TELUS Reports Fourth Quarter Results



    Operating earnings up 8% while underlying EPS increases 22%

    VANCOUVER, Feb. 15 /CNW/ - TELUS Corporation today reported fourth
quarter 2007 revenue of $2.33 billion, an increase of 3.4 per cent from a year
ago. The performance was driven by nine per cent growth in wireless revenue
and seven per cent growth in wireline data revenue, partially offset by
declines in local and long distance wireline revenues. Consolidated earnings
before interest, taxes, depreciation and amortization (EBITDA) increased
eight per cent to $953 million due to a 14 per cent increase in the wireless
segment and two per cent increase in the wireline segment.
    Net income in the quarter was $400 million and earnings per share (EPS)
was $1.23, up 66 per cent and 73 per cent respectively. Net income and EPS
included favourable tax related adjustments of approximately $143 million or
44 cents per share, compared to $20 million or six cents a year ago. Also
contributing to the increase in EPS were lower financing charges and a
reduction in shares outstanding from continued share repurchases. Excluding
tax related adjustments in both periods and the charge for the net-cash
settlement feature for share options this period, net income was $258 million
and EPS was $0.79, up 17 per cent and 22 per cent, respectively. Free cash
flow was up 85% despite higher capital expenditures, due to the same positive
factors that boosted EPS.
    For the full year, TELUS reported revenue growth of 4.5 per cent to
$9.1 billion and four per cent growth in EBITDA (adjusted for comparability).
TELUS invested $1.77 billion in capital expenditures and generated healthy
free cash flow of $1.57 billion, which funded shareholder dividends of
$521 million and the repurchase of $750 million of TELUS shares during the
year. TELUS met or exceeded three of four initial consolidated financial 2007
targets set more than a year ago, including both profitability targets.

    
    FINANCIAL HIGHLIGHTS
    -------------------------------------------------------------------------
    C$ in millions, except per share amounts        3 months ended
                                                      December 31

    (unaudited)                                      2007     2006  % Change
    -------------------------------------------------------------------------
    Operating revenues                             2,330.8  2,254.6     3.4%
    EBITDA(1)(2)                                     953.4    884.3     7.8%
    Income before income taxes and
     non-controlling interest                        384.2    333.5    15.2%
    Net income(2)(3)                                 400.1    240.5    66.4%
    Earnings per share (EPS), basic(2)(3)             1.23     0.71    73.2%
    Cash provided by operating activities            817.4    747.2     9.4%
    Capital expenditures                             472.5    415.2    13.8%
    Free cash flow(4)                                427.8    231.1    85.1%

    (1) Earnings before interest, taxes, depreciation and amortization
        (EBITDA) is defined as Operating revenues less Operations expense
        less Restructuring costs. See Section 6.1 of Management's review of
        operations.
    (2) Comparative results for 2006 have been corrected for a change in
        employee future benefits transitional pension asset accounting,
        resulting in a positive impact on EBITDA, net income, and basic
        earnings per share for the fourth quarter in 2006 of $6.2 million,
        $4.3 million, and 1 cent, respectively. In 2007, TELUS revisited
        estimates and determinations used for employee future benefits
        transitional pension asset accounting and decreased the pension
        expense by $24.7 million in each year from 2000 to 2006.
    (3) Net income and EPS for the three month period in 2007 includes
        favourable tax related adjustments of $143 million or 44 cents per
        share, compared to $20 million or 6 cents for the same period in
        2006.
    (4) See Section 6.2 of Management's review of operations.
    

    "Despite a turbulent year in the telecom industry and capital markets,
TELUS' performance was solid as we focused on delivering against our
long-standing national growth strategy," said Darren Entwistle, TELUS
president and CEO. "Disciplined performance in the fourth quarter allowed
TELUS to end the year on a positive note, which bodes well for 2008."
    "TELUS continues to generate strong cash flow that we are deploying three
ways," stated Mr. Entwistle. "We invested almost $1.8 billion in capital
expenditures, much of it directed to new service initiatives and to generate
long-term growth, and we returned to shareholders almost $1.3 billion in the
form of value creating share buybacks and increased dividends."
    Robert McFarlane, TELUS executive vice-president and CFO, said, "I am
pleased to see a higher operating margin generated in the fourth quarter,
countering unexpected costs earlier in 2007. As a result, the organization
achieved its full year 2007 consolidated profitability targets."
    "TELUS enters 2008 in a position of considerable financial strength and
balance sheet flexibility that allows TELUS to advance our strategy regardless
of very unsettled capital markets," said Mr. McFarlane. "Demonstrating this
was the ease with which we funded the $743 million Emergis acquisition in
mid-January and today's announcement of a $700 million 364-day revolving bank
facility with a select group of Canadian banks, which ensures we continue to
have ample unutilized funding sources."

    -------------------------------------------------------------------------
    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. The Company disclaims any intention or
    obligation to update or revise any forward-looking statements, whether as
    a result of new information, future events or otherwise, except as
    required by law. In the case of annual guidance, it is the current
    practice of the Company to evaluate and, where it deems appropriate,
    provide updates. Subject to legal requirements, this practice may be
    changed at any time at the Company's sole discretion. Accordingly this
    news release is subject to the disclaimer and qualified by the
    assumptions (including assumptions for 2008 guidance and share
    purchases), qualifications and risk factors referred to in the
    Management's review of operations- February 13, 2008
    -------------------------------------------------------------------------

    
    OPERATING HIGHLIGHTS

    TELUS wireless
    -   Revenues increased by $90 million or 8.8% to $1.1 billion in the
        fourth quarter of 2007, when compared with the same period in 2006
    -   Wireless data revenue increased $39 million or 43% due to adoption of
        full function personal data devices and increased text messaging
    -   Net subscriber additions were 161,400, an 11% decrease from the same
        quarter in 2006. Postpaid additions were 106,400, down 18%, while
        prepaid loading increased by 5.6% to 55,000, which included a one-
        time reduction of 5,100, for a clean-up of deactivated accounts.
    -   ARPU (average revenue per subscriber unit per month) decreased by
        1.2% to $63.70 continuing the trend experienced in the third quarter
        due to the competitive impacts on the voice component. The fast
        growing data component at $7.95 represents 12.5% of ARPU
    -   EBITDA increased by $59 million over the fourth quarter of 2006,
        representing 14% growth, due to network revenue growth and lower COA
        expense
    -   Cost of acquisition per gross addition decreased 19% year-over-year
        to $352
    -   Blended monthly subscriber churn increased to 1.59% from 1.33% a year
        ago due to product mix shifting to prepaid combined with higher
        deactivations associated with introduction of WNP in 2007
        Postpaid churn increased slightly to 1.14%
    -   Cash flow (EBITDA less capital expenditures) increased $29 million or
        9% to $355 million in the quarter due to an increase in EBITDA.
        Capital expenditures also increased with continued investments in
        capacity and coverage.

    TELUS wireline
    -   Revenues decreased by $14 million or 1.1% to $1.2 billion in the
        fourth quarter of 2007, when compared with the same period in 2006.
        Data growth was offset by declines in local and long distance
        revenues
    -   Data revenues increased by $31 million or 7.2% due to increased
        high-speed Internet subscribers and enhanced data and hosting
        services
    -   TELUS added 26,200 net high-speed Internet subscribers, pushing
        TELUS' high-speed base to more than one million, an 11% increase from
        a year ago. High-speed net adds were much lower than a year ago
        reflecting a mix of competitive and market factors
    -   EBITDA increased by $10 million or 2.2%, due to lower cost of sales
        associated with voice and data equipment and increased capitalization
        of labour
    -   Network access lines (NALs) declined by 39,000 in the quarter, down
        3.2% from a year ago. This reflects continued residential line losses
        from ongoing competitive activity and wireless substitution partially
        mitigated by an increase in business access lines
    -   Cash flow (EBITDA less capital expenditures) declined 12% to
        $125 million, due to an increase in capex for new phases of the
        billing and client care system development in B.C. as well as upfront
        capital investments to support new contract wins.
    

    Corporate Developments

    TELUS successfully acquires Emergis

    On January 17, TELUS successfully completed its $743 million bid to
acquire Emergis under its offer to acquire all of their common shares. This
acquisition advances TELUS' business strategy based on its fit with two of our
four key industry verticals.
    Emergis is a business process outsourcer that specializes in the
healthcare and financial services sectors and is a leader in the automation of
electronic health records and claims processing and pharmacy solutions. In
addition, Emergis' suite of financial service solutions complements TELUS'
focus in this sector.
    TELUS is taking a leadership role in the transformation of healthcare in
Canada. It has invested in strengthening its healthcare service capabilities
in the last several years, building teams with deep expertise and delivering
innovative solutions. Emergis' complementary expertise, applications and
customer base are expected to strengthen TELUS' existing industry solutions
and allow it to better compete in the growing and transforming healthcare
industry.

    Government issues wireless spectrum decision

    On November 28, Industry Canada announced the framework for the upcoming
Advanced Wireless Spectrum auction planned for May 2008. The Government 
decided to set aside 40 MHz of 105 MHz of available spectrum for potential new
entrants and to require existing providers including TELUS to share their
infrastructure. This includes mandated roaming and tower sharing. TELUS is
participating in a round of public comments and the Government is expected to
announce final rules at the end of March 2008.
    TELUS was disappointed the Government failed to abide by its policy
mandate to rely on market forces to the greatest extent possible to deliver
benefits for Canadian consumers and instead made a decision that will favour a
select group of industry players at the expense of companies that have
invested more than $20 billion building wireless infrastructure.
    While TELUS remains in a good position to compete and generate ongoing
growth, this announcement creates uncertainty regarding the future competitive
structure, which has negatively impacted share values of TELUS and other
wireless carriers.

    TELUS continues share repurchases

    During the fourth quarter, TELUS continued to purchase shares under its
Normal Course Issuer Bids (NCIBs). Repurchases were 3.1 million shares for a
total outlay of $147.5 million. For the full year, TELUS repurchased
13.6 million shares for $750 million thereby reducing shares outstanding by
four per cent.
    TELUS renewed its NCIB program on December 20, 2007 with the intention,
if considered advisable, to purchase and cancel, over a 12-month period, up to
8 million of its outstanding common shares and 12 million of its outstanding
non-voting shares on the Toronto Stock Exchange. This represents approximately
4.6% of the common and 8.1% of the non-voting outstanding public float of each
class of shares.
    Since December 2004, TELUS has repurchased a total of 53 million shares
for an outlay of $2.5 billion under four share repurchase programs. TELUS
believes that such purchases are in the best interest of the Company and
constitute an attractive investment opportunity and desirable use of company
funds that should enhance the value of the remaining shares.

    TELUS is Canada's best in corporate reporting, including governance and
    sustainability

    The Canadian Institute of Chartered Accountants (CICA) handed TELUS five
awards, including the Overall Award of Excellence for Corporate Reporting, at
the 2007 award ceremony in December. The CICA awards reflect TELUS' commitment
to continuous improvement and to clear and thorough reporting to all its
stakeholders. TELUS was also awarded best Corporate Governance disclosure for
the third year running and was handed first-time awards for best Corporate
Social Responsibility reporting and an honourable mention for Financial
Reporting. Finally, TELUS received the award of excellence in corporate
reporting in the Communications and Media category for the thirteenth
consecutive year.

    Ville de Montréal selects TELUS as primary telecom partner in
    $87 million deal

    In early February, a new partnership with Ville de Montréal was announced
in which TELUS will provide and manage Internet Protocol (IP) based voice and
data services for the city's more than 300 administrative offices. The
contract is valued at $87 million over ten years.
    The advanced telecommunications framework is to support the city's goals
of accessing a cost-effective infrastructure while providing a secure IP
backbone for new services and solutions. Migration from the city's previous
technology to TELUS' centralized IP-based communications platform is expected
to begin in the fall of 2008.

