Good morning, ladies and gentlemen. Welcome to the TELUS fourth quarter 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, and welcome to the TELUS fourth quarter 2006 conference call and webcast. Let me introduce the TELUS executives online with us today. 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 fourth quarter financial and operating results and detailed supplemental 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 direct your attention to slide 2. The forward-looking nature of the presentation, answers to questions, and statements about future financial results, guidance, and financings 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.Darren Entwistle: Thanks, John. Good morning and thank you for joining us. Let’s begin on slide four. Today I will recap TELUS' full-year results for 2006 based on our excellent fourth quarter. I will also discuss our strategic uses of cash flow and unprecedented recent developments on the regulatory front. Bob will then review in detail our Q4 results. In 2006, TELUS once again demonstrated the strength of our winning business strategy that focuses on the growth tenants of wireless and data in the domestic Canadian market. At the consolidated level, TELUS delivered strong…

Great, thanks very much, Darren. Let’s begin with a review of our wireless results on slide 16. Wireless revenues and EBITDA continued to deliver strong double-digit growth. Revenue surpasses $1 billion for the second straight quarter, driven by continued subscriber growth and higher ARPU. EBITDA increased 33% to a fourth quarter record of $432 million. Excluding cost of acquisition expenses, which were lower this quarter than a year ago due to a 10% decline in gross additions and a 3% decline in the cost of acquisition per gross add, EBITDA growth was 16%, in line with revenue growth. CapEx in the quarter decreased by 26%. This was more of a timing issue as we had higher CapEx in the fourth quarter of 2005, when the labor disruption ended. Slide 17 shows the pre- and post-paid composition of TELUS' 182,000 net subscriber additions in the fourth quarter of 2006 and 2005. The lower year-over-year result was predominantly due to a 40,000 decline in pre-paid subscriber net additions in the face of aggressive pre-paid offerings by certain of our competitors this year. Post-paid net additions of 129,500 were down a more modest 10% from a year ago and represented 71% of TELUS' total quarterly net adds, a 10-point improvement in the mix from the fourth quarter of ’05. The subscriber results reflect reduced share net adds for TELUS associated with lower gross addition opportunities due to the reduction in overall industry churn and the resulting reduction in deactivations available from other carriers, as well as an overall slowing of industry penetration growth in the fourth quarter. In 2006, our total subscribers increased 12% to $5.1 million, and we experienced record-high annual gross additions despite the slowdown in the fourth quarter, so TELUS continues to experience solid growth and our overall subscriber mix…

Thanks, Bob and Darren. 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 is from Peter MacDonald from GMP Securities. Go ahead, please.

My question is on the wireline margins. If I exclude restructuring and non-ILEC, my back of the envelope calculation shows that your traditional wireline margins were down somewhere around 300 to 400 basis points sequentially. Now obviously you met the high-end of the guidance range but maybe you can just discuss what the trends are in there. Was there something earlier in the year that does not transpire into Q4, or were there any one-time items, for example?

There were a number of hopefully one-time, if you count weather as one-time, but who knows these days, but certainly in the fourth quarter this year in the west, we experienced some highly unusual weather patterns that led to significant overtime in our field force to maintain quality of service. That was an impact this year. If we go back to last year, there was as I recall circa $7 million of credits on CDNS which were reaped by our TELUS Quebec incumbent territory. So that was in the results a year ago. There were rate reductions in CDNS that affected our ILEC territory to the negative side and throughout most of 2006, and certainly for the fall quarter or the fourth quarter. I think the over two things to note are in our incumbent areas, we are rolling out TELUS TV service and we also have significant work going on on the network and there is an element that is capitalized but there is a significant element that is not capitalized, so there is an op-ex ramp up associated with deployment of those new services and that is reflected in the numbers. That was relatively negligible a year ago. Those are the big things. Generically, typically as we all know and it has been a permanent trend, a dollar of data carries a smaller margin than a dollar of voice conventionally, so that would be more of a macro point.

Ron, next question, please.

Thank you. The next question is from Peter Rhamey from BMO Capital Markets. Go ahead, please.

Actually, just as a follow-up to that question real quick, Rob, typically do you expense about 15% of CapEx? My real question is on data growth, 8.8%. How much of that is organic? Is there any equipment revenue in there, and if so, what would be the adjusted number?

Peter, could you just re-ask the question, you said we expense 15% of CapEx?

