Good morning, ladies and gentlemen, welcome to the TELUS 2016 Q4 earnings conference call. I would like to introduce your speaker, Mr. Paul Carpino, please go ahead.

Thanks, Mike. Good morning, everyone, and thank you for joining us today. The Q4 2016 news release and detailed supplemental investor information are posted on our website at telus.com/investors. On the call today will be President and CEO, Darren Entwistle, who will provide opening comments followed by a review of the fourth quarter operational and financial highlights; and our 2017 targets by Doug French, our CFO. After our prepared remarks we will conclude with a question-and-answer session. In consideration of your day, we will try and keep this call to under an hour. Let me direct your attention to Slide 2. This presentation, answers to questions and statements about future events including 2017 annual targets and outlook and intentions for dividend growth and future share purchases include forward-looking statements that are subject to risks and uncertainties and are made based on certain assumptions. According, actual performance 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 risks and assumptions outlined in our public disclosures. In particular, our fourth quarter management's review of operations, as well as filings with securities commissions in Canada and the United States. The appendix of this presentation and section 4 of our fourth quarter management's review of operation provide definitions and reconciliations of the non-GAAP measures that we use today. Let me now turn the call over to Darren starting on Slide 3.

Thank you, Paul, and good morning to everyone. As you have seen today, TELUS finished 2016 with strong Q4 results driven importantly by both our wireline and wireless businesses. Consolidated revenue was up 2.7% and EBITDA was up 5.1%, reflecting strong absolute and relative performance versus our peers. In the fourth quarter we delivered strong loaning across all key growth segments, with 127,000 net new postpaid wireless, internet and TELUS TV customers, up 17% from last year. In wireless we reported postpaid net additions of 87,000 in the fourth quarter, up 40% from one year ago. We also saw growth in network revenue and wireless EBITDA, which were up 5.4% and 5.1% respectively. Blended ARPU was also strong at CAD66.24 and up a solid 3.9% from 2016. Customer loyalty remains the best in our industry where we achieved a churn rate of 0.98%. A meaningful 37 and 47 basis points better than our two national peers. Impressively, TELUS has now delivered a postpaid churn rate below 1% for three consecutive years. With strong ARPU and a low churn rate, TELUS also continues to deliver the best lifetime revenue per subscriber at CAD5,300, a significant 27% and 36% higher than our two closest competitors. Turning to wireline, our proven and diversified TELUS product portfolio delivered strong performance in respect of revenue, EBITDA, and subscriber growth. External wireline revenues increased 1.3% and adjusted EBITDA grew a strong 5.0% in the fourth quarter. Data revenue grew 6.1% and high-speed internet and TV net additions were up a healthy 24,000 and 16,000, respectively. Importantly, TV and high-speed net additions exceeded our residential network access line losses by a factor of two times, further highlighting the effectiveness and the success of our capital investments in these growth sectors. Our strong wireline results within this competitive…

Thank you, Darren, and good morning. I'm on Slide 8. Fourth quarter wireless results showed a strong network revenue growth and improving margins as a result of solid operational execution in a competitive market. Network revenue grew 5.4% reflecting 3.9% increase in ARPU, driven by data and continued high value postpaid subscriber growth. While reported EBITDA was down 4.7% due to the immediately investing transformative compensation expense recorded in the fourth quarter, adjusted EBITDA increased by 4%. When excluding the nonrecurring real estate gain in the fourth quarter of 2015, adjusted wireless EBITDA increased by 5.1% from higher network revenue, cost savings through our execution of our operational efficiency and effective initiatives. Adjusted EBITDA margins were up 20 basis points as revenue growth and expense control offset an increase in combined COA and COR costs as a result of the competitive environment. Capital expenditures increased year-over-year by 19% reflecting the continued LTE enhancements, spectrum deployments, and increased investments to support our small cell and 5G strategy. Moving on to wireline on Slide 9. In wireline, revenue increased 1.3% year-over-year making it 24 consecutive quarters now with wireline revenue increases. The growth was driven by CAD60 million increase in data revenue reflecting continued high-speed and TV subscriber growth and higher revenue per internet and TV subscriber, as well as strong growth from TELUS international. Offset was a decline in voice and other revenue. Reported EBITDA declined as a result of the transformative compensation expense. Adjusted wireline EBITDA increased by 1.7% with a margin of 28.5% and, when excluding the nonrecurring real estate gain in the fourth quarter of 2015, adjusted wireline EBITDA growth was 5% for the fourth quarter reflecting the benefits of our cost efficiency programs and improving margins in data services. CapEx increased 22% due to continued generational investments…

