TELUS Reports Strong Results for First Quarter 2017

VANCOUVER, British Columbia, May 11 -- TELUS issued the following news release:

TELUS Corporation's consolidated operating revenue increased 2.9 per cent to $3.2 billion in the first quarter of 2017, over the same period a year ago, reflecting higher revenue from data services and subscriber growth in both wireless and wireline operations. Earnings before interest, income taxes, depreciation and amortization (EBITDA)1 increased by 11 per cent to $1.3 billion. When excluding restructuring and other costs, adjusted EBITDA was up 6.4 per cent to $1.3 billion. This growth reflects higher revenue growth, as well as ongoing execution of operational efficiency and effectiveness initiatives.

"TELUS continued to demonstrate the quality and effectiveness of the company's long-term strategy in the first quarter by delivering industry-leading revenue and EBITDA growth in conjunction with the best customer loyalty in our industry," said Darren Entwistle, President and CEO. "Through the consistency of our strong results owing to our skilled team's dedicated execution of our strategy, we are increasing our industry-leading 2017 financial targets to reflect additional revenue and EBITDA growth opportunities, including those associated with the acquisition of MTS customers. Moreover, we are once again raising our quarterly dividend by 7.1 per cent, commensurate with our dividend growth model that is underpinned by our strong financial and operational results."

Mr. Entwistle added, "Our dividend increase reflects the thirteenth increase since 2011, and is the first of our new three year program that will target annual dividend growth between seven and 10 per cent from 2017 through to 2019. Our track record of delivering on our industry-leading shareholder-friendly initiatives continues to generate significant value for our shareholders. Notably, TELUS has now returned over $14 billion to shareholders, including $9 billion in dividends, representing $24 per share since 2004."

Doug French, Executive Vice-President and CFO said, "TELUS' results for the first quarter of 2017 demonstrate our team's ability to successfully execute our national growth strategy by making smart, generational investments that further advance our network leadership and support continued profitable customer growth. Those investments coupled with our keen focus on effectiveness and efficiency initiatives are clearly paying off as evidenced by our strong first quarter results. This consistent execution gives us the confidence to deliver on our strategy while balancing our commitments to TELUS stakeholders."

In wireless, network revenue growth was driven by a 12 per cent increase in data revenue, reflecting a larger proportion of higher-rate two-year plans in the revenue mix, including Premium Plus plans, increased adoption of larger data buckets or topping up of data buckets, continued subscriber growth, a more favourable postpaid subscriber mix, and higher data-related roaming revenues. In wireline, data services and equipment revenue growth of 4.2 per cent was generated by increased Internet and enhanced data service revenues from continued high-speed Internet subscriber growth and higher revenue per customer, growth in business process outsourcing revenues, an increase in TELUS TV revenues from subscriber growth and higher TELUS Health revenues.

In the quarter, TELUS attracted 75,000 new wireless postpaid, high-speed Internet and TV customers, up 44,000 over the same quarter a year ago. The higher net additions included 44,000 wireless postpaid customers, 24,000 high-speed Internet subscribers, and 7,000 TELUS TV customers. TELUS' total wireless subscriber base of 8.6 million is up 2.3 per cent from a year ago, reflecting a 3.8 per cent increase in the postpaid subscriber base to 7.6 million. TELUS' high-speed Internet connections have increased 5.4 per cent to 1.7 million, while TELUS TV subscribers are higher by 5.3 per cent to 1.1 million.

TELUS' continued focus on putting customers first, which has been underway since 2008, continued to deliver an industry-leading wireless monthly postpaid churn rate of 0.93 per cent. TELUS' postpaid churn rate has now been below 1 per cent for 14 of the past 15 quarters.

CONSOLIDATED FINANCIAL HIGHLIGHTS

Click here to view the table: (http://about.telus.com/community/english/news_centre/news_releases/blog/2017/05/11/telus-reports-strong-results-for-first-quarter-2017)

(1) EBITDA is a non-GAAP measure and does not have any standardized meaning prescribed by IFRS-IASB. TELUS issues guidance on and reports EBITDA because it is a key measure used to evaluate performance at a consolidated and segmented level. For further definition and explanation of this measure, see Section 11.1 in the accompanying 2017 first quarter Management's discussion and analysis.

(2) Adjusted EBITDA is defined in this news release as excluding restructuring and other costs. For the first quarter of 2017 and 2016, restructuring and other costs were $4 million and $48 million respectively.

