Good morning, ladies and gentlemen welcome to the TELUS Second Quarter 2008 Earnings Conference Call. I would like to introduce your speaker, Mr. John Wheeler. Please go ahead sir.

Thank you very much and let me introduce the TELUS executives on line with us today. They are Darren Entwistle, President and CEO; and Bob McFarlane, Executive Vice President and CFO. We'll 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 or less. The news release on second quarter's 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 second quarter slides are posted for viewing at telus.com Investors. You will be on listen-only mode during the opening comments. Let me now direct your attention to slide two. The forward-looking nature of the presentation, the answers to questions and statements of our future events are subject to risks and uncertainties and assumptions. Accordingly, actual results could differ materially from statements made today. So do not place undue reliance on them. We also disclaim any obligation to update forward-looking statements except as required by law. I ask that you read our legal disclaimers and refer you to the risk and assumptions outlined in our public disclosure and filings with Securities Commission in Canada and U.S. Now, over to Darren on slide three.

Thanks, John. Good morning and thank you for joining us today. I will first speak to what was satisfactory about TELUS' second quarter results. Second, I will discuss what was less than satisfactory; and third, I will highlight hat to watch for from our company in the second half of the year. Let's start with slide four. TELUS' strength in execution in a competitive market delivered positive results in the second quarter, as evidenced by strong wireless net additions of 176,000 customers, a 7% decrease in the total cost of acquisition reflecting efficient and effective marketing, a year-over-year improvement in churn to 1.43%, the first decline since the introduction of wireless number portability in early 2007. Moreover, satisfactory results in the wireline business were reflected by solid wireline revenue growth, driven primarily by data revenue from both the acquisition of Emergis in January and 7% organic growth. Also on the wireline front, we saw resilient long distance revenue and a small sequential improvement in network access line losses due to the success we are affecting in the business market in Central Canada. Also positive, we saw a 70% increase in high-speed Internet client additions plus solid progress on TELUS TV. We are gaining momentum from temporary order processing constraints a year ago, caused by the major IT conversion to a new billing and client care system in Alberta. And finally, we saw the successful extension of the same major IT initiatives to British Colombia as we cut over more than 1 million wireline residential customers to the integrated billing and client care platform, clearly benefiting from lessons learnt in Alberta last year. As a result of our solid operational execution thus far this year, TELUS has revised upward our full year 2008 revenue guidance range, was now in the ranges…

Great. Thanks, Darren and good morning everyone. Let's begin with the wireless highlights on slide number eight. TELUS reported strong wireless results that are positively affected by introduction of a postpaid value oriented brand and execution in the smartphone space. Gross and net ads were a TELUS second quarter record with high proportion of postpaid subscribers combined with low COA per addition. The success bodes well for TELUS' ongoing revenue growth and the very attractive future economics that this growth should generate. Clearly, we are still in the early days of our postpaid value brand, but we are pleased with the results today. This new initiative strengthens our marketing effort against competitors who already have multiple brands. We are also encouraged with the recent trend of declining wireless churn, which is down 10 basis points sequentially and 2 basis points year-over-year. Our wireless churn rate remains the best amongst the major Canadian carriers and clearly demonstrates that our retention efforts are paying off. Wireless data revenues increased by 54%, due to an accelerated adoption of smartphones, which is driving increased use of data services. Increase messaging, data roaming and continued migration of existing clients including Mike, the full functioning smartphones helped derive data revenue. Wireless guidance for the year is revised modestly to reflect improved revenue growth and the cost of acquisition associated with the record level of loading Now let's turn to slide nine and review our wireless financial results. Wireless revenues were up 9%, based on 11% growth in the wireless customer base as well as the 54% increase in data revenue, while overall revenue per customer declined slightly. EBITDA, as adjusted increased by more than 7%. In addition to the cost associated with record loading levels, we also saw increases in certain network operating expenses due to…

Thanks, Bob. Just before I turn the conference call to the operator to start the question period, I ask your corporation in asking one question at a time please. So over to Alex. Question And Answer

Thank you. [Operator Instructions]. And from National Bank Financial, Greg MacDonald. Please go ahead with your question.

