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TELUS CORPORATION
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TELUS CORPORATION
MODERATOR: JOHN WHEELER
AUGUST 30, 2000
2:00 P.M. MT
Operator: Ladies and gentlemen, thank you for standing by. Welcome to
the TELUS Corporation retail broker investor conference
call. All participants will be in a listen only mode for the
duration of the conference. As a reminder, this conference
is being recorded Wednesday, August 30th, 2000.
I would now like to turn the conference over to Mr. John
Wheeler, VP of Investor Relations. Please go ahead, sir.
John Wheeler: Thank you very much, and thank you to all those on the line
that are joining us today. Let me introduce who is on the
line. We have Darren Entwistle, the President and CEO of
TELUS, and George Cope, the President and CEO of Clearnet.
The format of the call will be some introductory comments and
then some -- a question-and-answer session based on some
submitted and common questions that we've been getting.
Slides that accompany these remarks are available -- and only
available -- on the transaction website. If you're not
already on that, here's the address: www.telus.com/clearnet.
So turning to slide two, let me remind you that the opening
comments and answers will contain statements about expected
future events and future financial results of TELUS and
Clearnet that are forward-looking and are subject to risks
and uncertainties. These risk factors are listed in the
company's regulatory filings.
Let me now turn to slide three, and before I turn you over to
Darren, let me outline what we will be covering on the call.
We'll start with the TELUS strategy and the deal benefits.
Next, George will review the deal from the Clearnet
viewpoint, and then we'll take a quick run through the
financing and valuation issues, and conclude with the
investment opportunity.
Darren, over to you, and we're now on slide four.
Darren Entwistle: Thanks very much, John. Well, it's been a very exhilarating
last 10 days following the announcement of the deal on the
21st of August. It is the largest acquisition in Canadian
Telecom's history. It's $6.6 billion, and it does create the
largest mobile operator in the Canadian market place.
In my first week on the job, I took the opportunity at that
time to communicate what TELUS would be doing as an
organization in terms of strategy development. In essence, we
are an organization that will be focusing on exploiting the
convergence that's taking place between voice, data, IP and
mobility within the market, essentially, our task being to
turn IP technology into competitive advantages for Canadian
business, or compelling solutions for Canadian residential
consumers.
At that particular time, I set out two immediate priorities
for the organization. One was to establish a national
footprint for our mobility business, mobility business that
had up to that time been landlocked in Alberta and B.C. and
was seeking to establish a national footprint. And the second
priority being to accelerate the development and deployment
of our data and IP services.
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TELUS CORPORATION
Res. #16198950
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This particular deal, which as I've just said creates the
largest mobile operator in Canada in terms of revenue, allows
us as well to effectively leverage the strategic partnership
that we have in place with Verizon in the U.S. That strategic
partnership is enshrined by a brand and technology agreement
which allows us to tap into proprietary applications,
technology, and indeed to leverage the purchasing power that
Verizon has. In essence, you can see this deal bringing
together the largest mobile operator in Canada with the
largest mobile operator in the U.S., Verizon Wireless, who
has some 25.5 million subscribers.
And on the purchasing power front, leveraging Verizon's
relationships with their suppliers across both handset and
technology procurement, as well as advantageous access to new
features and applications, will be brought to good effect for
Canadians in the mobile market. And indeed, when Verizon's
25.5 million subscribers now come north of the border, well,
they're going to be roaming on our national network.
Clearly, as I said, we had two routes to achieve our
objective of a national footprint. I'm now moving on to slide
six. One route was to have participated in the spectrum
auction and built our national network capability. The other,
of course, was the acquisition of Clearnet. For four reasons,
we view it as better to have bought rather than participated
in the spectrum auction and built out our own network. Let me
explain each in turn.
Firstly, the acquisition of Clearnet gives us speed to
market. Overnight, we assume the market leadership position
in the Canadian mobile industry. This contrasts favorably
against participating in the spectrum auction. Should we have
been successful, spending about $1 billion to acquire a
license, spending another billion dollars to roll out the
network infrastructure, and the considerable sums to acquire
a considerable mobile base within central and eastern Canada,
and probably by the end of the three years, in terms of the
roll out of our network, well, we would be at the bottom tier
of the Canadian mobile players rather than in a market
leadership position.