Thank you, Doug. Mike, can you please proceed with questions from the queue for Darren and Doug?

Sure. First question comes from Simon Flannery [Morgan Stanley]. Please go ahead.

Great. Thank you. This one for Doug. Doug, could you just talk about the balance sheet, and the leverage targets? I think you're just a shade about your 2 to 2.5 target? How do you think about wanting to get back in that range, versus balancing that versus buybacks? And I guess, a question for both of you, in terms of the 7% to 10% how should we think about what's driving that? Is the low end of guidance a 7% dividend, and the high-end of guidance a 10%, or what other factors go into that? Thanks.

Okay. So for the balance sheet, as we previously discussed on our last call, we expect to be back to, within the range in 2018 to our leverage metrics. You can also see in our appendix for free cash flow, that even after dividends as we lead out into 2017 and 2018, that we will be free cash flow after dividends during that time frame. So that is our expectations on our leverage, and Darren, do want to add comments on the second one?

Simon, you're right, the low end of the guidance is 7%, and the high end of the guidance is 10%. And the way to think about it is, it's driven by the EBITDA performance of the organization, of flowing through to the bottom line, and the improving cash picture of the organization, per the guidance that I gave on the last call, and where we want to be by 2018.

Great. Thank you.

Great. Thanks, Simon. Next question, Mike?

All right, next we have a question from Phillip Huang [Barclays Capital]. Please go ahead.

Yes, thanks, good morning. A question on the fixed line side of the business. Was wondering if you could, I think on the back of Shaw's strong broadband subscribers, it was easy to assume that Shaw that taken some gross share away from TELUS, given their WideOpen plans, but clearly that does not appear to be the case this quarter. Was wondering, if you could give us an update on the overall market, including the pricing environment?

Okay. So as it relates to developments on Shaw 150 – I have got a bit of an echo on the line.

I think it's gone now.

It's gone now, okay. Good. So as it relates to the market developments on the competitive front, with both Shaw 150 and the BlueSky program with Xfinity, I think the first point for investors to note, is that TELUS – and I would suspect Shaw as well, would prefer robust competition over regulation that would be onerous, or government intervention any day of the week. I think it's also healthy in terms of the market, when we see the developing competition being based on product innovation and value for money, rather than purely price discounting. I think that's superior over the long-term for the sustainability of the competitive intensity. It's superior over the long-term for customers, and superior over the longer term for investors, like when you're competing on product-based innovation and value for money, rather than price discounting. When we look at the market, and our positioning within the market, and the tale of the tape, we would believe at TELUS of the Optik ecosystem versus Xfinity, it's favorable to our organization. And we think it's favorable in respect of functionality, features, the road map that we have for the Optik ecosystem, and cost economics. The other thing that I think is important to reflect upon is that the Optik ecosystem at TELUS is buttressed by the combination of Optik with our wide band fibre deployment, that supports the performance and functionality of optics, but also drives our HSIA offering and features like speed symmetry that's quite unique on the uplink, as well as the downlink, and all sorts of future for all home services, that I think will be quite exciting in the years ahead, that present the opportunity for us to earn our way to establishing new RGU connections with the home, and the revenue, and the…

Yes, thanks for that, Darren. I think you've been pretty constant with your CapEx plans over the next several years. But I thought I'd would ask you to give us an update on your thoughts for plans in 2017, should we assume CapEx will remain around the CAD2.9 billion level? Thanks.

