Good day, ladies and gentlemen. Welcome to the TELUS 2020 Q1 Earnings Conference Call. I would like to introduce your speaker Mr. Robert Mitchell. Please go ahead.

Hello, everyone. Thank you for joining the call today. Our first quarter 2020 results, news release, MD&A and financial statements and detailed supplemental information were posted on our website this morning at telus.com/investors. On our call today, we have Darren Entwistle, President and CEO; Doug French Executive Vice President and CFO; Zainul Mawji, President Home Solutions; and Jim Senko, President Mobility solutions. Let me briefly direct your attention to slide 2. This presentation and answers-to-questions contain forward-looking statements that are subject to risks and uncertainties and made based on certain assumptions. Accordingly, actual performance could differ from statements made today, so we ask that you do not place undue reliance upon them. We disclaim any obligation to update forward-looking statements except as required by law and we refer you to the risks and assumptions outlined in our public disclosures including our first quarter 2020 MD&A, our 2019 MD&A and filings with Securities Commissions in Canada and the U.S. With that, let me now turn the call over to you Darren.

Thanks, Rodrigo and hello, everyone. The COVID-19 pandemic has had a profound impact as we all know on the communities where we live, where we work and where we serve. As I highlighted in my shareholder letter issued earlier today and posted on our website, our team is working diligently and with their characteristic grit their collaboration and their innovation to ensure all Canadians stay connected at a time when the human connection has frankly, never been more important. Our robust and consistent performance over the longer term including, strong Q1 financial and operating results coupled with the strength of our balance sheet and financial liquidity positions us well to navigate the uncertainty caused by the global health crisis and importantly for the anticipated market opportunities thereafter. As we responded to this unprecedented emergency, our focus has been on taking care of our team members, taking care of our customers and our communities, whilst embracing our fiduciary responsibilities to you, our shareholders. Notably, we are leveraging our strong digital and work-from-home capabilities to safeguard team member and customer health and to support customer transactions to help offset the impacts within our store and call center operations that have been impacted. Looking beyond this pandemic, we will continue to leverage our digital channels across the customer journey in order to meet evolving client needs as well as to harvest the resulting effectiveness and efficiency benefits of doing so. Myself and the leadership team at TELUS continue to be inspired by the TELUS team as they literally work around the clock to keep Canadians connected. With global physical distancing measures in place, our world-leading broadband services have never been more essential than what they are right now. Citizens are increasingly relying on this connectivity to stay in touch with loved ones and…

Thanks, Darren. Our investments in simplification customer experience and network superiority continue to drive very strong wireless subscriber and financial performance in Q1 2020. As Darren outlined, we continue to offer our clients exceptional client experiences over a world-leading network. Our network has held up very well as our customers evolve and adjust their daily lives in response to COVID-19. Data usage has been stable as more people are using home WiFi, while as Darren outlined, we have seen a significant increase in other areas like voice and video calling. Total subscriber net additions were 70,000, up a healthy 10,000 over Q1 2019. High-value mobile phone net additions were 21,000, an increase of 10,000 year-over-year as strong growth in January and February was offset with slower growth in March. Once again, TELUS led the industry by a considerable margin with our mobile phone churn rate of 0.94% inclusive of both postpaid and prepaid results as a result of our customer-first approach. Our postpaid churn rate was an amazing 0.73%, a nine basis point improvement year-over-year. We continue to successfully manage the transition to no overage plans. 60% of our rate plan changes are now step-ups or flat versus 40% step downs. The value of step up and step-downs are converging. The volume of step-ups and step-downs is decreasing. And we're really happy by what we're seeing on device financing, as device financing has helped us reduce subsidy not recovered in the device payment by 45%. We are holding up really well under COVID. We felt the impacts of the health emergency in mid-March as gross loading started to slow down. This was offset by a significant reduction in churn, as customers' usual activity of switching between carriers decreased. With 90% of stores closed, we quickly adapted to a new mode…

