TELUS George Cope, President & CEO TELUS Mobility BMO Nesbitt Burns Telecom Conference Sept. 16,...
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Transcript of TELUS George Cope, President & CEO TELUS Mobility BMO Nesbitt Burns Telecom Conference Sept. 16,...
TELUS
George Cope, President & CEOTELUS Mobility
BMO Nesbitt Burns Telecom ConferenceSept. 16, 2003
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This presentation contains forward-looking statements about expected future events and financial and operating results that are subject to risks and uncertainties. TELUS’ actual results, performance, or achievement could differ materially from those expressed or implied by such statements. For additional information on potential risk factors, see TELUS’ Annual Information Form, and other filings with securities commissions in Canada and the United States.
TELUS disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
All dollars in C$ unless otherwise specified.
Forward-Looking Legal Disclaimer
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about TELUS
Canada’s 2nd largest telco - only national pure-play, facilities-based, full-service telecom provider
Executing national growth strategy focused on data, IP & wireless
2003E Revenues $7.1 to 7.2B
EBITDA $2.75 to 2.85B
FCF $800M to 1.0B
Operating segments: Communications: wireline
Mobility: wireless
Enterprise value: ~$17B (equity ~ $9B)
Daily trading1: 1.1M shares
1 recent 3 month average. TSX: T, T.A; NYSE: TU
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TELUSCommunications
$5.7B
43%
18%
10%
6%Other
12ME Q2-03
$7.1B
Local Voice
Wireless
Data31%
31%
19%5%Other
LD
Wireless
12ME Q2-00
Local Voice
23%
Data
14%LD
TELUSCommunications
TELUSMobility
TELUSMobility
revenues from wireless & data have grown from 28% to 50% of total revenue in 3 years
about TELUS
consolidated revenue profile evolution
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about TELUS
2003 YTD review – consolidated
significant growth in profitability driven by excellent wireless performance & wireline efficiencies
1 Excludes restructuring & workforce reduction costs
148M$166M$18MNet Income
$0.42
$0.46$0.04EPS
2.0%$3.51B$3.45BRevenue
15%$1.39B$1.21BEBITDA1
YTD Q2-03 changeYTD Q2-02
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about TELUS
2003 YTD review – consolidated
1 Ratio of capex to total revenues2 EBITDA less capex, cash interest, cash taxes, cash dividends; excludes restructuring &
workforce reduction cash costs of $193M
over $600M improvement in free cash flow generation & 2003 deleveraging target achieved six months early
$606M$445M($161M)Free Cash Flow2
13pts15%28%Capex Intensity1
46%$513M$955MCapex
YTD Q2-03 changeYTD Q2-02
0.6X3.0X3.6XNet Debt: EBITDA
TELUS Mobility
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Source: Industry analysts
2002
38%
2006E
49-54%
2003E
41-42%
12Msubs
16-17Msubs
13-13.2Msubs
wireless industry update
penetration growth
3 million or more net adds expected over next 3 yrs
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$1,213M$903M
YTD Q2-03YTD Q2-02
TELUSMobility TELUS
Mobility
continued significant industry EBITDA growth, 34% YTD to $1.2B
wireless industry update
total industry EBITDA1
Source: Company reports. 1 Sum of reported wireless EBITDA for BCE, Rogers Wireless, Microcell and TELUS Mobility
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wireless industry update
net additions
TELUS
Mobility
Q2-03 YTD net addition market share
TELUS Mobility continues to capture healthy share of industry net additions
Source: Company reports, and analyst estimates 1 Includes Microcell subscriber losses
39%1
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subscribers
Q2-03
102.6K
Q2-02
102.8K
net additions steady
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ARPU
Q2-03
$55
Q2-02
$56
Average Revenue Per Unit ($/month)
ARPU increase contributed to 16% network revenue growth, exceeding 14% subscriber growth
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TELUS Mobility Rogers AT&TBCE Wireless Microcell
$55
$41$45$46
ARPU
continued industry leadership
Source: Company reports
Q2-02
Q2-03 $56
$47$48
$39
significant premium to competitors maintained
