TELUS Reports First Quarter Results



    
                            2009 guidance updated
               TELUS TV surpasses 100,000 subscriber milestone
    

    VANCOUVER, May 7 /CNW/ - TELUS Corporation reported first quarter 2009
revenue of $2.375 billion, an increase of $25 million or one per cent. The
increase was driven primarily by three per cent growth in wireless revenue and
six per cent growth in wireline data revenue, more than offsetting the ongoing
declines in local and long distance wireline revenues. Consolidated earnings
before interest, taxes, depreciation and amortization (EBITDA) decreased by
4.5 per cent due to increased defined benefit pension plan expenses of $29
million and investments in operating efficiency initiatives that resulted in a
$21 million increase in restructuring costs. Underlying EBITDA increased $7
million, or nearly one per cent, if pension and restructuring costs are
excluded. These results have been negatively impacted by lower than expected
wireless operating performance.
    Net income in the first quarter was $322 million and earnings per share
(EPS) were $1.01, an increase of 10 and 12 per cent respectively. Net income
and EPS included favourable income tax-related adjustments of approximately
$62 million or 20 cents per share this quarter, compared to $17 million or
five cents in the same period a year ago. Excluding income tax-related
adjustments in 2008 and 2009, net income and EPS were both down five per cent
due to lower operating earnings.
    Cash provided by operating activities was down three per cent to $614
million this quarter. Free cash flow was down 76 per cent to $125 million this
quarter, primarily because of higher cash taxes and capital expenditures.
TELUS paid cash income taxes of $214 million this quarter in respect of 2008
earnings and current year tax installments. TELUS increased capital
expenditures by $154 million to fund wireless and wireline broadband build-out
initiatives.

    
    FINANCIAL HIGHLIGHTS

    -------------------------------------------------------------------------
    C$ in millions, except per share amounts       3 months ended
    (unaudited)                                       March 31
                                                    2009      2008  % Change
    -------------------------------------------------------------------------
    Operating revenues                             2,375     2,350       1.1
    EBITDA(1)                                        906       949      (4.5)
    Income before income taxes                       379       401      (5.5)
    Net income(2)                                    322       292        10
    Earnings per share (EPS), basic(2)              1.01      0.90        12
    Cash provided by operating activities            614       634      (3.2)
    Capital expenditures                             474       320        48
    Free cash flow(3)                                125       528       (76)

    (1) Earnings before interest, taxes, depreciation and amortization
        (EBITDA) is defined as Operating revenues less Operations expense
        less Restructuring costs. See Section 11.1 of Management's discussion
        and analysis.
    (2) Net income and EPS for the three month period in 2009 included
        favourable income tax-related adjustments of $62 million or 20 cents
        per share, compared to $17 million or 5 cents for the same period in
        2008.
    (3) See Section 11.2 of Management's discussion and analysis.
    

    The Company has provided revised 2009 guidance to update its original
targets announced in December 2008. The revisions reflect the worsening
Canadian economy since that time, weaker than expected wireless results at
TELUS and the industry in the first quarter, and the company's most recent
outlook. Wireless and wireline revenue have been adjusted down by a total of
approximately $350 million. Wireless and consolidated EBITDA have been reduced
by $125 million. EPS has been slightly reduced to a range of $3.35 to $3.65
reflecting the impact of lower EBITDA, and the reported 20 cent favourable tax
adjustment. See section 9 of Management's discussion and analysis for full
details.
    "Clearly, TELUS' wireless results do not meet the expectations we set
late last year and are reflective of the weakening Canadian economy and
competitive activity," said Darren Entwistle, TELUS president and CEO. "Given
the current environment, TELUS has accelerated our efficiency initiatives.
Accordingly, we have significantly increased our restructuring cost estimate
for this year to approximately $125 million to drive efficiency and enhance
our competitiveness."
    "Building on our financial strength, we are continuing to invest in our
core business including our broadband wireless and wireline networks. These
capital investments are aimed at providing competitive advantage and
supporting TELUS' growth strategy," added Mr. Entwistle.
    "We are pleased to report that in April, we surpassed the 100,000 TELUS
TV client milestone" said Mr. Entwistle. "Moreover, the launch of TELUS
Satellite TV later this year will extend the coverage of our entertainment
offering."
    "TELUS continues to benefit from a strong balance sheet in accordance
with our longstanding prudent financial policies. By extending the $500
million accounts receivable securitization program to May 2012, we have
ensured that our primary short term credit and securitization sources of
capital totaling $2.5 billion are committed into 2012 so we maintain a strong
liquidity position and reduce the impact to TELUS from the uncertainties of
the capital markets," said Robert McFarlane, TELUS executive vice-president
and CFO.

    
    -------------------------------------------------------------------------
    This news release contains statements about expected future events and
    financial and operating results of TELUS that are forward-looking. By
    their nature, forward-looking statements require the Company to make
    assumptions and are subject to inherent risks and uncertainties. There is
    significant risk that the forward-looking statements will not prove to be
    accurate. Readers are cautioned not to place undue reliance on forward-
    looking statements as a number of factors could cause actual future
    results and events to differ materially from that expressed in the
    forward-looking statements. Accordingly this news release is subject to
    the disclaimer and qualified by the assumptions (including assumptions
    for 2009 guidance, share purchases, restructuring costs), qualifications
    and risk factors referred to in the Management's discussion and analysis
    in the 2008 annual report, and the 2009 first quarter Management's review
    of operations, and in other TELUS public disclosure documents and filings
    with securities commissions in Canada (on www.sedar.com) and in the
    United States (on EDGAR at www.sec.gov).The planned launch of TELUS
    Satellite TV is also a future event that is subject to risks and
    uncertainties - the service may not be available when indicated, its
    features may not operate as expected and the expected benefits to TELUS
    may not be fully realized. Except as required by law, TELUS disclaims any
    intention or obligation to update or revise forward-looking statements,
    and reserves the right to change, at any time at its sole discretion, its
    current practice of updating annual targets and guidance.
    -------------------------------------------------------------------------

    OPERATING HIGHLIGHTS

    TELUS wireless

    -   External revenues increased by $30 million or 2.7% to $1.1 billion in
        the first quarter of 2009, compared with the same period in 2008.
    -   Wireless data revenue increased $61 million or 41% due to the
        continued adoption of full function smartphones with increased use of
        data services such as messaging and social networking.
    -   As previously disclosed, ARPU (average revenue per subscriber unit
        per month) declined by 5.6% to $58.39 compared to the same quarter a
        year ago. The fast-growing data component of $11.26, represented 19%
        of ARPU, while the decline in the voice revenue worsened due to lower
        business-oriented Mike service revenue, increased use of in-bucket
        minutes, adoption of lower priced rate plans, decreased roaming
        revenues, and increased penetration of the Koodo brand.
    -   Net subscriber additions were 48,000, a decrease of 46% from the same
        period a year ago. Postpaid net additions of 44,000 represented 92%
        of the total net additions.
    -   EBITDA of $488 million decreased by 3% as lower than expected network
        revenue growth was more than offset by increased operating expenses,
        including: higher cost of acquisition and retention; higher network
        expenses to support the 9.2% growth in the wireless subscriber base
        and increased data usage; and higher bad debt expense from a
        broadened subscriber base and higher involuntary subscriber churn.
    -   Cost of acquisition per gross addition increased slightly by 2.4%
        year-over-year to $336 reflecting higher subsidies on smartphones.
    -   Blended monthly subscriber churn increased to 1.62% from 1.53% a year
        ago due to deactivations of customers impacted by the weaker economic
        environment.
    -   Simple cash flow (EBITDA less capital expenditures) decreased by 33%
        to $292 million in the quarter due to lower operating performance and
        higher capital spending to support the next generation HSPA network
        build-out.

    TELUS wireline

    -   External revenues decreased by $5 million or 0.4% to $1.2 billion in
        the first quarter of 2009, when compared with the same period in
        2008, as data and other growth was more than offset by the declines
        in local and long distance revenues.
    -   Data revenues increased by $32 million or 6.3% due to higher revenues
        from outsourcing services provided to business customers and the
        inclusion of an additional half-month of revenue from the Emergis
        acquisition on January 18, 2008. Increased enhanced data and hosting
        services, and high-speed Internet and TELUS TV subscriber growth also
        contributed to the increase.
    -   TELUS added 14,000 high-speed Internet subscribers, a 30% decrease
        from a year ago, due to a maturing market, ongoing competition, and
        reduced household formation.
    -   EBITDA of $418 million decreased by 6.3% due primarily to higher
        pension expenses and restructuring costs, TELUS TV costs, and upfront
        costs for implementing large complex enterprise customer services,
        partly offset by lower salaries and other employee related costs.
        EBITDA excluding pension and restructuring costs increased 4.2%.
    -   Network access lines (NALs) declined by 51,000 in the quarter to
        4.2 million, which is down 3.9% from a year ago. Residential NAL
        losses of 41,000 improved year-over-year as cable-TV competitors
        digital telephone coverage expansion slowed, and from the benefit of
        bundling services, including TELUS TV. A decrease in business NALs
        was experienced in Western Canada.
    -   Simple cash flow (EBITDA less capital expenditures) decreased $51
        million to $140 million in the quarter due to lower EBITDA and
        increased capital expenditures, which primarily relates to continued
        broadband network enhancements.

    CORPORATE AND BUSINESS DEVELOPMENTS

    TELUS TV surpasses 100,000 subscriber milestone and to launch satellite
    TV service
    

    TELUS' all-digital television, movie and radio entertainment service hit
a notable milestone in April as the TELUS TV subscriber base surpassed 100,000
customers. The company's rollout of infrastructure and supporting marketing
campaigns in Alberta, British Columbia and Eastern Quebec continues. Since
launching TELUS TV the company has advanced the service by introducing up to
33 High Definition (HD) channels, personal video recorder (PVR) capabilities
with an industry best 60 hours of HD recording time, and HD video on demand
delivering an improved viewing experience with sharper images and enhanced
sound quality. These features and the quality and flexibility of TELUS TV are
creating further momentum as TELUS expands HD coverage through a concerted
investment program to enhance the wireline broadband network.
    TELUS also announced today that it expects to enhance its TELUS TV
service by launching TELUS Satellite TV later this year. The new satellite TV
service will complement TELUS' current IP-based TV service by enabling the
company to more quickly expand the TV home bundle addressable market with
wireline, wireless, Internet and entertainment services for more than 90 per
cent of households across British Columbia and Alberta. TELUS Satellite TV
will likely feature more than 500 digital channels, more than 70 HD channels,
pay per view, an interactive programming guide, and time shifting. This new
satellite service is made possible by an agreement with Bell Canada.

    Operating Efficiency Update

    TELUS increased its focus on its ongoing operating efficiency program
beginning in the third quarter of 2008, and continued this effort into 2009.
TELUS is undertaking a number of initiatives across the company to improve
efficiency and reduce costs. Certain of these activities result in
restructuring costs, which totalled $28 million in the first quarter of 2009,
four times higher than the same period in 2008. In light of the worsening
economy and its impact on recent TELUS results the company continues to expand
its efficiency initiatives. The company's estimate of restructuring costs for
the full year of 2009 has now been increased to approximately $125 million
($59 million in 2008), from an earlier estimated range of $50 to $75 million.
    During the first quarter of 2009, full time equivalent employees
decreased by 1,160 from December 31, 2008, with permanent domestic reductions
of approximately 500 from efficiency initiatives and attrition. The remaining
decrease was primarily from seasonal reductions in both part-time staff and
TELUS International business process outsourcing services.

    Accounts Receivable Securitization extension

    In May, TELUS Communications Inc., a wholly owned subsidiary of TELUS,
amended an agreement with an arm's length securitization trust associated with
a major schedule I Canadian bank. The amendment resulted in the term of the
revolving period securitization agreement being extended three years to May 6,
2012, for an amount up to a maximum of $500 million. The agreement was
previously set to expire in July 2009.

    TELUS licenses Microsoft HealthVault to launch TELUS Health Space

    TELUS brought the power of storing and managing their own healthcare
information to Canadians with the launch of TELUS Health Space in early May. A
first in Canada, the new service is possible because of an agreement with
Microsoft giving TELUS an exclusive license to host and operate the
HealthVault platform in this country. TELUS Health Space allows Canadians to
electronically store and manage information including health records, chronic
disease management, pediatric care and wellness products throughout their
entire lives. Customers can share that information with their healthcare
practitioners to help them better manage the care provided to their families
by giving them an accurate, long-term picture of the individual's health and
any indicators of possible future disease or other issue.

    TELUS brings Canadians three new smartphones

    In April, TELUS launched the highly-anticipated Samsung OMNIA touchscreen
smartphone with Windows Mobile 6.1 Professional. Meaning "everything" in
Latin, OMNIA brings together all the features and capabilities needed to
provide users with a superior mobile experience - whether it is for work or
play. The OMNIA is packed with features including a 5.0 megapixel auto-focus
camera and Sharepix, which allows users to instantly upload their pictures to
their favourite social networking sites such as Facebook. It comes with 8 GB
of built-in memory and up to 16 GB of expandable memory, enough to store up to
30 DVD-quality movies, 7,000 songs, or 20,000 photos.
    During the quarter, TELUS also launched the BlackBerry Pearl Flip 8230
smartphone and the Palm Treo Pro with Windows Mobile 6.1 Professional.

    TELUS increases catalogue of Quebec music

    TELUS expanded its musical library of home-grown Quebec music available
for downloading on wireless devices, adding new productions from Quebec-based
record companies such as TACCA Musique, Audiogram, Indica Records, Déjà
Musique, Sphere Musique, Vega Musique, Dare to Care, Grosse Boîte, K.Pone.Inc
Music Group, Iro Productions, Tandem.mu and Abuzive Muzik as soon as they are
released. In many cases, TELUS customers can download songs before their
favourite artists' albums are released. With a digital catalogue of more than
25,000 tracks by Quebec-based artists, TELUS has the largest collection of
Quebec songs for mobile phones.

    New Prince George contact centre opens following renovations

    In March, TELUS put the finishing touches on $1.3 million in renovations
to its Prince George customer contact centre, doubling its capacity to 150
team members to help meet growing customer demand for TELUS services. TELUS
currently has about 250 team members in Prince George, which should grow to
about 325 once the new call centre is fully staffed.

    COMMUNITY INVESTMENT AND RECOGNITION

    TELUS launches Atlantic Canada Community Board

    In March, TELUS launched the TELUS Atlantic Canada Community Board,
chaired by General Rick Hillier (Retired). Atlantic Canada community leaders
joining the board include legendary recording artist Anne Murray, CTV Canada
AM personality Seamus O'Regan, actor and comedian Mary Walsh, and former NHL
star Danny Grant. The Atlantic Canada Community Board plans to donate $300,000
this year to local charitable organizations in the region. Its first donation
of $50,000 went to the IWK Health Centre in Halifax to help launch
Upopolis.com, a unique online social network for young patients in hospital.
The Atlantic Canada Community Board is the ninth TELUS Community Board in
Canada. Since their inception in 2005, these community boards have donated
$16.9 million to local charities, supporting 1,205 community projects.
    TELUS also announced its further commitment to helping at-risk youth
across the Atlantic Canada provinces with a new campaign to raise money for
the 31 Boys and Girls Clubs in the region. Between April 1 and June 30, TELUS
will donate $25 from the sale of every smartphone sold in Atlantic Canada to
the local chapters of Boys and Girls Clubs of Canada.

    TELUS one of Global 100 Most Sustainable Companies in the World

    TELUS was named one of five Canadian companies among the 100 most
sustainable large companies in the world. The annual Global 100 Most
Sustainable Companies in the World is compiled by Corporate Knights magazine
and research firm Innovest Strategic Value Advisors. The annual Global 100 is
announced each year at the World Economic Forum in Davos, Switzerland.

    TELUS named one of Canada's Best Diversity Employers

    TELUS was named one of Canada's Best Diversity Employers in an annual
competition recognizing national leaders in creating diverse and inclusive
workplaces. This year's list pays tribute to 35 companies and organizations in
Canada that have developed exceptional diversity initiatives to promote
inclusiveness among employee groups including women, members of visible
minorities, and persons with disabilities. The judges highlighted the
company's Connections program, which provides professional development and
network opportunities for women team members, as well as TELUS' new Diversity
Steering Committee and Diversity and Inclusiveness Council. They also noted
TELUS' extensive review of hiring processes last year, workforce diversity
representation numbers, the development of an employment equity plan and the
recruitment of Aboriginal team members through job fairs and presentations.

    TELUS earns Imagine Canada's Business and Community Partnership Award

    In March, Imagine Canada honoured TELUS with a Canadian Business &
Community Partnership Award. TELUS was recognized for its innovative
partnership with the Canadian Red Cross in creating the TELUS Red Cross Call
Centre in B.C. The partnership was inspired by the catastrophic Asian tsunami
of 2004, at which time the Red Cross struggled to handle the enormous influx
of calls from Canadians wanting to donate funds. TELUS built a new call centre
for the Red Cross, which opened in 2007. Using TELUS' leading-edge contact
centre technologies, Canadian Red Cross volunteers and staff are now able to
handle far more calls during a crisis, whether they are accepting donations or
working to re-unite families separated by a natural disaster.

    Aberdeen Group presents TELUS with the Performance Management and
    Learning award

    In March, global research company the Aberdeen Group presented TELUS with
the Performance Management and Learning award. The Aberdeen Group presented
five industry achievement awards for excellence in Human Capital Management
and the winners were selected from a research pool of thousands of enterprises
over the past 12 months. TELUS was presented the award for demonstrating deep
understanding of the elements of performance and harnessing the power of
learning and performance management technology and processes to achieve
business performance excellence.

    2009 TELUS World Skins Game in Quebec

    Mike Weir, Canada's most successful golfer, and Fred Couples, the U.S.
player aptly nicknamed 'Mr. Skins', will headline the international 'fivesome'
of players at the 2009 TELUS World Skins Game. The other players will be Geoff
Ogilvy (Australia) Trevor Immelman (South Africa) and Ian Poulter (England).
    The charity event, to take place in June at Quebec City's La Tempête Golf
Club, will raise funds for Opération Enfant Soleil, a local charity that
invests in the development of quality pediatric care in Quebec.

