March 31, 2003 (97.4% one year earlier).
Voice contribution revenue decreased for the first quarter of 2003, when
compared with the same period one year ago because of a lower shortfall
calculated according to the methods prescribed by the CRTC for TELUS and other
industry competitors.
Voice long distance revenue decreased for the first quarter of 2003, when
compared with the same period last year, primarily because of fewer consumer
and business minutes. Consumer revenues decreased by $7.1 million as a result
of competitive pressures from 'dial-around' services and other competitors;
partly offset by increasing the monthly long distance plan administration fee
from $1.25 to $2.95 in February of this year. Business revenues decreased by
$8.6 million as a result of fewer minutes. Wholesale settlement revenues
increased by $2.0 million due to higher international traffic. Substitution to
alternative technologies such as e-mail, Internet and wireless, and lower
business long distance rates contributed to long distance revenue and minute
erosion.
Data revenues include Internet access, hosting and applications, LAN/WAN,
gateway service, internetworking and remote access, managed information
technology (IT) services and legacy data services such as private line,
switched data services, data local access, data settlements and data equipment
sales. Wireless data revenues are included in Mobility segment Network
revenues. Communications segment data revenue growth excluding the negative
price cap impacts was $11.1 million or 3.3% in 2003 as compared to 2002.
Internet service revenues increased by $28.5 million because of growth in the
high speed Internet subscriber base, net of lower revenues from dial-up
Internet services as a result of subscriber migration to high-speed services.
As a result of post-implementation review following billing system
conversions, dial-up and high-speed Internet subscriber net additions include
negative adjustments of 6,400 and 3,000, respectively, in the first quarter of
2003. Growth in Internet-related revenues was partly offset by $13.7 million
lower revenues for data equipment sales and other data services such as analog
and packet-switched services, broadcast and videoconferencing, and managed
information technology. Non-core data revenues from international managed
information technology services decreased by $3.7 million to $9.6 million.
Other revenue decreased for the first quarter of 2003 primarily because
of $14.3 million lower voice equipment sales. Other changes included lower
rents from support structures, lower installation and contract services, and
lower Individual Line Service grant.
Included in the total external operating revenue are non-ILEC revenues of
$140.7 million for the first quarter of 2003 and $116.5 million for the first
quarter of 2002, an increase of $24.2 million or 20.8%.
Intersegment revenues represent services provided by the Communications
segment to the Mobility segment. These revenues are eliminated upon
consolidation together with the associated expense from the Mobility segment.
Key operating indicators - Communications segment
Quarter ended March 31 2003 2002 Change %
-------------------------------------------------------------------------
(000s for subscribers and additions)
Network access lines, end of period 4,913 4,946 (33.0) (0.7)
Total Internet subscribers(1),
end of period 814.2 707.3 106.9 15.1
Dial-up 372.1 440.3 (68.2) (15.5)
High-speed 442.1 267.0 175.1 65.6
Total Internet subscriber net additions(1) 12.5 37.4 (24.9) (66.6)
Dial-up (19.6) (14.8) (4.8) (32.4)
High-speed 32.1 52.2 (20.1) (38.5)
-------------------------------------------------------------------------
(1) Internet net additions and subscriber counts for 2003 are net of
reductions of approximately 6,400 dial-up subscribers and approximately 3,000
high-speed Internet subscribers as a result of a post-implementation review
following billing system conversions.
Operating revenues - Mobility segment
Quarter ended March 31 2003 2002 Change %
-------------------------------------------------------------------------
($ in millions)
Network revenue 492.1 414.9 77.2 18.6
Equipment revenue 40.3 32.2 8.1 25.2
-------------------------------------------------------------------------
External operating revenue 532.4 447.1 85.3 19.1
Intersegment revenue 3.7 4.1 (0.4) (9.8)
-------------------------------------------------------------------------
Total operating revenue 536.1 451.2 84.9 18.8
-------------------------------------------------------------------------
Mobility segment Network revenue is generated from monthly billings for
access fees, incremental airtime charges, prepaid time consumed or expired,
and fees for value-added services. Network revenue increased for the quarter
ended March 31, 2003 as compared to the same period in 2002 as a result of the
continued expansion of TELUS Mobility's subscriber base by 14.8% to
approximately 3.1 million subscribers from 2.7 million one year ago while
average revenue per subscriber unit per month (ARPU) increased to $54 from $52
in the same quarter last year.
TELUS Mobility continued its strategic focus on profitable revenue growth
and subscriber retention, which resulted in higher ARPU and a substantially
improved churn rate year over year. The $2 increase in the year over year ARPU
was the first such increase in some time reversing the declining trend.
Moreover, ARPU remained stable relative to the fourth quarter of 2002. This is
despite recent trends of greater in-bucket usage, postpaid / prepaid mix
changes, retention offers aimed at reducing postpaid churn, and overall
competitive market pressures. In-bucket usage refers to plans that offer
included minutes at a fixed fee for periods of time including "Evenings and
Weekends". The increased ARPU for the first quarter of 2003 was a result of
increased usage and pricing discipline. TELUS Mobility believes stable ARPU
and churn will continue during 2003. Average minutes of use (MOU) per
subscriber per month were 315 for the current quarter as compared to 250 for
the same period in 2002. As of March 31, 2003, postpaid subscribers accounted
for an industry leading 82.7% of the total cumulative subscriber base as
compared to 84.3% one year earlier and stable relative to the fourth quarter
of 2002. Net postpaid subscriber additions for the current quarter of 43,300
represented 64.9% of all net additions in the period as compared to 61,600
(68.1%) for the corresponding period one year ago. Total net subscriber
additions were 66,700 for the current quarter as compared to 90,500 for the
comparable period last year.
Blended postpaid and prepaid churn averaged 1.5% per month in the first
quarter of 2003, a significant improvement from 1.9% for the comparable period
one year earlier. Deactivations declined 6.1% to 139,000 for the first quarter
2003 as compared to 148,100 for the same period in 2002 despite a 14.8%
increase in the subscriber base. The improved churn and industry leading ARPU
are evidence of the continued focus and execution by TELUS Mobility on
subscriber retention and profitable revenue generating subscriber growth. The
decline in churn is attributed to improved network quality and coverage,
improved client service levels, client contracting as part of loyalty and
retention programs, and the grand fathered per-second rate plans.