    Yellow Pages Group selects TELUS in $90 million deal

    In October, TELUS announced that Yellow Pages Group (YPG) has selected
TELUS to provide support services and management of the information technology
infrastructure for their Western Canada-based operations. This long-term
contract with Canada's largest directory publisher is valued at approximately
$90 million.
    Under the agreement, TELUS will provide a wide range of services
including IT infrastructure operations, IP applications development, wireless
services, document services and managed network services ranging from help
desk to desktop to computing operations. TELUS will also provide facilities
and managed services for YPG's online directory system in TELUS Internet Data
Centres.

    TELUS acquires Toronto-based Fastvibe

    TELUS has acquired privately held Fastvibe Corporation, a small but
leading provider of innovative and superior quality Web streaming solutions
for business. Launched in 2000, Fastvibe, based in Toronto, serves
approximately 130 corporate customers including the Bank of Montreal, Bank of
Nova Scotia, Barrick Gold, Trans Canada Pipelines, Ministry of Education of
Ontario, Torstar and Investors Group. Web streaming is a rapidly growing
market.
    The Fastvibe team brings unique technical, event and production Web
streaming management expertise to TELUS. The acquisition strengthens TELUS'
technology solutions portfolio by offering Canadian businesses an
environmentally responsible and cost effective way to deliver information like
training, employee communications and investor information to staff and
stakeholders who are geographically dispersed.

    TELUS House opens its doors in the Nation's Capital

    In October, TELUS House in Ottawa was opened. The building is a
Leadership in Energy and Environmental Design (LEED) "silver" designed
facility, making it one of the most environmentally friendly buildings in the
city. The 160,000 square-foot, nine floor facility is a sustainable building,
designed and built to embrace healthy living, conserve energy and support the
environment. For example, TELUS House is designed to reduce energy consumption
by almost 40 per cent compared to model national energy code buildings, and
its high-efficiency plumbing system is designed to reduce water usage by more
than 40 per cent.

    Upopolis keeps kids in hospitals connected

    As part of TELUS' commitment to making the future friendly for Canadian
youth, it partnered with Kids' Health Links Foundation (KHLF) and McMaster
Children's Hospital (MCH) to launch of Upopolis.com, Canada's first secure
online social network for kids in hospital care. This site, powered by TELUS,
allows young patients to connect with their peers and teachers, much like they
do on Facebook. Upopolis provides a personal profile, secure mail, instant
chat, discussion boards, personal blogs and links to games. The site also
provides unique features to kids in hospital like a homework site to stay
up-to-date with school, links to kid-friendly health and wellness information,
and connections to other children with the same condition.
    Through a partnership with Kids' Health Links Foundation, TELUS is
providing a gift of technology services to develop Upopolis. TELUS helped
build the site and will continue to provide site expansion, ongoing access to
Upopolis.com, managed Web hosting, and application support and maintenance
services.

    TELUS becomes first Canadian telco to deploy and support Cisco
    TelePresence

    TELUS is the first Canadian telecommunications provider to achieve both
the Cisco TelePresence Connection Certification and the Cisco TelePresence
Authorized Technology Provider Certification. These designations recognize
TELUS' capability to sell, deploy and support Cisco TelePresence and for
having the network sophistication to deliver an optimal customer experience.
    The Cisco TelePresence system allows TELUS to bring customers unique,
'in-person' experiences between people, places and events in a secure
environment. This system delivers life-size images via ultra-high-definition
video and spatial audio within a specially designed environment to create the
experience of being in the same room with remote participants, whether they
are down the street or around the world.
    TELUS has also implemented Cisco TelePresence internally in its Vancouver
and Toronto offices, and is using the solution to help improve team member
efficiency and customer communication, reduce travel, and assist in meeting
environmental goals.

    TELUS first to bring Canadians the next generation RAZR

    TELUS became the first Canadian wireless carrier to offer the CDMA RAZR2
V9m in the quarter. The next generation of the revolutionary MOTORAZR brings
together brains and beauty with a full SPARK entertainment service line-up
along with the elegant styling synonymous with the RAZR. For ultimate
enjoyment of TELUS multimedia SPARK, the phones come packaged with a stereo
headset, data cable, mini-to-micro USB adapter, Motorola Mobile Phone Tools
software, and 1GB microSD memory card.
    TELUS also introduced the Samsung R500 wireless phone, which lets
consumers reflect their own style with a choice of red and blue exchangeable
faceplates and access to the company's SPARK suite of services.

    TELUS introduces four new Mike handsets

    In December, TELUS launched four new handsets to its Mike Push To Talk
(PTT) line-up. With more than 12 Mike handsets, TELUS has the largest
selection of Push To Talk devices in Canada.
    The new Motorola i876 and Motorola i876w Push To Talk phones offer
unmatched levels of processing speed, multimedia, and convenience. Such
innovative new features as 3D Audio, 3D Animation and stereo Bluetooth allow
users to get more effective at work and better enjoy their downtime with
music, games, and Web access.
    TELUS also launched the i876 and i876w, both boasting a combined alarm
clock/stopwatch/timer and a camera with a built-in photo editor. The
difference between the two models is simply styling - while the i876 comes in
sleek dark brown, the i876w's casing is a lustrous pearl with a titanium ivy
design. The emergence of this option represents the increasing popularity of
Mike outside its industrial roots, as well as the growing diversity of
industries that have relied on Mike over its 11 years in the market.

    TELUS training program tops in the world

    TELUS was recognized by the American Society for Training and Development
for having the world's third best enterprise learning program in the world.
TELUS was one of only two Canadian corporations honoured with a BEST award by
the society. In 2007, TELUS' 34,000 employees took 361,000 online courses and
64,000 classroom courses. TELUS previously won BEST awards in 2003, 2004, and
2005.

    Karen Radford named Best Canadian Woman Executive

    Karen Radford, TELUS executive vice-president and president of TELUS
Québec and Partner Solutions, was named Best Canadian Executive at the 4th
annual Stevie Awards for Women in Business. This international award
recognizes the outstanding performance in the workplace and honours the
efforts, accomplishments, and positive contributions of companies and
businesspeople worldwide. Ms. Radford was selected as Best Canadian Executive
by a panel of judges and advisors featuring many leading figures in the
business world. More than 800 entries from companies of all sizes across
virtually every industry were submitted for consideration in categories such
as Best Entrepreneur, Best Executive, Lifetime Achievement, and Women Helping
Women.

    Four TELUS executives named Top 100 women by the Women's Executive
    Network

    The Women's Executive Network (WXN) recognized four of TELUS' senior
leaders for their career successes and dedication to the communities where
they live and work. The society's 2007 list of Canada's 100 most powerful
women included Audrey Ho, TELUS senior vice-president, General Counsel and
Corporate Secretary; and Judy Shuttleworth, TELUS vice-chair of Human
Resources. Ms. Ho received the award in the Professionals category and Ms.
Shuttleworth was recognized in the Corporate Executives category. This was the
first Top 100 award for Ho and the third time Shuttleworth had been honoured
with the award. Karen Radford, TELUS executive vice-president and president of
TELUS Québec and Partner Solutions; and Janet Yale, TELUS executive
vice-president of Corporate Affairs, were also honoured at the luncheon and
included in the prestigious list. Both members of the top 100 list for the
previous three years, Ms. Radford and Ms. Yale were inducted into the new WXN
Hall of Fame.

    TELUS and its team members donate $5.5 million to Canadian charities

    TELUS, its team members and alumni give where they live. They have
donated and pledged $5.5 million for 2008 to more than 2,800 charities across
Canada as part of the Team TELUS Cares charitable giving program. TELUS team
members and alumni have chosen to make donations through payroll and pension
deduction to more than 45,000 eligible registered Canadian charities such as
the Canadian Cancer Society, B.C. Children's Hospital Foundation and the
Canadian Breast Cancer Foundation. TELUS then matches these donations dollar
for dollar to provide financial support for those charities. TELUS and its
team members have contributed $113 million to charitable and not-for-profit
organizations and volunteered more than 2.1 million hours of service to local
communities since 2000.

    TELUS International team members build homes in Manila

    The TELUS International office in Manila, Philippines took part in a
TELUS Day of Service in November. More than 300 TELUS team members, family and
friends partnered with Gawad Kalinga, an organization similar to Habitat for
Humanity, to build homes in a newly-created village. The village, known as the
TELUS GK Village, will help provide a brighter future to families in the
Philippines. TELUS' dedication to the community doesn't stop with this one day
- TELUS has committed to building 71 homes over the next year to house 107
families in TELUS GK Village.

    TELUS partners with SOVERDI and City of Montréal to plant 22,000 trees
    and shrubs

    In January 2008, the Société de verdissement du Montréal métropolitain
(SOVERDI), the City of Montreal, and TELUS announced the results of their 2007
greening campaign. In total, 12,000 trees and 10,000 shrubs were planted in
alleyways, schoolyards and riverbanks in over 20 public spaces in the greater
Montreal area, thanks to this innovative partnership.

    Dividend declaration

    The Board of Directors has declared a quarterly dividend of forty-five
cents ($0.45) Canadian per share on the issued and outstanding Common shares
and forty-five cents ($0.45) Canadian per share on the issued and outstanding
Non-Voting shares of the Company payable on April 1, 2008 to holders of record
at the close of business on March 11, 2008.
    This quarterly dividend represents a 20 per cent increase from the $0.375
quarterly dividend paid in 2007.

    About TELUS

    TELUS (TSX: T, T.A; NYSE:   TU) is a leading national telecommunications
company in Canada, with $9.1 billion of annual revenue and 11.1 million
customer connections including 5.6 million wireless subscribers, 4.4 million
wireline network access lines and 1.2 million Internet subscribers. TELUS
provides a wide range of communications products and services including data,
Internet protocol (IP), voice, entertainment and video. Committed to being
Canada's premier corporate citizen, we give where we live. Since 2000, TELUS
and our team members have contributed $113 million to charitable and
not-for-profit organizations and volunteered more than 2.1 million hours of
service to local communities. Eight TELUS Community Boards across Canada lead
our local philanthropic initiatives. For more information about TELUS, please
visit telus.com.


    
    TELUS Corporation

    consolidated statements of income                             (unaudited)


    Periods ended December 31          Three months         Twelve months
    (millions except per
     share amounts)                  2007       2006       2007       2006
    -------------------------------------------------------------------------
                                             (restated)            (restated)

    OPERATING REVENUES             $2,330.8   $2,254.6   $9,074.4   $8,681.0
    -------------------------------------------------------------------------
    OPERATING EXPENSES
      Operations                    1,371.3    1,362.4    5,464.7    4,998.2
      Restructuring costs               6.1        7.9       20.4       67.8
      Depreciation                    386.2      353.2    1,354.7    1,353.4
      Amortization of intangible
       assets                          68.1       53.9      260.3      222.2
    -------------------------------------------------------------------------
                                    1,831.7    1,777.4    7,100.1    6,641.6
    -------------------------------------------------------------------------
    OPERATING INCOME                  499.1      477.2    1,974.3    2,039.4
      Other expense, net                5.8       10.1       36.1       28.0
      Financing costs                 109.1      133.6      440.1      504.7
    -------------------------------------------------------------------------
    INCOME BEFORE INCOME TAXES
     AND NON-CONTROLLING INTEREST     384.2      333.5    1,498.1    1,506.7
      Income taxes                    (18.0)      91.6      233.6      353.2
      Non-controlling interests         2.1        1.4        6.6        8.5
    -------------------------------------------------------------------------
    NET INCOME AND COMMON SHARE
     AND NON-VOTING SHARE INCOME      400.1      240.5    1,257.9    1,145.0