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ARPU
drivers
per minute billing - Jul-02 evening & weekend clock change - Jun-03 minutes of use up 18% YTD roaming/resale agreements expanded distribution Verizon’s preferred Canadian PCS roaming partner iDEN roaming with Nextel in U.S. expanding data offering (intercarrier SMS, 1X)
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churn
strong sequential improvement
intense focus on retention has yielded material improvement in churn rate
Q2-03Q3-02 Q4-02 Q1-03
1.7%
2.0%
1.5%1.7%
Q2-02
1.3%
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churn
leading North American performance
BCE Cingular
2.4%
2.2%
1.6%
2.2%1.7%
1.4% 1.3%
TELUSVerizonAT&T Rogers Nextel
3.3%
SprintPCS
Microcell
3.0%2.6%
T-Mobile
TELUS’ Q2 churn rate is best-in-class
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churn reduction
drivers
3 year contracts improved coverage
significant improvement in drop call rate expanded national footprint
better phones grandfathered rate plans dedicated retention team improved customer care levels
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profitable subscriber growth
marketing cost as % of lifetime revenue declining
10%15%COA/ Lifetime revenue
1.3%2.0%Churn
$56ARPU $55
$428COA (excl. retention) $420
Q2-03Q2-02
$4,300
$2,800Lifetime revenue
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EBITDA growth & margin expansion
Wireless EBITDA ($)
Q2-02 Q2-03
$119M
26%
38%
$201MEBITDA margin(network revenue)
industry leading EBITDA growth of 69% & significant year-over-year margin enhancement
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EBITDA flow-through
113% of Q2 network revenues flowed to EBITDA line
$(6)MOperating Revenue Growth
Expensedecline
$83M EBITDA growth
$76M
+
Q2-03
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capex
Wireless capex ($)
Q2-02 Q2-03
$141M
29%
14%
$78M
Capex intensity(total revenue)
significant reduction in capital intensity
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EBITDA less capex
$145M cash flow improvement
$(22)M
Q2-02
Q2-03
$123M
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operating cash flow yield
14%Capex Intensity2
EBITDA Margin1 38%
FCF Yield3 21%
Q2-03
attractive wireless FCF yields improving
1 EBITDA margin based on network revenue. EBITDA Margin based on total revenue was 35% for Q2-03
2 Capex as % of total revenue3 EBITDA less capex, as a % of total revenue
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how does TELUS Mobility measure up?
Sources: Cdn. Statistics - Company Reports; US Statistics - Morgan Stanley. TELUS estimates. 1 Projected capex as a % of forecast total revenue. 2 Projected EBITDA less projected Capex divided by projected total revenues
3 Projected wireless penetration gain divided by # of carriers in market. For TELUS, projected net adds divided by projected covered POPs
0.5%0.9%1.2%Penetration gain/carrier3
6 to 83 to 4-No. of carriers in market
10%8%17%(EBITDA – Capex) / tot. rev2
21%17%16%Capex intensity1
18%28%43%Annual EBITDA growth rate
33%32%37%EBITDA / network rev.
US Avg 2003
Cdn Avg 2003
TM 2003 guidance
best-in-class North American operating performance
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2003 guidance
TELUS Mobility
40 to 45%$750 to 775MEBITDA
13 to 24%$350 to 400MCapex
$275 to 350M$350 to 425MEBITDA-capex
better1.8% or lessChurn rate
~50K
11 to 13%
YoY Change
Net additions
Revenue
2003 guidance
350 to 375K
$2.25 to 2.3B
2003 guidance reflects continued relentless focus on profitable subscriber growth
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camera phones continued line-up of cool phones data services (SMS, 1X) Mike nationwide Direct Connect new distribution
what’s new / what’s coming
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conclusion
TELUS Mobility executing to plan
Capturing solid share of industry growth Leading ARPU & 16% network revenue growth Dramatic improvement in churn Financial discipline - cost containment EBITDA growth in excess of 40% & margin
expansion Mobility significant contributor to consolidated FCF
TELUS Mobility is a premium operator in fundamentally strong Canadian wireless market
questions?