TELUS Corporation
Q4 2007 Earnings Call Transcript

Published: 15 Feb 2008

[Operator:]

Good morning ladies and gentlemen. Welcome to the TELUS Fourth Quarter 2007 Earnings Conference Call. I will like to introduce your speaker, Mr. John Wheeler. Please go ahead.

[John Wheeler:]

Thank you. Let me introduce the TELUS executives online with us today. They are Darren Entwistle, President and CEO; and Bob McFarlane, Executive Vice President and CFO. We will start with introductory comments by Darren and Bob. This will be followed by a question-and-answer session with both executives. The call is scheduled for one hour. The news release on fourth quarter financial and operating results and detailed supplemental investor information, are posted on our website at telus.com. For those with access to the Internet, the slides are posted for viewing at telus.com/investors. You will be in listen-only mode during the opening comments. Let me now direct your attention to slide two. The forward-looking nature of the presentations, answers to question, and statements about future events are subject to risks and uncertainties and assumptions. Accordingly actual results could differ materially from statements made today. So do not place undue reliance on them. We also disclaim any obligation to update forward-looking statements, except as required by law. I ask that you read our legal disclaimers and refer you to the risks and assumptions outlined in our public disclosure in filings with Securities Commissions in Canada and the United States. Now over to Darren on slide three.

[Darren Entwistle:]

Good morning. Reflecting back some aspects of the changing telecom industry and regulatory environment in 2007 were positive for TELUS. But the balance can only be to characterize as both frustrating and disappointing. Notwithstanding this, TELUS generated solid operational results for the year, continuing to advance our national growth strategy with the focus on growth tenets of wireless and data. Lets begin our review on slide four. At a consolidated level, TELUS delivered revenue growth of 4.5% breaking through the $9 billion level. EBITDA was up 4% to $3.8 billion on the year, underpinned by our wireless operations which were up 10%. TELUS' consolidated EBITDA margin of 41% for the full year, represents a consistent performance with 2006. This is noteworthy given the higher than expected mid-year cost we experienced in three particular areas

[Robert McFarlane:]

Thanks Darren and good morning everyone. Let me begin the financial results review with our Wireless segment on slide 15. Fourth quarter wireless financial results were solid year-over-year. Wireless revenues were up nearly 9% as subscriber growth was slightly offset by a small decrease in revenue per customer. EBITDA increased by 14% as a result of higher network revenue growth and lower cost of acquisition or COA for short, as we achieved profitable subscriber growth. This was partially offset by higher customer-retention spending as clients move from voice-centric mobile phones to what we call, smart phones such as PDAs and BlackBerrys. Overall we were pleased to see wireless EBVITDA margins expanded by 2 points. The increase in wireless CapEx this quarter was mostly due to the continued network enhancements in capacity and coverage. Our EVDO REV A high speed network now covers roughly 80% of the population. Despite the fourth quarter increase, wireless CapEx was consistent with the original level targeted for the year 2007. Turning to slide 16, wireless net additions were lower year-over-year. TELUS added 161,000 net additions in the quarter, after including the one-time reduction of 5,100 to prepaid net adds following a billing system audit. Note that this adjustment was reflected in both net ads and churn. This adjustment related to subscribers which deactivated over the past two years but were still registered as subscribers in our billing system. Gross additions increased by 11% to a record level in the fourth quarter despite our disciplined marketing efforts, which are covered in more depth in the next few slides. Prepaid net additions increased 5.6% to 55,000 from the year ago, while postpaid net ads were 106,400 representing 66% of TELUS' total net ads in the quarter. While our prepaid subscriber base continues to expand, our overall subscriber mix remains at an 80

[John Wheeler:]

Thanks very much, Bob. Just before I turn the call over to Sebastian to conduct the Q&A session, can I ask your cooperation for one question at a time please? Sebastian, please proceed. Question And Answer

[Operator:]

Thank you [Operator Instructions]. And the first question is from Peter MacDonald, GMP Securities. Please go ahead with your question.