    OTHER COMPREHENSIVE INCOME
      Change in unrealized fair
       value of derivatives
       designated as cash flow
       hedges                          17.7          -       82.0          -
      Foreign currency translation
       adjustment arising from
       translating financial
       statements of
       self-sustaining foreign
       operations                      (2.3)       4.6       (7.2)       5.8
      Change in unrealized fair
       value of available-for-sale
       financial assets                (0.3)         -       (0.6)         -
    -------------------------------------------------------------------------
                                       15.1        4.6       74.2        5.8
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME           $  415.2   $  245.1   $1,332.1   $1,150.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET INCOME PER COMMON SHARE
     AND NON-VOTING SHARE
      - Basic                      $   1.23   $   0.71   $   3.79   $   3.33
      - Diluted                    $   1.22   $   0.70   $   3.76   $   3.30
    DIVIDENDS DECLARED PER
     COMMON SHARE AND
     NON-VOTING SHARE              $   0.45   $  0.375   $  1.575   $   1.20
    TOTAL WEIGHTED AVERAGE COMMON
     SHARES AND NON-VOTING SHARES
     OUTSTANDING
      - Basic                         326.2      339.5      331.7      343.8
      - Diluted                       328.1      343.8      334.2      347.4



    TELUS Corporation
    consolidated balance sheets                                   (unaudited)

                                                    December 31, December 31,
    As at (millions)                                    2007         2006
    -------------------------------------------------------------------------
                                                                   (restated)
    ASSETS
    Current Assets
      Cash and temporary investments, net           $     19.9    $        -
      Short-term investments                              42.4         110.2
      Accounts receivable                                710.9         707.2
      Income and other taxes receivable                  120.9          95.4
      Inventories                                        243.3         196.4
      Prepaid expenses and other                         199.5         195.3
      Derivative assets                                    3.8          40.4
    -------------------------------------------------------------------------
                                                       1,340.7       1,344.9
    -------------------------------------------------------------------------
    Capital Assets, Net
      Property, plant, equipment and other             7,177.3       7,117.7
      Intangible assets subject to amortization          978.2         898.0
      Intangible assets with indefinite lives          2,966.5       2,966.4
    -------------------------------------------------------------------------
                                                      11,122.0      10,982.1
    -------------------------------------------------------------------------
    Other Assets
      Deferred charges                                 1,318.0       1,129.7
      Investments                                         38.9          35.2
      Goodwill                                         3,168.0       3,169.5
    -------------------------------------------------------------------------
                                                       4,524.9       4,334.4
    -------------------------------------------------------------------------
                                                    $ 16,987.6    $ 16,661.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Cash and temporary investments, net           $        -    $     11.5
      Accounts payable and accrued liabilities         1,476.6       1,363.6
      Income and other taxes payable                       7.3          10.3
      Restructuring accounts payable and accrued
       liabilities                                        34.9          53.1
      Advance billings and customer deposits             631.6         606.3
      Current maturities of long-term debt                 5.4       1,433.5
      Current portion of derivative liabilities           26.6         165.8
      Current portion of future income taxes             503.6         137.2
    -------------------------------------------------------------------------
                                                       2,686.0       3,781.3
    -------------------------------------------------------------------------
    Long-Term Debt                                     4,583.5       3,474.7
    -------------------------------------------------------------------------
    Other Long-Term Liabilities                        1,717.9       1,257.3
    -------------------------------------------------------------------------
    Future Income Taxes                                1,048.1       1,076.5
    -------------------------------------------------------------------------
    Non-Controlling Interests                             25.9          23.6
    -------------------------------------------------------------------------
    Shareholders' Equity                               6,926.2       7,048.0
    -------------------------------------------------------------------------
                                                    $ 16,987.6    $ 16,661.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    consolidated statements of cash flows                        (unaudited)

                                       Three months         Twelve months
    Periods ended December 31
     (millions)                      2007       2006       2007       2006
    -------------------------------------------------------------------------
                                             (restated)            (restated)
    OPERATING ACTIVITIES
    Net income                     $  400.1   $  240.5   $1,257.9   $1,145.0
    Adjustments to reconcile net
     income to cash provided by
     operating activities:
      Depreciation and
       amortization                   454.3      407.1    1,615.0    1,575.6
      Future income taxes             (16.5)     126.3      376.9      411.4
      Share-based compensation        (30.6)     (10.2)      95.8       25.1
      Net employee defined benefit
       plans expense                  (23.1)      (7.2)     (92.1)     (30.1)
      Employer contributions to
       employee defined benefit
       plans                          (25.3)     (19.0)     (92.8)    (123.3)
      Restructuring costs, net of
       cash payments                    2.8       (6.2)     (18.2)      (4.0)
      Amortization of deferred
       gains on sale-leaseback of
       buildings, amortization of
       deferred charges and other,
       net                              3.0       39.2        4.1       51.7
      Net change in non-cash
       working capital                 52.7      (23.3)      25.1     (247.7)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                       817.4      747.2    3,171.7    2,803.7
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Capital expenditures             (472.5)    (415.2)  (1,770.3)  (1,618.4)
    Acquisitions                          -       (4.5)         -      (49.0)
    Proceeds from the sale of
     property and other assets          2.1          -        7.5       14.9
    Change in non-current
     materials and supplies,
     purchase of investments and
     other                             (1.1)      (2.3)      (8.8)     (22.7)
    -------------------------------------------------------------------------
    Cash used by investing
     activities                      (471.5)    (422.0)  (1,771.6)  (1,675.2)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Common Shares and Non-Voting
     Shares issued                      0.2       21.6        0.9      104.5
    Dividends to shareholders        (269.9)    (127.2)    (520.8)    (411.7)
    Purchase of Common Shares
     and Non-Voting Shares for
     cancellation                    (147.5)    (199.5)    (749.9)    (800.2)
    Long-term debt issued           2,991.8      244.1    7,763.3    1,585.9
    Redemptions and repayment of
     long-term debt                (2,901.6)    (250.3)  (7,857.0)  (1,314.7)
    Partial repayment of deferred
     hedging liability                    -          -          -     (309.4)
    Dividends paid by a
     subsidiary to non-controlling
     interests                            -          -       (4.3)      (3.0)
    Other                                 -          -       (0.9)         -
    -------------------------------------------------------------------------
    Cash used by financing
     activities                      (327.0)    (311.3)  (1,368.7)  (1,148.6)
    -------------------------------------------------------------------------
    CASH POSITION
    Increase (decrease) in cash
     and temporary investments,
     net                               18.9       13.9       31.4      (20.1)
    Cash and temporary
     investments, net, beginning
     of period                          1.0      (25.4)     (11.5)       8.6
    -------------------------------------------------------------------------
    Cash and temporary
     investments, net, end of
     period                        $   19.9   $  (11.5)  $   19.9   $  (11.5)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    SUPPLEMENTAL DISCLOSURE OF
     CASH FLOWS
    Interest (paid)                $ (171.2)  $ (218.5)  $ (454.4)  $ (516.1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest received              $   32.7   $    0.3   $   41.6   $   24.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income taxes (inclusive of
     Investment Tax Credits)
     received, net                 $  122.7   $    3.9   $  122.7   $   98.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    TELUS Corporation

    segmented information                                         (unaudited)

    Three-month periods ended
    December 31                          Wireline              Wireless
    (millions)                       2007       2006       2007       2006
                                             (restated)            (restated)
    -------------------------------------------------------------------------
    Operating revenues
      External revenue             $1,220.3   $1,234.3   $1,110.5   $1,020.3
      Intersegment revenue             30.7       26.5        6.9        6.3
    -------------------------------------------------------------------------
                                    1,251.0    1,260.8    1,117.4    1,026.6
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense              782.7      803.3      626.2      591.9
      Restructuring costs               5.9        5.2        0.2        2.7
    -------------------------------------------------------------------------
                                      788.6      808.5      626.4      594.6
    -------------------------------------------------------------------------
    EBITDA(1)                      $  462.4   $  452.3   $  491.0   $  432.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $  337.0   $  309.2   $  135.5   $  106.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX              $  125.4   $  143.1   $  355.5   $  326.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses
     (as adjusted)(3)
      Operations expense
       (as adjusted)(3)               781.2      803.3      627.1      591.9
      Restructuring costs               5.9        5.2        0.2        2.7
    -------------------------------------------------------------------------
                                      787.1      808.5      627.3      594.6
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)        $  463.9   $  452.3   $  490.1   $  432.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $  337.0   $  309.2   $  135.5   $  106.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted)
     less CAPEX                    $  126.9   $  143.1   $  354.6   $  326.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Three-month periods ended
    December 31                        Eliminations          Consolidated
    (millions)                       2007       2006       2007       2006
                                                                   (restated)
    -------------------------------------------------------------------------
    Operating revenues
      External revenue             $      -   $      -   $2,330.8   $2,254.6
      Intersegment revenue            (37.6)     (32.8)         -          -
    -------------------------------------------------------------------------
                                      (37.6)     (32.8)   2,330.8    2,254.6
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense              (37.6)     (32.8)   1,371.3    1,362.4
      Restructuring costs                 -          -        6.1        7.9
    -------------------------------------------------------------------------
                                      (37.6)     (32.8)   1,377.4    1,370.3
    -------------------------------------------------------------------------
    EBITDA(1)                      $      -   $      -   $  953.4   $  884.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $      -   $      -   $  472.5   $  415.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX              $      -   $      -   $  480.9   $  469.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses
     (as adjusted)(3)
      Operations expense
       (as adjusted)(3)               (37.6)     (32.8)   1,370.7    1,362.4
      Restructuring costs                 -          -        6.1        7.9
    -------------------------------------------------------------------------
                                      (37.6)     (32.8)   1,376.8    1,370.3
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)        $      -   $      -   $  954.0   $  884.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $      -   $      -   $  472.5   $  415.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                         $      -   $      -   $  481.5   $  469.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                            EBITDA (as adjusted)
                             (from above)                $  954.0   $  884.3
                            Incremental charge
                             (recovery)(3)                    0.6          -
                           --------------------------------------------------
                            EBITDA (from above)             953.4      884.3
                            Depreciation                    386.2      353.2
                            Amortization                     68.1       53.9
                           --------------------------------------------------
                            Operating income                499.1      477.2
                            Other expense, net                5.8       10.1
                            Financing costs                 109.1      133.6
                           --------------------------------------------------
                            Income before income taxes
                             and non-controlling interests  384.2      333.5
                            Income taxes                    (18.0)      91.6
                            Non-controlling interests         2.1        1.4
                           --------------------------------------------------
                            Net income                   $  400.1   $  240.5
                           --------------------------------------------------
                           --------------------------------------------------

    (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").

    (3) Substantially all of the Company's share option awards that were
        granted prior to January 1, 2005, and which were outstanding on
        January 1, 2007, were amended by adding a net-cash settlement
        feature; such amendment resulted in an incremental charge to
        (recovery from) operations of $0.6 and did not result in an immediate
        cash outflow (inflow). In respect of 2007 results provided to the
        Company's chief operating decision maker, operations expense and
        EBITDA are being presented both with, and without, the impact of such
        amendment.



