<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
TELUS CLEARNET AUDIO WEBCAST
----------------------------
OPERATOR: Ladies and gentlemen, thank you for standing by. Welcome to
the TELUS and Clearnet investor conference call. At this
time, all participants are in a listen-only mode. Later, we
will conduct a question-and-answer session. At that time, if
you have a question, you will need to press the '1' followed
by the '4' on your push-button phone. As a reminder, this
conference is being recorded today, Monday, August
twenty-first of 2000. I would now like to turn the conference
over to Mr. John Wheeler, Vice-President, Investor Relations.
Please go ahead, sir.
WHEELER: Thank you very much and thank you for joining us on short
notice. I'd like to introduce who is online with us today. We
have Darren - excuse me - Darren Entwistle President and CEO
of TELUS, George Cope, President and CEO of Clearnet, Barry
Baptie, Chief Financial Officer of TELUS, and Bob McFarlane,
Chief Financial Officer of Clearnet. We'll open with some
introductory comments and then a question-and-answer period.
The presentation slides that accompany the remarks today are
available on a web site which is www.telus.com/clearnet. You
will be on a listen-only mode for opening comments. A
conference call operator will handle the question period. Let
me also remind you -- and as you can see on a slide -- 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 uncertainty. These risk factors are listed in
the company's regulatory filings. Before we start the call,
let me also announce that we are planning to have a
retail-broker communications event in the next several days
and details will be provided when it's finalized. With that,
let me turn it over to Darren.
ENTWSTLE: Good morning, everyone. Before we get started, let me
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 1
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
take you through the content of the call today. I'll kick off
and take you briefly through TELUS' strategy. Then I'll
describe why we feel it's better to buy than to build. We'll
explain why we think Clearnet is such a good fit with TELUS.
And then I'll take you through the key elements of the deal,
including the synergies. Then you'll hear from George Cope
who will be the future president and CEO of the new TELUS
Mobility and George will give you Clearnet's perspective on
this deal. Following George will be Barry Baptie, the CFO at
TELUS, who will take you through the financing of the
acquisition and evaluation issues. I'll then come back to
conclude with an overview of the investment opportunity in
TELUS. We've got a big day ahead so let's get started. Forty
days ago, I introduced to you TELUS' strategy which was all
about exploiting the convergence that is taking place between
data, IP, and mobility. I also set out at that time TELUS'
two immediate priorities. Number one was to establish a
national footprint for our mobility business and number two
was to accelerate the development and deployment of our data
and IP services. Well, you know what? We've just answered the
first priority. In addition to that, we just made a big step
towards the second. We believe that the convergence of data
and IP will fundamentally shift the value of mobility assets.
And through the acquisition of Clearnet, we've secured a
platform for delivering data, Internet, and e-commerce
services to Canadians on the move. We've resolved to be the
North American leader in exploiting convergence. And with
Clearnet, we've picked up a company where over 50% of their
handsets are web-enabled. We talked a lot about the
partnership that we have in TELUS with Verizon. Well, this
deal allows us to truly crank up that partnership with
Verizon. We have a brand new technology agreement in place
which allows us to use the brand at Verizon to tap into their
applications, services, and technology so we can present a
seamless service to business customers all across North
America. If I had to draw a line under it, you're now going
to see a combination of the largest mobile operator in Canada
in terms of revenue, partnering with the largest mobile
operator in the US with over 25.5 million subscribers. And
you know what? When those 25.5 million subscribers come to
Canada, they'll be roaming on
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 2
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
our network. Let me take you through now why we feel it's
better to buy than to build. Essentially, we consider it a
no-brainer of a decision. Decision to buy Clearnet is
superior to building our own wireless network for four
reasons. Number one: speed to market. A catapult to a
leadership position in mobility market in Canada. Number two,
we pick up spectrum richness. We will have between forty-five
and fifty-five megahertz of spectrum across Canada. Number
three, we pick up a hell of a lot of management talent and
skilled employees. And number four, the economics are
compelling. We will create an incremental 1.5 billion dollars
of value by buying versus building. This allows us to
eliminate the uncertainty inherent in an auction process,
although it is intended that we will still participate in the
auction going forward but this will be to gain further
competitive advantage and not be borne out of necessity.
Let's talk a little bit now about Clearnet, our partner of
choice. With Clearnet, we're picking up two national
digital networks. That gives us twenty-one million POPs of
coverage and a license that extends to thirty-one million
POPs. We've got compatible CDMA technology which gives us
the PCS platform to drive further growth in the Canadian
mobility market. We've got a... we've got excellent
relationships with Motorola and Nextel that we will be
inheriting. We will be embracing those relationships and
we will be building upon those relationships. And as I've
already alluded to, we'll be picking up a talented and
entrepreneurial management team and a growth-oriented
culture, and that's key to our success. We'll be picking
up in total twenty-six hundred skilled employees in
eastern Canada and that's key to TELUS' expansion plans.
So what the hell does this new company look like? Well,
let's take a peek. We are the market leader in the
Canadian mobility market. Let's have a look at the
attributes of this new company. We'll have... we'll have
the highest number of new sub... new customers; up four
hundred thousand over last year or some 29%. At 1.5
billion, we'll have the largest revenue base. We'll have
the highest average revenue per customer and we're
fifty-seven dollars per month. We'll have the lowest churn
rate at 1.74%. And perhaps most importantly in terms of
both the functionality and quality of our
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 3
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
services going forward, we'll have the most spectrum: between
forty-five and fifty-five megahertz across Canada. Let's take
a step back now and look at the highlights of the deal. TELUS
has tendered an offer to acquire 100% of the shares of
Clearnet or a fifty-fifty combination of cash and shares,
valuing the Clearnet shares at seventy dollars. The Clearnet
board is recommending that shareholders tender their shares
in Clearnet in response to this consideration. The four major
shareholders... representing over 30% of the economic
interest and 86% of the votes, Lenbrook, Nextel, Motorola,
and Madison-Dearborn have agreed to irrevocably tender their
shares. The consideration in totality is 4.6 billion dollars.
2.3 billion of that will be in cash and we'll have 53.9
million non-voting, class A shares coming from TELUS. We will
assume 2 billion in Clearnet debt. The exchange ratio will
be 1.636 TELUS non-voting shares for each Clearnet share. The
deal is subject to a fifty-fifty cash share proration. Nextel
and Motorola are taking 100% and 75% respectively of TELUS
stock and have agreed to hold this stock for one year, which
speaks volumes for their confidence in the deal and for their
confidence in TELUS. Conditions precedent to closing include
tendering of at least 66 2/3% of each class of Clearnet share
and the normal regulatory approvals. Importantly, TELUS plans
to list on the US exchange, at closing, that we think this
will be attractive to new growth investors and to the
Clearnet shareholder base. And this reflects the fact that
this transaction will increase our public float by some 72%
in the non-voting shares. Let's talk a bit about synergies.
The synergies make a great deal even better and clearly the
strategic and commercial fit between TELUS and Clearnet will
deliver significant and material synergies. We estimate these
synergies to be between 2.1 and 2.4 billion dollars. We
expect to derive 1.6 billion in operating synergies coming
from enhanced revenue and reductions in operating and capital
costs. In addition to that, we expect to use the tax loss
carry-forwards at Clearnet which will translate into a net
present value of some 5 to 8 hundred million or eight
to twelve dollars a share. And let me point out: TELUS has a
very, very strong track record in realizing synergies.