Equipment sales, rental and service revenue in the three-month period
ended March 31, 2003, was $40.3 million as compared to $32.2 million for the
same period in 2002. The increase in equipment revenue occurred despite a
decline in gross subscriber additions for the current quarter of 205,700 as
compared to 238,600 for the same period in 2002. The increase was principally
due to handset pricing discipline and product mix.
Intersegment revenues represent services provided by the Mobility segment
to the Communications segment. These revenues are eliminated upon
consolidation together with the associated expense from the Communications
segment.
Key operating indicators -Mobility segment
Quarter ended March 31 2003 2002 Change %
-------------------------------------------------------------------------
(000s for subscribers and additions)
Net subscriber additions - postpaid 43.3 61.6 (18.3) (29.7)
Net subscriber additions - prepaid 23.4 28.9 (5.5) (19.0)
------------------------------------
Net subscriber additions - total 66.7 90.5 (23.8) (26.3)
Subscribers - postpaid 2,533.9 2,250.6 283.3 12.6
Subscribers - prepaid 528.3 417.6 110.7 26.5
------------------------------------
Subscribers - total 3,062.2 2,668.2 394.0 14.8
Churn, per month (%) 1.5 1.9 (0.4) -
Cost of Acquisition (COA) per gross
subscriber addition ($)(1) 507 480 27 5.6
Cost of Acquisition (COA) per gross
subscriber addition excl. retention
and migration ($)(1) 425 404 21 5.2
ARPU ($) 54 52 2 3.8
Total POPs (2) covered 25.9 25.1 0.8 3.2
Total POPs covered including 28.2 25.1 3.1 12.4
roaming/resale (millions) (3)
Digital POPs covered (millions) 25.4 24.8 0.6 2.4
Digital POPs covered including 27.9 24.8 3.1 12.5
roaming/resale (millions) (3)
EBITDA margin as a percentage of
network revenue (%) 36.3 29.5 6.8 -
EBITDA excluding COA ($ millions) 282.8 215.7 67.1 31.1
-------------------------------------------------------------------------
(1) For the three months ended March 31, 2002, Cost of Acquisition of
$480 and $404 before retention and migration costs excluded the $21.0 million
favourable clarification of tax legislation by the Ontario Provincial Sales
Tax authorities, representing a reversal of a cumulative COA liability. When
including the $21.0 million reduction, COA for the three months ended March
31, 2002 would be $392 and $315 excluding retention and migration.
(2) POPs is an abbreviation for Population. A POP refers to one person
living in a population area, which in whole or substantial part is included in
the coverage areas.
(3) TELUS Mobility has not activated all digital-roaming areas. TELUS
Mobility PCS Digital Population Coverage was 21.5 million, and 27.9 million
including the roaming/resale agreement with Bell Mobility and Aliant Telecom
Wireless. TELUS Mobility PCS and Mike Digital Population Coverage was 25.4
million.
Operations expense - Communications segment
($ in millions) 2003 2002 Change %
-------------------------------------------------------------------------
Quarter ended March 31 739.7 806.1 (66.4) (8.2)
-------------------------------------------------------------------------
Operations expense for the Communications segment decreased in the first
quarter of 2003, when compared with the same period last year, primarily
because of the Operational Efficiency Program savings and lower equipment
costs of sales. An increased pension expense partially offset these cost
reductions.
ILEC operations expense was $584.5 million in the first quarter of 2003
compared with $652.3 million in the same period last year, a decrease of $67.8
million or 10.4%. The primary reasons for the reduction in ILEC operations
expense in the first quarter of 2003, when compared with the first quarter of
2002, were:
- Incremental Operational Efficiency Program savings of $75.0 million
from lower salaries and benefits. Total staff for the Communications
segment decreased by approximately 600 in the current quarter;
- Incremental Operational Efficiency Program non salary-related savings
of $20.0 million from lower advertising and promotions expense, lower
employee-related overhead costs, and use of fewer contractors;
- Lower equipment cost of sales of $14.4 million. This included $5.0
million lower high-speed Internet cost of sales because of reduced
gross additions of high-speed Internet subscribers and adoption of
EITF 01-9 in mid-2002 for recognizing certain discounts to customers
net against revenues;
- Lower payments to Verizon under the Software and Related Technology
Service Agreement of $4.0 million;
- Costs associated with non-core international data revenues decreased by
$3.0 million to $9.2 million;
- Increased expense of $14.8 million as a result of lower labour
capitalization associated with reduced capital spending;
- Increased pension expense of $16.3 million; and
- Inflationary and other increases of $17.5 million.
Non-ILEC operations expense was $155.2 million in first quarter of 2003
compared with $153.8 million in the same period last year, an increase of $1.4
million or 0.9%. The primary changes in Non-ILEC operations expense were:
- Facility and settlement costs increased by $9.7 million higher because
of higher international transit minute volumes;
- Bad debt expense increased by $6.0 million; and
- Other costs decreased by $14.3 million as a result of concerted focus
on managing operating expenses.
Operations expense - Mobility segment
($ in millions) 2003 2002 Change %
------------------------------------------------------------------------
Quarter ended March 31 357.5 328.6 28.9 8.8
------------------------------------------------------------------------
Expenses related to equipment sales increased $16.4 million (24.3%) to
$83.8 million in the first quarter as compared to $67.4 million for the same
period one year earlier. First quarter 2002 expenses included a $21.0 million
reduction resulting from a clarification of provincial sales tax legislation
related to handset subsidies, which represented the reversal of a cumulative
liability previously recorded in marketing cost of acquisition (COA).
Excluding this $21.0 million favourable clarification of provincial tax
legislation, the current quarter expense decrease was $4.6 million (5.2%)
principally due to a decline of 32,900 gross subscriber activations as
compared to the same period in the prior year as well as favourable exchange
rates. These handset costs are included in marketing cost of acquisition
(COA).