In addition, we also pick up a skilled employee base. We get
access to top management talent. George Cope has agreed to
assume the position of President and CEO of the new mobility
business, but we also pick up, importantly, 2600 skilled
mobile employees, located predominantly in central and
eastern Canada, which fits well with our expansion plans.
Contrast this with recruiting from scratch in a market such
as the telecommunications industry, where there is a serious
imbalance between the demand and supply for talent. You come
down on the side of the buy side.
Third reason is, of course, spectrum richness. The
acquisition of Clearnet gives us 45 megahertz worth of
spectrum, versus 10, perhaps 20 megahertz acquired by the
auction process. As a result of this deal, we will have the
most spectrum of any mobile operator in North America, with
45 to 55 megahertz of spectrum, coast to coast.
Finally, we modeled the benefits of buying versus building,
and have determined that the acquisition route creates an
additional $1.5 billion of value for our shareholder base.
Two final thoughts to ebb in your mind: number one, the
uncertainty inherent in an auction process has now been
eliminated for our shareholders. They have clarity with
respect to the implementation of our data, IP and mobility
strategy. And secondly, it improves the competitive dynamic
in the market by mitigating the potential for the emergence
of a fifth operator.
Moving on to slide seven, to give you a flavor of what
attracted us to Clearnet as an organization, firstly, we pick
up not one but two national digital wireless networks,
firstly
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TELUS CORPORATION
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the Mike business, predicated upon the iDEN technology, which
covers 21 million POPs, and secondly, the PCS business, which
covers 17 million POPs. And Clearnet as an organization has a
license to extend that coverage to 31 million POPs. This
contrasts very well with the 6.6 million POPs of coverage we
had previously within B.C. and Alberta.
Additionally, the two organizations, TELUS Mobility and
Clearnet, have compatible CDMA technology, which allows us to
leverage the PCS platform to drive top line revenue growth,
and also to integrate our network operations to benefit the
bottom line. We also inherit from Clearnet two key
relationships with Nextel and Motorola, who are leaders in
the global mobile industry, and we intend to embrace and
build upon those relationships going forward.
Turning now to slide eight, to give you the highlights of the
deal, we've acquired 100 percent of Clearnet. The
consideration is in the form of 50 percent cash and 50
percent stock, specifically $2.3 billion in cash and $53.86
million TELUS class A non-voting shares. That gives us an
equity value, or consideration, for Clearnet of $4.6 billion.
When you layer in the net debt at Clearnet, you get an
implied enterprise value of $6.6 billion.
We, of course, paid $70 a share for Clearnet, and in addition
to that, the implied exchange ratio for TELUS to Clearnet
shares is 1.636. Importantly, Nextel and Motorola have
elected to receive 100 percent and 75 percent TELUS stock,
respectively, and to a standstill on their position for a
period of at least one year, which speaks volumes for their
confidence in the deal, volumes for the confidence in TELUS
stock, and for the prospect for the business on a go-forward
basis.
We intend to close this deal in mid to late October and
concurrent with closing, we intend to seek a listing on the
U.S. exchange.
Turning to slide nine, a couple of things which speak to the
timing of the deal. I've already alluded to the fact that
getting this deal done in advance of the spectrum auction
this autumn eliminates the uncertainty associated with the
auction process. I have participated personally in seven
spectrum auctions during the course of my career, and I can
tell you there is no such thing as a guaranteed outcome.
Secondly, I believe that we are on the cuff of the next spurt
of growth with respect to mobile penetration. Currently in
Canada, mobile penetration stands at 25 percent, up 500 basis
points over the last 12 months, and it now shows signs of
accelerating. If you contrast this with experience garnered
through G-7 countries, it indicates that once penetration
hits the sweet spot of 25 percent, it typically accelerates
rapidly thereafter. And a lot of that, of course, would be
fueled by data and IP applications.
And I think an excellent way of forecasting mobile
penetration growth in Canada going forward is to actually
take a look at the U.S. The Canadian market typically lags
the U.S. market by 12 to 18 months, so I think if you take a
snapshot of the picture in the U.S. right now, super-impose
it on the Canadian market in about 12 months' time, and you
can forecast fairly accurately the developments that are
likely to transpire.