Thank you, Jim. As Darren mentioned in his remarks, the unparalleled capacity, reliability, privacy and symmetry delivered by our ongoing investments in PureFibre have never been more important. Our world-class network continues to be recognized in ways that are meaningful to our customers. TELUS PureFibre ranks as the number one major Internet service provider in Canada for gaming by PC Magazine and Netflix named TELUS PureFibre number one in Canada for 17 consecutive months through February. Wireline customer expansion has seen an industry-leading 36,000 wireline net RGU additions in Q1, up 2,000 year-over-year and strong Internet additions of 26,000 in Q1, up a healthy 4,000 over the first quarter of 2019. These results were bolstered by the introduction of our whole home bundle, which combines the attributes of our Internet, TV, security, home automation and mobility offerings into a simplified and robust value proposition. The quality loading and product intensity dynamics of these subscribers are favorable and yield solid churn performance. TV net additions were 8,000, despite heightened competitive intensity and an evolving landscape of increased streaming services. We are well positioned as the only TV provider in our market to offer flexible packaging, fully integrate premium over-the-top subscription services and offer a streaming TV alternative. These differentiated value propositions recognize consumer demand for both linear TV and streaming content and are particularly relevant in our current environment. Residential voice net losses of 13,000 reflect continued substitution by wireless and Internet-based services, partially mitigated by our expanding fiber footprint, bundled product offerings and strong retention efforts. Security net additions of 15,000 were up 9,000 over last year despite challenges in March due to COVID-19 impacts. These results were strengthened by our digital capabilities and our innovations in virtual and do-it-yourself installations. Meanwhile, ADT by TELUS enables us to bundle our…

Thank you Zainul, and hello everyone. I want to wish everyone good health and safety as we overcome the COVID-19 pandemic together. I also just want to thank our amazing team for their continued dedication and adaptability and the corporate affairs and finance team who have continued to lead in transparent quality reporting. Let me begin by providing some specific COVID-19 updates including some recent trends we are seeing and how these changes -- how these will change and impact the expectations for the rest of the year. We entered the pandemic with a position of strength, which enabled us to deliver strong financial and operational results to start the year. You heard that from Jim, from Zainul, and Darren altogether. In addition, with over $3 billion of liquidity and strong balance sheet we have the flexibility needed to financially navigate through the crisis and invest strategically. Notably our long-term debt average term to maturity is 12.3 years and our weighted average cost of long-term debt is only 3.92%. Additionally, access to capital markets remains strong for TELUS, although, we don't have any debt maturities until 2021. As Jim detailed, we've seen a slowdown in subscriber activity for our wireless business that we expect will continue, while physical distancing measures are in place and as business resumes in stages across the country. However, our customer churn is expected to still remain favorable. Consistent with our expectation for lower customer transactions during the crisis, our upfront cash outlays for mobile phones will correspondingly decrease due to the lower handset financing and subsidies required. Similar to our global peers we experienced declines in roaming revenue in the final weeks of March. Additionally, data overages declined as restrictions were put into place, and we also saw significant increases though in voice and SMS…

Thank you, Doug. Mike, can we please proceed with questions at this point?

Of course, so first question comes from Vince Valentini from TD Securities. Please go ahead.

Yeah. Thanks very much. Two things if I can. Darren, can I get your perspectives on the changes to society we're seeing in terms of more embracing of technology and also more work-from-home. And how you see not during the crisis, but a year or more down the road how you see that net impact on TELUS' business given you'll have maybe less people in offices or fewer business lines but more residential connectivity perhaps? And the second if you don't mind commenting on as well as Shaw talked about some imbalances between retail pricing in Western Canada versus Ontario, especially when it comes to Internet in as much as a $30 price gap. I'm just wondering, if you have any thoughts on Western versus Eastern Internet pricing and what – if that's an opportunity for you? Thanks.

Darren over to you.

Hi. Sorry, I was on mute there. Apologies. Given the virtual nature of the call Vince and for everyone else I'll steward the questions along the way here. And I'll hand them off to the appropriate person on the TELUS team. Zainul, I'll foreshadow for you that as it relates to the geo aspects of Internet pricing I'll hand that one over to you in just a second. Vince as it relates to your first question in terms of the impact and what I think is interesting prospectively in how we leverage the tuition value and the transformational aspects coming out of COVID-19 to position ourselves for success into the future. A number of things, I would highlight in that regard. Firstly, I think the importance of being a digital-first organization is going to be paramount. Clearly, we are seeing a level of digital adoption and digitization across our economy and across our societies through health, education even bridging divides be they geographic or socioeconomic in terms of the reach of that technical capability on the digital front. So I think that would be number one. And that's really something that is very much akin to our existing strategy at TELUS in terms of leveraging our digital capabilities, which is why I think you have seen us weather the pressures of the pandemic in terms of our operational loading and the dilution that it had on our physical channels extremely well because that's a good competency set within TELUS in terms of our digital-first mentality and the assets that we've constructed that we're now leveraging in that regard. Second thing that is key is the ability to work from home both ourselves and to enable that for our clients. And if you think about fiber ubiquity and 5G ubiquity enabling…