Typically, for every rule of thumb that I have been using and I could be wrong is 15% of CapEx gets expensed typically. I was wondering if that is kind of what we could apply for your broadband build, because I understand it is about $200 million a year, just for us to get some sense of the numbers.

That is not an approach I am really familiar with looking at. What I am more familiar with is you look at labor expense, a certain portion is capitalized versus expensed, depending on what they are working on. For example, when you are working on repairing weather-related damage, et cetera, that is not a capitalizable expense, because you are just repairing to the original state. We certainly had a high level of that occurring, which drives actually a compounded costs, because you are running into overtime as well, and not just the fact that it is worked that is expensed rather than being capitalized. So I do not have the exact number in that regard, but absolutely that was a definite trend in the fourth quarter. I know most of you are on Bay Street, but if you were living out here in the west coast, we had an all-time record amount of rain, an all-time record amount of snow and it was in the same month, November, right in the middle of the fourth quarter. So needless to say, that was a challenge for maintaining our network. Sorry, you asked a question about equipment, Peter, just rephrase that?

Yes, organic data revenue growth, I assume it includes some equipment sales, which are lower margin. I was wondering if you could help us out with that 8.8% number and adjust it for equipment sales and give us a service revenue growth rate.

I do not know top of mind, but I think the conclusion would be whether you are looking at the revenue or the equipment side, it would be similarly positive. There is no big differential I am familiar with.

Ron, next question, please.

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

My question is on wireless data. Could you provide us an update on the status of the EVDO rollout, maybe give us a feel for what percent of the footprint is covered and the fact that wireless CapEx was down year over year; is that an indication that major markets are now covered and there is not much more planned, or should we expect considerable wireless CapEx going forward to expand the reach of 3G?

In terms of EVDO, we have concentrated mostly on urban deployments, and so whether it is our CapEx or that of Bell’s, collectively through the network sharing arrangement, all of the major urban areas have been covered. We are continuing to push that footprint out into our rural areas, for example, in Alberta, so there continues to be expenditures in that regard. We have also begun pre-deploying for DORA, if you will, the Rev A of EVDO, and that is also reflected in our projected CapEx guidance for wireless in 2007, so we definitely are going down that path as well. We have been incurring EVDO expenditures for two years. We are definitely passed the peak but it remains an element. We are not providing specific guidance as to the amount being expended, but suffice to say that we do have a deployment not only for concluding the EVDO but also to commence DORA in 2007.

Ron.

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

Wireless data was very impressive in the quarter and pulled up the overall ARPU for wireless, but looking at the underlying voice trend, Bob, it seems to be flat for the last couple of quarters and then it seems to be down about 1.5%, 2% this quarter, with minutes of usage also flat to declining. The question for you is one, is this at all a concern for you with the trend that we are seeing in voice ARPU? Second of all, is there a way or is there a need to stimulate minutes of usage in any way?

Firstly, it would be incorrect to conclude that voice ARPU started to decline in the fourth quarter and not in the previous quarters. We have been running for some period of time year-over-year decreases in our voice ARPU. That is not a new fourth quarter phenomenon. I just chose to emphasize it more. I think there is a misconception out there in the general public that pricing is going up in wireless when in fact, because of ARPUs going up, when in fact pricing continues to go down on a net basis on voice, but it is the significant adoption of new data services, as well as roaming revenues for some carriers contributing to an overall aggregate increase in ARPU. In our case, we have always modeled some compression in the voice ARPU. I think that has been the case for quite a while now, and so what we are really seeing is that the significant adoption of wireless is more than offsetting that and that is why the overall ARPU is going up as it is.

Ron.

Thank you. The next question is from Glen Campbell from Merrill Lynch. Go ahead, please.

My question is for Darren. Darren, you mentioned that wireline CapEx in ’07 at $1.2 billion is a cyclical peak. I wonder if you could talk a little bit about whether you see the possibility that TELUS might have to go beyond its plan for an ADSL 2+ fiber to the node strategy for the wireline network. It is something that might cause CapEx to either rise after 2007 or remain high for a very long time. Thanks.