    Dividend Declaration

    The Board of Directors has declared a quarterly dividend of forty-seven
and one half cents ($0.475) Canadian per share on the issued and outstanding
Common shares and forty-seven and one half cents ($0.475) Canadian per share
on the issued and outstanding Non-Voting shares of the Company payable on July
2, 2009 to holders of record at the close of business on June 10, 2009.
    This quarterly dividend represents a two and one half cent (ten cents
annualized) or 5.6 per cent increase from the $0.45 quarterly dividend paid on
July 1, 2008.

    Access to Quarterly results information

    Interested investors, the media and others may review this quarterly
earnings release, quarterly results slides, supplementary financial
information and our full first quarter 2009 report on our website at
telus.com/investors.

    Quarterly conference call and webcast presentation

    TELUS quarterly conference call is scheduled for Thursday, May 7, 2009 at
3:00 pm ET and will feature a presentation about our first quarter results. It
will be followed by a question and answer period with analysts. Interested
parties can access the call live on a listen-only basis at:
telus.com/investors. A transcript will be posted on the website within several
business days. Also, a recording will be available on May 7 until May 17, 2009
at: telus.com/investors by telephone (1-403-205-4531 or 1-877-245-4531,
reservation no. 888223 followed by the number sign.)

    About TELUS

    TELUS (TSX: T, T.A; NYSE:   TU) is a leading national telecommunications
company in Canada, with $9.7 billion of annual revenue and 11.6 million
customer connections including 6.2 million wireless subscribers, 4.2 million
wireline network access lines, and 1.2 million Internet subscribers. Led since
2000 by President and CEO, Darren Entwistle, TELUS provides a wide range of
communications products and services including data, Internet protocol (IP),
voice, entertainment and video. In support of our philosophy to give where we
live, TELUS, our team members and retirees have contributed $137 million to
charitable and not-for-profit organizations and volunteered more than 2.6
million hours of service to local communities since 2000. Nine TELUS Community
Boards across Canada lead our local philanthropic initiatives. For more
information about TELUS, please visit telus.com.

    
    TELUS Corporation

    interim consolidated statements of income and
    other comprehensive income                                    (unaudited)

                                                             Three months
    Periods ended March 31 (millions except per
     share amounts)                                       2009          2008
    -------------------------------------------------------------------------
                                                                (as adjusted)
    OPERATING REVENUES                                 $ 2,375       $ 2,350
    -------------------------------------------------------------------------
    OPERATING EXPENSES
      Operations                                         1,441         1,394
      Restructuring costs                                   28             7
      Depreciation                                         334           346
      Amortization of intangible assets                     93            76
    -------------------------------------------------------------------------
                                                         1,896         1,823
    -------------------------------------------------------------------------
    OPERATING INCOME                                       479           527
      Other expense, net                                     5            17
      Financing costs                                       95           109
    -------------------------------------------------------------------------
    INCOME BEFORE INCOME TAXES                             379           401
      Income taxes                                          57           109
    -------------------------------------------------------------------------
    NET INCOME                                             322           292
    OTHER COMPREHENSIVE INCOME
      Change in unrealized fair value of
       derivatives designated as cash flow
       hedges                                               29             4
      Foreign currency translation adjustment
       arising from translating financial
       statements of self-sustaining foreign
       operations                                            1            (2)
      Change in unrealized fair value of
       available-for-sale financial assets                   -            (1)
    -------------------------------------------------------------------------
                                                            30             1
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME                               $   352       $   293
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET INCOME ATTRIBUTABLE TO:
      Common Shares and Non-Voting Shares              $   321       $   291
      Non-controlling interests                              1             1
    -------------------------------------------------------------------------
                                                       $   322       $   292
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
      Common Shares and Non-Voting Shares              $   351       $   292
      Non-controlling interests                              1             1
    -------------------------------------------------------------------------
                                                       $   352       $   293
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET INCOME PER COMMON SHARE AND NON-VOTING SHARE
      - Basic                                          $  1.01       $  0.90
      - Diluted                                        $  1.01       $  0.90
    DIVIDENDS DECLARED PER COMMON SHARE AND
     NON-VOTING SHARE                                  $ 0.475       $  0.45
    TOTAL WEIGHTED AVERAGE COMMON SHARES AND
     NON-VOTING SHARES OUTSTANDING
      - Basic                                              318           324
      - Diluted                                            318           325



    TELUS Corporation

    interim consolidated statements of financial position         (unaudited)

    As at (millions)                                  March 31,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
                                                                (as adjusted)
    ASSETS
    Current Assets
      Cash and temporary investments, net              $    65       $     4
      Accounts receivable                                  842           966
      Income and other taxes receivable                     28            25
      Inventories                                          264           333
      Prepaid expenses and other                           240           176
      Derivative assets                                      8            10
    -------------------------------------------------------------------------
                                                         1,447         1,514
    -------------------------------------------------------------------------
    Capital Assets, Net
      Property, plant, equipment and other               7,375         7,317
      Intangible assets subject to amortization          1,312         1,317
      Intangible assets with indefinite lives            3,849         3,849
    -------------------------------------------------------------------------
                                                        12,536        12,483
    -------------------------------------------------------------------------
    Other Assets
      Other long-term assets                             1,461         1,418
      Investments                                           43            42
      Goodwill                                           3,564         3,564
    -------------------------------------------------------------------------
                                                         5,068         5,024
    -------------------------------------------------------------------------
                                                       $19,051       $19,021
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Accounts payable and accrued liabilities         $ 1,410       $ 1,465
      Income and other taxes payable                        12           163
      Restructuring accounts payable and accrued
       liabilities                                          50            51
      Dividends payable                                    151           151
      Advance billings and customer deposits               660           689
      Current maturities of long-term debt                   3             4
      Current portion of derivative liabilities             78            75
      Current portion of future income taxes               419           459
    -------------------------------------------------------------------------
                                                         2,783         3,057
    -------------------------------------------------------------------------
    Long-Term Debt                                       6,509         6,348
    -------------------------------------------------------------------------
    Other Long-Term Liabilities                          1,190         1,295
    -------------------------------------------------------------------------
    Future Income Taxes                                  1,255         1,213
    -------------------------------------------------------------------------
    Shareholders' Equity
      Common Share and Non-Voting Share equity           7,290         7,085
      Non-controlling interests                             24            23
    -------------------------------------------------------------------------
                                                         7,314         7,108
    -------------------------------------------------------------------------
                                                       $19,051       $19,021
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    interim consolidated statements of cash flows                 (unaudited)

                                                             Three months
    Periods ended March 31 (millions)                     2009          2008
    -------------------------------------------------------------------------
                                                                (as adjusted)
    OPERATING ACTIVITIES
    Net income                                           $ 322         $ 292
    Adjustments to reconcile net income to cash
     provided by operating activities:
      Depreciation and amortization                        427           422
      Future income taxes                                  (11)           (3)
      Share-based compensation                               9             6
      Net employee defined benefit plans expense             4           (25)
      Employer contributions to employee defined
       benefit plans                                       (53)          (27)
      Restructuring costs, net of cash payments             (1)           (3)
      Amortization of deferred gains on
       sale-leaseback of buildings, amortization
       of deferred charges and other, net                   20             8
      Net change in non-cash working capital              (103)          (36)
    -------------------------------------------------------------------------
    Cash provided by operating activities                  614           634
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Capital expenditures                                  (474)         (320)
    Acquisitions                                             -          (687)
    Change in non-current materials and supplies,
     purchase of investments and other                      (4)           (2)
    -------------------------------------------------------------------------
    Cash used by investing activities                     (478)       (1,009)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Common Shares and Non-Voting Shares issued               1             -
    Dividends to shareholders                             (151)            -
    Purchase of Common Shares and Non-Voting Shares
     for cancellation                                        -          (122)
    Long-term debt issued                                3,574         3,712
    Redemptions and repayment of long-term debt         (3,499)       (3,181)
    Dividends paid by a subsidiary to non-controlling
     interests                                               -            (5)
    -------------------------------------------------------------------------
    Cash provided (used) by financing activities           (75)          404
    -------------------------------------------------------------------------
    CASH POSITION
    Increase (decrease) in cash and temporary
     investments, net                                       61            29
    Cash and temporary investments, net, beginning
     of period                                               4            20
    -------------------------------------------------------------------------
    Cash and temporary investments, net, end of
     period                                            $    65       $    49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
    Interest (paid)                                    $   (49)      $   (45)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest received                                  $     -       $     1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income taxes (inclusive of Investment Tax
     Credits (paid) received, net                      $  (214)      $    (1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    segmented information                                         (unaudited)

    Three-month periods ended
     March 31                             Wireline              Wireless
    (millions)                         2009       2008       2009       2008
    -------------------------------------------------------------------------
    Operating revenues
      External revenue            $   1,245  $   1,250  $   1,130  $   1,100
      Intersegment revenue               33         31          7          7
    -------------------------------------------------------------------------
                                      1,278      1,281      1,137      1,107
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense                834        828        647        604
      Restructuring costs                26          7          2          -
    -------------------------------------------------------------------------
                                        860        835        649        604
    -------------------------------------------------------------------------
    EBITDA(1)                     $     418  $     446  $     488  $     503
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                      $     278  $     255  $     196  $      65
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX             $     140  $     191  $     292  $     438
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Three-month periods ended
     March 31                            Eliminations          Consolidated
    (millions)                         2009       2008       2009       2008
    -------------------------------------------------------------------------
                                                                        (as
                                                                    adjusted)
    Operating revenues
      External revenue            $       -  $       -  $   2,375  $   2,350
      Intersegment revenue              (40)       (38)         -          -
    -------------------------------------------------------------------------
                                        (40)       (38)     2,375      2,350
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense                (40)       (38)     1,441      1,394
      Restructuring costs                 -          -         28          7
    -------------------------------------------------------------------------
                                        (40)       (38)     1,469      1,401
    -------------------------------------------------------------------------
    EBITDA(1)                     $       -  $       -  $     906  $     949
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                      $       -  $       -  $     474  $     320
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX             $       -  $       -  $     432  $     629
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  EBITDA (from above)   $     906  $     949
                                  Depreciation                334        346
                                  Amortization                 93         76
                                  -------------------------------------------
                                  Operating income            479        527
                                  Other expense, net            5         17
                                  Financing costs              95        109
                                  -------------------------------------------
                                  Income before income
                                   taxes                      379        401
                                  Income taxes                 57        109
                                  -------------------------------------------
                                  Net income            $     322  $     292
                                  -------------------------------------------
                                  -------------------------------------------

    (1) Earnings Before Interest, Taxes, Depreciation and Amortization
        ("EBITDA") is a measure that does not have any standardized meaning
        prescribed by GAAP and is therefore unlikely to be comparable to
        similar measures presented by other issuers; EBITDA is defined by the
        Company as operating revenues less operations expense and
        restructuring costs. The Company has issued guidance on, and reports,
        EBITDA because it is a key measure used by management to evaluate
        performance of its business segments and is utilized in measuring
        compliance with certain debt covenants.
    (2) Total capital expenditures ("CAPEX").



    -------------------------------------------------------------------------
                              TELUS CORPORATION

                    Management's discussion and analysis

                                   2009 Q1
    -------------------------------------------------------------------------


    Caution regarding forward-looking statements

    -------------------------------------------------------------------------
    This document and Management's discussion and analysis contain forward-
    looking statements about expected future events and financial and
    operating results of TELUS Corporation (TELUS or the Company, and where
    the context of the narrative permits, or requires, its subsidiaries). By
    their nature, forward-looking statements require the Company to make
    assumptions, and forward-looking statements are subject to inherent risks
    and uncertainties. There is significant risk that assumptions,
    predictions and other forward-looking statements will not prove to be
    accurate. Readers are cautioned not to place undue reliance on forward-
    looking statements as a number of factors could cause actual future
    results, conditions, actions or events to differ materially from the
    targets, expectations, estimates or intentions expressed. Except as
    required by law, the Company disclaims any intention or obligation to
    update or revise any forward-looking statements, and reserves the right
    to change, at any time at its sole discretion, its current practice of
    updating annual targets and guidance. Annual targets, revised guidance
    and related assumptions for 2009 are described in Section 9: Annual
    guidance for 2009.

    Factors that could cause actual results to differ materially include, but
    are not limited to:
    -------------------------------------------------------------------------

    Competition (including more active price competition and the likelihood
    of new wireless competitors beginning to offer services in late 2009 and
    into 2010 as a result of the 2008 advanced wireless services (AWS)
    spectrum auction); economic growth and fluctuations (including the global
    credit crisis and economic recession in Canada, and pension performance,
    funding and expenses); capital expenditure levels (increasing in 2009 and
    potentially in future years due to the Company's fourth generation (4G)
    wireless deployment strategy and any new Industry Canada wireless
    spectrum auctions); financing and debt requirements (including ability to
    carry out refinancing activities and fund share repurchases); tax matters
    (including acceleration or deferral of required payments of significant
    amounts of cash taxes); human resource developments; business
    integrations and internal reorganizations (including ability to
    successfully implement cost reduction initiatives); technology (including
    reliance on systems and information technology, broadband and wireless
    technology options, choice of suppliers and suppliers' ability to
    maintain and service their product lines, expected technology and
    evolution path and transition to 4G technology, expected future benefits
    and performance of high-speed packet access (HSPA) / long-term evolution
    (LTE) wireless technology, successful implementation of the network build
    and sharing arrangement with Bell Canada to achieve cost efficiencies and
    reduce deployment risks, successful deployment and operation of new
    wireless networks and successful introduction of new products, services
    and supporting systems); regulatory approvals and developments (including
    interpretation and application of tower sharing and roaming rules, the
    design and impact of future spectrum auctions, the review of new media
    and Internet traffic management practices, and possible changes to
    foreign ownership restrictions); process risks (including conversion of
    legacy systems and billing system integrations, and implementation of
    large complex deals that may be adversely impacted by available resources
    and degree of co-operation from other service providers); health, safety
    and environmental developments; litigation and legal matters; business
    continuity events (including manmade and natural threats); any
    prospective acquisitions or divestitures; and other risk factors
    discussed herein and listed from time to time in TELUS' reports and
    public disclosure documents including its annual report, annual
    information form, and other filings with securities commissions in Canada
    (on sedar.com) and in its filings in the United States, including Form
    40-F (on EDGAR at sec.gov).

    For further information, see Section 10: Risks and risk management in
    TELUS' 2008 Management's discussion and analysis and updates in Section
    10 of this document.
    -------------------------------------------------------------------------
    

    Management's discussion and analysis

    May 6, 2009

    The following is a discussion of the consolidated financial position and
results of operations of TELUS Corporation for the quarters ended March 31,
2009 and 2008, and should be read together with TELUS' interim Consolidated
financial statements. This discussion contains forward-looking information
that is qualified by reference to, and should be read together with, the
Caution regarding forward-looking statements above.
    TELUS' Consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles (GAAP), which differ in
certain respects from U.S. GAAP. See Note 21 to the interim Consolidated
financial statements for a summary of the principal differences between
Canadian and U.S. GAAP as they relate to TELUS. The interim Consolidated
financial statements and Management's discussion and analysis were reviewed by
TELUS' Audit Committee and approved by TELUS' Board of Directors. All amounts
are in Canadian dollars unless otherwise specified.
    TELUS has issued guidance on and reports on certain non-GAAP measures
used by management to evaluate performance of business units, segments and the
Company. Non-GAAP measures are also used to determine compliance with debt
covenants and manage the capital structure. Because non-GAAP measures do not
have a standardized meaning, securities regulations require that non-GAAP
measures be clearly defined and qualified, and reconciled with their nearest
GAAP measure. For the reader's reference, the definition, calculation and
reconciliation of consolidated non-GAAP measures are provided in Section 11:
Reconciliation of non-GAAP measures and definition of key operating
indicators.

    
    Management's discussion and analysis contents

    -------------------------------------------------------------------------
    Section                           Contents
    -------------------------------------------------------------------------
    1.  Introduction                  A summary of TELUS' consolidated
                                      results for the first quarter of 2009
    -------------------------------------------------------------------------
    2.  Core business, vision         A discussion of activities in support
         and strategy                 of TELUS' six strategic imperatives
    -------------------------------------------------------------------------
    3.  Key performance drivers       A list of corporate priorities for 2009
    -------------------------------------------------------------------------
    4.  Capabilities                  A description of the factors that
                                      affect the capability to execute
                                      strategies, manage key performance
                                      drivers and deliver results
    -------------------------------------------------------------------------
    5.  Results from operations       A detailed discussion of operating
                                      results for the first quarter of 2009
    -------------------------------------------------------------------------
    6.  Changes in financial          A discussion of changes in the
         position                     consolidated statements of financial
                                      position for the three-month period
                                      ended March 31, 2009
    -------------------------------------------------------------------------
    7.  Liquidity and capital         A discussion of cash flow, liquidity,
         resources                    credit facilities and other disclosures
    -------------------------------------------------------------------------
    8.  Critical accounting           Accounting estimates that are critical
         estimates and accounting     to determining financial results, and
         policy developments          changes to accounting policies
    -------------------------------------------------------------------------
    9.  Annual guidance for 2009      TELUS' revised guidance for the full
                                      year, and related assumptions
    -------------------------------------------------------------------------
    10. Risks and risk management     An update on certain risks and
                                      uncertainties facing TELUS and how the
                                      Company manages these risks
    -------------------------------------------------------------------------
    11. Reconciliation of non-GAAP    A description, calculation and
        measures and definition of    reconciliation of certain measures used
        key operating indicators      by management
    -------------------------------------------------------------------------
    


    1.   Introduction

    The discussion in this section is qualified by the Caution regarding
forward-looking statements at the beginning of Management's discussion and
analysis.

    1.1  Materiality for disclosures

    Management determines whether or not information is material based on
whether it believes a reasonable investor's decision to buy, sell or hold
securities in the Company would likely be influenced or changed if the
information were omitted or misstated.

