Good morning, ladies and gentlemen. Welcome to the TELUS third quarter 2006 earnings conference call. I would like to introduce your Chairperson, Mr. John Wheeler, Vice President of TELUS Investor Relations. Go ahead, sir.

Thank you very much, Ron. Welcome to the webcast and conference call for TELUS, and let me introduce today the TELUS executives online with us. They are Darren Entwistle, President and CEO, and Bob McFarlane, Executive Vice President and CFO. We will start with introductory comments by Darren and then 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 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 posted for viewing at telus.com/investors. You will be in listen-only mode during the opening comments. Let me now direct your attention to slide 2. The forward-looking nature of the presentations, answers to questions and statements about proposed income trust conversion, future financial results, guidance, financing, and share repurchase programs are subject to risks and uncertainties and assumptions. Accordingly, they could differ materially from 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 3.

Thanks, John, and good morning, everyone. Let’s get started on slide 4. I will begin today’s discussion by addressing the surprising tax policy development in Ottawa this week and the implications of TELUS’ proposal to convert to an income trust. I will then move on to the highlights of TELUS’ strong third quarter results, including developments on the regulatory front and TELUS’ new partnership with the Government of Ontario. The Government of Canada’s decision to arbitrarily alter the tax regime affecting income trusts while TELUS is in the midst of our conversion to a trust is both disappointing and unexpected. TELUS’ decision to proceed to an income trust was predicated on tax policies that the Canadian Government had reviewed and reaffirmed twice in the last year. Clearly a consistent legislative framework is critical to making sound investment decisions. Companies should be able to rely on this continuity when in the process of implementing major strategic decisions. To be blindsided by a policy change of this magnitude without warning or due process is disappointing. Our decision to proceed with an income trust was predicated on the effectiveness of our winning strategy that has been in place since 2000. TELUS’ superior asset mix, strong and predictable growth, and our track record of operational excellence make TELUS an attractive trust candidate with the potential to set a new standard for income trust performance. It is important to note that the benefits of tax efficiency within a trust structure simply accentuate the strategic value we create for our shareholders and augment the cash available for re-investment into our core business. TELUS is assessing the implications of the Federal Government’s tax plan before making a decision on whether to proceed or cancel the proposed income trust conversion. TELUS believes we have the fiduciary responsibility to…

Thanks, Darren, and good morning, everyone. Let me begin with a review of our wireless results, referring to slide 13. It seems logical to start here because, as Darren mentioned, wireless represented more than 50% of consolidated EBITDA this quarter. Wireless revenues, EBITDA, and cash flow continued to deliver strong double-digit growth. Revenue surpassed $1 billion, driven by strong subscriber growth and higher ARPU. EBITDA increased 17% with industry-leading wireless EBITDA margins of 47.5%. Cap-ex increased year over year as expected in the third quarter, but we nevertheless have lowered our guidance for full year 2006, as I will outline a little later. As shown on slide 14, net subscriber addition growth continued to be robust, and was relatively unchanged year over year at 137,000. Post-paid subscriber growth was up slightly to 109,000, while prepaid additions of 29,000 were slightly lower than last year. Post-paid net adds as a percentage of total net adds increased to 79% in the third quarter. TELUS’ prepaid offer continues to provide superior subscriber economics with higher ARPU, relatively lower churn, and a growing total base. Overall subscribers increased 14% to 4.9 million, so TELUS continues to experience solid growth, and our overall subscriber mix remained at 81% post-paid. Our revenue and EBITDA gains are being driven by more than just subscriber growth. As shown on slide 15, ARPU continues to increase, up $2.00 year over year, driven by significant growth from adoption of new wireless data services, which has exceeded erosion in traditional voice services. TELUS’ wireless data ARPU increased more than $2.00, or 79% to $5.11, and accounted for almost 8% of ARPU this quarter. While this represents excellent momentum, there remains a great opportunity to catch up to other providers in this area to drive ongoing future revenue growth from wireless data.…

Just before I turn the call over to Ron to conduct the Q&A session, can I ask your cooperation for one question at a time, please. Ron, please proceed.

(Operator Instructions) The first question will be from Marje Soova from Goldman Sachs. Go ahead, please.

Thank you. You have discussed plans with dividends and share repurchase for next year. I was wondering if you could also just address your views in terms of leverage targets going forward, and if you would be open to increases in leverage in order to enhance returns to equity shareholders. Thank you.