Thanks. Good morning, guys. The question I have is on the buyback itself, 12% executed on what would be your maximum. Didn't see a dividend increase this quarter, 12% executed on the buyback. I can appreciate that you wanted to hold cash in the second quarter in particular, as there were still some uncertainty at that time on the spectrum auction. But with that complete, looking at a little more clarity on your capital requirements in the second half, are we to expect that the company is now revisiting a focus on returning shareholders' cash to shareholders in particular given how weak the stock is... has been. I wonder if you can give us some insights on what you are thinking of there.

Okay. Well, the first thing I would say is, I think the real story news today is operational execution, and that is certainly what management concentrates on. And I have responsibilities certainly for leading our strategies with regard to capital structure. But wealth creation is first and foremost, created through operational execution. So, we are looking forward to questions on what really matters here. In terms of dividends, we've had four consecutive annual increases, that's annual; we never do them in the third quarter. So we've never communicated that we would contemplate doing an off-cycle increase. So I think that's extraneous to the quarter. In terms of the NCIB; obviously, we had significant repurchases. We also had some blockade periods which related to spectrum auction et cetera. So in any event, we continue with the NCIB program. I think the important thing is that we've got a lot more firepower here given the share price. Maybe the only people around that cheer when the share price goes down, but the people on the treasury group are very excited about the low share price right now.

Okay. Thanks. That's helpful.

Okay, Alex.

Thank you. And your next question from GMP Securities, Peter MacDonald. Go ahead please.

Thanks. There was a pretty strong rumor in the market that you would make an announcement on your GSM strategy today. That would have made sense given you've had plenty of time to review it and the spectrum option behind you and I guess the benefits declined with the passage of time. But from your comments, Darren it sounded like you are still considering the option. So unless I misunderstood your comments, may be you can highlight what the remaining factors are that you are reviewing and given that timing and competition of... the timing of competition and 4G is getting closer, is there a drop dead date, when it doesn't makes sense to pursue it any further?

Thanks for the question, Peter. I would say, our perspective is that it's more important to make the right decision than to synchronize it with our quarterly release. As I said previously, technology evolutions are a way of life for our organization at both the wireline and wireless front and we consider them carefully and deliberately, always with a view to augmenting the economics of the organization. I think what is clear is that as it relates to 4G, we will be going LTE. And of course that was enabled by our securing of spectrum in the recent AWS auction. We are currently evaluating prospective paths to get to LTE and 4G and we are of course looking to select the path that maximizes our economics. I think it's pretty clear that when evaluating the prospective paths that these paths come with new revenue and competitors positioning opportunities that enhance the economics of the organization. So continuing to review it, and review it very carefully. I think what's perhaps interesting for investors is that any decision in this regard will be made from a position of strength as evidenced by the operational execution in the second quarter of this year, predicated upon our CDMA network. And I think if you look at our strength whether it's our ability to deliver new client additions, whether it's the strength of our CDMA value proposition as it relates to data services delivering data growth, whether it relates to our leadership on the smartphone front, or the way that we successfully leverage the economics of our Bell network sharing agreement, clearly we are doing very well in that regard. As soon as we have made this decision in that particular arena, we will communicate it the way that we have done in the past.

Okay, thank you. Alex, next question please.

Thank you. And from RBC Capital Markets, Jonathan Allen. Please go ahead.

Thanks very much. First, congratulations on the wireless adds, very impressive for the quarter. I am curious though about the staying power of the Koodo brand. I'd imagine, it must have had a fairly material impact on the net adds for the quarter, but I am curious what your experience has been since the launch? Was it a big launch and a big subscriber grab at the beginning and things have tapered off since then or has subscriber additions been quite steady month-to-month going into the summer? And on a similar note, I am curious about the COA on the Koodoo customers? Is the subsidy substantially sequentially lower for Koodoo versus the traditional TELUS and hence the lowest COA that we've have seen in the last couple of quarters? Is that actually something that is sustainable for the company?

Jonathan, I'll open it up and I'll hand over to Bob. Actually, the staying power on the Koodoo brand is actually quite short, because that's not the name of the brand, the brand is called Koodo. So it's important that we provide, I think that clarification. Number two, our approach as it relates to value based brand is not short-term in nature, but rather investing for longer term success. We think having the multiplicity of brands in the marketplace is the right thing to do in terms of creating economic value and I would say that that particular decision has improved in respect of its efficacy with the likelihood of new entrants coming to fruition post the AWS option that transpired recently. As it relates to your question, in respect of the cost and the structure clearly, I think if you are managing a value-based brand effectively looking for a market that is complementary for the TELUS market, where people really are value seekers, then you need to make sure that the cost infrastructure that you built to support that brand is very effective to support what you want to achieve in the marketplace from a pricing perspective. I'll hand it over to Bob if he wants to make any additional comments.