    1.2  Canadian economic environment

    Global economic uncertainty and tightening credit markets, particularly
in the latter half of 2008, resulted in Canada's economy entering into
recession in the fourth quarter of 2008. The economy is now expected to remain
in recession until the fourth quarter of 2009. See related risks in Section
10.2 Economic growth and fluctuations.
    On April 21, 2009, the Bank of Canada made the following comments on the
economy. "In an environment of continued high uncertainty, the global
recession has intensified and become more synchronous since the Bank's January
Monetary Policy Report Update, with weaker-than-expected activity in all major
economies. Deteriorating credit conditions have spread quickly through trade,
financial, and confidence channels. While more aggressive monetary and fiscal
policy actions are underway across the G20, measures to stabilize the global
financial system have taken longer than expected to enact. As a result, the
recession in Canada will be deeper than anticipated, with the economy
projected to contract by 3.0 per cent in 2009. The Bank now expects the
recovery to be delayed until the fourth quarter and to be more gradual. The
economy is projected to grow by 2.5 per cent in 2010 and 4.7 per cent in 2011,
and to reach its production capacity in the third quarter of 2011. Given
significant restructuring in a number of sectors, potential growth has been
revised down. The recovery will be importantly supported by the Bank's
accommodative monetary stance."

    
         Effects on TELUS
    

    Wireless segment operating and financial results in the first quarter of
2009 were adversely affected by the weak macro-economic environment,
accelerating a negative trend first observed in the fourth quarter of 2008,
and were below management expectations. Year-over-year wireless gross
subscriber additions were stable at 346,000 in the first quarter of 2009;
however, net additions decreased by 46% to 48,000. Weakness in subscriber net
additions in the first quarter of 2009 is primarily attributable to the
combination of a lack of customary growth in gross additions, combined with an
increase in deactivations. The increase in deactivations was due to both a
larger subscriber base and increased churn rate among business customers
impacted adversely by the current economic environment.
    Wireless subscriber gross additions for the first quarter of 2009
increased by 0.3% when compared to the first quarter of 2008. This compares to
year-over-year growth rates of 4.8% for the fourth quarter of 2008 and 15% for
the year ended December 31, 2008. The worsening growth trend for gross
subscriber additions is believed to be primarily due to the weakening Canadian
economy as evident by lower consumer confidence and a resulting decrease in
retail sales including deferral of buying decisions by customers, lower and
more cautious business spending, and lower employment levels.
    Similarly, TELUS has experienced a decline in wireless ARPU (average
revenue per subscriber unit per month), which is being impacted by lower
service revenue from the Company's Mike(R) service, increased proportion and
use of lower per-minute rate plans (including increased use of in-bucket
minutes) and decreased roaming revenues. This can be attributed to the
continued highly competitive market and the ongoing global economic recession
increasingly being experienced in Canada. This is particularly acute for the
Company's Mike Push To Talk(TM) business-oriented service, which is commonly
used in economically sensitive business sectors such as manufacturing,
automotive, construction, transportation dispatch, and energy. Mike service
subscribers represent less than 11% of TELUS' total wireless subscriber base,
as at March 31, 2009.
    The wireline segment has been impacted to a lesser degree, with data and
other revenue growth largely offsetting lower voice local and long distance
services. The Company has observed a larger number of disconnections and fewer
installations of business network access lines (NALs), particularly in B.C.
and Alberta, attributed partly to economic conditions and partly to
competition. Business NALs increased in Ontario and Quebec during the first
quarter of 2009, while the number of residential NAL losses in B.C. and
Alberta has moderated in the most recent two quarters.
    In light of the impacts of the worsening economy and weaker than expected
first quarter results, the full year annual guidance first set in December
2008, has been revised downward as outlined in Section 9: Annual guidance for
2009.
    TELUS' capital structure financial policies, which are discussed under
Capabilities - Section 4.3 Liquidity and capital resources, were designed with
credit cycles in mind. The Company believes that these financial policies and
guidelines, and maintaining credit ratings in the range of BBB+ to A -, or the
equivalent, provide reasonable access to capital markets. The economic
weakness and stock market decline that began in 2008 are expected to increase
TELUS' net defined benefit pension plans expense and funding in 2009, which is
reflected in the Company's public guidance for 2009. See Section 9.

    
    1.3  Consolidated highlights

    -------------------------------------------------------------------------
    ($ millions, unless noted otherwise)             Quarters ended March 31
                                                    2009      2008    Change
    -------------------------------------------------------------------------
    Consolidated statements of income
    -------------------------------------------------------------------------
    Operating revenues                             2,375     2,350       1.1%
    Operating income                                 479       527     (9.1)%
    Income before income taxes                       379       401     (5.5)%
    Net income(1)                                    322       292        10%

    Earnings per share(2) (EPS) basic ($)           1.01      0.90        12%
    EPS(2) diluted ($)                              1.01      0.90        12%
    Cash dividends declared per share(2) ($)       0.475      0.45       5.6%

    Average shares outstanding - basic
     (millions)(1)                                   318       324     (1.9)%
    -------------------------------------------------------------------------
    Consolidated statements of cash flows
    -------------------------------------------------------------------------
    Cash provided by operating activities            614       634     (3.2)%
    Cash used by investing activities                478     1,009      (53)%
      Capital expenditures                           474       320        48%
      Acquisitions                                     -       687         -
    Cash (used) provided by financing activities     (75)      404         -
    -------------------------------------------------------------------------
    Subscribers and other measures
    -------------------------------------------------------------------------
    Subscriber connections(3) (thousands)         11,596    11,207       3.5%
    EBITDA(4)                                        906       949     (4.5)%
    Free cash flow(4)                                125       528      (76)%
    -------------------------------------------------------------------------
    Debt and payout ratios(5)
    -------------------------------------------------------------------------
    Net debt to EBITDA - excluding
     restructuring costs (times)                     1.9       1.8        0.1
    Dividend payout ratio(6) (%)                      57        54      3 pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    n.m. - not meaningful; pts - percentage points

    (1) Net income for the first quarter of 2008 has been adjusted. See
        Section 5.1.
    (2) Includes Common Shares and Non-Voting Shares.
    (3) The sum of wireless subscribers, network access lines and Internet
        access subscribers measured at the end of the respective periods,
        based on information in billing and other systems. The measure
        excludes TELUS TV(R) connections
    (4) EBITDA and free cash flow are non-GAAP measures. See Section 11.1
        Earnings before interest, taxes, depreciation and amortization
        (EBITDA) and Section 11.2 Free cash flow.
    (5) See Section 7.4 Liquidity and capital resource measures and Section
        11.4 Definitions of liquidity and capital resource measures.
    (6) Based on 12-month trailing earnings per share excluding favourable
        tax-related adjustments of 30 cents per share for the period ended
        March 31, 2009 and 82 cents per share for the period ended March 31,
        2008.
    -------------------------------------------------------------------------

    Highlights from operations, comparing results for the first quarter of
2009, or measures at March 31, 2009, to those one year earlier:

    -   Subscriber connections increased by 389,000 in the 12-month period
        ended March 31, 2009 to nearly 11.6 million. This includes 9.2%
        growth in wireless subscribers and 3.2% growth in Internet
        subscribers, partly offset by a 3.9% decrease in network access
        lines.

    -   Operating revenues increased by $25 million, primarily from 41%
        growth in wireless data revenue, partly offset by the 2.9% decline
        wireless voice revenues. Wireline revenues decreased slightly as the
        6.3% growth in wireline data revenue was more than offset by declines
        in local and long distance revenues.

    -   Operating income decreased by $48 million due to: (i) a $43 million
        lower EBITDA resulting primarily from increases in defined benefit
        pension plan expenses and restructuring costs; and (ii) $5 million
        higher depreciation and amortization expenses. EBITDA increased by
        $7 million when excluding the $29 million increase in pension
        expenses and the $21 million increase in restructuring costs. The
        increase in EBITDA before higher restructuring and pension costs
        reflected an $18 million improvement in wireline, net of an
        $11 million decrease in wireless.

    -   Income before income taxes decreased by $22 million as the decrease
        in Operating income was partly offset by lower valuation losses on
        short-term investments, lower costs for securitized accounts
        receivables, and recognition of interest income for tax recoveries.

    -   Net income increased by $30 million, while basic earnings per share
        increased by 11 cents. Net income in the first quarter of 2009 and
        2008 includes income tax-related adjustments arising from legislated
        income tax changes, settlements and tax reassessments for prior
        years, and any related interest on reassessments (see Section 5.2).
        Net income before income tax-related adjustments was $260 million in
        the first quarter of 2009, a decrease of $15 million or four cents
        per share compared the same period in 2008. Average shares were
        two per cent lower than the first quarter of 2008, due to market
        repurchases under normal course issuer bid (NCIB) programs during
        2008.

    -------------------------------------------------------------------------
    Net income continuity                                     Quarters ended
    ($ millions)                                                 March 31
    -------------------------------------------------------------------------
    Net income in 2008                                                   292
    Deduct net favourable income tax-related adjustments
     in 2008 (see Section 5.2)                                           (17)
                                                              ---------------
                                                                         275
    Tax-effected changes:
      Lower EBITDA(1)                                                    (31)
      Higher depreciation and amortization(1)                             (3)
      Other                                                               19
                                                              ---------------
                                                                         260
    Net favourable income tax-related adjustments in 2009
     (see Section 5.2)                                                    62
                                                              ---------------
    Net income in 2009                                                   322
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) For the purposes of this presentation, the 2009 blended statutory tax
        rate was used.
    -------------------------------------------------------------------------

    Liquidity and capital resources highlights, comparing results for the
first quarter of 2009, or measures as at March 31, 2009, to those one year
earlier:

    -   At March 31, 2009, TELUS had unutilized credit facilities of
        $1.04 billion, as well as additional unutilized availability under
        its accounts receivable securitization program, consistent with its
        objective of generally maintaining more than $1 billion of unutilized
        liquidity.

    -   The Company continues to meet two other key guidelines. Net debt to
        EBITDA at March 31, 2009 was 1.9 times, within the Company's long-
        term target policy range of 1.5 to 2.0 times.

    -   The dividend payout ratio, based on the annualized first quarter
        dividend and earnings for the twelve-month period ended March 31,
        2009 (excluding favourable income tax-related adjustments and minimal
        impact from a net-cash settlement feature), was 57%, slightly above
        the Company's prospective guideline of 45% to 55% of sustainable net
        earnings. The ratio was 52% based on actual earnings for the 12-month
        period ended March 31, 2009.

    -   Cash provided by operating activities decreased by $20 million,
        primarily from income tax payments in the first quarter of 2009,
        largely offset by other non-cash working capital changes. Income tax
        payments of $214 million in the first quarter of 2009 were in respect
        of final 2008 income taxes due and first quarter instalments for 2009
        income taxes.

    -   Cash used by investing activities decreased by $531 million. The
        decrease was mainly due to the acquisition of Emergis in January
        2008, partly offset by increased capital investments in wireless and
        wireline broadband infrastructure to enhance the Company's
        competitive position and support long-term growth.

    -   Cash used by financing activities was $75 million in the first
        quarter of 2009, including dividend payments of $151 million and a
        reduction in amounts drawn against the 2012 credit facility, net of
        an increase in commercial paper. In comparison, during the first
        quarter of 2008, $404 million of cash was provided by financing
        activities, as the Company increased utilization of bank facilities
        and commercial paper for corporate purposes including the acquisition
        of Emergis.

    -   Free cash flow decreased by $403 million to $125 million, due mainly
        to increased income tax payments and capital expenditures.

    2.   Core business, vision and strategy

    The discussion in this section is qualified in its entirety by the Caution
regarding forward-looking statements at the beginning of Management's
discussion and analysis.
    TELUS' core business, vision and strategy were described in its 2008
Management's discussion and analysis. Activities in the first quarter of 2009
that support the Company's six strategic imperatives include the following:

         Building national capabilities across data, IP, voice and wireless
    

    TELUS continues to invest in broadband networks and services to enhance
the Company's competitive position and support future growth opportunities.
The Company announced that more than $1 billion of its $2.05 billion capital
spending plan for 2009 would be invested in British Columbia and Alberta. The
investments are being directed primarily to advanced wireless and wireline
broadband initiatives. The construction of TELUS' advanced wireless network is
under way, based on the latest version of high-speed packet access (HSPA)
technology, with HSPA-based service expected to be launched in B.C., Alberta
and nationally by early 2010. The investment in HSPA technology is expected to
ensure an optimal future transition to long-term evolution (LTE) technology,
the emerging world-wide standard for fourth generation or 4G wireless
networks. The Company's wireline broadband investments will expand the reach
of high-speed Internet and digital TELUS TV service in B.C. and Alberta.

    
         Focusing relentlessly on the growth markets of data, IP and wireless

    The Company commenced implementation of a seven-to-ten year contract worth
up to $900 million with the Government of Quebec, to deliver and manage the
province's next generation data network. Revenues are expected to be
recognized beginning in 2010, while expenses to implement the contract are
expected to ramp up in 2009.

         Investing in internal capabilities to build a high-performance
         culture and efficient operations
    

    The Company increased its focus on its ongoing operating efficiency
program beginning in the third quarter of 2008, continuing into 2009. An array
of initiatives is in various stages of deployment to improve efficiency and
reduce costs. Certain of these activities result in restructuring costs, and
in the first quarter of 2009 such costs were $28 million, or four times higher
than the same period in 2008. The Company's estimate of restructuring costs
for the full year of 2009 has now been increased from a range of $50 to $75
million to approximately $125 million ($59 million in 2008), due to the
acceleration of efficiency initiatives. This action reflects the impact of a
worsening Canadian economy on TELUS' first quarter financial results.
    During the first quarter of 2009, full time equivalent employees
decreased by approximately 1,200 from December 31, 2008, with reductions of
approximately 500 from efficiency initiatives and attrition. The remaining
decrease was primarily from seasonal reductions in both part-time staff and
business process outsourcing services for customers.

    
    3.   Key performance drivers

    This section is qualified by the Caution regarding forward-looking
statements at the beginning of Management's discussion and analysis.
    Management sets corporate priorities each year to advance TELUS' strategy
and focus on the near-term opportunities and challenges to create value for
shareholders.

    -------------------------------------------------------------------------
    Corporate priorities for 2009
    -------------------------------------------------------------------------
    Execute on TELUS' broadband strategy, leveraging investments in leading
    wireline and wireless networks to deliver winning solutions for customers

    Increase the efficiency of operations to improve TELUS' cost structure
    and economic performance

    Outpace the competition and earn the patronage of clients through an
    engaged TELUS team.
    -------------------------------------------------------------------------

    4.   Capabilities

    The discussion in this section is qualified by the Caution regarding
forward-looking statements at the beginning of Management's discussion and
analysis.

    4.1  Principal markets addressed and competition

    The principal markets addressed by the Company and its competition were
described in Section 4.1 of TELUS' 2008 Management's discussion and analysis.

    4.2  Operational resources

    Operational resources were described in Section 4.2 of TELUS' 2008
Management's discussion and analysis.

    4.3  Liquidity and capital resources

         Capital structure financial policies
    

    The Company's objectives when managing capital are: (i) to maintain a
flexible capital structure that optimizes the cost of capital at acceptable
risk; and (ii) to manage capital in a manner that balances the interests of
equity and debt holders.
    In the management and definition of capital, the Company includes
shareholders' equity (excluding accumulated other comprehensive income),
long-term debt (including any associated hedging assets or liabilities, net of
amounts recognized in accumulated other comprehensive income), cash and
temporary investments and securitized accounts receivable.
    The Company manages the capital structure and makes adjustments to it in
light of changes in economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to shareholders, purchase
shares for cancellation pursuant to normal course issuer bids, issue new
shares, issue new debt, issue new debt to replace existing debt with different
characteristics and/or increase or decrease the amount of sales of trade
accounts receivable to an arm's-length securitization trust.
    The Company monitors capital utilizing a number of measures, including:
net debt to EBITDA - excluding restructuring costs; and dividend payout ratio
of sustainable net earnings. For further discussion, see Section 7.4 Liquidity
and capital resource measures.

    
     Reporting back on TELUS' financing and capital structure management
                                plan for 2009

    -------------------------------------------------------------------------
    Repurchase TELUS Common Shares and TELUS Non-Voting Shares under the
    normal course issuer bid (NCIB)

    No shares were repurchased in the first quarter of 2009, but the program
    for up to eight million shares remains available until December 22, 2009.
    -------------------------------------------------------------------------
    Pay dividends

    The dividend declared for the first quarter of 2009 (paid April 1, 2009)
    was 47.5 cents per share as compared to 45 cents per share in the same
    period in 2008, or an increase of 5.6%.
    -------------------------------------------------------------------------
    Use proceeds from securitized receivables, bank facilities and commercial
    paper, as needed, to supplement free cash flow and meet other cash
    requirements

    Proceeds from securitized accounts receivable were $300 million at
    March 31, 2009, unchanged from December 31, 2008. During the first
    quarter of 2009, the Company reduced amounts drawn against its 2012
    credit facility to $300 million from $980 million, while increasing
    commercial paper to $1,188 million from $432 million at December 31,
    2008. In May 2009, TELUS extended the termination date for its accounts
    receivable securitization program to 2012.
    -------------------------------------------------------------------------
    Maintain compliance with financial objectives, policies and guidelines

    Maintain a minimum $1 billion in unutilized liquidity - The Company had
    unutilized credit facilities of $1.04 billion at March 31, 2009, as well
    as additional availability under its accounts receivable securitization
    program.

    Net debt to EBITDA excluding restructuring costs ratio of 1.5 to 2.0
    times - Actual result of 1.9 times at March 31, 2009.

    Dividend payout ratio of 45 to 55% of sustainable net earnings on a
    prospective basis - The ratio was 57% when calculated based on the
    annualized first quarter dividend and 12-month trailing earnings,
    excluding favourable tax-related adjustments and minimal impacts from a
    net-cash settlement feature. The ratio was 52% based on actual earnings
    for the 12-month period ended March 31, 2009.
    -------------------------------------------------------------------------
    Maintain position of fully hedging foreign exchange exposure for
    indebtedness

    Maintained for the 8.00% U.S. dollar Notes due 2011, the only foreign
    currency-denominated debt issue.
    -------------------------------------------------------------------------
    Give consideration to issuing long-term public debt or establishing new
    term credit facilities in 2009 to refinance short-term financing sources
    or upcoming debt maturities

    Late in 2008, the Company extended the term of its $700 million, 364-day
    credit facility with a select group of Canadian banks, to March 1, 2010.
    The Company continues to monitor the capital markets and has access to a
    shelf prospectus pursuant to which it can offer $2.5 billion of debt and
    equity.
    -------------------------------------------------------------------------
    Preserve access to the capital markets at a reasonable cost by
    maintaining investment grade credit ratings and targeting improved credit
    ratings in the range of BBB+ to A -, or the equivalent, in the future

    At May 6, 2009, investment grade credit ratings from the four rating
    agencies that cover TELUS were in the desired range.
    -------------------------------------------------------------------------

    4.4  Internal control over financial reporting

         Changes in internal control over financial reporting

    There were no changes in internal control over financial reporting that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

    5.   Results from operations

    The discussion in this section is qualified by the Caution regarding
forward-looking statements at the beginning of Management's discussion and
analysis.