Finally, moving to slide 10, having a look at the synergies
associated with this deal, they are significant. A lot of
these synergies are peculiar to a Canadian acquirer. This is
an intra-country deal, rather than a foreign investor
stepping into the market, which means the potential for
synergy realization is much greater, and a lot of these
synergies are indeed peculiar to TELUS itself as an
organization.
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TELUS CORPORATION
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We expect to derive between $2.1 and $2.4 billion of
synergies, which equates to some $32 to $36 per Clearnet
share. That breaks down as follows. We expect to realize $1.6
billion from operating synergies. That comes from revenue
enhancements, operating cost reductions, and capital cost
savings. In addition to that, we expect to realize between
$500 million and $800 million of tax synergies related to the
accelerated use of the tax loss carry-forwards at Clearnet.
Additionally, in these particular numbers, there are a number
of unquantified synergies, which relates to things such as
the bundling of wireless and wireline products, providing
back-haul on a national basis for the Clearnet organization,
and tapping into the Verizon relationships. All those things
that I talked about at the outset of this call in terms of
leveraging the relationship with Verizon are not included in
these synergy numbers themselves. Additionally, these
synergies are net synergies. The cost of realizing these
synergies is, again, included in these numbers.
Moving now to slide 11, I'll hand over now to George Cope,
who will be the future president and CEO of the new mobility
business. George, over to you.
George Cope: Great. Thanks, Darren, and thanks, everyone, for taking the
time today to be brought up to date on this transaction. Let
me begin on slide 11 with just a brief overview of Clearnet.
Clearnet, starting basically from a ground-zero start in the
digital world in '95-'96 today has 700,000 subscribers.
Darren has mentioned our team members of 2,600 already.
As you know on the phone, we've been very successful in the
capital markets, both in Canada, in the United States and
around the world in raising over $3 billion in capital. I
think most importantly there is the over 40 analysts who
cover Clearnet which we hope to and plan to work with as many
of them to understand the TELUS story and take that story to
the U.S. market with the U.S. listing that Darren's already
talked about.
We've led the Canadian wireless industry in post-paid growth
in the last year. We've led in revenue growth. We have both
digital networks in CDMA and Mike and, most importantly, the
crown jewels of our company are the 45 megahertz of wireless
spectrum that we have in the market place today in Canada.
Now, why now and why go forward with this transaction? Well,
first of all, obviously to our shareholders, the board of
directors have recommended that this is a tremendous
transaction for them. Most importantly to the Clearnet board
have been the people who have invested in this company
throughout its history, those that invested in our IPO have
now seen a four and a half times return on their money in
just over five years. Even those who most recently
contributed to our last treasury issue in December of '99
have seen a 75 percent return and, most importantly, this
deal represents a 61 percent premium to the 20-day trailing
average of the stock prior to the announcement. Our debt
holders also receive significant credit enhancement.
At the same time, though, this transaction isn't all about
cash, it's about shares and cash and we think that's a very
important item for our shareholders as they now get to
participate in the story going forward of TELUS and the TELUS
Mobility story. The competitive position of Clearnet is
improved dramatically through, if you will, transferring this
asset into the TELUS group and organization.
Now, when you look at TELUS, they were by far the most
logical choice for us going forward. I am on slide 13 now.
I've just been told to remind you of. TELUS has a
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TELUS CORPORATION
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complementary network to Clearnet. It operates at CDMA in the
PCS world as do we, so it fits. They had really no assets on
the network side in eastern Canada. We have done
disproportionately well in eastern Canada. TELUS has
dominated, if you will, the market in western Canada.
Another logical reason for this transaction is the Mike
business will be dramatically improved in western Canada as
we get access now to the 1,600 cell sites that TELUS has in
western Canada at 800 megahertz, the same frequencies that
Mike works on and we get access to the business distribution
channel that TELUS has through its independent dealer
channels in the West to sell this product as well. It truly
it is an ideal synergy. On top of that, our back-haul costs,
which currently are very expensive because we are not a
teleco, will now accrue to TELUS and that is clearly a
synergy for them in this transaction.
Let me now go to slide 14 and, as you know already, I have
accepted the role of CEO of this new merged wireless
entity -- by the way, with great enthusiasm. The metrics here
are second to none and when you are talking to your investors
over the next few days about this story, please refer to some
of these numbers.
