Telus Corp (TU) 2005 Q3 法說會逐字稿

Ladies and gentlemen, welcome to TELUS Communication Q3 conference call. Participants will be on a listen-only mode. If you have a question press the one followed by the four on your telephone. As a reminder this conference is being recorded, Thursday November 10, 2005. If at any time during the conference you need to reach an operator, please press star zero. I would now like to turn the conference over to John Wheeler, Vice President, Investor relations. Please go ahead, sir.

Thank you very much, Claudine, and welcome to everyone on the line to the TELUS third quarter 2005 conference call and webcast. Let me introduce the TELUS executives on line with us today. With me are Darren Entwistle, President and CEO, and Bob McFarlane, Executive Vice President and CFO. We will start with introductory comments followed by a question-and-answer session. A news release on third quarter financial and operating results and detailed supplemental investor information are posted on our website at telus.com.

For those with access to the Internet, the slides are there for viewing at telus.com, investor call. You will be in listen-only mode during Executive comments. Let me direct your attention to slide two. The forward-looking nature of the presentation, answers to question and statements about future financial results are subject to risks and uncertainties. Accordingly, TELUS' actual results could differ materially from statements made today. I ask that you read our legal disclaimers and refer you to the risks outlined in our public disclosure in Canada and the United States. Now over to Darren on slide three.

Thanks, John. Good morning and thank you for joining us today. This has been another challenging quarter at TELUS. Frankly, one of many such quarters since I joined TELUS over five years ago. TELUS' consistent ability to answer the challenges reflects the depth and execution of our leadership team and our ability to deliver for our shareholders, customers and team members. Once again, shareholders are benefiting from the strong execution of our strategy that we invoked over five years ago. Indeed, notwithstanding the work stoppage that we have been experiencing for the last 15 weeks, I'm pleased to report yet again solid financial results evidenced in our third quarter performance. Let's start by reviewing these third quarter top-line results as set out on slide four. The underlying theme this quarter is that TELUS demonstrated the resilience and strength of our industry leading business model in the face of a protracted labor destruction.

At the consolidated level TELUS delivered strong revenue growth at 6% compared to the third quarter of last year. TELUS' more modest EBITDA growth of 3% was obviously impacted by the labor destruction here in western Canada. Nevertheless, in the face of the work stoppage, TELUS still delivered the best EBITDA growth in the Canadian telecom's industry. Focusing on the important bottom-line earnings and cash flow, net income was up 21% and free cash flow was up 16%. Turning to slide five. TELUS Mobility has clearly continued to execute on its profitable growth strategy and was largely unaffected by the strike. Revenue in TELUS' wireless operation was up an impressive 16% due to another $2 increase year-over-over in ARPU, which is the 11th consecutive quarter of such growth. Moreover, TELUS generated record third quarter net additions of 138,000 subscribers. EBITDA at TELUS Mobility was up strongly once again, with 28% growth aided by slightly lower COA and Canadian industry leading churn of 1.33%.

Notably, cash flow in TELUS' wireless business, measured simply as EBITDA less CapEx, was up 49% to $327 million. Clearly, the growth story at TELUS and in the Canadian wireless industry remains strong. With wireless today accounting for 42% of TELUS' revenues, 49% of TELUS' EBITDA and 57% of our simple cash flow, we are well positioned to deliver continuous value expansion for our shareholders due to TELUS' exposure to wireless in its asset mix. TELUS Communications' results were obviously impacted by the labor disruption. Overall, revenue was flat with data up 5% and long distance down 5%. However, the most obvious impact of the work stoppage was on the expense line with temporarily higher expenses for such items as management overtime, security, plus our inability to capitalize labor at business as usual levels. This translated into EBITDA being 14% lower year-over-year at TELUS Communications.

Despite CapEx being lower in the quarter, cash flow at TELUS Communications was still a substantial $250 million, although down 10% due to lower EBITDA growth. As we have mentioned in the past TELUS was impacted in the initial months of the strike with high speed net additions being abnormally low at only 7,000 subscribers this past quarter. This is not a normal run rate, obviously. TELUS has put some excellent promotional offers into the market in September and now into the Christmas selling season for our ADSL service and the applications that ride on the back of it. Now that we are at full operational capability in Alberta and soon to be in the same position in British Columbia, TELUS will be fulfilling this demand for ADSL in the fourth quarter. Let me now turn to slide six and update you on the impacts and current status of the labor situation at TELUS.

As I mentioned last quarter, we were determined to bring the collective bargaining process to a positive conclusion for our shareholders, customers and team members. The process to achieve this outcome has been a challenge that has absorbed much effort and required considerable perseverance. The operational impact of the strike on customer service has been less than what we had expected. The excellence of TELUS' emergency operations planning and the robust work stoppage procedures that we put in place, effectively and expediently reassigned management personnel into front line rolls. TELUS also complimented these resources with third party contractors. Another factor allowing us to provide strong customer service in the face of the work stoppage was the lack of support for the strike outside of British Columbia, with increasing numbers of Alberta team members choosing to return to work. The number of Albertans currently choosing to return to work within the bargaining unit of that province stands at 59%.

Notably, there was no strike activity east of Alberta. The operations procedures that we put in place to deal with the work stoppage worked exceedingly well in many areas, especially our call centers, where we often achieved better than normal service levels, indeed even reaching historic highs in respect of customer service delivered out of our call centers. This is important because much of TELUS' work, up to 80%, is automated today. Moreover, we have long since moved beyond being a regional telco to now being a leading national operator capable of drawing upon national resources to shore up our requirement in challenged areas of our operations geographically. During the work stoppage our ability to maintain work levels has far exceeded our original expectations. Where we with anticipated only dealing with repairs, we have been, in fact, in a position to take orders and fulfill them.

Compared to our original expectations, the impact of a work disruption was less than what we anticipated and, indeed, as I've indicated, we have exceeded customer service levels in many areas. But as well, we have also exceeded certain costs due in part to having so many union team members choosing to return to work in Alberta. Notwithstanding this, including the increased costs that we've absorbed, TELUS' financial results compare favorably with our peers in the Canadian telecom industry. Moreover, cash flow has been temporarily improved by the reduction in capital expenditures. At the consolidated level CapEx was down $57 million this quarter from the same period a year ago. And this impact was reflected in the cash flow numbers that I cited earlier in my remarks. Let me now update you on the recent events in the negotiation and ratification of a new collective agreement as set out on slide seven. As you may know, I engaged personally at the bargaining table and after two weeks of effort TELUS and the TWU were pleased to have reached a negotiated tentative agreement on the 10th of October.