(3) Adjusted net income and adjusted basic EPS are non-GAAP measures and do not have any standardized meaning prescribed by IFRS-IASB. These terms are defined in this news release as excluding from net income attributable to common shares and basic EPS (after income taxes), 1) restructuring and other costs; and 2) unfavourable income tax-related adjustments in the first quarter of 2016. For further analysis of adjusted net income and adjusted basic EPS, see Section 1.3 in the accompanying 2017 first quarter Management's discussion and analysis.

(4) Free cash flow is a non-GAAP measure and does not have any standardized meaning prescribed by IFRS-IASB. For further definition and explanation of this measure, see Section 11.1 in the accompanying 2017 first quarter Management's discussion and analysis.

(5) The sum of active wireless subscribers, residential network access lines (NALs), high-speed Internet access subscribers and TELUS TV subscribers (Optik TV and TELUS Satellite TV subscribers) measured at the end of the respective periods based on information in billing and other systems. In relation to an acquisition and a divestiture both undertaken during the first quarter of 2017, beginning of period residential NALs, high-speed Internet and TELUS TV subscriber balances have been increased by a net 1,000, 4,000 and 5,000 respectively.

For the quarter, net income of $441 million and basic earnings per share (EPS) of $0.73 increased by 17 per cent and 14 per cent respectively reflecting EBITDA growth, partially offset by higher depreciation and amortization expenses. When excluding restructuring and other costs and unfavourable income tax-related adjustments adjusted net income and adjusted basic EPS increased by 5.6 per cent and 5.7 per cent respectively.

Free cash flow4 of $217 million in the first quarter doubled from $108 million a year ago due to lower cash taxes paid and higher EBITDA, partially offset by an increase in capital expenditures.

This news release contains statements about financial and operating performance of TELUS (the Company) and future events that are forward looking, including with respect to the Company's 2017 annual targets and guidance and future dividend increases. By their nature, forward-looking statements require the Company to make assumptions and predictions and are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future performance and events to differ materially from those expressed in the forward-looking statements. Accordingly, the forward-looking statements in this news release should be read together with the cautionary note in the accompanying first quarter Management's discussion and analysis. Forward-looking statements in this news release are made based on the assumptions (including assumptions regarding the 2017 annual targets and guidance, semi-annual dividend increases through 2019, and our ability to sustain and complete our multi-year share purchase program through 2019), and subject to the qualifications and risk factors referred to in the accompanying Management's discussion and analysis for the first quarter of 2017, in the 2016 annual Management's discussion and analysis, and in other TELUS public disclosure documents and filings with securities commissions in Canada (on SEDAR at sedar.com) and in the United States (on EDGAR at sec.gov). The forward-looking statements contained in this news release describe our expectations at the date of this news release and, accordingly, are subject to change after such date. Except as required by law, TELUS disclaims any intention or obligation to update or revise forward-looking statements, and reserves the right to change, at any time at its sole discretion, its current practice of updating annual targets and guidance.

First Quarter 2017 Operating Highlights

TELUS wireless

* Wireless network revenues increased by $100 million or 6.4 per cent year-over-year to $1.7 billion. This growth was driven by a larger proportion of higher-rate plans in the revenue mix, including the Premium Plus plans launched in June 2016, a larger proportion of customers selecting plans with larger data buckets or topping up their data buckets, growth in the subscriber base, a higher postpaid subscriber mix, and higher data-related roaming revenues. This growth was partially offset by the ongoing decline in voice revenue from increased adoption of unlimited nationwide voice plans and continued but moderating substitution to data services and lower voice-related roaming revenues.

* Blended ARPU was higher by 3.9 per cent to $65.53. This represents TELUS' twenty-sixth consecutive quarter of year-over-year growth. The growth was driven by data network revenue growth as described above.

* Monthly postpaid subscriber churn of 0.93 per cent declined by four basis points year-over-year. The improvement reflects our focus on executing on customers first initiatives and retention programs, even with higher churn from CDMA customers ahead of the anticipated CDMA network shutdown in the second quarter of 2017. Blended monthly churn declined by eight basis points to 1.18 per cent reflecting improvements in both postpaid and prepaid churn rates, as well as an increase in the mix of postpaid subscribers.