    5.1  General
    

    As noted in Section 8.2 Accounting policy developments, effective January
1, 2009, the Company adopted the new recommendations for business combinations
(Canadian Institute of Chartered Accountants (CICA) Handbook Section 1582),
consolidations (CICA Handbook Section 1601) and non-controlling interests
(CICA Handbook Section 1602). Net income and Comprehensive income no longer
include a deduction for non-controlling interests. Net income and
Comprehensive income are now attributed to either the holders of TELUS Common
Shares and Non-Voting Shares, or to Non-controlling interests. On the
Consolidated statements of financial position, Non-controlling interests are
now a component of Shareholders' Equity.
    The Company has two reportable segments: wireline and wireless.
Segmentation is based on similarities in technology, the technical expertise
required to deliver the products and services, the distribution channels used
and regulatory treatment. Intersegment sales are recorded at the exchange
value. Segmented information is regularly reported to the Company's Chief
Executive Officer (the chief operating decision-maker). Segmented disclosure
is reported in Note 5 of the interim Consolidated financial statements.

    
    5.2  Quarterly results summary

    -------------------------------------------------------------------------
    ($ in millions,
     except per share  2009   2008   2008   2008   2008   2007   2007   2007
     amounts)            Q1     Q4     Q3     Q2     Q1     Q4     Q3     Q2
    -------------------------------------------------------------------------
    Operating
     revenues         2,375  2,454  2,450  2,399  2,350  2,330  2,310  2,228
    -------------------------------------------------------------------------
      Operations
       expense        1,441  1,479  1,465  1,477  1,394  1,371  1,317  1,340
      Restructuring
       costs             28     38     10      4      7      6      6      3
    -------------------------------------------------------------------------
    EBITDA(2)           906    937    975    918    949    953    987    885
      Depreciation      334    351    344    343    346    386    333    318
      Amortization of
       intangible
       assets            93     84     92     77     76     68     70     73
    -------------------------------------------------------------------------
    Operating income    479    502    539    498    527    499    584    494
      Other expense
       (income)           5     11      6      2     17      6      8     18
      Financing costs    95    118    122    114    109    109     86    127
    -------------------------------------------------------------------------
    Income before
     income taxes       379    373    411    382    401    384    490    349
      Income taxes
       (recovery)        57     88    125    114    109    (19)    79     94
    -------------------------------------------------------------------------
    Net income(1)       322    285    286    268    292    403    411    255
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income
     attributable to
     Common Shares and
     Non-Voting Shares  321    285    285    267    291    400    410    253
    Income per Common
     Share and Non-
     Voting Share
      - basic          1.01   0.90   0.89   0.83   0.90   1.23   1.24   0.76
      - diluted        1.01   0.89   0.89   0.83   0.90   1.22   1.23   0.75
    Dividends declared
     per Common Share
     and Non-Voting
     Share            0.475  0.475   0.45   0.45   0.45   0.45  0.375  0.375
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Net income for the periods prior to 2009 Q1 has been adjusted, as
        noted in Section 5.1.
    (2) EBITDA is a non-GAAP measure. See Section 11.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    -------------------------------------------------------------------------

         Trends
    

    The consolidated revenue trend continues to reflect growth in wireless
network revenues generated from an increasing subscriber base; however, this
growth has moderated significantly since the onset of the economic downturn in
Canada in late 2008. In the first quarter of 2009, the year-over-year decrease
in wireless ARPU accelerated to 5.6%, as strong growth in data ARPU was more
than offset by declining voice ARPU. The voice ARPU decline reflects
significant deterioration in Mike service ARPU, pricing competition, greater
spending restraint and price optimization on the part of customers, increased
use of in-bucket or included-minute service plans, and to a lesser extent, the
growing base of Koodo postpaid basic subscribers.
    Continuation of economic uncertainty may disrupt usual seasonal patterns
for wireless subscriber additions in future quarters. Historically, there has
been significant fourth quarter seasonality with respect to higher wireless
subscriber additions, related acquisition costs and equipment sales, resulting
in lower fourth quarter wireless EBITDA. The third quarter has recently become
more significant with back-to-school offers.
    Consolidated revenues also continue to reflect growth in wireline data
revenue, which includes new revenues from the acquisition of Emergis beginning
in mid-January 2008. Data revenue growth in the first quarter of 2009 was more
than offset by declining wireline voice local and long distance revenues. The
decline in wireline voice revenues is due to substitution to wireless and
Internet services, as well as competition from VoIP service providers,
resellers and facilities-based competitors. The number of residential network
access line (NAL) losses has moderated in the two most recent quarters because
of more effective winback efforts and synergies from bundling services, while
TELUS' main cable-TV competitor's digital telephone coverage expansion slowed.
The Company has observed a larger number of disconnections and fewer
installations of business NALs attributed partly to economic conditions and
partly to competition. However, business NALs do not reflect growth from
certain data services, such as private networks.
    Consolidated Operations expense includes expenses from Emergis beginning
in mid-January 2008. The sequential decrease in operations expense in the
first quarter of 2009 resulted mainly from lower accrued performance bonuses.
Restructuring costs have increased beginning in the second half of 2008, as
management refocused its efforts on accelerating efficiency initiatives,
primarily in the wireline segment.
    The sequential decline in depreciation in the first quarter of 2009 was
due to certain assets becoming fully depreciated. Depreciation expenses were
sequentially higher in the third and fourth quarter of 2007 as a result of
reductions to estimated useful service lives of certain asset classes.
    Amortization of intangible assets in the fourth quarter of 2008 is net of
investment tax credits of $6 million. The investment tax credits were each
applied following a determination of eligibility by a government tax authority
and relate to assets capitalized in prior years that are now fully amortized.
The sequential increase in amortization of intangible assets in the third
quarter of 2008 was due to implementation of the converged billing platform
for B.C. residential customers in mid-July 2008, while the sequential increase
in amortization in the first quarter of 2008 was due mainly to the January
2008 acquisition of Emergis.
    Financing costs shown in the preceding table are net of varying amounts
of interest income, including interest from the settlement of prior years'
income tax-related matters, particularly in the first quarter of 2009 and
third quarter of 2007. Interest expenses had been trending lower due primarily
to a lower effective interest rate from financing activities in the first half
of 2007 and April 2008. An increase in interest expenses in the third and
fourth quarters of 2008 resulted from a higher debt balance that helped fund
the third quarter 2008 payment for advanced wireless services (AWS) spectrum
licences.
    The trends in Net income and earnings per share (EPS) reflect the items
noted above, as well as adjustments arising from legislated income tax
changes, settlements and tax reassessments for prior years, including any
related interest on reassessments. EPS has been positively impacted by
decreased shares outstanding from share repurchases in 2008 and 2007.

    
    -------------------------------------------------------------------------
    Income tax-related
     adjustments
    ($ in millions,
     except EPS        2009   2008   2008   2008   2008   2007   2007   2007
     amounts)            Q1     Q4     Q3     Q2     Q1     Q4     Q3     Q2
    -------------------------------------------------------------------------
    Approximate Net
     income impact       62     32      -      -     17    143     93     17
    Approximate
     EPS impact        0.20   0.10      -      -   0.05   0.44   0.28   0.05
    Approximate basic
     EPS excluding
     tax-related
     impacts           0.81   0.80   0.89   0.83   0.85   0.79   0.96   0.71
    -------------------------------------------------------------------------

    5.3  Consolidated results from operations

    -------------------------------------------------------------------------
    ($ in millions, except EBITDA margin)            Quarters ended March 31
                                                    2009      2008    Change
    -------------------------------------------------------------------------
    Operating revenues                             2,375     2,350       1.1%
    -------------------------------------------------------------------------
    Operations expense                             1,441     1,394       3.4%
    Restructuring costs                               28         7       n.m.
    -------------------------------------------------------------------------
    EBITDA(1)                                        906       949     (4.5)%
    Depreciation                                     334       346     (3.5)%
    Amortization of intangible assets                 93        76        22%
    -------------------------------------------------------------------------
    Operating income                                 479       527     (9.1)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA margin (%)(2)                            38.1      40.4  (2.3) pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) EBITDA is a non-GAAP measure. See Section 11.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    (2) EBITDA divided by Operating revenues.
    ------------------------------------------------------------------------

    The following discussion is for the consolidated results of TELUS.
Segmented discussion is provided in Section 5.4 Wireline segment results,
Section 5.5 Wireless segment results and Section 7.2 Cash used by investing
activities - capital expenditures.

         Operating revenues
    

    Operating revenues increased by $25 million in the first quarter of 2009
when compared to the same period in 2008. Wireless network revenues increased
by $35 million from strong growth in data revenues, partly offset by declining
voice revenues, while wireless equipment revenues decreased by $5 million
mainly from lower handset prices and reduced accessory sales. Wireline data
revenue growth of $32 million and other revenue growth of $8 million were
offset by continued erosion in voice service revenues due to the effects of
local competition and technological substitution.

    
    Operations expense
    -------------------------------------------------------------------------
                                                     Quarters ended March 31
    ($ millions)                                    2009      2008    Change
    -------------------------------------------------------------------------
    Salaries, benefits except DBPP,(1) and
     employee-related expenses                       587       634     (7.4)%
    DBPP expense (recovery)                            4       (25)      n.m.
    Other operations expense                         850       785       8.3%
    -------------------------------------------------------------------------
                                                   1,441     1,394       3.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) DBPP - defined benefit pension plans.
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Salaries, benefits (except DBPP benefits) and employee-related expenses
decreased by $47 million in the first quarter of 2009 when compared to the
same period in 2008. The decrease resulted mainly from a reduction in bonus
pay accruals from a lower operating forecast for 2009, as well as a decrease
in full-time equivalent (FTE) employees from efficiency initiatives and
attrition during the first quarter of 2009, while management salaries were
frozen at 2008 levels. TELUS' defined benefit pension plans expense increased
by $29 million, mainly due to the decline in value of defined benefits pension
plans assets in 2008.
    Other operations expenses increased by $65 million and included higher
network operating costs in both segments, increased bad debt expense in the
wireless segment, and increased wireline TELUS TV programming and customer
acquisition costs. These increases were partly offset by lower advertising
costs and higher capitalized labour costs associated with the larger capital
expenditure program.

    
         Restructuring costs
    

    Restructuring costs increased by $21 million to $28 million in the first
quarter of 2009 when compared to the same period in 2008. Restructuring costs
in the first quarter of 2009 were primarily severance costs in respect of
approximately 25 efficiency initiatives. During the first quarter of 2009,
full-time equivalent (FTE) staff decreased by approximately 350 from such
initiatives and decreased by approximately 150 from attrition. Restructuring
costs are now expected to be approximately $125 million for the full year of
2009. See Section 9: Annual guidance for 2009.

    
         EBITDA
    

    Consolidated EBITDA decreased by $43 million in the first quarter of 2009
when compared to the same period in 2008, primarily due to increased defined
benefit pension plan expenses and restructuring costs. Consolidated EBITDA,
before impacts of increased pension and restructuring costs, increased by $7
million primarily from lower performance bonus accruals and increasing
traction from efficiency initiatives. In particular, wireline EBITDA before
increased pension and restructuring costs increased by $18 million. Wireless
EBITDA before increased pension and restructuring costs decreased by $11
million, as growth in network revenue was more than offset by increases in
customer acquisition and retention expenses, network costs and bad debts
expense.

    
         Depreciation

    Depreciation decreased by $12 million in the first quarter of 2009 when
compared to the same period in 2008. The decrease primarily reflects an
acceleration of depreciation during 2008 from a reduction in estimated useful
service lives for certain digital switching assets. This was slightly offset
by growth in capital assets over the past 12 months.

         Amortization of intangible assets
    

    Amortization increased by $17 million in the first quarter of 2009 when
compared to the same period in 2008. The increase included $8 million arising
from the July 2008 implementation of the converged wireline billing and client
care platform in B.C., and net increases in other intangible assets subject to
amortization including an additional half-month for Emergis. Amortization is
expected to increase for the full year of 2009 as compared to 2008, mainly due
to an additional seven months of amortization for the B.C. client care and
billing platform. See Caution regarding forward-looking statements.

    
         Operating income

    Operating income decreased by $48 million in the first quarter of 2009
when compared to the same period in 2008, due to lower EBITDA, as well as the
net increase in depreciation and amortization.

    Other income statement items

    -------------------------------------------------------------------------
    Other expense, net                               Quarters ended March 31
    ($ millions)                                    2009      2008    Change
    -------------------------------------------------------------------------
                                                       5        17      (71)%
    -------------------------------------------------------------------------
    

    Other expense, net includes accounts receivable securitization expense,
income (losses) or impairments in equity or portfolio investments, gains and
losses on disposal of real estate, and charitable donations. Accounts
receivable securitization expenses were $2 million in the first quarter of
2009 as compared to $6 million in the first quarter of 2008. The decrease
reflected lower proceeds from securitized accounts receivable as well as a
lower rate (see Section 7.6 Accounts receivable sale). Losses from market
value adjustments to short-term investments held for trading were $1 million
in the first quarter of 2009 as compared to $9 million in the previous year.
The balance of expenditures in both years was primarily charitable donations.

    
    -------------------------------------------------------------------------
    Financing costs                                  Quarters ended March 31
    ($ millions)                                    2009      2008    Change
    -------------------------------------------------------------------------
    Interest on long-term debt, short-term
     obligations and other                           115       112       2.7%
    Foreign exchange (gains) losses                   (7)        -       n.m.
    Capitalized interest during construction           -        (1)      n.m.
    Interest income                                  (13)       (2)      n.m.
    -------------------------------------------------------------------------
                                                      95       109      (13)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Interest expenses on long-term and short-term debt and other increased by
$3 million in the first quarter of 2009 when compared to the same period in
2008, mainly due to a higher debt balance resulting from payment for AWS
spectrum licences in the third quarter of 2008, largely offset by a lower
effective interest rate. Interest income in the first quarter of 2009 includes
an accrual of $12 million arising from the settlement of prior years' tax
matters.

    
    -------------------------------------------------------------------------
    Income taxes                                     Quarters ended March 31
    ($ millions, except tax rates)                  2009      2008    Change
    -------------------------------------------------------------------------
    Basic blended federal and provincial tax at
     statutory income tax rates                      115       124     (7.3)%
    Tax rate differential on, and consequential
     adjustments from, reassessments of prior
     years' tax issues                               (40)       (1)        -
    Revaluation of future income tax liability to
     reflect future statutory income tax rates       (19)      (18)        -
    Share option award compensation                    1         1         -
    Other                                              -         3         -
    -------------------------------------------------------------------------
                                                      57       109      (48)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Blended federal and provincial statutory
     tax rates (%)                                  30.3      30.9  (0.6) pts
    Effective tax rates (%)                         15.0      27.2 (12.2) pts
    -------------------------------------------------------------------------
    

    Blended statutory income taxes decreased in the first quarter of 2009 due
to lower blended statutory tax rates and the 5.5% decrease in income before
taxes. The effective tax rates in both years were lower than the statutory tax
rates due to the tax rate differential and consequential adjustments from
reassessments of prior years' tax issues, revaluations of future income tax
liabilities resulting from reductions to future B.C. provincial income tax
rates, as well as future tax rates being applied to temporary differences.
Changes to future B.C. income tax rates were enacted in the first quarter of
2009, reducing rates beginning July 1, 2010. During the first quarter of 2008,
a rate decrease was substantively enacted for B.C. provincial income taxes,
effective July 1, 2008.
    Income tax payments were $214 million in the first quarter of 2009,
including the final 2008 tax year remittances. See key assumptions in Section
9: Annual guidance for 2009.

    
    -------------------------------------------------------------------------
    Net income                                       Quarters ended March 31
    ($ millions)                                    2009      2008    Change
    -------------------------------------------------------------------------
    Attributable to
      Common Shares and Non-Voting Shares            321       291        10%
      Non-controlling interests                        1         1         -%
    -------------------------------------------------------------------------
                                                     322       292        10%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The calculation of basic earnings per share is based on Net income
attributed to Common Shares and Non-Voting Shares.

         Comprehensive income

    Currently, the concept of comprehensive income for purposes of Canadian
GAAP, in the Company's specific instance, is primarily to include changes in
shareholders' equity arising from unrealized changes in the fair values of
financial instruments.

    5.4  Wireline segment results

    -------------------------------------------------------------------------
    Operating revenues - wireline segment            Quarters ended March 31
    ($ millions)                                    2009      2008    Change
    -------------------------------------------------------------------------
    Voice local                                      470       502     (6.4)%
    Voice long distance                              166       179     (7.3)%
    Data                                             538       506       6.3%
    Other                                             71        63        13%
    -------------------------------------------------------------------------
    External operating revenue                     1,245     1,250     (0.4)%
    Intersegment revenue                              33        31       6.5%
    -------------------------------------------------------------------------
    Total operating revenues                       1,278     1,281     (0.2)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Wireline revenues decreased by $3 million in the first quarter of 2009
when compared to the same period in 2008. The comparative decrease was
comprised of the following:

    -   Voice local revenue decreased by $32 million. The decrease was mainly
        due to lower revenues from basic access and optional enhanced
        services caused by competition for residential subscribers and
        consequent decline in local residential access lines, offset in part
        by growth in business local services and access lines in Ontario and
        Quebec.

