Telus Corp (TU) 2007 Q2 法說會逐字稿

Good morning ladies and gentlemen.

Welcome to the TELUS second-quarter 2007 earnings conference call.

I would like to introduce your chairperson, Mr.

John Wheeler, Vice President of TELUS Investor Relations.

Thank you very much and welcome to the TELUS second-quarter 2007 conference call and webcast.

Let me introduce the TELUS executives on line with us today.

They are and Darren Entwistle, President and CEO; and Bob McFarlane, Executive Vice President and CFO.

We will start with introductory comments by Darren and Bob.

This will be followed by a question-and-answer session with both executives.

This call is scheduled for one hour.

The news release on the second-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 posted for viewing at telus.com investors.

You'll be in listen-only mode during the opening comments.

Let me now direct your attention to slide two.

The forward-looking nature of the presentations, answers to questions, and statements about future events are subject to risks and uncertainties and assumptions.

Accordingly, actual results could differ materially from the statements made today, so do not place undue reliance on them.

I ask that you read our legal disclaimers and refer you to the risks and assumptions outlined in our public disclosure and filings with securities commissions in Canada and the United States.

Now, over to Darren on slide three.

Good morning and thank you for joining us today.

As you now know, TELUS's second quarter of 2007 was a challenging one, and our results fell decidedly short of my expectations.

TELUS's results this quarter, on the face of it, do not reflect the excellence in execution that our Company normally achieves.

Notwithstanding the fact that certain material events occurred that were either one-time in nature or not expected to have the same level of impact going forward, we cannot deny or excuse the less-than-satisfactory results.

Importantly, let me assure investors however that TELUS is standing by its full-year 2007 guidance.

Before we cover TELUS's Q2 results in detail, let me comment on the unprecedented industry events last quarter as BCE progressed towards the acceptance of an offer to be acquired by a private equity investor group.

TELUS pursued the acquisition of BCE, given the compelling strategic and financial opportunity for both TELUS and BCE investors.

The benefits for investors included the prospect of significant operating synergies and the use of TELUS shares as a partial consideration to reduce debt whilst allowing BCE shareholders to participate in a largely tax-free rollover.

In addition, BCE shareholders could have retained an investment in a Canadian public company with a growing dividend.

Moreover, the resulting enlarged organization would have been investment grade and well-positioned for ongoing investments in new technology and services.

In the past months, we have completed a careful and thorough assessment of the opportunity.

We have taken into consideration the following including the challenge to TELUS of having to come from behind, given the disadvantageous nature of the offshore process for an industry bidder.

We've taken into account the diminishing economics to TELUS given the substantive price offered by the private equity consortium, including the significant break fee to overcome.

We've also taken into the account the deteriorating debt market conditions and our view of the positive benefits of not bidding, but instead competing against the highly-leveraged entity.

But most particularly, we have focused on the lack of congruence between the accelerated timeline adopted by BCE and the protracted timeline and uncertain outcome required to obtain requisite competition-bureau approval.

Given the significant reverse break fee already established that we would need to emulate, and the lack of any regulatory certainty, the risk that we need to be shouldered by TELUS shareholders would have been significant, and ultimately unacceptable.

Based on all these factors, we are confirming today that TELUS does not intend to submit a competing offer to acquire BCE.

As much as we think it would have been in the best interests of our Company, our industry and our country to combine TELUS with BCE; given the significant impediments, we believe that this is a prudent and disciplined decision that is the right one for TELUS investors.

While TELUS was positioned to and capable of marshalling a superior price, we were precluded by the process and the inability to secure a sufficient degree of regulatory certainty within a relevant timeframe.

This is unfortunate for shareholders who will not have the right to opine either positively or negatively on the merits of our proposal, both in an absolute sense and a relative one.

We also believe that TELUS on a stand-alone basis, executing our proven strategies with a strong growth-oriented asset mix and investment-grade financial policies and strengths; can continue to create significant future value for investors.

Based on this approach, in the last two and a half years we have delivered three successive double-digit dividend increases that have increased the dividends by 150%.

And as well, we have repurchased and cancelled C$2.1 billion worth of shares, reducing our shares outstanding by 7.5%.

One final insight is that the Morgan Stanley Global Telecom Index shows an average for telcos on net debt to EBITDA of 1.8 times; indicating the importance related to the capital intent of the telecom industry of a strong balance sheet.

This allows organizations to withstand unforeseen events in areas of technology change, regulatory developments, competitive dynamics and as we've seen today, capital market cycles.

TELUS remains well-positioned in this regard.

Let me now turn back to TELUS's quarterly results and the wireline business in particular on slide five.

TELUS's revenue performance continued to demonstrate resilience in the competitive wireline market.

Notably, data revenue continued to be strong, up 8% this quarter across an array of services.

At the same time, TELUS experienced only moderate network access line losses at 3%.

The implementation of a major IT initiative by TELUS in Alberta that consolidates multiple order entry and billing systems down to one customer care platform, impacted significantly but negatively TELUS's second-quarter results.

The full-scale transition of more than 1 million customers to this new system resulted in initial difficulties that seriously reduced TELUS's ability to process new orders.

It is important to note for investors that despite the temporary issues we faced in adding new customers and services, we did not experience any problems getting bills out the door to existing customers in a timely and accurate fashion.

As you may know, this could have long-term impacts and I am somewhat comforted to report that our problems have been short term in nature.

To manage the situation, TELUS implemented emergency operation plans in order to maintain service levels with additional resources being added within our call centers to assist with the order backlogs.

As a result, wireline operating profit or EBITDA was impacted negatively by some C$29 million as TELUS experienced unanticipated and elevated operating costs, and as well, a one-time long-distance revenue adjustment.

To make matters worse, given our challenges on fulfillment, TELUS also experienced additional impact of implementing a stop sell on high-speed Internet customer marketing in Alberta during this time.

To illustrate, TELUS experienced negative net additions in Alberta on high speed for the second quarter, given these difficulties.

I'm pleased to note that the order backlogs have now been reduced materially and call center operations within Alberta are now finally returning to normal.

Despite the temporary difficulties incurred, TELUS remains committed to this new IT platform and the associated benefits of cost efficiencies, differentiated customer service and improved customer retention.

We know from our experience on the wireless side when we rationalized five customer care platforms down to one, that these system consolidation benefits are real and achievable; but in this instance, painful to implement.

Let's now turn to more positive wireline developments this quarter as shown on slide six.

I'm pleased to highlight the major competitive contract win with the Department of National Defense which transpired in June and significantly advances TELUS's national growth strategy.

Under this agreement, TELUS will provide and manage a portfolio of network services for the Department of National Defense including all of its national and international locations.

The five-year contract is valued at over C$200 million.

This competitive win builds on our strong IP technology implementation track record that has included most recently the government of Ontario with the data network solution that we are implementing at their various sites across the province.

On the regulatory front, on July 25th the CRTC issued its first decision on local forbearance, eliminating the regulation of residential phone services in Fort McMurray, Alberta; an important market for TELUS.

TELUS expect similar deregulation decisions in the coming weeks in most of our large urban markets including Vancouver, Victoria, Calgary and Edmonton.