* Postpaid net additions of 44,000 were higher year-over-year by 36,000 due to higher gross additions, reflecting the success of targeted promotions and marketing efforts focused on higher-value postpaid loading, prepaid to postpaid migrations and lower churn. Postpaid net additions were offset by prepaid losses of 53,000 reflecting focus on higher-value postpaid loading, increased competition for prepaid services, prepaid to postpaid conversions and higher churn from CDMA customers.

* EBITDA increased by $64 million or 8.6 per cent while adjusted wireless EBITDA (EBITDA excluding restructuring and other costs) increased by $56 million or 7.4 per cent over last year to $821 million. The growth reflects higher network revenue as well as ongoing operational efficiency and effectiveness initiatives, partly offset by higher network operating, external labour and administrative expenses. Adjusted EBITDA margin as a percentage of total revenue increased 120 basis points to 45.8 per cent.

* Wireless capital expenditures increased by 38 per cent over the same period a year ago due to ongoing investments in TELUS' fibre-optic network to support its small-cell technology strategy to improve coverage and prepare for a more efficient and timely evolution to 5G. TELUS also expanded its investment in Manitoba to improve coverage, capacity and speeds to significantly enhance customer service and supplement the business acquisition of Bell MTS subscribers, dealers and network. Additionally, TELUS continued its investments in system and network resiliency and reliability in support of customers first initiatives, and to ready the network and systems for future retirement of legacy assets.

TELUS wireline

* External wireline revenues increased by $9 million or 0.7 per cent to $1.4 billion. This growth was generated primarily by higher data services and equipment revenue.

* Data services and equipment revenues increased by $42 million or 4.2 per cent, due to increased Internet and enhanced data revenues from continued high-speed Internet subscriber growth and higher revenue per customer, growth in business process outsourcing services, increased TELUS TV revenues from continued subscriber growth and increased TELUS Health revenues.

* High-speed Internet net additions of 24,000 were up 12,000 from the same quarter a year ago, reflecting the ongoing expansion of TELUS' high-speed broadband footprint, including fibre to the premises and high-speed Internet over LTE offering.

* Total TV net additions of 7,000 were lower by 4,000 over the same quarter a year ago, as a result of lower gross additions and satellite-TV subscriber losses due to slower subscriber growth for paid TV services reflecting a high rate of market penetration for TV services and heightened competitive intensity, including OTT services. These factors were partly offset by the ongoing expansion of our addressable high-speed Internet and Optik TV footprint, connecting more homes and businesses directly to fibre and bundling of these services together.

* Residential network access lines (NALs) declined by 23,000 in the quarter, an improvement of 3,000 over the same quarter a year ago. Residential NAL losses continue to reflect the ongoing trend towards wireless and Internet substitution, partly mitigated by the success of TELUS' bundled service offerings.

* Wireline EBITDA increased by $57 million or 14.6 per cent while adjusted EBITDA (EBITDA excluding restructuring and other costs) increased by $21 million or 4.7 per cent over last year to $444 million. The improvement reflects ongoing revenue growth and execution on operating efficiency and effectiveness initiatives, as well as improving margins in data services, including Internet, TELUS TV, TELUS Health and business process outsourcing services. Adjusted EBITDA margin as a percentage of total revenue increased 110 basis points to 30.2 per cent.

* Wireline capital expenditures increased 8 per cent over the same period a year ago due primarily to continued strategic investments in broadband network infrastructure, including connecting more homes and businesses directly to TELUS' fibre-optic network. This investment supports high-speed Internet and Optik TV subscriber growth, as well as TELUS' growing customer demand for faster Internet speeds, and extends the reach and functionality of TELUS' business and healthcare solutions.

TELUS updates 2017 consolidated financial targets

TELUS' consolidated financial targets for 2017, including revenue, EBITDA excluding restructuring and other costs and basic earnings per share, are being updated now that TELUS and Bell have formally closed their deal to have approximately 100,000 Bell MTS postpaid wireless customers and 15 dealer locations acquired by TELUS.

TELUS is also raising its consolidated capital expenditure target to reflect the ongoing fibre-optic network rollout and to support increased wireless network investments in Manitoba. The investments will support ongoing profitable customer growth and support TELUS' small-cell technology strategy to improve coverage and prepare for a more efficient and timely evolution to 5G.

1) In 2017, total restructuring and others costs are expected to be approximately $125 million, as compared to $479 million in 2016.

2) Basic EPS for 2016 adjusted to exclude the lump-sum transformative compensation expense of 38 cents.

3) Capital expenditure targets and results exclude expenditures for spectrum licences.