This tentative agreement was recommended by the TWU leadership and taken out for ratification in a series of town hall meetings. TELUS was, of course, disappointed to have this agreement defeated three weeks later on October 30th by a very narrow 53 vote difference amongst the 9,000 people who had cast their votes. Encouragingly, TELUS and the TWU reached another tentative agreement this past Sunday. This agreement is again supported by the TWU executive leadership and, as well, their bargaining committee. Thankfully, the second ratification process is designed to be more expedient than the previous one. We expect the outcome of a mail-out and mail-in ballet to be completed and announced by the end of next week. TELUS is intent on seeing the benefits of this five year collective agreement soon begin to flow for the benefit of all stakeholders, including unionized employees who will benefit from the best renumeration and the best employment security in the Canadian telecom and cable industries.

This new agreement will also provide for improved union and management relations that will benefit from the establishment of a common interest forum and the cessation of all legal undertakings by both parties. Moreover, this new agreement will also and importantly benefit TELUS' customers who can now be better served with more flexibility, including enhanced service hours and improved responsiveness from the TELUS team. And finally, and importantly again, TELUS investors will benefit from increased productivity from outsourcing non-core aspects of our business from consolidating certain functions and from increased time on the job by TELUS employees. Given that we are in the midst of a ratification process, we are not in a position to communicate the details of the new collective agreement at this juncture.

Suffice to say for now, that the cost of the new collective agreement is consistent with the representations that we have made the shareholders thus far. Clearly, resolving this long running situation will allow TELUS to focus more effectively and efficiently on the competitive challenges and, as well, the opportunities that are inherent within our industry. With that in mind, let's look at two of the new growth opportunities in our wireless and wireline business units as shown on slide eight.. TELUS is today announcing that TELUS Mobility is launching its new wireless high speed network, known to many as EVDO, in five major Canadian cities, Vancouver, Calgary, Edmonton and Montreal. The new service will offer business clients wireless data transmissions at typical speeds of 400 to 700 kilobits per second, which is at least six times faster than existing data services. This should be a catalyst for further and continued data growth at TELUS Mobility.

For example, EVDO will increase the effectiveness of the applications delivered by the Sierra Wireless AirCard and other new data services that are now emerging including mobile TV. I'm also pleased to announce today the extension of our future friendly home strategy within TELUS Communications and the expansion of our suite of services for Mobility and security to now include entertainment. TELUS TV is ready to move beyond the trial phase at TELUS Communications. In both Edmonton and Calgary we will begin a phased neighborhood roll-out of our innovative all digital television service. TELUS TV delivers differentiated and unparalleled customer choice without resorting to value destroying price discounting. With or without a collective agreement ratification, our skilled team members will be selling and delivering TELUS TV into the homes of our customers in Alberta. Let's now conclude on slide nine.

As is our practice, we are updating our 2005 annual guidance today, which reflects both the negative impact of the four month labor disruption on the wireline business and, as well and importantly, the ahead of plan trajectory of our wireless business. The resilience of the TELUS business model is evident in that certain downward revisions in TELUS Communications' results for this year are offset and mitigated by strength at TELUS Mobility in the face of the work stoppage. A clear substantiation of the business model that we had put in place over the last five years. To illustrate, we are now raising our revenue guidance for TELUS Corporation by an additional $50 to $75 million. Moreover, due in part to lower capital expenditures, we are raising the free cash flow outlook for TELUS Corporation by $150 million for the year to $1.4 to $1.5 billion. TELUS Corporation has demonstrated our commitment to return capital to investors, to deliver, in essence, against the expectations that we have set with them, specifically, capital that is surplus to our requirements for investment into our core businesses.

This was clearly illustrated again in the third quarter, which saw TELUS announce the early redemption of $1.6 billion of notes previously due in May, 2006, in December now 2005. TELUS also delivered on the continued execution of a share repurchase program with a further $233 million expended in the quarter for a total of $742 million thus far. And finally, TELUS has announced today a 37.5% increase in the TELUS dividend to be paid in January 2006. The increase from $0.20 in our dividend per quarter to $0.275 is entirely consistent with our sustainable dividend growth model first announced a year ago. And as well, it demonstrates the transparency we provided investors with a clear dividend policy guideline.

Notably, this is only the second step in the long-term execution of our dividend growth model. Despite the non-recurring operating challenge of the labor disruption, the solid execution of our consistent strategy, focussed on wireless and data growth, has allowed us to deliver these value enhancing actions. Let me now turn things over to Bob to brief you on the excellent operational and financial results that continue to be generated by the team of people at TELUS.

Thanks, Darren, and good morning, everyone. Let me begin my comments with a recap of TELUS Mobility's excellent results shown on slide 11. TELUS Mobility has again reported best in class results in the North American wireless industry. Mobility continues to deliver double-digit revenue, earnings and cash flow growth. Growth and revenue of 16% and EBITDA of 28% were certainly impressive and, clearly, our operations were largely unaffected by the labor disruption in western Canada experienced in the quarter. Turning to slide 12. TELUS Mobility experienced a record third quarter for net additions, adding 138,000 new subscribers. TELUS Mobility achieved a second successive quarter of positive growth and year-over-over pre-paid subscriber net additions as well.

Our total subscriber base has increased by 14% year-over-year, with post paid subscribers, as a percentage of total subscribers, remaining relatively stable at an industry high 82% of our 4.3 million total subscribers. Turning to slide 13 and given that TELUS is the last major Canadian carrier to report wireless additions, I thought I would take a moment to review the subscriber growth momentum in the Canadian wireless market. As you can see in the bottom of the slide, the Canadian wireless industry continues to grow at an accelerating pace. There are nearly 500,000 industry net additions in the third quarter 2005, a solid 1.6 point penetration gain in one quarter alone. Wireless penetration now exceeds 50% in Canada as at the end of the third quarter. This represents a 5-point expansion in the past 12 months and marks the second straight year of accelerating subscriber growth. Given these trends, it appears the Canadian industry is on track for another record year of subscriber additions.

The next slide shows that TELUS continues to maintain our industry leading average revenue per user, or ARPU, with a significant premium to our closest competitor. TELUS Mobility ARPU increased by $2 to $64 driven by growth in consumer and business data usage, a 4% increase in voice minutes of use, and continued pricing discipline in our operations. Of note, our post paid ARPU increased to over $71 million in the third quarter and our pre-paid ARPU grew to about $27, approximately double that of our peers. TELUS Mobility's positive operating trends are evident on slide 15. Blended churn remains relatively flat at a low 1.3% and the cost of acquisition per gross subscriber addition was down slightly to $371. These strong metrics, combined with our increasing ARPU, means that we are generating a lifetime revenue per average subscriber of $4,800. This is up 4% year-over-year. So with a declining COA and an already high and increasing level of lifetime revenue, we are driving improvement in our already excellent marketing efficiency metric, as indicated on the last line of this slide.