Following the
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 4
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
deal between TELUS and BC Telecom, the merger that took
place, TELUS realized over a 140 million dollars in
operating synergies. Let me turn the presentation over to
George now to speak about the deal from Clearnet's
point-of-view.
COPE: Great. Thank you, Darren, and good morning, everyone, and
thank you very much for joining this call on this historic...
historical day in the Canadian telecom industry and
specifically the wireless industry. Bob McFarlane and I are
excited to be here today with Darren and his other team
members this morning. This truly is an amazing day for
Clearnet shareholders and I also believe, as we discuss this
opportunity on the phone this morning, you'll believe it is
also for TELUS shareholders. It also is a great day for the
Canadian wireless industry and the structure of the industry
going forward. What I'd like to do over the next ten minutes
is share three things with you: talk about the deal, if you
will, from a Clearnet shareholder perspective; why we chose
TELUS as our partner going forward; and then share with you
my views on the Newco and the merged wireless entity
opportunity and add to some of the comments that Darren has
made already. Let me first of all talk to the Clearnet
shareholders. Today's transaction, we are definitely
recommending to all shareholders. The price for this
transaction represents a 61% premium over the twenty-one-day
trailing average of the Clearnet stock. It offers a superior
return on investment for all Clearnet shareholders. Very
importantly to Bob McFarlane and myself, those that have got
to know us over the years, those that participated in our IPO
a little over five years ago see an over 450% return on their
capital. Any institution or retailer or investor who has
shared in any of our treasury issues over the years has done
remarkably well. By... by... by way of example, our most
recent treasury issue in December of '99 would represent a
75% return in nine months. Also very important for the
shareholders to understand, this transaction mitigates
considerably the risk of a fifth player in the Canadian
wireless marketplace going forward. And what is tremendous
about this transaction is the structure enables shareholders,
if they choose, to participate in
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 5
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
a wireless play going forward through ownership of TELUS. And
I understand many of you... to many of you in the US today,
this is a new name to you and you have my commitment, along
with Darren who's already spoken with the US listing coming
forward, that we will be committed to making sure you fully
understand the opportunities that we have here going forward.
Let me talk also a little bit now about why TELUS. Quite
often when mergers take place, people talk about synergies
and sometimes it can be fairly hollow. In this case, there's
nothing could be further from the truth. These two companies
are, by far, the best possible merged wireless organizations
in the Canadian marketplace today. TELUS leads the wireless
industry in western Canada. Clearnet is a national entity,
but has had a disproportionate amount of success in eastern
Canada. Both companies chose CDMA for their PCS network
build. TELUS has spectrum-rich positions at both eight
hundred megahertz and one-dot-nine in western Canada.
Clearnet, of course, has spectrum positions at one-dot-nine
for PCS and nationally at eight hundred megahertz for our
Mike/IDEN business. Another key driver for us was the future
of the Mike business and the IDEN technology in Canada. For
those of you who don't know, TELUS has a heritage of
understanding more than any telephone company in Canada the
value of two-way radio and were one of the pioneers of that
service in Canada for a number of years.
/video switches to a medium shot of an empty presentation room with screens in
the background showing TELUS' and Clearnet's names/
COPE: The Mike network which is enjoying enormous success now will
only grow quicker through this acquisition and then merger of
the wireless entities. By way of example, the number of cell
sites that TELUS will allow the Mike business to access in
western Canada are just simply mind-boggling and tremendous
in terms of opportunity. On top of that, it was very
important to us that we bring together economies of scale and
critical mass for an industry that's growing at dramatic
rates. Verizon as a partner in this wireless entity, through
TELUS and Nextel, two of the absolute dominant wireless
players in the United States give us an enormous opportunity.
And
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 6
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
finally, in the time I've come to know Darren and those on
the phone who've come to know me, he and I share the same
view. We are passionate about shareholder value and present
value of stock and that net present value through running the
operation. We share a common vision for growing this
organization and my role as the CEO of the new wireless
organization. I'm honoured to actually accept that role. And
now, let me talk a little bit about Newco and its opportunity
going forward. Darren mentioned some of these numbers, but I
can't... I cannot say them myself because it's just... it's a
fun morning, folks. This company will have the strongest...
spectrum position of any carrier in North America today,
fifty-five megahertz in the west, forty-five megahertz in the
east. We can participate in the auctions in Ontario in an
opportunistic way, but certainly don't desperately need to
win. We will be the leader in our ..., some 21% higher than
the other national carrier today, 21% pro forma. We have
total revenue... largest revenue. We added the most net
subscriber additions in the past twelve months and, most
importantly to the analyst community and to the institutional
investors, we are a growth organization. Pro forma, this
transaction, in the last twelve months, this company led the
Canadian wireless industry in revenue growth, the number one
comparable multiplier to be looking at in a growth industry.
So those that have known me for a number of years should know
I am very enthusiastic about this transaction. I myself am
tendering my shares into this transaction and fully support
the future... strategy of this organization and look to add
significant resources from both the TELUS wireless
organization and the Clearnet organization to build a
dynamic... operation going forward. Thank you. Let me turn it
back over to Darren.
ENTWSTLE: Okay, we'll hear from Barry Baptie now, our CFO.
BAPTIE: Thanks, Darren. I want to cover the financing and the
valuation impacts of this great deal. TELUS will finance this
transaction with 7.7 billion dollars in bank bridge
financing. This facility will finance the cash portion of
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 7
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
the acquisition and allow us to refinance existing debt where
necessary or desirable. The facility also contains provision
for a revolving credit facility that can be used for general
corporate purposes. These loans are fully underwritten by TD
securities and JP Morgan. We will be seeking an investment
grade debt rating and plan to refinance up to five billion
dollars in the public debt markets. This deal will leverage
our financial... capacity. Consideration for Clearnet is
structured as a fifty-fifty mix of cash and stock in order to
achieve three goals. Firstly, to maintain our ability to
finance future growth in the data and Internet space by
preserving a strong balance sheet and healthy cash flow.
Secondly, to maintain our investment grade credit ratings.
And finally, to maintain our TELUS dividend in order to meet
the expectations of existing shareholders. If we look at the
pro forma balance sheet at June thirtieth, 2000, as if the
transaction had already taken place, TELUS would now be a
16.3 billion-dollar company in terms of assets. We'd also
maintain a strong capital structure with net debt of 7.6
billion and total shareholder equity of 6.8 billion dollars.