    TELUS Corporation

    segmented information                                         (unaudited)

    Years ended December 31              Wireline              Wireless
    (millions)                       2007       2006       2007       2006
                                             (restated)            (restated)
    -------------------------------------------------------------------------
    Operating revenues
      External revenue             $4,810.6   $4,823.1   $4,263.8   $3,857.9
      Intersegment revenue            114.2       98.3       26.9       23.4
    -------------------------------------------------------------------------
                                    4,924.8    4,921.4    4,290.7    3,881.3
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense            3,221.8    2,997.7    2,384.0    2,122.2
      Restructuring costs              19.5       61.6        0.9        6.2
    -------------------------------------------------------------------------
                                    3,241.3    3,059.3    2,384.9    2,128.4
    -------------------------------------------------------------------------
    EBITDA(1)                      $1,683.5   $1,862.1   $1,905.8   $1,752.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $1,219.0   $1,191.0   $  551.3   $  427.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX              $  464.5   $  671.1   $1,354.5   $1,325.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses
     (as adjusted)(3)
      Operations expense
       (as adjusted)(3)             3,076.7    2,997.7    2,360.4    2,122.2
      Restructuring costs              19.5       61.6        0.9        6.2
    -------------------------------------------------------------------------
                                    3,096.2    3,059.3    2,361.3    2,128.4
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)        $1,828.6   $1,862.1   $1,929.4   $1,752.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $1,219.0   $1,191.0   $  551.3   $  427.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted)
     less CAPEX                    $  609.6   $  671.1   $1,378.1   $1,325.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Years ended December 31            Eliminations          Consolidated
    (millions)                       2007       2006       2007       2006
                                                                   (restated)
    -------------------------------------------------------------------------
    Operating revenues
      External revenue             $      -    $     -   $9,074.4   $8,681.0
      Intersegment revenue           (141.1)    (121.7)         -          -
    -------------------------------------------------------------------------
                                     (141.1)    (121.7)   9,074.4    8,681.0
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense             (141.1)    (121.7)   5,464.7    4,998.2
      Restructuring costs                 -          -       20.4       67.8
    -------------------------------------------------------------------------
                                     (141.1)    (121.7)   5,485.1    5,066.0
    -------------------------------------------------------------------------
    EBITDA(1)                      $      -    $     -   $3,589.3   $3,615.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $      -    $     -   $1,770.3   $1,618.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX              $      -    $     -   $1,819.0   $1,996.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses
     (as adjusted)(3)
      Operations expense
       (as adjusted)(3)              (141.1)    (121.7)   5,296.0    4,998.2
      Restructuring costs                 -          -       20.4       67.8
    -------------------------------------------------------------------------
                                     (141.1)    (121.7)   5,316.4    5,066.0
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)        $      -    $     -   $3,758.0   $3,615.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $      -    $     -   $1,770.3   $1,618.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted)
     less CAPEX                    $      -    $     -   $1,987.7   $1,996.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                            EBITDA (as adjusted)
                             (from above)                $3,758.0   $3,615.0
                            Incremental charge(3)           168.7          -
                           --------------------------------------------------
                            EBITDA (from above)           3,589.3    3,615.0
                            Depreciation                  1,354.7    1,353.4
                            Amortization                    260.3      222.2
                           --------------------------------------------------
                            Operating income              1,974.3    2,039.4
                            Other expense, net               36.1       28.0
                            Financing costs                 440.1      504.7
                           --------------------------------------------------
                            Income before income
                             taxes and non-controlling
                             interests                    1,498.1    1,506.7
                            Income taxes                    233.6      353.2
                            Non-controlling interests         6.6        8.5
                           --------------------------------------------------
                            Net income                   $1,257.9   $1,145.0
                           --------------------------------------------------
                           --------------------------------------------------

    (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").

    (3) Substantially all of the Company's share option awards that were
        granted prior to January 1, 2005, and which were outstanding on
        January 1, 2007, were amended by adding a net-cash settlement
        feature; such amendment resulted in an incremental charge to
        operations of $168.7 and did not result in an immediate cash outflow.
        In respect of 2007 results provided to the Company's chief operating
        decision maker, operations expense and EBITDA are being presented
        both with, and without, the impact of such amendment.
    

    Caution regarding forward-looking statements

    -------------------------------------------------------------------------
    This report contains statements about expected future events and
    financial and operating results of TELUS Corporation (TELUS or the
    Company) 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
    assumptions (see below), 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 in the
    forward-looking statements. The Company disclaims any intention or
    obligation to update or revise any forward-looking statements, whether as
    a result of new information, future events or otherwise, except as
    required by law. In the case of annual guidance, it is the current
    practice of the Company to evaluate and, where it deems appropriate,
    provide updates. Subject to legal requirements, this practice may be
    changed at any time at the Company's sole discretion.

    Assumptions for 2008 targets include: economic growth consistent with
    recent provincial and national estimates by the Conference Board of
    Canada, including gross domestic product (GDP) growth of 2.8% in Canada
    and above average growth in the provinces of Alberta and British
    Columbia; forecast exchange rate between the Canadian dollar and U.S.
    dollar at or near parity; increased wireline competition in both business
    and consumer markets, particularly from cable-TV and VoIP (voice over
    Internet protocol) companies; impact from the acquisition of Emergis in
    mid-January; Canadian wireless industry market penetration gain of 4.5 to
    5%; potential participation in advanced wireless services (AWS) spectrum
    auction is not reflected in capital expenditures; no new wireless
    competitive entrant assumed for 2008; approximately $50 million
    restructuring expenses (up from $20.4 million in 2007); a blended
    statutory tax rate of approximately 31 to 32%; a discount rate of 5.5%
    (50 basis points higher than 2007) and expected long-term return of 7.25%
    for pension accounting (unchanged from 2007); and average shares
    outstanding of approximately 320 million (down from 331.7 million in
    2007). Earnings per share (EPS), cash balances, net debt and common
    equity may be affected by purchases of up to 20 million TELUS shares over
    a 12 month period under the normal course issuer bid that commenced
    December 20, 2007.

    Factors that could cause actual results to differ materially include, but
    are not limited to: competition (including more active price competition
    and the possibility of new wireless competition after the 2008 spectrum
    auction); economic growth and fluctuations (including pension
    performance, funding and expenses); capital expenditure levels (including
    possible wireless spectrum asset purchases); financing and debt
    requirements (including funding acquisition purchases, share repurchases
    and debt financings); tax matters (including acceleration or deferral of
    required payments of significant amounts of cash taxes); human resource
    developments; business integrations and internal reorganizations
    (including post-acquisition integration of Emergis); technology
    (including reliance on systems and information technology, evolving
    wireline broadband and wireless next generation technology options and
    the possible need for prospective wireless sharing arrangements to
    achieve cost efficiencies and reduce deployment risks); regulatory
    approvals and developments (including the essential services proceeding,
    spectrum auction, tower sharing and roaming rules, the new media
    proceeding and possible changes to foreign ownership restrictions);
    process risks (including conversion of legacy systems and billing system
    integrations); 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 www.sedar.com) and filings in the United States including Form
    40-F (on EDGAR at www.sec.gov).

    For further information, see Risks and risk management in Section 10 of
    TELUS' 2006 annual and 2007 first, second and third quarter Management's
    discussion and analyses, as well as updates reported in Section 5 of this
    document.
    -------------------------------------------------------------------------

    Management's review of operations

    February 13, 2008

    The following is a discussion of the consolidated financial condition and
results of operations of TELUS Corporation for the three-month periods and
years ended December 31, 2007 and 2006. 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 has issued guidance on and reports on certain non-GAAP measures
that are used by management to evaluate performance of business units,
segments and the Company. In addition, non-GAAP measures are used in measuring
compliance with debt covenants and are used to 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 readers' reference,
the definition, calculation and reconciliation of consolidated non-GAAP
measures is provided in Section 6: Reconciliation of non-GAAP measures and
definition of key operating indicators.

    
    Management's review of operations

    -------------------------------------------------------------------------
    Section                           Description
    -------------------------------------------------------------------------
    1.  Introduction, performance     A summary of TELUS' consolidated
        summary and targets           results for 2007, performance against
                                      2007 targets, and presentation of
                                      targets for 2008
    -------------------------------------------------------------------------
    2.  Results from operations       A detailed discussion of operating
                                      results for the fourth quarter and year
                                      ended December 31, 2007
    -------------------------------------------------------------------------
    3.  Financial condition           A discussion of significant changes in
                                      the balance sheets for the year ending
                                      December 31, 2007
    -------------------------------------------------------------------------
    4.  Liquidity and capital         A discussion of cash flow, liquidity,
        resources                     credit facilities and other disclosures
    -------------------------------------------------------------------------
    5.  Risks and risk management     An update of risks and uncertainties
                                      facing TELUS and how it manages these
                                      risks
    -------------------------------------------------------------------------
    6.  Reconciliation of non-GAAP    A description, calculation and
        measures and definition of    reconciliation of certain measures used
        key operating indicators      by management
    -------------------------------------------------------------------------


    1.   Introduction, performance summary and targets

    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 telecommunications industry and Company developments

         Economic and telecom industry growth
    

    The Conference Board of Canada recently estimated Canadian real GDP
growth for 2007 and 2008 to be 2.6% and 2.8%, respectively. TELUS estimates
that revenues for the Canadian telecom industry grew by approximately 5.5% to
$40 billion in 2007 due to its continued robust wireless growth, which more
than offset the declines of a mature wireline segment. In this context, TELUS'
revenues grew by 4.5% to $9.07 billion during 2007. Bell Canada (BCE) and its
affiliates represented about 45% of the total industry revenue.

    
         Key industry development
    

    In April 2007, Canada's largest telecommunications service provider BCE
Inc. entered into a strategic review process. Three consortia signed
non-disclosure and standstill agreements to enable them to potentially prepare
an offer to BCE shareholders under a competitive auction process. On June 21,
2007, TELUS announced that it had entered into a mutual non-disclosure and
standstill agreement and was pursuing non-exclusive discussions to acquire
BCE. On June 26, the three consortia submitted bids to acquire BCE, while
TELUS announced that inadequacies in BCE's bid process did not make it
possible for TELUS to submit an offer. On June 30, BCE announced that it had
entered into a definitive agreement to be acquired by a consortium led by
Teachers Private Capital, the private investment arm of the Ontario Teachers'
Pension Plan, and the U.S.-based Providence Equity Partners and Madison
Dearborn Partners, LLC. In early August, TELUS concluded its assessment of
whether it should potentially make a competing offer for BCE, and announced
that it did not intend to submit a competing offer. The BCE Board recommended
that their common shareholders accept the consortium's offer at an all-cash
price of $42.75 per common share or approximately $34 billion. On
September 21, 2007, BCE shareholders overwhelmingly approved the acquisition.
The closing of the transaction is subject to receipt of regulatory approvals
including by the CRTC, which is commencing a public hearing on February 25 to
review the change in control of BCE's broadcasting licences. BCE recently
indicated that it expected the transaction to close in the second quarter of
2008.
    
         Wireless developments
    

    TELUS estimates that the Canadian wireless revenue growth rate was in the
double digits in 2007, as market penetration for the industry increased by an
estimated 4.9 percentage points to approximately 61% of the population. TELUS'
wireless segment achieved 10.5% revenue growth and 10.1% subscriber growth in
2007.
    A key driver of wireless growth continues to be the increased adoption
and usage of data services such as text messaging, mobile computing and PDA
usage. Canadian wireless providers continue the roll-out of faster next
generation high-speed wireless networks to capture this growth opportunity.
Competition remains intense due to a number of factors including a presence of
mobile virtual network operators (MVNOs) such as Virgin Mobile and Videotron;
discount brand offerings by Bell and Rogers; and the March 2007 introduction
of wireless number portability, which allows customers to move to a different
provider while retaining their existing phone number.
    On November 28, 2007, The Federal Industry Minister announced his policy
and spectrum auction framework surrounding the introduction of advanced
wireless services in Canada. A spectrum auction for 105 MHz is expected in May
2008 that is expected to follow the same simultaneous, multiple round, highest
bidder model as in the 2001 PCS spectrum auction. The Minister has chosen to
introduce measures intended to make it easier for new entrants to bid on and
acquire spectrum. The principal policy tools adopted are (i) the set-aside of
40MHz of spectrum for new entrants, including regional and metropolitan
blocks; and (ii) mandatory roaming and tower sharing (at commercial rates).
TELUS is participating in a round of public comments and the government is
expected to announce the final rules at the end of March 2008. See Risks and
risk management - Section 5.1 Regulatory.

    
         Wireline developments
    

    TELUS estimates that industry wireline revenues were flat in 2007. The
industry is continuing to focus its attention on broadband services to
moderate the losses in network access lines and as penetration in this area
approaches a saturation point, telecom and cable-TV companies have started to
compete on speed, applications and price to differentiate their product
offerings. Internet telephony is emerging to be a lucrative revenue stream for
cable-TV companies. Telecom companies are strategically positioning themselves
to encroach into the TV market with new IPTV offerings. Consumers continue to
substitute wireless and VoIP services for traditional wired telephony
services. Competitive losses and substitution have resulted in certain North
American telecom companies having residential access line losses around 10%.
    TELUS' wireline segment external revenues decreased by 0.3% in 2007,
similar to 2006, as growth in data services nearly offset losses in voice
services. TELUS' residential access lines decreased 6.5% in 2007, compared
with a 5.2% loss in 2006. TELUS continues to launch TELUS TV(R) services to
select neighbourhoods in its incumbent territories.
    In 2007, the CRTC granted residential local exchange forbearance in
markets where incumbents are facing increasing competitive pressure. TELUS
received approval for deregulation of wireline residential phone service in 63
communities (about 75% of residential lines in non-high cost serving areas)
and business service in 35 communities across B.C., Alberta and Quebec (about
two-thirds of business lines). This positively impacts TELUS' competitiveness
by providing improved pricing, marketing and bundling flexibility.
    TELUS approach to the business market is through a focus on non-incumbent
growth in Central Canada as well as, nationally, a focus on key vertical
markets of healthcare, financial services, energy and the public sector. For
example, in January 2008, TELUS completed its acquisition of Emergis Inc.,
described below.