I believe that the importance of these decisions is being underestimated by investors.

I greatly respect the strong and visionary leadership of industry Canada in taking the steps necessary to rely on market forces to the maximum extent possible in liberalizing the regulatory framework for our industry.

These steps are providing TELUS with a level playing field and the competitive tools not formally in our repertoire which will enhance competition and benefit customers and investors significantly.

Turning to slide seven, let's examine TELUS's wireless results for the second quarter of 2007.

It's important to note that the March implementation of the wireless number portability in Canada had a significant impact, both positive and negative, on TELUS's second-quarter results along a number of operating parameters which was not fully anticipated by industry pundits.

First, wireless number portability contributed to the 15-basis point increase we experienced in customer churn, as compared to the same period last year.

Second, TELUS achieved higher than normal gross customer additions and strong net additions this quarter, which contributed to a higher cost of acquisition.

Third, wireless number portability also contributed to a 32% increase in customer retention costs, which TELUS believes is a prudent investment in the intensely competitive marketplace.

TELUS's management team must however continue to take a hard look at whether this size of increase was fully needed to achieve these results.

Also contributing to the higher COA this quarter was the impact of launching Amp'd Mobile in March.

And of course I will discuss this development, shortly.

With that background, it is important to note that TELUS achieved an 11% growth in wireless revenue, facilitated by the 18th consecutive quarter of increasing ARPU as well as the 64% increase coming from data revenue.

Combined, these factors are more than offsetting the continued declines that we are experiencing in voice revenue due to competition from the more than 15 wireless brands from which customers can choose from in Canada.

Unfortunately, due to the much higher costs of acquisition and retention this quarter as just discussed, TELUS only generated a 3% increase in wireless operating profit.

I recognize, as does the TELUS leadership team, that this is not the profit growth investors were expecting from TELUS this quarter.

We've got something in common.

Given that TELUS is standing by our full-year guidance for 2007, this is not the rate of growth that our Company cares to repeat on a go-forward basis.

Turning to slide eight, let me comment on several other wireless developments this quarter.

Let's start with the bad news.

As you know, in June the start-up business Amp'd Mobile Inc.

in the US entered bankruptcy proceedings.

Disappointingly, its irreparable financial issues also impacted TELUS and Amp'd's nascent joint launch and business arrangements in Canada.

As a result, TELUS made the difficult decision to discontinue sales in Canada and write down our small equity venture investment in Amp'd in the US.

This, combined with depreciation and operating costs, resulted in an approximate C$19 million impact this quarter on TELUS's P&L.

Turning to more pleasant wireless developments, TELUS's higher wireless capital expenditures this quarter reflect the continued rollout of our high-speed EVDO and EVDO Rev A network upgrades, covering two-thirds of the Canadian population.

It is important to note that this investment is driving new wireless solutions for customers and resulting in the significant wireless data growth I mentioned earlier.

By way of example, a notable competitive development for TELUS occurred in June with the release of the Blackberry World Edition.

This sleek new device of course integrates high-speed data capabilities with CDMA coverage in North America and adds GSM international coverage to keep our clients connected when they travel around the world.

As a final note, investors will be watching closely the expected advanced wireless services spectrum auction rules for Canada which are set to be announced this fall with an auction expected early in 2008.

TELUS's position on this front is clear, logical and unassailable.

For a market the size of Canada, having three national network players is clearly sufficient.

This is, in fact, what the Competition Bureau determined in 2005 when previously bankrupt Microcell was acquired by the Rogers organization.

The Canadian wireless industry is a remarkable success story, given the benign regulatory environment it has enjoyed and it's been marked by over C$20 billion of investment and is well-characterized by large initial cash losses for the facilities-based carriers, but this investment drove innovation, customer choice, light regulation and as well the economic growth that we are now seeing being delivered to investors in this industry.

Now is not the time to provide public handouts to deep-pocketed investors who want to enter the wireless business in Canada.

TELUS advocates an open and fair auction, with the same rules applying to all participants.

Clearly it was a disappointing second quarter for TELUS and a momentous one for the entire industry.

Let me conclude on slide nine with four key themes for investors to take away.

First, TELUS is obviously not pleased with their performance in the second quarter.

While steps were made to advance TELUS's national growth strategy, they were not executed with the precision that is the hallmark of our organization.

The good news is that the deficiencies so clearly evident in the second quarter are due to the underperformance of management of TELUS and thus correctable.

Let me assure investors, remedial decisions have been made and actions are underway to better advance our growth strategy for the balance of the year.

The leadership team at TELUS remains committed to improving our performance in the second half of 2007.

Second, the primary drivers behind the negative aspects of our second-quarter results are special events that are either one-time in nature or not expected to have the same level of impact going forward.

Third, TELUS remains committed to achieving its original consolidated full-year targets for 2007; striving to build upon our excellent track record of achieving or exceeding our guidance year in and year out.

Fourth, we continue to execute on our long-standing commitment to balance the interests of debt and equity holders and to return cash to investors, and we demonstrated this again in the second quarter.

TELUS repaid C$1.5 billion of debt which matured on June 1st and refinanced the debt at considerably lower interest rates, saving TELUS tens of millions of dollars in future interest costs.

For equity holders, we also continued to execute on our third normal course issuer bid; repurchasing C$170 million of TELUS shares.

Since 2004, TELUS has repurchased and cancelled nearly 45.6 million shares for C$2.1 billion.

We also declared today, a C$0.375 quarterly dividend which represents a year-over-year increase of 36%.

In conclusion, whilst TELUS experienced operating challenges in the second quarter, I am confident the Company is well-positioned to advance our growth strategy as to continue generating value for investors in the years ahead.

TELUS's consistent winning strategy, superior asset mix, commitment to operational excellence and our track record for creating value and returning cash to shareholders; remains undiminished.

Let me personally apologize for the performance that we generated in the second quarter and also echo my personal commitment to improve upon our performance in the quarters ahead.

Let me now turn the call over to Bob to brief you in more detail, on our financial results.

Thanks, Darren and good morning everyone.

Let's begin the financial results review with our wireless results on slide number 11.

Wireless revenues continued to deliver strong double-digit growth while Op expenses and consequently EBITDA were negatively impacted by the first full-quarter wireless number portability or WNP for short.

The revenue growth was generated by a continued 11% subscriber growth and higher ARPU driven by a 48% increase in the data component.

Reported EBITDA increased by 2.2%, negatively impacted by the first full-quarter of WNP which resulted in higher cost of acquisition and retention costs; which I'll explain more in a moment.

The increase in CapEx this quarter was mostly due to network enhancements and strategic investments in our EVDO Rev A network, which we recently launched in British Columbia, Alberta and Quebec.

With the EVDO Rev A rollout largely complete, we're on track to meet our annual wireless CapEx guidance of approximately C$550 million.

Slide 12 reflects the directional impact of wireless number portability on the industry overall, as well as for TELUS specifically.

WNP was successfully implemented by the Canadian Industry in mid March, enabling full portability from wireless to wireless carriers and in addition wireline to wireless and vice versa; a world first.