[Peter MacDonald:]

[Darren Entwistle:]

I think Peter's speculating on technology, evolution in an open form is not necessary the best thing to do for our shareholders. Clearly its always in comment upon us, whether it's a wireless business or wireline, to stay abreast, we are developing ecosystems from a technology perspective in the telecom's world. I think it's important to note that and so far as TELUS is concerned whether you are taking about the wireless business or wireline, technology upgrades have been a way of life for us. If you think about what's going on right now within our broadband access network and the iterations that we are experiencing in terms of upgrading our access technology, I think that's reflective of the type of continuous change that you can expect from a technology perspective. And wireless has been no different, when I arrived here eight years ago, the network in the West was effectively analog. We have gone from analog to digital, digital to WiMAX, WiMAX to EVDO, EVDO to EVDO Rev A. So it's been a continuous stream of technology upgrades for us and I think its something that as an organization, we do very well from a execution perspective. I think its also important to point that at the end of the day we have our eye on the economics. And in so far as making a technology upgrade is concerned, it's based on a business case. And effectively if I distill the business case down to two book ends in terms of let's say doing the right thing for shareholders, you don't want to be in a situation where you prematurely move towards a new technology not having sweated the existing assets efficiently and not having generated the ROI on the previous technology stage that you use shareholder money do invest it in the place. Likewise on the other hand, if you wait too long you can become uncompetitive and of course that has an economic result on the organization as well. So really, it's at the end of the day all about timing and getting the timing right and making the right business case decision. For us, right now I think people forget we have made an investment in both EVDO and recently a very cost-efficient upgrade to Rev A which we're truly operationalizing this year in 2008 with handset availability really coming online and of course, we have enjoyed that capability previously with the Sierra wireless air card on the mobile computing front. But I think its incumbent upon us right now to say we have technology leadership from a bandwidth perspective within the wireless world. That's good for consumer data applications and good for consumers data applications and good for business data approximately. And we need to sweat the heck out of this technology stage to get the ROI that we want on the EVDO and EVDO Rev-A investment in the first place. And it's interesting to note that right now, if you compare us to alternative technologies in Canada, we do have a leadership position. From a speed perspective we have the fastest network, both on the downlink and on the uplink pass and we should be exploring that. I guess the final thing to say is beyond that, when we think about a technology evolution within the business case format, we want to think about where are the eco systems developing within this new technology that we are considering, what's it going to give us in terms of things like access to handsets, economies of scale, so on and so forth. Those are the key drivers, and it's interesting to know that frequently when you are considering technology upgrade, the cost of that upgrade are non-recurring. You experienced them once to drive the new technology through implementation. But the benefit associated with that new technology coming to fruition are recurring and of course, that always delivers a strong economic result when your cost are upfront, but the benefits are improving.

[John Wheeler:]

Next question please, Sebastian.

[Operator:]

Vince Valentini from TD Newcrest. Please go ahead.

[Vince Valentini:]

Yes, thanks very much. I am glad that you are talking about the Rev A there, because my question is on wireless data. I see that you had a quite a deceleration in the growth in data ARPU, it was up 69% in the first quarter and the fourth quarter, here we see it up only 29%. But it seems like you're taking steps to try to reverse that trend in outgrowth reaccelerates, spending a lot of money on retention to get new smart phones into customers hands. So I am wondering, if you can flush out a little bit more. Do you expect the data ARPU growth actually to reaccelerate? And as part of that answer, would you mind sharing with us some detail on the mix of your customers, although you gross add you had in the fourth quarter, could you give us, as what percentage of those might have been on smart phones?

[Robert McFarlane:]

Okay, Vince, first thing, I think first point to make is, that our wireless data service growth year-over-year fourth quarter was 43%. That would compare to the number that you previously mentioned. So in that light, I think it's good growth. It's not as high perhaps as it could be. But you've touched on something that hangs quite positive for the future and that is the significant conversion of... as referenced in my comments, voice-centric type of traditional phones for more smart phone devices and in the likes the PDA's et cetera. And that certainly has been an emerging trend in 2007, particularly back half of 2007. And so essentially you're getting part of your existing base, as well as new subscribers increasingly adopting devices out of their desire to use the data where they may not have used previously. So I think that's a positive trend for the future. In terms of the that the base one metric that might be helpful is that a little under 20% of our existing base, would be comprised of handsets that our EVDO capable. So that gives you an idea, as we have upgraded the network on EVDO going back two and a half to three years ago, and done it over the past three years and in fact now into Rev-A less than 27 of base has EVDO handsets. So consequently as that's building up, I think those are build in positive dynamic for future data growth which is clearly the emerging trend in the marketplace. So, that bodes well as well.