    -------------------------------------------------------------------------
    Network access lines (NALs)                          As at March 31
    (000s)                                          2009      2008    Change
    -------------------------------------------------------------------------
    Residential                                    2,361     2,545     (7.2)%
    Business                                       1,834     1,820       0.8%
    -------------------------------------------------------------------------
    Total                                          4,195     4,365     (3.9)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Changes in NALs                                  Quarters ended March 31
    (000s)                                          2009      2008    Change
    -------------------------------------------------------------------------
    Residential                                      (41)      (51)       20%
    Business                                         (10)       12       n.m.
    -------------------------------------------------------------------------
    Total                                            (51)      (39)     (31)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Residential NAL losses in the first quarter of 2009 are favourable by
10,000 when compared to the same period in 2008, because of more effective
winback efforts and synergy with bundled services including TELUS TV, as well
as slowing of a cable-TV competitor's geographic expansion of digital
telephone service. The decrease in business NALs during the first quarter of
2009 reflects competitive inroads in the business market by cable-TV
companies, as well as some economic impacts leading to a larger number of
disconnections and fewer installations, particularly in B.C. and Alberta.
Business NALs in Ontario and Quebec increased during the first quarter of
2009, as well as over the past 12 months. Growth in certain data services,
such as private networks, is not measured by business NAL counts.

    
    -   Voice long distance revenues decreased by $13 million, due mainly to
        lower average per-minute rates resulting from ongoing industry-wide
        price competition, a lower base of residential subscribers, and lower
        billed retail minute volumes, partly offset by higher volumes of
        inbound terminating traffic.

    -   Wireline data revenues increased by $32 million, primarily due to:
        higher managed workplace revenues from growth in outsourcing services
        for business customers and an additional half-month of revenue from
        Emergis, acquired in mid-January 2008. Internet, enhanced data and
        hosting service revenues increased from growth in business services
        and high-speed Internet subscribers. Revenues from digital TELUS TV
        services increased from subscriber growth over the past year. Basic
        data services revenues increased from higher volumes of
        competitor digital network access and rate increases. This growth was
        partly offset by lower broadcast, video conferencing and data
        equipment sales, mainly due to a larger equipment sale in the first
        quarter of 2008.

    -------------------------------------------------------------------------
    Internet subscribers                                As at March 31
    (000s)                                          2009      2008    Change
    -------------------------------------------------------------------------
    High-speed Internet subscribers                1,110     1,040       6.7%
    Dial-up Internet subscribers                     114       146      (22)%
    -------------------------------------------------------------------------
    Total Internet subscribers                     1,224     1,186       3.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net additions of Internet subscribers           Quarters ended March 31
    (000s)                                          2009      2008    Change
    -------------------------------------------------------------------------
    High-speed Internet subscriber net additions      14        20      (30)%
    Dial-up Internet subscriber net losses           (10)       (9)     (11)%
    -------------------------------------------------------------------------
    Total Internet subscriber net additions            4        11      (64)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    High-speed Internet subscriber net additions were lower in the first
quarter of 2009 when compared to the same period in 2008, due to a maturing
market and cable-TV competitors' expanded product offerings. Subscriptions to
digital TELUS TV service surpassed 100,000 in April 2009, due to increasing
adoption by TELUS high-speed Internet customers, as the Company has improved
installation capability, rolled out high-definition TV (HDTV) channels and
personal video recorders, increased geographic coverage and had success with
bundle offers.

    
    -   Other revenue increased by $8 million primarily to higher voice
        equipment sales.

    -   Intersegment revenue represents services provided by the wireline
        segment to the wireless segment. These revenues are eliminated upon
        consolidation together with the associated expense in the wireless
        segment.

    -------------------------------------------------------------------------
    Operating expenses - wireline segment            Quarters ended March 31
    ($ millions)                                    2009      2008    Change
    -------------------------------------------------------------------------
    Salaries, benefits except DBPP(1) expense
     (recovery), and employee-related costs          451       484     (6.8)%
    DBPP expense (recovery)                            4       (23)      n.m.
    Other operations expenses                        379       367       3.3%
    -------------------------------------------------------------------------
    Operations expense                               834       828       0.7%
    Restructuring costs                               26         7       n.m.
    -------------------------------------------------------------------------
    Total operating expenses                         860       835       3.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) DBPP - defined benefit pension plans.
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total operating expenses increased by $25 million in the first quarter of
2009 when compared to the same period in 2008 and included approximately
one-half month of additional expenses from Emergis.

    -   Salaries, benefits and employee-related costs decreased by
        $33 million in the first quarter of 2009 when compared to the same
        period in 2008. The decrease resulted from a significant reduction in
        bonus pay accruals from lower expected performance for 2009,
        efficiency initiatives targeting discretionary employee-related
        expenses such as travel, and one fewer paid days.

    -   The defined benefits pension plans expense increased by $27 million,
        mainly due to the decline in value of these plans' assets in 2008.

    -   Other operations expenses increased by $12 million in the first
        quarter of 2009 when compared to the same period in 2008. Other
        operations expenses increased primarily due to: access facility costs
        associated with implementing new contracts; TELUS TV programming and
        customer acquisition costs; transit and termination charges resulting
        from higher outbound call volumes to the U.S. and higher foreign
        exchange rates; and vendor costs for network maintenance.

    -   Restructuring costs increased by $19 million in the first quarter of
        2009 when compared to the same period in 2008, reflecting an array of
        initiatives under the Company's competitive efficiency program.

    -------------------------------------------------------------------------
    Wireline segment - EBITDA                        Quarters ended March 31
                                                    2009      2008    Change
    -------------------------------------------------------------------------
    EBITDA ($ millions)                              418       446     (6.3)%
    EBITDA margin (%)                               32.7      34.8  (2.1) pts
    -------------------------------------------------------------------------
    

    Wireline segment EBITDA decreased by $28 million in the first quarter of
2009 when compared to the same period in 2008, due primarily to increases in
defined benefit pension plan expenses and restructuring costs. Excluding the
increases in pension expenses and restructuring costs, wireline EBITDA
increased by $18 million due to lower performance bonus accruals, partly
offset by other increased costs. The EBITDA margin pressure is generally
impacted by declining voice revenues having higher margins than the growing
data services.

    
    5.5  Wireless segment results

    -------------------------------------------------------------------------
    Operating revenues - wireless segment            Quarters ended March 31
    ($ millions)                                    2009      2008    Change
    -------------------------------------------------------------------------
    Network revenue                                1,072     1,037       3.4%
    Equipment revenue                                 58        63     (7.9)%
    -------------------------------------------------------------------------
    External operating revenue                     1,130     1,100       2.7%
    Intersegment revenue                               7         7         -%
    -------------------------------------------------------------------------
    Total operating revenues                       1,137     1,107       2.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Wireless operating indicators
    -------------------------------------------------------------------------
                                                        As at March 31
                                                    2009      2008    Change
    -------------------------------------------------------------------------
    Subscribers (000s)
    Postpaid                                       4,966     4,513        10%
    Prepaid                                        1,211     1,143       5.9%
    -------------------------------------------------------------------------
    Total                                          6,177     5,656       9.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Proportion of subscriber base that
     is postpaid (%)                                80.4      79.8    0.6 pts
    Digital POPs(1) covered (millions)(2)           32.7      31.9       2.5%


                                                     Quarters ended March 31
                                                    2009      2008    Change
    -------------------------------------------------------------------------
    Subscriber gross additions (000s)
    Postpaid                                         215       204       5.4%
    Prepaid                                          131       141     (7.1)%
    -------------------------------------------------------------------------
    Total                                            346       345       0.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Subscriber net additions (000s)
    Postpaid                                          44        72      (39)%
    Prepaid                                            4        16      (75)%
    -------------------------------------------------------------------------
    Total                                             48        88      (46)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ARPU(3) ($)                                    58.39     61.88     (5.6)%
    Churn, per month(3) (%)                         1.62      1.53   0.09 pts
    Average monthly minutes of use per
     subscriber (MOU)                                382       394     (3.1)%
    COA (4) per gross subscriber addition(3)(5) ($)  336       328       2.4%
    Retention spend to network revenue(3)(5) (%)    10.5       8.5    2.0 pts
    EBITDA excluding COA ($ millions)                604       616     (1.9)%
    EBITDA to network revenue (%)                   45.5      48.5  (3.0) pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    pts - percentage points

    (1) POPs is an abbreviation for population. A POP refers to one person
        living in a population area that is wholly or substantially included
        in the coverage area.
    (2) Including roaming/resale agreements, principally with Bell Canada.
    (3) See Section 11.3 Definitions of key wireless operating indicators.
        These are industry measures useful in assessing operating performance
        of a wireless company, but are not defined under accounting
        principles generally accepted in Canada and the U.S.
    (4) Cost of acquisition.
    (5) In the first quarter of 2009, the Company refined the measurement of
        the costs of acquisition and retention in its operational systems to
        align with changes in the business. Prior year comparative figures
        have been restated on a consistent basis.
    -------------------------------------------------------------------------

    Wireless segment revenues increased by $30 million in the first quarter of
2009 when compared to the same period in 2008, due to the following:

    -   Network revenue increased by $35 million or 3.4% in the first quarter
        of 2009 when compared to the same period in 2008, due primarily to
        strong wireless data revenue growth and the 9% growth in the
        subscriber base. Overall network revenues increased as data revenue
        growth of $61 million or 41% was partially offset by lower voice
        revenues of $26 million or 2.9%. Wireless data revenues now represent
        19% of network revenue as compared to 14% from the same period in
        2008. This growth in data revenues continues to reflect strength in
        text messaging and smartphone service revenues driven by increased
        usage and features, and continued penetration of Internet sticks,
        smartphones and EVDO-capable handsets, despite lower inbound data
        roaming rates.

    -   Blended ARPU of $58.39 decreased by $3.49 or 5.6% in the first
        quarter of 2009 when compared to the same period in 2008. Data ARPU
        of $11.26 increased by $2.54 or 29%, while voice ARPU of $47.13
        decreased $6.03 or 11%. Declining voice ARPU is a continuing trend,
        but accelerated due to economic weakness. The decrease in voice ARPU
        included a combination of factors: lower Mike service ARPU; declining
        minutes of use by both consumers and businesses, increased use of
        included-minute rate plans as subscribers shift usage patterns and
        move to optimize price plans; one fewer calendar days in the current
        period, decreased inbound roaming rates; and increased penetration of
        the Koodo brand supporting network revenue and subscriber growth.

        Gross and net subscriber additions include the results of the Koodo
        brand launched in March 2008. Despite current economic conditions,
        gross subscriber additions of 346,000 in the first quarter of 2009
        increased slightly over the same period in 2008. The proportion of
        postpaid gross subscriber additions was 62% in the first quarter of
        2009, up three percentage points when compared to the first quarter
        of 2008.

        Net additions in the first quarter of 2009 were 48,000, down 46% from
        the same period in 2008. Net additions were negatively impacted by
        increasing recessionary pressures, including lower customer
        confidence and spending and higher overall churn as compared to the
        first quarter of 2008, but stable when compared with the fourth
        quarter of 2008. Postpaid subscriber net additions for the same
        period represented 92% of total net additions as compared with 82% of
        total net additions for the first quarter of 2008.

        The blended churn rate increase year-over-year reflects higher
        involuntary churn due to rising unemployment levels and continued
        competitive marketing intensity within both the postpaid and prepaid
        market segments.

    -   Equipment sales, rental and service revenue decreased by $5 million
        or 7.9% in the first quarter of 2009 when compared to the same period
        in 2008. The decrease was due to lower per-unit revenues resulting
        from industry-wide device pricing and penetration of the Koodo brand,
        as well as lower accessory sales, partially offset by higher
        retention volumes.

    -   Intersegment revenues represent services provided by the wireless
        segment to the wireline segment and are eliminated upon consolidation
        along with the associated expense in the wireline segment.

    -------------------------------------------------------------------------
    Operating expenses - wireless segment            Quarters ended March 31
    ($ millions)                                    2009      2008    Change
    -------------------------------------------------------------------------
    Equipment sales expenses                         183       153        20%
    Network operating expenses                       154       141       9.2%
    Marketing expenses                                93       103     (9.7)%
    General and administration (G&A) expenses
      Salaries, benefits(1) and employee-related
       costs                                         139       149     (6.7)%
      Other G&A expenses                              78        58        34%
    -------------------------------------------------------------------------
    Operations expense                               647       604       7.1%
    Restructuring costs                                2         -       n.m.
    -------------------------------------------------------------------------
    Total operating expenses                         649       604       7.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Includes defined benefit pension plans recovery of $nil in 2009 and
        $2 million in 2008.
    -------------------------------------------------------------------------

    Wireless segment total operating expenses increased by $45 million in the
first quarter of 2009 when compared to the same period in 2008 to promote,
acquire, support and retain the 9% year-over-year growth in the subscriber
base.

    -   Equipment sales expenses increased by $30 million in the first
        quarter of 2009 as compared with the same period in 2008, in part due
        to higher retention volumes to support migration of clients to
        smartphones and multimedia devices, the impact of a higher U.S.
        dollar exchange rate, inventory valuation adjustments including
        returns related to money-back guarantees and increased per-unit
        device costs.

    -   Network operating expenses increased by $13 million in the first
        quarter of 2009 as compared with the same period in 2008. The
        increase in network operating expenses supported the 41% growth in
        data revenues, and was primarily caused by increasing adoption of
        smartphones, multimedia devices and Internet sticks that drove
        increases in revenue share costs to third parties, licensing costs to
        service providers and increased data roaming volumes.

    -   Marketing expenses decreased by $10 million in the first quarter of
        2009 as compared with the same period in 2008, due to a decrease in
        advertising and promotion expenditures relating to the initial launch
        of the Koodo brand in March 2008. COA per gross subscriber addition
        was relatively consistent with an increase of $8 or 2.4% in the first
        quarter of 2009 when compared to the same period in 2008. Increase in
        COA included: higher net subsidy costs as the lower Koodo subsidy was
        offset by pricing incentives to support increased smartphone and
        multimedia device sales; higher foreign exchange rates; and inventory
        valuation adjustments (including returns); partially offset by the
        lower advertising and promotion expenditures.

        Retention costs as a percentage of network revenue increased to 10.5%
        in the first quarter of 2009 as compared to 8.5% for the same period
        in 2008. The increase in retention costs was primarily volume in
        nature with continued focus on migration of clients to smartphones
        and multimedia devices. The increase also included device repairs
        resulting from complexity of the service offerings.

    -   In G&A expenses, salaries, benefits and employee-related costs
        decreased by $10 million in the first quarter of 2009 as compared to
        the same period in 2008, primarily reflecting a reduction in
        performance bonus accruals from lower expected operating performance
        for 2009. Other G&A expenses increased by $20 million, including an
        $11 million higher bad debt expense reflective of a broader
        subscriber base, current economic conditions and increased
        involuntary subscriber churn. Other G&A expenses also included higher
        external labour costs.

    -   Restructuring costs included various initiatives under the Company's
        competitive efficiency program.

    -------------------------------------------------------------------------
    Wireless segment - EBITDA                        Quarters ended March 31
                                                    2009      2008    Change
    -------------------------------------------------------------------------
    EBITDA ($ millions)                              488       503     (3.0)%
    EBITDA margin (%)                               42.9      45.4  (2.5) pts
    -------------------------------------------------------------------------
    

    Wireless segment EBITDA decreased by $15 million in the first quarter of
2009 when compared to the same period in 2008, as lower than expected growth
in network revenue was more than offset by overall operating expenses.
Wireless EBITDA, before the increase in pension and restructuring expenses,
decreased by $11 million. Wireless EBITDA margins decreased as a result of
higher expenditures for customer acquisition and retention, increased network
costs related to data usage and outbound roaming activities, and a significant
increase in bad debts expense.

    
    6.   Changes in financial position

    Changes in the Consolidated statements of financial position for the
three-month period ended March 31, 2009, are as follows:

    -------------------------------------------------------------------------
    Financial position
     as at:           Mar. 31,  Dec. 31,                  Explanation of
    ($ millions)         2009      2008       Changes        the change
    -------------------------------------------------------------------------
    Current Assets

    Cash and temporary     65         4      61     n.m.  See Section 7:
      investments, net                                    Liquidity and
                                                          capital resources

    Accounts receivable   842       966    (124)   (13)%  Mainly a decrease
                                                          in wireless
                                                          customer accounts
                                                          receivable due to a
                                                          decrease in
                                                          postpaid ARPU, as
                                                          well as faster
                                                          accounts receivable
                                                          turnover at 43 days
                                                          in the first
                                                          quarter of 2009
                                                          compared to 48 days
                                                          in the fourth
                                                          quarter of 2008 and
                                                          first quarter of
                                                          2008

    Income and other       28        25       3      12%  Reflects an
     taxes receivable                                     increase in accrued
                                                          other taxes
                                                          receivable, net of
                                                          refunds received

    Inventories           264       333     (69)   (21)%  Mainly a decrease
                                                          in wireless handset
                                                          volumes, parts and
                                                          accessories, partly
                                                          offset by a higher
                                                          proportion of
                                                          higher-priced data
                                                          capable devices

    Prepaid expenses      240       176      64      36%  Primarily annual
     and other(1)                                         payment of wireless
                                                          licence fees and
                                                          maintenance
                                                          contracts, net of
                                                          amortization

    Derivative assets       8        10      (2)   (20)%  Fair value
                                                          adjustments to
                                                          foreign exchange
                                                          hedges
    -------------------------------------------------------------------------
    Current Liabilities

    Accounts payable    1,410     1,465     (55)    (4)%  A decrease in
     and accrued                                          accrued capital
     liabilities                                          expenditures,
                                                          licences and
                                                          material, as well
                                                          as lower payroll
                                                          and accrued
                                                          employee benefits,
                                                          net of a four-day
                                                          increase in payroll
                                                          days outstanding
                                                          and a seasonal
                                                          increase in accrued
                                                          interest payable

    Income and other       12       163    (151)   (93)%  Reflects final
     taxes payable                                        income tax payments
                                                          for the 2008 tax
                                                          year as well as
                                                          2009 instalments,
                                                          offset by the
                                                          current income tax
                                                          expense for the
                                                          period

    Restructuring          50        51      (1)    (2)%  Payments under
     accounts payable                                     previous
     and accrued                                          restructuring
     liabilities                                          initiatives
                                                          slightly exceeded
                                                          new obligations

    Dividends payable     151       151       -       -%  -

    Advance billings      660       689     (29)    (4)%  Primarily a
     and customer                                         decrease in
     deposits                                             deferred revenue
                                                          from lower wireless
                                                          handset volumes
                                                          held by external
                                                          channels

    Current maturities      3         4      (1)   (25)%  Reflects a
     of long-term debt                                    reduction in
                                                          capital leases