    
         Emergis Inc.
    

    On November 29, 2007, TELUS and Emergis Inc. announced that TELUS had
agreed to make an offer to acquire all the outstanding common shares of
Emergis for $8.25 cash per common share by way of a takeover bid (the Offer).
The Offer represented a 17% premium to Emergis' average closing price on the
Toronto Stock Exchange over the previous 30-day period.
    Emergis is a business process outsourcer that specializes in the
healthcare and financial services sectors and is a leader in the automation of
electronic health records. TELUS has targeted and invested in serving the
healthcare and financial business sectors. Emergis' complementary expertise,
applications and customer base are expected to strengthen TELUS' existing
industry solutions and allow it to better compete in the growing and
transforming healthcare industry. This acquisition is consistent with three of
TELUS' strategic imperatives: building national capabilities; focusing
relentlessly on the growth markets of data, IP and wireless; and partnering,
acquiring and divesting.
    As at December 31, 2007, TELUS had made market purchases of 1,017,000
Emergis Inc. common shares for $8.3 million. On January 8, 2008, TELUS
announced that the Commissioner of Competition had advised that she did not
intend to challenge the transaction under the merger provisions of the
Competition Act (Canada). On January 17, TELUS announced that it was
successful in its bid, with approximately 94% of the outstanding common shares
of Emergis, on a fully diluted basis, having been tendered to the Offer. The
remaining shares were obtained through a compulsory acquisition process
completed the next day.
    On January 17, TELUS financed and paid $743.4 million for all of the then
issued and outstanding Emergis common shares by drawing down its syndicated
credit facility and utilizing available cash resources, primarily proceeds of
commercial paper issuance. Emergis was de-listed from the Toronto Stock
Exchange on January 21.
    With respect to TELUS' 2008 targets, the Company had assumed 10 months of
expected Emergis operating results, incremental financing costs and an
estimated $10 million of restructuring costs. With the transaction closing in
mid-January, TELUS' 2008 target results may be slightly affected by an
additional 1.5 months of Emergis' operations. With the acquisition of Emergis,
the pro forma Net debt to EBITDA ratio measured for December 31, 2007, is 1.9.
See the Caution regarding forward-looking statements.

    
    1.3  Consolidated highlights
    

    Comparative results for 2006 have been corrected for a change in employee
future benefits transitional pension asset accounting. In the adoption and
implementation of new accounting recommendations for employee future benefits
in the 2000 fiscal year, various estimates, assumptions and determinations
were made. The Company revisited the various determinations made in 2000. This
resulted in changes to previously reported Operations expense and Income taxes
on the Consolidated statements of Income, and changes to Deferred charges,
Future income tax liabilities and Retained earnings on the Consolidated
balance sheets. The Company has determined that the correction was not
material to its previously filed financial statements.
    The effects of the adjustments to reflect the amortization of the entire
transitional asset of a defined benefit pension plan on the Company's results
of operations, including the associated effects of income tax changes, for
2006 were:

    
    -------------------------------------------------------------------------
    Changes to the Consolidated
     statements of income                      As                      As
    Year ended December 31, 2006           previously              currently
    ($ millions except per share amounts)   reported   Adjustment   reported
    -------------------------------------------------------------------------
    Operations expenses                      5,022.9      (24.7)     4,998.2

    Operating income                         2,014.7       24.7      2,039.4

    Income before income taxes and
     non-controlling interest                1,482.0       24.7      1,506.7

    Income taxes                               351.0        2.2        353.2

    Net income and Common Share and
     Non Voting Share income                 1,122.5       22.5      1,145.0

    Income per Common Share and
     Non-Voting Share
      - Basic                                   3.27       0.06         3.33
      - Diluted                                 3.23       0.07         3.30
    -------------------------------------------------------------------------

    The effects of the adjustments to reflect the amortization of the entire
transitional asset of a defined benefit pension plan on the Company's
financial position, including the associated effects of income tax rate
changes, as at December 31, 2006, are as set out in the following table:

    -------------------------------------------------------------------------
    Changes to the Consolidated
     balance sheet                            As                      As
    As at December 31, 2006               previously               currently
    ($ millions)                          reported(1)  Adjustment   reported
    -------------------------------------------------------------------------
    Assets
    Other assets
      Deferred charges                         956.6      173.1      1,129.7

    Total Assets                            16,488.3      173.1     16,661.4

    Liabilities and Shareholders' Equity
    Current liabilities                      3,781.3          -      3,781.3
    Future income taxes                      1,023.3       53.2      1,076.5
    Shareholders' equity(2)                  6,928.1      119.9      7,048.0

    Total Liabilities and Shareholders'
     Equity                                 16,488.3      173.1     16,661.4
    -------------------------------------------------------------------------
    (1) The December 31, 2006, amounts reflected as previously reported have
        been adjusted for a $44.0 reclassification of future income taxes
        between current and non-current and a $19.9 reclassification of debt
        issue costs.
    (2) Shareholders' equity changes are restricted to changes in retained
        earnings. Retained earnings as at December 31, 2005, would increase
        from $849.7 to $947.1.
    -------------------------------------------------------------------------

    TELUS' annual targets for 2007, as published in the annual 2006
Management's discussion and analysis, excluded an estimated $150 to
$200 million incremental pre-tax charge, or 30 to 40 cents per share, for
introducing a net-cash settlement feature for share option awards granted
prior to 2005. The actual incremental amount recorded in 2007, which did not
result in an immediate cash outflow, was a pre-tax charge of $168.7 million,
or 0.32 cents per share. The Chief Executive Officer, who is the chief
operating decision-maker, regularly received 2007 reports on two bases:
including and excluding the charge for the net-cash settlement feature. The
highlights table below presents both views.

    -------------------------------------------------------------------------
    Consolidated highlights

    ($ millions, except
     shares, per               Quarters ended               Years ended
     share amounts,              December 31                December 31
     subscribers and       2007     2006   Change     2007     2006   Change
     ratios)                   (restated)                 (restated)
    -------------------------------------------------------------------------
    Consolidated statements of income
    -------------------------------------------------------------------------
    Operating revenues  2,330.8  2,254.6    3.4 %  9,074.4  8,681.0    4.5 %

    Operating income      499.1    477.2    4.6 %  1,974.3  2,039.4   (3.2)%
    Net-cash settlement
     feature expense        0.6        -      -      168.7        -      -
                        -------- -------- -------- -------- -------- --------
    Operating income
     (as adjusted)        499.7    477.2    4.7 %  2,143.0  2,039.4    5.1 %

    Income before
     income taxes         384.2    333.5   15.2 %  1,498.1  1,506.7   (0.6)%
    Net-cash settlement
     feature expense        0.6        -      -      168.7        -      -
                        -------- -------- -------- -------- -------- --------
    Income before
     income taxes
     (as adjusted)        384.8    333.5   15.4 %  1,666.8  1,506.7   10.6 %

    Net income            400.1    240.5   66.4 %  1,257.9  1,145.0    9.9 %
    Net-cash settlement
     feature expense,
     after tax              0.9        -      -      105.0        -      -
                        -------- -------- -------- -------- -------- --------
    Net income
     (as adjusted)        401.0    240.5   66.7 %  1,362.9  1,145.0   19.0 %

    Earnings per share,
     basic ($)             1.23     0.71   73.2 %     3.79     3.33   13.8 %
    Net-cash settlement
     feature per share        -        -      -       0.32        -      -
                        -------- -------- -------- -------- -------- --------
    Earnings per share,
     basic (as adjusted)
     (1) ($)               1.23     0.71   73.2 %     4.11     3.33   23.4 %

    Earnings per share,
     diluted ($)           1.22     0.70   74.3 %     3.76     3.30   13.9 %

    Cash dividends
     declared per
     share ($)             0.45    0.375   20.0 %    1.575     1.20   31.3 %
    -------------------------------------------------------------------------
    Consolidated statements of cash flows
    -------------------------------------------------------------------------
    Cash provided by
     operating
     activities           817.4    747.2    9.4 %  3,171.7  2,803.7   13.1 %
    Cash used by
     investing
     activities           471.5    422.0   11.7 %  1,771.6  1,675.2    5.8 %
      Capital
       expenditures       472.5    415.2   13.8 %  1,770.3  1,618.4    9.4 %
    Cash used by
     financing
     activities           327.0    311.3    5.0 %  1,368.7  1,148.6   19.2 %
    -------------------------------------------------------------------------
    Subscribers and other measures
    -------------------------------------------------------------------------
    Subscriber
     connections(2)
     (thousands) at
     December 31                                    11,147   10,715    4.0 %

    EBITDA(3)             953.4    884.3    7.8 %  3,589.3  3,615.0   (0.7)%
    Net-cash settlement
     feature expense        0.6        -      -      168.7        -      -
                        -------- -------- -------- -------- -------- --------
    EBITDA (as
     adjusted)(1)(3)      954.0    884.3    7.9 %  3,758.0  3,615.0    4.0 %

    Free cash flow(4)     427.8    231.1   85.1 %  1,573.2  1,596.0   (1.4)%
    -------------------------------------------------------------------------
    Debt and payout ratios(5)
    -------------------------------------------------------------------------
    Net debt to
     EBITDA - excluding
     restructuring costs                               1.7      1.7      -
    Dividend payout
     ratio (%)                                          47       45    2 pts
    -------------------------------------------------------------------------
    pts - percentage points
    (1) EPS - basic (as adjusted) and EBITDA (as adjusted) correspond to the
        definitions used in TELUS' 2007 annual targets and revised guidance.
    (2) 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.
    (3) EBITDA is a non-GAAP measure. See Section 6.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
        EBITDA (as adjusted) is regularly reported to the chief operating
        decision-maker and corresponds to the definition used in setting
        TELUS' 2007 EBITDA targets and revised guidance.
    (4) Free cash flow is a non-GAAP measure. See Section 6.2 Free cash flow.
    (5) See Section 6.4 Definition of liquidity and capital resource
        measures.
    -------------------------------------------------------------------------

    Highlights for the fourth quarter and full year of 2007, as discussed in
Section 2: Results from operations, include the following:

    -   Subscriber connections increased by 432,000, including 139,000 in the
        fourth quarter of 2007. During the year wireless subscribers grew by
        10% to 5.57 million, the number of Internet subscribers grew by 6% to
        1.18 million and the number of network access lines decreased by 3%
        to 4.40 million. Notably, during the fourth quarter of 2007, high-
        speed Internet subscribers surpassed the one million mark for the
        first time, closing at 1,020,200. Wireless net additions were 161,400
        in the fourth quarter.

    -   Operating revenues increased by $76.2 million and $393.4 million,
        respectively, in the fourth quarter and full year of 2007, when
        compared to the same periods in 2006, due primarily to growth in
        wireless network revenues and wireline data revenues, which more than
        offset revenue declines in wireline voice local and long distance.

    -   Operating income increased by $21.9 million in the fourth quarter of
        2007 and decreased by $65.1 million for the full year of 2007, when
        compared to the same periods in 2006. Excluding the net-cash
        settlement feature expense recorded in 2007, operating income (as
        adjusted) increased by $22.5 million and $103.6 million,
        respectively, in the fourth quarter and full year, primarily due to
        growth in wireless EBITDA partly offset by higher depreciation and
        amortization expenses.