As we move forward, our capital structure will... will
reflect our desire to highlight fully the value in the
constituent parts of TELUS. It will also high... highlight
the ability to establish a transaction currency for future
growth initiatives and to pursue the divestiture of non-core
assets where appropriate to highlight value and to refocus
the resources on core operations. I believe it is appropriate
to give analysts some view of what the new TELUS might look
like in the year 2001. In establishing this guidance, we
utilized the consensus street analyst view of TELUS and
Clearnet and made appropriate adjustments to reflect
operating and tax impacts of the transaction on the combined
new company. On the revenue line, the result for new TELUS,
including Clearnet, are revenues of 7.4 billion dollars in
2001. At the... at the EBITDA level, using the same method,
the new TELUS will have 2.7 dollars of EBITDA inclusive of
seventy to eighty million dollars of operating synergies. It
is also important to note that Clearnet, as well as... as
well as its analysts, are expecting Clearnet to turn EBITDA
positive in 2001. And finally, in estimating the new
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 8
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
TELUS cash net income, analysts can use the following:
interest at 8... 8%, a tax rate of 44% in 2001. Going
forward, however, we will be recording cash earnings per
share. And finally, for calculation of accounting earnings,
the transaction goodwill of approximately 5 billion
dollars is to be amortised over twenty years. Turning to
several valuation issues this transaction raises, first and
foremost, the focus of the new TELUS will be on growth in
revenues, growth in cash flow, and growth in cash earnings
and we believe this should be reflected in the valuation of
our stock. First, if we examine the valuation of Clearnet
itself in the context of several other recent comparable
transactions, you can see on the basis of revenue and
subscriber multiples on several past precedents our offer
clearly falls in line with these other transactions. Now,
some may say it appears to be at the high end of Canadian
precedents. However, we believe there are no Canadian
precedents for this transaction. We are taking the leading
wireless company in western Canada, which covers 24% of the
population, and extending this into the fast-growing,
national footprint. We achieve certainty of our national
spectrum position. We also achieve substantial synergies upon
the combination of our... wireline... wireless businesses.
And finally, we achieve 100% control, not a minority
position. No other Canadian wireless transaction involved
these key strategic or valuation elements. Clearly, TELUS now
needs to be valued on a sum-of-the-parts basis, given the
differing characteristics of our three underlying operating
businesses. Our wireline business value should reflect its
strong brand, its market position, and its strong cash flow.
TELUS Mobility's valuation should now reflect it being the
largest national player. It also has been rich in spectrum
and with strong operating metrics. Finally, our data business
generates revenue growth with over three hundred and fifty
thousand ISP customers and leading edge local portals will
represent increasing value as we move forward. Looking at a
simpler method of looking at TELUS as a whole, this method is
to look at and compare our valuation multiples to growth
rates. Today, TELUS is trading at two-point-six times 2001
street consensus total revenues while our estimated CAGR to
the year 2003
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 9
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
exceeds 8%. TELUS is trading at roughly seven times adjusted
EBITDA for next year while our estimated CAGR to 2003 is 16%.
I know every one of you will have your own way to value
TELUS. But looking at all our measures -- growth rates,
capital flexibility, free cash flow, dividend, valuation
multiples -- we're convinced TELUS represents the best
package of any company in the Canadian telecom sector. Back
to Darren.
ENTWSTLE: Thanks, Barry. This is an exhilarating moment. We've just
taken a quantum leap in the implementation of our growth
strategy by addressing, in part, the immediate priorities
that I outlined for you only forty days ago. I said I was
attracted to TELUS because of its growth potential and here
we are turning this potential into reality. TELUS is now
accelerating towards its strategic intent of becoming the
leading player in converging voice, data, IP, and mobility
services into solutions that deliver competitive advantage to
our customers. We have the capabilities, resources, and
culture necessary to forge this leadership role for TELUS in
a North American telecommunications market. While the
combination of Clearnet and TELUS Mobility is powerful, there
remains huge, latent values still to be exploited in the
market and we have just created the vehicle to realize this
value for our current and our future shareholders. Clearnet
and the new TELUS have much in common, including a passion
for growth, compatible CDMA technology and a belief that the
right culture delivers competitive advantage. Together, we
will offer the country's most compelling solutions for our
customers supported by our high quality networks. You can
expect to see the team in TELUS executing similar bold moves,
including organic investments, opportune acquisitions, or
strategic partnerships. Specifics will differ, but our
behaviour will be defined by certain hallmarks. We will act
quickly and decisively in a manner that is consistent with
our strategy. We will focus relentlessly on building our
competitive position in the high-growth, high-margin areas of
data, IT, and mobility. And we will continue to pay careful
attention to the economic benefits and financial implications
of our actions. Every step we take will be founded by sound
business principles. When I was talking about aggressive
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 10
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
growth in early July, I referred to a sensible balance
between growth and earnings. We're here to build a profitable
business, not to have an adventure. As we propel TELUS along
its growth trajectory, we expect our progress to be reflected
in the valuation of our stock. Unlike other growth stocks,
however, TELUS will be a growth stock with strong cash flow
and cash earnings, a unique investment opportunity when you
contrast this with the hollow promises of future earnings for
many pure growth stocks or the spiteful ambitions of
organizations handcuffed by a singular fixation on earnings.
TELUS will be a stock of choice for investors seeking an
exposure to the fast-growing data, IP, and wireless market,
but who expect, who demand earnings be a natural outcome of a
successful strategy, not a distant aspiration. And that's why
we are such an outstanding investment opportunity. Let me
repeat: this deal is significant not only in itself, but what
it says about who TELUS is now and where we will be taking
this company in the future. We are well-positioned to pursue
aggressively our growth strategy and we have the financial
muscle and capabilities to govern our own success. Finally,
remember this is only Chapter One of what is going to be an
important Canadian story of growth and development. I'll be
back in another sixty days' time, as promised, to deliver
Chapter Two. Meanwhile, watch this space. Thank you very
much. George, Barry, Bob and myself will now welcome your
questions.
OPERATOR: Ladies and gentlemen, we will now begin the
question-and-answer session. If you have a question, please
press the '1' followed by the '4' on your push-button phone.
You will hear a three-tone prompt acknowledging your request.
If your question has been answered and you wish to withdraw
your polling request, you may do so by pressing the '1'
followed by the '3'. If you're on the speakerphone, please
pick up your handset before and during your request. One
moment please for your first question. Jonathan Robinson of
National Bank Financial, please proceed with your question.
ROBINSON: Yeah, hi, guys. I wonder if you could shed a bit more light
on the 1.6 billion of the operating synergies,
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 11
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
splitting it between revenue and cost. I missed the timeframe
you expect to achieve those synergies. And also, Darren, I
think you mentioned that your... your build versus buy
decision had revealed one and a half billion dollars of
incremental value. Maybe you could give a little more
information on that.
WHEELER: Okay, thank you very much, John. And Darren, you going to
take that one?
ENTWSTLE: I'll... I'll open up.
WHEELER: Yeah, and I just... just... I didn't get a chance to make
a... a comment at the start. There's a lot of analysts on the
line and I... I'd like... like to ask the analysts to try to
limit their questions to one at a time and we'll... we'll
take a cycle to... through for your second or third question
if it doesn't get answered... asked by somebody else. Go
ahead, Darren.
ENTWSTLE: Thanks very much. To answer the question, as I've said, we
expect to garner between 2.1 and 2.4 billion dollars' worth
of synergy as a result of undertaking this deal, about 1.6
billion or approximately twenty-four dollars per Clearnet
share will come from operating synergies, operating synergies
related to revenue enhancement, operating cost reduction, and
capital cost reduction. The split of the 1.6 billion is
approximately 1.1 billion coming from capital and operating
cost reductions and half a billion approximately coming from
revenue enhancement, which will relate to the increased focus
that we'll have on the business market, the high growth that
we expect to achieve from data, IP and e-commerce,
facilitated by the spectrum richness that we have and by
driving up our ... and realizing low return. Insofar as the
question's concerned about the 1.5 billion of incremental
value of buying versus building, essentially, that's the
quantification of lead time to market, our avoidance of the
significant costs associated with securing spectrum and,
additionally, the richness of the spectrum where we have a
forty-five to fifty-five megahertz differential between
buying Clearnet and the ten megahertz that we would pick up
through the auction
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 12
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
process. I don't know if Barry wants to comment further on
that.