Carefully planning, strong IT execution and implementation made this a consumer and commercial success, industry wide.

Q2 was the first full quarter of WNP experienced by Canadian wireless carriers.

As expected, the advent of WNP had some impacts on the industry this quarter.

Gross additions were up 8%, churn ticked higher, COA was up on aggregate basis; while cost of retention, at least for those who report it, was also up.

The results at TELUS were no exception.

TELUS saw an increase in gross and net additions ahead of the industry growth rate, as we were a net beneficiary of WNP porting from our competitors.

TELUS's blended monthly churn rate increased in the quarter to 1.45% from 1.3% last year, as total deactivations increased.

Finally, cost of acquisition and retention costs were also impacted by WNP, which can be seen on the next slide.

EBITDA, on an adjusted basis, excluding a non-cash charge of C$1.8 million related to the net cash settlement feature for employee share options granted prior to 2005; increased slightly by about 3%.

However, increased loading and other impacts related to the introduction of WNP significantly impacted wireless profitability in the quarter.

C$20 million of the C$30 million increase in costs of acquisition expense can be directly related to the higher gross loading, for which WNP was a major contributing factor.

TELUS increased its retention programs in the quarter to mitigate the increased exposure to competitive churn and as a result, the cost of retention or COR increased by C$27 million.

Adjusted to exclude these incremental impacts largely related to WNP, EBITDA would have increased by 13%.

Turning to slide 14, let me update you on Amp'd Mobile and the related impacts on TELUS.

In March of this year, Amp'd Mobile Canada launched its interactive and mobile entertainment services.

Unfortunately, on June 1st its parent company, Amp'd Mobile Inc., entered bankruptcy proceeding in the United States.

Following attempts to restructure its business under Chapter 11, Amp'd indicated an intention to suspend operations in the US.

As a result, TELUS expects disruption of Amp'd live service and Amp'd sales have therefore been discontinued in Canada.

As the network carrier for Amp'd in Canada, TELUS is reaffirming our commitment to Amp'd clients by ensuring that all voice and basic messaging services continue to function until we're able to contact subscribers to offer them a comparable or better package of voice and our multimedia services.

We do not expect an impact on revenue or subscribers as the majority of few thousand Canadian Amp'd clients are expected to migrate to TELUS.

TELUS's second-quarter results include Amp'd-related write-offs of approximately C$2 million to EBITDA, a pretax write-off of our C$11.8 million venture investment in the parent US company, as well as pretax adjustment of C$5 million for asset write downs.

As a result, there was an aggregate C$0.04 impact to second-quarter earnings per share.

There is also the possibility of about another C$0.01 EPS impact in the third quarter related to Amp'd, and no further impacts expected thereafter.

Please turn to slide 15 and look at a more positive quarterly development.

TELUS added 128,000 wireless subscribers in the quarter, reflecting the success of our WNP-related retention efforts and marketing.

Prepaid net adds increased 41% to 29,000 from a year ago, while postpaid net adds of 99,000 were strong, although down slightly year over year by 4,000.

Postpaid additions represented 77% of TELUS's total quarterly net adds and the overall postpaid subscriber mix remains stable at about 80%.

Q2 and year-to-date net adds are consistent with annual guidance, and therefore we are reconfirming our net subscriber addition guidance today for the full year.

Slide 16 shows that wireless revenue gains were driven by more than just subscriber growth.

Our ARPU continues to increase due to the adoption of new wireless data services, which has exceeded the continued competitive erosion in traditional voice service ARPU.

Of note, this is the 18th successive quarter of year-over-year ARPU growth.

TELUS's wireless data ARPU increased by 48% to C$6.58, which accounted for 10.3% of total ARPU.

The potential for continued strong wireless data growth is very positive, given the increasing penetration of EVDO-capable device in our subscriber base, as well as the future introduction of even higher bandwidth applications and devices given the recent deployment of EVDO Rev A.

Slide 17 provides a review of churn level against our industry peers.

Second quarter blended monthly churn increased by 15 basis points to 1.45%, as the level of deactivations was impacted by the first full quarter of WNP.

Notably, postpaid churn remained low at 1.07%.

Despite the slight increase experienced with the introduction of industry-wide WNP, TELUS continues to achieve best-in-class wireless churn levels when compared to our Canadian and North American peers.

Now, let's turn to a review of the wireline side of our business starting on slide 18.

Revenues decreased slightly, which I will analyze on the next slide.

And as Darren mentioned, reported EBITDA was significantly impacted by the full commercial implementation of the new billing and client care system for more than 1 million residential customers in Alberta.

Meanwhile, capital expenditures were slightly lower in the second quarter of 2007, reflecting a decrease in capitalized billing and client-care system development expenditures, while we continue to invest upfront to support new enterprise customers in Central Canada as well as investments in broadband and network access growth.

As a percentage of revenue, CapEx for the wireline segment remains stable at 26% as the organization continues to invest for the long term, consistent with our corporate strategy.

Slide 19 looks more closely at the components of wireline revenue growth.

Local and long-distance revenue declines are reflective of the competitive environment and substitution from wireless in [voice].

However, long distance was also negatively impacted by a one-time accounting adjustment related to the implementation of the new IT system in Alberta; and I'll look at this more closely on the next slide.

Reported declines in local and long-distance revenues were in turn offset by the increase in data and other revenues.

Strong year-over-year growth in high-speed Internet and a pricing increase in the spring last year, plus increase managed data revenues on the business side, led to an 8% data revenue growth.

Lower provisions for quality of service rebates partly offset by lower equipment sales, contributed to the other revenue growth.

The table on slide 20 provides a better indication of the underlying revenue for wireline and long distance.

TELUS recognized a one-time negative C$13 million adjustment to reflect a better estimate for earned but unbilled long-distance revenues.

As a result of billing cycles that don't match exactly with month end, as well as increased bundling long-distance revenue recognition involved some amount of estimation.

With the new system in Alberta, we now have significantly improved billing data, including information on LD rate plans, discounts and pricing allocation within a bundle.

This resulted in a one-time C$13 million adjustment which is not expected to recur.

So normalized long-distance revenue was down 12%; reflecting industry-wide trends of increased price competition and ongoing substitution.

Excluding this one-time adjustment, underlying wireline revenue growth was slightly positive.

Now, let's turn to slide 21 and take a deeper look at wireline EBITDA.

As Darren mentioned, the new IT billing and client care system implementation in Alberta went well with respect to our billing cycles.

We have accurate and timely bills and no long-term issues that companies can sometimes experience with such major system conversions.

Having said that, expenses in the second quarter included increased costs related to this system implementation; including the previously discussed C$16 million one-time accounting adjustment, as well as costs related to addressing certain order backlogs which resulted from this system implementation.

These costs included C$11 million, primarily for external labor costs and another C$5 million related to additional resources in call centers in order to maintain service levels.

Adjusting for these increased expenses, underlying wireline EBITDA would have been up 1.5%.

Let's move to slide 22 on high-speed Internet.

Here again, the new IT system implementation in Alberta temporarily slowed one of the drivers of data growth which is high-speed Internet additions.