Thanks, Darren. So I'm not going to get into the details of any of our pricing strategies. I'm not sure that's appropriate. But what I will say is, competitive intensity in the West is not new. That's been fairly consistent over the course of time. And we certainly have incredibly healthy competition that forces us to rise to the challenge of giving our customers more differentiated value. We're really focused our efforts on our whole home bundle and reducing any barriers to entry to various services within our bundle, coupled with customers-first and smart simplification. We think about our pricing across the bundle and we're really focused on ensuring that customers have the simple ability to step up to different services and the differentiating characteristics that I talked about in my remarks, across the various elements of our bundle. So the bottom line that I would say is that, it's not new to have significant competitive intensity in our environment. And various competitors approach it with different pricing strategies.

Next question, please, Mike?

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

Thank you. Good afternoon. I hope everyone is doing well. First, just a clarification on the numbers, in terms of the outlook, probably for Doug. It sounds like you are looking to achieve or try to hit the free cash flow guidance for the year. Wondering if we can just unpack that a little bit and give us your assumptions regarding CapEx for the year? And also maybe the subsidies, lower subsidy spending for this year. And then, my second question is just, probably for Darren regarding TELUS Health. I totally agree with you that this could be a game changer in terms of how society and everyone views health, especially telehealth, virtual care especially. I wonder if you can help us understand the size of that business within TELUS Health and whether do you think there is an opportunity here to surface value like what you have looked upon for TELUS International? Thanks.

Doug, you want to take the first one on confirming our expectations for free cash flow within COVID-19 related to our original target expectations?

Sure. As we mentioned, obviously, we're going to update The Street in July when we do our Q2 results and try at more specificity around that. That being said, we obviously have put in the initiatives that Darren highlighted in his presentation on over $250 million of margin-enhancing and cost reduction initiatives that will help contribute to offset the impacts and the revenue impacts that we described throughout the presentation. I think, as we evolve that and as we implement the learnings I think it will be more -- they will be more transparent when we get to July we'll be able to discuss that a little bit more openly. And I think we're obviously striving to do exactly that. On the capital front, there's obviously certain capital initiatives that we can't execute throughout a COVID environment. But that being said we definitely went and reallocated to step up to infrastructure spend such as fiber in Alberta and other items to make sure that we continue to invest strategically where it makes sense to do so. And so we'll update both in July. But as of right now that is what we're driving to between those two initiatives. We'll probably won't show or give you the handset savings at the moment. But we did include that in the appendix for the two-week period in which you could probably extrapolate some based on the volume.

In terms of your question Jeff as it relates to the previous financial disclosure that we've given on the health front, about half of our business is in the digital health primary care health ecosystem portfolio. So, thinking about what we're doing with consumers what we're doing with docs clinicians and allied health on the EMR front. Thinking about what we're doing with pharmacy management systems and the like. It is right now about half of our business as it relates to the previously disclosed financials. It is the part of the business that is growing most rapidly for us. As I said earlier, as it relates to virtual care telehealth, if you will, it is hyperscaling. That business is growing at a pace where we're actually having challenges keeping up on the supply side in terms of everything from physician and clinician and nurse recruitment right through to operational considerations at the clinical level. Such is the pace of the appetite as it relates to customer demand which is why to me it's all the more impressive when you see Babylon increasing tenfold which I think is a fairly logarithmic definition of hyperscaling and you've got Akira growing at a blistering pace towards one million employee connections within their employer-based virtual care solution. And the fact that on the EMR front enabling video consultations between doctors and their patients we only launched that capability a few weeks ago. And already we are between 25% and 30% penetration of our 26,000 physicians within the EMR base after effectively a month. And that really does reflect the pace of the scaling that we've been seeing and it's tremendously encouraging. And what's I think very much a testament to the operational commitment excellence and ingenuity of the team is that they have…

Thanks guys.

Mike, next question please.