BAPTIE: I think you covered it fully, Darren.
WHEELER: Yeah, that's great. Thanks very much.
OPERATOR: Your next question is from Michael Graves of Standard Asset
Management. Please proceed.
GRAVES: Good morning. I'd like to talk a little more about
consolidation. What ramifications of your move do you think
there will be in the market with respect to consolidation in
general? Belatedly I'm trying to limit this to one question.
You implied you're not done with acquisitions. Is your next
most likely type of acquisition something on the wireline
side to support data or are you committing to wireless data
and not going to pursue wireline data at all, say, through
someone like GT Telecom?
ENTWSTLE: That's a good question. It's difficult to forecast perfectly
what compelling opportunity we will pursue next, but let me
give you a model that perhaps can be informative. In terms of
acquisitions of this magnitude, you can expect to see us make
them in two particular areas. One, in the wireless arena and,
two, around data and IP which indeed may constitute a
wireline investment. But those are the two areas where we...
where we will be focussing our resources. I don't know if
George wants to make a comment about the consolidation of the
mobile industry in particular.
COPE: Well, I think the only thing I'll add is what I said at the
beginning. This transaction mitigates what the investors in
Clearnet have been talking to me the most about and that is
the Canadian marketplace with a virtual certainty of five now
reduced certainly to, if anything, a sure mitigated
opportunity that we've got a great shot at a four-industry
structure again. And that has been nothing short of tremendous
for investors to date in the Canadian wireless industry.
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 13
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
GRAVES: Thank you.
WHEELER: Next question.
OPERATOR: Your next question is from Ron Mayers of National Bank
Financial. Please proceed. Mr. Mayers, please proceed with
your question.
MAYERS: Hi, sorry to keep you waiting. There... there is some issue
here on... or there appears to be some regulatory issue here.
My question is: is it your intention to place the assets in a
trust to facilitate an October closing? Or is it your belief
that you can actually get the regulatory approvals that you
need by October?
ENTWSTLE: Our view is that we can get the regulatory approvals that we
need by October.
COPE: Which leaves us -- this is George Cope -- leaves us a number
of different opportunities with Industry Canada within the
context of the spectrum capital. We will be moving
aggressively to address those issues and have already begun
discussions with Industry Canada and we will report back more
as we... as we can share it.
ENTWSTLE: On that particular point, we would look to divest likely the
excess spectrum that we have over the fifty-five megahertz
capital in western Canada and recycle that money into the
spectrum auction itself.
OPERATOR: Your next question is from Rick Grubbs of Credit Lyonnais.
Please proceed. Mr. Grubbs, please proceed with your
question.
GRUBBS: Oh, yes, good afternoon, guy... good morning, guys. Just
wondering, in the... in the sense of the... the listings...
TELUS' listed on Toronto and Clearnet in US as well. Will
there be any kind of a US listing in the stock?
ENTWSTLE: Yes... the increase in liquidity -- there's almost 72%
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 14
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
increase in the non-voting float -- will lead us to seek a
listing in the US on either Nasdaq or NYSE.
GRUBBS: Okay, great, thank you.
OPERATOR: Your next question is from Jeff Gabarkovs of Nesbitt-Burns.
Please proceed.
GBRKVS: Thanks very much. You mentioned that you were planning to
refinance five billion in public debt. Can you just take me
through the... mechanics of it in terms of what issues would
be refinanced at what point in time?
COPE: Okay. The... we'll take the bridge, the five-billion-dollar
bridge to take out financing. Almost immediately upon the...
the close of the deal, we'll be out in the street.
GBRKVS: Okay, there's the Clearnet notes...
COPE: Okay, the... well, part of that depends upon the... the
Clearnet noteholders themselves. However, we built into the
financing bridge the capability to take them out if we have
the... the ability or if they so desire.
GBRKVS: Okay, well, this would be a change of control, so would you
not be tendering for these bonds?
ENTWSTLE: Let Bob McFarlane answer this question, being most familiar
with the ... notes.
MCFRLANE: Thanks, Darren. As for our change of control provisions and
certain of our public debt, I encourage people to read those
provisions. TELUS is an investment grade company and, as
Darren outlined and Barry, with significant shareholder
equity and, consequently, it is not our understanding that a
change of control is triggered by this transaction as it
relates to our notes. Of course, people will have to
ascertain that for themselves. I think the real opportunity
here for investors is the fact that TELUS represents a
tremendous credit, a solid investment grade credit, and so
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 15
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
consequently, there is significant credit enhancement that is
occurring immediately in relation to our debt to the benefit
of all our... all our... all of our investors.
GBRKVS: Okay, thank you.
OPERATOR: Your next question is from David Lambert of National Bank
Financial. Please proceed.
LAMBERT: Yeah, hi, congratulations on the deal. I was wondering if you
could give us some more insight into your premium that you're
paying on the Clearnet stock and if the European auctions
are... are affecting the planning or the valuation of the...
of the Clearnet shares.
ENTWSTLE: Okay, I'll take that particular question. One... I think if
you look at transaction comparables, we've paid a
middle-of-the-road value for this particular asset. I think
it is a fair value for the Clearnet shareholders and leaves
latent value for us to remain to be exploiting at TELUS. So I
think it stands well when you put it in the contrast of... of
the comparables. As Barry said in his particular remarks
today, there are very few precedents with respect to this
deal. We are taking 100% control of this particular asset. In
addition to that, we are catapulting ourselves into a market
leadership position. We're... eliminating uncertainty
inherent in any auction process and we're picking up a highly
talented management team. In addition to that, we've got 2.1
to 2.4 billion dollars' worth of synergy which I can tell you
can only be picked up by a national investor, by a Canadian,
essentially. And of that 2.1 to 2.4 billion, about two thirds
of it comes from cost reduction, capital avoidance, and the
remainder comes from realizing significant tax savings
through the use of Crystal's -- or Clearnet's, rather -- tax
loss carry-forward which is very attractive for us. Going
forward, I think this reflects the fact that we're placing a
considerable bet, vote of confidence, if you will, in the
mobility industry. If you have a look at mobility stocks in
Canada, they've been slightly depressed over the last twelve
months as a result of the auction process, but we
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 16
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
expect the next phase of growth to come very shortly. If you
look around the G-7 countries themselves, once mobile
penetration in a country gets to be between 20 and 25%, it
takes off rapidly thereafter. And certainly, if you combine
what we will be doing on the mobility front with what we'll
be doing on data and IP and the synergies between wireline
and wireless, this gets to be a very compelling and indeed an
economic opportunity for us to pursue.
LAMBERT: Thank you.
OPERATOR: Your next question is from Greg McDonald of Morgan Stanley.
Please Proceed.
MCDONALD: Thanks. Good morning, everyone. Question goes to some of the
divestiture potential that you talked about. I guess number
one, in terms of sale of the excess spectrum in the west that
you referred to, I wonder first if you might indicate whether
you're currently speaking with anyone on that. And, secondly,
is that the issue that you were referring to when you... when
you talked about potential divestiture... divestiture of
non-core assets or is there something else within the... the
group that you would look at that you consider non-core?
