TELUS reports strong operational and financial results for fourth quarter 2019; Announcing leading 2020 consolidated financial targets

Fourth quarter consolidated revenue and EBITDA growth of 2.5 and 7.9 per cent; Annual consolidated revenue and EBITDA growth of 3.2 and 8.4 per cent, achieving original revenue and EBITDA targets for 2019

Strong fourth quarter customer growth of 176,000 net additions, reflecting broadband network leadership and customer service excellence

Consistent wireless net additions of 130,000, including 70,000 high-quality mobile phone additions and 60,000 mobile connected device additions; Industry-best postpaid churn below 1 per cent for sixth consecutive year

Industry-leading wireline customer additions of 46,000 including 28,000 Internet, 15,000 TV and 15,000 Security net new clients, and stable residential voice losses of 12,000

Leading customer growth of 713,000 net additions in 2019, up 21 per cent over 2018

Targeting leading 2020 consolidated revenue and EBITDA growth of up to 8 and 7 per cent; free cash flow targeted to increase to up to $1.7 billion

TELUS announces two-for-one share split to shareholders of record on March 13, 2020, building on our leading shareholder-friendly initiatives

Vancouver, B.C. – TELUS Corporation today released its unaudited results for the fourth quarter of 2019. For the quarter, consolidated operating revenue of $3.9 billion increased by 2.5 per cent over the same period a year ago, driven by growth in wireless network revenue and wireline data services revenue. Earnings before interest, income taxes, depreciation and amortization (EBITDA) increased by 10.8 per cent to $1.4 billion and when excluding restructuring and other costs and non-recurring losses and equity losses related to real estate joint ventures, Adjusted EBITDA was up 7.9 per cent. This growth reflects higher wireless network revenue driven by a growing subscriber base, growth in wireline data service margins, a higher EBITDA contribution from our CCBS and health businesses, and the effects of implementing IFRS 16. This was partly offset by continued declines in wireline legacy voice and legacy data services, a decline in contribution from our legacy business services as well as lower gains on sales of assets. Applying a retrospective IFRS 16 simulation to fiscal 2018 results, pro forma Adjusted EBITDA growth was approximately 3.0 per cent, or 5.2 per cent excluding an atypical decline in wholesale roaming revenue and gains on sales of assets in the same period a year ago.

For the quarter, net income of $379 million increased by 3.0 per cent over the same period last year and Basic earnings per share (EPS) of $0.61 increased by 1.7 per cent driven by EBITDA growth, partly offset by higher depreciation and amortization due to growth in our asset base, including from investments in our broadband technologies and business acquisitions, and increased financing costs. When excluding the effects of restructuring and other costs, income tax-related adjustments, and non-recurring losses and equity losses related to real estate joint ventures, adjusted net income of $400 million decreased by 2.2 per cent compared to the prior year, while adjusted basic EPS of $0.67 was down 2.9 per cent.

“In 2019, TELUS continued its track record of delivering strong and consistent financial and operating results in both wireless and wireline, a trend the TELUS team has demonstrated over the long-term” said Darren Entwistle, President and CEO. “Both 2019 and the fourth quarter were characterized by profitable growth, with a thoughtful balance between continuing to meaningfully grow our customer base and enhancing profitability. The fourth quarter concluded another year of robust customer growth where we added a leading 713,000 net customer additions, while achieving our annual revenue and EBITDA growth targets for the ninth consecutive year. This continued performance is achieved thanks to the unwavering dedication of the TELUS team to execute on our longstanding growth strategy, despite an intensely competitive environment. Moreover, our team’s commitment to providing an industry-best customer experience enabled TELUS to continue our leadership in customer loyalty, and achieve our sixth consecutive year of industry-leading postpaid wireless churn below one per cent.”

Mr. Entwistle added, “Our success is also underpinned by the significant, continued investments we are making in our leading network. In 2019, TELUS earned the top spot in all five major wireless network reporting, including accolades from Opensignal, J.D. Power, PCMag, Ookla and Tutela. These recognitions reinforce the superiority of our networks and the value of our ongoing capital investments in broadband technologies. Our 2019 awards build on our outstanding record of achievement with respect to network excellence, having earned the top spot in four out of five of the major mobile network reporting for the third consecutive year in a row or more, which represents a key differentiator for our organization. Notably, these awards are based on our national networks, inclusive of both urban and rural coverage.”

“Similarly, on the wireline side, in 2019 TELUS PureFibre earned the distinction of providing Canada’s #1 Netflix streaming experience and being the country’s best Wi-Fi provider, complementing our third party wireless network accolades,” Mr. Entwistle continued. “More recently, TELUS was recognized as Canada’s Best Gaming Internet Service Provider for major ISPs in 2020 by PCMag. This is a testament to our leading fibre investments, and the dedication and spirited teamwork of the TELUS team in putting our customers first in everything we do.”