Network service expenses consist of site-related expenses, transmission
costs, spectrum licence fees, contribution revenue taxes, and other direct
costs related to network operations. Network operating expenses decreased $0.8
million or 0.9% to $86.1 million in the first quarter of 2003, as compared to
$86.9 million for the same period in 2002. Reduced Industry Canada spectrum
licence fees of $5.0 million more than offset increases attributed to
transmission and site-related expenses to support the increased sites,
subscriber base, and improved service levels. PCS digital population coverage
increased 6.4 million (Bell - 5.0 million and Aliant - 1.4 million) from 21.5
million before the roaming/resale agreements to 27.9 million including
roaming/resale areas turned on by the end of the first quarter. Total digital
population coverage (Mike and PCS) as of March 31, 2003, was 25.4 million
(27.9 million including all current digital roaming service areas) as compared
to 24.8 million one year ago.
Marketing expenses excluding handset subsidies were $55.8 million for the
first quarter 2003 as compared to $49.4 million for the same period in 2002.
The $6.4 million increase was primarily due to higher advertising and
promotion expenses and to a lesser extent, dealer compensation costs incurred
during the launch of several promotions during the first quarter of 2003. COA
excluding retention and migration was $425 for the current quarter as compared
to $404 (excluding any benefit from the $21.0 million PST clarification) for
the same period in 2002. The increase in COA excluding retention and migration
was due to higher marketing costs and lower than expected gross subscriber
additions, partially offset by a decrease in handset subsidies. COA including
retention and migration was $507 for Q1 2003 as compared to $480 for the
corresponding period in 2002. Retention and migration COA was $82 for the
first quarter 2003 and $76 for the same period last year.
General and Administration (G&A) expense consisted of employee
compensation and benefits, facilities, client services, bad debt and various
other expenses. G&A increased 5.5% to $131.8 million for the first quarter
2003 as compared to spending of $124.9 million for the same period in 2002.
The increase in payroll was principally related to inflation and a growth in
permanent staffing levels in the areas of client operations, company-owned
retail stores, expansion into new coverage territory, and channel distribution
expansion to support subscriber growth and improved service levels. TELUS
Mobility has realized significant economies of scale with the integration of
its operations and billing systems. Consequently, full-time equivalent
employees decreased by 1.3% to 5,021 from 5,088. In the first quarter of 2003,
bad debts decreased slightly over the same period last year.
Earnings(1) Before Interest, Taxes, Depreciation and Amortization (EBITDA) by segmen
Quarter ended March 31 2003 2002 Change %
-------------------------------------------------------------------------
($ in millions)
Communications segment 492.2 466.7 25.5 5.5
Mobility segment 178.6 122.6 56.0 45.7
-------------------------------------------------------------------------
TELUS Consolidated 670.8 589.3 81.5 13.8
-------------------------------------------------------------------------
(1) Excluding Restructuring and workforce reduction costs.
EBITDA(1) margin(2) by segment (%)
Quarter ended March 31 2003 2002 Change %
-------------------------------------------------------------------------
($ in millions)
Communications segment 40.0 36.7 3.3 --
Mobility segment 3 33.3 27.2 6.1 --
-------------------------------------------------------------------------
TELUS Consolidated 38.5 34.7 3.8 --
-------------------------------------------------------------------------
(1) Excluding Restructuring and workforce reduction costs.
(2) EBITDA divided by total revenue.
(3) EBITDA margin as a percentage of network revenue was 36.3% for Q1
2003 as compared to 29.5% (24.5% before PST clarification) for the
same period last year.
Communications segment EBITDA excluding Restructuring and workforce
reduction costs improved primarily because of Operational Efficiency Program
savings of $95 million, partially offset by $21.9 million negative price cap
decision impacts, $16.3 million higher pension expense, and lower long
distance and other revenues. Excluding price cap decision impacts, EBITDA
increased by $47.4 million or 10.2%.
TELUS Mobility continued to successfully execute its national strategy
focused on profitable revenue growth. The significant increase in Mobility
segment EBITDA was principally due to an 18.6% increase in network revenue,
resulting from a 14.8% increase in the cumulative subscriber base, improved
ARPU from $52 to $54, as well as realization of economies of scale.
Incremental network revenue flowed through to EBITDA excluding COA at a rate
of 86.9% in the first quarter 2003 as compared to 88.8% for the same period in
2002.
TELUS Mobility EBITDA improved by $77.0 million (75.8%) when the $21.0
million favourable PST clarification in the first quarter 2002 is excluded.
EBITDA margin as a percentage of network revenue improved to 36.3% for the
first quarter as compared to 29.5% (24.5% before the PST clarification) for
the same period one year earlier. The improvement in EBITDA margin was
attributed to strong ARPU and subscriber growth, cost containment, and to the
economies of scale recognized through efficiencies resulting from the
successful integration of TELUS Mobility's operations.
Depreciation and amortization
Quarter ended March 31 2003 2002 Change %
-------------------------------------------------------------------------
($ in millions)
Depreciation 318.6 291.1 27.5 9.4
Amortization of intangible assets 92.5 83.3 9.2 11.0
-------------------------------------------------------------------------
Depreciation and amortization expenses increased by $36.7 million in the
first quarter of 2003, when compared with the first quarter of 2002, primarily
because of growth in wireless, data network, and administrative software
capital assets.
Restructuring and workforce reduction costs
($ in millions) 2003 2002 Change %
-------------------------------------------------------------------------
Quarter ended March 31 6.5 12.5 (6.0) (48.0)
-------------------------------------------------------------------------
Restructuring and workforce reduction costs were recorded for initiatives
under the Company's Operational Efficiency Program. In 2001, the Company
initiated the phased Operational Efficiency Program aimed at improving
operating and capital productivity and competitiveness. The second and third
phases commenced in 2002, with the third phase continuing into 2003. For
further detail, refer to Note 3 of interim consolidated financial statements.
Staff reductions since the beginning of 2002 were approximately 5,800.
Since the inception of the Operational Efficiency Program in 2001 through
March 31, 2003, the Company has reduced its staff count by approximately
6,600, comprised of 4,700 bargaining unit positions and 1,900 management
positions. TELUS currently expects approximately 700 additional net employee
reductions to occur in 2003 as a result of the Operational Efficiency Program.