Turning to slide 16 you can see that the three national wireless carriers added 1.7 million new subscribers over the last 12 months, while industry EBITDA increased a healthy $800 million or by 26% to 3.9 billion. TELUS Mobility's discipline execution continues to generate a disproportionately larger share of incremental EBITDA relative to our share of net additions. While TELUS Mobility accounted for 31% of net additions, we captured an estimated 44% of the incremental industry EBITDA growth, during the last 12 months. Certainly this has been a value enhancing outcome to the benefit of our TELUS shareholders. Moving to slide 17. TELUS Mobility's excellent subscriber metrics translate into our North American leading wireless EBITDA margins. At 47.5%, TELUS Mobility's third quarter EBITDA margin is significantly better than our direct peers in Canada, as well as compared to US wireless carriers, whose margins range from 25% - 36%.

To wrap up the Mobility's segment on slide 18, we've updated our full year 2005 guidance reflecting the increased ARPU experienced this year to date, ahead of expectations, we now expect higher levels of revenue and profitability for 2005 regardless of the labor disruption. So I'm pleased to inform that today we are raising the ranges for revenue and EBITDA by approximately 75 million and 50 million respectively. Meanwhile, CapEx guidance remains unchanged. While the labor disruption has slowed down capital investments in the third quarter somewhat, we'll be attempting to catch up in the fourth quarter. So, we continue to believe that an approximate 400 million CapEx estimate for the full year is appropriate. Clearly the outlook for Mobility continues to be very strong. Turning now to wireline results on slide 19. TELUS Communications revenue is remarkably stable, despite the labor disruption in western Canada that effected our ILEC operations for most of the third quarter. The third quarter revenue breakdown is shown here.

Growth in local and data revenues were offset by declines in long distance and voice equipment sales. Data revenue growth was 5% on a reported basis, as mandated CDNS discounts have offset increased data revenues from acquisitions, while consumer data revenue growth slowed in the third quarter due to lower internet additions caused by the labor disruption. Underlying organic data growth was approximately 4% when excluding the impact of regulatory decisions and acquisitions made in the past year. Slide 20 shows overall financial results for the wireline segment. We are quite pleased in the resilience of our wireline revenues, which remain stable year-over-year despite the labor disruption and competitive activity. This bodes well for our future. As expected, our EBITDA decreased during the third quarter as a result of costs associated with emergency operations activities, which has successfully maintained service levels during the labor disruption. We estimate that incremental expenses associated with the labor disruption in the Communications segment were approximately $68 million.

Excluding cost for revenue impacts, adjusting our EBITDA for such non-recurring expenses means that our normalized Communications EBITDA would have been flat year-over-year. As expected, CapEx declined due to constrained labor resources to deploy capital during the labor disruption. Depicted on slide 21 are non-incumbent operations in central Canada were largely unaffected by the labor disruption in the west. Our focus here remains on generating quality recurring data focussed revenues in this business. Revenue of 151 million was up 4% and we had our fourth straight quarter of positive EBITDA. We remain on track to achieve our annual guidance for non-incumbent revenue and EBITDA. Moving on to slide 22. We can see the high-speed internet results. TELUS added 7100 new high speed internet subscribers in the third quarter. We experienced lower subscriber loading in this quarter as the labor disruption constrained our marketing and fulfillment capabilities.

On a positive note, we are able to successfully maintain service levels during the labor disruption and as a result customer retention rates remain significantly better than experienced last year, despite challenges caused by the labor disruption. Including 250,000 dial-up subscribers, TELUS' total internet base now totals 986,000, with 75% being high speed. Slide 23 highlights our network access line, or NAL, performance which declined 2.2% year-over-year. As expected, TELUS experienced increased residential line losses, down 3.2%. This reflects increased competitive activity for resellers and VoIP competitors, including a full quarter of cable telephony competition in Calgary and Edmonton, ongoing substitution to wireless, and the impact of the labor disruption which limited TELUS' ability to process new customer installations or port existing lines to competitors in the west. Business lines fell 0.6% year-over-year, but remains stable sequentially as growth in non-incumbent business lines offset a decrease in incumbent business lines.

To conclude on TELUS Communications, you can see on slide 24 that we are making changes to 2005 wireline guidance to reflect year-to-date results and expectations for the fourth quarter, including the estimated impact of the labor disruption, whether it is resolved latest this month or not. We are increasing revenue guidance by $50 million to a new range of 4.825 to 4.85 billion, reflecting ahead of plan execution in the first nine months of 2005. We are lowering guidance for EBITDA to 1.8 to 1.875 billion and widening the range to take into account the temporary increase in expenses and uncertainty related to labor disruption, which also includes a lower estimate for restructuring and work force reduction costs this year in a range of $20 to $50 million. CapEx guidance is also being lowered by $100 million, as you would expect. We are also lowering guidance for high speed internet net adds to approximately 65,000, to take into account the weak third quarter result and the impact of a continued labor disruption. Now let's turn to TELUS' consolidated results as shown on slide 25.

Consolidated revenue was up 6% to just over $2 billion, driven by the strong revenue growth at wireless and stable revenues in wireline. EBITDA grew close to 3% due to significant growth at Mobility partly offset by lower EBITDA in Communications. I'll analyze earnings per share in the next slide. And capital expenditures, while they were down this quarter by 18%, as mentioned earlier, due to labor disruption. Now looking at EPS on slide 26. Reported EPS was up 20% this quarter, which included a favorable $0.05 adjustment for tax related matters, primarily due to the reevaluation of deferred tax liabilities caused by a reduction in B.C. provincial income tax rates effective July 1, 2005. If we normalize for restructuring and work force reduction costs taken in the third quarter last year versus none this year due to labor disruption, the actual underlying growth rate is 2.1%, despite the temporary effects of the labor disruption. If we further normalize for the $0.12 per share impact of the labor disruption in this third quarter of this year, the actual underlying growth rate would have been an even more favorable 28%.

Slide 27 shows how the $581 million in reported free cash flow was generated this quarter. We've ended the quarter with $1.3 billion in cash and temporary investments. Clearly this puts us in a strong position to redeem early the $1.6 billion of notes on December 1st, repay the remaining balance of the approximate $200 million of lump sum and retroactive payments owing to employees on ratification, and continue with the share repurchase program. Slide 28 gives you further details with regards to our share buyback program activity. TELUS is authorized to repurchase up to 25.5 million shares over a one-year period ending December 19, 2005. In the third quarter we were active in the market, purchasing 5.1 million shears for $233 million at an average price of $45.84. We have now repurchased a total of 17.9 million shares or 70% of the authorized program. We intend to continue a share repurchases in the fourth quarter.

Let me now turn to slide 29 and discuss another important aspect of returning capital to shareholders. Consistent with our dividend growth approach, TELUS last year set a payout ratio target guideline of 45% to 55% of sustainable net earnings on a perspective basis. As Darren mentioned earlier, the board has approved a 37.5% increase in the quarterly dividend to $0.275 per share from $0.20 effective for the January 1, 2006 payment. The decision to significantly increase our dividend reflects our confidence in TELUS' ability to continue to grow EPS on a sustainable basis and our ongoing commitment to return capital and create value for shareholders. As shown on slide 30, TELUS has issued a notice of early redemption on its 1.6 billion 7.5% coupon notes due June 1, 2006. The redemption price, which is payable on December 1st, will be set on November 28th based on the yield for a government of Canada bond with the equivalent maturity plus 35 basis points, but in no case, will be less than par.