This company led the industry pro forma last year in
subscriber growth. It leads the industry in total revenue
and, most importantly, in a growth story, growth in revenue.
It has the highest ARPU of over $57 when you blend the two
organizations together -- and, by the way, that's about 21
percent higher than the other national wireless carrier and
higher, again, than the new PCS entrant.
We have the largest spectrum position of any company in North
America. That will become increasingly important as we move
towards Web services on wireless phones over the next two
years. And we lead the industry in churn. As a result, we
have the most valuable client base.
We believe this -- the wireless asset within TELUS will trade
at a premium to other wireless assets in Canada because of
these metrics, also because of our spectrum and finally,
because we have the IDEN network or the Mike network that no
one else has in Canada and it will be a better service, going
forward, as a result of this transaction. So all in all, a
very compelling story going forward for investors on the
wireless side of the TELUS organization.
Let me now turn the presentation on slide 15 back over to
John and he'll take you through some of the financing
highlights. John?
J. Wheeler: Thanks, George. I'm going to cover financing and valuation
impacts of this excellent deal. I'm on slide 15. TELUS will
be financing this transaction with $7.7 billion in bank
bridge financing.
The facility will finance the cash portion of the acquisition
and allow us to refinance existing debt where necessary or
desirable. The facility will also contain provisions for a
revolving credit facility that can be used for general
corporate purposes. These loans are fully under-written by
TD Securities and J.P. Morgan and we'll be seeking an
investment-grade debt rating and plan to refinance up to
$5 billion in the public debt markets.
Turning now to slide 16, consideration for Clearnet was
structured as a 50-50 mix of cash and TELUS stock in order to
achieve three goals. First was the ability to finance future
growth in the data and Internet space by preserving a strong
balance sheet and a healthy cash flow. Second, we're seeking
to maintain investment-grade credit ratings and third, we are
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TELUS CORPORATION
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going to be maintaining our TELUS dividend in order to meet
the expectations of our existing shareholders.
Let's now move on to slide 17 and look at our pro forma
balance sheet on June 30th, 2000, as if the transaction had
already taken place. We will be a $16.3 billion company in
terms of assets, including cash of $400 million, plant,
property and equipment of $7.4 billion and goodwill of $5.3
billion. We would also maintain a strong capital structure
with net debt of $7.6 billion and total shareholders' equity
of $6.8 billion. Also, as we move forward, our capital
structure will reflect our desire to highlight fully the
value in the constituent parts of TELUS, to establish a
transaction currency for future growth initiatives and also
to pursue the divestiture and monetization of non-core assets
where appropriate to highlight value and to refocus resources
on our core growth operations.
Now, turning to slide 18, we've provided investors with a
view of what the new TELUS might look like in 2001. In
establishing this guidance, we utilized consensus street
analyst views of TELUS and Clearnet and made appropriate
adjustments to reflect operating and tax synergies that
Darren's already talked about.
On the revenue line, the result for new TELUS, including
Clearnet, is revenues of $7.4 billion in 2001. At the EBITDA
level, using the same method, the new TELUS will have $2.7
billion of EBITDA in 2001, inclusive of $70-$80 million of
operating synergies.
It's also very important to note that Clearnet, as well as
its analysts, are expecting that company to turn EBITDA
positive during 2001. In estimating the new TELUS cash net
income, analysts can use the following guidance: interest at
8 percent, tax rate in 2001 of 44 percent and finally, for
those going to the bottom line, the goodwill of approximately
$5 billion from this transaction is going to be amortized
over a 20 year period.
Moving on to some valuation issues on slide 19, there are
several, obviously, a transaction like this raises some
valuation issues. First and foremost, the focus of the new
TELUS will be on growth in revenues, cash flow and cash
earnings and we believe that this should be reflected in the
valuation of our stock.
First, we need to examine the valuation of Clearnet itself in
the context of other recent comparable transactions. On the
basis of revenue and subscriber multiples on several past
precedents, the offer clearly fell in line with other
transactions.
Now, some have commented that it appears to be at the high
end of Canadian precedent, however, there is no Canadian
precedent for this Clearnet transaction. We will be achieving
100 percent control. We're going to be able to take a leading
wireless company in western Canada, which covers 24 percent
of the population, and extend this into the fast-growing
national footprint.