EBITDA savings since inception of the Operational Efficiency Program have
increased to approximately $245 million by the first quarter of 2003. The
annual savings for 2003 are currently expected to be approximately $450
million. Thereafter, annual recurring savings are currently estimated to be
approximately $550 million.
Other expense (income)
($ in millions) 2003 2002 Change %
-------------------------------------------------------------------------
Quarter ended March 31 5.6 4.8 0.8 16.7
-------------------------------------------------------------------------
Other expense (income) includes accounts receivable securitization
expense, charitable donations, income from or impairments in portfolio
investments, gains and losses on disposal of property, and 2002 Discontinued
operations. The first quarter 2003 accounts receivable securitization expense
increased by $2.4 million from expanding the volume of receivables under the
securitization program to an average of $467 million in the first quarter of
2003 from $143 million last year. This was partly offset by a timing
difference of lower charitable donations expense in the first quarter of 2003.
Financing costs
($ in millions) 2003 2002 Change %
------------------------------------------------------------------------
Quarter ended March 31 161.6 181.4 (19.8) (10.9)
------------------------------------------------------------------------
Financing costs include interest expense on long-term and short-term
debt, interest income, foreign exchange gains and losses, and amortization of
debt issue costs. Interest on long-term and short-term debt decreased by $9.1
million in the first quarter of 2003, when compared with the first quarter of
2002. This was primarily a result of debt repurchases in the third and fourth
quarters of 2002. The average debt principal outstanding during the first
quarter of 2003 was $8,283 million ($8,783 million in the first quarter of
2002). The effective interest rate on the average debt outstanding for the
first quarter of 2003 was 8.2% (8.1% in 2002). Financing costs in the first
quarter of 2003 were reduced by $9.8 million interest income from settlements
of tax-related matters.
Income taxes (recovery)
($ in millions) 2003 2002 Change %
-------------------------------------------------------------------------
Quarter ended March 31 (5.9) 16.5 (22.4) (135.8)
-------------------------------------------------------------------------
TELUS recorded a $47.0 million income tax recovery in the first quarter
of 2003 for settlement of previous years' tax matters. This settlement was
partially offset by higher income taxes related to higher income before taxes.
Non-controlling interest
($ in millions) 2003 2002 Change %
-------------------------------------------------------------------------
Quarter ended March 31 0.7 0.5 0.2 40.0
-------------------------------------------------------------------------
Non-controlling interest primarily represents a partner's interest in
TELUS International Inc.
Preferred dividends
($ in millions) 2003 2002 Change %
-------------------------------------------------------------------------
Quarter ended March 31 0.9 0.9 - -
-------------------------------------------------------------------------
There were no changes to quarterly dividends on preferred shares.
Interest on convertible debentures
($ in millions) 2003 2002 Change %
-------------------------------------------------------------------------
Quarter ended March 31 1.7 1.6 0.1 6.3
-------------------------------------------------------------------------
The interest on convertible debentures is presented net of related income
taxes. As these debentures are convertible into non-voting shares and are
classified as equity on the balance sheet, the related interest is recorded as
a charge to retained earnings rather than an interest expense.
Liquidity and capital resources
Cash provided by operating activities
($ in millions) 2003 2002 Change %
------------------------------------------------------------------------
Quarter ended March 31 399.7 293.7 106.0 36.0
------------------------------------------------------------------------
Cash provided by operating activities increased for the first quarter of
2003, when compared with the same period last year principally because of the
following:
- Changes in non-cash working capital included an improvement of
$116.8 million resulting from an $87.0 million reduction in accounts
receivable in the first quarter of 2003, compared to the same period
last year in which there was a $29.8 million increase in accounts
receivable
- An $81.5 million improvement in EBITDA;
- A $12.6 million decrease in income taxes paid;
- A $6.3 million decrease in interest paid, and
- Partly offset by a $110.9 million increase in payments under
restructuring and workforce reduction initiatives Payments in the first
quarter of 2003 were $153.9 million, compared with $43.0 million in the
first quarter of 2002 (see Note 3 to the interim consolidated financial
statements).
Cash provided (used) by investing activities
($ in millions) 2003 2002 Change %
------------------------------------------------------------------------
Quarter ended March 31 (182.6) (415.3) 232.7 56.0
------------------------------------------------------------------------
Net cash used by investing activities for the first quarter of 2003
decreased, when compared with the same period last year, because of reduced
capital spending and disposal of an administrative property under the terms of
a sale and leaseback transaction in 2003. An $8.2 million pre-tax gain on the
property sale, on total cash proceeds of $19.3 million, has been deferred and
amortized over the term of the lease.
Capital expenditures by segment
Quarter ended March 31 2003 2002 Change %
------------------------------------------------------------------------
($ in millions)
Communications segment 153.5 309.1 (155.6) (50.3)
Mobility segment 54.3 96.8 (42.5) (43.9)
------------------------------------------------------------------------
Capital expenditures - general 207.8 405.9 (198.1) (48.8)
------------------------------------------------------------------------
------------------------------------------------------------------------
Capital expenditure intensity (%)(1) 11.9 23.9 (12.0) -
------------------------------------------------------------------------
(1) Capital expenditures as a percentage of revenue
Capital spending decreased in the Communications segment in the first
quarter of 2003, when compared to the same period in 2002. Non-ILEC
expenditures decreased by $21.2 million to $18.6 million because of a focus on
optimizing existing facilities. The primary reasons for the decrease in ILEC
capital expenditures by $134.4 million to $134.9 million were:
- ADSL facilities and systems expenditures decreased by $48.2 million to
$20.0 million due to a focus on higher utilization of existing
facilities, the completion of systems in 2002, and slowing growth in
the industry;
- Payments for software licences and trademarks to Verizon in 2003
decreased to zero, compared with $26.2 million in 2002;
- Network infrastructure spending decreased by $18.2 million due to
reduced demand for facilities; and
- Spending on internal systems and processes decreased due to completion
of initiatives in 2002, such as the national long distance and card
service platform and internal web enablement projects.
