Good morning, ladies and gentlemen. Welcome to the TELUS 2017 Q4 Earnings Conference Call. I would like to introduce your speaker, Mr. Darrell Rae. Please go ahead.

Good morning or afternoon everyone and thank you for joining us today. TELUS’s fourth quarter 2017 and 2018 targets news release and detailed supplemental investor information are posted on our website, at telus.com/investors. On the call today will be President and CEO, Darren Entwistle who will provide opening comments; followed by a review of the fourth quarter operational and financial highlights and 2018 targets by Doug French, our CFO. After our prepared remarks, we will conclude with a question-and-answer session. In consideration of your day, we are going to try to keep this call to under an hour. Let me direct your attention to Slide 2. This presentation, answers to questions and statements about future events, including our 2017 targets outlook and assumptions as well as intentions for dividend growth and capital investments and the performance of TELUS, include forward-looking statements that are subject to risks and uncertainties and are made based on certain assumptions. Accordingly, actual performance could differ materially from statements made today, so do not place undue reliance on them. We also disclaim any obligation to update forward-looking statements, except as required by law. I ask that you read our legal disclaimers and refer you to the risks and assumptions outlined in our public disclosures, in particular, our fourth quarter management review of operations and in our 2017 annual MD&A Sections 9 and 10 as well as with filings with securities commissions in Canada and the United States. The appendix of this presentation and Section 3 of our fourth quarter management’s review of operations provide definitions and reconciliations of the non-GAAP measures that we use today. Let me now turn the call over to Darren, starting on Slide 3.

Thanks, Darrell, and good morning, everyone. As you seen today TELUS finished 2017 with strong Q4 financial and operational results. Despite a highly competitive environment we realize strong loading, strong data revenue growth, and a strong financial performance across both our wireless and wireline operations. These results were underpinned by our team’s ongoing commitment to customer service excellence and client loyalty and our continue attraction and efficiency and effectiveness initiatives. Notably, consolidated revenue was up 0.9% and EBITDA was up 0.7% in the fourth quarter. We do have a strong loading across all key growth segments with 156,000 new postpaid wireless, Internet and TELUS TV customers, up 23% from this time last year. In wireless our team earned 121,000 postpaid net additions. This reflects a 39% year-over-year increase and our strongest quarter of postpaid net loading since the fourth quarter of 2012. While we anticipated strong fourth quarter loading to close out 2017. Q4 was characterized by a heightened market activity and aggressive holiday promotions. Notwithstanding this TELUS delivered strong results. Strong results thanks to our team's unparalleled commitment decline service excellence that results in low churn and strong client loyalty. Strong results that reflect the speed, the reliability and the coverage of our world leading wireless network and strong results from our differentiated value proposition and are in-market execution. These strategic capabilities underpin the proficiency of the TELUS team and delivering strong results in periods of heightened customer activity. We saw strong growth in wireless network revenue and EBITDA which were up 5.4% and 5% respectively. This was supported by blended ARPU of $67.27, an increase of 1.6% in the fourth quarter. Moreover we continued to lead in customer loyalty achieving a postpaid churn rate of 0.99%. Notably, this was up only 1 basis point year-over-year despite the aggressive…

Thank you, Darren. I am on Slide 9. We finished the year with a strong quarter for wireless and network revenue growth of 5.4% up $91 million year-over-year. Wireless ARPU increased 1.6% driven by a larger portion of higher end rate plans and smartphones in our mix and the continued growth in data usage. Adjusted wireless EBITDA grew 5% reflecting our wireless – our network revenue growth partially offset by higher COA and COR expenses. Reported wireless EBITDA included a net recovery of $21 million related to our MTS subscriber acquisition and lower restructuring and other costs at Q4 2016 included the lump-sum transformational compensation expense. The MTS net recovery reflects the downward revision of our estimate for the number of the qualifying MTS subscribers we acquired from Bell to 74,000. The migration process is complete as of January 31, 2018, and please see our MD&A for more details. Postpaid gross additions increased 17% year-over-year while retention spending grew 3%, both driving higher handset subsidies, commission costs in the quarter, but will deliver strong revenue and EBITDA growth in the future. Turning to wireline, external growth increased $31 million or 2.1% as a result of higher Internet loading and average revenue for Internet customer as customer continue to move to higher-tier plans an increase in TELUS Health revenue was driven by organic growth of professional services and support revenue and acquisitions and higher TV service revenues from a growing subscriber base and other operating increases mainly due to a gain on the sale of a non-core security consulting business. This growth was partially offset by ongoing declines in higher margin legacy data and voice for portfolios. We generated adjusted wireline EBITDA growth of 4.3% and primarily from the 2.1% revenue growth as noted and our cost savings from our ongoing…

