Good morning, ladies and gentlemen. Welcome to the TELUS 2019 Q3 Earnings Conference Call. I'd like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.

Thanks Mike. Hello, everyone. Thank you for joining the call today. The third quarter 2019 results, news release, quarterly report, and detailed supplemental information are posted on our Web site at telus.com/investors. On our call today, we have Darren Entwistle, President and CEO, who will provide opening comments. This will be followed by Doug French, our Executive Vice President and CFO who will review our second quarter results. Following that, we will move to the question-and-answer session. Let me direct your attention to slide two. This presentation and answers to questions contain forward-looking statements that are subject to risk and uncertainties and made based on certain assumptions. Accordingly, actual performance could differ from statements made today, so that we ask you do not place undue reliance upon them. We also disclaim any obligation to update forward-looking statements, except as required by law. We refer you to the description of risk and assumptions in our third quarter MD&A and 2019 annual report and ask that you be aware of these. Now, let me turn the call over to you, Darren, starting on slide three.

Thanks, Robert, and good morning everyone. As you've seen today, TELUS reported third quarter results that reflect strong operational and financial performance that are industry leading across multiple parameters. This included revenue and EBITDA expansion in both our wireless and wireline product portfolios, in concert with robust customer growth across the business. These results were backed by our team’s unwavering focus on providing industry best customer experience in combination with the ongoing generational investments that we’ve been making in our globally leading wireline and wireless broadband networks. Importantly both of these are fundamental to the continued success of our long-term growth strategy at TELUS. In the third quarter our industry leading consolidated operating revenue increased by 2.6% excluding our one-time gain on the sale of TELUS Garden in Q3 of last year. Consolidated EBITDA growth also industry leading at 4.1% or 8.3% before normalizing for IFRS 16. Notably, the robust and industry best expansion of our subscriber base by 246,000 customers was driven by high quality mobile phone net additions driven by strong growth in connected device subscribers and driven by industry leading wireline net additions. As a result total RGU growth was up 14% on a year-over-year basis. Turning now to our wireless operations. We achieved solid year-over-year EBITDA growth in the third quarter of 4% or 7% before normalizing for IFRS 16. Total wireless revenue growth of 1.1% was impacted by decline in equipment revenue as a result of the intense competitive activity that we saw around device pricing and the busy back-to-school selling season including the persistent of high subsidies. Third quarter network revenue expanded by 2%, driven by strong high quality subscriber growth and supported by a moderation and ARPU decline. Wireless loading in the third quarter included 111,000 mobile phone net additions, down just slightly…

Thank you Darren, and hello everyone. Before we get started, please recall that our year-over-year reported comparisons include the impact of a one-time revenue gain in the third quarter of 2018 of a 171 million related to the sale of our TELUS Garden building in Vancouver and the 118 million donation to the TELUS Future Friendly foundation which was funded with the proceeds from the sale of TELUS garden. From the revenue and EBITDA perspective, this was allocated 50/50 to our wireless and wireline segments. So, the numbers that I'll be talking to in the year-over-year comparisons will exclude those one-time items. Let's begin with the review of our third quarter results starting with the wireless side on Slide 10. External revenues increased by 1.1% driven by network revenue growth of 2% and partly offset by 1.6% decline in lower margin equipment revenue due to the intense competition around device promotions in the quarter. Network revenue increased 31 million or up 2% sequentially a 30 basis points reflecting 5.5% in a subscriber base over the past 12 months. This growth results are supported by a moderating decline in our mobile phone ARPU as Darren discussed. Adjusted wireless EBITDA increased by 7% reflecting higher network revenue growth, lower operating costs and the implementation of IFRS 16. The adjusted wireless EBITDA margin also increased by 260 basis points to 46.5%. On a pro forma basis, after IFRS 16, wireless adjusted EBITDA increased by a strong 4%. Moving to Slide 11, in wireline external revenue was up 4.7% driven by organic data revenue growth of 8.4% reflecting organic growth in TELUS International and TELUS Health increased internet and enhanced data service revenues reflecting higher revenue per customer as well as a 6.7% increase on our internet subscriber base over the past 12 months.…

Thank you, Dough. Mike, can you please proceed with the questions from the queue.

Okay. First question comes from Maher Yaghi from Desjardins Securities. Please go ahead.

Thank you for taking my question. I have just one on the wireline and the second on the wireless. The margins on wireline were inevitably higher, can you discuss a little bit about the sustainability of those margins or your -- the past that you see going forward on that what's helping in driving that positive performance. It's been a long time since we've seen that kind of a moving in your margins in the wireline. And the second question more I would say bigger picture done. When you look at the environment in wireless in kind of an it has shifted and investors are more concerned about the profitability of the industry. You've been working and leading businesses in that segment for a long time. Can you talk about how you see the telecom wireless business in Canada in general compared to its historical profitability matrix, has it changed, is ROIC different as you view with going forward with the launch of unlimited the fact that companies are continuing to subsidize with these plans and the profitability as you look into 2020, 2021?

