Annual report - About TELUS

management discussion and analysis
2001 FINANCING PLAN
TELUS has a significant financing program to accomplish
in 2001. The primary focus is to refinance the $6.25 billion
bridge bank facility arranged in October 2000, and to
finance net new cash requirements for 2001 totalling
approximately $1 billion, including the $403 million annual
cost of dividends and $356 million cost of licenses acquired
by TELUS in the spectrum auction conducted by Industry
Canada early in 2001. The Company may also consider
refinancing, during the year, the $1.7 billion of Senior
Discount notes outstanding at Clearnet.
TELUS plans to meet these financing needs primarily
through bond issues in Canada and the United States,
and by arranging a new core bank facility. Dispositions of
assets and sales of certain businesses currently carried on
by TELUS may also be a significant source of funds. In
addition to real estate sales, the Company has announced
that it may sell the directory advertising business and is
pursuing the sale of its leasing business. Successful outcomes
of these sales could realize proceeds of approximately
$1 billion. Leasing, securitization transactions, and
quasi-equity transactions will also be considered to meet
part of the overall financing requirements. Equity issuances,
especially in connection with acquisition activity, could
form a part of the financing activities.
The size of TELUS’ financing requirements means that
a major portion of the funding will need to be raised in
United States capital markets. TELUS expects to maintain
its current position of fully hedging its foreign exchange
exposure. Floating rate exposure at the end of 2000 was
approximately $2.8 billion, representing 35% of total debt.
The Company plans to reduce this exposure significantly
during 2001, primarily through issuance of longer term
fixed rate debt, and in part by hedging floating rate exposure
using derivatives. As a result of the size of borrowings
under the bridge facility, 62% of debt outstanding
matures in 2001. The Company plans to spread maturities
of new debt issuance over a range of years to manage
future refinancing risk.
TELUS believes that its internally generated cash flow
combined with its ability to access external capital provide
sufficient resources to finance its cash requirements during
2001. The capital markets currently appear receptive to
financings by TELUS, but there is no assurance that there
will be continued availability of the financing we require or,
if available, that the terms will be attractive to the Company.
TELUS has an objective to preserve ongoing access to
capital markets at a reasonable cost by maintaining its
> 50
investment grade credit ratings. This will be facilitated by
implementing the financing plan in the manner set out
above, and by striving over the longer term to move the
debt to total capital ratio toward 50%.
REPORTING BACK ON 2000 KEY ISSUES
The following nine key issues for 2000 were highlighted in
last year’s TELUS annual report. In the letter to shareholders
we also stated that we intended to achieve an average
total shareholder return of 15% or more per year for
the next five years. In 2000, shareholders enjoyed a 22%
total return (price gain of 18% and dividend yield of 4%).
Appointment of a new President and CEO of TELUS and a
new President of TELUS Mobility
Darren Entwistle was announced as the new President
and CEO of TELUS in early June and assumed his duties
in July. He made an immediate positive impression on
employees and shareholders alike with his launch into a
100-day planning and strategy process, and the bold
acquisition of Clearnet Communications.
John Maduri was appointed President of TELUS Mobility
in May, coming to TELUS with a strong background including
14 years of senior financial and operating experience in
the wireless industry. Subsequent to the Clearnet acquisition
in October, George Cope, the well-regarded CEO of
Clearnet, assumed leadership for the combined TELUS
Mobility. John has become President of the new Business
Solutions unit.
Minimize effectiveness of competitors in our western markets
As shown below, TELUS was successful in minimizing
losses to competitors in the West.
Market Share (%) 2000 estimate 2000 actual
Local 94 – 95 98
Long Distance 69 – 70 71
Wireless 54 – 55 56
Local market share losses were minimal due to the pull
back of a competitor in the residential market and the success
we achieved with the bundling of residential services
– adding 480,000 in the year – and an approach to the
business market that uses competitive bids and contracts.
Competitors in the local, long distance, wireless and highspeed
Internet markets were still very active. An example
of the new competitive reality was the Province of Alberta
awarding a contract to a Bell Intrigna consortium to build a
high-speed broadband network to government buildings in