Thank you, Doug. Mike can you please proceed with questions from the queue for Darren and Doug.

Sure. [Operator Instructions] And first question comes from Phillip Huang from Barclays. Please go ahead.

Hi. Good afternoon, guys. Congrats on the strong wireless results. I was wondering if you could provide some incremental color perhaps on your performance in the major regions, just given your distinct wireless market shares across the country. Just wondering if it's fair for us to assume that you gain some share in Ontario, but maintain or potentially lost a bit of share in BC and Alberta?

It’s pretty solid performance across Canada nationally, Phillip, so I don't think it's right to call out one region in particular because we didn't have a dichotomy in terms of our performance where we were strong in one area and weak in the other. I think it was geographically quite a strong performance for the TELUS organization across the board. So I think it would be leading you to draw inferences to a wrong conclusion, if we highlighted that level of disparity when it's not empirically the case. We delivered a set of robust results that are not geography specific.

That’s helpful. Maybe if I could dive a little deeper, what happened in Q4 just as everyone's reported now? I want to better understand the competitive dynamics in December, just leading up to the mid December, well documented five-day pricing plan promotions. Rogers characterized the market is being a bit quiet which kind of led them to initiate the pricing promotions in Western Canada and pull forward some volumes. Just wanted to get your take on the market prior to those promotions? Would you say it was also quite for TELUS up to mid December? I'm just trying to assess how each of the players sort of fared in the quarter up to that point since Shaw began offering iPhones? Thanks.

Looking at Q4 holistically, thinking about the competitive intensity commencing within the Black Friday period, it was a competitive period for the industry as per usual given the characteristics of Q4. I don't want to comment on the interpretation of the market by one of our competitors. That’s their interpretation. That’s their call and they acted accordingly. I think what's more relevant is to speak to what TELUS did, we've responded to the competitive activity as it unfolded. So I'm not going to do an analysis on why, what precipitated on December 14 came to fruition, but we responded accordingly. I think the results that we generated speak for themselves. I think we're advantaged by the strong level of performance. So we have on the insurance front, which of course as you well know is buttressed by the customers’ first mentality, TELUS and what we do in terms of clients experience excellence, complemented by the extremely high quality of our wireless network. So I think we can – we fared reasonably well accordingly. I think we need to be mindful, but when we get into rate plan competition, the rate plan discounts at the ARPU level. Frequently are not overcome by the volumes that get generated and can be net dilutive to the overall economics of the industry and I think it's important to be cognizant of that. And the other thing that we've talked about TELUS for quite some time is not to uniquely look at our wireless business according to the P&L, but the P&L on the balance sheet and when you have heavy daily plans in an industry where you spend billions of dollars on spectrum and technology deployment frequently with technology having a very short life or a half life if you will. Before you do…

That's very helpful. Thanks for the color Darren.

Appreciate the question.

All right, and next we have a question from Greg MacDonald from Macquarie. Please go ahead.

Thank you. Good afternoon, guys. So Darren, I'm looking at the guidance and in the consensus currently being at the low end of the guidance for revenue and EBITDA, I guess you can call about a recently positive message there. Could you comment on what the major issues are that would influence whether the company can hit the top or the low end of that guidance?