Yeah. And the one thing that I would add is consistent with our tradition, we are not providing brand specific results or analysis.

Yeah. If I could you just clarify then that from what Darren was saying, was there a big push at the beginning of the quarter then with subscriber additions for Koodo? And then it tapered off or have you seen things had been pretty consistent?

I'm not going to comment because we are not breaking out how the brand is doing and fairly you watch a brand and that entails a certain activities. But when I tried to emphasize Jonathan is that this is an approach that's to deliver a result in 2008, it's a longer term strategy. I also think trying to draw inference from four months worth of results is a highly sarcastic [ph] event. All I can tell you is that our approach and our mentality as it relates to the value-based brand is long-term in orientation. Clearly, it takes effort to introduce it into the marketplace. And as well as, for your question, we want to build the cost infrastructure for that brand that supports the fact that we want to have a value-based price proposition in the marketplace and I think that's the smart thing to do.

Okay, thanks Darren. Congratulations again.

Thank you.

Alex, thank you.

Thank you. And our next question; Goldman Sachs, Scott Malat. Go ahead please.

Thanks for taking the question. Yeah, just on the retention spend, was it little bit higher than we would have thought, just seems like you are subsidizing the smartphones more aggressively. Can you just give us an idea of your mix in smartphones, maybe that the usage patterns on these devices versus company averages?

We don't disclose the specific composition on smartphones and its subscriber base. But I think it would be... while we believe that we are leading the market by a wide margin in respect of adoption of smartphones. And clearly, our retention efforts has been quite successful on that regard. So not only in terms of product offering, attracting new users to that category, but also internal migration to smartphones. Most particularly, and perhaps the contrast with U.S. experience with our Mike iDEN brand, we've been quite successful on an ongoing program of migration of more mobile phone centric users over to our PCS offering where the adoption of smartphone with associated data, revenue subscription which they didn't enjoy, the Mike subscribers. So that program entails not only a retention side but a revenue enhancement in terms of getting the data growth on conversion of subscribers which really leaves the Mike brand over time more and more to a push-to-talk centric service and you can see in our overall churn rate for our organization as it relates to the industry. But certainly that's been a successful program to date in contrast market given the experience in the United States.

Alright.

Certainly. Alex, next question.

Thank you. And our next question; from Merrill Lynch, we have Glen Campbell. Go ahead please.

Yeah, thanks very much. Darren, I wanted to ask a little bit more about your cost reduction efforts. You expressed I guess, just tried to say some frustration in not being able to move faster there. You've trimmed your restructuring budget from $50 million to $30 million and yet, it stayed at target for the second half. Can you talk a little bit about perhaps what's holding you back? Is it internal factors, just execution, competitors et cetera, and what you are hoping to do there? Thanks.

Thanks for the question, Glen. I think one of the things I tried to point out in my remarks is that if you go back to 2001, this organization has invested upwards of $1 billion in efficiency initiatives that have been very significant in nature. I guess what I am a bit frustrated with is that, despite the continuity on that front and the significant gains that we've realized, we've tapered off in about the last 12 to 18 months as it relates to those activities, and I think we need to back on track as an organization. And I'm indeed disappointed to be revising downwards from $50 million to $30 million of course restructuring charges. And what I tried to highlight in my comments is that we are going to get back on track with our existing efficiency initiatives and we have a portfolio of those at TELUS and I think it behooves us to find additional efficiency initiatives. And it's particularly true when you think that on both the wireless and on the wireline front, we've got all challenges that are common to our industry as it relates to margin compression from competitive intrusion or technology substitution. But we also have to absorb the near tern dilutive impacts of some of these our key strategies for success over the longer term, which is of course the J curves that are related to investing in a new value brand, investing in new data applications, trying to augment our performance on high-speed Internet access supporting TELUS TV. Also, the very significant dilution that's associated with implementing some of the large contract wins that we've secured in the enterprise market. I think one of the things that has hindered us is that we had a lot on our plate as an organization. Trying to materially improve your productivity from a performance perspective, at the same time, you are going through a major IT initiative on the billing and the client care front. Those two things are not always easily done being mutually inclusive. And I think to the extent to which we can have a little bit more stability rather than have distractions as it relates to major M&A events, as it relates to spectrum auctions, regulatory events and of course get some stability with the new IT initiative, I think having a little bit more of a regularized platform at TELUS will allow us to get back on track as it relates to what we need to achieve on the efficiency front and also source sell additional efficiency initiatives that I hope I can communicate to the market in the quarters ahead and I think it's imperative that we do so, given the dynamics of our industry, which are now impacting wireline and wireless.