Net adds were lower in 14,000 as marketing activities were curtailed in Alberta, which temporarily reduced new order processing capabilities caused by the IT conversion.

As a result, we're lowering our full-year 2007 high-speed net add guidance by 10,000 to now a target of more than 125,000.

We remain optimistic that we can achieve the new guidance, even while our cable TV competitor continues to expand marketing for its lower-priced telephony bundled Internet offerings.

Our high-speed Internet subscriber base now totals 963,000, which is up 16% from a year ago.

The next slide highlights our network access line performance trend.

Residential line losses in the second quarter were 56,000, a decrease of 5.7% year over year, reflecting continued competitive activity such as the rollout of cable telephony service in many new markets over the past year as well as wireless substitution.

However, this decline in residential lines was partially offset by a 1% increase in business lines, resulting in an overall line loss of 3.1% versus a year ago.

These results continue to highlight TELUS's relative resiliency to competitive intrusion as compared to our peers around the world.

Slide 24 shows the robust growth trajectory and changing mix of TELUS's overall total subscriber connections.

This shows that on a consolidated basis continued growth in wireless and high-speed Internet subscribers is significantly outpacing declines in residential network access lines and dial-up Internet.

Interestingly, TELUS has generated a million more total connections in the last two years, despite the many competitive pressures in the industry.

This slide clearly shows the continued successful execution of our strategy, focusing on investing in the growth in wireless and data that continues to create value for our investors.

So putting it all together, now let's look at TELUS on a consolidated basis starting on slide 25.

As you can now appreciate, TELUS had a challenging quarter for earnings growth.

Consolidated revenue in the second quarter grew 4%, but reported EBITDA declined by just over 1%.

This reflects increased acquisition and retention expenses in wireless totaling C$47 million, which we largely attribute to WNP implementation and wireline system implementation impacts of about C$29 million.

Interestingly, excluding these impacts, EBITDA growth would have been 7%.

Reported EPS declined 26%.

Please note that the C$1.03 EPS last year included a positive C$0.34 adjustment for tax-related matters.

When excluding the positive impact adjustments in both periods, EPS actually increased by 6% year over year.

CapEx, as previously outlined, increased 5% as a result of increased wireless spending on EVDO Rev A technology rollout.

Now let me elaborate on the drivers behind the EPS decline on the next slide.

This slide provides a detailed breakdown of the components of the 33% year-over-year decrease in reported EPS.

Incremental tax impact on EPS is a net C$0.31 when accounting for the C$0.34 in positive tax-related adjustments in the same quarter last year as well as the C$0.03 positive adjustment this quarter.

Underlying EBITDA growth, normalized for the many other items in the quarter, generated C$0.14, while C$0.05 relates to lower restructuring costs.

Increased costs to retention and costs of acquisition largely in our wireless segment, contributed to a C$0.13 decline.

The combined revenue and expense impacts of the Alberta IT system implementation reduced EPS by a further C$0.06.

The operating and capital write-offs related to Amp'd Mobile reduced EPS by C$0.04.

Other items added C$0.08, including a lower average number of outstanding shares due to share repurchases and lower depreciation.

Although a number of these items were not originally contemplated, we remain confident that we can achieve our EPS target for 2007 which is in the range between C$3.25 to C$3.45.

Slide 27 summarizes our total share repurchases in the quarter and historically, since we first began buying back shares in December of 2004.

We remained active in the market last quarter, repurchasing a total of 2.7 million TELUS shares for C$170 million.

This brings TELUS's aggregate share repurchases since December of '04 to 45.6 million shares for C$2.1 billion.

Importantly for investors, this has led to a 7.5% or a 26.8 million reduction in the total shares outstanding in the past two and a half years, despite shares issued for option exercises and other dilution.

Notably, TELUS's innovative move to the net cash settlement method for [pass] options, beginning at the start of this year, has accelerated the impact of share repurchases on reducing overall shares outstanding.

Outstanding shares were already 2% lower than at the 2006 year end.

Now if you follow TELUS closely, you've seen slide 28 before.

It clearly highlights on a per-share basis, our strong and ongoing record of returning capital to shareholders.

[For] illustrative purposes in '07, the combination of over 36% higher dividend of C$1.50 and estimated significant share repurchases for the year, based on annualizing our quarterly dividend and buybacks year to date, with result on a total return of capital to shareholders of approximately C$3.73 per share.

What is clear in this slide is that TELUS's strong free cash profile is allowing TELUS to deliver on our continuing commitment of returning a significant and growing amount of capital to investors.

Before concluding, I want to quickly highlight the material financing developments at TELUS last quarter, which are shown on slide 29.

TELUS launched an unsecured commercial paper program backstopped by our bank credit facility for up to C$800 million.

As at June 30, we had C$664 million in total outstanding under this program.

This low-cost variable-rate financing combined with the well-timed March 2007 C$1 billion debt offering at a blended interest rate of approximately 4.8%, in combination with accounts receivable securitization proceeds; were used to redeem TELUS's 7.0% coupon US-dollar notes which matured on June 1st 2007.

This C$1.5 billion refinancing at lower rates is expected to result in annualized interest savings of approximately C$33 million and is extended in smooth maturities, while supporting TELUS's strong balance sheet.

As you can see in the next slide, TELUS has an enviable debt maturity profile with no significant debt refinancings until mid 2011.

In recent weeks, there has been a material deterioration in the debt capital markets with a massive flight to quality.

This has resulted in a rapid escalation of high-yield credit spreads and a market being closed to new issuance.

We believe that TELUS's consistent approach to a prudent long-term financial policy which balances the interests of shareholders and debt holders remains in the best interests of our stakeholder.

Given the recent capital market, as well as industry developments, we should enjoy enhanced competitive advantage in TELUS's considerable investment-grade financial strength.

Now to conclude on slide 31; we have summarized TELUS's 2007 consolidated targets.

Despite a challenging quarter, we are to date reiterating our consolidated annual guidance which remains unchanged from that originally set in mid December 2006.

Again, as a reminder, for an apples-to-apples comparability, EBITDA and EPS targets are adjusted to exclude the impact of the accounting expense for the net cash settlement of pre-2005 options.

Given the growth rates, it's evident that we expect solid performance in the second half of the year, as we execute against our '07 priorities and focus on operational excellence.

And with that, Darren and I would be pleased to answer your questions.

So I'll turn the call back over to John Wheeler to commence the Q&A.

Thanks Bob and Darren.

Just before I turn the call over to Erica to conduct the Q&A session; can I ask your cooperation for one question at a time please?

That sounds familiar.

Erica, please proceed.

(Operator Instructions).

Our first question is Vince Valentini, TD Newcrest.

Please go ahead.

Thanks very much.

I'm trying to get a bit more comfort on how you can hit your wireless guidance for the year.

You talked about number portability hitting your marketing costs in your COA and your retention.

And I understand that, but I'm not quite sure why that goes away in the second half, when wireless number portability is still here and arguably still in its infancy.

There's got to be more to it than that.