Maybe I'll kick it off and let Doug top up in terms of anything that you want to just say on the wireline margins. The wireline margins if you normalize for IFRS 16 are about flat modestly diminished on an apples to apples basis year-over-year in the circa 29% zone. Which is I think a positive thing for us given certain maturation characteristics of the business and what we want to do in terms of getting over the 30% threshold in the near term and getting the 35% wireline margins over the medium term which I think certainly is achievable for this organization. And so, if you look at what's going to get us the 35% margins on wireline that I believe are achievable. Firstly, I would say improving margins at both our TI operations and to a lesser extent TELUS Health. TI is as you know is still processing the acquisitions of both Xavient and Voxpro and the maturation of those two acquisitions as we develop our ITO franchise within TI's operations. We look at where the margins are now within TI, they're slightly above 20% on a IFRS 16 basis and we think with certain moves in the future we can move those margins up to circa 25% or slightly better than that. And then, with the scaling of our TI operations which is scaling extremely well right now, the weighted average mathematics within the totality of our wireline base I think is going to support significantly our desire to cross 30% and in our 35% goal in the medium term. Second thing that I think will help on this particular front is the acquisition of ADT and the overall growth of our security business. Our security business has been growing very well for TELUS organically. So, I'm…

I think you covered wireline margins very well Darren. I think the only maybe thing on wireless I will top-up on is when we changed our reporting to break out mobile phones versus connected devices, it was to absolutely focus on value for our customers and delivering to them what they want, while maximizing the margin component and not chasing a loading number at all costs. And I think that's the other way we're managing through it of giving customers exactly what they want while managing the financial outcomes associated with that and that change was absolutely related to doing that.

And it's good as well because one of the other things that doesn't get discussed because of the purity of our focus on smartphones is that, our connected devices portfolio was up significantly on a year-over-year basis for TELUS. And as we scale our IoT business that is going to make a tidy contribution to wireless revenue growth, wireless ARPU, revenue growth and EBITDA flow through in the years ahead because the margins on our IoT business are extremely attractive for this organization and I think doing those things in combination with some of the cost efficiency characteristics of our new plans will be very positive for cash generation.

Mike, next question?

Yes, next question comes from Vince Valentini from TD Securities. Please go ahead.

Thanks very much. And thanks again guys, your outlook commentary on free cash flow and dividends and now CapEx is very appreciated relative to what we get from most of your peers. So, with this $2.75 billion number, is it fair to say that your wireless CapEx intensity is unlikely to decline in 2020 and 2021, as you start to rollout more 5G network elements, so most of this decline you'd be expecting is on the wireline side?

I think that's a fair assumption Vince.

Great. And just one follow-up, you've probably been busy with your numbers this morning. But, if you saw Quebec or Vidéotron and also pretty huge increase in sub ads year-over-year I mean, given that they only cover Quebec, they added 57,000 subs, it seems to be them taking a lot of market share. I know you said, the overall market was competitive in Q3 and back-to-school season. Can you comment at all is Quebec sort of an extra step up in competitive intensity versus what you may see in other provinces or is it just par for the course?

I would say, it’s slightly more acute within the province of Quebec, given the competitive characteristics of that market with the players that are entrenched there. And some of the bundling strategies that are deployed is some more challenging market economically, on average, having a lower ARPU than the rest of the country. So, the bumping grind within Quebec is indicative of the industry in totality, in terms of the competitiveness. But I would say, it's fair comment to articulate that it's more acute within Quebec.

Thanks.

Thanks, Vince. Mike next question.

Next question comes from Drew McReynolds from RBC. Please go ahead.

Thanks very much. Good morning. My question is around your migration path to unlimited Darren and Doug, you've provided some pretty good context here this morning. Obviously, for the big national players that migration path looks slightly different here. Can you comment on your timeframe for migration? We're seeing Rogers, clearly do it quick Perhaps PC do it much slower. Just wondering kind of your thoughts on that timeframe and whether Q3 KPIs such as ARPU and margin here is somewhat indicative of what to expect going forward maybe how those trend based on your expectations today? Thank you.