ENTWSTLE: Okay. We're not talking to anyone at this point in time about
the sale of the excess... excess spectrum in the west, with
the exception of Industry Canada, of course. In terms of
divestitures, we have not included within our synergies any
sums related to the sale of that excess spectrum. So that is
pure upside for us to realize. We will be undertaking a
number of divestitures. Essentially, the model that we will
be using determines which assets we will be culling from our
portfolio, will be those assets that are no longer aligned
with the strategy of this company that I've just espoused,
those assets that are underperforming or those assets that
have realized full value and have nowhere to go but to
deteriorate. We will also seek demonetization of our asset
base as well. I can't give you any more information than
that. This is a well-scoped-out plan of divestitures to build
a war chest for future acquisitions at TELUS. I
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 17
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
think the thing that I would do by perhaps giving you more
information would undermine our ability to realize full value
for those assets when we actually proceed with the sale.
MCDONALD: Okay, can you tell us whether the ESMR business is a part of
what you consider non-core?
ENTWSTLE: Oh, no, definitely not. One of the attractions to us in...
buying Clearnet in the first place was the Mike business.
Why? Because it fits very well with our focus on business.
Why? Because it has the highest ARPU in the entire industry.
Why? Because it has the lowest churn rate. No, we stand fully
behind that business.
MCDONALD: Thanks very much, guys.
OPERATOR: Your next question is from Rob Goff of Credit Suisse First
Boston. Please proceed.
GOFF: Thank you very much and congratulations.
ENTWSTLE: Thanks, Bob.
GOFF: Could you give any further details on the breakdown of that
1.1 billion in operating versus capital savings on the deal?
ENTWSTLE: Yeah. In terms of the operating cost savings, we expect to
realize significant savings from the elimination of roaming
costs between TELUS and Clearnet, although we have not
included in the quantification any better terms and
conditions that we could exact from either Rogers or Bell
Mobility, given the volume purchasing power we will now have
with the traffic on our mobility network. We have not
included that. Rationalization of corporate and head office
expenses are also included. Consolidation of marketing and
advertising expenditures and integrating our network
operations. In addition, we expect to realize savings on the
capital front of some two hundred and fifty million dollars
over the next five years and that will be from avoiding
Clearnet's need to expand in the
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 18
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
west and TELUS' need to expand in the east.
GOFF: Very good. Thank you.
OPERATOR: Your next question is from Richard Talbot of... RBC Dominion
Securities. Please proceed.
TALBOT: Thanks very much and congratulations on the deal. My question
had to do with the differences in the... in the culture
between the two companies. I wonder if you could comment on
how you'd see integrating the two and really tying the... as
much as you can, the goal of performance to the actual effort
and results that are produced.
ENTWSTLE: Okay. I think this is a question that perhaps both myself and
George should speak to. A couple of things: number one, in
terms of our passion for the right culture driving
performance and competitive advantage in this organization,
George and I are as one. We share a belief in the importance
of people, particularly within today's environment where
there is an imbalance between the demand and supply for
talent. In terms of culture, we share a passion for growth.
We both believe in spirited teamwork and we both know that to
be successful going forward, we need to be innovative. So I
foresee a hell of a lot of alignment between the culture that
we're moving towards at TELUS and the culture that's already
embraced by Clearnet.
COPE: And I... I echo the same. I also... for the, again, US
investors on the phone who wouldn't be as familiar with
TELUS, you can obviously hear in listening to Darren the same
type of aggressive approach to the marketplace that Clearnet
has taken and that, combined with, we believe, a significant
amount of our executive group also joining this force, will
go a long way to blending these two cultures together. Our
people are growth-oriented. If you have one message today,
you've got to have that TELUS is growth-oriented. That's why
I'm on board and why I think our whole team will be on board.
TALBOT: Thank you. We look forward to Chapter Two.
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 19
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
ENTWSTLE: Thanks, Richard.
OPERATOR: Your next question is from John Grandy of Yorkton Securities.
Please proceed.
GRANDY: Hi, good afternoon. You talked a little bit about how you
were planning to deal with the... the excess spectrum which
you'll end up owning in western Canada. I wonder if you could
also talk about a potential issue in terms of the... the
Competition Bureau, given that your market share in western
Canada will probably be over the... the threshold which...
which would likely lead to a Competition Bureau review.
ENTWSTLE: That's not our view on that at all and we don't expect any
issues from the... Competition Bureau.
COPE: And... and let me add to that. There is no industry more
competitive in this country than the wireless industry and
we're talking about an industry that, even after the merger,
has three competitors... two competitors in that market on
top of us and an auction coming forward with another national
company, currently a regional company, with expectations
based on the public record that they want to be national.
We... obviously have a process to go through with the
Competition Bureau, but there is no industry more competitive
in this country.
GRANDY: I wouldn't argue with that, but I... I thought TELUS had
about a 60% market share given Clearnet's initial subscribers
so that would put you at a level where there would be an
automatic review.
COPE: Well, we will be going to the Competition Bureau. Both...
both ourselves and TELUS are relaxed given the environment,
competitor environment that we are in today.
GRANDY: Okay, thank you.
OPERATOR: Your next question is from Drew Hanson of DLJ. Please
proceed.
HANSON: Yes, good morning, congratulations. In relation to the...
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 20
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
the cost or revenue synergies you mentioned -- and it sounds
like a significant co-mingling of assets, including spectrum
-- can you relate to how that can be accomplished in light of
the Clearnet public securities? Do they need to be, again,
removed in order to achieve those cost... cost synergies,
revenue synergies, capital savings I think you just went
through?
COPE: Can you ... we apologize. Can you repeat the question again
so we get it right?
HANSON: Sure. Can you... maybe... maybe Bob McFarlane can address
this, if you can accomplish the revenue's cost savings that
were outlined in relation to the... the Clearnet public debt,
if there's going to be a complete merger of the two companies
and having the remaining Clearnet public securities remain
outstanding.
MCFRLANE: Well, first of all, it is a takeover bid for the Clearnet
shares and so what's being contemplated is a... is a takeover
of Clearnet by TELUS. And accordingly, it would be my
expectation that not only would shareholders who elect to
shares... obtain TELUS shares, essentially the... the debt
would either be inherited or possibly refinanced by TELUS to
the extent that it's inherited and... and is... and survives.
Obviously, TELUS is an investment grade credit and, as I
mentioned earlier, there's significant credit enhancement.
Specifically, you asked about cost synergies in the business,
in... in... as for... I can only speak to the wireless side.
I think some of the things that should be obvious to people
is TELUS is one of the largest providers of transmission
traffic in the country. One of the largest expense lines on
Clearnet is transmission. There's clearly synergies there. We
have automatic roaming synergies which Darren has also
outlined. We have common ability for increased common cell
site location which will displace not only some operating
expenses such as rent and maintenance at the cell site level,
but obviously on the capital front. The list goes on and on
and is topped off with a rather... somewhat unique benefit
which TELUS describes and that... that is because they're in
the similar business in Canada, they will be crystallizing
Clearnet's
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 21
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
over one billion dollars of tax loss carry-forward. So all
combined, certainly, there's no doubt that wireless business
will not only be strong on the revenue side, it'll also be
stronger on a cost side. And for any debt holder, I... I
think it's obvious there's tremendous credit enhancement
occurring through this announcement today.
HANSON: Have you already approached the US agencies on a... on a
rating or... in light of this acquisition on what the rating
would be? I know the Canadian agencies have ... rating on
TELUS.
BAPTIE: Drew, it's Barry. No, we haven't. We will be doing that in
the very near future.
