rbc whistler conference 2003 the view from the summit
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RBC Whistler Conference 2003 The View from the Summit. Robert McFarlane EVP & Chief Financial Officer February 19, 2003. Forward-Looking Legal Disclaimer. - PowerPoint PPT PresentationTRANSCRIPT
RBC Whistler Conference 2003The View from the Summit
Robert McFarlaneEVP & Chief Financial Officer
February 19, 2003
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This presentation contains forward-looking statements about expected future events and financial and operating results that are subject to risks and uncertainties. TELUS’ actual results, performance, or achievement could differ materially from those expressed or implied by such statements. For additional information on potential risk factors, see TELUS’ Annual Information Form, and other filings with securities commissions in Canada and the United States.
TELUS disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
All dollars in C$ unless otherwise specified.
Forward-Looking Legal Disclaimer
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Agenda
Q4 Review 2002 Review 2003 Outlook
Slide 4
About TELUS Mobility
Subscribers - 3.0M
Revenue - $2.0B
EBITDA - $535M
CDMA footprint - coast to coast 1X
iDEN Mike network - only one in Canada
Spectrum position - best in Canada
Licensed POPs - Cdn. Population (31.4M)
Network coverage - 27.4M (~90%) + roaming
Strategic relationships - Verizon Wireless & Nextel
Leading national wireless provider
Q4 Review
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Q4 Review – Mobility
($M) Q4-01 Q4-02 ChangeNetwork Revenue 424 491 16%EBITDA 55 129 133%
Capex 205 125 39%Capex Intensity1 42.6% 22.6% 20ptsEBITDA-capex (150) 3.4 102%
Flat YoY expenses on strong network revenue growth & reduced capex drove tremendous cash flow improvement1 Ratio of capex to total revenues
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Q4 Review – Mobility
Q4-01 Q4-02 ChangeSubscribers 2.6M 3.0M 16%ARPU $56 $56 - -
Churn 2.09% 1.68% 41ptsCOA $509 $543 6.7%COA (ex. retention) $447 $478 6.9%
~20% ARPU premium to competitors maintained Material improvement in churn rate
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Q4 Review – ARPU
Q4-02
$56
Q4-01
$56
Q4 ARPU flat year-over-year
Average Revenue Per Unit ($/month)
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Q4 Review – Churn
Q4-02
2.09%
Q4-01
1.68%
Q4 monthly churn rate improved 41 pts YoY
Monthly churn rate (%)
2002 Review
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2002 ReviewPerformance vs. Targets
Original 2002 Target
2002 Results
Variance
Revenue $1.95 to 2.0B $2.02B 2.3%
EBITDA $450 to 470M $535M 16%
Capex $560M $460M 18%
EBITDA-capex ($110) to (90M) $75M $175M
Significantly exceeded 2002 targets
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2002 ReviewEBITDA & Margin
Wireless EBITDA ($)
$173M
2001 20022000
$356M
11%
20%
26%
$535M
EBITDA Margin
Outstanding 2002 EBITDA growth of 50% contributing to material YoY margin expansions
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2002 ReviewCapital Expenditures
Significant capital intensity improvement
2001 2002
$644M1
Capital Expenditures ($M)
35%Capex intensity
$460M
23%
1 Excludes $356M for spectrum acquisition in 2001
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2002 ReviewCapital Intensity
Superior capital intensity compared to US average
23%
Canadian Average1
TELUS MobilityU.S. Average
25%
27%
Capital Intensity (%) - 2002Source: Company & analyst reports
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2002 ReviewEBITDA-Capex
Positive cash flow of $75M in 2002 $719M YoY improvement
($644M)
$75M
EBITDA-Capex ($M)
2001
2002
Slide 16
2002 ReviewPerformance vs. Targets
Original 2002 Target
2002 Results
Variance
Net additions 425 to 450K 418K (20K)
Churn < 2.0% 1.8% 20 pts
Introduce new data products & services
N/A 1X / SMS / ++
N/A
Implement roaming/resale agreements
N/A complete N/A
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2002 ReviewNet Additions
2002
418K
2001
418K
Net additions flat YoY despite decline in industry net additions
Net Additions
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Although flat YoY, 2002 net additions of 418K represent increased share of industry net additions