So I'm wondering if you can comment -- have there been some specific adjustments made to your marketing and retention spending; have you sort of recognized you were spending too much perhaps to keep customers or get new ones and you've adjusted that so -- is that what gives you the confidence to think your spending comes down and therefore your EBITDA growth improves in the second half?

Well Vince, I guess first of all it's not preordained.

So it's aspirational.

We need to execute in the second half of the year.

I think that's clearly obvious.

Certainly there is a minor impact related to the Amp'd that did flow through the wireless side of the organization.

We did have the start up of that Canadian operation which we sponsored as well as the writedowns that I referenced.

So there was an element in the cost of acquisition related to that.

As well, I think in terms as well as number portability; while it is a new development, this being the first full quarter that it has been in place in the Canadian industry and therefore what the long-term stabilized outcome is yet to be seen.

I think it's fair to say that given the wide knowledge of the launch in late March that there was as we commented upon in the past, the deferral repurchase or purchase decision effect in the industry which resulted in a bit of a spike in the gross adds and as well as people were thinking of moving, I think it would be fair to say a number of them deferred the decision until after wireless number portability so they can enjoy the benefit of the number going along with them.

So I think it's fair to say therefore that in terms of churn rate and deactivation levels, etc.; while they can always be influenced by evolving competitive trends, there is logic to suggest that there an element of an exaggerated impact if you will, on the first quarter.

But nonetheless, I think wireless number portability does have some permanent implications in terms of the importance on retention and associated impacts.

And we've observed that in other markets like the United States.

So the point is that we can and expect to do better in the second half; particularly related to our retention and COA spending.

And therefore, we are confident in our ability to achieve our full-year guidance.

Thank you.

Next question.

The next question is from Peter Rhamey of BMO Capital.

Please go ahead.

Yes, thanks very much and good afternoon.

I wanted to ask in a similar line of questioning but on the wireline side; the billing system implementation is always problematic for many companies.

And you talked about this system being specific to Alberta.

I was wondering if you could just update us on first of all, what gives you the confidence that this system is fully up and running.

Maybe you could share with us some of your run rate numbers that you've got in the third quarter here.

But as well, could you talk a little bit about-- is B.C.

next?

Or what other major system implementations do you have coming down the pipe over the next year or two?

Thanks, very much.

Thanks for the question, Peter.

I guess what gives us the confidence is the fact that they system is now stabilized.

And as a result of that, we've begun to resurrect our normal fulfillment process as it relates to DSL and basic voice services in terms of network access lines.

We're also getting the excessive OpEx that we actually had to put in place to deal with the system implementation deficiencies out of our business and things are returning to normal within our call centers.

So I think extrapolation from that particular point, we expect to experience robust system performance over the remainder of the year in Alberta and certainly we are encouraged now by the level of system stability that we are enjoying as it relates to the fulfillment aspect of the IT implementation.

As I said in my remarks, it's important to point out that one of the areas where we didn't experience deficiencies was our ability to get bills out the door in both a timely and accurate fashion.

Effectively, the issue with the system has been on the provisioning front.

We've put a lot of resources to be well deployed to address that particular deficiency and it was a very unenjoyable period for about three months as we worked hard to achieve system stability.

But that has now been realized and the additional cost that we implemented within the business to deal with the fact essentially we had manually provision a number of customers due to the system not being operable; that cost is now coming out of our P&L.

Effectively, over the remainder of this year we're just going to focus on continuing on with the upward implementation and starting to progress towards realizing the benefits of the system which is effectively rationalizing a myriad of customer-care platforms on the wireline side of our business down to one.

That will be a positive cost event.

The new system will also help us to bundle much more effectively than we have in the past and be more responsive to changing market conditions with a myriad of systems; it's been problematic trying to be expedient in responding in an opportunistic sense to market conditions.

The next step for us in terms of the systems progression is to go to British Columbia on the wireline front.

And we're forecasting to do that in the first half of 2008.

And I'm hopeful that the tuition value related to all the problems that we experienced with the Alberta implementation will mean that the B.C.

implementation will go a heck of a lot smoother.

Clearly, the Alberta implementation was a very painful learning process.

But if we can recycle that tuition value into a much stronger implementation in B.C., I think that bodes well for us.

To that, for us it will be rolling it out from the consumer side of our business to business solutions to TELUS Quebec, and eventually of course looking to combine the wireline and wireless sides of our business so we can bring the full power of our portfolio to bear for the benefits of both consumers and investors.

Thanks very much for that.

Just for greater clarity, that cut over would occur second half or first half of '08 in B.C.?

First half of '08.

First half; thank you.

Erica?

Thank you.

The next question comes from Jonathan Allen of RBC Capital Markets.

Please go ahead.

Thanks very much.

First, I'll congratulate you.

I see the CRTC has now deregulated Calgary, Edmonton and Vancouver; so at least one positive result from that.

A question for you on wireless; the voice ARPU declined down about 2.8% year over year and seemed to pick up a little bit in the quarter.

We've seen the trend I guess accelerating over the last little while.

I'm curious as a first question whether or not there was an impact from number portability; whether there were perhaps more attractive promotions that were outstanding in the quarter that brought down some of the ARPU.

Thanks, Jonathan.

The question succinctly can be answered as yes.

I think it's obvious that when you have the implementation of number portability which was previously an impediment for a customer moving from one operator to the next; it's obviously going to translate into some pricing pressure as it relates to the voice component of our ARPU.

I guess what I would direct you to is that on a net basis, the ARPU is up and if we can continue to make the investments that we're making from a capital perspective in technologies like EVDO Rev A, where we are closing in on covering two-thirds of the Canadian population and expect to have handsets available in 2008 to leverage that network power; then the growth in data revenues can more than offset the commoditization that we're seeing on the voice side.

And the economics are quite solid because unlike the type of pressure that we face on the wireline business, where typically new services come at a significantly lower margin than the legacy services that they're supplanting; on the wireless side we enjoy a very healthy operating margin associated with new data applications coming to fruition.

And I guess if you look at the amount of growth still available to us, we're at a situation right now where data only accounts for about 10% of our ARPU; there's still significant opportunity for data growth to be realized.

And we're also in a situation where effectively the market has not yet matured.

We currently stand as sort of 59 to 60% of penetration.

So that should ameliorate to a certain extent, some of the pricing pressure as it relates to the commoditization of legacy services on the wireless front as we still pursue as an industry [emerging in] growth for the sector.

Well Darren, that brings up a second question or a follow up I guess for John's purposes so he doesn't cut me off.

With the shutdown of Amp'd Mobile, I guess it brings back the question of if there is some re-pricing or some lower promotions that are impacting the flagship TELUS brand; perhaps you can discuss the merits of coming back with perhaps a discount brand similar to your peers with Fido and Solo rather than re-pricing your flagship brand.

Yes, I don't think it's the smartest thing to do; to discuss any broad form of what are marketing plans are as it relates to our wireless business.

It is a competitive market.

You will have heard in my comments that there are in effect, 15 brands from people to choose from within the Canadian wireless industry.

I guess what I would say is the hallmark of our success within a 15-brand industry is that fact that we've enjoyed 18 consecutive quarters of ARPU accretion which means we're doing something right with the TELUS flagship brand.