HANSON: Okay, thank you.
OPERATOR: Your next question is from Jeff Heines of Deutsche Bank.
Please proceed with your question.
HEINES: Hi. I wonder if there's any thought to doing an IPO or a
separate listing for your wireless business like your friends
of Verizon and most of the other telcos are doing down here
in the US. And one question for, I guess, George over at
Clearnet. Did Clearnet's board consider any other offers
against the TELUS offer?
COPE: Yeah, absolutely.
ENTWSTLE: Okay, let me start off. At TELUS, with respect to the
mobility business, number one, we're committed to
highlighting the value; number two, we're committed to
establishing a transaction currency which will fuel future
growth ambitions that we have for this particular business
and for establishing a currency so that we can remunerate the
people within the mobility business against a balance of
corporate and business unit objectives. Against that
particular model, we will be considering a number of
mechanisms including a pure IPO, a tracking stock, indeed, a
strategic partnership. And we've come to no conclusions as of
yet.
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 22
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
COPE: And Jeff, it's George speaking. You... you know me well
enough that one of the objectives for us, for making sure
value creation is possible going forward, is all the
alternatives that've just been lined out for the company
going forward. And with some of our people involved,
including Bob McFarlane, we're going to address those issues
as aggressively as we can with the team from TELUS. Now, let
me read a prepared statement on your question, your second
question. "Clearnet has committed to TELUS and Clearnet has
agreed not to solicit any competitive offers. If, however, we
receive any unsolicited offers within a seven-day period,
then we will respond." I will not comment any further as to
the likelihood of competitive offers this morning. Thank you.
HEINES: Great. Thank you very much.
OPERATOR: Your next question is from Suzanne Stein of Goldman-Sachs.
Please proceed.
STEIN: Hi, congratulations. I'm a little confused as far as the
rules regarding the desegregation of spectrums. Do... can you
talk a little about the rules surrounding the spectrums
that... as far as you know it from Industry Canada that you
need to eliminate?
COPE: Yeah, I'm... I'm happy to... to talk about it -- it's George
Cope -- and give you just a general overview here,
particularly, again, for... for our American investors. I
mean, first of all, let's try and make sure everybody
understands that the cap in Canada, as it currently stands,
is fifty-five megahertz. That is the cap. With the proposed
merger in western Canada, we will have excess spectrum over
that cap. We have already begun discussions with Industry
Canada. Clearly, the cap is fifty-five megahertz so, as
Darren mentioned, one of the clear alternatives is a
divestiture of the additional spectrum and we're in
discussions with Industry Canada in terms of that process.
Then there are a number of different ways Industry Canada
will look at helping us through that process, but clearly,
we... we expect the
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 23
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
full support of Industry Canada and we will obviously operate
within the guidelines that Industry Canada has set out for
the wireless industry in Canada.
STEIN: But is it your understanding that you can do that privately
or that has to be facilitated by Industry Canada and possibly
put into the upcoming auction process?
COPE: Any... any transfer of licenses in Canada requires a
blessing, if you will, by Industry Canada. So this process
will be in consultation with Industry Canada, not without
Industry Canada. Hopefully, that's a helpful... a helpful
answer to you. But this is a first of its kind in Canada. We
know the rules. Industry Canada's put them, they're very
clear and we'll act within them.
STEIN: Thank you.
COPE: Thank you.
OPERATOR: Your next question is from Stephen Salamon of HSBC
Securities. Please proceed. Mr. Solomon, please proceed with
your question.
SALAMON: Congratulations, everyone, on a great transaction.
ENTWSTLE: Thank you.
COPE: Thanks.
SALAMON: And I just wanted to ask a little bit about the consumer
business. Clearly, the acquisition of Clearnet gives you a...
a view into the consumer business in eastern Canada. I guess
the question is: is that something that you would be
interested in pursuing, particularly along the lines that
you've talked about, the... the data side and the... the
wireless side.
COPE: Well, on the wireless, certainly. The... the business market
success of Clearnet in the mid-business market's pretty clear
to the marketplace if you look at our Mike
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 24
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
success and our PCS success. If you look at the Canadian
wireless industry today, you know, we're going from the 25%
penetration to 75% penetration based on general available
forecasts from the analysts. What that means is there's 70%
of Canadians, consumers who today don't have wireless phones.
So we're not going to ignore that part of the market. At the
same time, we're going to continue our focus on the business
commercial market in, frankly, an expanded way because of the
ability to... to add footprint to the Mike network and our
PCS network. And of course, our local loop substitution
strategy across Canada -- and particularly, obviously, in...
in eastern Canada, we've had tremendous success -- will
continue. And also, as everyone knows, just last week, we
launched a digital prepaid service for the first time ever,
focussed at the consumer market and particularly the youth
market as it will be the first prepaid service in Canada to
also have web access and that is all rolling out throughout
this month.
SALAMON: Now, I guess the flipside to that question, George, is do
you... how do you foresee Mike supporting the... the business
initiatives that... that TELUS has taken on the wireline
side?
COPE: Well, one of the great things first, Steve, out of this
transaction for people is the arsenal is much fuller now in
terms of full sweep of services for corporate Canada on a
national basis, both wireless and wireline. And on the Mike
side, I mean, probably... you know, I can't... I don't know
what words to use to describe how enthusiastic I am now for
the prospects of the Mike business going forward, more so
than ever before, because of the... the coverage, a footprint
that we can access in the west. And as everyone knows, we
already have an enormous footprint in the east. And we have
committed already, in fact, to Motorola to expedite a
build-out of an additional four million POPs on the IDEN
business as quickly as we can.
SALAMON: Great. Thank you very much.
OPERATOR: Your next question is from Bob Krishess of Credit Suisse
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 25
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
First Boston. Please proceed.
KRISHESS: Just a quick question, follow-up on the debt so we can keep
McFarlane on the phone as much as possible here. Could you
just... is the assets... is the wireless assets going to be
actually acquired at the parent company or is it going to
be... at a sub? I'm just trying to figure out if the Clearnet
debt is possibly going to be sitting at a subsidiary here or
at the parent here.
MCFRLANE: A require... it'll be acquired at the parent level.
KRISHESS: Thank you.
OPERATOR: Your next question is from Dvai Ghose, the CIBC World
Markets. Please proceed.
GHOSE: Yeah, hi. My question's for George Cope in terms of
valuation. I'm wondering what... what the hurry was to sell
in this current environment. You talked about some precedent
transactions and there really aren't any in Canada, but there
are in the United States. And while I'm not suggesting that
Clearnet necessarily deserves a per subscriber or service...
revenue multiples associated with voice stream or the aerial
transactions, presumably, if you'd waited a couple of years,
you could've had more bidders and much more of an
international style valuation as have been associated with
those deals as opposed to this deal which is at a significant
discount. And given the fact that your stock traded as high
as seventy-two dollars per share earlier this year without a
bid in place, I'm wondering if you could just justify the
valuation.