We achieve certainty of our national spectrum position and we
will achieve substantial synergies upon combination of our
wireless business. No other Canadian wireless transaction
involved any of these key strategic elements.
Turning to slide 20, we note that TELUS needs to be valued on
a sum-of-the-parts basis, given the differing characteristics
of our three operating businesses. The wireline business
value should reflect strong brand, the market position we
have and the very strong cash flow that we're generating and
growing. TELUS Mobility's valuation should now reflect being
the largest national player, which is spectrum rich and has
strong operating metrics, as George has already outlined --
and remind you that the new mobility company will be a
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TELUS CORPORATION
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national leader in Internet-enabled phones. Our data business
generates revenue growth, including from the IP business and
it has over 350,000 and strongly growing base of ISP
customers and it has leading-edge local portals that will
represent increasing value going forward.
There's also a more simple method of looking at TELUS as a
whole and this method is to compare our valuation multiples
to growth rates. Today, TELUS is trading at 2.6 times total
2001 street consensus while our estimated CAGR to 2003
exceeds 8 percent -- this is on the revenue line. TELUS is
trading at roughly 7 times adjusted street consensus EBITDA
for the next year, while our estimated CAGR to 2003 is 16
percent.
Everyone has their own way to value TELUS, but look at all
our measures: growth rates, capital flexibility, free cash
flow, dividend and valuation multiples. We're convinced TELUS
represents the best package of any company in the Canadian
telecom sector.
Now back to Darren to conclude.
D. Entwistle: Thanks, John. I'll just wrap up by reiterating our strategy.
The strategy for TELUS going forward is to lead the North
American market in converging voice, data, IP and mobility
solutions, essentially to turn that technology into
competitive advantage for business customers and compelling
solutions for residential customers.
As an organization, the way that we have done this deal
signals to the market the way we will behave going forward.
We will act decisively. We will act with clarity and focus,
targeting data IP and mobility and we will act responsibly as
an organization.
This is a unique investment opportunity. It's a growth stock
that's going to have strong cash flow and cash earnings and I
think this contrasts well with the hollow promises of future
earnings from many pure growth stock plays or the stifled
commercial ambitions of many organizations that have a
singular fixation on earnings.
I believe TELUS, for the reasons articulated during this
conference call, is an excellent investment opportunity,
indeed, that it represents the best package of value of any
company within the North American telecom sector. We believe
that quite fervently and, to be truthful, concurrent with
closing of this deal at the end of October we will be
pursuing a U.S. listing and taking our investment story to
the U.S.
I'd like to hand back over to John now and we'll handle Q&A.
J. Wheeler: OK. Thank you very much, George and Darren. I've got a
number of questions that have been put forward to us and I'll
just go through them and pose them to you, and if you could
please respond to them.
The first question is, "Do you really think you'll close by
the end of October? What approvals are necessary that could
stand in your way?"
D. Entwistle: OK, I guess the quick answer to that is, yes, we really do
feel we'll close between mid and late October. Certainly, the
feedback that we've had to date from the regulatory team put
together from TELUS and Clearnet is very positive in terms of
how things are progressing with both Industry Canada and the
Competition Bureau. So we do not foresee any problems to
getting the necessary regulatory approvals to close this deal
by the end of October.
J. Wheeler: OK. Thank you, George.
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Second question - "How will you deal with the issues of
merging two companies with different cultures?" And I'll pass
that one over to George first.
G. Cope: Yeah, maybe I'll take a shot at that and answer it. First of
all, people need to understand that we're merging 2,600
Clearnet employees, pretty committed to this wireless
industry, with 1,500 TELUS Mobility employees, also equally
committed to this industry. TELUS Mobility has been the
market leader. Fifteen hundred employees that I know, based
on the announcement of this transaction, were extremely
enthusiastic with this move. The Clearnet employees likewise
recognize the value of this national entity and, quite
frankly, I think the integration of these organizations is
going to be a powerful tool going forward in the market
place.
The other side of that is 4,100 employees -- both companies
up until now are short of resources in this sector. We will
do some realignment of some of the skill sets, but, quite
frankly, I believe I'm up to the task and, more importantly,
given the response from both organizations and the overlap is
so minimal in terms of these organizations, we're extremely
enthusiastic that that can be executed properly for the
market place.