We've consistently posted a best-in-class performance in terms of customer retention.

And as it relates to the efficiency and the economics of our business, we continue to lead the way, in terms of COA as a percentage of lifetime revenue.

So right now I think we're pretty satisfied that with the operating characteristics of our business.

But I think we have to always be mindful of developments within the industry, and including the implication of discount brands and how we deal with that.

And as you know, we're an organization that doesn't close doors, but keeps our options open and explores all opportunities to present the right marketing profile for our Company in the marketplace so long as we can generate the type of economics that investors have come to expect from us.

Great, thanks Darren.

Thanks, Jonathan.

Erica?

Greg MacDonald, National Bank Financial; please go ahead.

Thanks.

Good afternoon, guys.

My question is on -- in the press release there is a reference made to -- and Darren, I think you made comment on this as well -- suggesting that your investment-grade rating is an advantage for the company.

I would agree with it.

I'm wondering if you're only referring to an advantage from an operating perspective, or are there other options that you could take advantage of with respect to your balance sheet?

I guess in other words I'm asking -- does the decision not to pursue BCE suggest that the Company could consider a strategic review of its capital structure at some point in the near term or is that just not on the horizon in the current time?

Again I don't think that the Company is well served by ruling out potential developments down the road from a corporate development or financial engineering perspective.

I don't think again, we're well-served by discussing elements of this nature within a public forum.

I do believe strongly that having an investment-grade balance sheet is of paramount importance and you need to look no further than the current credit market conditions to understand why that is so important.

Not only does it help lower our weighted average cost to capital which improves the economics of our business because we enjoy lower pricing on the debt front; but as well it gives us ready access to the debt markets to pursue opportunistically the opportunities that we think make good economic sense for the security holders of our organization.

And to have financial flexibility is a huge plus for the telecom industry because it's been such a tumultuous industry, any time when you have to incur significant capital expenditures but you're also subject to change within the competitive landscape, subject to change within the regulatory landscape, subject to change as it relates to how capital markets move to and fro; it's nice to have financial flexibility to give the organization resiliency to exogenous pressures and also give the organization opportunities that would be outside of our reach if our balance sheet was less than robust.

Bob, I don't know as the CFO if you want to add any color to that?

No, I think you've covered it Darren.

But I think keep in mind that when you're looking at capital structure, we always look at it from a long-term perspective.

And one need look no further than the past few weeks or look no further than 2002 to see down cycles in the market and so you've got to be sure that when you set a capital structure, it's one which is optimized from a long-term multi-cycle perspective and that is certainly the approach that we've taken in the past few years.

And yes, we always look at it annually in terms of what should we be doing on an incremental basis.

In fact, the whole BCE initiative; one of the prime advantages of our whole approach was it would have resulted in an investment grade organization which would have made that entire organization in a completely different competitive situation and resiliency attribute than perhaps it will find itself in.

But that's water under the bridge.

In any event, the point is that whether TELUS stand-alone, our existing operations, or looking at whatever opportunity presents itself in the future; we believe we are advantaged by the capital structure that we have.

Good, thank you.

Erica?

The next question comes from Glen Campbell of Merrill Lynch.

Please go ahead.

Yes, thanks very much.

Darren, I have a question on wireless.

This sub growth was good but when we look at the ARPU growth it lags what your competitors are doing as does your-- and you're losing revenue market share.

So it makes me-- I guess I ask the question; are you comfortable that you're churning and winning the right customers relative to your competitors?

Clearly, you're looking for a good second half performance which suggests that we're not asking for the specifics of your plans, but you've got some specific actions in mind.

So I'm wondering sort of-- are you satisfied with what you're doing there and if not, are there sort of changes sort of in the works?

I don't Glen that I would ever answer a question saying that I'm satisfied with the operations of the organization because that means I've got nothing else to add.

So I think I would be better characterized as permanently dissatisfied.

I would say the sub growth this was satisfactory for TELUS.

Effectively, if you look at it, it was three-quarters postpaid and one quarter prepaid.

If I had my druthers, I would like to have seen a little bit more exposure on the postpaid front from the organization; but all in all, not dissatisfied.

And I think whilst that mix is not as rich in the postpaid front let's say as what the Rogers organization posted, I think it still compares favorably from an industry perspective.

We also have certain inherent challenges on the CD main front where we cannot necessarily take full advantage of roaming opportunities in what is increasingly a GSM world and that's a dichotomy that's institutionalized, but we have to live with.

I think it's also important to point out is that whilst we hit 128,000 in net adds, we only modestly benefited from wireless local number portability.

I think the real winner in that regard was the Rogers organization.

Despite comments that have been made to the contrary, certainly we can track the movement of wireless number portability very accurately as an industry and we were net positive, but modestly so.

So I think in terms of areas for improvement, I think that would be one.

But as I said previously heading into number portability, number portability is not a race.

It's here to stay and we'll be judicious in the way that pursue it.

We don't want to be disruptive and create downward pricing pressure by being overly aggressive in the near term.

Let's take the longer term view and make sure that we're capturing our fair share of the market and we're generating a good economic return for investors.

I guess also we have a certain cross to bear.

When you're a leader, sometimes people catch up.

And we have posted a rather good ARPU yet again in the C$64 range.

And we are again the industry leader in that regard and our ARPU is an improvement on a year-over-year basis from what we've posted previously.

So at the end of the day, you need to look at things on a nominal basis as well.

And I think if you compare us in terms of some of our key operating characteristics, whether it's ARPU or whether it's churn where there has been some catching up by one competitor and some deterioration by another in that particular area; we remain the industry leader in that regard.

And even as it relates to COA as a percentage of lifetime revenue, despite the fact that given that the challenges of the smaller CDMA ecosystem where we would typically pay circa C$40 to C$50 more per handset; we still lead the way in terms of COA efficiency as a percentage of lifetime revenue; and that is of course taking into account that this particular quarter our COA was inflated by the costs of implementing our protectionist mechanisms related to number portability; may be somewhat exaggerated as Bob has accurately described and of course some inflation as it relates to the implementation of Amp'd which has been less than a positive experience from our organization.

So I think there is more work to do for us on the wireless front.

I think orders of priority for us; number one, I still think that there is a big opportunity with number portability for TELUS to capture a more balanced share of the business market in Canada, which I think has attractive ARPU characteristics.

But that's a strategy that's not a near-term strategy.

It's a long-term strategy and we'll be patient and disciplined in terms of pursuing our reasonable amount of market share in that particular sector where we are currently underweight as an organization, given our heritage.

The second order of priority for us is going to be driving through with the EVDO Rev A development so that we can continue to ensure our CapEx investments underpinned the major of area of growth for us, which is on the data front.

And it's interesting; you talk with people catching up to us.

Well, one area where we have not been a leader Glen is on data.

And that's an area where we have been closing in, catching up if you will, with people that have been the leaders in that area.

So I think data is a big part of the DNA of our organization on both the wireline and the wireless front and I think you can expect us to continue to do well in that regard.

And finally, for us I think we need a tune up on the marketing front.