In regard to leverage, we have an established and well-known leverage policy as it relates to both debt to EBITDA being in the ratio of 1.5 to 2, as well as net debt to capitalization. At this time, we are making no change to our leverage policy, and it has in the past been viewed in the corporate structure as the optimal range for our organization. I know that there was discussion in the contemplation of an income trust scenario, wherein, due to the lack of tax deductibility of interest and therefore the higher cost of capital associated with debt in an income trust structure, that there is logic to perhaps having a lower leverage than otherwise. Obviously in a corporate structure scenario, that would not be applicable, and therefore, for the time being, we are maintaining our existing leverage policy.

Ron, next question, please.

Thank you. The next question is Vince Valentini from TD Newcrest. Go ahead, please.

Thanks very much. Bob, could you give us an updated estimate -- assuming you are not a trust, what type of cash tax payments you would expect to make in 2007 and 2008?

In regard to income taxes, they would be negligible as they would pertain to foreign income that we earned, and therefore from a materiality perspective, cash income taxes would commence in 2008.

Ron, next question.

The next question is Jonathan Allen from RBC Capital Markets. Go ahead, please.

Thanks very much. As part of the income trust conversion in September, you had also announced a collapse of the dual-class share structure. Even though the income trust consideration is now being reconsidered, is there any change in your view on collapsing the dual-class shares?

Jonathan, in terms of the two classes of shares, we have had a structure and a corporate structure that has worked well for ourselves. Clearly as you referenced, in the income trust conversion scenario, we intended to collapse into one class of units, because you cannot have multiple classes in a trust structure. Having said that, we have always reminded anyone when we have had the opportunity that the dual-share cost structure at TELUS is solely to facilitate compliance with foreign ownership restrictions that govern the telecom sector, while at the same time allowing unfettered access to global capital markets and unfettered ability for non-resident investors to invest at will in TELUS. Having said that, we have also emphasized that if the legislation changes such that TELUS is no longer subject to foreign ownership restrictions, then the articles of the company provide for an automatic conversion of the non-voting shares into the voting class, and therefore, I certainly have not understood a rationale for a differential pricing between the two classes when they enjoy the same dividend and participation in economics. Having said all of that, we are familiar that certain hedge funds like to take positions and play one way or the other, and that is really not in our interest to facilitate in one direction or the other. All I would suggest is that when it came to an important vote, such as the vote that would occur in order to decide whether the company would convert into a trust, you will notice that the non-voting share is perhaps mis-named. It actually has a vote as a class. I would just remind investors that there are significant shareholder rights for perhaps the mis-named non-voting share class at TELUS and we have no intentions at this stage to publicly announce regarding a conversion of the two classes, but again, I remind that I think the rights are virtually identical between the two and I certainly do not understand the rationale for differential pricing.

Ron, next question, please.

The next question is Dvai Ghose from Genuity Capital Markets. Go ahead, please.

Thanks very much. I just want to come back on those two points that were made earlier, Bob. First of all, on the voting/non-voting side, you were going to collapse them on the trust. I do not think there is anything magical about a trust vis-à-vis foreign ownership, so why wouldn’t you do it as a common equity? Second, it is great to see a quick response to the trust debacle of Tuesday with a 36% increase in the divi, but even on a fully taxed basis, looking at your $1.6 billion or so of free cash flow and taxing it, there is only a 47% payout. You were prepared for something like an 80% payout as a trust. Is there any reason why it should not be that much as a common equity on a fully taxed basis?