J. Wheeler: OK. Thank you. And a third question, "If this is such a good
deal, why has your share price weakened and what are you
doing to help strengthen it?"
D. Entwistle: OK, well just let me correct you on that, John. It's not a
good deal, it's a great deal. Firstly, the strategic,
commercial and economic benefits of this deal are undeniable
and in the fullness of time that will be reflected in the
stock price of this organization.
Following announcement we've seen some pressure from two
sources -- one, arbitrageurs stepping in, shorting our stock
and as well, a transition in our investor base as we move to
more of a growth orientation for our organization. I think
what should be very encouraging to anyone who's been looking
at the performance of our stock, however, over the last 10
days is that since August 23rd the stock has been responding
very positively and, as you can see today, the stock on the
voting side closed at $40. And let me just draw a line under
that. When I joined this organization a little over seven
weeks ago, the stock was trading at $39. Well, now it's at
$40 and we own Clearnet, or at least we're on the way to
owning Clearnet, seeking to close at the end of October and I
feel pretty bullish about that and bullish about the
prospects for further share price increases going forward.
J. Wheeler: Thank you, another question for probably you Darren. "What
acquisitions are you considering in the IP/data area and how
can you finance another large transaction?"
D. Entwistle: OK, well, as I've said on many occasions we don't start by
looking at acquisitions, we start with a strategy and an
implementation plan for realizing that strategy. And that
implementation plan looks at a range of options from organic
development, strategic partnerships through to acquisitions.
Areas where we seek to acquire are areas where lead time to
market is critical -- and that's certainly true within the
data and IP domain -- or where there's a scarcity of
resources, particularly in terms of talent and picking up the
right amount of data and IP talent to facilitate a
realization of our strategy or indeed, to pick up a quality
customer base to improve our credentials. Those are some of
the things that would lead us to behave in an acquisitive
fashion.
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On the data and IP front, some of the areas that we may look
at going forward are within the local area network, data
network integration business because we think that's one of
the key building blocks is successfully executing the data
and IP strategy and, as well, with respect to IP
applications, whether that ranges from web hosting through to
application service provision. I'm not going to be any more
specific than that at this point in time.
I think what is also fair to say is that we'll do things off
our own bat, in organic fashion, and also tap in to the key
strategic alliance that we have with Verizon and the
partnership that we have as a result of that with Genuity,
which is a tier one IP player within the U.S. market place.
J. Wheeler: OK. Another question we have is a question of branding,
given that TELUS has strong brands and Clearnet has strong
brands, it's: "Just what's going to happen with the brands
going forward?"
G. Cope: Well, let me take a shot at that. First of all, there are a
lot of questions, not a lot of answers for that today that we
can share with you.
Let me make sure you understand that it will be TELUS-- TELUS
Mobility, particularly the TELUS brand name is the name of
the organization. Having said that, both myself and Darren
believe we would be foolish to lose, also, the value that's
been created in the Clearnet and Mike brands and so I
wouldn't be surprised to see things like Mike by TELUS and
consumer-focused Clearnet products by TELUS and why don't we
come back a little more on that.
And frankly, anything we say now just goes into the
competitors' hands on that front. So we need a little bit of
time to let the right people focus on that. But clearly,
we're going to use the best of all brands. Let's make it
clear to everyone that TELUS is the organization who's made
the acquisition.
J. Wheeler: OK, thanks, George. Another question, which I think I
probably can handle, it's: "After the deal closes, who will
own the TELUS shares?"
And if -- if you assume that Verizon does not exercise their
rights to pick up some more shares, they would fall to 21.7
percent from their current position of 26.6. And, again,
that's an assumption that we don't know at this point.
There are two other major shareholders that would move in
which would be Nextel, at 4.7 percent, and Motorola, at 3
percent, because of their options to take a certain amount of
TELUS shares, leaving the public ownership position at just
over 70 percent, 70.6 percent, to be exact.
Another question we've had is, "Why did you pay such a high
premium on the purchase of Clearnet?"