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

Thank you for taking my question. Darren you discussed the opportunities for TI in the medium to long-term as the economy reopens and companies reassess their business models and look to become more agile potentially offering upside to TI. But I wanted to ask you how the pandemic has affected your TI business in the short-term as well as if it has affected your plans to surface value from that business. I think there were four IPOs in April in the U.S. and they were all biotech. So, I know it's hard to forecast how the market will behave in the next few months. But I just wanted to see how you're viewing that surfacing of value in TI. And second question just quickly on your wireless business. As you entered the pandemic, you are starting to see some improved momentum in ARPU and not turning positive year-on-year, but the slope of the curve is starting to improve. Can you maybe Doug tell us what the dollar amount of roaming that you could potentially lose because of the pandemic and the overage as we try to model the business going forward? Thank you.

Doug, why don't you and Jim tag team on the second question? I think both could give some good color and insight to Maher on that one. Firstly as it relates to TI, we are still on the path and quite intentional as it relates to taking that business public within 12 to 24 months time. Obviously, I don't have a crystal ball and its contingent upon what the market is like at that particular juncture. We're not going to do anything where we're forced, but I see nothing right now that would knock us off of that rhythm and we can evaluate at that juncture in terms of what the state of the economy is. And to make sure that if we do take it public, we can realize the full value of that business given the significant potential inherent in TI. The other thing that's important to know is 12 to 24 is not a hard rule. It's a goal. And we're in a position to treat that on a discretionary basis. It's not like we're forced to do the monetization. It's not like we need the cash or the liquidity. This is a business that we intend to control. And the singular reason that we're taking IPO public -- are taking TI public is to effect a transaction currency. So it's not about as I said the monetization or cash consideration but it's about establishing a transaction currency that can be used in servitude to the growth strategy. So how do we create another funding arm so to speak? How do we create a transaction currency that can allow us to pursue acquisitions that we think are very exciting to support the scaling, to support the diversification, to support the vertical portfolio, the product portfolio, and the…

Thanks, Darren. So part of the reason we can't give full guidance now is the assumption around roaming. But that being said, Jim is going to give you some high level assumptions and volatility that we're expecting to the back end of the year. The only other thing on data if you remember we had been talking about data overage already being in low single-digits. And so as that continues to evolve through what Jim was talking about on the unlimited plans that we're getting as many step-ups now or more step-ups and step-downs on a proportionate basis that will continue to moderate. So I would suggest that is probably a normal course slightly accelerated impact but not as material as the roaming. It is in our assumptions on the ARPU impact the largest volatility factor on that front. But Jim maybe you can top-up on how you see that going through the rest of the year?

For sure, Doug thanks. So from service revenue I think the challenge is expected with transient headwinds but not unique to TELUS and not structural. We expect temporary ARPU fall off in Q2 and beginning to recover in Q3 and sort of back to pre-COVID towards the end of Q4. Revenue – roaming revenue obviously is our biggest headwind. And there's a lot of uncertainty there. I think offsetting that though we are seeing some positive trends as well. So for example the increase in voice usage is in turn driving step-ups to unlimited talk and text plans in Koodo. And we're seeing a general trend on increase in changes for more rate plans with unlimited talk and text and larger data buckets which is great. And as I mentioned earlier we're quite pleased with the transition in the Peace of Mind. So we're seeing the majority of our step-ups now are neutral to positive. And the value of the step-up is converging with the value of the step down. And overall step down volumes are decreasing. So all in all like I think there's some really positive underlying trends in there.

Thanks.

Mike we have time for one last question please.

Next question comes from Simon Flannery from Morgan Stanley.

Great. Thank you for fitting me again. Just a clarification on the dividend. Should we be expecting that you basically do two semiannual increases in the 3.5% so it'd be 7% in total increase in November. Is that the idea? Or 7% to 10%? And then just a little bit on the economy more broadly. Are you seeing any different trends in Alberta? And how do you think this compares for that market compared to some of the prior energy crises? Thanks.

Okay. I'll take the dividend question. I'll kick it off on Alberta. And then Zainul I'll ask you to top-up given that you sit on Premier Kenney's Advisory Council. I think it would be important for investors to hear your insights as it relates to Alberta. Simon just to be clear, our twice a year model we're not moving away from. Clearly what happened here is a unique set of circumstances peculiar to the pandemic but the axiom of the two increases per year rhythm is something that we would intend to stick with prospectively. I think it's important to point out and I tried hard to convey this appropriately in the letter that I wrote to you. We could have clearly increased the dividend in Q1. At the end of the day, the nominal amount on the accretion was $9 million. So it's not a question of doability or affordability. And if you look at how strong our Q1 results were financially and operationally, you look at our free cash flow position not just in Q1 but what Doug has conveyed on a full year basis in terms of our intention to hit our original target and when you look at our liquidity at a near all-time high in excess of $3 billion this is clearly something that we could have done. We just didn't think as a Board that it was the right thing to do within the context of the current environment. We didn't think that it was appropriate or sensitive to the environment and the impacts being felt by our stakeholders at a societal level or the economic impact as it relates to some of our business relationships. And so we thought it was appropriate to defer it. We also thought at the end of the…

Thank you.