Just a follow-up on that. Is one of the possibilities on the table, the possibility of a deeper network sharing arrangement with PCM and there has been a lot of talk about a joint network build and the technology aspect of it. But is it one of the opportunities that's possibly there to move to a more of a network sharing sort of arrangement?

I think discussing specific programs, Glen, in a format such as this is not always in the best interest of our shareholders. What I can say is the network sharing agreement that we had with Bell, effectively since 2001 has allowed us to improve the economics of our wireless business. It's also allowed us to introduce new technologies more expeditiously as we went through 1x and EVDO and EVDO RevA and I think those two characteristics of our network sharing agreement, the improved economics that it gives us through capital avoidance and the ability to bring new technologies to market more expeditiously. I think those things have served us well in the past. And I would hope that agreement will continue to serve us well in the future as we make the strategic choices that we have to make in respective technology.

Thanks very much.

Alex, please

Thank you. Our next question from UBS Securities, Jeffrey Fan. Go ahead please.

Thanks very much. I want to ask you a question on ARPU on the non-data ARPU. It looks the decline was about 6% this quarter. I know you gave us some reasons on what that was driven by, but I wondering if there are any sort of measures that you intend to take, just on the voice alone to help stem that decline? And as a quick follow-up, just to help us forecast your ARPU more accurately, I am wondering if you can at least provide us with some color on how the Koodo sales would impact your ARPU with everything else I guess being equal? Thanks.

Alright Jeff. Well, I think on the first part, again sort of reflecting Darren's comments on the prior questions, I don't think this is really the forum to talk about future pricing in any respect. But suffice to say fundamentally, it reflects the significant competitive rivalry that exists in the wireless industry to the benefit of consumers and to TELUS for price accordingly. Having said that, well, the question is phrasing [ph] the standpoint of what you are going to do about voice ARPU going down? TELUS has had a leading ARPU for many, many years now and we are glad to see someone else has gotten up to our level, so that is a healthy thing I think with respect to future pricing dynamics in the Canadian Industry. In terms of the Koodo impact, again, we're not giving specific disclosure as it relates to Koodo. But I think if you just do some rough mathematics, given the size of our subscriber base, the fact that we only launched the product in the last week of March, and therefore the results related to that would be ramping... we only have a partial impact in terms of ARPU in the quarter. I think you would find it would be incidental.

Okay.

Alex, next question please.

Thank you. And our next question from Genuity Capital, Dvai Ghose. Go ahead please.

Yeah, hi. Thanks very much. If I can follow up on two points. Number one on the Koodo, it seems that it added a lot of subscribers in the quarter, in part because there is no systems activation fee or contract. Are you concerned that it will cannibalize your core TELUS Mobility brand? And on the HSPA, is there a legal issue here and as much is a 30-day business day cool-off period post auction from Industry of Canada. Does that preclude you from making an announcement vis-à-vis HSPA until I think the September, the 3rd?

Well, the first question I think related to in terms of the stock et cetera lack of it on Koodo and whether there is cannibalization or concerned about... on our core brand. Although I would say is we reported statistics today with very low churn rate for the organization, good adds, so you can intuit from those the answer. In terms of the legal question, I don't know what exactly you're referring to. I think Darren talked about this not being the forum to speculate about agreements and negotiation. And in terms of legal restrictions that relate to collusion for AWS. And so why don't we have that relates to if you are referring to a network sharing arrangement that we have with Bell or is that something that would be in a moment to that. But I'm not really familiar with the concern that you have.

So that was the question, thank you.

Okay. Next question Alex, please.

Thank you. [Operator Instructions]. And our next question is from BMO Capital Markets, Peter Rhamey. Go ahead please.