    -   Income before income taxes increased by $50.7 million in the fourth
        quarter of 2007 and decreased by $8.6 million for the full year of
        2007, when compared to the same periods in 2006. Excluding the effect
        of the net-cash settlement feature, Income before income taxes
        increased by $51.3 million and $160.1 million, respectively, in the
        fourth quarter and full year, due to lower financing costs and growth
        in operating income (as adjusted).

    -   Net income and EPS - basic for the fourth quarter of 2007 increased
        by $159.6 million and 52 cents, respectively, when compared to the
        same period in 2006. Net income and EPS - basic for the full year of
        2007 increased by $112.9 million and 46 cents, respectively, when
        compared to the same period in 2006.

    -------------------------------------------------------------------------
    Net income continuity                         Three-month
                                                 periods ended   Years ended
                                                  December 31    December 31
    -------------------------------------------------------------------------
    2006 (restated)                                   240.5        1,145.0
      Deduct favourable 2006 tax-related
       adjustments                                      (20)          (171)
      Add favourable 2007 tax-related
       adjustments                                      143            250
    Changes in:
      EBITDA (as adjusted)                               46             95
      Interest expenses                                  15             31
      Depreciation and other                          (23.5)          12.9
    -------------------------------------------------------------------------
    2007 (as adjusted)                                401.0        1,362.9
      Net-cash settlement feature in 2007              (0.9)        (105.0)
    -------------------------------------------------------------------------
    2007 (reported)                                   400.1        1,257.9
    -------------------------------------------------------------------------

    -   The average number of shares outstanding in 2007 was 3.5% lower for
        the full year of 2007 when compared to 2006. The decrease in shares
        was due to $750 million of repurchases under the normal course issuer
        bid (NCIB) programs as well as far fewer shares being issued from
        treasury following the introduction of the net-cash settlement
        feature for options.

    -   The Company renewed its NCIB program for another year. Under Program
        4, which will expire on December 19, 2008, the maximum number of
        shares that may be purchased is eight million Common Shares and
        12 million Non-Voting Shares. See Section 4.3 Cash used by financing
        activities.

    Highlights for the fourth quarter and full year of 2007, as discussed in
Section 4: Liquidity and capital resources, include the following:

    -   Cash provided by operating activities increased by $70.2 million and
        $368.0 million, respectively, in the fourth quarter and full year of
        2007, when compared to the same periods in 2006. The increases were
        mainly due to liquidation of certain short-term investments, lower
        interest paid and higher recoveries of taxes and related interest.

    -   Cash used by investing activities increased by $49.5 million and
        $96.4 million, respectively, in the fourth quarter and full year of
        2007, when compared to the same periods in 2006. The increases were
        mainly due to upfront capital investment to support new enterprise
        customers as well as expenditures for digital wireless capacity and
        coverage.

    -   Cash used by financing activities increased by $15.7 million and
        $220.1 million, respectively, in the fourth quarter and full year of
        2007 when compared to the same periods in 2006, due primarily to
        increased dividend payments. The dividend declared in the fourth
        quarter of 2007 increased by 20% to 45 cents per share, up from
        37.5 cents per share in each of the four preceding quarters.

    -   Free cash flow increased by $196.7 million in the fourth quarter of
        2007 and decreased by $22.8 million for the full year of 2007, when
        compared with the same periods in 2006. Free cash flow increased 85%
        for the quarter due primarily to higher recoveries on taxes and
        related interest as well as different timing of interest payments in
        2007 as a result of financing activities in the first half of the
        year. Free cash flow decreased 1.4% for the full year as increased
        capital expenditures and cash payments as a result of introducing the
        net-cash settlement feature were nearly offset by lower interest paid
        and higher recoveries of taxes and related interest.

    -   Net debt to EBITDA of 1.7 continued to be in the long-term target
        policy range of 1.5 to 2.0 times.

    -   The dividend payout ratio based on the annualized fourth quarter
        dividend and actual earnings for 2007 was 47% and the dividend payout
        ratio calculated to exclude the impacts of tax-related adjustments
        and the charge for introducing the net-cash settlement feature was
        54% - both within the target guideline of 45 to 55% of net
        sustainable earnings.

    1.4  Performance scorecard for 2007 results

    Half of the 12 original consolidated and segmented targets for 2007 were
met or exceeded, while six were not achieved.

    -   Three of the four consolidated targets were met or exceeded (EBITDA,
        capital expenditures and EPS), while the revenue target was not
        achieved;

    -   Wireless revenues were below target by 2% largely due to year-over-
        year growth in the average revenue per subscriber unit per month
        (ARPU) levelling off and declining slightly in the second half of the
        year, and net subscriber additions being 6% below the annual target.
        The wireline revenue fell short of its original target by about 1%
        due to a one-time negative adjustment to long distance revenues as
        well as lower equipment sales and lower than expected additions of
        high-speed Internet subscribers;

    -   The consolidated EBITDA (as adjusted) target was achieved and the
        wireline EBITDA (as adjusted) target was exceeded largely because
        total restructuring charges of $20.4 million were lower than the
        original expectation of $50 million. The wireless EBITDA target was
        not achieved as a result of pricing pressures, and increased
        subscriber acquisition and retention costs;

    -   EPS (as adjusted) exceeded its target by 23% due to favourable tax-
        related adjustments of approximately 75 cents per share. Excluding
        the tax-related adjustments, EPS (as adjusted) was $3.36, or in the
        middle of the target range; and

    -   The consolidated, wireline and wireless capital expenditure levels
        were within 2% of the respective targets.
    

    During the year, management also provided revised annual guidance for
2007 with the announcement of results for the second and third quarters of
2007 and with the 2008 targets news release and investor call on December 13,
2007. The December guidance for 2007 met or exceeded on 10 indicators, but was
short on the two subscriber amounts.
    TELUS' results for 2007 are compared to original 2007 targets in the
scorecard below. In addition, 2008 targets (published in the news release on
December 13, 2007) are presented and compared to results for 2007. See Caution
regarding forward-looking statements at the beginning of this report.

    
    -------------------------------------------------------------------------
    Scorecards                  Performance for 2007          2008 targets
    -------------------------------------------------------------------------
    Legend
    ++ Exceeded target
       range                               Original                   Change
    +  Met target       Actual    Change     2007   Target          from 2007
    x  Missed target   results  from 2006  targets  result  Targets   actual
    -------------------------------------------------------------------------
    Consolidated
     Revenues          $9.074      4.5%   $9.175 to    x    $9.6 to  6 to 8%
                       billion              $9.275            $9.8
                                           billion          billion

      EBITDA(1)
       (2007 as
       adjusted)(2)    $3.758      4.0%   $3.725 to    +    $3.8 to  1 to 5%
                       billion              $3.825           $3.95
                                           billion          billion

      EPS - basic
       (2007 as
       adjusted)(3)    $4.11      23.4%   $3.25 to     ++  $3.50 to   (8) to
                                            $3.45            $3.80     (15)%

      EPS - basic
       (2007 as
       adjusted),
       excluding
       favourable
       tax-related
       impacts         $3.36      18.7%   $3.25 to     +   $3.50 to     4 to
                                            $3.45            $3.80       13%

      Capital
       expenditures    $1.770      9.4%    Approx.     +    Approx.       7%
                       billion              $1.75            $1.9
                                           billion          billion
    -------------------------------------------------------------------------
    Wireline segment
     Revenue
     (external)        $4.811    (0.3)%   $4.85 to     x  $4.975 to  3 to 5%
                       billion              $4.9            $5.075
                                           billion          billion

      EBITDA (2007 as
       adjusted)(2)    $1.829    (1.8)%  $1.775 to     ++  $1.725 to  (6) to
                       billion             $1.825            $1.8       (2)%
                                           billion          billion

      Capital
       expenditures    $1.219      2.4%    Approx.     +   No target       -
                       billion              $1.2
                                           billion

      High-speed
       Internet
       subscriber
       net additions  103,500   (32.7)%   More than    x   No target       -
                                           135,000
    -------------------------------------------------------------------------
    Wireless segment
     Revenue
     (external)        $4.263     10.5%   $4.325 to    x   $4.625 to    8 to
                       billion              $4.375           $4.725      11%
                                           billion          billion

      EBITDA (2007 as
       adjusted)(2)    $1.929     10.1%    $1.95 to    x   $2.075 to    8 to
                       billion               $2.0            $2.15       11%
                                           billion          billion

      Capital
       expenditures     $551      29.0%     Approx.    +   No target       -
                       million               $550
                                            million

      Wireless
       subscriber
       net additions   514,600   (3.9)%    More than   x   No target       -
                                            550,000
    -------------------------------------------------------------------------
    (1) See Section 6.1 Earnings before interest taxes depreciation and
        amortization (EBITDA) for the definition.
    (2) The actual result for 2007 EBITDA (as adjusted) excludes an
        incremental charge of $168.7 million relating to the introduction of
        a net-cash settlement feature for share option awards granted prior
        to 2005, of which, $145.1 million is in wireline and $23.6 million is
        in wireless. The target for 2007 EBITDA (as adjusted) excluded an
        estimated $150 to $200 million expense for introducing this feature,
        of which, $120 to $150 million was expected in wireline and $30 to
        $50 million was expected in wireless.
    (3) The actual result for 2007 EPS - basic (as adjusted) excludes an
        after-tax charge per share of $0.32 relating to the introduction of a
        net-cash settlement feature, while the 2007 target excluded an
        estimated $0.30 to $0.40 for introducing this feature.
    -------------------------------------------------------------------------

    The following key assumptions were made at the time the original targets
for 2007 were announced in December 2006.

    -------------------------------------------------------------------------
    Key assumption for 2007 targets   Actual result
    -------------------------------------------------------------------------
    Canadian real GDP growth of 2.7%  In its autumn and winter outlooks, the
    (revised down during the year)    Conference Board of Canada issued
                                      estimates for Canadian real GDP growth
                                      of 2.6% for 2007 and 2.8% for 2008 with
                                      above average growth in Alberta and
                                      B.C.

    Increased wireline competition    Evidence of healthy competition within
    in both business and consumer     TELUS' incumbent business and consumer
    markets, particularly from        markets are forbearance decisions from
    cable-TV and VoIP companies       the CRTC. Cable-TV companies began to
                                      market basic telephony services to home
                                      office and small businesses, and
                                      increased promotions of lower price
                                      "light" services to households

    Forbearance for local retail      Confirmed for residential markets
    wireline services in major        covering approximately 75% of TELUS'
    urban markets by the second       residential lines, in non-high-cost
    half of 2007                      serving areas, and about two-thirds of
                                      TELUS' business lines

    No further price cap mandated     The CRTC decision on parameters for the
    consumer price reductions         next price cap period, announced
                                      April 30, 2007, confirmed this
                                      assumption

    Canadian wireless industry        Based on Company estimates and reported
    market penetration gain           Canadian industry net additions
    estimate: 4.5 to five             (excluding any impacts of competitors'
    percentage points                 subscriber writeoffs), the industry
                                      penetration gain for 2007 is estimated
                                      to be at the upper end of this
                                      assumption range

    Restructuring expenses of         Lower than expected at $20.4 million in
    approximately $50 million         2007

    A blended statutory income        Confirmed at 33.6% in 2007, however,
    tax rate of 33 to 34%             the effective tax rate was 15.6% in
                                      2007 as a result of favourable tax
                                      settlements and reassessments for prior
                                      years, and recent changes in
                                      prospective Federal tax rates that
                                      resulted in significant revaluations of
                                      future income tax liabilities

    A discount rate of 5.0% and       Confirmed for 2007
    expected long-term average
    return of 7.25% for pension
    accounting

    Average TELUS shares outstanding  The average shares outstanding during
    of 330 to 335 million for         2007 were 331.7 million
    the full year
    -------------------------------------------------------------------------

    1.5  Financial and operating targets for 2008
    

    The following discussion is qualified in its entirety by the Caution
regarding forward-looking statements at the beginning of this report. TELUS'
2008 targets shown in the table in the previous section were originally
announced on December 13, 2007.
    The expected earnings per share in 2008 reflects anticipated overall
higher operating profitability, anticipated reduction in tax rates and an
expected decrease in total outstanding shares due to continued share
repurchases. The 2008 EPS growth rate is expected to be offset by increased
depreciation and amortization expenses, and slightly higher financing costs
related to the $743 million acquisition of Emergis, partially mitigated by
lower interest rates as a result of debt refinanced in 2007 at lower rates of
interest.
    Capital expenditures in 2008 are expected to be approximately
$1.9 billion, an increase of $130 million. The higher level of capital
expenditures reflects anticipated significant investments in network
infrastructure to improve broadband capabilities, development of new
applications, and high-speed wireless coverage and capacity. In addition, this
spending supports continued housing growth in Alberta and British Columbia
above the national average, and success-based capital for new large contract
wins in Central Canada. The 2008 capital expenditures include continued phased
investments to implement the new converged order entry and billing system in
B.C.

