Good morning, ladies and gentlemen. Welcome to the TELUS 2018 Q4 Earnings Conference Call. And I would like to introduce your speaker, Mr. Darrell Rae. Please go ahead.

Thanks Mike. Good morning, everyone, and thank you for joining us today. TELUS' fourth quarter 2018 earnings and 2019 targets news release, quarterly report, and detailed supplemental investor information are posted on our website, telus.com/investors. On the call today we have President and CEO, Darren Entwistle; Doug French, our CFO; and Josh Blair, our Group President and Chief Corporate Officer. After our prepared remarks, we will conclude with a question-and-answer session. Let me now direct your attention to Slide 2, our caution regarding forward-looking statements. This presentation, answers to questions and statements about future events, including our 2019 targets as well as intentions for dividend growth and capital investments and the performance of TELUS include forward-looking statements that are subject to risks and uncertainties and are made based on certain assumptions. Accordingly, 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 cautionary note and refer you to the risks and assumptions outlined in our public disclosures, in particular our 2018 Management's Discussion and Analysis Sections 9 and 10 as well as filings with securities commissions in Canada and United States. The Appendix of our presentation in Sections 1 and 11 of our 2018 MD&A provide definitions and reconciliations of the non-GAAP measures that we use today. Let me now turn the call over to Darren.

Thanks, Danni, and good morning everyone and Happy Valentine's Day. As you've seen today TELUS finished 2018 with strong Q4 financial and operating results. Despite a highly competitive environment, we realized robust loading and financial performance across both our wireless and wireline operations. These results were underpinned by our team's ongoing commitment to customer service excellence and our continued traction in our efficiency programs. Consolidated revenue was up 6.3% and EBITDA increased by 4.3% in the fourth quarter. Moreover we delivered strong loading across all key growth segments with 164,000 new postpaid wireless, Internet, and TELUS TV customers, our strongest result in four years. In wireless, we achieved solid growth in revenue and EBITDA which were up 5.4% and 5% respectively. Postpaid wireless net additions of 112,000 represented healthy fourth quarter loading. This was bolstered by industry-leading postpaid churn of 0.91% and eight basis points improvement over this time last year. Notably this result is 32 and 35 basis points better than our two national peers. Thanks to our frontline team members, TELUS has now delivered five consecutive years of postpaid churn below 1%. Also in the fourth quarter monthly ABPU was $66.80. This reflects a 0.7% decline in the quarter driven by decreases in chargeable data usage and competitive pressures from rate plans with larger data buckets. These factors were partially offset by growth from customers selecting higher rate plans and more higher value smartphones in gross additions and our retention mix as data usage growth continues to be strong. Whilst the general trends towards moderating annual ABPU growth is as anticipated, we are working diligently to better monetize robust data growth, while simultaneously delivering a strong value for money proposition to our customers. To this end, we continue to focus intensely on quality, margin accretive customer growth through…

Thank you, Darren. Healthcare is expected to be a continued growth area in future years based on an increasing emphasis on chronic disease management, the enhanced focus of consumers and employers on optimizing wellness and the potential benefits that technology can deliver in terms of efficiency and effectiveness within the sector. At TELUS, we are leveraging our leading broadband networks, as Darren commented on, to increase the availability and effectiveness of our innovative services across the primary care ecosystem in order to ensure we are well-positioned for the anticipated strong ongoing growth in this sector. Notably, no other company has a full set of assets that we have setting us up for success in this critical vertical. Indeed, TELUS Health has become a Canadian leader in providing managed solutions across a wide range of elements including electronic, medical, and health records, pharmacy management systems, employer health offerings, consumer health services, benefits management for insurers, and extended healthcare providers and as well and importantly platform interconnectivity services such as operating Canada's prescribe it electronic prescription service. Additionally, our emerging foray into the consumer health realm, as Darren spoke to, will enable us to have more touch points with our customers in terms of expanding our bundled services for mobility, Internet, TV, home phone, smart security, and home automation to now include health offerings such as virtual care and home health monitoring. Turning to our financials in 2018, our domestic health vertical revenues grew by double-digits to surpass the $700 million mark. Our health solutions now make up the majority of this portfolio, with the remainder being the broadband services we offer to our B2B health clients. In terms of EBITDA, our margins are in line with our broader wireline segment with room for upside as we scale TELUS Health into the future. With moderate capital intensity and strong execution, TELUS Health is well-positioned to be a meaningful contributor to our cash flow growth in the years ahead. Let me now turn the call over to Doug to provide some additional details regarding the fourth quarter and our targets for 2019.