[John Wheeler:]

Okay. Sebastian.

[Operator:]

Greg MacDonald from National Bank Financial. Please go ahead.

[Greg MacDonald:]

Thanks good morning guys. Question goes to Darren. Darren it's really another strategic type question. We know from TELUS' interest in Bell last year that you thought that there were certainly scale benefits... scale and scope benefits for doing a deal in Canada. I wonder if you just might comment on looking at the landscape besides Bell, are there scale or scope benefits for further consolidation in the telecom market. I am not just thinking of TELUS, but overall. I mean is it your view that the maturity pressures in the business have changed in the last two years or not, that we are in a situation in Canada now that consolidation should occur and probably will occur in the next two or three years.

[Darren Entwistle:]

Thanks for the question Greg. Clearly the machinations that we went through in the summer with BCE, we are predicated on a strategy where we felt that economies of scale are important and when you make the type of investments that we make from a CapEx and an OpEx perspective, the extent to which you can better leverage economies of scale, that's always a positive thing within our industry, effectively. Size does matter when you have the type of initiatives that we have from a magnitude perspective, the investments that are required, the execution and the complexity scale, both from a return on investment perspective and from the diversification perspective, as it relates to the way that you manage your portfolio and all the complexities therein is something that will be a strategy that I would subscribe to. The second comment would be scale opportunities have to be quality scale opportunities. And I think it would be fair to say in the absence of BCE, the number of quality scale realization opportunities within the Canadian landscape, is significantly scarce, if not non altogether. So pursuing scale only makes good sense if A) its quality combination that your pursuing and you are confident that you can deliver the operational execution and just outside of the BCE envelope don't see opportunities of that ilk within that Canadian landscape. What we do think makes good sense is looking at opportunistic acquisition pursuits that would allow us to fill capability gaps in so far, as key components of our strategy are concerned. Clearly, you will see with the number of the landmark wins that we have been securing within the enterprise and public sector market that, that scenario of our business that is doing exceedingly well for TELUS. And one of the reasons that its doing well is that we haven't taken a broad based focus. We have been very segmented in our approach to the market, rather than broad based and so far, as the business market is concerned, we have looked to focus on key verticals, the verticals that I referenced during my opening remarks today. Again, those verticals are key whether they are financial services, whether they are oil and energy, public sector in general or healthcare in particular, we are doing very well and we are winning business in that regard. And I was a opportunistic move for us to make on the acquisition front, whereby we think the economics are good, whereby it fills an important strategic capability gap that we think that we can execute against and that we can deliver the operational integration of that acquisition opportunity, we will give it due consideration. But again, I will make the same comment that I made previously in referring to economies of scale. Its got to be quality opportunity and even in so far, as vertical markets are concerned, the number of quality opportunities from an acquisition perspective, they really are few and far between within the Canadian landscape, which is an interesting thing because then that takes you all the way back to organic execution. And I will make the comment that I have made at several of these calls over the last three years. TELUS does not need to do an acquisition to see its strategy through the provision in form. As a result of this strategy that we have had in place over the last eight years, we are in a very strong position, we have got an excellent platform to continue to deliver good organic operational execution and that is all that is required at this years strategy through to fruition, which means that any acquisition opportunity, I guess judged purely as something that's opportunistic. It's a nice to have opportunity rather than a need to have opportunity. I think that always makes us a little bit more sanguine when it comes back to the economics of any deal. And of course in terms of any appetite that we have, we are in a fortune situation right now and a differentiated situation, while we have got a extremely strong balance sheet. So we can give opportunities due consideration and we can process those opportunities with out straining the financial and economic resources of the organization

[Greg MacDonald:]

Thanks,

[John Wheeler:]

Sebastian?

[Operator:]

Robert Goff from Haywood, please go ahead.

[Robert Goff:]

Thank you very much, when you look at the lower COA from yourself and Darren, could you say what the key drivers? Are they the efficiencies or discipline by their providers or would it also effect on our lower net present value per newer marginal subscriber?