TELUS plans to finance the redemption and the regular coupon interest payment through a combination of our large cash balances, proceeds from our accounts receivable securitization program and/or from our resolving credit facilities. This early redemption has a modestly positive NPV to TELUS, but will result in an estimated after tax accounting charge of $0.06 to $0.07 per share, to be recorded in the fourth quarter of 2005. As you can see in slight 31, following TELUS' September 26th announcement of its intention to early redeem the 1.6 billion in notes, three of four credit rating agencies issued positive upgrades taking us to the BBB+ or the equivalent BBB high rating level for TELUS Corporation. And with DBRS rating our wholly owned operating subsidiary TELUS Communications, Inc. one notch higher at A low. In addition, TELUS is today announcing an amended long-term financial policy leverage target for net debt to EBITDA. The new targeted range is 1.5 to 2.0 times, changed from the previous target of 2.2 to 1 or less.

As of September 30th, TELUS' 2005 net debt to EBITDA was 1.8, which is consistent with the newly updated long-term targeted leverage range. Finally, as you can see in this last slide, we're making changes to our consolidated guidance. Revenue guidance has been adjusted upwards due to positive revisions in both our wireless and wireline businesses. Our EPS guidance range has been tightened to $1.90 to $2, which includes the $0.06 to $0.07 financing charge impact in Q4 that I just mentioned. CapEx guidance has been lowered by $100 million, as noted earlier, and free cash flow is being revised upwards by 150 million, primarily reflecting the reduced CapEx guidance and restructuring costs. To close out, I'd like to remind everyone that TELUS intends to release its 2006 targets on December 16th in conjunction with my 2006 guidance call. Darren and I would now be happy to take your questions, so I will turn the call back to John to moderate the Q&A portion of today's call.

Thanks, Bob. Just before I turn the call over to Claudine to conduct the Q&A session, can I ask your cooperation for one question at a time, please. However, if you need a follow-up related to that question, that is appropriate. Claudine, please proceed.

Thank you. [OPERATOR INSTRUCTIONS] An our first question comes from the line of Peter MacDonald at GMP Securities. Please proceed.

Thank you. I was glad to see the dividend increase coming to effect in the quarter as promised, despite the labor disruptions, so congratulations on that. But I do have a couple of questions on the use of cash. First, will the dividend review be an annual event and can we assume it stays at 45% to 55% and is that of normalized earnings?

Thanks, Peter, I'll answer that question on behalf of the TELUS board. In terms of the dividend payout ratio range, you would be correct to assume that that is, in fact, our guideline to the street, so that is a policy within TELUS Corporation. So you should expect stability in respect to that policy and you should expect us to adhere to that policy to the extent to which we have surplus cash and are desirous of returning it to shareholders. Number two, in terms of presuming whether the dividend increase is an annual event, the answer to that would be a soft yes.

The yes would relate to the fact that we have postulated a dividend growth model, which means we are forecasting, if you will, successive increases in the dividend that is consistent with our dividend payout ratio range should we have surplus cash that we would be desirous to returning to shareholders. The reason that I say it is a soft yes is, of course, the fact that the dividend decision remains the providence of the TELUS Board of Directors and is subject to change at their discretion along the way. So importantly to take away, I think you can count on the 45% to 55% dividend payout ratio range as a policy going forward and the fact that we've been quite explicit postulating a dividend growth model means that we are looking to deliver successive increases to the dividend in so far as we have surplus cash consistent with our dividend payout ratio range, but that is subject to change and is at the discretion of the TELUS Board of Directors from time to time.

Then secondly, you lowered your debt to EBITDA target to 1.5 to 2 times, so maybe you can expand the rationale behind that a little bit and what your comfort level would be in increasing that ratio in the case of required added CapEx or acquisition opportunities. And maybe as a follow-up on that, Darren, can you also talk, as you have in the past, with All stream. If you can run through an explanation on Manitoba Tel All Stream and why that may or may not make sense at this time.

Thanks, Peter. It's Bob McFarlane. I'll take the front end of your multi-part question, which as I recall was related to the debt to EBITDA targets here, referenced the change, if you will, in terms of establishing new a long-term range of 1.5 to 2.0 on a net debt to EBITDA basis. The rationale for that is essentially we perform periodically here, and my treasure team, a cost of capital analysis for Teleson. We analyze where we believe the optimum tradeoff between leverage and dilution is. And it's our belief that for the characteristics of our business and the credit rating agencies criteria, et cetera, that 1.5 to 2 times range, as we define that, the ratio would be consistent with achieving our targeted credit ratings of BBB high to A low.

In fact we are at BBB high or plus in respect to three out of the four agencies already and we are at 1.8 times net debt to EBITDA as of September 30th. So essentially our theory has proved out correct and you'll note that the yields at which our debt trades is very attractive relative to our competitors and certainly at the narrowest spreads that they have been in many, many years. And that bodes well for our ability to fund the operations at a low cost and expand earnings through reduced interest expense on a go forward basis. In terms of funding, say, CapEx programs, we have given consistent guidance in that regard in terms of on a consolidated basis being in the mid to high teens as expressing CapEx divided by sales. And, of course, from time to time one is going to have troughs or peaks.

Having said that, we, in this past quarter, clearly have had some deferral of CapEx as it relates to constrained resources due to the labor disruption. So one would naturally expect a shifting of CapEx into next year. So while I'm not about to give guidance for next year, I would suggest that we would continue to expect around mid to high teens in CapEx intensity on a normal basis. However, certainly if we do have a resolution to labor disruption this quarter, hopefully we'll have an acceleration in CapEx in the first part of next year reflecting a shift in activities from this year. Having said all that, the leverage target is a long-term target, so the point is that you should be acting consistent with that in a strategic fashion, not to say that you cannot deviate from it in the short-term. Having said that, I'll hand it over to Darren to address the second part of your question.

Thanks, Bob. Obviously, Peter, I believe that you'd agree that the interest of shareholders are not best served by discussing strategic business development opportunities in a public form. I think it is important to note that TELUS has all the assets that we need to execute effectively and organically on our national growth strategy with a focus on wireless and data services. So any business development opportunity on the acquisition front would be complimentary to the core asset base that we have now, which is completely capable of fulfilling our strategy, sticking to an organic growth plan.