The Communications segment capital intensity ratio decreased to 12.5% in
the first quarter of 2003 from 24.3% in first quarter of 2002. The
Communications segment contribution to cash flow (EBITDA less Capital
expenditures) increased to $338.7 million in the first quarter of 2003 from
$157.6 million in the same period last year.
Mobility segment capital expenditures were significantly reduced for the
first quarter 2003 as compared to the same period in 2002. TELUS Mobility
continued the enhancement of digital wireless coverage during the first
quarter 2003. Capital spending declined significantly year over year
principally because of:
- Implementation of the 1X digital network in 2002;
- Digital conversion of analogue networks in 2002; and
- Reduced coverage expansion costs in 2003 due to operationalized
roaming/resale agreements in 2002 with Bell Mobility and Aliant Telecom
Wireless.
As at March 31, 2003, TELUS Mobility 1X digital population coverage
including roaming/resale areas was 24.3 million. Capital expenditure intensity
for TELUS Mobility was 10.1% for the first quarter 2003 as compared to 21.5%
for the same period one year ago due to both lower capital spending and growth
in network revenues. As a result of continued EBITDA growth and reduced
capital expenditure intensity, Mobility significantly improved cash flow
(EBITDA less Capital expenditures) to $124.3 million for the current quarter
as compared with $25.8 million for the same period in 2002.
As a result of achieving reduced capital expenditures and achieving
improved EBITDA, consolidated cash flow (EBITDA less Capital expenditures) has
improved to $463.0 million in the first quarter of 2003, when compared with
the $183.4 million in same period in 2002. The Company expects capital
expenditures to increase during the remainder of the year such that the
capital intensity ratio for 2003 will be consistent with the consolidated 20%
or less annual target.
Cash provided (used) by financing activities
($ in millions) 2003 2002 Change %
------------------------------------------------------------------------
Quarter ended March 31 (200.7) 58.9 (259.6) -
------------------------------------------------------------------------
Cash used by financing activities increased in the first quarter of 2003,
when compared with the same period one year ago, principally due to
$182.6 million of net debt redemptions in 2003, compared with $51.2 million of
net debt issues in 2002. Debt redemptions in the first quarter of 2003
included approximately $151 million of bank facilities, $30 million of First
Mortgage Bonds and $1.6 million of capital leases. Proceeds of $20.1 million
were received from Common and Non-voting shares issued from Treasury under the
employee share purchase plan and from share option plans (compared with
$32.8 million of proceeds issued in the same period in 2002 under the same
plans and from warrants). Cash dividends paid to shareholders increased by
$18.0 million as a result of lower enrolment in dividend reinvestment plans
(approximately 17% for the dividend paid in January 2003, compared with
approximately 45% one year earlier) and an increased number of shares
outstanding. The 15-cent dividend paid per Common share and Non-voting share
remained unchanged from one year ago.
Liquidity and capital resource ratios
Mar. 31, Mar. 31, Dec. 31,
Period ended 2003 2002 Change 2002
------------------------------------------------------------------------
Net debt(1) ($ millions) 8,195.3 8,827.2 (631.9) 8,390.3
Total capitalization(2)
($ millions) 14,705.5 15,230.3 (524.8) 14,834.1
EBITDA (12-month
trailing, $ millions) 2,600.1 2,501.2 98.9 2,518.6
Net interest cost(3)
(12-month trailing,
$ millions) 667.0 687.6 (20.6) 686.8
Fixed rate debt as proportion
of total indebtedness (%) 95.1 93.3 (1.8) 93.4
Average term to maturity of
debt (years) 6.5 7.3 (0.8) 6.6
Net debt(1) to total
capitalization(2) (%) 55.7 58.0 (2.3) 56.6
Net debt to EBITDA(4) 3.2 3.5 (0.3) 3.3
Earnings coverage(5) 0.7 2.3 (1.6) 0.6
EBITDA interest coverage(6) 3.9 3.6 0.3 3.7
Free cash flow(7)
(3-month, $ millions) 375.7 101.0 274.7 (104.0)
Free cash flow(7)
(12-month trailing,
$ millions) 248.8 (727.2) 976.0 (25.9)
------------------------------------------------------------------------
(1) Long-term debt plus current obligations and cheques outstanding less
Cash and temporary investments and cross-currency foreign exchange hedge asset
(plus cross-currency foreign exchange hedge liability) related to U.S. dollar
notes. The cross currency foreign exchange hedge liability as at
March 31, 2003 was $204.6 million ($187.9 million hedge asset as at
March 31, 2002). Net Debt as calculated herein, includes a notional amount
related to accounts receivable securitization of approximately $121.5 million
at March 31, 2003 ($30 million at March 31, 2002), which is required to be
included in the numerator of the Leverage Ratio covenant calculation in TELUS'
credit facilities.
(2) Total capitalization is defined as Net debt plus Non-controlling
interest and Shareholders' Equity.
(3) Net Interest Cost is defined as Net financing cost before non-cash
accreted interest and gains on repurchase or redemption of debt, calculated on
a 12-month trailing basis. Accreted interest was recorded up to and including
the second quarter of 2001, affecting the calculation for the period ended
March 31, 2002. Gains on repurchase and redemption of debt were recorded in
the second and third quarters of 2001 and the third quarter and fourth
quarters of 2002, affecting each period reported above.
(4) Net debt to EBITDA is defined as Net debt as at the end of the period
divided by 12-month trailing EBITDA, where EBITDA excludes Restructuring and
workforce reduction costs. This measure is substantially the same as the
Leverage Ratio covenant in TELUS' credit facilities.
(5) Earnings coverage ratio is calculated on a 12-month trailing basis as
Net income before interest expense on total debt and income tax expense
divided by interest expense on total debt.
(6) EBITDA interest coverage is defined as EBITDA excluding Restructuring
and workforce reduction costs divided by Net interest cost. This measure is
substantially the same as the Coverage Ratio covenant in TELUS' credit
facilities.
(7) Free cash flow is defined as EBITDA excluding Restructuring and
workforce reduction costs less Capital expenditures, cash interest, cash taxes
and cash dividends. This measure is used to provide an indication of
underlying cash flows in the business for the items identified. As defined,
free cash flow excludes Restructuring and workforce reduction costs working
capital changes, and other sources and uses of cash, which are disclosed in
the consolidated statements of cash flows.