I think we can do better on the marketing front in terms of COA, COR efficiency; but I think we can do better on the marketing front by opening up new points of distribution, new channels to market to ensure that our products have a more profound reach into the marketplace to help drive profitable.

And again, I think we can think our way through to how we can ensure that maybe there's a little bit of a better tweak on the postpaid front where the economics, on a relative basis, our superior.

So that's what we're going to be up to.

That's very helpful, thanks.

Just a quick follow up; are you still in the market with double-your-minutes promotions.

I know they were a big factor in Q2.

Are you still offering them in the current quarter?

No, we're not.

Okay, thanks.

Erica, next please?

The next question comes from Dvai Ghose of [Genuity] Capital Markets.

Please go ahead.

Yes, thanks very much.

Darren, if I can ask you about efficiency; particularly in the wireline side of course.

I think you went through a strike in 2005 and the anticipation was more efficient labor structure.

Since that time your wireline employee base is up some 14%.

It's up 10% year over year, which could be a disappointment.

I'm wondering if more can be done on the efficiency side.

Okay, Bob will take you through the waterfall on the employee base front, which I think is a good question that you're asking, Dvai.

And I think people would benefit from an education as to how that particular year-over-year growth breaks down.

And then I'll come back and I'll just make some comments as it relates to your question.

Dvai, I think what's important to understand from I guess from a productivity perspective or an efficiency perspective as it relates to our wireline organization is that we do have significant outsourcing operations that provide outsourcing services to third-party multi-national corporations.

And that's in our TELUS international business segment.

And if you exclude the roughly 1800 increase in employees year over year in that operation, then our wireline employee count as of June '07 was 22,987; that compares to 22,552 a year ago.

So you're talking about less than a 2% increase year over year.

So I think that's an important consideration.

I guess to come back, Dvai I think you've a fair point.

I think we can do more on the efficiency front than what we've been posting thus far.

As I've said previously, implementing the new collective agreement, investing in the implementation and the new collective agreement is something that we've been doing.

And I think some of those up-front costs and some of the protracted implementations that we've been pursuing as it relates to some of the new operating latitudes that we enjoy within that collective agreement; are deferring or delaying our ability or masking our ability to demonstrate some of the efficiency gains that we were able to realize through that new collective agreement.

And hopefully we can make in the future, more evident, more transparent and more impactful for investors to observe.

I think it's also important to point out that the IT implementation that we've been pursuing, let's put the troubles to one side; just the implementation of the IT system in and of itself has generated significant costs into our organization.

It's been a very, very CapEx as we OpEx intensive exercise to get that system implemented.

And again, that's impacting negatively our efficiencies in the near term, but hopefully will impact them positively as it gets implemented over the medium to longer term.

And of course the problems have been exacerbated in areas like Q2 because of the significant problems that we experienced in trying to get the Phase A implementation of the system up and running in a very robust fashion.

I think just to illustrate; we had to bring in over 300 people to our call center in Alberta to undertake manual fulfillment processes and that particular experience was not enjoyable either from a process-performance perspective or from a cost perspective when you have to bring in that magnitude of people to undertake what essentially becomes a manual fulfillment process.

And of course the other things that continue to challenge us are formally very lucrative products like long distance where we've experienced a lot of pricing pressure.

It's interesting to note that even within the normalized LD erosion that we experienced in the second quarter, it's actually not a minutes erosion; it's really reflective of two things.

One is the re-price on the retail side of the business, because minutes have actually grown.

And then TELUS not generating the type of wholesale traffic that we have previously; so it's those two things in combination, but that type of re-price pressure does get reflected in the margins of the organization in quite an impactful fashion.

And overall, as I said earlier, a lot of the new products that we're selling don't carry the same margins as the legacy products that are either getting supplanted or commoditized.

I'm just telling you what is effectively inherent as a challenge of the wireline side of the business.

But I think Dvai you're right to point out that we can do more and need to do more as it relates to the efficiency of our business.

Sort of traditionally, on the wireline front as rightly point out; and I think now laterally on the wireless front as well.

And I think that's something that you can look for us to be concentrating on as a management team in the weeks and months ahead.

Can I ask you a real quick follow up on the systems?

Given the systems issues and the fact that you are implementing in new areas; will this slow down the rollout of new products such as a more extensive rollout of TV?

Well it did in Alberta because we issued a stop sell on both ADSL and TELUS TV.

Hopefully, that problem is non-recurring.

So if my view is correct that the pain that we experienced in Alberta will at least produce significant tuition value in terms of the way that we garner the learnings to make sure that the implementation in B.C.

goes smoothly; then it will not negatively impact our ability to install network access lines on the voice front in B.C., or continue on with ADSL in B.C., or carry on with TELUS TV.

Hopefully, all of those problems are now behind us given that the system is implemented in Alberta and it is robust and we're now returning to normal operations within our call centers and our fulfillment processes.

Thank you very much, Darren.

Erica, please?

Jeffrey Fan, UBS Securities; please go ahead.

Thanks very much.

I just want to go back to the wireless for a second and ask you about your net loads for the second half of this year.

You guys kept your guidance for 550 or more in terms of net adds.

But my impression also from your talk about the spending is that you're going to slow down the acquisition or retention spend in the second half.

So I'm just trying to understand if you can elaborate a little bit more on how you're comfortable that reduction in spending is not going to impact your net loads in the second half.

Thanks.

Don't confuse reduction with efficiency.

Yes Jeffrey, of course we don't want to get too specific here because of the competitive implications, but it's fair to say that with the launch of WNP in the second quarter there were exaggerated impacts in terms of the level of repurchase decisions going on in the marketplace at that time on a seasonally-adjusted basis.

I think if you look at the net adds that we had 128,000 over the 550 you're into a 23% territory.

And consequently, that's a little bit higher than I think normally you have around 22%.

I think that's where we were last year.

So we're a little bit ahead of the game.

So we're basically saying continuation of existing run rate.

Remember that we did win the government in Canada, a wireless business; and that's largely going to be a second half of the year conversion rate.

So in any event, given the loading that we have experienced, that we continue to experience, we would anticipate to tracking on towards the full-year guidance.

As to whether we're specifically going to increase or decrease the cost COA; I think there are opportunities in our organization to reduce some costs.

I certainly don't need to renew Amp'd related costs, as an example; but going beyond that, I don't think would be prudent in this forum.

Maybe just a quick follow up then on the efficiency issue; can you maybe identify some things that shouldn't have been done in Q2 on the efficiency side and that might give us some comfort that going to the second half that things will be much better.

Let's maybe break it down into a three-layer stratification.

One is heavier investment period given the launch of number portability which I think would naturally be the case.

So that should get normalized or smoothed out as we progress through the remainder of 2007 and beyond.

Next, I think there are areas where we did not spend as efficiently or as effectively as we could have, so perhaps we [over-ranked] it; perhaps we weren't on the ball as much as we would have liked to have been on the marketing front.

Perhaps the effectiveness of the COA wasn't what we would come to expect.

So I think-- call layer two, just sort of management pulling up its socks and making sure that we get a better bang for our buck in terms of our marketing expenditures.