    Derivative             78        75       3       4%  Fair value
     liabilities                                          adjustments for
                                                          share options and
                                                          restricted share
                                                          unit hedges, net of
                                                          options exercised
                                                          or forfeited

    Current portion of    419       459     (40)    (9)%  Primarily changes
     future income                                        in TELUS
     taxes                                                Communications
                                                          Company and TELE-
                                                          MOBILE COMPANY
                                                          partnerships'
                                                          income that will be
                                                          allocated over the
                                                          next 12 months
    -------------------------------------------------------------------------
    Working            (1,336)   (1,543)    207      13%  Reflects an
     capital(2)                                           improved cash
                                                          position despite
                                                          significant income
                                                          tax payments,
                                                          through ongoing
                                                          management of
                                                          working capital,
                                                          including accounts
                                                          receivable and
                                                          accounts payable
    -------------------------------------------------------------------------
    Capital Assets,
     Net               12,536    12,483      53       -%   See Capital
                                                           expenditures in
                                                           Section 7.2 Cash
                                                           used by investing
                                                           activities and
                                                           Depreciation and
                                                           Amortization in
                                                           Section 5.3
                                                           Consolidated
                                                           results from
                                                           operations
    -------------------------------------------------------------------------
    Other Assets
    Other long-term
     assets(1)          1,461     1,418      43       3%   Primarily pension
                                                           plan funding and
                                                           continued
                                                           amortization of
                                                           transitional
                                                           pension assets

    Investments            43        42       1       2%   Reflects a minor
                                                           new investment
    Goodwill            3,564     3,564       -       -%   -
    -------------------------------------------------------------------------
    Long-Term Debt      6,509     6,348     161       3%   Includes a net
                                                           $756 million
                                                           increase in
                                                           commercial paper,
                                                           partly offset by
                                                           a $680 million
                                                           reduction in
                                                           amounts drawn
                                                           against the 2012
                                                           credit facility.
                                                           Also reflected is
                                                           an $85 million
                                                           increase in the
                                                           Canadian dollar
                                                           value of the 2011
                                                           U.S. dollar
                                                           Notes, which is
                                                           largely offset by
                                                           a lower
                                                           derivative
                                                           liability (see
                                                           Other Long-Term
                                                           Liabilities)
    -------------------------------------------------------------------------
    Other Long-Term
     Liabilities        1,190     1,295    (105)    (8)%   Primarily changes
                                                           in U.S. dollar
                                                           exchange rates
                                                           and a fair value
                                                           adjustment of the
                                                           derivative
                                                           liability
                                                           associated with
                                                           the 2011 U.S.
                                                           dollar Notes, net
                                                           of an increase in
                                                           deferred revenue
    -------------------------------------------------------------------------
    Future Income
     Taxes(1)           1,255     1,213      42       3%   Increase in
                                                           future taxes on
                                                           long-term assets
                                                           and liabilities,
                                                           including
                                                           unrealized gains
                                                           and losses on
                                                           derivatives,
                                                           partly offset by
                                                           a revaluation for
                                                           statutory tax
                                                           rate changes and
                                                           reassessments for
                                                           prior year tax
                                                           issues
    -------------------------------------------------------------------------
    Shareholders' Equity
    Common Share and
     Non-Voting Share
     equity(1)          7,290     7,085     205       3%   Mainly Net income
                                                           of $321 million
                                                           and Other
                                                           comprehensive
                                                           income of
                                                           $30 million
                                                           attributable to
                                                           holders of Common
                                                           Shares and Non-
                                                           Voting Shares,
                                                           less $151 million
                                                           of dividends
                                                           declared
    Non-controlling
     interests             24        23       1       4%   Net income
                                                           attributable to a
                                                           non-controlling
                                                           interest
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Commencing in 2009, the new recommendations of the CICA for goodwill
        and intangible assets (Handbook Section 3064) apply to the Company.
        The application of this standard resulted in adjustments to the
        Consolidated statements of financial position. See Section 8.2
        Accounting policy developments.

    (2) Current assets subtracting Current liabilities - an indicator of the
        ability to finance current operations and meet obligations as they
        fall due.
    -------------------------------------------------------------------------
    

    7.   Liquidity and capital resources

    The discussion in this section is qualified by the Caution regarding
forward-looking statements at the beginning of Management's discussion and
analysis.
    The Company's capital structure financial policies, financing plan and
results are described in Section 4.3. In the normal course, the Company has
generated annual cash flow from operations exceeding annual capital investment
needed to support business growth and re-investment in technology. In the
first quarter of 2009, cash provided by operating activities, exceeded cash
used by investing activities, while in the first quarter of 2008, cash
provided by operating activities was supplemented by financing activities for
the January 2008 acquisition of Emergis.

    
    -------------------------------------------------------------------------
    Summary of Consolidated statements of
     cash flows                                     Quarters ended March 31
    ($ millions)                                      2009     2008   Change
    -------------------------------------------------------------------------
    Cash provided by operating activities              614      634    (3.2)%
    Cash (used) by investing activities               (478)  (1,009)      53%
    Cash (used) provided by financing activities       (75)     404      n.m.
    -------------------------------------------------------------------------
    Increase in cash and temporary investments, net     61       29        -
    Cash and temporary investments, net, beginning
     of period                                           4       20        -
    -------------------------------------------------------------------------
    Cash and temporary investments, net, end of period  65       49       33%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.1  Cash provided by operating activities

    Cash provided by operating activities decreased by $20 million in the
first quarter of 2009 when compared to the same period in 2008. The
year-over-year decrease included the following changes:

    -   EBITDA decreased by $43 million as described in Section 5: Results
        from operations. The decrease in EBITDA included a $29 million
        increase in non-cash Net employee defined benefits plans expenses and
        a $21 million increase in non-cash restructuring charges; EBITDA
        excluding these items increased by $7 million.

    -   Contributions to employee defined benefit plans increased by
        $26 million in the first quarter of 2009 when compared to the same
        period in 2008. See assumptions for defined benefits pension plans in
        Section 9: Annual guidance for 2009;

    -   Payments under restructuring programs increased by $19 million.

    -   Income tax payments were $214 million in the first quarter of 2009 as
        compared to $1 million in the same period of 2008. The Company has
        commenced to make significant income tax payments in 2009 (see income
        tax payment assumptions in Section 9).

    -   Other changes in non-cash working capital significantly offsetting
        the above cash outflows, including: (i) reduced short-term investment
        activity of $74 million ($nil in 2009; $(74) million in 2008); (ii)
        reduced accounts receivable due to faster turnover; and (iii)
        inventory reductions in the first quarter of 2009.
    

    7.2  Cash used by investing activities

    Cash used by investing activities decreased by $531 million in the first
quarter of 2009 when compared to the same period in 2008. The decrease was
primarily due to the acquisition of Emergis in the prior year, otherwise
offset by increased capital expenditures.
    Assets under construction were $826 million at March 31, 2009, up $144
million from December 31, 2008, and related mainly to the Company's wireline
and wireless broadband initiatives, described further below.

    
    -------------------------------------------------------------------------
    Capital expenditures                            Quarters ended March 31
    ($ millions, except capital intensity)            2009     2008   Change
    -------------------------------------------------------------------------
    Wireline segment                                   278      255      9.0%
    Wireless segment                                   196       65      202%
    -------------------------------------------------------------------------
    TELUS consolidated                                 474      320       48%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less capital expenditures(1)                432      629     (31)%
    Capital intensity (%)(2)                            20       14     6 pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) See Section 11.1 EBITDA for the calculation and description.
    (2) Capital intensity is the measure of capital expenditures divided by
        operating revenues. This measure provides a basis for comparing the
        level of capital expenditures to other companies of varying size
        within the same industry.
    -------------------------------------------------------------------------
    

    Capital expenditures increased by $154 million in the first quarter of
2009, relative to expenditures in the same period in 2008. Capital
expenditures of $474 million in the first quarter of 2009 are consistent with
the annual guidance of approximately $2.05 billion. Capital intensity of 20%
in the first quarter of 2009 reflects a wireline intensity level of 22% (20%
in 2008 Q1) and a wireless intensity level of 17% (6% in 2008 Q1). EBITDA less
capital expenditures decreased by $197 million due mainly to these increased
capital intensity levels, as well as lower EBITDA as described in Section 5.3.

    
    -   Wireline segment capital expenditures increased by $23 million in the
        first quarter of 2009, relative to expenditures in the same period in
        2008, mainly due to investments in broadband and TELUS TV initiatives
        primarily in B.C. and Alberta. Partly offsetting this were
        expenditures in 2008 for the billing and client care platform
        implemented for B.C. residential customer accounts in July 2008.
        Wireline cash flow (EBITDA less capital expenditures) was
        $140 million in the first quarter of 2009, reflecting a decrease of
        $51 million or 27% when compared to the same period in 2008.

    -   Wireless segment capital expenditures increased by $131 million in
        the first quarter of 2009 when compared to the same period in 2008
        due mainly to new investments in HSPA technology and service
        capability for the planned launch by early 2010, while expenditures
        in the first quarter of 2008 were relatively low, pending the outcome
        of the AWS spectrum auction mid-year and finalization of the
        Company's wireless technology evolution plans. Wireless cash flow
        (EBITDA less capital expenditures) was $292 million in the first
        quarter of 2009, reflecting a decrease of $146 million or 33% when
        compared to the same period in 2008.

    7.3  Cash provided (used) by financing activities

    Net cash used by financing activities was $75 million in the first quarter
of 2009. This compares to net cash provided by financing activities of $404
million in the same period of 2008.

    -   Cash dividends paid to shareholders in the first quarter of 2009 were
        $151 million, paid January 2, 2009, and were in respect of the $0.475
        dividend per share declared in the fourth quarter of 2008 for
        shareholders of record on December 11, 2008. The first quarter of
        2008 does not show a comparable cash outflow for dividends, as the
        2007 fourth quarter dividend was remitted on December 31, 2007.

    -   There were no purchases of TELUS shares under the NCIB program in the
        first quarter of 2009. The maximum number of shares that may be
        repurchased under the current program, before December 22, 2009, is
        four million Common Shares and four million Non-Voting Shares.

    Shares repurchased for cancellation under normal course issuer bid
    programs

    -------------------------------------------------------------------------
                   Shares repurchased           Purchase cost ($ millions)
            -------------------------------- --------------------------------
                                             Charged to  Charged to
                Common  Non-Voting                Share    Retained
                Shares    Shares     Total    capital(1) earnings(2)    Paid
    ---------------------------------------- --------------------------------
    2008 -
     Program 4
      First
       quarter 950,000  1,968,900  2,918,900         54          68      122
    ---------------------------------------- --------------------------------
    2009 -
     Program 5
      First
       quarter       -          -          -          -           -        -
    ---------------------------------------- --------------------------------

    -------------------------------------------------------------------------
    (1) Represents the book value of shares repurchased.
    (2) Represents the cost in excess of the book value of shares
        repurchased.
    -------------------------------------------------------------------------

    -   Net amounts drawn on the 2012 bank facility decreased by
        $680 million, while commercial paper issues increased by
        $756 million.

    -   In comparison, during the first quarter of 2008, the Company
        increased utilization of the 2012 bank facility from $nil to
        $321 million and increased the amount of issued commercial paper by
        $213 million for general corporate purposes, including the
        acquisition of Emergis in January.

    7.4  Liquidity and capital resource measures

    -------------------------------------------------------------------------
    Liquidity and capital resource measures
    As at, or 12-month periods ended, March 31        2009     2008   Change
    -------------------------------------------------------------------------
    Components of debt and coverage ratios(1)
     ($ millions)
    -------------------------------------------------------------------------
    Net debt                                         7,301    6,653      648
    Total capitalization - book value(2)            14,715   13,636    1,079
    EBITDA - excluding restructuring costs           3,816    3,796       20
    Net interest cost                                  449      432       17
    -------------------------------------------------------------------------
    Debt ratios
    -------------------------------------------------------------------------
    Fixed-rate debt as a proportion of total
     indebtedness (%)                                   76       76        -
    Average term to maturity of debt (years)           3.8      4.7     (0.9)
    Net debt to total capitalization (%)(1)           49.6     48.8   0.8 pts
    Net debt to EBITDA - excluding restructuring
     costs(1)                                          1.9      1.8      0.1
    -------------------------------------------------------------------------
    Coverage ratios(1)
    -------------------------------------------------------------------------
    Interest coverage on long-term debt(3)             4.3      4.6     (0.3)
    EBITDA - excluding restructuring costs
     interest coverage                                 8.5      8.8     (0.3)
    -------------------------------------------------------------------------
    Other measures(1)
    -------------------------------------------------------------------------
    Free cash flow ($ millions)(4)                     (42)   1,493   (1,535)

    Dividend payout ratio of sustainable net
    ----------------------------------------
     earnings guideline - 45 to 55%
     ------------------------------
    Dividend payout ratio - actual earnings,
     excluding income tax-related adjustments and
     net-cash settlement feature (%)                    57       54     3 pts
    Dividend payout ratio - actual earnings (%)         52       44     8 pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) See Section 11.4 Definitions of liquidity and capital resource
        measures.
    (2) The figure for March 31, 2008 reflects an adjustment to retained
        earnings, resulting from adoption of the new recommendations of the
        CICA for goodwill and intangible assets. See Section 8.2.
    (3) The figure for March 31, 2008 is adjusted, reflecting changes to Net
        income from adoption of the new recommendations from the CICA for
        business combinations, consolidations, and non-controlling interests.
        See Section 5.1 and Section 8.2.
    (4) Twelve-month trailing figures. See Section 11.2 Free cash flow for
        the definition.
    -------------------------------------------------------------------------
    

    Net debt at March 31, 2009 increased from one year earlier mainly due to
the $500 million debt issue in April 2008, an increase of $388 million in
commercial paper, net of a $200 million decrease in proceeds from securitized
accounts receivable, a $21 million decrease in amounts drawn on the 2012
credit facility, and a $16 million increase in cash. The Company often shifts
among short-term financing sources to take advantage of interest cost
differentials. The net increase in debt supported payment of $882 million for
AWS spectrum licences in the third quarter of 2008. Total capitalization
increased because of higher net debt and retained earnings, partly offset by
lower share capital due to share repurchases in 2008.
    The average term to maturity of debt was 3.8 years at March 31, 2009,
decreasing 0.9 from one year earlier from the elapse of time and an increase
in proportion of commercial paper, partly off-set by the April 2008 debt issue
of $500 million maturing in 2015. The proportion of debt on a fixed-rate basis
was 76% at March 31, 2009, unchanged from one year earlier, as increased use
of commercial paper was offset by the April 2008 debt issue, lower proceeds
from securitized receivables and lower amounts drawn on the 2012 credit
facility.
    The interest coverage on long-term debt ratio was 4.3 for the 12-month
period ended March 31, 2009, down from 4.6 in the one year earlier and
primarily reflecting higher long-term interest expense. The EBITDA interest
coverage ratio for the 12-month period ended March 31, 2009 was 8.5, down from
8.8 one year earlier due to an increase in net interest cost.
    Free cash flow for the 12-month period ended March 31, 2009, decreased by
$1.5 billion when compared to free cash flow for the 12-month period ended
March 31, 2008. The decrease was largely due to the $882 million payment for
AWS spectrum licences in the third quarter of 2008, increased general capital
spending of $305 million, and net income tax payments of $223 million in the
12-month period ended March 31, 2009, as compared to a net income tax recovery
of $116 million in the 12-month period ended March 31, 2008.
    The Company's strategy is to maintain the financial policies and
guidelines set out below. The Company believes that these measures are
currently at the optimal level, and by maintaining credit ratings in the range
of BBB+ to A-, or the equivalent, are expected to provide reasonable access to
capital markets.

    TELUS' long-term financial guidelines and policies are:

    
    -   Net debt to EBITDA - excluding restructuring costs of 1.5 to 2.0
        times

        The ratio at March 31, 2009 was 1.9 times, up by 0.1 from one year
        ago, but unchanged from December 31, 2008.

    -   Dividend payout ratio target guideline of 45 to 55% of sustainable
        net earnings

        The target guideline is on a prospective basis, rather than on a
        trailing basis. The ratio calculated for the 12-month trailing period
        ended March 31, 2009, excluding income tax-related adjustments and a
        minimal effect from a net-cash settlement feature from earnings, was
        57%. The measure calculated based on actual earnings for the same
        period was 52%.

    7.5  Credit facilities

    At March 31, 2009, TELUS had available liquidity of $1.04 billion from
unutilized credit facilities, as well as unutilized availability under its
accounts receivable securitization program, consistent with the Company's
objective of generally maintaining at least $1 billion of available liquidity.

    TELUS credit facilities at March 31, 2009
    -------------------------------------------------------------------------
                                                  Out-    Backstop
                                                standing     for
                                                 undrawn commercial
                                                 letters    paper   Available
    ($ in millions)   Expiry    Size    Drawn  of credit   program  liquidity
    -------------------------------------------------------------------------
    Five-year
     revolving
     facility(1) May 1, 2012    2,000     (300)     (226)   (1,188)      286
    364-day
     revolving
     facility
     (2)       March 1, 2010      700        -         -         -       700
    Other bank
     facilities            -       63       (4)       (3)        -        56
    -------------------------------------------------------------------------
    Total                  -    2,763     (304)     (229)   (1,188)    1,042
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Canadian dollars or U.S. dollar equivalent.
    (2) Canadian dollars only.
    -------------------------------------------------------------------------
    

    TELUS' revolving credit facilities contain customary covenants, including
a requirement that TELUS not permit its consolidated Leverage Ratio (debt to
trailing 12-month EBITDA) to exceed 4 to 1 (approximately 1.9 to 1 at March
31, 2009) and not permit its consolidated Coverage Ratio (EBITDA to interest
expense on a trailing 12-month basis) to be less than 2 to 1 (approximately
8.5 to 1 at March 31, 2009) at the end of any financial quarter. There are
certain minor differences in the calculation of the Leverage Ratio and
Coverage Ratio under the credit agreements as compared with the calculation of
Net debt to EBITDA and EBITDA interest coverage. Historically, the
calculations have not been materially different. The covenants are not
impacted by revaluation of capital assets, intangible assets and goodwill for
accounting purposes. Continued access to TELUS' credit facilities is not
contingent on the maintenance by TELUS of a specific credit rating.