[Robert McFarlane:]

Rob in terms of the COA, really there is a couple of dynamics here. Sometimes you can have a lower COA expenses, because your gross adds went down. Our gross adds actually went to a record level in Q4 and our COA expenses were down so obviously it's not just a volume driver, measured as COA per gross add which sort of normalizes for that consideration again as you referenced went down significantly. Our absolute dollar advertising and promotion expenses were down year-over-year fourth quarter to fourth quarter and so it would be primary reason and so when you get good gross adds on a lower AMP spend then you are getting in a efficiency gain if you will on that side of it. In terms of the subsidy and commission side, I think that contrary to erroneous speculation, we were prudent in the fourth quarter and such reflected in that COA number. And then lastly because of the mix and this should be a minor factor, because the mix of prepaid to postpaid you tend to have lower subsidy and commissions as it relates to prepaid as in postpaid because we get a cost structure to the respective ARPU profile of our additions. So that's really the dynamic that occurred in the fourth quarter at the end of the day the only way to really summarize it is that we had improved efficiency on the COA. And so when you think back to item recall I think it was around the first quarter of the year-end people were saying, Gee why is your COA's way up and so on so forth, funny enough for the full year our COA is actually down, and yet our gross adds are significantly up year-over-year and our net adds are down a bit. But they are very consistent with what they were the prior year and so, all in all I think it's a good going in terms of the efficiency side. On the contrary you would be... maybe we should spent more and then dent our demand civilization [ph], I won't get in that debate publicly, but clearly in terms of the effectiveness what we did spent it was quite efficient.

[Robert Goff:]

Okay

[John Wheeler:]

Sebastian please.

[Operator:]

John Henderson from Scotia Capital. Please go ahead

[John Henderson:]

Yes thank you. I have a question minor around your wireless data pricing I know you've touched it already. But I did want to ask if the that the slowdown in wireless data growth in Q4 may have been attributed to your price plan for unlimited email at $15 a month and whether or not that may have caused some cannibalization. And then also just in terms of what your impact may be from the new unlimited usage, weather access usage price plan at $3 a month, it's a lowest I have seen. I mean what sort of impact that may have on CapEx and how you are kind of sort of following that, if your seeing what's your signs from earlier adoption you are seeing of that plan and how you could control the CapEx side of the equation if that goes out of control?

[Robert McFarlane:]

Okay John, in terms of the wireless data pricing, firstly I would say that the type of consumer-centric plans that were introduced by the industry and a lot prior to fourth quarter I think did some demands then in terms of consumer was data but would not have had a material impact in terms of cannibalization. I think you refer to as and turn of the base. So I don't think that that would have been a material dynamic there. Really what you add is a classic demand stream going on the consumer segment which wasn't a big focus of wireless data growth in the prior three years, which was largely business oriented if you think of PDAs and the like. So that on a go-forward basis I think, there is quite an opportunity for growth in the consumer segment, from both the advent of more segmented pricing plans, but in addition to that, devices such as the BlackBerry Pearl, which are geared more to a consumer sell hold type of market and are doing very well in the marketplace.

[John Wheeler:]

Next question Sebastian?

[Operator:]

Thank you. Glen Campbell from Merrill Lynch. Please go ahead.

[Glen Campbell:]

Yes, thanks very much. My question is for Darren, it's on long-term capital intensity in wireline. You talked a lot about the reasons, why wireline CapEx is going to be high this year and next year. But I wonder if you could just give us a general sense of where you think CapEx to sales in the wireline segment tend to or should stabilize for the long run after a couple of years? Thanks.