I think let's go through it quickly Greg. Number one, I want to see a continuing strong performance from both wireline and wireless. It's one of the key differentiating factors for TELUS versus our global peers that have strong operational and financial contribution from both wireline and wireless. So to the extent to which we get a evolving competitive dynamic on the wireline side of our business that reflects competition more on technology, the product functionality, and technology advancements, features and products if you will versus price discounting and I think that will be a nice balance to support the growth aspirations that we have you know on wireline going forward. And I think the competitive dynamic can be very healthy there, where you're competing on broad that technology for the products that they support your value proposition, the straight of your distribution and the excellence of your customer service that does underpin the value for money, rather than just consistent singular price discounting. So I think that particular development should bode well for us in 2018 on wireline and it's important to note that will be passing the 50% build threshold on the fibers front early in 2018. And the economic characteristics of our pure fiber deployment from revenue growth OpEx reduction EBITDA growth and more economic returning competitive differentiation. I think again bode well for us to be able to deliver against the expectations that we're setting up with the street in terms of growth characteristics on revenue EBITDA and as well EPS and cash flow separately. Next on the wireless front, I'm looking for us to continue to lead with focus on lifetime revenue per client, despite the competitive – heavy competitive intensity that we concluded 2017 with we exited Q4 with $5500 lifetime revenue per client…

Okay. Thanks for that. Can I ask a quick follow-on? If you're able to hit the higher end of the guidance range on EBITDA, does that suggest that there's an opportunity to move up toward the higher end on the dividend growth guidance? Or are issues like spectrum auction and balance sheet still getting factors on that front? Thanks.

So I think the best thing I can say to on that Greg is, we gave you a guidance range and dividend growth 7% to 10%, so it says that anything is possible between the 7% and 10%. I think we've got a pretty good track record in terms of delivering against expectations in that regard, but doing it on a responsible basis. And the two factors that are going to determine whether we're going to be closer to 7% or closer to 10% are the EBITDA growth component and to the extent to which we’re at the higher end of the EBITDA range that support us being at the higher end of the dividend growth range. And that correlation I think is an important piece of transparency for you to understand, so that would be parameter number one. And then parameter number two is affordability. And that’s something that we've discussed along the way. As we've gone through that free cash flow negative period as we have financed that our broadband builds on both wireline and wireless, and now as we have forecasted to you, we are going free cash flow positive in 2018 and we expect that to be a chronic case prospectively normalizing for spectrum auctions along the way. So increasingly the affordability is constantly improving in terms of the dividend accretion that we want to deliver to you and I think that’s a developing good new story for this organization as we have forecasted.

Very helpful. Thanks very much.

Thanks Greg. Mike, next question.

Yes. The next question comes from Jeff Fan from Scotiabank. Please go ahead.

Thank you and good afternoon. One housekeeping question and then a more big picture question. Housekeeping is just regarding your guidance for 2018, can you help us parse out some of the contributions from acquisitions on both the revenue and EBITDA line, just so that we can get to an organic number. And then the bigger picture question is for Darren. I guess one of the assumptions that we've always kind of looked at amongst the national wireless operators, is the networks their quality historically anyways may have been similar to each other. But based on the network test that we are seeing now and based on the results that we're seeing and based on some of your competitors at least one of your competitors investment that they're making on the network? Are we starting to see that GAAP materializing to a point that is contributing to potential leadership and shares that may not have been there in the past? And then more importantly, whether you think this can maybe translate to a leadership position as well in 5G?

So on the first one is that we had mentioned next quarter. We would give more insight to TI and Health, and so your first question on the organic versus acquisition side of TI will be a little – will be more at that time. So I’m going to not highlight that today, but we’ll definitely bring that back when we have the updates on more information on TI and Health at that stage

Okay.