Also, as I have said previously and I think this guidance sometimes has been helpful, that when we evaluate business development opportunities, we have a very set and very transparent set of criteria. Number one, there would have to be a solid strategic fit. So what would that particular acquisition do to accelerate our focus on wireless and data growth on a national basis. Number two, what is the commercial differentiation that we achieve through the acquisition that allows us to improve our sustainable points of competitive advantage.

Number three, of course, the economics are all important, which essentially boils down to price. And then lastly, what is the digestive capability that TELUS organization, i.e. do we feel confident that we can deliver on the post acquisition integration and deal up the return to shareholders that they would expect. And, of course, we need to make sure TELUS that we are a balanced organization. We can only digest a finite number of activities on our plate at a given point in time, so we need to be very cognizant in respect to the [vam] with this management team.

Okay, thank you. It's comprehensive.

Our next question comes from the line of Glen Campbell at Merrill Lynch. Please proceed.

Yes, thanks very much. During the quarter you made an announcement about installing Nokia, or I guess using Nokia DSLAMs for ADSL 2 plus capability. And now you've announced the launch of TV. Could you talk a little bit about what your capabilities are in terms of delivering bandwidth sufficient for TV across your foot print and how you might plan to grow that?

Glen, yes. We are indeed adding Nokia as a manufacturer within our network to compliment some of the moves that we have made in the past with Lucent, Alcatel and Cisco, so that we get the correct data speeds to be able to deliver not just high speed internet access into the household but, on top of that, security applications and as well, today, with the announcement of the launch of Entertainment Services, a innovative digital TV service. In respect of the bandwidths that we are looking at right now, I won't speak about the footprint because I think that's completively sensitive information. I'm not going to forecast as to which markets we'll be targeting geographically in the near-term. I don't think that advantages our shareholders. But in respect to bandwidth, we are achieving bandwidths of circa 8 megabits per second, which is sufficient to deliver a payload of high speed internet access security applications and as well TV.

Of course, for those customers that are closer to our central offices where we have a shorter loop length, we can get payloads of up to 10 megabits per second. We are at the present point in time also in the process of delivering, and this is, of course, part of the Nokia development that you referred to, ADSL 2 plus, which will take over the next 12 months our bandwidth within set geographies from 8 megabits per second up to 15 megabits per second, which will facilitate the introduction of things like high definition TV. Contemporaneous with that, we are also exploring the route of going ADSL 2 plus bonded, essentially making use of multiple pairs within the home, which can allow us to double the bandwidth in respect of ADSL 2 plus from 15 megabits per second to 30 megabits per second.

Over the next two years to three years we will be significantly upgrading our access infrastructure, pushing five or deeper into our access layer to the curbside cabinet within neighborhoods and then going with what we would call a GPON solution which would be a combination of an optical topology with an ethernet connection into the household that would allow us to deliver 100 megabits per second. I think the important point for shareholders is that TELUS is taking a prudent and judicious economic approach to upgrading our access infrastructure. Our desire is to sweat our assets. We've already made $1 billion investment in rolling out ADSL in the first place. So to sweat that asset, maximize our ability to deliver applications over given levels of bandwidth, leverage compression technologies to maximize the bandwidth and deliver the best return on investment to investors possible while simultaneously making sure that we can differentiate ourselves from the competition in a meaningful way as a result of the applications that ride on that bandwidth.

Thanks very much for that very detailed answer. I know you don't want to give CapEx guidance now but could you give us a sense of -- referencing that normal range of low to mid-teens of CapEx intensity. The program you are describing over the next two to three years, how much would that boost capital spending or, to put it another way, would it take you outside the normal range? Can you give us any sort of parameters to help model that?

Two comments to make, Glen. We, of course, have been investing in our access infrastructure over the past 18 months to facilitate the introduction of TELUS TV and that's going to need to continue. In respect of forward-looking guidance in so far as the CapEx is required to support the TV initiative. And beyond the TV initiative I think you should look to the guidance that we will be providing, as per usual, in December for 2006, where we will set out our CapEx intensity targets for TELUS Corporation, for TELUS Communications and for TELUS Mobility at that particular juncture.

Okay. Thanks very much.

Our next question comes from the line of Jonathan Allen at RBC Capital Markets. Please proceed.

Thanks very much, good morning. First just a follow-up question, Darren, on your comments about the five strategic criteria. I'm interested, first of all, in the -- what would be the greatest weighting that you would apply to it? You mentioned strategic fit on increasing wireless and data. Is that the overriding criteria or would you evaluate an opportunity that presented perhaps more just a one-time financial opportunity? And perhaps even in a follow-up question for Bob, looking at the tax. For my estimate you'll be using up the tax losses in 2006 and begin paying some fairly sufficient cash taxes in 2007. How big of a priority is it, within your organization, to manage that upcoming tax bill and in the absence of actually doing an opportunistic acquisition, what can you do to minimize some of that tax bill?

Thank you, Jonathan. A couple of things I think are important to say. In respect to the four criteria that we set out that we use as a template to evaluate strategic business development opportunities. For the sake of clarity they were a strategic fit, commercial differentiation, underlying economics and post acquisition integration considerations. In respect to the weighting, I think suffice to say for people on this phone that we think those criteria are mutually inclusive, so that we look at them holistically rather than one individual parameter being weighted over and above the rest. One thing I can say in terms of guidance, however, is that the overriding view from a sequence perspective is that first we have to evaluate the strategic fit. So looking at the economics in isolation is not something that we would do.

We would first, of course, evaluate what is the strategic fit. And if we came to a conclusion that there was a good strategic fit, then, of course, we would look at economic considerations and ancillary. But we would not do the reverse. Where the strategic fit was absent, we would not be, necessarily, persuaded to undertake an acquisition purely for the sake of advantageous economics or the opportunity to capture an ancillary economic benefit such as tax avoidance. So again, I think it's important to point out these are mutually inclusive and we look at them on a holistic basis. But the starting point for this organization is always going to be what is the strategic fit, what does it do to advance this strategy, what does it do to deliver for us commercial differentiation. At that particular juncture, then we review pricing considerations and the ancillary element of the underlying economics.

And, Jonathan, in regards to tax, paying tax isn't such a bad thing, because it means your business is generating profits. Having said that, in terms of what we make in acquisition to shelter tax, I think Darren has really addressed the criteria at which we would evaluate such an opportunity. And you are correct in terms of base assumption that we would become -- you exhaust the current shelter that we have in 2006 and therefore, begin remitting tax on a one-year delayed basis, i.e. starting in 2007. So that's the base scenario.

If I could just follow-up on one last question to what you referred to earlier, Bob, in looking at some of the debt refinancing opportunities. You've done the 2006 issue. But when we look at 2007 and 2011, you've got 7.5% to 8.5% coupon debt and you'll probably be able to refinance that below 5% currently. Is there anything that would prevent you from refinancing the debt now in terms of the FX hedges, et cetera, or is this an opportunity that you've looked at?