[Darren Entwistle:]

Glen, you're really, seriously asking me to project three to five-year CapEx intensity ratios for the wireline business. That's not something, obviously that I am prepared to do. One of the things that we have said previously is that, we believe, given the margins that we have invested within our wireline business, that it's the right thing to make the necessary upgrades in our access network from a bandwidth perspective, so that we can do two pretty important things. Number one, work hard to preserve the margins that are associated with the heritage services, predominantly on the volume side of our business and clearly there are good margins that we generate from that segment of our business. And then, number two, establish a new wireline access network platform for advanced data services whether they are Internet related, security related or TV related, and it's, without a doubt, a heavy risk for our organization [ph] which is why you see CapEx intensity at circa 25% as we undertake these investments and they are multiyear investments. There is no escaping that reality. So we can either abandon that business or we can invest in that business both from a protection point of view and also from a forward-looking new services point of view and build the platform for the longer term. But I think, we will deliver in the permissive time, an economic return for our shareholders and essentially for us that is the road that we are going down and as I say the magnitude of the investment is significant. We previously announced the $600 million that we are spending over the course of 07, 08 and 09 in upgrading our broadband type network and we think that, that is a prudent thing to do. So, these sums are material and the program is multiyear in its orientation because elevating in your bandwidth, in your access network significantly, making the move from ADSL2+ to VDSL2, to fiber into new neighborhoods, fiber to condos in terms of multiple dwelling units, fiber eventually in the permissive sometime, to legacy neighborhoods in terms of the technology retrofit. These things all take time and they will cost money but we think it's a right thing to do, to protect the margins that we enjoy today and establish a platform for future growth. The other thing that I think, people do forget about sometimes is that, the business at TELUS from a mathematics perspective if nothing else is fundamentally changing. So, as we move from being a company that was predominantly wireline with wireless as the growing segment, to a company that's effectively half wireline and half wireless to a company that in the future will be predominantly wireless, in terms of the asset mix where our revenues and profits are derived from, and as well where cash flow is derived from, and of course the intensity from a CapEx perspective that we have traditionally experienced on the wireless side, it does reflect the more attractive near-term economics of that element of our industry. So when you look at our CapEx intensity on a consolidated basis, they weight of wireless will have a greater impact in the years ahead as it becomes a greater proportion of our financial mix and of our asset mix.

[John Wheeler:]

Excuse me Sebastian go ahead.

[Operator:]

Jeffrey Fan from UBS Securities. Please go ahead.

[Jeffrey Fan:]

Thanks very much. Just a quick question again on some of your data plans that were offered in the marketplace. I am wondering if you can give any color because on the take up on some of these entry price plans and whether, consumers were really drawn in at the lower price plans or did you see a lot of consumers actually take a higher price plans meaning, we can't just look at the $10 or $15 ARPU or price per month as kind of the ARPU uplift and there may be greater ARPU uplift and then, what is I guess apparent. Just wondering if you can just share any thoughts on that?

[Robert McFarlane:]

Well Jeffrey, when TELUS introduced $15 pricing geared to a consumer market for the data that was for unlimited messaging. It had... it was the access beyond that, such as Internet to web browsing and the like were subject to a data cap. That was not the approach taken by our competitors. So the TELUS approach was one which was based on using unlimited messaging effectively which is not capacity intensive and that's a very thoughtful and a prudent approach for offering benefit to the consumer in the marketplace, in a category not directly addressed previously, but in a way which is shareholder-friendly shall I say. That was not the approach which was by reciprocated by our competition. So consequently, our approach was one which fueled adoption through the devices in conjunction with a rate plan that gave people what they really wanted to get going and data processing time provided a tool to access other services such as downloading and browsing and the like, which would simulate additional revenues for our organization. So I think that's a next-line approach that we tried to take to the marketplace and want to see how the industry evolves in that area going forward.

[John Wheeler:]

Sebastian?

[Operator:]

Peter Rhamey from BMO Capital Market please go ahead.

[Peter Rhamey:]

Yes, I was hoping that this is a question on wireless and when we look at your net adds impacted by a little bit higher churn and it seems it's going on generally across the industry both in Canada and U.S. Yes your gross ads are up, of course I am trying to look out in the next year to two and should we look at this as being positive in that gross ads are actually you can get your churn down that translates for net adds or should be looking at the net add trend and saying, look industry has penetrated and sustainable growth rate in the next two or three years is a net 450, 500 basis points undergo for our base. I am not too sure how on the demand function here for the industry as a whole?