COPE: Sure, I'm happy to justify valuation. I think it is a
tremendous deal for our shareholders and everyone knows Bob
McFarlane, and George Cope are pretty focussed on present
value of the wireless business, we think, more so, than most
operators. 61% premium to the twenty-one day trailing average
in the industry environment which changed after the minister
announced a wide-open auction process is pretty... pretty
reflective of a... of very
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 26
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
fair valuation for our shareholders, and the transaction
structure allowing our shareholders to participate in the up
side which is clearly a stronger and better wireless
organization than Clearnet stand-alone or TELUS Mobility
stand-alone and, quite frankly, the strongest wireless
company, by any metrics in North America and on a Canadian
leadership position. This is a transaction we... we endorse
for all those reasons and we think our... our shareholders
have done tremendously well. And I will also mention not only
is that the view of George Cope, it's the view of the board
at Clearnet, including some pretty significant strategic
partners who understand the wireless business such as
Madison-Dearborn, such as Nextel, and such as Motorola.
GHOSE: Thanks, George.
OPERATOR: Your next question is from Glen Campbell of Merrill-Lynch.
Please proceed.
CAMPBELL: Yes, thanks very much. I wonder if you could clarify, to the
extent you know, how roaming will work going forward. You've
got... I guess, deals with Cantel on the Clearnet side and
with Bell on the TELUS side. And I also wanted just to... you
know, as a follow-up, I wanted to understand the Verizon deal
a little bit better as well; how that works, what systems
you'll use, what... what it's going to cost you.
COPE: Yeah, thanks, Glen. Let me try to start on the... the... the
side that affects Clearnet and talk about the... the Rogers
relationship. Let me first of all say, as I've said probably
before, Rogers has been a tremendous supplier to Clearnet and
provides us national footprint and we hope those
relationships will continue as positive in the future as we
can have them. It's given us great footprint. There are
clearly other opportunities now to expand our footprint with
the merger and we'll utilize those where it makes perfect
sense for ourselves and the merged organization. I can't
comment on Bell Mobility. We don't have a relationship there
but let me turn it over to the TELUS folks.
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 27
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
ENTWSTLE: In terms of... let me just speak directly to the question,
Glen, on Verizon and what it's going to cost us. It's going
to cost us nothing from an incremental perspective. We can
absorb that within the economies of scope and scale in the
brand... in the present branded technology agreement. So the
breadth of branded technology agreement that we have in place
extends previously from GT down through Verizon, covering
both the wireline and the wireless business and extending to
the Verizon brand as well. So we have complete access within
that particular contractual arrangement to the brand, to the
applications, to the services, and to the technology and
that's all enshrined within the agreement. And that's why I
made my comments at the outset that this particular deal
allows us to really crank up the Verizon relationship. And
clearly, when you look at it, we've got a situation where
we're combining Canada's largest mobile operator in terms of
revenues with the largest mobile operator in the US,
providing an opportunity for a seamless service for business
customers all across North America. And when those 25.5
million customers at Verizon come north of the border, well,
they're going to be roaming onto our network. So we see a
huge amount of benefits there.
COPE: And my... I have two additions to make. Glen, one of the
great parts of this transaction on a national basis is that
roaming revenue coming to this entity and, as mentioned,
twenty-five million subs and on top of that, the five million
subscribers plus that Nextel has in the US And with their
exploding growth, you know, you couldn't have a better two
organizations to... to leverage a national footprint in
Canada off of. And we have both.
CAMPBELL: So just to clarify, I'm not hearing you saying that on the...
the analog roaming on Canada's side that this deal will sort
of trigger a breach or... or require renegotiation of... of
the Rogers or Bell deals. It's a year option.
ENTWSTLE: It does not... it does not breach. And let me just say again
that... Rogers has been a tremendous supplier, and
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 28
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
we have a great relationship with those folks on that side,
obviously. And... we're going to... continue to... hopefully
represent the commercial volumes have bringing to the table
-- maybe that can be reflected in something that benefits
both organizations in the future or on the mobility... Bell
Mobility side.
CAMPBELL: Okay. Again, to confirm on the other part... the benefits of
this Verizon deal in terms of roaming and systems. Are those
in your synergy numbers or... something on top of that?
COPE: That's on top of the... synergy numbers. Not included. Not
quantified.
CAMPBELL: Both systems and roaming?
COPE: That's correct.
CAMPBELL: Excellent. Thank you.
OPERATOR: Your next question is from Doug Kirk of Nesbitt-Burns.
Please proceed.
KIRK: Good morning... just... want to deal with... branding and
management structure. How's the new wireless entity going to
be structured? Is it going to be managed out of... Toronto
and consolidated there? And what implications does that have
for... for the western operations. And... when... when do you
anticipate changing the branding or are you going to
change... What aspects of the branding are you going to
change?
ENTWSTLE: Head office for... the new TELUS-Mobility business will
remain in Calgary... although will remain... we will continue
to have a significant corporate presence, obviously, in
Toronto in the east. The management that will be coming on
board from Clearnet will not be asked to relocate. One of the
reasons behind doing this deal in the first place... was to
get hold of the high-quality management that exists at
Clearnet, so we're not going to piss away that particular
opportunity by forcing them to
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 29
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
relocate. That's number one. Number two, with respect to...
brand... TELUS is going to be the brand, although clearly we
see a lot of value in the Clearnet name and the... and the
Mike name. And can foresee a situation where we have TELUS as
an umbrella brand and use very effectively... Clearnet or
Mike for targeting the consumer and business markets
respectively.
KIRK: Okay. Well... And that would leave you sort of three brands
in the East then. Would you just have two ultimately? A
consumer brand or what?
COPE: George. Could I... let me... let me try to help a little bit,
here in my role as CEO. All... all we're doing now is telling
our competitors what we're doing. So, stay tuned folks, we've
got three beautifully powerful brands to hit the marketplace
with. But... since we know the competitors are on the phone,
they'll have to stay tuned too. Next question.
ENTWSTLE: Next question, please.
OPERATOR: Your next question is from Mary Anne DeMonte-Whelan of BLC
Securities. Please proceed.
WHELAN: Thank you. Just... two questions. First of all, with respect
to the pre-paid program that Clearnet just recently
introduced. You going to keep that prepaid program or change
it slightly because TELUS' program is... is different? And...
secondly, a question for Darren... with respect to the churn.
You have higher churn at Clearnet, and a very low rate in...
the TELUS-Mobility. What type of plans do you have to keep
that down or bring it down collectively?
MCFRLANE: Let me... let me try both. And then if I don't give the right
answer, Darren will answer the one on the churn, too. Now
let's... dealing with the first one, pre-paid, well, I think
it's... it's an all-encompassing thing. Until the transaction
closes it's business as usual. Obviously when the transaction
closes, we're gonna take the best of all programs and roll
them into the
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 30
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
marketplace. And, you know, one of the great advantages for
the Clearnet shareholders, we get access to the analog cost
and one of the great advantages on the TELUS side, we get a
national pre-paid program and a lot of other national
programs going out. In terms of churn, now let me just speak
on Clearnet's behalf. First of all, as everyone knows,
historically we had the lowest churn in North America. That
has not been the case the last two quarters. As we indicated
on a conference call we are working diligently to address
that issue and will continue to do that in a very aggressive
way. And hopefully to the satisfaction of our... our new...
new partner, and I guess my new boss.