I think we have been pretty clear from the outset that our approach on the broadband front is one where we are looking to achieve a smooth CapEx profile on a sustained basis. So when you see us make an announcement about a $600 million broadband to build program, that was projecting out for three years, and so that is indicative of the smooth profile in respect of providing the necessary technology upgrades to deliver the bandwidth on a per-home basis that we need to be competitive. We have also indicated quite explicitly in previous calls what the technology path for this organization looks like. Effectively, what we have said is we are going to take ADSL to ADSL 2+ and then from there to proceed to ADSL 2+ bonding where we are actually multiplexing access lines together to double the bandwidth to around 30 megs. Also, simultaneously with that, push fiber deeper into the access layer, closer to the neighborhood again to raise the bandwidth. That would allow us to deploy technologies like DDSL or [tepon], where we would have a combination of a fiber deeply deployed within a neighborhood and then an ethernet connection into the home. For us, what we would like to do is push fiber deeper into the access layer on a consistent basis rather than a lumpy CapEx profile, and then have an ethernet connection into the home, and we think that is the right balance between the necessary bandwidth to be competitive and prudent capital investments that are done on a smooth basis, if you will, over a protracted period. We have indicated three years in this particular instance. The only area where I think we would be different in terms of our technology deployment and the topology of our technology deployment would be apartment buildings, or what we would term to be multiple-dwelling units. In those instances, we would be looking to bring fiber directly to the suite because it is economical to do so, or in new neighborhoods where we are deploying fiber on a greenfield basis and we have the opportunity to more economically deploy fiber directly into people’s homes and bring that type of bandwidth into play. We have also said that the balance for us is we never want to hit our head on a bandwidth ceiling and become uncompetitive. We want to make sure that we have a bandwidth envelope that allows us to deliver the type of applications that customers want and whereby we can derive an attractive economic ramp from those applications. But also, not to get ahead of ourselves in terms of technology upgrades, to make sure that we sweat each access technology along the way to maximize the return on the investment.

Ron.

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

Thanks very much. If I can ask a question about use of cash, you set some pretty clear targets but the ranges are quite big and you are clearly trending to the low-end of your dividend payout as well as your net debt-to-EBITDA range. On the other hand, you obviously have the commitment to your debt-holders to improve credit matrix and so on and you have some refinancing coming up. To further complicate issues, there is speculation about privatization and so on. How do you balance all these things, either Darren or Bob? As a quick factual question, Bob, in December you published a free cash flow target of 15.25 to 16.25 for ’07, and you have taken it away in your release today. I am wondering why that is.

Firstly, I am puzzled by the commitment for a credit upgrade. We have a target credit rating policy. It is very clear, for a number of years, a BBB-high to A low, and we are sitting at BBB-high for three of the four, and the fourth has a rating under review. So I am not sure we have any pressure in that regard. We just carried through with our longstanding targets. We are sitting in the middle of our 1.5 to 2.0 debt-to-EBITDA range, so we certainly do not seem to be constrained one way or the other. Perhaps we could be at 1.75 and be exactly in the middle and that would satisfy you even more, I am not sure. Then, in terms of how these all balance, it is pretty straightforward. I do not think there are many companies with as clear financial policies as we do when we provide both a dividend payout ratio target range on a sustainable go-forward basis, as well as a leverage policy target, so it is easier to model our business. I think, as I tried to demonstrate in the presentation today, that has led to significant returns in capital, increased dividends, increased share repurchases and I think that has been healthy for a share price. Also, I am not sure that all of the analysts have understood the cash settlement program, given the absence of any dilution now that will occur from share option issuances, so the share repurchase program in terms of gross repurchases is going to flow right through to net repurchases. It will not be offset as it has been partially in the past. I think we have the right set of policies. We are not looking to revise them. They work well. We think that they are aligned with lowering the cost of capital for the organization, and we remain committed to that approach. In terms of a free cash flow target for 2007, I am not sure why it is not on the slide. I do not know if there is a particular issue. We are not really ducking anything, Dvai. There is no conspiracy theory working in this regard, so I would be free to talk to anyone about free cash flow offline.

Ron, next question, please.

Thank you. The next question is from Randal Rudniski from Credit Suisse. Go ahead, please.

Could you tell us when you would expect to be rolling out high-def on the TELUS TV? Are there any metrics around TELUS TV that you can share with us at this point?

I think right now, given that we are best-in-class in terms of our disclosure, we would prefer to keep the operating metrics to ourselves in respect to TELUS TV as it goes through its infancy period. From a competitive intelligence perspective, we think that this particular policy well serves our existing shareholders. In terms of high definition per se, we will be looking to deploy high definition in the latter half of 2007. I guess the only thing to say in conclusion would be that we are indeed reasonably satisfied with the progress and the take-up that we are seeing on TELUS TV, right from an execution perspective within the TELUS network, a service delivery perspective, and a customer appetite perspective in terms of demand for the service. We are pleased thus far and I think for this organization right now, we want to execute on the ADSL 2+ deployment, which will give us the bandwidth that we are looking for to enable the rollout of high definition TV. The ADSL 2+ footprint will largely be in place over the course of 2007, so that we can bring HD to the market in the latter half of this year.