D. Entwistle: OK, well, I would take issue with paying a high premium. Yes,
we did pay a premium, but I think that premium was pretty
much middle of the road and certainly that view is
corroborated by reports from both investors and analysts.
When I say it's in the middle of the road, I'd say middle of
the road when I compare it with trading and transaction
multiples. Indeed, it's arguable that this type of
transaction does not have a precedent, so it's not fair to
compare it with other transactions. A couple of things that
are unique about this particular deal, one it involved 100
percent of a company, so it
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was a complete control position that we moved into, and
additionally we've now acquired a market leadership position.
Not a lot of other transaction comps have those particular
attributes.
In addition, I think that the mobile industry in Canada is
set for its next spurt of growth, as I articulated in a few
slides earlier on in this conference call. And as a result of
dealing of doing this deal, we're now positioned to
capitalize on it and actually bring together everything that
we would like to do on the data, IP and mobility front.
And finally, the synergies with respect to this particular
deal are material and many of them are unique to TELUS as an
organization. To repeat, we will pick up between $32 and $36
per share in synergies that span from operating costs right
through to accelerated use of tax loss carry-forwards.
So I think all these things, comparison with trading and
transaction comps, the 100 percent control position we
achieved and the market leadership position we've achieved,
the mobile growth that's still to come, the latent potential
in that particular area, and our synergies in totality makes
this deal an excellent deal from an economic perspective.
J. Wheeler: OK. Another question is, "You've talked about a non-core
asset review and could you give us an idea of what you're
thinking at -- what you're thinking of in this area?"
D. Entwistle: OK. I think any organization that is going to embark upon a
strategy that will involve significant investment, be it
investments in organic development or, indeed, undertaking
acquisitions, should first be disciplined enough to build a
war chest, if you will, by culling from the portfolio those
assets that are not aligned with the new strategy, those
assets that are under-performing and cannot be remedied and,
indeed, those assets that have peaked in value. And that's
exactly what we're doing right now at TELUS as an
organization and I'm not going to identify any of the assets
that we've earmarked for disposal because then I think that
will undermine the value that we can realize for those assets
in the market place, but in totality, we're looking to have a
disposal program that will reap about $1 billion worth of
benefit.
In addition to that, we're also looking at monetizing certain
assets, I guess would be a good way of describing it, that
we're seeking to make things like our real estate portfolio
do a little bit more for us on a go-forward basis. And of
course, following this deal, as the market leader, we have
some capital structure moves that were not previously
available to this organization.
And when you look at embarking on an acquisitive path, I've
already talked about data and IP being an area that we would
be interested in. I think that will complement well with what
we do in that area. And, as well, there is no data and IP
organization that is similar in size to this particular deal.
Typically, the type of opportunities that we would be looking
at in the data and IP space would be between $50 and $200
million. So we would be looking at doing a series of
acquisitions rather than sort of the big-bang approach that
this deal represents over a period of some 12 to 24 months
and we would seek to leverage the strength of our balance
sheet and the financial flexibility that we still have, even
following this deal, and the funds that we will garner
through the divestiture program.
J. Wheeler: OK, well, that's it for questions. I'll just maybe turn it
back to Darren for just a very brief sum-up and that will be
the call. Thank you very much.
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D. Entwistle: OK. Again, we feel very exhilarated by the prospects of this
business going forward. We think it represents an absolutely
excellent investment opportunity and certainly the feedback
that we've picked up on the first seven days of our road show
is very encouraging for us and the response that we've met
from the investment community has almost been uniformly
positive.
As I've said on previous occasions, TELUS is an organization
that's on the move. We're aggressively expanding into central
and eastern Canada on both the data/IP and on the mobility
front and I expect continued success going forward.
The last thing to say is thanks very much for joining us
today. I don't know if George wants to add any final words.
G. Cope: No, I'll just add, Darren, thank you. Thank you for taking
the time. We know it's a big commitment and please focus on
this story. You're going to see some exciting things in the
future. Thank you.
J. Wheeler: Thank you very much and for those that would want more
information I would point you both to the TELUS investor
relations department and the Clearnet investment relations
department and those phone numbers are on your slide, your
last slide, which is slide 23.
Thanks very much for joining us today.
Operator: Ladies and gentlemen, that does conclude our conference for
today. You may all disconnect and thank you for
participating.