In regard to the first part of your legal two-part question, I do not, so there has to be a fine levied from John on you, Dvai, although I must say you are improving from your normal five-part questions. The dual share class structure has worked well for the company in the past. The difference in a trust structure is you cannot have two classes of units in a trust, so it is not a possible structure that could be facilitated in a trust structure. So we have come up with a structure that facilitates compliance with foreign ownership, but essentially a class to one unit class. Given that the government’s announcement was unexpected, at least by TELUS, and this is Friday and it was only on Tuesday, late Tuesday the government made the announcement, I think any expectation that we would have a model to collapse a share structure that has been in existent for the past six years and worked well is a little bit accelerated. Certainly we have no intentions, again, to do so. As always, we will always give consideration to good suggestions from our shareholders, but this structure has worked well for us in the past and therefore to proceed on that default basis should not be controversial. In terms of the second part of your question, which relates to the dividends, as I emphasized in our presentation, the combination of a return of capital in the form of dividends and share repurchases, just keeping share repurchases at the existing run-rate experience this year into next year would lead to a combined approximate $3.85 return of capital per share. Given there were different classes of shareholders, some taxable, some non-taxable, we have in the past received considerable feedback as to preference for either dividends or share repurchases, and that is not a unique preference amongst all investors, so we chose in the past to have a dual track initiative return capital shareholders, been widely applauded by all shareholders for that approach. What we are doing today is reminding the investment community that in the event that we do not pursue an income trust conversion, we will revert to our traditional approach to return a significant amount of capital to shareholders, both in the form of dividends and share repurchases. As I have illustrated, the aggregate amount of that, just continuing with our existing share repurchase program run-rate, in combination with the new higher dividend, would lead to a combined return on capital that approaches the same distribution of capital that have been contemplated in an income trust conversion scenario.

Next question.

The next question comes from Glen Campbell from Merrill Lynch. Go ahead, please.

Thanks very much. A question on employee headcount. I notice that it rose about 10% year over year in the wireless segment, roughly in line with subscriber growth, and clearly we are looking for opportunities for operating leverage going forward. Could you talk about what might have driven that, and also how it might change going forward, whether we might look for slower growth relative to subscriber growth in the future? Thank you.

I guess we are getting into the micro now. In terms of the staffing on the wireless side, I would point out that revenues grew at a 17% clip and subscriber growth grew at a 10% clip, so that is a healthy ratio, I would suggest. The EBITDA margin, the organization at 47.5%, also -- that, by the way, is of total revenues, not merely of network revenues -- is also industry-leading, so we have a high margin level, high productivity level in the organization. Obviously we are investing to maintain superior levels of customer service. You can see in the churn rate that is maintaining an industry-leading low level, that that is having and continuing to have positive effect. We are also investing in adding expertise in the area of wireless data. That is probably the biggest growth area outside of the operations area in the consumer operations. Obviously with the significant growth in wireless data, that is also paying dividends. I have no specific guidance in relation to staffing levels on a go-forward basis for the wireless operation.

The next question is from Jeffrey Fan from UBS Securities. Go ahead, please.

Thanks very much. My question is on your wireless ARPU. When we look at the data growth in ARPU, it is certainly very strong. But when we subtract that out, looking at voice and other ARPU, it looks like it is down a little bit year on year. Could you talk about maybe how you would plan to grow that side of the ARPU? Not the data, but sort of the non-data? It looks like your minute of use is also flat. Is minute of use something that you could use to drive further growth? Or maybe there are other levers that you could use? Thank you.

Jeffrey, in terms of the wireless ARPU, I think your question is a good one, and maybe it will help clear up a misconception that seems to be out there. As you know and as we emphasized in our presentation, we have experienced great wireless ARPU growth, up a couple of bucks to the $5.11 territory. Having said that, we have experienced a traditional repricing downward in the voice services area. I do not really see the price-per-minute trend, of a decreasing price minute for voice changing. That is a function of the very competitive aspect of the Canadian wireless industry. What we are really experiencing here is that the introduction of new wireless data services and a tremendous accelerated adoption of those services facilitated by new, high-speed EV-DO handsets, the EV-DO investment, in our case, at least, that we have made in our network, et cetera, has led to a rapid acceleration of data that has exceeded the voice revenue decline on a per subscriber basis. That is a trend that I would say based on past experience, we would expect to continue in the future. So the great aspect of this industry is even though it is becoming less and less expensive for consumers to enjoy the benefits of voice wireless services, from a carrier perspective, we are introducing new services that obviously are being enjoyed, as they are receiving rapid take-up. The net result is accretive to our overall ARPU.

Ron, next question, please.

The next question is from Michael Rollins from Citigroup. Go ahead, please.

Good morning. I was wondering if you could walk us through the steps from here with respect to the income trust tax proposal. What are the steps for that to become policy or law, so to speak? Within that context, what are the opportunities possibly for some sort of compromise or renegotiation of the principals of that new tax proposal? Thank you.

