The 2008 CSR brochure

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Financial highlights

In 2008, TELUS’ operating revenues increased 6.4 per cent to $9.65 billion, largely due to wireless growth and wireline data growth, including new wireline data revenues from the January 2008 acquisition of Emergis. Revenues from wireline data and wireless services represent 69 per cent of total revenues, up from 67 per cent in 2007 and 28 per cent in 2000. This is consistent with our strategic imperatives focusing national growth in wireless, data and Internet Protocol (IP).

When 2008 EBITDA of $3.8 billion is compared to 2007 EBITDA excluding a largely one-time $169 million expense, the increase was only 0.6 per cent. This was due to growth in wireless and data revenues being partly offset by costs supporting growth, including acquisition and retention costs related to record digital wireless subscriber additions, higher restructuring costs in support of efficiency activities and short-term dilutive growth initiatives. These initiatives include TELUS TV, Koodo Mobile and upfront implementation costs of new, large enterprise contracts.

Net income decreased by $130 million or 27 cents per share (basic) in 2008 when compared to 2007. The decrease included lower net income tax recoveries and related interest of $208 million (63 cents per share). Net income before income tax-related adjustments increased by $78 million, or 36 cents per share.

Cash flow, defined as EBITDA less capital expenditures, declined by $950 million to $1.0 billion, due mainly to the $882 million payment for Advanced Wireless Spectrum (AWS) licenses in 2008 and increased capital expenditures supporting broadband investments and upfront expenditures to support new enterprise clients. Excluding payment for AWS spectrum licenses, cash flows would have declined by three per cent or $68 million to $1.9 billion.

The following chart shows how TELUS allocates its resources, relative to revenue. The largest percentage (52 per cent) goes to paying our suppliers, 92 per cent of which are Canadian companies or multi-national companies with locations in Canada.

Corporate Resource Allocation

Financial highlights

Years ended December 31 $ in millions, except per share amounts and ratios	2008	2007	% change
Operating revenues	9,653	9,074	6.4
Operating income	2,066	1,974	4.7
Net income	1,128	1,258	(10)
Earnings per share, basic	3.52	3.79	(7.1)
EBITDA¹	3,779	3,589	5.3
As adjusted²
EBITDA	3,779	3,758	0.6
Operating income	2,066	2,143	(3.6)
Net income	1,128	1,363	(17)
Earnings per share, basic	3.52	4.11	(14)
Capital expenditures	1,859	1,770	5.0
Simple cash flow³	1,038	1,988	(48)
Dividends declared per share	1.825	1.575	16
Dividend payout ratio⁴	56%	54%	2 pts

¹ Earnings before interest, taxes, depreciation and amortization.
² In 2007, EBITDA (as adjusted) and operating income (as adjusted) exclude an incremental charge of $169 million relating to the introduction of a net-cash settlement feature for share option awards granted prior to 2005. Net income (as adjusted) and earnings per share (as adjusted), exclude $105 million and 32 cents, respectively, for this charge on an after-tax basis.
³ EBITDA (as adjusted) less capital expenditures and, for 2008, deducting payment of $882 million for AWS spectrum licences.
⁴ Based on earnings per share excluding favourable tax-related adjustments and the 2007 net-cash settlement feature expense.

To learn more about TELUS financial performance and targets for 2009, visit TELUS’ 2008 annual report.

In 2008, we increased our capital expenditures to almost $1.9 billion, or 19 per cent of operating revenues. The increase in capital expenditures in 2008 was directed to investments supporting high bandwidth services for business and residential customers, the next generation wireless High Speed Packet Access (HSPA) network, and upfront expenditures to support new enterprise customers.

Capital expenditures by province

$ in millions	2008¹	%	2007	%
British Columbia	451	24	454.6	25.7
Alberta	739	40	699.3	39.5
Saskatchewan	1	0.0	0.5	0.0
Manitoba	1	0.0	5.5	0.3
Ontario	444	24	433.7	24.5
Quebec	183	9.8	154.6	8.7
Atlantic Canada	9	0.5	1.3	0.1
Outside Canada²	31	1.7	20.8	1.2
Total capital expenditures	1,859	100	1,770.3	100

¹ Rounded.
² Primarily TELUS International.

Notwithstanding current economic trends, in 2009, TELUS expects to make increased capital investments of approximately $2.05 billion, 10 per cent higher than 2008, representing approximately 20 per cent of expected operating revenues as we focus on expanding our wireless and wireline broadband and data capabilities and coverage.