    -------------------------------------------------------------------------
    Assumptions for 2008 targets
    -------------------------------------------------------------------------
    Canadian real GDP growth estimate of 2.8%

    Canadian dollar at or near parity with the U.S. dollar

    Increased wireline competition in both business and consumer markets,
    particularly from cable-TV and VoIP companies

    The impact from the acquisition of Emergis was assumed to begin in March
    2008; the transaction closed in mid-January 2008 and is expected to have
    a minor impact on the 2008 targets

    Canadian wireless industry market penetration gain estimate is 4.5 to
    five percentage points for the year

    The potential participation in AWS spectrum auction is not reflected in
    capital expenditures

    No new wireless competitive entrant assumed for 2008

    Restructuring expenses of approximately $50 million including
    approximately $10 million related to the integration of Emergis

    A blended statutory income tax rate of 31 to 32%

    A discount rate of 5.5% (50 basis points higher than in 2007) and
    expected long-term average return of 7.25% for pension accounting
    (unchanged from 2007)

    Average TELUS shares outstanding of approximately 320 million for the
    full year.
    -------------------------------------------------------------------------

    TELUS has maintained its long-term financial policy guidelines including
net debt to EBITDA of 1.5 to 2.0 times, and a dividend payout ratio guideline
of 45 to 55 per cent of sustainable net earnings. The 2008 targets are in
compliance with these policy guidelines. Based on an updated review of the
company's tax position, TELUS expects minimal cash tax payments in 2008, and
significant cash tax payments commencing in 2009.
    Earnings per share, net debt and common equity may be affected by
purchases of up to 20 million TELUS shares over a 12-month period under the
normal course issuer bid that commenced December 20, 2007.
    While anticipated cash flow is expected to be more than sufficient to
meet current operating requirements in 2008, TELUS may seek additional
financing for the Emergis acquisition and potential spectrum purchases. TELUS
has accepted a committed term sheet from a small group of Canadian banks to
provide a new $700 million 364-day revolving credit facility. The provision of
this new facility provides incremental liquidity to TELUS and allows TELUS to
continue meeting one of its financial objectives, which is to maintain
$1 billion in liquidity. See Section 4.5 Credit facilities.

    
    2.   Results from operations

    2.1  General
    

    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).

    
    2.2  Quarterly results summary

    Certain comparative information for 2006 was restated, as described in
Section 1.3.

    -------------------------------------------------------------------------
    ($ in millions,
     except per share amounts)         2007 Q4   2007 Q3   2007 Q2   2007 Q1
    -------------------------------------------------------------------------
    Segmented revenue (external)
      Wireline segment                 1,220.3   1,204.6   1,180.1   1,205.6
      Wireless segment                 1,110.5   1,105.3   1,048.0   1,000.0
    -------------------------------------------------------------------------
    Operating revenues (consolidated)  2,330.8   2,309.9   2,228.1   2,205.6
      Operations expense               1,371.3   1,316.5   1,340.3   1,436.6
      Restructuring and workforce
       reduction costs                     6.1       6.4       3.2       4.7
    -------------------------------------------------------------------------
    EBITDA(1)                            953.4     987.0     884.6     764.3
      Depreciation                       386.2     332.5     318.3     317.7
      Amortization of intangible assets   68.1      70.1      72.5      49.6
    -------------------------------------------------------------------------
    Operating income                     499.1     584.4     493.8     397.0
      Other expense (income)               5.8       8.0      18.5       3.8
      Financing costs                    109.1      86.2     127.2     117.6
    -------------------------------------------------------------------------
    Income before income taxes and
     non-controlling interest            384.2     490.2     348.1     275.6
      Income taxes                       (18.0)     78.6      93.7      79.3
      Non-controlling interests            2.1       1.7       1.3       1.5
    -------------------------------------------------------------------------
    Net income                           400.1     409.9     253.1     194.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income per Common Share and
     Non-Voting Share
      - basic                             1.23      1.24      0.76      0.58
      - diluted                           1.22      1.23      0.75      0.57
    Dividends declared per Common
     Share and Non-Voting Share           0.45     0.375     0.375     0.375
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ in millions,
     except per share amounts)         2006 Q4   2006 Q3   2006 Q2   2006 Q1
    -------------------------------------------------------------------------
    Segmented revenue (external)
      Wireline segment                 1,234.3   1,200.3   1,189.9   1,198.6
      Wireless segment                 1,020.3   1,010.4     945.3     881.9
    -------------------------------------------------------------------------
    Operating revenues (consolidated)  2,254.6   2,210.7   2,135.2   2,080.5
      Operations expense               1,362.4   1,239.7   1,201.2   1,194.9
      Restructuring and workforce
       reduction costs                     7.9      12.5      30.7      16.7
    -------------------------------------------------------------------------
    EBITDA(1)                            884.3     958.5     903.3     868.9
      Depreciation                       353.2     325.8     335.2     339.2
      Amortization of intangible assets   53.9      57.5      46.9      63.9
    -------------------------------------------------------------------------
    Operating income                     477.2     575.2     521.2     465.8
      Other expense (income)              10.1       4.0       9.6       4.3
      Financing costs                    133.6     116.6     127.5     127.0
    -------------------------------------------------------------------------
    Income before income taxes and
     non-controlling interest            333.5     454.6     384.1     334.5
      Income taxes                        91.6     128.3      15.1     118.2
      Non-controlling interests            1.4       2.4       2.6       2.1
    -------------------------------------------------------------------------
    Net income                           240.5     323.9     366.4     214.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income per Common Share and
     Non-Voting Share
      - basic                             0.71      0.95      1.06      0.61
      - diluted                           0.70      0.94      1.05      0.61
    Dividends declared per Common
     Share and Non-Voting Share          0.375     0.275     0.275     0.275
    -------------------------------------------------------------------------
    (1) EBITDA is a non-GAAP measure. See Section 6.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    -------------------------------------------------------------------------


         Trends
    

    The consolidated revenue trend continues to reflect strong growth in
wireless network revenues generated from an increasing subscriber base.
Wireless ARPU (average revenue per subscriber unit per month) declined by
$0.87 and $0.80, respectively, in the third and fourth quarters of 2007 when
compared to the same periods in 2006. This decline in ARPU in the second half
of the year followed 18 successive quarters of year-over-year increases,
however, ARPU for the full year of 2007 increased by $0.10. The recent
quarterly year-over-year ARPU decreases result from strong data growth being
offset by declining voice ARPU, due to shifting product mix, pricing
competition and declining per-minute prices.
    The consolidated revenue trend also reflected good growth in wireline
segment data revenue. However, this is fully offset by declining wireline
voice local and long distance revenues due to substitution for wireless and
Internet services, as well as competition from VoIP service providers,
resellers and facilities-based competitors.
    Historically, there is significant fourth quarter seasonality with higher
wireless subscriber additions and related acquisition costs and equipment
sales, resulting in lower wireless EBITDA. The seasonality affects, to a
lesser extent, the wireline high-speed Internet subscriber additions and
related costs.
    As described in Section 1.3, quarterly Operations expenses in 2007
include an expense for introducing a net-cash settlement feature for share
option awards. The net-cash settlement feature expense (recovery) for the
first, second, third and fourth quarters of 2007 were $173.5 million,
$1.8 million, $(7.2) million and $0.6 million, respectively. The third quarter
credit was an adjustment to the initial estimate recorded. Restructuring costs
varied by quarter, depending on the progress of ongoing initiatives underway.
    The downward trend in depreciation expense ended in the second half of
2007 with a reduction in estimated useful service lives for certain circuit
switching and network management assets resulting in write-downs of
approximately $20 million and $47 million, respectively, in the third and
fourth quarters of 2007. The previous downward trend was interrupted by a
provision of approximately $17 million in the fourth quarter of 2006 to align
estimated useful lives for TELUS Québec assets, resulting from integration of
financial systems. Depreciation is expected to increase slightly for the full
year of 2008 due to a planned increase in capital assets. See Caution
regarding forward-looking statements.
    With a major new wireline billing and client care system put into service
in March 2007, $18 million of additional amortization was recorded in each of
the second, third and fourth quarters of 2007, reversing the downward trend in
Amortization of intangible assets. In addition, Amortization expenses in the
second and fourth quarters of 2006 and the first quarter of 2007 were reduced
by approximately $12 million, $5 million and $5 million, respectively, for
investment tax credits relating to assets capitalized in prior years that are
now fully amortized, following a determination of eligibility by a government
tax authority.
    Within Financing costs shown in the table above, interest expenses
trended lower except for interest expense in respect of a court decision in a
lawsuit related to a 1997 BC TEL bond redemption matter (including
$7.8 million in the fourth quarter of 2006). The sequential decline in
financing costs in the third quarter 2007 was due to lower effective interest
rates and debt balances plus increased interest income from tax refunds.
Financing costs in the eight periods shown are net of varying amounts of
interest income.
    The generally upward trend in Net income and earnings per share 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.

    
    -------------------------------------------------------------------------
    Tax-related adjustments
    ($ in millions, except
     EPS amounts)                      2007 Q4   2007 Q3   2007 Q2   2007 Q1
    -------------------------------------------------------------------------
    Approximate Net income impact          143        93        10         4
    Approximate EPS impact                0.44      0.28      0.03      0.01
    Approximate basic EPS excluding
     tax-related impacts                  0.79      0.96      0.73      0.57
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Tax-related adjustments
    ($ in millions, except
     EPS amounts)                      2006 Q4   2006 Q3   2006 Q2   2006 Q1
    -------------------------------------------------------------------------
    Approximate Net income impact           20        30       124        (3)
    Approximate EPS impact                0.06      0.09      0.36     (0.01)
    Approximate basic EPS excluding
     tax-related impacts                  0.65      0.86      0.70      0.62
    -------------------------------------------------------------------------

    2.3  Consolidated results from operations

    -------------------------------------------------------------------------
    ($ in millions
     except EBITDA             Quarters ended               Years ended
     margin in %                 December 31                December 31
     and Employees)        2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Operating revenues  2,330.8  2,254.6    3.4 %  9,074.4  8,681.0    4.5 %
    Operations expense  1,371.3  1,362.4    0.7 %  5,464.7  4,998.2    9.3 %
    Restructuring costs     6.1      7.9  (22.8)%     20.4     67.8  (69.9)%
    -------------------------------------------------------------------------
    EBITDA(1)             953.4    884.3    7.8 %  3,589.3  3,615.0   (0.7)%
    Depreciation          386.2    353.2    9.3 %  1,354.7  1,353.4    0.1 %
    Amortization of
     intangible assets     68.1     53.9   26.3 %    260.3    222.2   17.1 %
    -------------------------------------------------------------------------
    Operating income      499.1    477.2    4.6 %  1,974.3  2,039.4   (3.2)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(2)   1,370.7  1,362.4    0.6 %  5,296.0  4,998.2    6.0 %
    EBITDA (as
     adjusted)(2)         954.0    884.3    7.9 %  3,758.0  3,615.0    4.0 %
    Operating income
     (as adjusted)(2)     499.7    477.2    4.7 %  2,143.0  2,039.4    5.1 %

    EBITDA margin(3)       40.9     39.2  1.7 pts     39.6     41.6 (2.0)pts
    EBITDA margin
     (as adjusted)(3)      40.9     39.2  1.7 pts     41.4     41.6 (0.2)pts

    Full-time equivalent
     employees at end
     of period           33,374   31,094    7.3 %
    -------------------------------------------------------------------------
    (1) EBITDA is a non-GAAP measure. See Section 6.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    (2) Excludes an incremental charge of $0.6 million and $168.7 million,
        respectively, in the fourth quarter and full year of 2007 for
        introducing a net-cash settlement feature for share option awards
        granted prior to 2005. Operations expense (as adjusted) and EBITDA
        (as adjusted) are regularly reported to the chief operating decision-
        maker. EBITDA (as adjusted) corresponds to the definition used in
        setting TELUS' 2007 EBITDA target and revised guidance.
    (3) EBITDA or EBITDA (as adjusted) divided by Operating revenues.
    -------------------------------------------------------------------------
    

    The following discussion is for the consolidated results of TELUS.
Segmented discussion is provided in Section 2.4 Wireline segment results,
Section 2.5 Wireless segment results and Section 4.2 Cash used by investing
activities - capital expenditures.