The short-term obligation and long-term debt balance as at March 31, 2003
decreased by $511 million to $7,877 million from $8,388 million as at
December 31, 2002. This reduction in the debt balance included a $332 million
decrease in the Canadian dollar value of U.S. dollar denominated Notes because
of an approximate five U.S. cent appreciation of the Canadian dollar between
December 31, 2002 and March 31, 2003. TELUS' U.S. dollar debt is fully hedged,
resulting in a corresponding increase of $332 million being recorded in the
Deferred hedging liability.
The proportion of debt with fixed interest rates increased as at
March 31, 2003, when compared with March 31, 2002 and December 31, 2002,
because the amount of utilized Bank facilities at March 31, 2003 decreased by
approximately $173 million from one year ago and decreased by approximately
$151 million since the end of 2002.
The primary reasons for a reduction in the net debt to total
capitalization ratio measured at March 31, 2003, when compared to a year ago,
were the repurchase of approximately $410 million of debt in the third and
fourth quarters of 2002. Total equity increased by approximately $104 million
as a reduction in retained earnings was more than offset by the $323 million
of net proceeds from a public equity issue in the third quarter of 2002 and
Common shares and Non-voting shares issued over the last twelve months. The
Company's Operational Efficiency Program and strong Mobility cash generation
resulted in significant increased free cash flow allowing for additional debt
reduction in the first quarter of 2003. For the first quarter of 2003, the
free cash flow measure exceeded cash payments of $153.9 million for
Restructuring and workforce reduction.
The net debt to EBITDA ratio measured at March 31, 2003 improved, when
compared with March 31, 2002 and December 31, 2002, as a result of debt
reduction and an increase in twelve-month trailing EBITDA.
The EBITDA interest coverage ratio measured at March 31, 2003 improved,
when compared with March 31, 2002 and December 31, 2002, as a result of higher
twelve-month trailing EBITDA and lower twelve-month trailing net interest
costs.
Credit Facilities
TELUS credit facilities at the end of March 2003 consisted of a
$1.5 billion (or U.S. dollar equivalent) revolving credit facility expiring on
May 30, 2004 ($504 million drawn along with $101 million in outstanding
undrawn letters of credit), an undrawn $800 million (or the U.S. dollar
equivalent) 364 day revolving credit facility extendible at TELUS' option for
any amount outstanding as at May 28, 2003 for one year on a non-revolving
basis, and approximately $74 million in other bank facilities (nil drawn and
approximately $19 million in committed and outstanding undrawn letters of
credit, at March 31, 2003). The Company expects to renew its 364 day
extendible revolving credit facility in the amount of $600 million on similar
terms, prior to the May 28, 2003 availability termination date of such credit
facility.
At March 31, 2003, TELUS had unutilized available liquidity well in
excess of $1 billion. TELUS' credit facilities contain customary covenants
including a requirement that TELUS not permit its consolidated Leverage Ratio
(Funded Debt and Asset Securitization Amount to trailing 12-month EBITDA) to
exceed 4.0:1 (approximately 3.2:1 as at March 31, 2003) and not permit its
consolidated Coverage Ratio (EBITDA to Interest Expense and Asset
Securitization Charges on a trailing 12-month basis) to be less than 2.5:1
(approximately 3.9:1 as at March 31, 2003) at the end of any financial
quarter. There are certain minor differences in the calculation of the
Leverage Ratio and Coverage Ratio under the credit agreement as compared with
the calculation of Net debt to EBITDA and EBITDA interest coverage. The
calculations are not expected to be materially different. Continued access to
TELUS' credit facilities is not contingent on the maintenance by TELUS of a
specific credit rating.
Accounts Receivable Sale
TELUS Communications Inc., a wholly owned subsidiary of TELUS, is able to
sell an interest in certain of its receivables up to a maximum of $650 million
and is required to maintain at least a BBB(low) credit rating by Dominion Bond
Rating Service, or the purchaser may require the sale program to be wound
down. The necessary credit rating was exceeded by one level at BBB as of
April 29, 2003. The value of securitized receivables at March 31, 2003, was
$454 million. See Note 8 to the interim consolidated financial statements.
TELUS' credit facilities require that a portion of sold accounts
receivable be added to debt for purposes of calculating the Leverage Ratio
covenant under the credit agreement. This portion is calculated on a monthly
basis and is a function of the ongoing collection performance of the
receivables pool. At March 31, 2003, this amount, defined as the Asset
Securitization Amount, was $121.5 million.
Credit Ratings
On April 16, 2003, Moody's Investor Service changed the outlook for
TELUS' senior unsecured credit rating to 'stable' from 'negative'. No other
new rating actions have been announced since July 2002. TELUS has an objective
to preserve access to capital markets at a reasonable cost by maintaining
investment grade credit ratings.
Credit rating summary
S&P(1) DBRS(1) Moody's(2) Fitch(1)
------------------------------------------------------------------------
TELUS Corporation
Senior Bank Debt BBB BBB Ba1 BBB
Debentures and Notes BBB BBB Ba1 BBB
Medium-term Notes BBB BBB --- ---
Commercial Paper A-2 R-2(high) --- ---
TELUS Communications Inc.
Debentures BBB BBB --- BBB
Medium-term Notes BBB BBB --- BBB
Commercial Paper A-2 R-2(high) --- ---
Preferred Shares P-3(high) Pfd-3 --- ---
TELUS Communications
(Quebec) Inc.
First Mortgage Bonds BBB BBB --- ---
Debentures BBB BBB --- ---
Medium-term Notes BBB BBB --- ---
Commercial Paper A-2 R-2(high) --- ---
------------------------------------------------------------------------
(1) Outlook or Trend 'negative'
(2) Outlook 'stable'
Off-Balance Sheet Arrangements and Contractual Liabilities
Financial Instruments
TELUS uses various financial instruments, the fair values of which are
not reflected on the balance sheet, to reduce or eliminate exposure to
interest rate and currency risks. These instruments are accounted for on the
same basis as the underlying exposure being hedged.
