Telus 2011 Annual Report Download - page 53

TELUS 2011 ANNUAL REPORT . 49
MANAGEMENT’S DISCUSSION & ANALYSIS: 2
Focusing relentlessly on the growth markets
of data, IP and wireless
The Company’s strategy of focusing on growth areas is reflected in
approximately $8.0 billion or 77% of 2011 operating revenues coming
from wireless service and equipment revenues and wireline data service
and equipment revenues. This reflects an increase of $756 million or
10% when compared to the same period in 2010. Revenue from growth
markets more than offset declining wireline voice and other service and
equipment revenues.
In May 2011, TELUS entered into a five-year contract extension with
the Government of Ontario to provide, manage and supply a portfolio of
telecommunications services, including information technology security.
In the third quarter of 2011, following a three-year request for proposal
and negotiation process, TELUS signed a 10-year agreement with the
Government of B.C. to provide telecommunications and strategic services
to the government and its public sector partners. TELUS was the govern-
ment’s previous service provider for many of these services. The Company
expects to invest approximately $350 million over a 10-year period to
extend advanced communications technology into rural B.C.
The new agreement with the Government of B.C. provides the fol-
lowing rural benefits: maintaining Internet gateways and points of presence
in 119 central offices throughout the province; continuing to offer afford-
able wholesale Internet access for regional and local service providers;
increasing Internet speeds tenfold in many areas throughout the province;
working towards increasing Internet connectivity from approximately 93%
to approximately 97% of the popu lation through various programs and
commitments in conjunction with the deferral account program man aged
by TELUS; connecting up to 450 schools with high-speed fibre optic
cables over 10 years; and over a five-year period, extending wireless
coverage along approximately 1,700 kilometres of primary and secondary
highway segments, many of which are in mountainous terrain.
Providing integrated solutions that differentiate
TELUS from its competitors
In May 2011, the Company announced the TELUS Future Friendly® Office
suite of products and services for small and medium businesses (SMB).
The suite was built in collaboration with Cisco and features Cisco Unified
Communications technology that is built for companies with fewer than
100 employees. The Future Friendly Office includes TELUS-supported
Cisco office systems linked to TELUS wireless and wireline network
services, and is available across Canada. In October 2011, the Company
introduced the TELUS Business FreedomTM bundle of wireless and wire-
line telecommunications services for SMBs in B.C. and Alberta. Two
flexible packages are offered that include anytime device upgrades and
changes to services, as well as 24/7 technical support and one bill.
Business AnywhereTM is a solution for businesses with mobile employees
who need to communicate outside the office. Business SelectTM is
a solution for businesses that primarily work in a single location or have
minimal mobility requirements. In November, TELUS launched a new
self-serve website where SMBs can shop for wireless services.
TELUS continues to roll out new Clear & Simple® initiatives to enhance
the customer experience by providing more flexibility and freedom. In
June 2011, TELUS reduced international wireless roaming rates for its cus-
tomers with the introduction of Clear & Simple international travel pricing.
Voice roaming rates were reduced by up to 50% and data roaming rates
were reduced by up to 60%. Separate bundles and passes are no longer
required to access the lower rates, making it easy for TELUS customers to
use wireless services overseas. This was made possible by working with
carriers around the world to negotiate reduced roaming rates.
TELUS introduced Clear & Simple device ownership principles in
June. For customers who obtained a subsidized handset under a term
contract after November 21, 2010, the remaining device balance appears
on their monthly bills. These customers may upgrade at any time to a
new handset at the acquisition price, by paying the outstanding balance
on the old device. If customers want to end their agreement early and
leave TELUS, they need only pay the outstanding device balance plus an
early cancellation fee of $50, where permitted.
TELUS has enhanced Optik TV services, including expansion of the
South Asian channel line-up and the addition of a Facebook application
enabling customers to view and use Facebook while watching TV. Optik
TV now offers customers access to more than 500 digital channels of
entertain ment services, including more than 100 HD channels.
Partnering, acquiring and divesting to accelerate
the implementation of TELUS’ strategy and focus
TELUS’ resources on the core business
Acquisition of TELUS-branded wireless dealership businesses
During 2011, the Company acquired 100% ownership of certain
inde pendent TELUS-branded wireless dealership businesses for
$81 million cash. These investments were made with a view to
enhancing consistency and control over customer service, as well
as enhancing distribution of wireless and wireline products across
Western Canada.
Transactel
Through a series of transactions in 2011, TELUS acquired control of,
and increased its equity interest to 95% in, Transactel (Barbados) Inc.,
a business process outsourcing and call centre company with facilities
in two Central American countries. An investment of $71 million in
2011 was made with a view to enhancing the Company’s business
process outsourcing capacity, particularly regarding Spanish-language
capabilities, and acquiring multi-site redundancy in support of other
TELUS facilities. The acquisition was effected as follows.
On January 7, 2011, TELUS exercised its first purchased call option
to increase its 29.99% equity interest in Transactel (Barbados) Inc. to
a 51% economic interest for $20 million cash. Upon such exercise, the
Company continued to account for its resulting direct 51% economic
interest in Transactel using the equity method. Subsequently, Transactel
achieved the business growth target necessary for TELUS to exercise
its second purchased call option. The Company exercised its second
purchased call option and asserted its control effective February 1, 2011
(the acquisition date), after which TELUS’ interest in Transactel was
accounted for on a consolidated basis. The Company was required to
remeasure its previously held 51% economic interest at the acquisition-
date fair value, resulting in the recognition of a gain of $17 million recorded
in Other operating income. In the second quarter of 2011, the Company
recorded a post-acquisition equity transaction with the vendor for an
incremental 44% economic interest for $51 million cash. See Note 16(e) of
the Audited consolidated financial statements for additional information.
Electronic medical records (EMR) solutions
TELUS Health Solutions is running three pilot projects with EMR providers
KinLogix Medical, QHR Technologies and Wolf Medical Systems. These
EMR providers’ solutions are connected with the TELUS Health Space®
platform, which enables patients and service providers to securely access
and share health information. The pilot projects are targeted to reach
Canadians in Quebec, Ontario, Alberta and British Columbia. TELUS
Health Space, powered by Microsoft HealthVault, is a secure and
confidential online consumer platform that enables patients to access