ENTWSTLE: I guess... just... Bob's comment on... we're into a situation
where... a big sort of number of times in the past. We're
gonna take best package from both organizations. That's
number one. Clearly, TELUS has done an excellent job in the
west of keeping churn down and has a strong relationship...
with its customers. I think as I've said, one of the metrics
-- key attributes -- of the new TELUS-Mobility going forward
it's that we'll have lowest churn in the industry at one dot
seven-four percent. What, you know, constitutes churn? You
have to have a high quality of service... and your
proposition needs to be compelling and remain compelling over
time. And one of the things I've looked at is the forty-five
to fifty-five megahertz of spectrum that this enlarged entity
will now have. And that's speaks to the quality of service
that we'll be able to offer our customers on a going-forward
basis, and the functionality that we'll be able to offer them
-- indeed the quality of our marketing proposition. I guess
something... my last point would be... how will we keep it
down... going forward? Well, I'll set George a churn... a
churn target and I'll kick his ass if he doesn't get it.
COPE: /laughs/
OPERATOR: Your next question is from John Henderson at Scotia Capital
Markets. Please proceed. Mr Henderson? Please proceed with
your question.
HENDRSON: Hello, sorry about that. I was on mute. I'd like to go
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 31
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
back to the synergies and the timeframe. I heard the question
on asking when the synergies... over what timeframe they'd be
expected to be realized, but... didn't hear an answer. And
also if you could... stay on the five hundred to eight
hundred minutes of tax loss carry-forwards. Is that...
something that'll be realized sort of in the next year or
two. Or... and... and what would have it... how... how
quickly would have been realized if it were just under
Clearnet.
BAPTIE: The last part of the question I'll leave to Bob to answer...
with respect to when Clearnet could have realized them. With
respect to the TELUS, this is Barry speaking... John. They
will... realized dependent on the... corporate structure we
pick, almost immediately. So... but over the next three of
four years we'll be fully utilized. With respect to the...
when the synergies kick in, depending on the type of synergy,
some of them'll kick in immediately as we... reduce
duplication, or harmonize things like... advertising and
marketing programs. Some of the other ones such as the
revenue synergies will... build up as we... put together the
marketing programs to target... you know, the small-medium
business market and... you know, with bundled products from
the wireline etcetera. So they'll... they'll be longer in
their realization.
HENDRSON: What do you expect, say in year three, your annual operating
cost synergy to be and your annual revenue synergy to be?
BAPTIE: Good question, John, but I won't be going there.
HENDRSON: Oh, Jeez. Okay.
BAPTIE: Do you want Bob to pick up on the...
HENDRSON: Please.
MCFRLANE: In respect to the question as to what timeframe would
Clearnet likely... realize shelter from its... ta... tax loss
carry-forwards, the answer is... at least three
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 32
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
years out. And therefore there's a significant difference in
terms of the net present value impact of those losses in the
hands of TELUS as compared to Clearnet.
BAPTIE: Now just follow up to say our estimate is that they'll be
fully utilized and none will fall off the table.
HENDRSON: Right. Thank you.
OPERATOR: Your next question is from John Wilson of UBS-Warburg Please
proceed.
WILSON: Yes, good morning. I guess... just trying to follow up on
some of the earlier comments I'm... I'm still a little bit
confused on. First of all... you mentioned on the revenue
synergies side, I think it was five hundred million in
revenue synergies from business and data and obviously a key
focus here for TELUS going forward on data. When you look at
that roll-out, does that... does that... contemplate
increased spending on capex to accommodate your new services
and data, and is that reflected in your two hundred and fifty
million, I think you said, saving in capex... for the
wireless operation? In other words, is that two hundred and
fifty million net of increased spending you're gonna do for
the operation on data, or is that data spending still to come
and we'll find out about that later?
ENTWSTLE: The costs of realizing the synergies are fully
included within the synergy modelling.
WILSON: ...
ENTWSTLE: Does not come later,. in direct response to your question.
WILSON: But so in that number you've included... an increased ramp
on data spending?
ENTWSTLE: That's correct.
WILSON: Okay, and finally, just one really quick one. We... we
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 33
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
talked about a US listing right at the very beginning. I'm
still unclear. You mentioned a couple of options for the
wireless unit in terms of realizing value. When you talked
about definitely doing a US listing, are you talking for
TELUS or you talking for the wireless operation?
ENTWSTLE: We're talking about for TELUS.
WILSON: Okay, thank you.
WHEELER: Okay, operator, we'll take one more question and... we'll
have to... close it down.
OPERATOR: Thank you. Sir, your final question is from Bryan Long of
Chesapeake Partners. Please proceed.
LONG: Sorry, I have a couple-part question. Are Motorola and Nextel
guaranteed to receive their stock election or are they
subject to the same prorate... as other shareholders. And...
if Clearnet... were to receive another offer in the next
seven days, would they owe a breakup fee and what would
that... breakup fee be?
ENTWSTLE: Motorola and Nextel are subject to the same proration as
other shareholders and I'll let George answer the second
question.
COPE: If Clearnet was to... receive an offer which it pursued
within the next seven days the breakup fee would be four
percent of the transaction.
LONG: Okay, and does that change after the seven days?
COPE: Yes it does.
LONG: To what?
COPE: 2%.
LONG: I'm sorry sir. That's a 4% breakup fee within the first seven
days and 2% after that?
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 34
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
COPE: It's 4... it's 4% of the equity value of the consideration --
4.6 billion as I alluded to earlier. And that declines to 2%
when the... offers become irrevocable.
QUESTION: Okay. And how will the Clearnet... US stock be treated in the
deal? The exact same as the Canadian, same consideration?
COPE: That is correct.
LONG: Great, thank you very much.
COPE: Thank you. And with that I'll just turn it over to Darren
to... to wrap up.
ENTWSTLE: 'Kay thanks very much for attending the call. I'm not sure...
there was a couple of answers about the synergies with
respect to the time period that we expected to realize the
synergies over. I'm not sure that was answered, but it was a
five year period. I appreciate your attendance on this call,
and I think the questions have been excellent. And I hope
that George, Bob, and Barry, myself have answered those
questions to your satisfaction. Both Clearnet and TELUS
continue to believe that this is an excellent deal for both
shareholders. We believe that the offered 4.6 billion is fair
and it represents a fifty three percent premium over the
August 18th average trading price. The transaction obviously
for TELUS is the right one. In essence it is a quantum leap
for us to a leadership position in the Canadian mobility
market. And the timing of the deal is excellent. Excellent
relative to the auction process and it positions us to
exploit the next spurt of growth that will be fuelled by data
and IP convergence in the Mobility... industry. Furthermore,
TELUS and Clearnet will deliver significant operating and tax
synergy in totals of 2.1 to 2.4 billion. The deal positions
us extremely well to exploit across wireline and wireless the
convergence that's taking place across voice, data, IP and
mobility. And the deal, importantly, has been
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 35
<PAGE>
ACTIVATE CANADA
-------------------------------------------------------------------------------
structured to retain a financial strength, our strong balance
sheet and our flexibility to pursue other... other
opportunities going forward. As I said in my remarks
previously, TELUS should definitely be the stock of choice
for investors seeking exposure to the fast-growing data,
IP-mobility market, but who expect, who indeed demand earning
to be a natural outcome of executing a successful strategy.
Thanks again. George, Barry, Bob and myself look forward to
meeting many of you over the next two weeks as we tour the
financial capitals of North America. Cheers.
OPERATOR: Ladies and gentlemen that does conclude your conference call
for today. You may disconnect your lines, and thank you for
participating.
----------------------------
END OF TAPE
-------------------------------------------------------------------------------
HIGHSCRIBE
480 Adelaide Street West
Toronto, Ontario M5V 1T2
(416) 960-0432 (416) 960-1825
page 36