Thank you. Ron.

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

Can I just follow-up quickly on the free cash flow question that Dvai asked? Is there no target now for free cash flow for 2007, or is it just the same and maybe it was a print error?

Jeff, we did not set a target for FCF, so the millions of questions that I wanted to ask back in December as opposed to new news in February, but free cash flow, first of all, it is a troubling one because each analyst seems to want to come up with their own definition of free cash flow, which means comparing our number to a consensus is a meaningless exercise because you each have different definitions. What we do is we disclose, as you will see in this package, the free cash flow in terms of how we get there. We are certainly not shying away from any targets, but we also have significant refinancings and other elements that can affect our interest expense. I think all that is going to -- it is a question of how good is it going to get as opposed to is it going to get better. So it is not that we have changed anything here. It is just I think what you need to know is in the deck. I am willing to talk openly about free cash flow with anyone offline.

Jeff, that was a supplemental. Did you have another question?

I wanted to ask a question about the wireless industry, and maybe this is directed to Darren. In your optimism about the long-term penetration opportunities in Canada, if we look at all the carriers now, everybody has reported, Q4 gross adds looks like it is down high-single digit year on year. Mind you, acquisition spending, marketing spending is down as well it seems like for the industry. But in order for penetration to continue to grow at the trend, 400 basis points, 500 basis points per year, do you think anything needs to be done within the industry, meaning sort of further promotions, higher COAs per sub? Are we getting to that level where we need to step things up a little bit as an industry?

No, I don’t think so. I think it is quite an amazing discussion actually, when you think about it, Jeff. You cannot judge an organization on a quarter’s performance. We said it was a little bit lighter in Q4 in net adds than what we expected, but if you look at the full year 2006, at 535,000 net adds, that was the second-highest loading for us in seven years. If you look at the industry over all, it was up 470 BPS, and we are projecting 450 to 500 for the industry in 2007 and potentially beyond. We are also projecting pretty robust performance for TELUS in 2007 and the 550,000 net adds. What is kind of amazing to me is that here we are growing our subscriber base at a double-digit rate of 12% in 2006, ARPU is up for the 16th consecutive quarter, churn is down. We have set a record in terms of lifetime revenue per customer of $4,850. COA is down, and if you go back to Q4 2005, COA was a big subject of discussion and now it is down. If you combine our lifetime revenue per customer with those COA efficiencies and an 11% CapEx intensity, you get a 34% cash flow yield. So for every buck that we generated in 2006 of revenue, $0.34 of cash came out the other end. Those are metrics that are just absolutely nothing short of unbelievable in terms of our performance. If you compare us to other markets around the world, I think there are some pretty obvious differentiating factors. Number one, Canada was effectively one of the last established markets to get going on wireless. There is no fundamental impediment that would block us from achieving the long-term goals in terms of penetration. We have had…

Ron.

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

I have a supplemental to Randal’s question on IP-TV and just a quick one on non-ILEC. Your FFH dilution that you noted, is that all IP-TV, and have I got it right at about $20 million for this quarter? Is that a level or a disclosure that we are going to see going forward?

No, it is actually the aggregate of the Internet and the TTP, and as you noticed, the Internet adds were up tremendously year over year, so that was a dominant component of a change. In terms of disclosure, I think to the extent that it is a material contributor to a year-over-year variance that we would be emphasizing it. I have not really thought through whether we are going to mention the number exactly each quarter. I think this quarter and year-over-year basis, unless we focus on it, one wouldn’t even understand the nature of the year-over-year change, so that is why we focused on it at this juncture.

I think it is fair to say, John, that the impact of the labor disruption last year in ’05 was exceptional and it hurt our operational ability to deploy ADSL, so we wanted to highlight the difference in the cost of sale in this year versus last year because of that exceptional event. I think it is not something that we would do on a routine basis going forward. The other thing to note is Bob’s conservatism once again, because we didn’t just normalize, so to speak, for the higher ADSL and FFH loadings. We also made an adjustment for what transpired on the wireless front where we had lighter loadings. So we took again a very balanced approach and I think that is judicious and fair to investors.

John, you second one on non-ILEC.