Thank you, Josh, and good morning everyone. As Darren discussed, TELUS delivered strong fourth quarter results building on our financial and operational momentum, we delivered throughout 2018. Consolidated revenue and adjusted EBITDA growth was a result of favorable contributions from both our wireless and wireline operating segments. Earnings per share was driven by higher EBITDA partially offset by an increase in depreciation and amortization reflecting growth in our asset base from the investments, including our broadband networks as well as those arising from business acquisitions and higher financing costs. Consolidated CapEx decreased 3.8% over last year reflecting a 9.5% decline in our wireline CapEx, while still expanding our fiber footprint to over 61%. Wireless CapEx increased by 8.5% as we increased infrastructure initiatives as we cover over 93% of Canadians with LTE advance, and over 99% of all Canadians with 4G LTE. For the year, CapEx of $2.9 billion declined by 5.8% and represented a capital intensity of 20%, a 300 basis point improvement over 2017. Free cash flow for the quarter of $122 million decreased by $152 million over the same period a year ago, as EBITDA growth was offset by higher wireless acquisition retention costs and the timing of cash taxes. Higher acquisition retention costs reflect handset promotions during the competitive holiday season and an increase in adoption of our platinum rate plans which increases the upfront subsidy for the latest premium devices and importantly is offset by higher monthly ABPU. Meanwhile in the same period, a year ago, subscriber loading was driven by bringing your own device promotion, lowering the industry's acquisition and retention costs in a period where costs are typically elevated. For the year, free cash flow of $1.2 billion increased by 24% on higher EBITDA and lower capital expenditures as planned. Before we review…

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

All right. So the first question comes from Drew McReynolds from RBC. Please go ahead.

Yes, thanks very much. Good afternoon. Just on the guidance I guess probably for you Doug, we've seen TELUS make some tuck-in acquisitions and I think you did another what appears to be a little one in early 2019, just comment on the contribution of our organic and acquisitions to guidance if you could? And then, secondly, Darren, you've talked a little bit recently about the trajectory on the wireline EBITDA margin side. And you've gone over extensively through 2018, just wondering what kind of dynamics on that margin side we should see for 2019? Thank you.

So on the acquisition side; we've locked most of our more significant acquisitions in TELUS International and Health. So 2019 and even the latest one that we did is to your point insignificant, so majority of our substantially all of our guidance in 2019 is related to ongoing operations and non-organic would be insignificant.

So, Drew, in terms of our goals on wireline margins, they haven't changed near-term for us is to get to the 30% level holistically factoring in the dilutive considerations on TELUS International. And then longer-term the goal is to get to 35% wireline margins, when we start factoring in the significant efficiencies of a near ubiquitously deployed broadband wireline network with the combination of both fiber and 5G and efficiencies inherent in that technology. So in terms of what to look for from TELUS going forward building upon the 3.1% growth that we delivered in the fourth quarter which is now sort of seven years of positive EBITDA accretion in the wireline side of the business which is pretty unique, I would say to our organization. If you look at the margins in Q4 in the high 27%, sorry 28% zone, if you for the full-year 2018 back out our TI business and some of the dilutive impacts from the underperformance in the first half and the still shapered in its infancy from the acquisitions that we affected with both Xavient and Voxpro, TELUS's Wireline margins on a normalized basis would already actually be north of 35% -- of 30%. And the other point is that if you left TI in but only backed out that dilutive impact from the acquisition, japiers [ph] that we would be around 29%. So I think we're heading definitively in the right direction and in terms of what to watch for prospectively with the significantly improved organic performance of TI in the second half of 2018 which bodes well for the performance in 2019 and the maturation of the investments that we've made in 2G acquisitions as they start to become much more contributing at the margin level, I think that is positive for…

Thank you.

Next question?

Yes. Next question comes from Simon Flannery from Morgan Stanley. Please go ahead.

Great. Thank you very much. I'm just following up on the build, the fiber build and the 5G, and you talked about combining fiber with 5G, so where does it start to make sense to bring in 5G, are you going to build fiber to say 80% or 90% or is it really at that sort of 70%, 75% where 5G starts to come in and you talked about waiting for 3.5. How do you think about the architecture of a 5G network, is it I think we've heard some of the Nokia’s of the world talk about 500 megahertz of millimeter wave and a 100 megahertz of 3.5, is that the sort of architecture that you're thinking of as well?