Thanks for the question. It is law right now. In terms of a tax change, per se, it is implemented with immediate effect and becomes law and then is codified in retrospect. That is necessary for the purposes of confidentiality and secrecy when you are making a major policy move in so far as tax legislation is concerned. So it is law now and it gets codified retrospectively through government. It would be fair to say that in terms of the steps that are about to unfold, we are faced with a very difficult, if not extremely challenging, scenario. In terms of the comments I made this morning, and as well as Bob, given that we felt the income trust conversion was a laudable pursuit, we feel that at this juncture, only 48 hours effectively into the decision, it is premature to shut the door to the income trust conversion at this juncture. Indeed, I think if we had been easily dissuaded in the past from certain strategies, we would not have built the asset base that we enjoy today. We believe that TELUS, within this difficult scenario, has a good argument that we should experience the same grandfathering as the existing income trusts. Clearly we feel strongly in that regard, because as a public company, we made a public pronouncement in terms of our intention to convert to an income trust. I think when a public company makes such a public pronouncement, it should expect a certain degree of consistency and continuity in respect of the existing legislative framework when we are in mid-stream of our implementation of this major strategic decision. Without a doubt, when investors are making decisions based on that public pronouncement, I think investors should count on a certain degree of consistency and continuity in…

Ron, next question, please.

The next question is from Vance Edelson from Morgan Stanley. Go ahead, please.

Thanks a lot. If we could just go back to wireless for a second, the overall wireless churn was up slightly. I was just wondering, is there any IDEN impact there that you could break out? If not, what accounts for the up-tick in churn? Then, similarly, as we go into number of portability next year, could you let us know the percentage of the base that is on contract? Thank you.

Without disclosing specifics, what I can say is our churn actually decreased year over year, so that is certainly not a cause of the increase. It is a very marginal change on a year over year basis, so my interpretation was it is essentially steady as she goes. In terms of the percent of contract versus [garbers], I am not familiar that we previously have disclosed that, but suffice to say that TELUS as an organization has been a leader going back a number of years ago. A good clue would be the fact that we have an approximate 81%-19% split in terms of post-paid/prepaid subscribers. Obviously substantially all the post-paid are on a contracted basis, typically with terms of up to three years.

Ron, next question.

The next question is from Rob Goff from Haywood Securities. Go ahead, please.

Thank you very much, and good morning. Could you give us a bit of perspective on where you are seeing losses in the residential down-side? Is it too wireless? Is it the elimination of second line for high-speed users? Is it Shaw or other IP providers?

I guess the quick answer to your question, Rob, is that it is all of the above. We are seeing line losses that are related to cable telephony in Shaw. We are seeing line losses related to the typical competitive intrusion that we have experienced in the past from the likes of Primus. We are seeing line losses related to the Rogers organization and their activity in our market, and we are seeing line losses related to technological substitution, whether it is VOIP and some of the VOIP providers, or whether it is wireless substitution. I think it is fairly uniform across the board. It varies on a quarter to quarter basis, but if you took a more long-term view, empirically speaking and went back 12, 18 months, there are fairly consistent contributions from each of the constituencies that I have articulated.

Ron, next question.

The next question is from James Breen from Thomas Weisel. Go ahead, please.

Great, thank you very much. On the video side, could you give us an update on TELUS TV and how the rollout has been, and potentially any color on the preliminary take-rate results? Thank you.

The rollout on TELUS TV has always been designed to be progressive. It is a neighborhood-by-neighborhood rollout, effectively. We have launched TELUS TV commercially within the Edmonton and Calgary markets, and we are looking to move out from those major markets to semi-urban confines of various geographies within Alberta. As well, we are progressing from an employee trial in the lower mainland of Vancouver to a commercial deployment in the lower mainland of Vancouver, again on a neighborhood-by-neighborhood basis. It has always been our desire that the expansion of TELUS TV should not be one that exhibits expediency as its defining characteristic. The early results for us on TELUS TV are encouraging. The robustness of the technology is performing very well, meeting or exceeding, if you will, our expectations. We think the product has a number of very attractive characteristics that are significant in terms of differentiating our product versus the incumbent. As we have indicated on numerous occasions, TELUS TV is a service predicated upon feature differentiation rather than price discounting, and that continues to be our mentality in terms of rolling out the product. As well, you will have noted that just prior to the income trust conversion, we indicated that we had embarked upon or were in the process of a $600 million broadband expansion within our ILEC territory to raise the bandwidth speeds from where they are right now to 15 to 30 megs, which will allow us to introduce new services over the course of 2007 that we think consumers will find attractive, most notably high definition TV. We are very encouraged by the performance of the product. The take-rate, although we do not disclose it and we will not be disclosing it for some time to come, we are very satisfied that with the progressive rollout and a progress take-up, and again we are focusing on feature differentiation rather than price-based discounting, and the performance of the network has also been strong.

