Telecom Summit The Communications Industry in Transition. Robert McFarlane EVP & Chief Financial Officer

Transcription

1 2010 Canadian Telecom Summit The Communications Industry in Transition Robert McFarlane EVP & Chief Financial Officer June 9, 2010

2 TELUS evolution to wireless & data 2 Revenue $9.6B 72% $6.0B Wireless Wireline LD Wireline 40% 23% LD Wireless 6% 18% 28% Wireless Wireline Data Data Wireline Local Local and 9% 10% other Wireline 49% 22% Data 22% months ending June 30, 2000 and Dec 31, 2009, respectively

3 Four myths regarding Canadian telecommunications The Canadian telecommunications market is not competitive Canada is falling behind its major trading partners on advanced broadband infrastructure Canadian productivity suffers due to high cost and low penetration of wireless R l t i t ti i i d t Regulatory intervention is required to manage competition

4 nadian te elecom market is not comp petitive myth #1 Ca TELUS wireless ARPU trend 4 Data ARPU ($) Voice ARPU ($) Strong data adoption not enough to offset 21% voice ARPU decline since % voice ARPU decline since 2005

5 nadian te elecom market is not comp petitive myth #1 Ca TELUS wireline long distance trend 5 Wireline Long Distance ($ millions) LD revenue has declined 30% since 2005, and 20% in Q1-10

6 nadian te elecom market is not comp petitive 60% myth #1 Ca BC and AB share of HSIA and TV households 6 Market share of High Speed Internet households 4% 58% 36% Market share of paid TV subscriptions 11% 6% 4% 79% Other Shaw leads TELUS in market share by a wide margin in Internet and TV

7 nadian te elecom market is not comp petitive myth #1 Ca BC and AB estimated share of telephony households 7 Local line share of telephony households in AB / BC 71% Other 26% Excludes wireless only and no telephony households TELUS share of local market has declined to 71% due to competition and technology substitution

8 nadian te elecom market is not comp petitive 60% myth #1 Ca Estimated share of Canadian wireless subscribers 8 Market share of total Canadian wireless subscribers 6% 28% 37% 29% Other TELUS national wireless subscriber market share is 28%

9 Four myths regarding Canadian telecommunications The Canadian telecommunications market is not competitive Canada is falling behind its major trading partners on advanced broadband infrastructure Canadian productivity suffers due to high cost and low penetration of wireless R l t i t ti i i d t Regulatory intervention is required to manage competition

10 and advanced d broadb my yth #2 Canada tr railing in Global capex intensity comparison Capex as % of revenue Source: Thomson-Reuters First Call TELUS MTS BCE VZ AT&T Deutsche Telekom BT Group France Telecom TELUS ahead of global peers in capital intensity

11 The biggest, fastest mobile network TELUS HSPA+ coverage HSPA+ technology: fastest data speeds 8 Quebec in Spring HSPA+ technology planned to be network. available by winter 2011

12 technology: fastest data speeds 8 Quebec in Spring 2010 TELUS HSPA+ coverage 9

13 European 3G+ deployments 13 3G+ coverage Sparse 3G+ coverage in Germany, Spain and Italy myth #2 Canada trailing in advancedd broadband

14 European 3G+ deployments 14 3G+ coverage No 3G+ networks available in the U.K. or France myth #2 Canada tr railing in advancedd broadband

15 d broadband advanced my yth #2 Canada tr railing in United States HSPA+ deployments 15 Los Angeles Las Vegas Memphis Buffalo HSPA+ coverage Philadelphia Washington Hartford New York & Long Island New Jersey Sporadic HSPA+ coverage in the U.S.

16 and d broadb railing in advanced Canada tr yth #2 C my Network investments bringing leading edge devices Apple devices available from three carriers in Canada

17 advanced d broadb and my yth #2 Canada tr railing in Telecom pricing and the Canadian price index 17 Rate of pricing change per year Rank Commodities and commodity groups Average from 2001 to 2009 Rank Commodities and commodity groups Average from 2001 to Tobacco products and smokers' supplies 9.3% 21 Child care and domestic services 2.7% 2 Water 6.0% 22 Electricity it 27% 2.7% 3 Alcoholic beverages and tobacco products 5.9% 23 Fresh fruit and fresh vegetables 2.6% 4 Fuel oil and other fuels 5.7% 24 Shelter 2.5% Cable and satellite services (incl pay 25 Housing 2.2% 5 television) 4.4% 26 Health care 2.2% Postal services and other communication Reading material & other printed material (excl 27 textbooks) 2.1% 6 services 40% 4.0% 7 Natural gas 3.9% 8 Education 3.6% 9 Gasoline 3.5% 10 Water, fuel and electricity 3.4% 11 Newspapers 3.3% 12 Energy 3.3% 13 Education and reading 3.2% 14 Public transportation 3.1% 15 Owned accommodation 3.1% 16 Magazines and periodicals 3.0% 17 Financial services 3.0% 18 Food and energy 3.0% 19 Food 3.0% 20 Shelter (incl. rented, owned) 2.7% Source: Statistics Canada 28 Alcoholic beverages 2.0% 29 Goods and services 2.0% 30 Household operations 1.9% 31 Transportation 1.7% 32 Health and personal care 1.6% Private transportation Rented accommodation 1.6% 1.4% 35 Telephone services 1.3% 36 Communications 1.2% 37 Household operations, furnishings and equipment 1.2% 38 Recreation, education and reading 0.7% 39 Books (excl textbooks) and other printed material 0.4% 40 Internet access services -0.7% 41 Clothing and footwear -0.8% Cable & satellite TV prices increased 47% from 2001 to 2009 whereas telecom services price increase well below CPI