Firstly, I note that you put in the past tense the refinancing the '06, it's December 1st. So we've got a couple weeks to go before that's done, and that's what I'm currently focussed on. But I think your question is well taken in the sense that one should look at the various refinancing opportunities in a holistic manner which we certainly do from a TELUS treasury perspective. And we will evaluate and are evaluating our alternatives with respect to other forms of debt. And the redemption formulas are set and clear in those notes and so it isn't as simple as you've higher a debt and you are going to refinance at lower rates, because there's redemption penalties and therefore. And as you also eluded to various swaps that need to be unwound. So, we are going to evaluate that and I'll provide more color in respect in our longer term financing plan on the December 16th call.

Thanks very much.

Claudine, next question?

Greg MacDonald, National Bank Financial. Please proceed.

Question is on the strike related costs. You indicated they are roughly 68 million, I think Bob mentioned. Other than timing, are there any significant changes in the run rate of those strike related cost impacts in Q4? And also where there any tangible strike related impacts on revenue? And what I'm referring to there are potential deferred enterprise sale impacts as potentially re-allocating sales staff, things like that or inability to install access lines or DSL, anything like that? There wasn't a mention, but I'm wondering if that might have had an impact that you might be able to define?

Okay, Greg. You're right. The number is 68 million respective the third quarter. If you recall, the strike commenced on July 21st. So it wasn't a full quarter in terms of the strike. But also keep in mind that there were rotating work stoppages that were going on for proceeding the start of third quarter and we had already invoked our emergency operations plan in order to address those situations. So we were incurring costs for the full quarter. Although, fair to say, not the entire emergency operation plan cost for the entire quarter. So there is that aspect as it relates to run rate. Having said that, you typically, as we did, have more up-front loaded costs in terms of training, so on and so forth, as it relates to the labor disruption. And that, therefore, bodes well in terms of a run rate going forward.

And in terms of the fourth quarter, I won't give any specific guidance on those line items, but what we try to do was provide updated guidance which takes into account either the assumption that the vote, which is currently underway, has a positive outcome and therefore the agreement is ratified later this month or not. So it provides the bookends and clearly it effects the expense line, not so much the revenue line, and therefore that's why we have the wider range at EBITDA level than we do at the revenue side. If the ratification vote that's underway goes positive, as Darren mentioned they are tabulating towards the end of next week, then we are obligated to have a return to work notice procedures within 72 hours. And then typically, given the magnitude of the 14 odd thousand people involved, that we have a return to work process that would see [barg] unit members return to work and managers be reassigned back to business as usual roles, over a seven a day period.

So I guess what I'm saying is, simplistically, if we had a yes vote I think of return to business as usual by the end of this month. So we would have one month of, call it, normal like expense levels. However, we are into a Christmas season which has its own seasonalities as well. All of that has been taken into account to the best of our ability in terms of the guidance that we've given. On the revenue side, we haven't disclosed a number per se. I just wanted, from my perspective, to mention that yes, one can -- there has been revenue impacts, we can make internal estimates, but we just didn't feel comfortable from a true MD&A perspective to say, de facto revenue impact has been this or it's been that. And, rather, I think, in terms of steering you in the right direction, the revenues have been resilient on the wireline and certainly outstanding on the wireless side, so we've done well regardless. Clearly we could have done a little better, but we've taken a more conservative disclosure approach in terms of just really pointing out the expense impact. Darren, did you want to add any comments as it relates to the labor impact?

Thanks, Bob.

Just as a quick follow on, thanks, guys. On the restructuring cost you mentioned also 18 million year-to-date, 20 to 50 million guided for the year. And thanks, Bob, I think what you're implying is that depends a lot on whether you get a yes or not. Does that naturally imply also that the 50 to 80 that wasn't impacted for this year, that we would have expected, is rolled into '06?

Again, you're correct in that we have tried to incorporate a range which encompasses the bookends of a near-term ratification next week or no ratification whatsoever for this calendar year and that applies to the restructuring costs as well. In terms of a longer term restructuring efforts, certainly we do have plans and much in the form of the CapEx where we've noticed a deferral CapEx, I think it's a similar characteristic as relates to restructuring charges.

Okay, thanks. And then just finally, in the guidance that you're going to be giving us in December, will you also be talking about the potential for cost savings as a result of the new labor deal at that date?

Yes, he will, Greg. On the guidance call we will refer to what we will be dealing up in terms of work force restructuring charges that we would intend to invest in 2006 to realize efficiency gains, some of which can be emanating from the freedoms that we will enjoy as a result of a new collective agreement. And just in respect of the revenue question that you are answering, I'm presuming that you are looking for an answer to that question. It would be fair to say that TELUS and the financial results that we have put forward as a result of the third quarter of this particular year, demonstrates significant resilience in the face of the work stoppage, particularly within the wireless component of our overall operations. It would also be fair to say that there's a degree of asymmetry, where the weighting of the work stoppage impact is more on the expense line than it is on the revenue line. There have been modest revenue impacts.

It would be fair to say, particularly in British Columbia, we have deferred installations and deferred business development opportunities with corporate customers in British Columbia as a result of the work stoppage and wanting to make sure that the politics of our work stoppage do not impact any of our corporate customers here in British Columbia. So we have deferred some installs and some business development opportunities. It would be fair to say on the consumer front, in both Alberta and BC, our long distance win-back activity, typically precipitated out of our call centers, has been mitigated as we've had to redirect our call center talent towards more high team factors like continuous customer care. So we have seen a situation in the third quarter where effectively our win-back capability on long distance was absent as we had people focus on basic service.

In addition our installs on the ADSL front were impacted by the work stoppage. It would be fair to say that the impact was skewed. The heaviest impact on ADSL subscriber growth came in July and August and then we started to recover in September as we improved our operational capability, which, I think, bodes reasonably well for some continued momentum to go through into Q4. Ironically, our TELUS TV launch was scheduled for the 21st of July in Alberta. the day the strike ensued. So of course we have seen a 15 week deferment of our TELUS TV launch. And I'd say as well, the strike has provided a minor distraction to our CLAC business in Ontario, Quebec, as we've had to draw upon some resources to shore up our operational capability here in western Canada.

I think an important point to take away is as a result of the fact that we have 59% of the people within the bargaining unit in Alberta now crossing the picket line and the fact that we are complimenting these resources with third party contractors, today we are at full operational capability in Alberta and will reach that point in the not-to-distant future in British Columbia, which is allowing us to pursue accelerated ADSL fulfillment and, as well, the launch of innovative services such as TELUS TV. So we feel pleased with that. Finally, the wireless business and the strength of the excellent performance at TELUS Mobility is evidence of the resilience from a revenue perspective but moreover a general, financial and economic perspective of the wireless business in the face of the work stoppage. And when you look at a business that's generating 16% revenue growth and 28% EBITDA growth and 49% cash flow growth, augmented by a $2 increase in ARPU and a 1.33% increase in churn and a record number of subscribers, that's a set of financial and operational parameters that is not necessarily reflective of a significant impact on that business by the work stoppage.

