Telus 2011 Annual Report Download - page 73

TELUS 2011 ANNUAL REPORT . 69
MANAGEMENT’S DISCUSSION & ANALYSIS: 7
.Wireline segment capital expenditures increased by $81 million
in 2011 when compared to 2010. The increase in expenditures was
mainly due to investments in Optik TV growth and service capabil-
ities, new Internet data centres and gigabit passive optical network
(GPON) technology, partly offset by lower expenditures for imple-
menting large enterprise deals and lower expenditures for broadband
network expansion due to the substantial completion of the VDSL2
technology overlay in 2011.
Wireline capital intensity was 26% in 2011, up from 25% in 2010,
while wireline cash flow (adjusted EBITDA less capital expenditures)
was $236 million in 2011, down $136 million or 37% from 2010.
7.3 Cash used by financing activities
Cash used by financing activities decreased by $410 million in 2011
when compared to 2010.
.Cash proceeds received from Common Shares and Non-Voting
Shares issued for the exercise of options was $24 million in 2011
as compared to $15 million in 2010.
.Cash dividends paid to holders of Common Shares and Non-Voting
Shares were $642 million in 2011, or an increase of $169 million from
2010. For dividends declared after March 1, 2011, the Company
switched to purchasing shares on the open market with no discount,
rather than issuing shares from treasury at a 3% discount, which
results in increased cash outflows. The increase also results from
a higher dividend rate of circa 10% and a slightly higher number
of shares outstanding in 2011.
.Commercial paper, short-term borrowings and bank facilities
The Company often shifts among short-term financing sources to
take advantage of interest cost differentials. The Company’s commer-
cial paper program provides low-cost funds and is fully backed up
by the five-year committed credit facility.
Commercial paper outstanding at December 31, 2011, was
$766 million as compared to $104 million at the end of 2010. Commer-
cial paper decreased by $216 million during the second half of 2011
after increasing by $878 million in the first half of 2011 to help fund:
(i) the June 1 repayment of matured U.S. dollar Notes and settle
related cross currency interest rate swap agreements; (ii) a discre-
tionary contribution of $200 million to defined benefit pension plans
in January; (iii) acquisition of certain independent TELUS-branded
wireless dealerships in the first quarter; and (iv) increases in TELUS’
economic interest in Transactel (Barbados) Inc. For comparison,
commercial paper in 2010 decreased by $420 million in the second
half of the year after increasing by $57 million in the first half of
the year.
Short-term borrowings are comprised primarily of amounts
advanced to the Company from an arm’s-length securitization trust
pursuant to transfer of receivables securitization transactions (see
Section 7.6 Sale of trade receivables). Proceeds from securitized trade
receivables were $400 million at December 31, 2011, unchanged since
the first quarter of 2010 when proceeds were reduced by $100 million.
Draws on bank facilities were $4 million at December 31, 2011, and
$nil at December 31, 2010.
No amounts were drawn against the Company’s five-year credit
facilities in 2011 or 2010. See Section 7.5.
.Long-term debt issue in May 2011; maturity of U.S. dollar Notes
in June 2011
On May 25, 2011, the Company successfully closed a $600 million
public offering of 3.65% Series CI five-year Notes. Net proceeds
of the offering, combined with commercial paper issues, were applied
to repayment of the June 1 maturity of U.S.$741 million, 8% Notes
and accrued interest, as well as to the settlement of associated cross
currency interest rate swap agreements. The Series CI Notes are
redeemable at the option of the Company, in whole at any time, or in
part from time to time, and contain certain change of control provisions.
.Long-term debt issue in July 2010; early partial redemption of U.S.
dollar Notes in September 2010
In the third quarter of 2010, TELUS successfully closed a $1 billion
public offering of 5.05%, Series CH, 10-year Notes. The Company
used the net proceeds to fund the early partial redemption of
U.S.$607 million publicly held 8% U.S. dollar Notes, as well as pay-
ments to terminate cross currency interest rate swap agreements
associated with the redeemed Notes. The early redemption resulted
in a third quarter 2010, pre-tax charge of $52 million, or approximately
$37 million after tax (12 cents per share).
.Acquisition of additional equity interest in subsidiary from
non-controlling interest
The effects of TELUS exercising its second purchased call option
in respect of Transactel (Barbados) Inc. included that the Company
recorded a second quarter 2011, post-acquisition equity transaction
with the vendor for the incremental 44% economic interest for
$51 million cash. Cash flows that are changes in invest ments in con-
trolled entities, and which do not also result in a change in control,
are presented as financing activities in the Consolidated statement
of cash flows when the entity concept of consolidation theory
required by IFRS is applied.
10
09
INCREASE (DECREASE) IN DEBT
AND SHORT-TERM BORROWINGS ($ millions)
11 126
(494)
10
10
09
DIVIDENDS DECLARED ($ millions)
11 715
642
10