So firstly, Jeff as I said in my opening comments, if you look at Canada holistically in terms of infrastructure and technology, and this would be true across both wireline and wireless, but our focus on wireless for the moment, I think the portfolio of wireless networks that we have in Canada are second to none when it comes to quality and speed. And you can see the results of the speed test, but what's great about Canada is that when we deploy new technologies. We don't just do it in urban centers. We do it pervasively, which is why we've got greater than 99% coverage on the LTE front. And if you look at the functionality of those networks combined with speed and coverage, and the reliability of the networks, when you think about in a performance on an access failure rate at point of view, a drop call rate point of view, latency in a symmetrical digital world, I mean we're top of the top quartile as a country in terms of in a wireless network performance and people continue to undervalue how much that actually matters to our country. Firstly, when you look at the demographics and the topography of our nation, we need technology, the bridge time and distance and to empower both our society and the competitiveness of our private sector and so it absolutely critical for us in terms of the vibrancy of our digital society, answering social challenges on health education and the environment, where technology, our technology has got a key leadership role to play in that regard. And it's our industry that underpins the innovation and the competitiveness of the private sector. I think for TELUS, we've done exceedingly well because the same reason that you guys asked me a few…

Thanks Darren.

Thanks Jeff. Next question Mike.

All right. Next question comes from Simon Flannery from Morgan Stanley. Please go ahead.

Great. Good morning, Darren. How are you? Thanks for the network commentary there. We just pick up and one of the things you mentioned was getting ready for 5G. There has been a lot of developments here in the last few months in terms of getting the standards. It seems like the chipsets and the handsets and other devices are starting to roll and we've got a lot of debate about what the right way to attack the market initially is whether it's fixed broadband using microwave spectrum or whether it's lower end spectrum IoT. What are your latest thoughts both on the use cases for 5G and how we should expect TELUS to start rolling that out? Thanks.

So I think in terms of 5G rollout period, I’ll give you sort of a broad boundary on it. Developments are taking place now from a preparation point of view, but I think the activity will be heightened between the second half of 2019 and the 2020 financial year, so that’s kind of 18-month period in terms of the Nexus on 5G deployment and accretion. In terms of the spectrum parameter components, my response there is all of the above, the single band frequencies deployed within the 600 megahertz zone for obvious reasons in terms of coverage and signal propagation and in-building penetration. I expect to see unlike the U.S., the 3.5-gig 5G ecosystem developed within the Canadian context and we will also be deployed as a millimeter wave spectrum whether it's 20-gig in the 40-gig vicinity or the 65-gig to 70-gig vicinity. It will be horses for courses type deployment. And what you can expect to see is a level of macro, micro network heterogeneity, wireline, wireless network heterogeneity and a multiplicity of spectrums deployed almost in a concatenated view to deliver the optimal client experience and I think we are well positioned for all of the above.

Great. Thank you.

Thanks. Next question.

Next question comes from Vince Valentini from TD Securities. Please go ahead.

Yes. Thanks very much. Darren, you were asked earlier about sort of the market conditions in Q4 and in December. Can I just ask specifically though, I mean your churn remains very impressive, but obviously it ticked up 1 basis point year-over-year. Is it fair to conclude that why you had great gross adds during December 14 to 19 in that period of heightened promotional activity your churn may have spiked up a little bit, so if you x-out that period, we would have seen a consistent trend of postpaid churn declining?

Yes. I'm kind of grumpy because it wrecked our average for 2017 since I wanted to be below 0.90. So yes, that would be a correct assumption despite the fact that nets were up 39% despite the fact that postpaid growth was up 17%. Yes, we indeed have churns spike.

Okay. And one – other one, I don't think you covered this in your network commentary a second ago. I mean we're hearing more about LTE-based services delivering up to 1-gig speeds even before we get to 5G. If that kind of thing is possible or are you at the point of having to rethink how much fiber-to-the-home is really necessary versus maybe just fiber-to-the-curb and tons of many hotspots or cell sites and then beaming signals over the last couple 100 meters just with wireless and maybe saving some CapEx?