    7.6  Accounts receivable sale

    TELUS Communications Inc. (TCI), a wholly owned subsidiary of TELUS, is a
party to an agreement with an arm's-length securitization trust associated
with a major Schedule I Canadian bank, under which TCI is able to sell an
interest in certain of its trade receivables. As a result of selling the
interest in certain of the trade receivables on a fully serviced basis, a
servicing liability is recognized on the date of sale and is, in turn,
amortized to earnings over the expected life of the trade receivables. An
amendment in May 2009 resulted in the term of this revolving-period
securitization agreement being extended three years, for an amount up to a
maximum of $500 million.
    TCI is required to maintain at least a BBB (low) credit rating by DBRS
Ltd. or the securitization trust may require the sale program to be wound
down. The necessary credit rating was exceeded by three levels at A (low) as
of May 6, 2009.

    
    -------------------------------------------------------------------------
    Balance of
     proceeds from
     securitized
     receivables    2009,  2008,   2008,   2008, 2008,  2007,   2007,   2007,
                     Mar.   Dec.   Sept.   June   Mar.   Dec.   Sept.   June
    ($ millions)      31     31      30      30    31     31      30      30
    -------------------------------------------------------------------------
                     300    300     250     150   500    500     550     500
    -------------------------------------------------------------------------

    Proceeds from securitized accounts receivable were $200 million lower in
the first quarter of 2009 than the comparable period of 2008, as other sources
of funding were being used.

    7.7  Credit ratings

    There were no changes to the Company's investment grade credit ratings in
the first quarter of 2009.

    -------------------------------------------------------------------------
    Credit rating summary      DBRS Ltd.       S&P     Moody's   FitchRatings
    -------------------------------------------------------------------------
    Trend or outlook             Stable     Stable      Stable        Stable

    TELUS Corporation
      Senior bank debt                -          -           -           BBB+
      Notes                      A (low)       BBB+       Baa1           BBB+
      Commercial paper         R-1 (low)         -           -             -
    TELUS Communications Inc.
      Debentures                 A (low)       BBB+          -           BBB+
      Medium-term notes          A (low)       BBB+          -           BBB+
      First mortgage bonds       A (low)         A-          -             -
    -------------------------------------------------------------------------
    

    7.8  Financial instruments, commitments and contingent liabilities

    Financial instruments (Note 4 of the interim Consolidated financial
statements)
    The Company's financial instruments, and the nature of risks that they
may be subject to, were described in the Company's 2008 Management's
discussion and analysis. Certain updates are provided below.

    Credit risk - Accounts receivable/allowance for doubtful accounts

    Credit risk associated with accounts receivable is minimized by the
Company's large and diverse customer base, which covers substantially all
consumer and business sectors in Canada. The Company follows a program of
credit evaluations of customers and limits the amount of credit extended when
deemed necessary. The Company maintains allowances for potential credit
losses, and any such losses to date have been within management's
expectations. The weighed average life of past-due customer accounts
receivable is 64 days, unchanged from December 31, 2008.

    Liquidity risk

    As a component of capital structure financial policies, discussed under
Capabilities - Section 4.3 Liquidity and capital resources, the Company
manages liquidity risk by maintaining bilateral bank facilities and syndicated
credit facilities, by maintaining a commercial paper program, by the sales of
trade receivables to an arm's length securitization trust, by continuously
monitoring forecast and actual cash flows and by managing maturity profiles of
financial assets and financial liabilities.
    The Company has significant debt maturities in future years. The Company
has access to a shelf prospectus, in effect until September 2009, pursuant to
which it can offer $2.5 billion of debt or equity securities. The Company
believes that its investment grade credit ratings provide reasonable access to
capital markets.

    Market risk

    The sensitivity analysis of reasonably possible changes in market risks
due to the Company's exposure to currency risk, interest rate risk, and other
price risk arising from share-based compensation is shown in Note 4(g) of the
interim Consolidated financial statements.

    Commitments and contingent liabilities

    Price cap deferral accounts

    There are no significant changes affecting the price cap deferral account
balance of $146 million, since the discussion in TELUS' 2008 Management's
discussion and analysis.

    Guarantees

    Canadian GAAP requires the disclosure of certain types of guarantees and
their maximum, undiscounted amounts. As at March 31, 2009, the Company's
maximum undiscounted guarantee amounts, without regard for the likelihood of
having to make such payment, were not material.
    Indemnification obligations: In the normal course of operations, the
Company may provide indemnification in conjunction with certain transactions.
Other than obligations recorded as liabilities at the time of the transaction,
historically the Company has not made significant payments under these
indemnifications.
    In connection with its 2001 disposition of TELUS' directory business, the
Company agreed to bear a proportionate share of the new owner's increased
directory publication costs if the increased costs were to arise from a change
in the applicable CRTC regulatory requirements. The Company's proportionate
share would have been 80% through May 2006, declining to 40% in the next
five-year period and then to 15% in the final five years. Should the CRTC take
any action that would result in the owner being prevented from carrying on the
directory business as specified in the agreement, TELUS would indemnify the
owner in respect of any losses that the owner incurred.
    As at March 31, 2009, the Company has no liability recorded in respect of
indemnification obligations.

    Claims and lawsuits

    A number of claims and lawsuits seeking damages and other relief are
pending against the Company. It is impossible at this time for the Company to
predict with any certainty the outcome of such litigation. However, management
is of the opinion, based upon legal assessment and information presently
available, that it is unlikely that any liability, to the extent not provided
for through insurance or otherwise, would be material in relation to the
Company's consolidated financial position, other than as disclosed in Note
19(c) of the interim Consolidated financial statements.

    7.9  Outstanding share information

    The table below contains a summary of the outstanding shares for each
class of equity at March 31, 2009. The total number of outstanding and
issuable shares is also presented, assuming full conversion of outstanding
options and shares reserved for future option grants. The number of
outstanding and issuable shares at May 6, 2009 was not materially different
from March 31, 2009.

    
    -------------------------------------------------------------------------
    Outstanding shares                         Common   Non-Voting   Total
    (millions of shares)                       Shares     Shares    shares
    -------------------------------------------------------------------------
    Common equity
      Outstanding shares at March 31, 2009         175        143      318(1)
      Options outstanding and issuable(2)
       at March 31, 2009                             -         15         15
    -------------------------------------------------------------------------
                                                   175        158        333
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) For the purposes of calculating diluted earnings per share, the
        number of shares was 318 million for the three-month period ended
        March 31, 2009.
    (2) Assuming full conversion and ignoring exercise prices.
    -------------------------------------------------------------------------
    

    8.   Critical accounting estimates and accounting policy developments

    8.1  Critical accounting estimates

    Critical accounting estimates are described in Section 8.1 of TELUS' 2008
Management's discussion and analysis. The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

    8.2  Accounting policy developments

    (Note 2 of the interim Consolidated financial statements)

    
    Transition to International Financial Reporting Standards (IFRS) as
    issued by the International Accounting Standards Board (IASB)
    

    In 2006, Canada's Accounting Standards Board ratified a strategic plan
that will result in Canadian GAAP, as used by publicly accountable
enterprises, being replaced with International Financial Reporting Standards
as issued by the International Accounting Standards Board (IFRS-IASB) over a
transitional period to be complete by 2011. TELUS will be required to report
using the IFRS-IASB standards effective for interim and annual financial
statements relating to fiscal years beginning no later than on or after
January 1, 2011, the date that the Company has selected for adoption.
    Canada's Accounting Standards Board will phase in or transition to
IFRS-IASB through a combination of three methods: (i) as current
joint-convergence projects of the United States Financial Accounting Standards
Board and the IASB are agreed upon, they will be adopted by Canada's
Accounting Standards Board and may be introduced in Canada before the publicly
accountable enterprises' transition date to IFRS-IASB; (ii) standards
identified by Canada's Accounting Standards Board as key or significant in
which the Accounting Standards Board has undertaken a project to converge
Canadian GAAP with the related IFRS prior to transition date and issued as
Canadian GAAP; and (iii) standards not subject to a joint-convergence project
have been exposed in an omnibus manner for introduction at the time of the
publicly accountable enterprises' transition date to IFRS-IASB. The first two
transition methods may, or will, result in the Company either having the
option to, or being required to, effectively, change over certain accounting
policies to IFRS-IASB prior to 2011 in the event a new standard is issued or
early adoption is permitted.
    The IASB's work plan currently, and expectedly, has projects underway
that are expected to result in new pronouncements that continue to evolve
IFRS-IASB, and as a result, IFRS-IASB as at the transition date is expected to
differ from its current form. In November 2008, the United States Securities
and Exchange Commission issued a proposed road map, with seven milestones,
that would permit certain United States reporting issuers to use IFRS-IASB in
their filings. This proposal is a significant development as it also
contemplates mandatory usage of IFRS-IASB by United States reporting issuers
as early as 2014 (such a mandatory usage decision - Milestone 6 - is
anticipated to be made by the United States Securities and Exchange Commission
in 2011). It is not possible to currently assess the impact, if any, this
proposal will have on the IASB's work plan; however, Milestone 1 is a
requirement for improvements in accounting standards and a subsequent
consideration by the United States Securities and Exchange Commission of
whether IFRS-IASB are of high quality and sufficiently comprehensive.

    
    There are several phases that the Company will have to complete on the
    path to changing over to IFRS-IASB:

    -------------------------------------------------------------------------
    Implementation phase        Description and status
    -------------------------------------------------------------------------
    Initial impact assessment
     and scoping                This phase includes the identification of
                                significant differences between existing
                                Canadian GAAP and IFRS-IASB, as relevant to
                                the Company's specific instance.

                                Based upon the current state of IFRS-IASB,
                                this phase was completed in the first quarter
                                of 2008. The Company used a diagnostic
                                process, and identified a modest number of
                                topics possibly impacting either the
                                Company's financial results and/or the
                                Company's effort necessary to change over to
                                IFRS-IASB. This diagnostic resulted in the
                                development of a detailed plan under which
                                activities are being conducted. The IASB has
                                activities currently underway which may, or
                                will, change IFRS-IASB and such change may,
                                or will, impact the Company. The Company will
                                assess any such change as a component of its
                                key elements phase.
    -------------------------------------------------------------------------
    Key elements                This phase includes identification,
                                evaluation and selection of accounting
                                policies necessary for the Company to change
                                over to IFRS-IASB. As well, this phase
                                includes other operational elements such as
                                information technology, internal control over
                                financial reporting and training.

                                Currently underway are the identification,
                                evaluation and selection of accounting
                                policies necessary for the Company to change
                                over to IFRS-IASB, considering impacts on
                                operational elements, such as information
                                technology and internal control over
                                financial reporting, are integral to this
                                process. As at March 31, 2009, approximately
                                two-thirds of the standards that relate to
                                TELUS have been reviewed. Communications
                                activities leveraging internal resources
                                occurred during the current reporting period,
                                and training has been made available by way
                                of an internal IFRS website dedicated to the
                                conversion.

                                The Company has regularly updated its Audit
                                Committee of the Board of Directors on the
                                status of the project, implications and
                                expected range of impacts.
    -------------------------------------------------------------------------
    Embedding                   This phase will integrate the solutions into
                                the Company's underlying financial system and
                                processes that are necessary for the Company
                                to change over to IFRS-IASB.
    -------------------------------------------------------------------------
    

    The Company will present its results for fiscal 2010 using contemporary
Canadian GAAP. In 2011, the Company will present its comparative results for
fiscal 2010 using contemporary IFRS-IASB. To accomplish this, in 2010 the
Company will effectively maintain two parallel books of account.
    In 2009, the Company will continue to review remaining standards for
application to TELUS, carry out impact assessments and provide targeted
training. The Company will also make accounting policy choices and prepare its
accounting systems accordingly, to enable preparation of its opening financial
position under IFRS-IASB for 2010. Although its impact assessment activities
are well underway and commencing according to plan, continued progress is
necessary before the Company can prudently increase the specificity of the
disclosure of pre- and post-IFRS-IASB changeover accounting policy
differences, other than as set out below:

    Goodwill and intangible assets

    As an activity consistent with Canadian GAAP being converged with
IFRS-IASB, the previously existing recommendations for goodwill and intangible
assets and research and development costs were replaced with new
recommendations (CICA Handbook Section 3064).
    Commencing with the Company's 2009 fiscal year, the new recommendations
of the CICA for goodwill and intangible assets apply to the Company. This
change in accounting policy has been made in accordance with the transitional
provisions of the new recommendations.
    The new recommendations provide extensive guidance on when expenditures
qualify for recognition as intangible assets. Prior to the Company's 2009
fiscal year, upfront wireline customer activation and connection fees, along
with the corresponding direct costs not in excess of revenues, were deferred
and recognized by the Company over the average expected term of the customer
relationship; the impact of the new recommendations on the Company is that
these fees and costs do not qualify for recognition as intangible assets.
    The effects of the application of this new standard on the Company's
consolidated statements of financial position as at March 31, 2009, and
December 31, 2008 are shown in Note 2(b) of the interim consolidated financial
statements. Due to the nature of these fees and costs and the periods of time
over which they have been deferred and recognized, the Company's results of
operations for the periods currently presented are not materially affected by
these new recommendations.

    Business combinations and non-controlling interests

    As an activity consistent with Canadian GAAP being converged with
IFRS-IASB, the previously existing recommendations for business combinations
and consolidation of financial statements were replaced with new
recommendations for business combinations (CICA Handbook Section 1582),
consolidations (CICA Handbook Section 1601) and non-controlling interests
(CICA Handbook Section 1602).
    Effective January 1, 2009, the Company early adopted the new
recommendations and did so in accordance with the transitional provisions; the
Company would have otherwise been required to adopt the new recommendations
effective January 1, 2011.
    Generally, the new recommendations result in measuring business
acquisitions at the fair value of the acquired business and a prospectively
applied shift from a parent company conceptual view of consolidation theory
(which results in the parent company recording book values attributable to
non-controlling interests) to an entity conceptual view (which results in the
parent company recording fair values attributable to non-controlling
interests). Unlike the corresponding new U.S. GAAP, which requires the
recognition of the fair value of goodwill attributable to non-controlling
interests, both the new Canadian GAAP recommendations and IFRS-IASB allow the
choice of whether or not to recognize the fair value of goodwill attributable
to non-controlling interests on an acquisition-by-acquisition basis.

    Measuring business acquisitions at fair value will, among other things,
result in:

    
    -   acquisition costs being expensed;

    -   acquisition-created restructuring costs being expensed;

    -   contingent consideration, that is accounted for as a financial
        liability, being measured at fair value at the time of the
        acquisition with subsequent changes in its fair value being included
        in determining the results of operations; and

    -   changes in non-controlling ownership interests subsequent to the
        parent company's acquisition of control, and not resulting in the
        parent company's loss of control, being accounted for as capital
        transactions.

    Whether the Company will be materially affected by the new recommendations
in the future will depend upon the specific facts of business combinations, if
any. The Company's consolidated financial statements were subject to a small
number of retrospectively applied non-controlling interest-related
presentation and disclosure changes:

    -   the Consolidated statements of financial position now recognizes non-
        controlling interest as a separate component of shareholders' equity;
        and
    -   the Consolidated statements of income and other comprehensive income
        now present the attribution of net income and other comprehensive
        income between the Company's shareholders and non-controlling
        interests rather than reflecting the non-controlling interest in the
        results of operations as a deduction in arriving at net income and
        other comprehensive income.
    

    Accounting policy developments in fiscal 2008

    As activities consistent with Canadian GAAP being converged with
IFRS-IASB, the following recommendations were applied by the Company
commencing in its 2008 fiscal year.

    Financial instruments - disclosure; presentation

    The existing recommendations for financial instrument disclosure were
replaced with new recommendations (CICA Handbook Section 3862); the existing
recommendations for financial instrument presentation were carried forward,
unchanged (as CICA Handbook Section 3863). The new recommendations resulted in
incremental disclosures, relative to those previously required, with an
emphasis on risks associated with both recognized and unrecognized financial
instruments to which an entity is exposed during the period and at the
statement of financial position date, and how an entity manages those risks.

    Inventories

    The previously existing recommendations for accounting for inventories
were replaced with new recommendations (CICA Handbook Section 3031). The new
recommendations provide more guidance on the measurement and disclosure
requirements for inventories; significantly, the new recommendations allow the
reversals of previous write-downs to net realizable value where there is a
subsequent increase in the value of inventories. The Company's results of
operations and financial position were not materially affected by the new
recommendations.

    9.   Annual guidance for 2009

    The discussion in this section is qualified by the Caution regarding
forward-looking statements at the beginning of Management's discussion and
analysis.
    The Company has provided revised guidance to update its original targets
announced in December 2008. The revisions reflect the worsening Canadian
economy since that time, weaker than expected wireless results at TELUS and
the industry in the first quarter, and the Company's most recent outlook.

    
                         ----------------------------------------------------
                          Revised annual                         Original
                             guidance      Expected change        targets
    Annual guidance          for 2009         from 2008          for 2009
    -------------------------------------------------------------------------
    Consolidated
      Revenues                   $9.7 to           0 to 3%        $10.025 to
                            $9.9 billion                     $10.275 billion

      EBITDA(1)                $3.625 to        (4) to 0 %          $3.75 to
                          $3.775 billion                        $3.9 billion
      EPS - basic,
       excluding income
       tax-related
       adjustments(2)     $3.15 to $3.45        (7) to 2 %    $3.40 to $3.70
      EPS - basic (3)     $3.35 to $3.65        (3) to 4 %    $3.40 to $3.70
      Capital
       expenditures         Unchanged at
                                  approx.                             Approx.
                           $2.05 billion              10 %     $2.05 billion

    Wireline segment
      Revenue (external)         $5.0 to                            $5.05 to
                            $5.1 billion          0 to 2 %    $5.175 billion
      EBITDA                Unchanged at
                                $1.65 to                            $1.65 to
                          $1.725 billion       (3) to (7)%    $1.725 billion


    Wireless segment
      Revenue (external)         $4.7 to                           $4.975 to
                            $4.8 billion          1 to 4 %      $5.1 billion

      EBITDA                   $1.975 to                             $2.1 to
                           $2.05 billion         (1) to 2%    $2.175 billion
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) See Section 11.1 Earnings before interest, taxes, depreciation and
        amortization (EBITDA) for the definition.
    (2) A non-GAAP measure.
    (3) Revised guidance for basic EPS includes 20 cents per share income
        tax-related adjustments from the first quarter of 2009.