[Darren Entwistle:]

Okay, well I think if your are going to be reading the press release I would ask you to go back and have a look at the slide that I presented in my opening comments that looks at the penetration rate for wireless in Canada and a penetration gain that's been realized a year in and year out and you can see that typically the penetration gain has been between 450 and 500 basis points on approved year basis one. So that's a pretty consistent trend in terms of how the industry has been performing and if you want predictability as to what 2008, 2009, 2010 will hold, I think that's a pretty good leading indicator for you to drive inference from. Next as it relates to tell us specific, you have got a pretty clear trend as well in terms of the net adds that we have been able to generate between lets say 515 and 585 over the last four years. So that's a ballpark figure from a growth perspective again and I think it's important to drive inference from. I think people forget that historically we as an organization didn't put the emphasis on other gross or net adds but rather put the emphasis on revenue growth and profit expansion from a disciplined perspective. But if you look again in the last four years in terms of our market share on a net basis, we have been in the ballpark of circa 30% sometimes a little bit more than that. But it's been a fairly consistent performance all the way along. In so far as the growth add comment is concerned about 2007, yes we would have delivered a better net add result, if we had a stronger performance on customer loyalty and retention which is why I commented in my remarks that got to be an area of focus for us from an improvement perspective going forward. I caveat that with the recognition, the churn that we are going to achieve going forward in terms of what is or what constitutes an excellent result, is a little bit different prospectively than what it has been historically because we now have the advent wireless number portability. But again I make the comments that I had made previously, in that number portability did not create any major economic deterioration factor for the wireless industry in the U.S, and I think prospectively given the fact that TELUS has a relatively low share of the business market for historical reasons in Canada, we should be able to better capture a balance share of wireless that adds on the business front in the years ahead, given that impairment of a lock in number of portability has been removed. The only other comment I would make as it relates to penetration gain gross adds and the like is in respect to the AWS Spectrum option. Typically if you have new players coming into the market that can have an overall effect on the penetration gain, pushing the penetration gain up, so that's another new exogenous factor to be considered in terms of penetration gain and gross adds along with normalizing now for the fact that well as local number portability is institutionalized within our industry.

[John Wheeler:]

Sebastian?

[Operator:]

Simon Flannery from Morgan Stanley. Please go ahead.

[Simon Flannery:]

Thank you very much. Good morning. You have had a few weeks now with Emergis. I was wondering if you could just comment a little bit on what your initials for the findings are, versus expectations and what sort of integration steps you've been able to take at this point? Thanks.

[Darren Entwistle:]

Surely on Emergis, I would say that we are very pleased with that being thus far. It would be fair to say that we closed the transaction about a month earlier than what we had originally anticipated, and that's good going from the execution team on that front. The level of a mode of synergy is nothing else between, the welcoming TELUS organization and the enthusiasm of Emergis has been exceedingly strong. Again, I mean, some pretty important comments, healthcare has already been strengthen up for TELUS. I don't like doing acquisitions where you've got no track record in a particular area. I prefer to do both-on acquisitions where you building upon a strength or a platform that's already existing within the organization and TELUS with our Western focus where typically within Western Canada, that's where you seeing the innovation and leadership within healthcare. We have enjoyed a very strong performance within the healthcare area traditionally as TELUS. Bring Emergis on-board with differentiated capabilities and new applications, transactional and processing capability, intellectual property, so on and so forth, significant talent that within our organization that understand the healthcare industry very well. Bringing that into the fold within Western Canada, where we have already great connectivity activity, whether it's technology connectivity with healthcare authorities or connectivity at the suite level with the CEOs and the CIOs of these health authorities of bringing Emergis into that full, is really opening up a pipeline of new opportunities that I think will deliver an excellent return for the TELUS organization. And the reverse is also true. As Canada is coming to grips with the healthcare challenge and as TELUS has looked to expand its presence in Ontario and Quebec, that's effectively where you have the traditional footprint of Emergis and that's the market where they've got the connectivity, they got the client base, they got the experience so on and forth, so we are looking as a TELUS organization to leverage the relationships and track record that Emergis has been able to establish in provinces like Quebec and Ontario and bring our capabilities to bear in that regards. So there is a nice complement between the two businesses that I think is very encouraging and clearly if any one is going to crack the code in the terms of healthcare challenge as it relates to affordability, the massive improvements required in patient care, in creating the shift from remediation and treatment to the prevention of the disease in the first place, a lot of the answers are going to be found in technology, technology investment and business transformation and that's the sweet spot for both the TELUS and the Emergis organization and we are excited about that. From a synergies perspective that will be fairly modest over the next couple of years, because we are going to keep a certain level of independence with Emergis and really have a complement our capabilities in the healthcare front rather than fully integrate it. And I think we have already commented that, we've set aside about $10 million in terms of restructuring costs to realize some near-term synergies that are fairly obvious over '08 and 09 as we bring structurally the two companies a little bit closer together.