Yes, thanks for taking my question. I'd like to talk a little bit about wireless; wireless has been earmarked by the balance between growth and profitability. And I note in this quarter a fantastic net adds as other color complement that you want. Should we see this as investors as a change in the balance that you are taking ahead of competition, enter... new competition coming into the market. Or is it more... or would you take a look at your ARPU trends and say, perhaps you got this a bit too aggressive in the quarter. And I do note also that your COA costs, your total COA costs were not up that much. So maybe it is a bit of a surprise for you. Any color you could add there Darren or Bob; that would be fantastic. Thank you.

I think as you reflect on our COA whether it's nominally or on a per gross add basis, it underscores very strongly the fact that our marketing was both efficient and effective in the quarter. Number two, as per Bob's comments to correlate the $0.92 reduction in ARPU with our value brand launch, is a mathematically incorrect thing to do, as it relates to our second quarter results. I think it's important to note as an organization, the focus of TELUS has not been on client sales, but rather generating profitability. The heritage of this organization has been a company that's putting more emphasis on revenue and EBITDA growth than subscriber additions. We brought a value based brand into the market place for competitive positioning reasons. We want to make sure that that value-based brand is complementary to the focus that we have with the core TELUS brand and it's nice to see that we experienced some traction in the second quarter, but we've got a long way to go yet and to draw influence from only effectively four months worth of results. I just don't think is an accurate thing to do. If you look at the ARPU dilution, there is really three driving factors that are independent of what we've done on the value-based brand front. And as Bob has indicated, the wireless market in Canada despite conjecture to this effect, is a very competitive market place and we are experiencing price commoditization on the voice side, which is indicative that the market is healthy, robust and the competitive dynamic is very strong. In addition to that, we have been working hard as Bob indicated in his comments, as it relates to our iDEN base to transition some of our iDEN consumers, who are not heavy users of…

Thanks very much, Bob... I mean Darren.

Thank you. And from Morgan Stanley, we have Simon Flannery. Please go ahead with your question.

Hi, thanks. This is Jay [ph] on behalf of Simon. Quick question on the Mike to PCS conversion. I was curious if you are evaluating any strategies to transfer heavy push-to-talk users over to PCS? And if so, what are your thoughts on QChat like technology? Thanks.

No is the answer to the question. I think people that are heavy push-to-talk users are exceedingly well served by iDEN. I would say the iDEN position has strengthened in the market as we haven't really seen competition from the likes of CDMA push-to-talk with the imploding [Indiscernible] platform or Kodiak on the GSM front really turn to solution, so I would say the iDEN position as it relates to heavy push-to-talk users is stronger than ever. We've got the best handsets that are appropriate to the type of market that we are seeking to address. They are regularized than when you are addressing the transport industry, the construction industry, the oil and gas industry, and the like, they value the regularized handsets that are unique to the iDEN proportion. We still lead by a significant margin when it comes to mitigating call latency and it comes to being first-in-class as it relates to speed at call setup, and I have to tell you when you're a heavy PPT user, mitigating call latency and having quick call setup are the characteristics that you value greatly. So that's the base that we are going to continue to nurture. The economics are very attractive, when you look at the type of ARPU that we can generate, relatively low churn rate and a CapEx intensity, that's in a single-digit figures that makes all very tidy economic profit from our iDEN business and we should continue to be responsible and nurture that business and the economics associated with it. What we are doing is within the iDEN base, customers that are not heavy users to push-to-talk and typically these are more consumer oriented clients, taking the opportunity to migrate them over to PCS, which his NPV positive. Because they go from being essentially voice customers to people that can now be voice and data customers, given how rich the application portfolio is within our CDMA offering. And that is something that we are actively pursuing and that's why I've made the comment that we are seeking to purify our iDEN base down to the heavy push-to-talk users. On the QChat front, that's a technology area that we are continuing to evaluate and have discussions with our U.S. counterparts in that regard, no comment beyond that to make at this particular juncture.

Okay, thanks.

Okay, Alex, we are through our questions in the queue, so I would like to thank everybody that's joined us today and we look forward to working with you in the coming months and quarters as we go forward. So thank you every much for joining us today.

And this concludes the TELUS second quarter 2008 earnings conference call. Thank you from TELUS.