Next question, Ron.

The next question is from Peter MacDonald from GMP Securities. Go ahead, please.

Thank you. Could you just walk through some of the specific opportunities you see for you, if the TPR is used for the basis for a telecom act? Maybe you could reflect those on the changes that are already happening within the current regulatory format. Specifically, what I am looking for is, should we be concerned that the changes to a potential telecom act or forbearance will result in pricing pressures, or could we be optimistic that price increases could result under the TPR?

Number one, I think the best interests of our investors are served by me not disclosing on a conference call our price strategy going forward, under forbearance or even under regulation. I think that is a matter of confidentiality that, in the best interest of investors, we should not disclose within any public domain. It would be fair to say that the forbearance move that we hope would come to fruition with the TPR being implemented would allow us to pursue a number of very attractive marketing initiatives. Number one, it would allow us to pursue a bundling strategy that we have been prevented from implementing in full. I think at the end of the day, a lot of our customers, particularly within the consumer market, would be highly attracted to the type of bundle that we could put together between regulated voice services, high-speed Internet services, wireless services, security services, and entertainment services. I believe that the freedoms that we will enjoy as a result of bundling will be very attractive. Additionally, it would be fair to say that we can pursue a greater level of simplicity in our rate plans with consumers, and to the extent to which we can simplify our rate plans, I think that makes us less susceptible, more resilient, if you will, to competitive intrusions, because consumers can more clearly understand the value that they derive from their relationship with TELUS. As well, it would be fair to say the extent to which our rate plans are simpler, that will also help us take cost out of our business, because when you have complex rate plans that are a result of a legacy regulatory environment, and these give rise to queries by customers in terms of the bills that they receive and calls into…

Ron, we will take the last question. We are just coming up on the hour. Thank you.

Thank you. The next question is John Henderson from Scotia Capital. Go ahead, please.

Thank you very much. Just wondering if you could comment on last year, the strike-related revenue impacts and how much they may have been in that quarter, in Q3. I know Alliant gave estimates of their strike-related revenue impact in 2004, and showed them at about the same as the cost impacts in each of the quarters that they had the strike. Would that be a fair starting point?

My recollection in terms of the third quarter of last year with the labor disruption is that there was minimal revenue impact as a result of that strike. If you recall, certainly our wireless operations continued almost unabated in terms of the wireline operations, given that we had the majority of our bargaining unit in Alberta working, in addition to management working overtime. We maintained essential services, so while there was some slowdown in terms of hooking up new lines and the like, I think it is difficult to measure with any exact fashion what the revenue impact was, but I would find it hard to believe that it would anywhere approach the level of costs that we incurred.

I think the one thing, John, that is a very obvious empirical difference building on Bob’s point is on the wireline front, we were impacted in terms of our ability to deliver on DSL in the third quarter of 2005. We achieved back in that third quarter about 7,000 net adds. Of course, we bettered that result by an incremental 34,000 net adds, to a total of 41,500 in the third quarter of 2006. I guess there is a legacy impact from that, it would be fair to say. The other area for us that was somewhat frustrating, if you remember back to the first-half of 2005, we delivered a very strong result on the wireline side of the business to couple the strength, the performance, on the wireless side. It would be an accurate description to say one of the areas of focus for us and frustration is some of the LD erosion that we have been experiencing. In the first-half of 2005, we were pretty much best-in-class in holding the line on LD erosion, and we have seen some slippage in that regard. Some of it is because of the operational impact caused by the labor disruption that is giving us a hangover. I am hopeful that as a result of our marketing activities going forward as it relates to win-back or what we will be able to achieve on the deregulation front, we can shore up our LD activities, and if not completely thwart the erosion, do a better job slowing it versus what we have experienced over the last couple of quarters.

Thank you very much, investors, for taking the time to join us today. We appreciate your ongoing interest and continued support of TELUS. Have a good day.

This concludes the TELUS third quarter 2006 earnings conference call. On behalf of myself and the rest of the conferencing team, thank you from TELUS.