I think we’ve actually shipped it from transparent to details and prescriptive when it comes to our CapEx guidance going forward. So, just to go around the houses on this one more time, one of the hallmarks of TELUS and the avoidance of write-offs at our organization is that the CapEx which has been mostly organic over the years has always been focused on our core business, core technology, mostly on the broadband front. Very data centric because that’s where we saw the growth coming from on both wireless and wireline; effectively very much national focused versus pursuing any type of international strategy of significance when it comes to CapEx investments. I think the other thing that has been helpful for investors is the strategy that we are pursuing today in 2017 is identical to the one that we communicated to the Street back in 2000 and I think that consistency when it comes to investing is a powerful thing, particularly when the strategy has been backed up by excellent operational and financial execution along the way. And so when you look at TELUS for 2017 – and I try to choose my words carefully in my opening remarks – the view that we are giving in terms of circuit CAD2.9 billion in 2017 and commenting that it’s at parity with what we did in 2016, it is really indicative of what you can expect TELUS over the next four to five years in terms of our spend rate. And as I said previously, we really do believe that the time is right for this particular investment. We've got advantageous positioning in terms of cost of capital. We’ve got a favorable regulatory environment in terms of the investments that we're making. We’ve got beautiful synergies across wireless and wireline as…

That’s very helpful. Thanks Darren.

Great, thanks. Mike, next question please.

Next question comes from Aravinda Galappatthige from Canaccord. Please go ahead.

Thanks for taking my question. On the wireless side, Darren, I mean, obviously things show very strong ARPU growth, and now there’s been a bit of discussion already around data overages. Given some of the [indiscernible] that you’ve had in the past, is that even a factor in terms of driving ARPU at this point? And can you just touch generally on the industry strength that we've been seeing both in the wireless ARPU and also postpaid net add? So what’s been your take over the last three quarters which is a surprise to the Street to the upside?

Okay. Let me take the last part of your question first. In terms of contribution to industry subscriber growth, I think it’s important to highlight, number one, it’s nice to see. So, at the end of the day to seek strong performance for the industry, I think it’s a good thing for investors and I will recognize the results at our peers. In terms of some of the factors that are underpinning it, I will highlight a few for you are, clearly we are seeing the population of Canada growth from immigration. I think that development that is having an impact along the way. Secondly and importantly, we are seeing an expansion in particularly in certain demographics of our society related to our digital economy and digital society and where we have got multiple RGUs per human being I think would be a good way to describe it. That can be reflected in many areas whether it is the name where people have one device for business and one device on the personal front or whether they have got a multiplicity of devices that relate to things like healthcare connectivity by the way of one particular example. The next thing that I think people need to think about is, it is just not smartphone connections. One of the things that has been left out is that we’re seeing more and more obviously tablet connections to go along with the smartphone connections both on its entry and on a mobile basis. The other aspect that I don’t think has been discussed as much and this has been de minimis for TELUS. So this is not reflected in our loading. But I think increasingly we are seeing wireless loading that’s related to wireless home phone. That is showing up in subscriber numbers.…

Great, thank you.

Thanks, Arvind. Next question Mike.

Next question comes from Vince Valentini from TD Securities. Please go ahead.

Yes, thanks very much. Question on wireless and your sub adds. So postpaid adds, we’re obviously very strong for you guys, I think you said up 40% year-over-year. But still you are number three in market share for the fourth quarter in a row. Are you just have satisfied that your numbers are really strong in the market share ranking doesn’t really matter. Or could we potentially see you take little bit more of an aggressive stands with pricing and promotions to try to get up to number two or number one on market share. And just one clarifications part of that, public mobile offer in the quarter for $40 with those subs have been counted as prepaid or postpaid? Thanks.