18 TELUS TV Investments have enabled TELUS differentiated TV service 18 myth #2 Canada trailing in advancedd broadb and

19 and advanced d broadb my yth #2 Canada tr railing in TELUS TV TELUS TV customers (000s) 41 Q Q Q TV subscribers doubled in past year but only 6% market share

20 and advanced d broadb my yth #2 Canada tr railing in Next generation network unbundling rulings 20 In 2008, CRTC orders forced sharing of next generation networks at discounted rates In 2009, Cabinet refers decision back to CRTC citing investment concerns In 2010, CRTC holds hearings on access to next generation networks Forced sharing will imperil business cases of those who build facilities TELUS supports thesis that markets should ultimately determine outcomes, not regulators

21 Four myths regarding Canadian telecommunications The Canadian telecommunications market is not competitive Canada is falling behind its major trading partners on advanced broadband infrastructure Canadian productivity suffers due to high cost and low penetration of wireless R l t i t ti i i d t Regulatory intervention is required to manage competition

22 Canadian productivity and telecommunications 22 ivity suffe ers due to wireless s Canada has lowest wireline rates and highest wireline penetration among member countries: OECD 99% of Canadian households subscribe to either wireline or wireless service: CRTC Canada has inexpensive i flat rate wireline pricing i & mobile party pays, while Europe has calling party pays myth #3 product Incentive to switch from wireline to wireless lower in Canada than in Europe

23 Global wireless pricing comparison 23 ivity suffe ers due to wireless s myth #3 product ARPU (US$) MOU (mins) ARPM ($) Developed Countries Asia Pacific Europe Canada U.S Source: BofA Merrill Lynch Global Wireless Matrix, April 2010 Canadian wireless rates, on a per minute basis, are some of the most affordable in developed world

24 Four myths regarding Canadian telecommunications The Canadian telecommunications market is not competitive Canada is falling behind its major trading partners on advanced broadband infrastructure Canadian productivity suffers due to high cost and low penetration of wireless R l t i t ti i i d t Regulatory intervention is required to manage competition

25 Telecom critical in addressing future social challenges costless s myth #4 regulato ory interv vention is Canada s social challenges include: Reducing environmental e impacts Access and affordability of health care Aboriginal culture and employment Solutions coming from ICT through wireless and wireline broadband networks Ability to invest not unlimited Building telecom policy on myths is dangerous strategy Carriers will build infrastructure only if they know they can earn a return and not have it expropriated

26 Advanced wireless services spectrum auction 26 costless s myth #4 regulato ory interv vention is 45% of AWS spectrum set aside for new entrants Rules allowed concurrent new entrant bidding for open spectrum leading to game playing that drove up cost of spectrum for incumbents Auction design resulted in $1.4B overpayment: NERA Canadian carriers paid nearly 3 times more than U.S. players for AWS spectrum (per MHZ per POP basis) TELUS spending on AWS spectrum approximates amount spent on new 3G+ network infrastructure Created Canadian competitive disadvantage shortly before possible liberalization of foreign ownership rules Spectrum auction set-asides equate to targeted subsidization resulting in misallocation of resources

27 Four REALITIES regarding Canadian telecom 27 The Canadian telecommunications market is not competitive Canada is NOT falling behind its major trading partners on advanced broadband infrastructure Canadian productivity DOES NOT suffer due to high cost and low penetration of wireless R l t i t ti i NOT i d t Regulatory intervention is NOT required to manage competition

28 Summary 28 Government policy should not be based on myth but on reality so we advance Canada s long-term productivity and social agenda There is a significant cost to regulatory intervention Telecom carriers need a consistent regulatory environment, free of surprises, to make multi-billion dollar infrastructure investments in broadband Massive investment in broadband essential to enabling solutions to drive national productivity advantage and help address important social challenges It is time to ensure greater reliance on market forces and removal of barriers to competition As long as equal treatment for all, TELUS supports removal of fforeign investment trestrictions ti ti Government policy must support facilities-based competition

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