2001
TELUS Mobility 22%
TELUS Mobility ~30%
2002 ReviewNet Additions
Source: Company & analyst reports
2002
1.9M1.3M
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Prepaid 17%
Postpaid 83%
3.0M Subscribers
2002 ReviewSubscriber Mix
TELUS Mobility has industry leading postpaid mix
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2002 ReviewARPU
1 Microcell ARPU 9 mo. YTDSource: Company reports & analyst reports
Average Revenue Per Unit ($/month) - 2002
TELUS Mobility BCE Wireless Rogers AT&T Microcell
$55
$45$46$401
YTD ARPU industry leading with ~20% premium to closest competitor
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1.8%
2002 ReviewChurn
North American industry leading monthly churn rate in Q4-02
Canadian Average1
TELUS MobilityU.S. Average
2.3%2.8%
Monthly Churn (%) - 2002Source: Company & analyst reports1 Microcell churn estimated
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Other Accomplishments in 2002
Completed integration (incl. Billing systems) Implementation of roaming agreements Improved network quality Significantly increased distribution Cross Carrier SMS in Canada Verizon - preferred Canadian roaming partner
Slide 23
2002 Review How far we have come in 2 years
Proforma 2000 2002 Change % ChangeDigital POPs (M) 22.6 27.4 4.8 21%Subscribers (000s) 2,160 2,996 836 39%ARPU ($) 59 55 (4)
(6.8)%
Churn (%) 1.98 1.80 18pts
9.1%
Lifetime revenue ($) 2,980 3,056 76 2.5%
Subscriber base up 39%Industry-leading value per subscriber has increased
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2002 Review How far we have come in 2 years
Proforma ($M) 2000 2002 Change % ChangeNetwork Rev. 1,396 1,853 457 33%EBITDA 173 535 362 209%
Capex 534 460 74 14%
Cap. Intensity1 33% 23% 10pts -
EBITDA-capex (360) 75 435 -
Tripling of EBITDA and capex reduction drove a $435M improvement in annual cash flow
1 Ratio of capex to total revenues
2003 Outlook
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What’s coming - SMS continues to explode
June 2002 Sept 2002 Jan 2003
137%
1,027%
682%
IntroductionApril 2002
TELUS Mobility SMS usage increasing exponentially
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What’s coming - Cool new phones
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What’s coming - Cool phones take pictures
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What’s coming - Cool pocket PC phone
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What’s coming - Cool new RIM Blackberry
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What’s coming - Mike goes national
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2003 Targets2003
Targets YoY
ChangeRevenue ~$2.2 to 2.25B 9 to 11%
Net additions 400 to 450K flat
Churn rate 1.8% or less flat or better
EBITDA $625 to 650M 17 to 21%
Capex $450M 2%
EBITDA-capex $175 to 200M 133 to 167%
2003 targets reflect continued relentless focus on profitable subscriber growth
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How does TELUS Mobility measure up?
Sources: TELUS estimates. Cdn. Statistics - Company Reports; US Statistics - Company Reports and Morgan Stanley1 Projected capex as a % of forecast total revenue. 2 Projected EBITDA less projected Capex divided by projected total revenues
3 Projected wireless penetration gain divided by # of carriers in market. For TELUS, projected net adds divided by projected covered POPs
Mobility’s 2003 key indicators superior to industry benchmarks
TM 2003 Targets
Cdn Avg 2003
US Avg 2003
EBITDA margin 29% 20% 29%Annual EBITDA growth rate 19% 14% 16%Capex intensity1 20% 17% 22%(EBITDA – Capex) / tot. rev2 8.4% 7.4% 6.6%Mkt penetration/cov. POPs 12% 42% 53%No. of carriers in market 3 to 4 3 to 4 6 to 8Penetration gain/carrier3 1.6% 1.1% 0.5%
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Summary
Met/exceeded 2002 financial targets Industry leader - ARPU & churn Value creation focused on leading EBITDA growth Capital discipline driving enhanced efficiency Free cash flow positive Proven management team Cash generation superior to North American peers
TELUS Mobility is a premium wireless asset with superior operating metrics
Questions?
Answers!
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