    The following key assumptions were made at the time the original 2009
targets were announced on December 16, 2008.

    -------------------------------------------------------------------------
    Assumptions for 2009 targets        Actual result to date, and confirmed
                                        or revised expectations for 2009
    -------------------------------------------------------------------------
    Ongoing wireline competition in     Expectation unchanged, as evidenced
    both business and consumer          by a major cable-TV competitor's
    markets, particularly from          continued digital telephone and
    cable-TV and VoIP companies         Internet subscriber additions and
                                        increasing penetration among business
                                        customers
    -------------------------------------------------------------------------
    Canadian wireless industry market   Expectation may be too high given the
    penetration gain of approximately   worsening Canadian economic
    4.5 percentage points for the year  performance experienced in the first
                                        four months of 2009
    -------------------------------------------------------------------------
    Downward pressure on wireless ARPU  Expectation confirmed by the 5.6%
                                        year-over-year decrease in TELUS'
                                        blended ARPU in the first quarter of
                                        2009, as discussed in Section 5.5
                                        Wireless segment results
    -------------------------------------------------------------------------
    New competitive wireless entry      Expectation unchanged
    beginning in the fourth quarter
    of 2009 with most entrants
    starting in 2010
    -------------------------------------------------------------------------
    Restructuring expenses of           Expectation revised to approximately
    approximately $50 million to        $125 million for the full year of
    $75 million                         2009, to reflect increased
                                        operational efficiency activities
    -------------------------------------------------------------------------
    A blended statutory tax rate of     Expectation unchanged. The blended
    approximately 30 to 31%             statutory income tax rate for the
                                        first quarter of 2009 was 30.3%
    -------------------------------------------------------------------------
    Net income tax payments of          Expectation unchanged. Net income tax
    approximately $320 to $350 million  payments in the first quarter of 2009
                                        were $214 million, including final
                                        payments for 2008 and first quarter
                                        2009 instalments
    -------------------------------------------------------------------------
    Forecast average exchange rate      Expectation unchanged.
    of U.S. $0.80 per Canadian dollar   The average closing exchange rate for
                                        the three-month period ended March
                                        31, 2009 was approximately U.S. $0.80
                                        per Canadian dollar. The daily
                                        closing rate varied from
                                        approximately U.S. $0.77 to U.S.
                                        $0.85 over this period. (Source: the
                                        Bank of Canada)
    -------------------------------------------------------------------------
    A pension accounting discount       The assumptions for defined benefit
    rate was estimated at 7.00%         pension plan accounting are set at
    (subsequently set at 7.25%) and     the beginning of each year. The
    expected long-term return of 7.25%  Company's estimate for contributions
    (consistent with the Company's      to defined benefit pension plans has
    long-run returns and its future     been revised to $191 million for
    expectations). Defined benefit      2009, based on recent actuarial
    pension plans net expenses and      reports
    funding were both estimated to
    increase in 2009, mainly due to
    the decline in value of defined
    benefits pension plans assets
    in 2008.

    -   Defined benefit pension plans
        net expenses were estimated to
        be $nil(1) in 2009,
        subsequently revised to
        approximately $18 million(2)

    -   Defined benefit pension plans
        contributions were estimated to
        be approximately $200 million(1)
        for 2009, subsequently revised
        to $211 million(2)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) December 16, 2008
    (2) Management's discussion and analysis for 2008, dated February 11,
        2009.
    -------------------------------------------------------------------------
    

    10.  Risks and risk management

    The following are updates to the risks and risk management discussion in
Section 10 of TELUS' 2008 Management's discussion and analysis.

    10.1 Regulatory

    Speed matching service requirements for wholesale Internet access
services (Telecom Order CRTC 2009-111, March 3, 2009)

    This CRTC order upheld a previous ruling (Telecom Decision CRTC 2008-117)
that incumbent local exchange carriers' retail ADSL access services are all
subject to a wholesale speed matching requirement. The effect of the order on
TELUS is that the Company is required to offer matching wholesale speeds for
existing retail ADSL Internet services if there is demand by a competitor, and
anytime a new speed of retail ADSL Internet service is offered, the Company
will be obligated to make that service available to competitors at wholesale
rates on a going-forward basis.
    TELUS is of the view that the scope of Decision 2008-117 and Order
2009-111 is too broad, in that these decisions extend unbundling obligations
to higher-speed access services carried on upgraded ADSL2+ and VDSL network
infrastructure. As a result, TELUS and other incumbent carriers have asked the
federal cabinet to confirm that investment in next-generation communications
networks should be encouraged as a matter of policy by overturning certain
aspects of these decisions. Specifically, TELUS is seeking the rescission of
Telecom Order CRTC 2009-111 and a variation of Telecom Decision CRTC
2008-117-1 to confine the speed matching requirement to existing retail ADSL
services offered by the Company, as of March 2008. If the Company's petition
is granted, TELUS would have no obligation to make available wholesale
versions of new retail ADSL services on a going-forward basis after that date.
The federal cabinet has until March of 2010 to issue a determination on TELUS'
petition.

    10.2 Economic growth and fluctuations

    Continuation of economic recessions may adversely impact TELUS

    An extended economic downturn may cause residential and business
telecommunications customers to delay new service purchases, reduce volumes of
use, discontinue use of services or seek lower-priced alternatives.
Significant economic downturns or recessions could adversely impact TELUS'
profitability, free cash flow and bad debt expense, and potentially require
the Company to record impairments to the carrying value of its assets
including, but not limited to, its intangible assets with indefinite lives
(spectrum licences) and its goodwill. Impairments to the carrying value of
assets would result in a charge to earnings and a reduction in shareholders'
equity, but would not affect cash flow.
    Risk mitigation: The Company cannot completely mitigate economic risks.
Until the first quarter of 2009, TELUS benefited from ongoing strong growth in
the Canadian wireless sector, now significantly affected by the economic
downturn. In addition, the cyclical resource economies in B.C. and Alberta are
now experiencing contraction or lower growth. TELUS continues to focus on four
key vertical markets of the public sector, healthcare, financial services and
energy, of which, the first three are generally expected to be less exposed to
the economic downturn than the manufacturing and export-oriented industries in
Ontario and Quebec and the cyclical resource economies in B.C. and Alberta. To
mitigate worsening economic impacts, TELUS is pursuing additional cost
reduction and efficiency initiatives, and may defer NCIB share repurchases
and/or reduce capital expenditures.

    Pension funding

    Economic and capital market fluctuations could also adversely impact the
funding and expense associated with the defined benefit pension plans that
TELUS sponsors. There can be no assurance that TELUS' pension expense and
funding of its defined benefit pension plans will not increase in the future
and thereby negatively impact earnings and/or cash flow. Defined benefit
funding risks may occur if total pension liabilities exceed the total value of
the respective trust funds. Unfunded differences may arise from lower than
expected investment returns, reductions in the discount rate used to value
pension liabilities, and actuarial loss experiences.
    Risk mitigation: TELUS seeks to mitigate this risk through the
application of policies and procedures designed to control investment risk and
ongoing monitoring of its funding position. Pension expense and funding for
2009 were largely determined by the rates of return on the plans' assets for
2008 and interest rates at year-end 2008, with expected funding revised based
on recent actuarial reports. As at March 31, 2009, the Company's best estimate
for defined benefit pension plans expense in 2009 is $18 million, as compared
to a recovery of $100 million in 2008, and the Company's estimate of cash
contributions to its defined benefit pension plans in 2009 is $191 million
($102 million in 2008).

    11.  Reconciliation of non-GAAP measures and definition of key operating
    indicators

    11.1 Earnings before interest, taxes, depreciation and amortization
    (EBITDA)

    TELUS has issued guidance on and reports EBITDA because it is a key
measure used by management to evaluate performance of business units, segments
and the Company. EBITDA is also utilized in measuring compliance with debt
covenants. (See Section 11.4 - EBITDA excluding restructuring costs.) EBITDA
is a measure commonly reported and widely used by investors as an indicator of
a company's operating performance and ability to incur and service debt, and
as a valuation metric. The Company believes EBITDA assists investors in
comparing a company's performance on a consistent basis without regard to
depreciation and amortization, which are non-cash in nature and can vary
significantly depending upon accounting methods or non-operating factors such
as historical cost.
    EBITDA is not a calculation based on Canadian or U.S. GAAP and should not
be considered an alternative to Operating income or Net income in measuring
the Company's performance, nor should it be used as an exclusive measure of
cash flow, because it does not consider the impact of working capital growth,
capital expenditures, debt principal reductions and other sources and uses of
cash, which are disclosed in the Consolidated statements of cash flows.
Investors should carefully consider the specific items included in TELUS'
computation of EBITDA. While EBITDA has been disclosed herein to permit a more
complete comparative analysis of the Company's operating performance and debt
servicing ability relative to other companies, investors should be cautioned
that EBITDA as reported by TELUS may not be comparable in all instances to
EBITDA as reported by other companies.
    The following is a reconciliation of EBITDA with Net income and Operating
income.

    
    -------------------------------------------------------------------------
                                                     Quarters ended March 31
                                                    -------------------------
    ($ millions)                                            2009        2008
    -------------------------------------------------------------------------
    Net income                                               322         292
      Other expense (income)                                   5          17
      Financing costs                                         95         109
      Income taxes                                            57         109
    -------------------------------------------------------------------------
    Operating income                                         479         527
      Depreciation                                           334         346
      Amortization of intangible assets                       93          76
    -------------------------------------------------------------------------
    EBITDA                                                   906         949
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    In addition to EBITDA, TELUS calculates EBITDA less capital expenditures
as a simple proxy for cash flow at a consolidated level and in its two
reportable segments. EBITDA less capital expenditures may be used for
comparison to the reported results for other telecommunications companies over
time and is subject to the potential comparability issues of EBITDA described
above.

    
    -------------------------------------------------------------------------
                                                     Quarters ended March 31
                                                    -------------------------
    ($ millions)                                            2009        2008
    -------------------------------------------------------------------------
    EBITDA                                                   906         949
    Capital expenditures                                    (474)       (320)
    -------------------------------------------------------------------------
    EBITDA less capital expenditures                         432         629
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    11.2 Free cash flow

    TELUS reports free cash flow because it is a key measure used by
management to evaluate its performance. Free cash flow excludes certain
working capital changes and other sources and uses of cash, as found in the
Consolidated statements of cash flows. Free cash flow is not a calculation
based on Canadian or U.S. GAAP and should not be considered an alternative to
the Consolidated statements of cash flows. Free cash flow is a measure that
can be used to gauge TELUS' performance over time. Investors should be
cautioned that free cash flow as reported by TELUS may not be comparable in
all instances to free cash flow as reported by other companies. While the
closest GAAP measure is Cash provided by operating activities less Cash used
by investing activities, free cash flow is considered relevant because it
provides an indication of how much cash generated by operations is available
after capital expenditures, but before acquisitions, proceeds from divested
assets and changes in certain working capital items (such as trade
receivables, which can be significantly distorted by securitization changes
that do not reflect operating results, and trade payables).
    The following reconciles free cash flow with Cash provided by operating
activities less Cash used by investing activities:

    
    -------------------------------------------------------------------------
                                                     Quarters ended March 31
                                                    -------------------------
    ($ millions)                                            2009        2008
    -------------------------------------------------------------------------
    Cash provided by operating activities                    614         634
    Cash (used) by investing activities                     (478)     (1,009)
    -------------------------------------------------------------------------
                                                             136        (375)
    Amortization of deferred gains on sale-leaseback
     of buildings, amortization of deferred charges
     and other, net                                          (20)         (8)
    Reduction (increase) in securitized accounts
     receivable                                                -           -
    Non-cash working capital changes except changes
     from income tax payments (receipts), interest
     payments (receipts) and securitized accounts
     receivable, and other                                     5         222
    Acquisitions                                               -         687
    Other investing activities                                 4           2
    -------------------------------------------------------------------------
    Free cash flow                                           125         528
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following shows management's calculation of free cash flow.

    -------------------------------------------------------------------------
                                                     Quarters ended March 31
                                                    -------------------------
    ($ millions)                                            2009        2008
    -------------------------------------------------------------------------
    EBITDA                                                   906         949
    Share-based compensation                                   9           6
    Net employee defined benefit plans expense
     (recovery)                                                4         (25)
    Employer contributions to employee defined
     benefit plans                                           (53)        (27)
    Restructuring costs net of cash payments                  (1)         (3)
    Donations and securitization fees included
     in Other expense                                         (3)        (10)
    Cash interest paid                                       (49)        (45)
    Cash interest received                                     -           1
    Income taxes received (paid) and other                  (214)          2
    Capital expenditures                                    (474)       (320)
    -------------------------------------------------------------------------
    Free cash flow                                           125         528
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    11.3 Definition of key wireless operating indicators

    These measures are industry metrics and are useful in assessing the
operating performance of a wireless company.
    Average revenue per subscriber unit per month (ARPU) is calculated as
Network revenue divided by the average number of subscriber units on the
network during the period and expressed as a rate per month. Data ARPU is a
component of ARPU, calculated on the same basis for revenues derived from
services such as text messaging, mobile computing, personal digital assistance
devices, Internet browser activity and pay-per-use downloads.
    Churn per month is calculated as the number of subscriber units
disconnected during a given period divided by the average number of subscriber
units on the network during the period, and expressed as a rate per month. A
prepaid subscriber is disconnected when the subscriber has no usage for 90
days following expiry of the prepaid card.
    Cost of acquisition (COA) consists of the total of handset subsidies,
commissions, and advertising and promotion expenses related to the initial
subscriber acquisition during a given period. As defined, COA excludes costs
to retain existing subscribers (retention spend).
    COA per gross subscriber addition is calculated as cost of acquisition
divided by gross subscriber activations during the period.
    EBITDA excluding COA is a measure of operational profitability normalized
for the period costs of adding new customers.
    Retention spend to Network revenue represents direct costs associated
with marketing and promotional efforts aimed at the retention of the existing
subscriber base divided by Network revenue.

    11.4 Definition of liquidity and capital resource measures

    Dividend payout ratio and dividend payout ratio of sustainable net
earnings: For actual earnings, the measure is defined as the most recent
quarterly dividend declared per share multiplied by four and divided by the
sum of basic earnings per share for the most recent four quarters. The target
guideline for the annual dividend payout ratio is on a prospective basis,
rather than on a trailing basis, and is 45 to 55% of sustainable net earnings.
The dividend payout ratio on an actual basis, excluding income tax-related
adjustments and ongoing impacts of a net-cash settlement feature introduced in
2007, is considered more representative of a sustainable calculation.
    EBITDA - excluding restructuring costs is used in the calculation of Net
debt to EBITDA and EBITDA interest coverage, consistent with the calculation
of the Leverage Ratio and the Coverage Ratio in credit facility covenants.
Restructuring costs were $80 million and $22 million, respectively, for the
12-month periods ended March 31, 2009 and 2008.
    EBITDA - excluding restructuring costs interest coverage is defined as
EBITDA excluding restructuring costs divided by Net interest cost.
Historically, this measure is substantially the same as the Coverage Ratio
covenant in TELUS' credit facilities.
    Interest coverage on long-term debt is calculated on a 12-month trailing
basis as Net income before interest expense on long-term debt and income tax
expense, divided by interest expense on long-term debt.
    Net debt is a non-GAAP measure whose nearest GAAP measure is Long-term
debt, including Current maturities of long-term debt, as reconciled below. Net
debt is one component of a ratio used to determine compliance with debt
covenants (refer to the description of Net debt to EBITDA below).

    
    -------------------------------------------------------------------------
                                                           As at March 31
                                                    -------------------------
    ($ millions)                                            2009        2008
    -------------------------------------------------------------------------
    Long-term debt including current portion               6,512       5,195
    Debt issuance costs netted against long-term debt         27          29
    Derivative liability                                     651       1,106
    Accumulated other comprehensive income amounts
     arising from financial instruments used to manage
     interest rate and currency risks associated with
     U.S. dollar denominated debt (excluding tax effects)   (124)       (128)
    Cash and temporary investments                           (65)        (49)
    Proceeds from securitized accounts receivable            300         500
    -------------------------------------------------------------------------
    Net debt                                               7,301       6,653
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The derivative liability in the table above relates to cross currency
interest rate swaps that effectively convert principal repayments and interest
obligations to Canadian dollar obligations, and is in respect of the U.S.
$1,925 million debenture maturing June 1, 2011. Management believes that Net
debt is a useful measure because it incorporates the exchange rate impact of
cross currency swaps put into place that fix the value of U.S. dollar
denominated debt, and because it represents the amount of long-term debt
obligations that are not covered by available cash and temporary investments.
    Net debt to EBITDA - excluding restructuring costs is defined as Net debt
as at the end of the period divided by the 12-month trailing EBITDA -
excluding restructuring costs. TELUS' guideline range for Net debt to EBITDA
is from 1.5 to 2.0 times. Historically, Net debt to EBITDA - excluding
restructuring costs is substantially the same as the Leverage Ratio covenant
in TELUS' credit facilities.
    Net debt to total capitalization provides a measure of the proportion of
debt used in the Company's capital structure.
    Net interest cost is defined as Financing costs before gains on
redemption and repayment of debt, calculated on a 12-month trailing basis. No
gains on redemption and repayment of debt were recorded in the respective
periods. Should they occur, losses recorded on the redemption of long-term
debt are included in net interest cost. Net interest costs for the 12-month
periods ended March 31, 2009 and 2008 are equivalent to reported financing
costs for those periods.
    Total capitalization - book value is calculated as Net debt plus
Shareholders' equity, excluding accumulated other comprehensive income or
loss:

    
    -------------------------------------------------------------------------
                                                           As at March 31
                                                    -------------------------
    ($ millions)                                            2009        2008
                                                                (as adjusted)
    -------------------------------------------------------------------------
    Net debt                                               7,301       6,653
    Shareholders' equity
      Common Share and Non-Voting Share equity             7,290       6,858
      Add back Accumulated other comprehensive loss          100         103
      Non-controlling interests                               24          22
    Total capitalization - book value                     14,715      13,636
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Media relations: Shawn Hall, (604) 697-8176,
shawn.hall@telus.com; Investor relations: Robert Mitchell, (416) 279-3219,
ir@telus.com

Organization Profile

TELUS Corporation

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