And then the third point, if you want to have a look at it, is Amp'd and of the 128,000 of net adds that we delivered, fewer than 2,000 were related to Amp'd and the rather modest Amp'd adds carried a big COA ticket associated with it.

So if you look at the quotient of costs from a gross add perspective on the Amp'd front, it was significantly disproportionate and certainly not an economic experience that we would expect to see carrying forward into Q3 and to Q4.

So that will not be materializing again, but it was a situation where the cost per gross add was quite significant.

So that gives you a flavor of where we're coming from and it also -- as Bob has rightly pointed out on the government of Canada front; a lot of the up front costs to facilitate that rather massive migration have already been absorbed and we will be realizing the efficiencies over the third quarter because the majority of the migrations are still ahead of us rather than behind us.

So we are less than halfway through that particular migration.

So those net adds are still to come for the organization.

Okay, great.

Thank, it's very helpful.

Erica?

The next question is John Henderson, Scotia Capital; please go ahead.

Thank you.

I'd like to go back to the BCE issue and just ask if you could comment; is this decision absolute, absolute or is it possible that if the timeframe for vote was pushed out to the 10/29 and/or the regulatory guidance was accelerated to sort of an acceptable timeframe, that you could possibly return?

Thanks for your question, John.

I've got a lot of empathy with your question.

I think it's important on this call to say; now using your vernacular that it's absolute that we will not be proceeding.

This is not the view that I wanted to give.

So we were as an organization, extremely serious about this opportunity and we have worked diligently as an organization to try and overcome a number of the impediments that were inherent in the process that we had to follow.

And we put our back into trying to get a requisite degree of regulatory certainty and unfortunately we just couldn't get there.

And when the process is stacked against you, decidedly so; and one of the byproducts of that is that you can't get regulatory certainty within a timeline that's relevant; then you've got to go back to first principles.

And for us, just think about it; going forward without regulatory certainty and having effectively not just overcome a significant price and an unprecedented break fee, but also to sign up to a C$1 billion reverse break fee in the absence of regulatory certainty would have been putting TELUS and our shareholders in a state of jeopardy that I just don't think would have been the responsible thing for us to do.

And that's unfortunate because I really did believe that the combination of the two businesses would have been a great thing for our country, given the fact that our industry is becoming increasingly global in character and I think size does matter if you're going to compete effectively and enjoy economies of scale that allow you to deliver economic value for your shareholders.

I think we could have achieved a deal that would have been good for both the shareholders at TELUS and the shareholders of BCE; and I think the attributes of our offering in terms of our ability to put a superior price on the table, the fact that our consideration would give people access to the material synergies that no one disputed.

It was just the question of how big is big.

I think people would have enjoyed, in terms of the resulting organization, a significant a growing dividend as we pursued our dividend and growth model.

I think for retail investors and certain institutions that don't enjoy the tax benefits of pension funds, that the deferred tax rollover would have been a highly-attractive feature.

And I think the enlarged entity would have been a platform capable of doing great things.

We didn't look at this particular acquisition as an end game, but rather a means to an end in terms of what we could do in the future within Canada and as well potentially the international feeder with that type of platform that would have a very strong balance sheet because we were looking to structure a deal where the resulting entity would be investment grade.

But I just can't get the ball over the goal line, given what we've had to work through on the process and the byproduct of that is insufficient time to get regulatory certainty.

And to go forward and sign up to that C$1 billion reverse break fee and then have to live with whatever remedy gets applied, which is indeterminate in nature; can greatly risk what is great about the TELUS organization.

And if we got a very onerous remedy, we would destroy one of the beautiful characteristics of our company, which is our superior asset mix and the disproportionate exposure that we enjoy to wireless.

And so we've reverted to Plan A; and TELUS fortunately has a fantastic Plan A and we've demonstrated that consistently year in and year out in terms of our winning strategy, the excellence of our operational execution, and the way that we've consistently created value and have taken that value creation and returned it to investors.

And I think Plan A for us just got stronger because I like what the competitive dynamic is going to look like in the years ahead.

I like the strength that we have with our balance sheet.

I think we can do good things and when you have that degree of a track record in terms of credentials for delivering and you've got a very robust balance sheet, you can be very, very, very opportunistic in seizing opportunities both organic or otherwise that create significant value for investors.

So that's what we've reverted to, but I have to tell you; I wish I could have given you a different answer because my head and my heart were dedicated to this particular opportunity.

Can you confirm that the regulatory guidance -- any that you may have received to this point was not about -- the reason to pull out was not that the guidance required certain asset sales that were unattractive to you?

That's a great question.

I'm going to give you a subjective answer.

But I believe that given the [fullness] of time, we could have secured regulatory approvals that would not have seen onerous remedies applied to TELUS, particularly in the area of wireless.

I think the outcome would have been one that would have been acceptable to TELUS and that it would have allowed us to proceed with this acquisition.

In fact, we had a legal opinion to that effect from our legal adviser on the deal that we would be able to secure a regulatory outcome for TELUS and TELUS's investors that would have been entirely acceptable to us and would have allowed us to proceed with this particular deal if we had the luxury of time.

And we don't.

And that's the catch-22 situation I face as I could have gambled on that legal opinion being 100% and that the remedies would have been acceptable rather than onerous.

But if I was wrong, the downside for TELUS investors would have been material and in this particular instance I think it behooves us to be conservative in our decision-making and that's what we've done.

But you are right to point this out because it makes it an even more bitter pill to swallow, given what might have been.

And just one last follow up; the alternative, one of them may be going down the same road as BCE on private equity; not a good solution for Canadians but probably a good solution for investors.

What is you appetite for that?

That's not a file that's currently under progression at our organization, but I think we have been very appropriate in differentiating ourselves as an organization that continually says, we don't close doors.

I think when you close doors you start introducing a level of subjectivity into the evaluation of opportunities that's not in the best interests of shareholders.

So for us, we always keep doors open and we always evaluate opportunities that can lead to sustained and material value creation for our investors.

I think it's also important to point out that I think TELUS will continue to be the master of its own destiny.

I think when you have a track record for value creation and a track record for returning that value in a meaningful way to investors, I think you would have seen Bob slide that indicates that we're approaching now C$4 of cash being returned on a per-share basis.

When you've got that type of track record, I think you can control your destiny in the marketplace.

And I think that's what you can expect from our organization going forward.

We'll continue to remain open to all ideas that lead to the sustainable realization of shareholder value and we'll continue to pursue the Plan A that I referred to earlier in an ardent and hopefully successful fashion.

And that's where we're at and I don't think we need to be subjected to any exogenous pressures when we've got the type of track record that we do for the creation of value.

Thanks very much, Darren.

Okay, Erica it's now 9:30 and we've had a long Q&A period so we're going to stop the questions at this point.

And I'd like to thank everybody on line for joining us today and we continue to appreciate your interest and continued support of TELUS.

Thanks very much.

Thank you.

This now concludes the TELUS second-quarter 2007 earnings conference call.

On behalf of myself and the rest of the conferencing team, thank you from TELUS.