It's not too distant from that, Simon. I think it's an eclectic combination that we will be looking at. Firstly, let me talk about the 5G combination with PureFibre. I think for right now, it's a pretty decent rule of thumb to say around the 75% PureFibre footprint on the holistic homes within our ILEC territories, is a relative ceiling for PureFibre beyond that we would start to leverage 5G technologies. It really depends on the circumstances. Let me give you an example. If your aerial in DC and you can leverage that and maybe if you go a little bit more aggressively on the PureFibre front, if you are buried in Alberta maybe you take now a bit of a different ratio between the two. What's the densification of the population or the community within that particular zone, is the community willing to participate in the economics of bringing PureFibre into their area, if they're willing to make a commitment on uncertain penetration rates, they not make the economics more doable for the investment on the fiber front and we've seen that on a number of occasions. So where can we take the technology cost curve on PureFibre particularly the civils component with developments in micro trenching and the like it. No, I think it's really is a geozone by geozone tuning that we would do, if you want to sort of a broad macro footprint type situation, I'd say 75% would be a reasonable zone. There are other areas as well that if you look in the rural maybe there's government subsidy programs that are in place that we can leverage to make your fiber more economical. Maybe the economics of the resource industries that are located in those areas make it more attractive even there is an…

Great. Thanks. Very helpful.

Thanks Simon. Mike, we'll take the next question.

Yes. Next question comes from Maher Yaghi from Desjardins Securities. Please go ahead.

Yes. I just wanted to go back to TELUS International and wanted to ask Josh maybe if you could give us an update in terms of financials. I know you gave some update a few quarters ago about revenues and margins. Can you talk about how 2018 finished in terms of revenues and margins and I noticed in your MD&A, you talked about the growth recovery on an organic basis that you're expecting in 2019. Can you talk about what's driving that recovery? I also have a question on wireless in terms of the market competitiveness in both states. I noticed a little bit of improvement there for you, when you look at your market share of net adds on a consolidated basis with the other two competitors in the market what's driving that improvement at the margin?

Okay. Well I'm happy to start with TELUS International. So, Maher, if you look at our Q2 call last August, we mentioned that we were hoping to finish the year over a $1 billion in revenue. I'm pleased to see that -- pleased to say that the team did surpass that quite easily, so delivered a good result in that regard. We also talked about wanting our margins to improve through two mechanisms and Darren spoke to them both. One was a return to organic growth which we did see in the second half of the year and we do see good promise for that throughout 2019 based on a couple of things. One, new customers that the TELUS International team has landed and we're ramping up as we speak and also a robust funnel of sales pursuits that are ahead of us. And then the second aspect of margin improvement that we wanted to see was as we integrate the Voxpro and Xavient acquisitions and leverage TELUS International scale to improve their margins. So we are also seeing good momentum on that front. So that all sums up to increasing our confidence in our medium-term goal of our margins being in that 15% to 20% zone. So with that I'll turn over for the second half of the question.

So in terms of wireless net adds, Maher, we were pleased with our results overall. As I think you know well, we're an organization that focuses on quality loading not just nominal loading and we want to have robust loading combined with good financial results and we want that for our wireless business and we want that for our wireline business. If you look at how we did on postpaid at 112,000 and look at our competition did and make certain adjustments for Government of Canada mobile movements within the industry, I think Q4 was a very strong result for the TELUS organization and that's true on postpaid and that's true on total mobility net adds combining both prepaid and postpaid overall. So we're pleased with that particular performance. And I don't think it's anything that's particularly differentiated for us. It does illustrate I think that when people are making choices and you can offer them a level of service, that is significantly better than the competition it's going to get you traction and we in Q4 had a churn rate that was 32 to 35 bps better than our competitors. And I think that's telling particularly in a seasonal period such as Q4 with Black Friday and the Christmas period, when you were delivering a superior network performance in a digital world and superior on it -- superior on just about every metric, superior on speed, superior on reliability in terms of lower access failure rates or lower drop call rates. Superior on quality in terms of latency, having lower latency which matters for people that want to use the devices to play games. When you're superior on coverage and depth of coverage because of what we can leverage in terms of our network sharing agreement. And when you…

Thanks for that. And Doug, can I ask you on an ABPU basis, if I can slip one last question here. Have we seen the worst part of the curve in terms of the reduced overage on the wireless ABPU or there could be a few quarters less in terms of negative growth here?

Yes, Doug. Why don't you answer that question?

It's a tough question for Doug.