So let me cantor through the questions, Vince. I would say in terms of Q4 we’re satisfied with our performance and comfortable with our positioning. Don’t take that to be that – we are not completive when it comes to loading or that we don’t have the continuous improvement mentality where we are always looking to do better. But I am pleased with the quarter. And I’m comfortable with our positioning. I guess the authenticity the comment is reflected in the back in my previous answer, I articulated that for us it’s about profitable revenue growth rather than where we rank on the loading league table in any particular quarter. Sure, we’ll strive to do better. And I think if you look back over the last five or six years there have been periods where we have led on the loading front. There is been periods where we have taken a disproportionate market share in the loading front. But I think the consistent piece for us is the quality of loading and the economic value on a sustained basis that we can generate on that. Secondly, as a result of our churn rate, we can be pretty discriminating when it comes to our choices because we don’t need to generate the investment at growth level to deliver a very good net adds results. When you are 37 and 47 bips better on churn than your peers as it relates to postpaid, that gives you a lot of economic latitude that’s quite positive. And when I talk about value and putting the metrics to the test and I talked about churn and its importance. I think it’s important to have a look at what the combination of ARPU and churn does for us when you look to lifetime revenue per client. To be in a position, we’re $1,100 better than one competitor and $1,400 better than another competitor on lifetime revenue per client. I think that’s a pretty smart position to be in particularly in a world where COA and COR chronically more expensive than what it used to be. So, that’s very much the focus for us. I wouldn’t want to see the gap widen if you will and you’ve got our representation that we’ll do our best to compete ardently. Maybe the league table will shift from one quarter to the next. But I’m going to tell you right now, don’t expect that we are going to do something silly, uneconomic, foolishly irrational as it relates to pulling certain discount price levers or going even more crazy than what we already are on device subsidy just because I want to close a notch on a league table ranking that’s not really the strategic pieces of the TELUS organization. And in terms of public mobile, it’s prepaid.

Thank you.

Thanks, Vince. Next question, Mike. Next question, Mike.

Next question comes from Richard Choe from JPMorgan. Please go ahead.

Great, thank you. Just wanted to go back to guidance, revenue guidance is a little bit higher than last year. Is this mostly driven by wireless and with wireline flattening out with especially the data revenue? Are we expecting to see an acceleration in wireless or could wireline rebound? Thank you.

Its Doug, We are seeing growth in both wireline and wireless. There will be a prominent in revenue growth of wireless over wireline now. So we’ll be more skewed to the higher end for wireless. But we will definitely see growth on both of our products sets of wireline and wireless.

And in terms of the fiber footprint, can you give us an idea on what market shares like within the footprint for older markets versus new ones and versus out of footprint. And where could that footprint go overtime?

I think, we’ll leave it that we’re doing very well without giving specificity on the market share front per community that we cover. That’s a bit competitively sensitive to us, including postulating as to where that might go in terms of share overtime. I guess, what I would guide you towards is that our performance has been strong in terms of loading. The performance of our fiber connectivity is better than the average. So when you look at our loading that’s our holistic loading the performance of our fiber to the home solution is even better than what you see in the overall reported loading. I don’t think we need to get into where we can take that too. But you can do some existing share calculations, TELUS versus our competition. And I don’t think we need to prime the pump anymore aggressively. I think the current course and trajectory is prudent for TELUS. I don't think we need to spend into the aggressive zone. And I go back to our thesis, we're going to focus on product innovation, and we're going to focus on client service excellence, and we're going to focus on getting you an economic return on the CapEx that we're investing, to support the fibre program.

Great. Thank you.

Great. Thanks, Richard. Next question, please?

All right. Next question comes from Maher Yaghi from Desjardins. Please go ahead.

Yes, thank you for taking my question. Many of my questions were asked, but I wanted to ask you on margins, we saw an improvement in margins in 2016, for both the segments versus 2015. And you're expecting margins per your targets for 2017 to improve as well. Can you talk about where those margins are coming from, wireless versus wireline?