On non-ILEC, I just wonder when we might expect to get to positive returns in that business. It has been something like six years or so of pretty heavy investments in it. I wonder if you have some comments or color on that. Or is this a business that is really a necessity for the whole picture of TELUS?

Well, you hit the nail on the head in the last comment. Everyone looks at Ontario and Quebec as sort of an incremental thing that we are doing just from an expansion perspective, but I have to tell you right now, it is a necessity if we are going to keep our business customer relationships in place in the west because they need national connectivity. In the absence of a [stentor] organization, we have to be able to provide that for them and have both the service capability and the footprint to address the needs of business customers that are headquartered in Western Canada but have satellite operations in the east. Number two, it would be fair to say that if you look at the EBITDA growth of our business in the non-ILEC region, it is a pretty healthy year-over-year growth rate. In terms of the cash dilution versus the $1.6 billion of free cash flow that this organization generates, the cash dilution is very, very, very modest. In fact, what would be an interesting way, John, to look at it is why don’t you look at Ontario and Quebec in totality, both the non-ILEC business and its cash appetite, and as well the ILEC business in eastern Quebec and the cash that it generates? If you actually meld the two of them together, we are cash positive so it would be fair to say that the cash flow appetite of our non-ILEC business addressing in a targeted fashion the business markets in Toronto, Montreal, Ottawa, and Quebec City, is being answered by the cash generation coming off of our ILEC business in Eastern Quebec. So if you actually hermetically seal Ontario and Quebec, there is no cash drain off of the ILEC business in Western Canada. I think that…

Ron, we have gone well through nine o’clock, so we will take one last question.

Thank you. The last question is from Philip Olesen from UBS. Go ahead, please.

Thanks for taking my question -- actually, two quick ones. First, in terms of the re-financing plans for the ‘07s, if you could maybe just give a little more color as to your current through process, both the split between term debt and commercial paper, and the likely currency of choice for the term debt? Secondly, maybe a little bit on the financial policy question. Understanding your desire to be able to continue to invest in the core business to allow yourselves to generate superior growth, that said, what would need to change for you to want to revisit your current capital allocation and capital structure policies? Is there in your mind any meaningful restrictions on your ability to take on a substantial amount of debt if you want to dramatically alter that balance sheet structure?

Okay. Boy, there is a lot in there. Let’s see if I can rattle through them. In terms of financing plans, I cannot be definitive but I would say we certainly have an intention to use both long-term debt. We haven’t settled on maturities, but I would expect a combination of maturities in terms of evening out a maturity profile. The commercial paper program we are establishing or intend to establish would be a maximum of $800 million Canadian, so that would be a book end. I doubt it would approach the maximum, but so at $1.5 billion Canadian re-financing program, somewhere around one-third or a little more than that could be from commercial paper. I think today, DBRS put out a put out a press release giving us a CP rating as well that you might reference on the news quotes. In terms of currency of choice, if you stood today and looked at [squawked-in] rates from U.S. to Canadian, they really do not provide any advantage, given the Canadian yield curve. We are a company generating revenues almost entirely in C dollars, so the natural hedge is C dollar liabilities, although of course one could issue in U.S. and swap in, but I think if the yield curve and swap rates remain as they are, I think it would most likely be Canadian dollar issuance we are talking about. So that is really the refinancing side of it. In terms of financial policy, we have very clear financial target guidelines. These are reviewed with the Board of Directors periodically. We just went through our annual review only in the fourth quarter, so there was a very recent re-looking at these. We reconfirmed the 1.5 to 2.0 debt-to-EBITDA target range, as well as our net capitalization target and dividend payout range as well. We remain committed to our leverage policy targets. We are right in the zone now. They are long-term targets, so in terms of restrictions, yes we could deviate below or we could deviate above. Generally what we have been doing is using the share repurchase program to ensure we do not drive below the guideline range. We actually changed the definition in the fourth quarter to make it more conservative to include the full amount of accounts receivable securitization, by the way, so the 1.7 is a more conservative definition than that which formerly existed. Again, we are committed on a long-term basis. We could go below, we could go above, but we will act in accordance with getting back into range if we do so. I think all our debt investors should take comfort in the record that we have demonstrated in the past of balancing the interests of equity holders and debt holders for the mutual benefit of both, will remain the case going forward.

Thank you very much. We appreciate you joining us today and as well, your continued support of TELUS. Thank you.

Thank you, and this concludes the TELUS fourth quarter investor conference call. On behalf of myself and the rest of the conferencing team, thank you from TELUS.