[John Wheeler:]

Thanks Darren. We are now at one hour. So we will take one more question and thank you.

[Operator:]

Thank you and the last question is from Dvai Ghose from Genuity Capital Markets. Please go ahead.

[Dvai Ghose:]

Yes, thanks very much. I just want to go back to Bob, the comment that you made about potentially under spending on COA. On the one hand it's great to see a 19% decline in COA in an aggressive market. It shows discipline and it drove great margin increases. But you entered this quarter with a pretty low PDA and data market share. You have a wonderful EVDO network and you finally got the BlackBerry Pearl to exploit. And there is not that much evidence that you exploited it. I mean your mix deteriorated in terms of prepaid, postpaid. We don't expect it to show up in ARPU immediately, but we do expect to show up negatively in COA immediately and it didn't. So, there was a perception in the quarter that the majority of your sales were PDA related, it doesn't seem to be a at all evident in the numbers. Isn't the near gain just going to lead to longer term pain when it comes to ARPU and churn recovery?

[Robert McFarlane:]

I see you are good on the rhymes and not so sure on the logic. Firstly, if you are talking about data growth, the majority of the data growth over the next period of time is going to come from your base not from the new additions. New additions of course will bring data growth rate but from a materiality perspective it's your base. So in that respect you may refer back to my comments in the presentation about significantly higher cost retention expenses linked to the upgrade... significant upgrade, in our base towards smart phones. That is clearly aligned with building a growth in wireless data on a go-forward basis. Next in terms of the fourth quarter, while the mix in prepaid increased, prepaid as a percent of additions in the industry and for TELUS have always had a record level in the fourth quarter because of the Christmas gift giving dynamic that does occur. The issue in that respect isn't so much to that prepaid doesn't provide data but how are you going to stimulate,, promote, make it easy and attractive for users of prepaid or postpaid to use data. Everything I had mentioned, what we have talked about previously of course is given the nature of the technology on the mike side which is advantaged and differentiate in marketplace, particularly in respective first-to-talk or dispatch usage is less so in respect of wireless data. It is not as high speed of service, it doesn't have the portfolio of devices that are available on our high-speed PCS network. And so we have had a conversion program going on for since early part of 2007, which essentially has taken the more voice-centric or data users prone to use high-speed or seek high-speed data service or solution which is more often stages in PCS and converting them over. So, the mic element has a very ARPU in general but significantly lower data component of ARPU and PCS. So, that conversion or migration program which is going in a quite an orderly manner and successful manner is also another aspect of building wireless data growth in the future.

[Darren Entwistle:]

Thank you very much everyone for participating in the call. Just a comment to close, we are fronting back on the questions, that were asked a number of questions dealt with us being asked to give a prediction as to what the future is going to hold over the medium to longer term. And I guess in responding to that one of the things I would back to is that TELUS is an organization that when we do invest for the future, we do it in a way that's clearly on strategy with the focus on our domestic market. And one thing that is going to be predictable in the future is our continue desire to enter the shareholders share and the fruits of the returns that we generate from our investments. And going forward I think its interesting to know that it's never been a situation in TELUS in terms of the last four years where investments have been mutually exclusive in terms of returning cash to shareholders. Investments have been affordable along with the investments, we have progressed successive increases in the dividend and have lived up to a constant NCRD program. In terms forward-looking expectations, our desire to continue returning cash to our shareholders that participate in the strategy of this organization is something that is an important facet of the longer-term orientation of this organization.

[Robert McFarlane:]

Thank you very much

[Operator:]

This now concludes the TELUS fourth quarter 2007 earnings conference call. On behalf of myself and rest of the conference team, thank you from TELUS.