So to hit the question right on the head, Q3 I think is a good indicator of what you can anticipate in Q4 and Q1 as we go through the transitional period in terms of the robustness and resiliency of our overall performance, we expect ARPU to be relatively stable. And so, let me give you the specificity of that clarity by highlighting that the Q3 results are indeed indicative, if you're drawing inference in terms of forward-looking expectations. A couple of things in terms of speed, maybe a good way to look at it is, we're not pushing it overtly in terms of speed of migration. We're being responsive to customers. But, it's not something that we're overtly looking to rush. However, we want to get on with it and get through this particular period, so we can harvest significantly the benefit. So, I would say, maybe a positioning point for us would be somewhere in between Bell and Roger. Secondly, for this organization, as I said on the previous call, we put about nine months of effort in compiling our activities on unlimited or what we call Peace of Mind endless data plans and device financing. So, our level of preparedness on this was significant. Our systems preparedness, our channel preparedness on this front, our call center preparedness culturally within this organization, as well as certain cost efficiency moves that were preparatory in nature, for the advent of these plans. And I think that is a credit to TELUS as an organization, which is allowing us to do a very good job, not just weathering this transition, but leveraging this transition and delivering very solid results on the wireless front, both operationally and financially. Secondly, if you look at things that get diluted or mitigated, let's pull out…

And Darren maybe just a cup of tieing a bit, I think the transparency around your rate plan versus your handset has also been a very key simplification and we have the tab construct where customers know exactly where they are on their handset versus their rate plan and now on key brand having a split between device financing and the limitless data. It also makes simplicity and a trust with our customer base that allows for that loyalty and incremental benefits that Darren suggested.

Thank you.

Thanks Drew. Mike next question?

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

Thanks very much. Good morning. Congratulations on closing the ADT purchase, can you just talk about the plans for integration there and to kind of stabilize the operations of that unit? And then given the election, Darren would be great to get your perspective on how you see the regulatory environment for you and for the industry in 2020 and beyond? Thanks.

Thanks, Simon. A couple of things, one is today, we've been operating our SmartHome Security and Smart Business Security unit as a distinct complimentary business of TELUS and ADT is going to get folded into that distinct operation. And we think that's the right way to integrate the asset for the near-term. Longer term, we can look at more significant integration, but right now, we're very keen on building a very strong consumer and B2B security practice at the TELUS organization given the significant upside that we see here. Secondly, as it relates to stabilizing the business, I would say, we're encouraged empirically but the evidentiary documentation that I've seen in terms of what we have done post the AlarmForce acquisition. Organically, we grew by 14,000 in Q3 with our security practice that the fastest growing security practice in North America. And we've shown that not only could we buy security operations and we made additional procurements in that regard beyond just the AlarmForce, not only could we just -- could we do better than just stabilizing those businesses, but that we could turn them into being both RGU accretive and financially accretive. And one of the key factors, of course, is the way that despite the fact that we are running a distinct security practice, we are bundling our security product line in a very beautiful, elegant and potent fashion with the totality of our future friendly home portfolio. And maybe just to give you some, I think some interesting stats on why we like the investment in ADT and building on what are very strong foundational organic operations on the security practice. If we look at the circa 500,000 clients that we're now bringing in, we're adding them to a organic operation, where about 50% of the smart…

Right, thanks for that.

Thank you, Simon. Mike, we have time for one more question.

The last question comes from Jeffrey Fan from Scotia Bank. Please go ahead.

Thanks and thanks for squeezing me in. I wanted to just touch on the CapEx guidance for the next couple of years and I'm just trying to understand what's going on with respect to that and the messaging behind it. It sounds like the slowdown or it is related to the fibre build. Are there any regulatory impact related to how you think about the investment just tying it back to the last question, there are some decisions that are coming down the road. I'm wondering whether that has any impact on how you think about the investment for the next couple of years. And then just financially, are we expected to kind of just think about the CapEx reduction as a direct flow through to your free cash flow for the next couple of years? Thanks.

Jeff, let me again in TELUS style try and answer this question very directly and transparently. The forward-looking CapEx guidance that we're providing and the nominal CapEx number that we are articulating for 2020 and 2021 does not include or anticipate any diminution related to regulatory policy, regulatory intervention or government intervention. The moderating CapEx as I said earlier, is predicated off the back of an easing appetite in wireline CapEx because of the progression of the fibre build that this organization has delivered that is the preponderance of the explanation in that regard. And there's nothing fancy about it. It's the fact that we started earlier on fibre deployment and I can tell you it wasn't an easy decision that we took in 2013. There were a lot appendance even within TELUS we were a house divided and there was a certain amount of bloody mindedness that was applied to say that we were going to tackle this challenge we were going to do it earnestly, we were going to do it at scale and we were going to earn our way. And so, the reason that we're at the point now of hitting 70% coverage of original optic footprint by the end of this year and only a few weeks away or 80% plus by the end of 2020 isn't because we founded some new deployment technology or discovered some great micro trenching strategy. It's because of the fact that we began earlier, we took that risk and we put our hearts and minds and our skill into doing that. The second thing that was key Jeff, is that we made a moral contract within the organization back in 2013 which said, so long as we generate great wireline results, we will keep making the fibre investments. So…

Thanks Jeff. And thank you everyone for taking the time to join us today. If you have any follow-up questions please feel free to reach out to the IR team later today.

Ladies and gentlemen, this concludes the TELUS 2019 Q3 earnings conference call. Thank you for your participation and have a nice day.