So they're coming from both. So the same way we've been delivering, and are look to – looking to deliver again in 2017 best-in-class EBITDA growth. We did it from the industry leadership position in 2016, and we're going to strive to do it again in 2017. A key factor underpinning that, on both wireless and wireline has been our cost efficiency programs. And you can expect to see us continue to make investments in that regard over 2017, 2018 and 2019, with CAD125 million being initiated in 2017 across that three-year period. And I think we've got a pretty good track record in that regard. I think it's important to note that you'll see us balancing our cost efficiency initiatives, with our top priority of putting customers first, ensuring that we can have customer service excellence, and drive strong operational loading. And simultaneously improve the OpEx and CapEx profile of this organization, and the margins that are inherent from those particular activities. If you look at the margin expansion in 2016, it's reflective of the execution of our cost efficiency programs. And we've seen margin expansion take place across the board, so margin improvements in wireless, but also margin improvements in wireline data, including TV, HSIA and health along the way. And yes, before you ask the question, we're still on a march to get to 30% margins on the wireline side of the business. We have not forsaken that particular target. The same way that on the wireless side of the business, we talk a lot about ARPU. But when we get into the management meetings at TELUS, I think you would be comforted, to see that we talk even more about AMPU, reflecting the fact, that you can't guarantee that ARPU is going to carry on, from…

Thank you, Darren. And just one housecleaning question. The free cash flow on Slide 15 of your presentation expecting nice growth year-on-year on free cash flow before tax payments but also after tax payments that decline in 2017, how much of that is a one-time in nature versus something that could be recurrent?

The tax, there is a tax decline which would be permanent. In 2016, we had a double payment of installments and tax amounts of the 3 to 600 is more of an ongoing run rate you will see that be more typical going forward. I would say from that perspective, you should include that in your model.

Thank you.

Thanks, Richard. Mike we have time for one more question.

All right. Next question comes from Jeff Fan from Scotiabank. Please go ahead.

Hey, good morning. I do want to touch on, just to clarify the transformative compensation agreements, maybe to Darren's comment about the benefits be more backend loaded can you help us understand how that works because maybe I'm thinking this a little bit to simply but if you are paying our $300 million in lieu of pay raises is that kind of a straight-line benefit that it doesn't sound it is so can you help us understand how this built-in to the benefit over 2017 and 2018, guess part of it was in 2016 as well. Just a little but on the mechanics on the shares to your issuing are you buying that in the market, are you issuing that through treasury, just wonder if you can help us with that. Then, as we look out after the end of this arrangement, I know it’s a few years out. But for two years without pay increases when you look out to 2019, does than three years of increases kind of come through in 2019 salaries, how is that going to work with look at in our modeling two years out? Thanks.

Again, we did this across the union management for the purposes of our culture and solidarity between both sides. We did the lump sum to buy the concessions that we were looking for within our collective agreement and let me give you a flavor of what we have done. Concessions that we have thought that are reflected in these lump sums, our concessions were we’ve moved from double time were over time to time and a half. When you have got a program like what we are doing on the TV and the HSIA front, with that particular generational investment having more affordable overtime was more effectively organization given competitive market conditions, it is a necessity. So that’s a productivity release for us that’s hardwired. We made the difficult decision to remove Sunday premiums within our client customer call center of operations. We did that because our business customers want to transact with seven days a week and don’t recognize differentiation between the days. In fact for some families where you got to make people working within the home, Saturdays and Sundays are more convenient days to transact with the TELUS organization or have someone over to install our optic TV service. We removed a day of holiday time within our bargaining unit because during this particular period of competitive intensity, the economic downturn in Alberta and the generational investments that we made in fiber, we need all hands on deck and that is our necessity for the business in the best job security that anyone can ever look for is having a successful company on a sustainable basis and that is what we're trying to achieve in every single one of those changes that we made was made with the customer in mind. What’s better for the customer? What…

Okay, thanks, Darren.

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Ladies and gentlemen, this concludes the TELUS 2016 Q4 earnings conference call. Thank you for your participation and have a nice day.