Yes, I think we're going to see some continued softness in the first part as we implement some of the initiatives that Darren talked about. But we're obviously all hands on deck. I'm striving to remediate any of those trends, so beyond that we don't really give that anymore guidance on that maybe I'll just stop there.

Yes, I think that's the right answer. The result in Q4, I think is indicative right now in terms of the softness. I don't think we're an organization that's forecasting deterioration.

Thank you.

Thanks Mike. We can take maybe two last questions here. Take a look at the time.

Okay. Next we have a question from Jeff Fan from Scotia Capital. Please go ahead.

Thanks very much. Just a question on wireless, the subsidy for this quarter. And I know I realize it doesn't flow through EBITDA but when we look at the cost of acquisition or retention and handset subsidy, it looks like that number is a little bit higher and I understand there are some seasonality involved but it looks like that number jumped up quite a bit. I wonder if you can talk a little bit about that whether that's something that's come a new normal subsidy that we expect to see on an annual basis now going forward. And maybe just one quick housekeeping question. You used to provide an IFRS 15 Reconciliation in your wireless EBITDA. I'm wondering if you can provide that for the fourth quarter. Thanks.

We did have IFRS 15 within our statements. So I think here you will find it in there. And on the stuff on the mix and subsidy looking like it's increasing, I think a lot of it is mix. And you'll see that with the platinum plus and some of the higher end smartphones, they will attract higher subsidies, so the investment in that is where you're seeing the uptick and within retention as well, retention at a higher platinum mix, higher handset mix on higher quality handsets would drive that. But the, in of themselves the rate is a little bit higher but not that mature, it’s more of the mix.

Okay, next question. Mike we will take our last question.

Yes. Last question comes from Richard Choe from JPMorgan Securities. Please go ahead.

Great, thank you. It looks like the fiber build is coming to an end over the next few years. You've been spending in the high $2 billion to almost $3 billion more recently in almost above $2 billion for call it six to eight years. As we come to the end of this build, what level of CapEx do you think we can see it come down to or will it stay around this level and if it stays around this level will it be for acquisitions, if it comes down with the priority be more buybacks or dividend growth? Thank you.

Okay. I think the emphasis is always going to be pictured on dividend growth supported by net income expansion and cash flow affordability. If we are in a chronic surplus cash situation and we have satisfied all of our investment opportunities that we deem to be prudent, then as I said previously we will never go further field and start investing your money in areas that are off strategy for us. So we will look at NCIB programs on a discretionary basis in that regard. The only other element on the NCIB is that if we feel that there is a weakness in our stock price related to any type of exogenous event given the strong confidence we have in our strategy and our underlying economics, we will expediently step in, and act on that softness, the buyback that shares at advantageous prices. Secondly, we're not going to give multi-year CapEx forecasts. I think we already lead the way in disclosure transparency and long-term forecasting with what we have done on the dividend growth model front. And I would draw your attention to my comments in my script where I indicated that I'm looking forward to the AGM in May to highlight, what we're going to do with the dividend growth model through 2020, 2021, and 2022 that I think will be important information for investors. The other thing is I don't think we need to be precise on the exact dollar value of the CapEx prospectively in the years ahead. But rather to say that CapEx in the years ahead will be moderating particularly at a CapEx intensity level on the wireline side of our business, but also in some cases at a nominal level. And when you combine that with continued EBITDA growth, I think that provides for,…

As a quick follow-up, you're close to your -- the high-end of your 2.5 times leverage target, would you rather stay, you think the business is stable not to stay at the 2.5 or would you rather have it be closer to the 2?

I think 2.5 is a good number, Richard. So if you take the hard core corporate finance look at the Pareto Optimal outcome of equity and tax affected debt and looking to econometrically minimize your weighted average cost of capital which is a smart thing to do when you deploy your capital, our whack gets minimized in the 2.5 to 2.75 zone. So I think that's a pretty healthy position for our balance sheet holistically. And given that we are a cash taxpaying organization being appropriately tuned to the amount of debt within the equity debt mix in terms of the tax effect that debt and leverage this shield constituency to it given our cash tax exposure, I think that's the right way of managing our mix and lowering or minimizing our weighted average cost of capital technically speaking.

Great, thank you.

Okay. Thanks Richard. And thank you all for taking the time to join us today, if you have any follow-up questions, feel free to contact the Investor Relations team. Have a good afternoon.

Ladies and gentlemen, this concludes the TELUS 2018 Q4 earnings conference call. Thank you for your participation and have a nice day.