The Company is exposed to interest rate risk arising from fluctuations in
interest rates on its temporary investments, short-term obligations and long-
term debt. The Company has entered into an interest rate swap that has the
effect of fixing the interest rate on $70 million of floating rate debt until
April 2004. Hedge accounting is not applied to this swap agreement.
The Company is exposed to currency risks arising from fluctuations in
foreign exchange rates on its U.S. Dollar denominated long-term debt. Currency
hedging relationships have been established for the related semi-annual
interest payments and principal payments at maturity. The Company's foreign
exchange risk management also includes the use of foreign currency forwards to
fix the exchange rates on short-term foreign currency transactions and
commitments. Hedge accounting is not applied to these foreign currency
forwards.
The Company is exposed to credit risk with respect to its short-term
deposits, accounts and leases receivable, interest rate swap agreements and
foreign exchange hedges. Credit risk associated with short-term deposits is
minimized substantially by ensuring that these financial assets are placed
with governments, well-capitalized financial institutions and other
creditworthy counter parties. An ongoing review is performed to evaluate
changes in the status of counter parties.
The carrying value of cash and temporary investments, bank indebtedness,
accounts receivable, leases receivable, accounts payable, restructuring and
workforce reduction accounts payable, dividends payable and short-term
obligations approximates their fair values due to the immediate or short-term
maturity of these financial instruments.
Commitments and Contingent Liabilities (Note 15 of the interim
consolidated financial statements)
The Company has a number of commitments and contingent liabilities. The
Company has $253.0 million in outstanding commitments for its Operational
Efficiency Program as at March 31, 2003, and approximately $13.0 million
additional Restructuring and workforce reduction expense may be recorded in
2003. The Company occupies leased premises in various centres and has land,
buildings and equipment under operating leases. The Company is currently
engaged in contract negotiations through the federal conciliation process. In
the normal course of the Company's operations, it enters into commercial
agreements that require, as a part of normal terms, guarantees by the Company.
Revised Guidance for 2003
2003 revised 2003 target Change
guidance
------------------------------------------------------------------------------
Consolidated
Revenues no change $7.2 to $7.3 billion -
EBITDA1 no change $2.7 to $2.8 billion 15 cents
Earnings (loss)
per share 50 to 70 cents 35 to 55 cents -
Capital
expenditures no change Approx. $1.5 billion see note 2
Free cash
flow(2) $500 to 600 million $300 to $600 million -
Net debt to
EBITDA no change 3.0 times -
Communications
segment
Revenue
(external) no change $5.0 to $5.05 billion -
Non-ILEC
revenue no change $575 million -
EBITDA(1) no change $2.075 to $2.15 billion -
Non-ILEC EBITDA no change Approx. $(60) million -
Capital
expenditures no change Approx. $1.05 billion -
High-speed
Internet
subscriber net
additions no change 150,000 to 175,000 -
Mobility segment
Revenue
(external) no change $2.2 to $2.25 billion -
EBITDA1 $675 to $700 million $625 to $650 million $50 million
Capital
expenditures no change Approx. $450 million -
Wireless
subscriber
net additions Approx. 350,000 400,000 to 450,000 (50,000) to
(100,000)
------------------------------------------------------------------------
(1) Earnings Before Interest, Taxes, Depreciation and Amortization,
excluding Restructuring and workforce reduction costs.
(2) EBITDA less Capital expenditures, cash interest, cash taxes and cash
dividends. Original target of $300 to $600 million was revised in the 2002
Annual Report to $500 to $600 million as a result of a settlement with tax
authorities in late February 2003.
4. Risks and Uncertainties
A comprehensive discussion of the risks and uncertainties can be found in
Management's Discussion and Analysis in TELUS' Annual Information Form, TELUS'
2002 Annual Report, and filings on sedar.com and on Edgar at sec.gov.
Consolidated statements of income
Three month periods ended March 31
(unaudited) (millions) 2003 2002
-------------------------------------------------------------------------------
OPERATING REVENUES $ 1,740.9 $ 1,698.0
------------------------------------------------------------------------
OPERATING EXPENSES
Operations 1,070.1 1 ,108.7
Depreciation 318.6 291.1
Amortization of
intangible assets 92.5 83.3
Restructuring and
workforce reduction costs 6.5 12.5
------------------------------------------------------------------------
1,487.7 1,495.6
------------------------------------------------------------------------
OPERATING INCOME 253.2 202.4
Other expense (income), net 5.6 4.8
Financing costs 161.6 181.4
------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND
NON-CONTROLLING INTEREST 86.0 16.2
Income taxes (recovery) (5.9) 16.5
Non-controlling interest 0.7 0.5
------------------------------------------------------------------------
NET INCOME (LOSS) 91.2 (0.8)
Preference and preferred
share dividends 0.9 0.9
Interest on convertible debentures,
net of income taxes 1.7 1.6
------------------------------------------------------------------------
COMMON SHARE AND NON-VOTING
SHARE INCOME (LOSS) $ 88.6 $ (3.3)
------------------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE
AND NON-VOTING SHARE ($) (NOTE 6)
- Basic 0.26 (0.01)
- Diluted 0.26 (0.01)
DIVIDENDS DECLARED PER COMMON
SHARE AND NON-VOTING SHARE ($) 0.15 0.15
TOTAL WEIGHTED AVERAGE COMMON SHARES
AND NON-VOTING SHARES
OUTSTANDING (MILLIONS)
- Basic 346.8 304.0
- Diluted 347.0 304.0
------------------------------------------------------------------------
------------------------------------------------------------------------
Consolidated balance sheets
As at As at
March 31, December 31,
(unaudited) (millions) 2003 2002
-------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and temporary
investments, net $ 7.4 $ -
Accounts receivable 553.4 640.4
Income and other taxes receivable 345.5 134.0
Inventories 86.3 96.5
Current portion of
future income taxes 156.1 138.8
Prepaid expenses and other 189.1 163.5
------------------------------------------------------------------------
1,337.8 1,173.2
------------------------------------------------------------------------
Capital Assets, Net
Property, plant, equipment
and other 7,869.2 8,025.9
Intangible assets
subject to amortization 930.6 998.5
Intangible assets with
indefinite lives 2,950.1 2,950.1
------------------------------------------------------------------------
11,749.9 11,974.5
------------------------------------------------------------------------
