Telus 2010 Annual Report Download - page 32

28 . TELUS 2010 annual report
$2 billion of debt refinancing completed in the past two years
and a lower overall level of debt.
Free cash flow increased by 95 per cent to $947 million
in 2010, reflecting both growth in earnings and a significant
$380 million decline in capital expenditures. Notably, our strong
cash flow position enabled us to make a voluntary $200 million
contribution in January 2011 to our defined benefit pension
plans, with positive impacts to our expected earnings and our
already strong pension funding position. The benefits from
the contribution include reductions in our pension expense
in 2011 and our cash taxes in 2010 and 2011.
Indicative of the Company’s momentum are the 2011 ranges
and growth rates for consolidated and segmented targets
shown in the illustration above. I had more comfort setting these
targets in December 2010 than a year earlier, due to the fourth
quarter exit rate on wireless ARPU – a 1.9 per cent increase
compared to a 7.7 per cent decline in 2009. However, one can
never get too comfortable in our industry, with key uncertainties
in 2011 that include the magnitude of the impact from new
wireless entrants and regulatory developments. These targets
should be read in conjunction with the important assumptions
and caution regarding forward-looking statements contained
in Management’s discussion and analysis (MD&A).
Based on targeted EBITDA growth, as well as lower
financing costs and much lower cash taxes, free cash flow
is also expected to increase notably in 2011.
Strong financial management
TELUS has considerable financial strength and a demonstrated
commitment to transparency and adherence to prudent finan-
cial policies and guidelines. These have guided our actions
successfully over the past decade as we executed our
operational strategy while building financial strength and thereby
earned the confidence of investors. Our track record is also
reflected in the strong investment
grade credit ratings we
maintain, BBB+ to A– with a stable trend, which have enabled
us to have ready access to capital markets.
We continued in 2010 to refinance and early redeem U.S.
debt due in June 2011 carrying an effective interest rate
of 8.5 per cent. In July, we successfully raised $1 billion of
10-year debt with a 5.05 per cent coupon. This mirrored
the same amount and coupon of a December 2009 debt issue.
The combined impact of these two bond issues would be to
lower annual interest costs by more than $65 million, which
will positively impact future earnings and cash flow. Importantly,
these debt issues also reduced our refinancing risk and
extended our debt maturity profile by almost two-thirds of
a year to 5.7 years.
Our good standing and ready access to capital markets
provide a competitive advantage in our ever-changing, technology-
driven and capital-intensive industry. This is increasingly
important as we continue to invest in new network infrastructure
and innovative solutions.
Considering interests of equity
and debt holders
TELUS continues its long-standing orientation to manage
capital in a manner that considers the interests of equity and
debt holders, and optimizes the cost and availability of capital
at an acceptable level of risk. We have acted to maintain our
strong credit ratings and 2010 represents the sixth consecutive
year that we have achieved our long-term financial policy
CONSOLIDATED AND SEGMENTED 2011 TARGETS
Earnings per share
(EPS) – basic
$3.50 to $3.90
7 to 19%
Revenues
$9.925 to
$10.225 billion
1 to 4%
Wireless EBITDA
$2.15 to
$2.25 billion
6 to 11%
Wireline EBITDA
$1.525 to
$1.625 billion
(6) to 0%
Wireline revenues
$4.725 to
$4.875 billion
(1) to 2%
Capital
expenditures
approximately
$1.7 billion
EBITDA
$3.675 to
$3.875 billion
1 to 6%
Wireless revenues
$5.2 to
$5.35 billion
4 to 7%