Zainul, you might want to comment on, Alberta. Maybe I'll give it to you. And I'll top-up on it, I think if required.

Thanks so much, Darren. Being on the ground in Alberta, I'm just so impressed and inspired by the people who continue to show incredible resilience, in the face of adversity. And our TELUS team in Alberta has been no exception to that. Our results have withstood the test of many downturns. In fact since 2014, 2015, most businesses materially streamlined their operations and have not resumed their previous spend levels. Over the last number of years, we've also markedly diversified our revenue streams, with a lower dependence on Alberta and specifically in the enterprise oil and gas sector. The current bulk of our revenues in Alberta are in the residential and consumer space, which have proven to be more resilient. And our services are very essential. We continue to see strong demand for those services. And we also have a higher proportion of those customers that are bundled customers, with solid churn characteristics. The entrepreneurial spirit in Alberta is very alive. And Albertans are demonstrating a stronger desire to reopen the economy post-COVID, relative even to other provinces. And TELUS' significant financial and technology investments reinforce our commitment to supporting a strong Alberta through the turnaround. I think, it's been stated in our results and in our disclosures that, we have advanced capital investments in Alberta. And we have significant positive acknowledgment across sectors of the Alberta economy. In terms of positive sentiment not only towards our infrastructure investments, but we're also seen as a significant partner, in a leadership role that we can play in driving diversification, particularly across lines of business like security, IoT, health, AgTech, where we are also underpenetrated. So we have a strong opportunity there. Just finally, it would be very remiss, if I didn't make a very quick comment that our hearts go out to those who were impacted by the flooding in Fort McMurray. Our TELUS team with the support of our emergency management operating committee and business continuity office has worked with impacted municipalities and first responders to quickly enable emergency action and maintain our networks, provide supplies to evacuees and offer a number of sources of support as is in our nature. We hope to see Fort Mac and all of Alberta recover stronger than ever, powered by TELUS.

Great. Thanks for the color.

Simon, it's not the situation it was 20 years ago. I think it would be fair to say in terms of the amount of business that we derived from Alberta, given the national expansion of TELUS and the product diversification of TELUS. We're now in a situation where 20% to 25% of our revenues are derived from the province of Alberta. Such has been the success of our national expansion and our product expansion. And to Zainul's excellent point of that particular composite two-thirds of it comes from the consumer market which has been not just particularly resilient, but the essential service component is huge. The economic and operational attributes of clients in Alberta are very attractive for this organization. And our business has performed well in terms of being countercyclical, which I think you would expect in terms of an essential service. And the criticality of mobile services, Internet services, health services and the life. And we've looked and learned on how to weather the ups and downs, as Albertans have had to do, during this particular time period. I think what's important for us is that we're committed to Alberta our relationship with the people of the province and the government is precious, to this organization. We didn't sign up for blue skies all the time, in Alberta. We signed up to be there through thick and thin. And that's what the government and the citizens of Alberta should expect from TELUS. And they're going to see it in terms of our investment commitment to the province, as it relates to fiber 5G, as it relates to health and AgTech, as Zainul articulated. And the technology investment is going to be particularly key because it's going to support the necessary diversification that will underpin the longer-term growth and resiliency of the Alberta economy. And then lastly, you got to remember one of the value propositions of our industry is that not only do we offer technology for growth purposes, we offer technology for efficiency purposes. So when companies are under economic duress, if we can offer them technology solutions that improve their efficiency, their effectiveness in serving customers or leveraging certain offshore attributes like TI, they can be very, very valuable for when times are particularly challenging such as the complexion of the value proposition that we put forth. But we'll be there through thick and thin. And we're putting our money where our mouth is in terms of the elevated investment, that Zainul referred to and our overall commitment to the province and its people.

Great, thanks.

Thank you, Darren. And thank you everyone for taking the time to join us today. Stay safe. Take care. And please feel free to reach out to the IR team, with any follow-up questions you may have. Mike, back over to you.

Ladies and gentlemen, this concludes the TELUS 2020 Q1 Earnings Conference Call. Thank you for your participation. And have a nice day.