Mr. Entwistle further commented, “Through the success of our broadband technology investments, in combination with our culture of putting our customers first, we have demonstrated our ability to consistently drive profitable growth over the long-term. Our proven strategy gives us the confidence in again delivering on the annual targets for 2020 that we have announced today, including revenue and EBITDA growth of up to 8 and 7 per cent respectively, alongside a meaningful expansion in free cash flow to up to $1.7 billion. Without question, it is the unparalleled execution by our talented team that enables our shareholder-friendly initiatives, notably our multi-year dividend growth program, which is now in its tenth year. In 2019, we returned more than $1.3 billion to shareholders, building on the close to $18 billion we have returned to shareholders since 2004, representing over $29 per share. Consistent with the approximate 7 per cent dividend growth achieved in each of the last three years, and following six consecutive prior years of circa 10 per cent annual dividend growth, we continue to target an additional seven to 10 per cent annual increase in 2020 through 2022. Further amplifying the success of our leading track record of shareholder-friendly initiatives, we are pleased to announce a two-for-one share split effective March 17, 2020, our second share split since 2013. Notably, it will enhance our trading liquidity, doubling our shares outstanding to approximately 1.2 billion, and improve the affordability of our shares for smaller retail investors.”

“Importantly, Canadians want to do business with an organisation that shares their values and puts them first,” continued Mr. Entwistle. “The positive outcomes generated by our focus on answering key societal issues enabled us to create value for all our stakeholders in 2019, including volunteering 1.1 million hours, or 152,000 days, in our communities throughout the year. Moreover, by year-end 2019, we supported tens of thousands of Canadians through our Connecting for Good initiatives, providing 39,000 Canadians from low-income families access to low-cost, subsidized, high-speed internet through TELUS Internet for Good; 3,900 youth aging out of foster care with access to a free smartphone and free data plan through TELUS Mobility for Good; and 22,000 Canadians living on the streets with access to mobile healthcare with TELUS Health for Good. Furthermore, in its inaugural year, the TELUS Friendly Future Foundation, together with our TELUS Community Boards, contributed $8 million to create a brighter future for vulnerable young people in Canada. As a result of our TELUS family’s commitment to giving back, we met all six of our annual social impact targets, and we look forward to setting and meeting our next round of ambitious giving targets in 2020.”

Doug French, TELUS’ Executive Vice-president and Chief Financial Officer, said, “Our results for the fourth quarter reflect our consistent approach to executing in the market, focusing on profitable customer growth as evidenced by our pre-IFRS 15 wireless EBITDA growth rate of 7.8 per cent for the quarter and 6.9 per cent for the full year. Importantly, these strong results are being achieved despite the highly competitive fourth quarter, an atypical decline in wholesale roaming revenue, as well as lapping of gains on sales of assets in the same period a year ago. Notably, excluding the atypical decline in wholesale roaming revenue in the quarter, ARPU, ABPU and network revenue continued to show consistent trends experienced throughout 2019. More specifically, ARPU would have declined by 1.2 per cent while ABPU and network revenue would have increased by 0.3 per cent and 2.0 per cent, respectively, driven by the strong underlying economics of our new service offerings including Peace of Mind, Easy Payment and Family Discounts. Our focused strategy supported our efforts on achieving the revenue and profitability financial targets we originally set out for 2019 one year ago, including revenue and adjusted EBITDA growth of 3.2 and 8.4 per cent. Clearly, our disciplined approach and rigorous execution on our customer friendly plans are driving economically accretive customer growth which will support future profitability and cash flow generation.”

Mr. French added, “For 2020, we expect to deliver another strong year of financial and operational results, fueled by our commitment to remain focused on driving profitable customer growth and ongoing focus on cost efficiency and effectiveness. As planned, we expect strong free cash flow growth in the year ahead, nearly doubling to up to $1.7 billion, driven by robust EBITDA growth, lower cash taxes and strategically focused capital expenditures, before spectrum, of $2.75 billion. Importantly, our cash dividend as a percentage of prospective free cash flow before spectrum is expected to improve significantly and fall within our free cash flow payout ratio of 60 to 75 per cent.”

“As we look forward to 2020 and beyond, we are excited about the future opportunities across our unique and growing asset base, and the cash flow generation those businesses will drive. Our generational and superior fibre build is increasingly nearing completion, enabling our dedicated team to deliver leading services that we can leverage to own the home and offer forward thinking business solutions. These investments are also preparing our evolution to 5G where an expansive and deep fibre footprint will continue to position TELUS’ broadband network among the best globally. Overall, our outlook for profitable growth will support our strong balance sheet position while we look to continue making the right strategic investments to advance our growth strategy.”

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