That is very helpful. Thank you.

Our next question comes from the line of March Suva at Goldman Sachs. Please proceed.

Thanks for taking the question. Why don't you just quickly follow-up on the strike related costs and just thinking about once the strike is over how long do you expect to keep on the temporary workers and what's the additional costs for kind of a double costs with your own workers returning to work and these additional temporary workers on board? And then in terms of the disconnects and in terms of line loss, you mentioned that there are some gross ads that you were not able to take advantage of also on the residential side. So I was wondering if you could quantify any more detail in terms of the losses and delayed gross additions on the residential line side.

In terms of how long it would take in terms of transitioning, I attempted to answer that previously, but suffice it to say, that if we had a ratification vote that went positive end of next week, we would be at a more business as usual expense level at the start of December. In terms of additional cost, we will not provide specific disclosure in that at this juncture. I think we've given what the costs are for the third quarter. We've also provided estimate of both revenue and EBITDA for the -- and restructuring costs for the year. Therefore, de facto, given a range for the fourth quarter I think that should suffice from our perspective for now. And then in terms of NELs, there are really a number of factors going in different opposite directions. Certainly as you eluded to in your question, we were constrained in terms of our ability to do new installations, for example, a host formation and the like. There have been some backlogs, particularly in British Columbia, in terms of those additions. So it's a deferral of line loss additions, consequently.

We've also faced increased competitive activity, for example, cable telephony from Shaws, they have expanded their geographic markets and been aggressive in the marketplace. However at the same time, on the residential side, we have been constrained not only on installing for ourselves but in terms of porting to some of the resellers on a wholesale basis. So that would be a factor in the opposite direction. And then of course on the business side, we have lines both in our incumbent area, which is directly affected by the strike, as well as lines in our non-incumbent areas, which are not so effected. In terms of incumbent areas, I think we have been fairly resilient in that regard. So overall in terms of if we had no labor disruption where would we have been? It's hard to say. I think we need to see this play out a little bit.

If we look at line losses elsewhere by telcos in Canada, certainly ours appears to be favorable in that regard, even though it is -- the loss rate has increased. And I think we need to see how in a post disruption market the extent to which a backlog remains or is extinguished versus competitive activities, see how it trends out. But fair to say, as per prior comments we have been making, we have been anticipating an increase in our line loss rate and that in fact has happened. Although the exact number on a normalized basis is difficult to calculate.

Great, thank you.

Next question, please.

John Henderson at Scotia Capital. Please proceed.

Thanks. Bob, looking at your guidance of $1.90 to $2 in earnings for the year and you've done $1.74 so far. So that suggests $0.16 to $0.26, and you got another $0.07 of one timers next quarter. That's down a lot. Just wonder if you could have comments on that?

Firstly, when you say down a lot it's consistent. In fact it is just a narrowing of a range in terms of the prior guidance. As you know Mobility is a significant component of TELUS' consolidated results. And the fourth quarter is when you have the seasonally high, around 40% of industry additions tend to occur in the fourth quarter of a calendar year. And the expensing up-front of the cost of acquisition expenses related to those additions always drives down your Mobility earnings and therefore that effects our consolidated EPS. So I think that would be probably the factor that is driving the result you're observing.

Could I have a follow-up on the Mobility side. Just wondering to what extent you're seeing the impact of high-end customers moving to GSM for the global roaming capability? I know you've kind of addressed that with the new Motorola world phone. But have you been seeing that and therefore the response this way?

John, it's a small segment. It's an attractive segment because these are people who travel internationally, tend to generate high ARPUs, but they are a narrow segment, particularly in the Canadian context. As you probably noticed in our disclosure today, we have introduced products and capabilities for GSM CDMA roaming on an international basis. So that gives us the ammunition, if you will, for the first time to address that segment. Having said that, to say that because we haven't participated in that area it's impacted our ARPU is sort of gee, I guess I look in the positive side and say, gee, there is a segment, a high ARPU segment we weren't addressing and we are already 20% above the competitors over the past number of years. So there presents an opportunity for us. But I would say it's a relative niche segment and therefore it doesn't have a tremendous materiality for the consolidated ARPU result.

That's great. Thanks very much.

Our next question comes from the line of Dvai Ghose at CIBC World Markets. Please proceed.

Question on your growth strategies. Wireless had a suburb quarter. Margin as a percentage of network revenues 51%, and the first time I've ever seen a wireless company in North America report north of 50%, which obviously leads to concerns about how you continue this rate of growth and in particular in terms of margin improvement. I'm wondering if you can comment about that and in particular, how local number portability may be a factor both in terms of a challenge as well as an opportunity, perhaps, to increase penetration on the business space. And on the TV side, in terms of your growth strategy, pricing and differentiation will be two key elements going forward, of course, in terms of penetration. I assume your pricing will be quite conservative, chasse on the telephony side. Could you confirm that and also what sort of differentiation are you offering today and over time?

Thanks for your multi-part question. I'll try and bring sense to it as effectively and as efficiently as possible.

Well, I thought everyone else is, why not.

In so far as the WLNP is concerned, I would, be that it is a double-edged sword, but I believe if you look at the characteristics of TELUS, one edge is sharper than the other and that edge is in our favor. Firstly, I think a lot of the fear mongering that proceeded the implementation of local number portability in the U.S. has proven to be unfounded and we did not see a high level of volatility that ensued in respect of customer churn. On the number portability front, following up from John Henderson's last question, a significant opportunity for further growth within TELUS lies in better penetrating the corporate market where at present we are under penetrated. I think if you look at the heritage of our organization, TELUS Mobility as the incumbent in the west had a very strong relationship with the corporations in western Canada.

But when we made the acquisition of Clearnet and absorbed the Clearnet footprint, we absorbed the business that was more biased towards consumer and smaller bids and not as profound a presence within the Canadian corporate market. And of course, as you are well aware, the Canadian marketplace is skewed towards having more corporations in central Canada. And I think it would be fair to say that one of the impediments that we have experienced in trying to better penetrate the corporate market. Marketing [candidates], of course, are the lack of number portability. So we believe that with number portability coming to fruition, at some juncture in 2007, still waiting to get that work through with the CRTC. This will provide an advantage for us to better penetrate the corporate market and I think that's a pretty interesting opportunity for us.

Because if you look at our characteristics as an organization within the wireless company, I think we've got the characteristics that would be attractive for corporates. Number one, one of the other impediments that we've experienced in terms of lack of global roaming has just been dealt up, as Bob explained, so that's gone along with number portability being eradicated in 2007. If you look at the TELUS brand, I think the TELUS brand traditionally plays well with large corporates.