The preceding disclosure respecting TELUS' 2017 financial targets contains forward-looking information and is fully qualified by the 'Caution regarding forward-looking statements' at the beginning of the accompanying Management's discussion and analysis for the first quarter of 2017 and in the 2016 annual Management's discussion and analysis, especially Section 10 entitled 'Risks and Risk Management' thereof which is hereby incorporated by reference, and is based on management's expectations and assumptions as set out in Section 9 of the 2016 annual Management's discussion and analysis entitled 'General trends, outlook and assumptions'. This disclosure updates Section 1.7 entitled 'Financial and operating targets for 2017' of TELUS' fourth quarter 2016 results and 2017 financial target news release dated February 9, 2017.

Kathy Kinloch and Claude Mongeau to join TELUS Board of Directors

TELUS is pleased to announce Kathy Kinloch and Claude Mongeau as new nominees to our Board of Directors, to be elected at the TELUS Annual General Meeting held on May 11.

Kathy currently serves as the President of the British Columbia Institute of Technology (BCIT), a position she has held since January 2014. Previously, Kathy has held several leadership positions, including President of Vancouver Community College from 2010 to 2013 and Dean of Health Sciences at BCIT from 2007 to 2010. Kathy was also Senior Advisor to the Ministry of Health for the B.C. government from 2006 to 2007, the Chief Operating Officer of the Fraser Health Authority from 2002 to 2006, and a Vice-President at Surrey Memorial Hospital from 1981 to 2002. Kathy holds a Bachelor of Science in Nursing from the University of Alberta and a Master of Arts in Leadership from Royal Roads University.

Claude Mongeau served as President and Chief Executive Officer of Canadian National Railway Company (CN) from 2010 to 2016. During his 22-year career at CN, he also served as Executive Vice-President and Chief Financial Officer from 2000 to 2009, Senior Vice-President and Chief Financial Officer from 1999 to 2000, Vice-President, Strategic and Financial Planning from 1995 to 1999, and Assistant Vice-President, Corporate Development from 1994 to 1995. Claude holds a Bachelor in Psychology from the University of Quebec and an MBA from McGill University.

Micheline Bouchard, who has been a TELUS director since 2004, is retiring today from our Board of Directors. We thank Micheline for her many contributions to TELUS, including her service as a member of the Audit, Human Resources and Compensation, and Pension committees.

Dividend Declaration - increased to $0.4925 cents per quarter

The TELUS Board of Directors has declared a quarterly dividend of $0.4925 Canadian per share on the issued and outstanding Common Shares of the Company payable on July 4, 2017 to holders of record at the close of business on June 9, 2017.

This second quarter dividend represents a 7.1 per cent increase from the $0.46 quarterly dividend paid on July 4, 2016 and is the thirteenth dividend increase since TELUS announced its original multi-year dividend growth program in May 2011. Over this period, TELUS' dividend is higher by 88 per cent.

Corporate Highlights

TELUS makes significant contributions and investments in the communities where team members live, work and serve and to the Canadian economy on behalf of customers, shareholders and team members. These include:

* Paying, collecting and remitting a total of approximately $559 million in taxes in the first quarter of 2017 to federal, provincial and municipal governments in Canada consisting of corporate income taxes, sales taxes, property taxes, employer portion of payroll taxes and various regulatory fees. Since 2000, the Company has remitted approximately $21 billion in these taxes.

* Disbursing spectrum renewal fees of $50 million to Innovation, Science and Economic Development Canada in the first quarter of 2017. Since 2002, TELUS' total tax and spectrum remittances to federal, provincial and municipal governments in Canada have totaled more than $26 billion.

* Investing $724 million in capital expenditures primarily in communities across Canada in the first quarter of 2017 and $33 billion since 2000.

* Spending $1.8 billion in total operating expenses in the first quarter of 2017, including goods and service purchased of $1.2 billion. Since 2000, TELUS has spent $101 billion and $66 billion respectively in these areas.

* Generating a total team member payroll of $627 million in the first quarter of 2017, including payroll taxes of $59 million. Since 2000, total team member payroll totals $40 billion.

* Paying $567 million in dividends in the first four months of 2017 to individual shareholders, mutual fund owners, pensioners and institutional investors.

* Returning $14.2 billion to shareholders through TELUS' dividend and share purchase programs from 2004 to the end of April 2017, including $9.0 billion in dividends and $5.2 billion in share purchases, representing $24 per share.