Maybe. The horses for courses comment was key. We've always lived with heterogeneity within our network, so we had deployed simultaneously ADSL2, VDSL2, Ethernet to the suite, GPON. All those things were happening concurrently within our network. So now we've got an access mechanism that we can deploy scale. The technology is robust, it's complimentary to the fiber build that meets the expectations and needs of the clients. We will continue to evaluate those along the way. But one of the things that’s important whether it's LTE or 5G, you still have to have fiber deployed deep, deep, deep into your access network and that’s where the big costs are. It's not so much in the electronics or as it relates to the optical line terminating equipments, it's in the civil component where you have the preponderance of those costs. And then laterally, if you just take your thesis and exploited further, I think it's really interesting because it leads it very well and how far we go on our fiber build. We are passing 50%. Do we go to 60% in stock, 70% in stock and then use wireless as an access mechanism. I think it's fantastic to have that optionality whether it's LTE or 5G and we're going to have fiber one way or the other deployed deep into our access layer, whether we bring it to the prem or leave it at the curb, I think that's an economic choice that will make at the time contingent upon our value proposition, our economics and the needs of our clients. So I couldn't picture as the better position in that regard.

Great, thank you.

.:

All right, last question comes from Maher Yaghi from Desjardins. Please go ahead.

Thanks for squeezing me in. I wanted to ask you, Darren about – your views about the wireless pricing and in Canada, do you wonder why would an incumbent wireless provider reprice their products to a level that makes it more clear to more people that they're over price compared to a new entrant. What's the strategy behind doing something like that in a very, very active season such as the holiday period? And the second question I wanted to just follow-up on is your assumptions for your targets for 2018 are based on economic expectations for growth in Canada, but that are than and what actually transpired in 2017. Yet your guidance is for organic growth or growth that you are planning to post that is higher. Is it – can I go on a tangent here and I and I say the differential between your guidance growth in 2017 and 2018 is mainly acquisition related?

No, I think that would be the wrong conclusion. So the acquisitions that we’re doing will be complementary, but the growth is related to strong wireline performance in an improving competitive dynamic that I think you're all aware of that I’ve already spoken about and increased coverage of our fiber build is related to continued wireless momentum in terms of both volumes and modest ARPU accretion along the way is related to costs efficiency measures that we’re booking as the TELUS organization and it’s leveraging the emerging businesses for us in TELUS Health and TELUS International. So it would be a wrong conclusion to assume that these results are unduly plotted on the acquisition front that will be a deeply erroneous conclusion. It’s a greater contributor, but it’s secondary to the organic performance on wireline for the reasons cited side, wireless for the reason cited and the emerging components all combined with cost efficiency.

Thank you for that. And maybe the first question about pricing in wireless…

I was really hoping that you'd forgotten about the first question, and we could just conclude the call right there. I can’t comment on that, Maher. I just I can't do that – I mean I think that you've got resources to go find answer on that question. But I just don't think it's appropriate or ethical for me to comment on it. What I did say, which I think is really important is that we've seen a lot of exogenous shots competitive, new competitors you know, price changes in the marketplace over the last 17 or 18 years. We've seen equity in credit market. We've seen regulatory impact and TELUS’ whether all of those rights and delivery gate expectations for investors. I think that what you can count on from our prospectively in 2018 and beyond and it is a fantastic characteristic of our organization and I really do believe that in my heart of heart the reason why we have such a strong survivability is because quarter tenant like being that on customer service or having that most pervasive broadband technology deployed that delivers for the clients, experience and the best people and culture. Those are the things that help you overcome those challenges and interruptions along the way and I think that the most important component of our story for investors to understand.

Thank you on the great job, on the build out in 2017.

Thanks for your comments. Appreciate that. End of Q&A

Thanks Maher and Thanks everyone for joining us today. If you have any follow-up questions, feel free to contact the Investor Relations team. On behalf of Darren and Doug, thanks for joining us today. Take care.

Ladies and gentlemen, this concludes the TELUS 2017 Q4 earnings conference call. Thank you for your participation and have a nice day.