In addition to that, I think the 1.33% churn rate that we have delivered evidences just how strong our customer care is, which is a key component when corporates are making a decision. And then as well on top of that, if you look at our network coverage, which is top drawer, and the fact that our network performance from dropped call to call latency is also best in class in North America, I think we have a strong proposition that we can deliver into corporates to compliment the wireline conversations that we are having with them in the key urban conurbation's in Ontario and Quebec. And as well, I think, to the extent to which we can focus on that market and pursue judiciously that opportunity, it would be fair to say that we drive the competitive dynamic down to two and three players versus the multiplicity of players in the wireless industry that are focussed on consumer now with the launch of new distribution channels like NB&Os.

So to the extent to which we can have more concentrated competition amongst fewer players, I like that particular dynamic because it allows for continued value expansion from this organization. And I think we are well placed to capitalize on it because of our business capability and characteristics, with the advent of number portabilities. So I would consider that on a net basis to be a positive development for this organization. On the TV side, you are quite right in terms of our pricing. It will be conservative. We will not be implementing a discount price model or discount price approach launch of TELUS TV in Alberta and thereafter in British Columbia. In fact, to the extent to which we can provide significant strength of differentiation versus the incumbent, then you may even see us pricing at a premium because we will be focussed on aspects of differentiation other than price that I've spoken about on previous calls. Our TV service will be all digital. The viewers will be able to customize the channel lineup to their viewing preferences.

Our IPTV solution will be a solution that will evolve from something that's delivered to a set-top box to something that is being capable of being delivered to a TV set and to a computer. On top of that we will be bringing a for-to-service with pure video on demand where people can rent their movies at any time that they would like rather than on a fixed half hour allocation. And of course they can enjoy full VCR control with the rental of those movies where they can fast forward the movies or reverse them or pause them. I won't go too much further than that, but that is indicative of the type of differentiation that we are focused on. And what we are interested in, in so far as both telephony and entertainment is concerned, is to have smart competition, judicious competition in terms of the underlying economics and as well to differentiate ourselves focussed on innovation as it relates to the commercial service rather than price.

Thanks a lot. Bob, real quick factual question. Page 13 of the MD&A says strike hit was 65 million. You say 68 million in the presentation. What's the difference, please?

68 million is the impact on expenses to Communications. 65 is the consolidated impact. And therefore there was a net savings in liability of 3 million as the costs of the strike were less than the savings from the people that were not working.

Thanks a lot.

And our next question comes from the line of Rob Goff at Haywood Securities. Please proceed.

The move to IP was viewed as a rare window for service providers to win new accounts. However, it sometimes seems that it's more of a window for the customer to win via reprice with their current or their existing service provider. Can you address your own balance on the two factors and perhaps from the industry dynamics on IP wins versus reprice?

Hi, Robb. I think that's down to marketing not technology, from our perspective. Just because you can deliver voice in a packet format does not mean you need to crush the economics in terms of your overall pricing associated with that service. It would be fair to say that when we introduce a voice over IP service within the consumer market in western Canada and eastern Quebec, we will look to differentiate that service not on price but on functionality, leveraging things like computer telephony integration and the way that we can integrate voice, data, e-mail, imaging and the like. And that is what is going to drive our marketing proposition and the underlying pricing philosophy associated with it. And as well, I think there is no better evidence of what you can expect from us on the voice over IP front then the fact that voice over IP and IP technology is a big upside opportunity for us at the leverage the technology advantage that we have in our national wireline infrastructure as we seek to pursue opportunities with business customers in Ontario and in Quebec.

And in so far as those customers are concerned, we have been focussed on IP differentiation on factors other than price where we can impart the customer's greater functionality than what they enjoyed under their legacy services. Greater pricing flexibility then what they could enjoy under previously tariff services. Greater opportunities for new applications such as security and a situation where they can enjoy better control over their corporate networks and the underlying cost base associated with those corporate networks. That's very much our philosophy in terms of how we are taking IP technology in a meaningfully way into the business market of Ontario and Quebec, i.e. what can we do to introduce new functionality that can help customers grow their revenue. How can we leverage IP technology to impart greater flexibility and control to our customers so that they can de-risk their business operations and that's a very attractive proposition. And I think that same mentality you can expect to be imbued in respect of our marketing philosophies that we will deliver to support voice over IP as an introduction to the consumer market in western Canada.

Next question?

Vance Edelson at Morgan Stanley. Please proceed.

Could you comment on the likelihood of returning to the board to extend and possibly expand the buyback authorization next month? And how do you think about the relative merits of buying back stock versus upping the dividend? Thanks.

Thanks for that question, Vance. Essentially we look at dividends and share repurchases as two forms of returning capital to shareholders. And from that standpoint we when going back a little over a year ago and we canvassed some of our major institutional shareholders, we found that there was a desire by some for either dividend increase or others for prioritizing share repurchases. So we elected to follow a program which did both.

Since we have sufficient cash flow to not only raise the dividend but repurchase shares, we have been doing that. So from that standpoint I think the guidance today in respect of the net debt to EBITDA provides a useful framework for you. We're in the near the middle of that zone and therefore we think that we can continue to improve our credit rating while increasing a dividend today and hopefully, as earnings improve in the future consistent with the 45% to 50% payout ratio of net earnings, continue to have the dividend growth potential, as Darren outlined earlier, while at the same time having share repurchases. In terms of the quantum of shares repurchases, that is something that we will be looking at and reviewing with our board later this year and I hope to be in a position in our December guidance call to give more color on that.

Claudine, we'll take one more question, thank you.

Jeffrey Fan, UBS Securities. Please proceed.

Thank you very much. Just a quick question on the progress on the search for a new Mobility CEO. I know, Darren, you've assumed interim role for that but can you just update us on that? Thanks.

Thanks for question, Jeff. I think it would be fair to say that we are going through a structure process to review the options for progressing forward on the wireless side of the business and insuring that we've got the strength of leadership in that regard to continue the excellent performance that we've seen from that part of our business thus far. At the present point in time I'm not capable of disclosing anything further than that, beyond saying that we are cognizant of what we need to achieve from a leadership perspective both the wireless and wireline sides of the business. We are pursuing a structured process to deliver an outcome in a reasonable timeframe and when we have something more substantive to report, we will proceed with the disclosure of that.

Is there any timing target that you are looking at?

I think it would be fair to say that a process in so far as insuring that you've got the leadership in place to take the business forward is difficult to time bound because it's not perfectly within your control. I think suffice to say for the present point in time we will look to get this done as expediently as possible and we are hopeful that we can get it done within a reasonable timeframe.

Thanks a lot.

Thank you very much for joining us today. Darren, just a final closing comment.

Thanks for the investors for joining us and for the quality questions that were put forward. As I said previously, we do appreciate your interest and continued support of TELUS as we move through the fourth quarter of this year and hopefully, once again, to deliver strong results into 2006. Thank you very much.

Ladies and gentlemen, that does conclude the conference call today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.