Telus 2011 Annual Report Download - page 32

28 . TELUS 2011 ANNUAL REPORT
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CFO LETTER TO INVESTORS
In 2011, TELUS produced strong financial growth leading to continued value creation. Our positive
financial performance was driven by accelerated data revenue growth in both the wireline and
wireless segments of our business. Our robust cash flow allowed us to fund ongoing strategic capital
investments and healthy dividend increases, which provided increased value for investors.
Growing financial performance
TELUS’ long-term strategy of investing in our core network assets
to drive data growth in both wireline and wireless has generated
significant momentum and positions the Company for continued
success. In 2011, we surpassed $10 billion of revenue with higher
than expected revenue growth of six per cent and generated
earn ings per share (EPS) growth of 15 per cent due to significantly
lower financing costs and higher operating income.
We are delivering on a consistent strategy that, in 2011, led to
industry-best results in many important wireless metrics, including
subscriber churn and postpaid net additions, as well as revenue
and EBITDA (earnings before interest, taxes, depre ciation and
amortization) growth. In addition, our continued deployment of
broadband technology has led to outstanding Optik TV subscriber
growth, which, through our strategy of offering integrated solutions,
is contributing to our best Internet subscriber growth in many years.
We are experiencing particularly strong double-digit data
revenue growth in both the wireless (47 per cent) and wireline
(14 per cent) segments of our business. Wireless growth is being
generated by continued industry-leading additions of smart-
phones and resulting increases in data usage, as well as higher
international roaming revenues. Wireline data growth reflects
higher revenues from growing Optik TV and High Speed Internet
service subscriptions and several small price increases, as
well as the acquisition of control of an international contact
centre operation.
Our 2012 targets, shown in the table, build on the momentum
we delivered in 2011. TELUS expects to generate strong double-
digit free cash flow growth in 2012 based on targeted earnings
growth, along with stable capital expenditures and cash taxes,
and reduced employer pension contributions. Free cash flow is
calculated before dividends and potential wireless spectrum pur-
chase costs. These targets should be read in conjunction with
the important assumptions and caution regarding forward-looking
statements contained in Management’s discussion and analysis.
Of note are the upcoming wireless spectrum auctions, which
may entail cash outlays in the hundreds of millions of dollars
toward the end of 2012 or early 2013. By way of example, the
spectrum we won in the 2008 auction cost $882 million. New
700 MHz spectrum is critical to the ongoing growth of our wire-
less business and plans to extend 4G long-term evolution (LTE)
coverage to rural Canada. We have maintained a strong financial
position to bid on 700 MHz and potentially 2.5 GHz spectrum with
more than $1 billion of available financial liquidity, strong invest-
ment grade credit ratings and ready access to capital markets.
Committed to prudent policies
We continue to consider the interests of both
equity and debt holders by adhering to our
long-term financial policies, including
our dividend payout ratio guideline and
debt leverage policy. Our commitment
to these prudent policies continues
to provide TELUS ready access to
credit markets to refinance long-
term debt coming due – a relatively
modest $300 million in 2012.
In 2011, we refinanced $1.1 billion
by successfully issuing $600 million
of five-year Notes at 3.65 per cent and
issuing low-cost commercial paper.
The Notes were the last of three debt
issues commencing in late 2009 totalling
$2.6 billion that repaid all our U.S. dollar
debt, which carried an effective interest
rate of 8.5 per cent. These new issues
have a weighted average interest rate
of 4.7 per cent, which has resulted in
reduced inter est costs of approximately
$120 million annually. TELUS is expected