Annual report - About TELUS

TELUS Mobility Expenses
TELUS Mobility expenses increased by $370.9 million.
Entering the national resale market in March 2000 combined
with the acquisition of QuébecTel and Clearnet
added $221.8 million in expenses. Expenses in western
operations increased by $149.1 million due to higher
commissions to dealers related to the increase in digital
subscribers ($72.3 million), a related increase in cost-ofgoods-sold
for wireless handsets and accessories ($57.4
million) caused by higher gross subscriber additions and
higher marketing costs of acquisition per gross subscriber
addition due to the increased sale of higher cost digital
handsets, and higher general support costs arising
from a higher subscriber base. New market initiatives
helped increase the number of digital subscribers to 31%
of the western subscriber base (excluding the former
Clearnet networks) at year-end (13% at the end of 1999).
Advanced Communications Expenses
Advanced Communications expenses increased to support
growth in data and Internet services; partly offset by
lower expenses in ISM-BC, TELUS’ information management
outsourcing company.
Other Expenses
Other segment expenses increased due to the inclusion of
QuébecTel financial results (excluding QuébecTel Mobilité)
for seven months, and other national start-up costs due to
the opening of facilities in late 1999, the hiring and training
of sales force personnel and increased directory-publishing
activity. These increases were partly offset by a $58 million
reduction in operating expenses recorded in 2000 for an
accounting policy change made on a prospective basis,
dealing with future employee benefits (Note 3).
The 4.1% increase in intercorporate expense eliminations
was due mainly to the provision of additional information
systems services by Advanced Communications
to other segments.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION (EBITDA)
EBITDA BY SEGMENT
($ millions) 2000 1999 Change %
TELUS Communications 1,853.4 1,709.9 143.5 8.4
TELUS Mobility
TELUS Advanced
307.4 379.7 (72.3) –19.0
Communications 200.5 139.1 61.4 44.1
Other and eliminations 103.5 98.7 4.8 4.9
EBITDA 2,464.8 2,327.4 137.4 5.9
Growth in EBITDA was driven primarily from:
° improved margins in TELUS Communications due to
continued focus on cost containment and achievement
of merger-related synergies
° 10% revenue growth at Advanced Communications
combined with only a 4% increase in costs
partially offset by:
° lower margins in TELUS Mobility due to accelerated
migration of analogue subscribers to digital services and
inclusion of Clearnet’s wireless operations for just over
two months
° lower margins in the Other segment due to increased
national expansion costs
EBITDA MARGIN* BY SEGMENT 2000 1999 Change
TELUS Communications 46.0% 42.0% 4.0%
TELUS Mobility
TELUS Advanced
24.1% 39.0% –14.9%
Communications 18.6% 14.1% 4.5%
Other 18.7% 30.7% –12.0%
TELUS Consolidated 38.3% 39.6% –1.3%
* EBITDA divided by total revenue
Depreciation and amortization (and amortization of
acquired intangibles) increased by $133.3 million
The increase was due mainly to QuébecTel depreciation
($39.4 million for seven months) and Clearnet depreciation
($47.6 million since October 20). Amortization of intangible
assets relating to acquired subscribers and wireless spectrum
added $24.6 million. The remaining increase resulted
from standardization of depreciation guidelines (part of
merger integration activities) and growing capital assets
in Advanced Communications. Amortization of goodwill
has been disclosed separately on the Income Statement
before the Net Income line.
Other income, net – decreased by $10.1 million
Other income of $30.1 million includes gains and losses
on disposal of properties and investments, as well as
recurring interest income and charitable donations. Net
gains on disposal of properties and investments were
$8.2 million in 2000 for the sale of two buildings and an
aircraft; while in 1999, net gains of $36.9 million were
recorded for the sale of real estate properties and investments.
One other building was sold in 2000 under a
leaseback arrangement – therefore, no gain or loss was
recorded. Sinking fund income decreased by $8.5 million,
as the sinking fund asset and related debt were both
retired in May 2000. These decreases were partly offset
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