Other Assets
Deferred charges 589.3 729.1
Future income taxes 957.4 1,170.3
Investments 47.8 48.1
Goodwill 3,124.7 3,124.6
------------------------------------------------------------------------
4,719.2 5,072.1
------------------------------------------------------------------------
$ 17,806.9 $ 18,219.8
------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Cash and temporary investments, net $ - $ 9.0
Accounts payable and
accrued liabilities 1,170.8 1,198.8
Restructuring and workforce
reduction accounts payable and
accrued liabilities 253.0 400.4
Dividends payable 52.8 52.2
Advance billings and
customer deposits 339.2 330.3
Current maturities of long-term debt 161.4 190.3
------------------------------------------------------------------------
1,977.2 2,181.0
------------------------------------------------------------------------
Long-Term Debt 7,715.2 8,197.4
------------------------------------------------------------------------
Future Income Taxes 990.6 992.3
------------------------------------------------------------------------
Other Long-Term Liabilities 613.7 405.3
------------------------------------------------------------------------
Non-Controlling Interest 11.4 11.2
------------------------------------------------------------------------
Shareholders' Equity
Convertible debentures 151.2 148.5
Preference and preferred shares 69.7 69.7
Common equity 6,277.9 6,214.4
------------------------------------------------------------------------
6,498.8 6,432.6
------------------------------------------------------------------------
$ 17,806.9 $ 18,219.8
------------------------------------------------------------------------
------------------------------------------------------------------------
Consolidated statements of cash flows
Three month periods ended March 31
(unaudited) (millions) 2003 2002
------------------------------------------------------------------------
OPERATING ACTIVITIES
Income (loss) from operations $ 91.2 $ (0.8)
Items not affecting cash:
Depreciation and amortization 411.1 374.4
Future income taxes 36.9 10.6
Net pension expense (credits) 13.1 (7.5)
Other, net 1.7 0.1
------------------------------------------------------------------------
Operating cash flow before restructuring
and workforce reduction costs 554.0 376.8
Restructuring and workforce reduction
costs, net of cash payments (147.4) (30.5)
------------------------------------------------------------------------
Operating cash flow 406.6 346.3
Net change in non-cash working capital (6.9) (52.6)
------------------------------------------------------------------------
Cash provided by operating activities 399.7 293.7
------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (207.8) (405.9)
Proceeds from the sale of property 19.3 -
Other 5.9 (9.4)
------------------------------------------------------------------------
Cash provided (used) by
investing activities (182.6) (415.3)
------------------------------------------------------------------------
FINANCING ACTIVITIES
Common Shares and Non-Voting
Shares issued 20.1 32.8
Dividends to shareholders (44.8) (26.8)
Long-term debt issued 17.5 192.0
Redemptions and repayment
of long-term debt (200.1) (79.3)
Change in short-term obligations - (61.5)
Amortization of debt
issue costs and other 6.6 1.7
------------------------------------------------------------------------
Cash provided (used)
by financing activities (200.7) 58.9
------------------------------------------------------------------------
CASH POSITION
Increase (decrease) in cash and
temporary investments, net 16.4 (62.7)
Cash and temporary investments,
net, beginning of period (9.0) 17.1
------------------------------------------------------------------------
Cash and temporary investments,
net, end of period $ 7.4 $ (45.6)
------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE
Interest paid $ 36.0 $ 42.3
------------------------------------------------------------------------
Income taxes (inclusive of Investment
Tax Credits paid (received) $ 0.6 $ 13.2
------------------------------------------------------------------------
------------------------------------------------------------------------
Telus Corporation
Segmented Information
Three month periods
ended March 31 Communications Mobility
(millions) 2003 2002 2003 2002
------------------------------------------------------------------------
External revenue $ 1,208.5 $ 1,250.9 $ 532.4 $ 447.1
Inter-segment revenue 23.4 21.9 3.7 4.1
------------------------------------------------------------------------
Total operating revenue 1,231.9 1,272.8 536.1 451.2
Operations expenses 739.7 806.1 357.5 328.6
------------------------------------------------------------------------
EBITDA (a) $ 492.2 $ 466.7 $ 178.6 $ 122.6
------------------------------------------------------------------------
CAPEX (b) $ 153.5 $ 309.1 $ 54.3 $ 96.8
------------------------------------------------------------------------
EBITDA less CAPEX $ 338.7 $ 157.6 $ 124.3 $ 25.8
------------------------------------------------------------------------
------------------------------------------------------------------------
Telus Corporation
Segmented Information
Three month periods
ended March 31 Eliminations Consolidated
(millions) 2003 2002 2003 2002
------------------------------------------------------------------------
External revenue $ - $ - $ 1,740.9 $1,698.0
Inter-segment revenue (27.1) (26.0) - -
------------------------------------------------------------------------
Total operating revenue (27.1) (26.0) 1,740.9 1,698.0
Operations expenses (27.1) (26.0) 1,070.1 1,108.7
------------------------------------------------------------------------
EBITDA (a) $ - $ - $ 670.8 $ 589.3
------------------------------------------------------------------------
CAPEX (b) $ - $ - $ 207.8 $ 405.9
------------------------------------------------------------------------
EBITDA less CAPEX $ - $ - $ 463.0 $ 183.4
------------------------------------------------------------------------
------------------------------------------------------------------------
(a) Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined as operating revenues less operations expense
and, as defined, excludes restructuring and workforce reduction
costs. The Company has issued guidance on, and reports, EBITDA
because it is a key measure used by management to evaluate
performance of its business segments and is utilized in measuring
compliance with debt covenants.
(b) Total capital expenditures ("CAPEX").
For further information: Media Relations: Nick Culo, (780) 493-7236,
nick.culo@telus.com, Investor Relations: John Wheeler, (780) 493-7310,
ir@telus.com, Shafiq Jamal, (604) 488-1100, Robert Mitchell, (416)
279-3219
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: April 30, 2003
TELUS Corporation
__ "James W. Peters"___
Name: James W. Peters
Title: Corporate Secretary