    
        Operating revenues
    

    Consolidated Operating revenues increased by $76.2 million and
$393.4 million, respectively, in the fourth quarter and full year of 2007 when
compared to the same periods in 2006. Growth in wireless network revenue and
wireline data revenue continue to exceed erosion in wireline voice local and
long distance revenues. Consolidated operating revenues for the full year of
2007 include a one-time reduction of about $13 million in long distance
revenues, recorded in the second quarter. This adjustment resulted from
billing system enhancements, which provided better data for estimating earned,
but unbilled revenue.

    
        Operations expense
    

    Consolidated Operations expense increased by $8.9 million and
$466.5 million in the fourth quarter and full year of 2007, respectively, when
compared to the same periods in 2006. The increases include incremental
charges for introducing a net-cash settlement feature for share option awards
granted before 2005. Operations expense adjusted to exclude the incremental
charges increased by $8.3 million and $297.8 million, respectively, primarily
to support the 10% year-over-year growth in the wireless subscriber base and
growth in wireless network revenue. In addition, expenses in the wireline
segment increased for the full year primarily due to billing system conversion
costs and external labour costs to improve service levels, as well as from
increased staffing. TELUS' net defined benefit pension plan expense decreased
by approximately $63 million for the full year, due primarily to favourable
returns on plan assets in 2006.
    The number of employees increased to support the wireline segment's
provision of outsourcing services to TELUS' customers, including human
resources outsourcing services and international call centre services, and to
support the growing wireless customer base. The number of full-time equivalent
employees providing outsourcing services to the Company's customers increased
by about 1,080 at December 31, 2007 when compared to one year earlier, while
elsewhere in the wireline segment the increase was 767 or four per cent. In
the wireless segment, the number of full-time equivalent employees increased
by 433 or six per cent to support double digit growth in subscriber base,
revenue and EBITDA.

    
        Restructuring costs
    

    Restructuring costs decreased by $1.8 million and $47.4 million,
respectively, in the fourth quarter and full year of 2007 when compared to the
same periods in 2006. Restructuring expenses in 2007 were in respect of
several smaller efficiency initiatives. An expense of approximately
$50 million is expected for efficiency initiatives in 2008.

    
        EBITDA
    

    Consolidated EBITDA increased by $69.1 million in the fourth quarter of
2007 and decreased by $25.7 million for the full year of 2007, when compared
to the same periods in 2006. EBITDA adjusted to exclude the net-cash
settlement feature increased by $69.7 million and $143.0 million,
respectively, in the fourth quarter and full year of 2007, when compared to
the same periods in 2006. Wireline EBITDA (as adjusted) decreased mainly due
to implementation impacts of a new wireline billing and client care system
(described in Section 5.3 Process risks). Wireless segment EBITDA (as
adjusted) increased as growth in the subscriber base increased network
revenues, partially offset by higher operations costs to support subscriber
growth and higher retention spending.

    
        Depreciation
    

    Depreciation increased by $33.0 million and $1.3 million, respectively,
in the fourth quarter and full year of 2007 when compared to the same periods
in 2006. The reduction in estimated useful service lives for certain circuit
switching and network management assets resulted in write-downs of
approximately $47 million and $67 million, respectively, in the fourth quarter
and full year of 2007. These increases were partly offset by a provision of
$17 million in the fourth quarter of 2006 to align TELUS Québec assets upon
integration of financial systems as well as writeoffs of certain network
assets earlier in 2006.

    
        Amortization of intangible assets
    

    Amortization increased by $14.2 million and $38.1 million, respectively,
in the fourth quarter and full year of 2007, when compared to the same periods
in 2006. A new wireline billing and client care system was put into service in
March 2007, increasing amortization by $18.0 million and $54.0 million,
respectively. Accelerated amortization of $5.0 million was recorded in the
second quarter of 2007 for assets related to the discontinuation of AMP'D
Mobile Canada services. These increases were partly offset by lower
amortization for other fully amortized software assets. In addition,
amortization expenses were reduced by approximately $5 million for the full
year of 2007 and reduced by approximately $5 million and $17 million,
respectively, in the fourth quarter and full year of 2006 to recognize
investment tax credits, now determined eligible by the tax authority, relating
to assets capitalized in prior years that are now fully amortized.

    
        Operating income
    

    Operating income increased by $21.9 million in the fourth quarter of 2007
and decreased by $65.1 million in the full year of 2007, when compared to the
same periods in 2006. Operating income (as adjusted) increased by
$22.5 million and $103.6 million, respectively, in the fourth quarter and full
year, as growth in EBITDA (as adjusted) was partly offset by increased
depreciation and amortization expenses.

    Other income statement items

    
    -------------------------------------------------------------------------
                               Quarters ended               Years ended
    Other expense, net           December 31                December 31
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
                            5.8     10.1  (42.6)%     36.1     28.0   28.9 %
    -------------------------------------------------------------------------
    

    Other expense decreased by $4.3 million in the fourth quarter of 2007 and
increased by $8.1 million in the full year of 2007, when compared to the same
periods in 2006. Accounts receivable securitization expenses were $5.3 million
and $20.7 million in the fourth quarter and full year of 2007, which decreased
by $0.3 million and increased by $2.7 million, respectively, from the same
periods in 2006 (see Section 4.6 Accounts receivable sale). For the full year
of 2007, increased expenses included an $11.8 million second quarter writeoff
of the Company's equity investment of in AMP'D Mobile Inc. and approximately
$4 million for various costs of assessing whether to acquire BCE, which
ultimately led to the decision in August to not bid for BCE. The net gains on
the sale of real estate and other investments, including valuation adjustments
on investments held for trading, exceeded net gains recorded in 2006.

    
    -------------------------------------------------------------------------
                               Quarters ended               Years ended
    Financing costs              December 31                December 31
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Interest on long-term
     debt, short-term
     obligations and
     other(1)             109.6    132.5  (17.3)%    464.5    510.6   (9.0)%
    Foreign exchange
     losses (gains)         1.9      1.9      -       13.0      6.4  103.1 %
    Interest income        (2.4)    (0.8)   n.m.     (37.4)   (12.3)   n.m.
    -------------------------------------------------------------------------
                          109.1    133.6  (18.3)%    440.1    504.7  (12.8)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    n.m. - not meaningful
    (1) Included estimates in 2006 for settlement of a lawsuit.
    -------------------------------------------------------------------------
    

    Interest expenses decreased by $22.9 million and $46.1 million,
respectively, in the fourth quarter and full year of 2007, when compared to
the same periods in 2006. The decreases were primarily due to financing
activities in the first half of 2007 (see Section 4.3 Cash used by financing
activities), which resulted in a lower effective interest rate for the fourth
quarter and full year of 2007 as well as a lower average debt balance in the
second half of 2007, when compared to the same periods in 2006. Partly
offsetting the lower effective interest rate was a higher average debt balance
for the full year of 2007, as debt issues were completed in March 2007 and
commercial paper was issued in May ahead of the June 1 maturity of
$1,483.3 million (US$1,166.5 million) Notes. The Company's closing net debt
(calculated in Section 6.4), was $6,142 million at December 31, 2007, down 2%
from $6,278 million one year earlier.
    The decrease in interest expenses for the full year of 2007 also included
an adjustment for application of the effective rate method for issue costs as
required under CICA Handbook Section 3855 (recognition and measurement of
financial instruments). In March 2007, forward starting interest rate swaps
were terminated resulting in prepaid interest of approximately $10 million
being deferred and amortized over 10 years, which is the term of the new debt.
    Interest income increased by $1.6 million and $25.1 million,
respectively, in the fourth quarter and full year of 2007, when compared with
the same periods in 2006, due primarily to recognition of increased interest
on tax refunds, and for the full year, increased interest from investments.

    
    -------------------------------------------------------------------------
                               Quarters ended               Years ended
    Income taxes                 December 31                December 31
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Blended federal
     and provincial
     statutory income
     tax based on net
     income before tax    129.2    111.4   16.0 %    503.0    505.6   (0.5)%
    Revaluation of
     future income tax
     liability           (140.8)    (0.2)     -     (177.3)  (113.1)     -
    Tax rate
     differential on,
     and consequential
     adjustments from,
     reassessments for
     prior years           (2.9)   (16.4)     -      (79.2)   (40.3)     -
    Share option award
     compensation           1.8      1.5      -       (3.6)     6.4      -
    Other                  (5.3)    (4.7)     -       (9.3)    (5.4)     -
    -------------------------------------------------------------------------
                          (18.0)    91.6    n.m.     233.6    353.2  (33.9)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Blended federal
     and provincial
     statutory tax
     rates (%)             33.6     33.4  0.2 pts     33.6     33.6    - pts
    Effective tax
     rates (%)             (4.7)    27.5    n.m.      15.6     23.4 (7.8)pts
    -------------------------------------------------------------------------
    

    The blended federal and provincial statutory income tax expense increased
in the fourth quarter of 2007 and decreased in full year of 2007, when
compared with the same periods in 2006, due primarily to the comparable
changes in income before taxes of 15.2% and (0.6)%, respectively. The
effective tax rates were lower than the statutory tax rates due to favourable
reassessments and settlements of prior years' tax matters as well as
revaluation of future income tax liabilities. Revaluations of future tax
liabilities resulted from enacted reductions to future federal income tax
rates as well as future tax rates being applied to temporary differences.
Changes to future federal income tax rates were enacted in December 2007, and
previously during the second quarters of 2007 and 2006.
    Based on the assumption of the continuation of the rate of TELUS
earnings, the existing legal entity structure, and no substantive changes to
tax regulations, the Company currently expects cash income tax payments to be
relatively low in 2008 with expected cash collections exceeding expected
payments. In 2009, income tax payments are expected to increase substantially.
The blended statutory income tax rate is expected to be 31 to 32% in 2008.

    
    -------------------------------------------------------------------------
    Non-controlling            Quarters ended               Years ended
     interests                   December 31                December 31
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
                            2.1      1.4   50.0 %      6.6      8.5  (22.4)%
    -------------------------------------------------------------------------
    

    Non-controlling interests represents minority shareholders' interests in
several small subsidiaries.

    
        Comprehensive income
    

    Commencing with the 2007 fiscal year, the Company adopted the
recommendations of the Canadian Institute of Chartered Accountants (CICA) for
accounting for comprehensive income (CICA Handbook Section 1530). 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. The calculation of earnings per share is based on Net income and
Common Share and Non-Voting Share income, as required by GAAP.

    2.4  Wireline segment results

    
    -------------------------------------------------------------------------
    Operating revenues -       Quarters ended               Years ended
     wireline segment            December 31                December 31
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Voice local(1)        505.4    527.5   (4.2)%  2,064.4  2,119.8   (2.6)%
    Voice long
     distance(2)          178.7    197.7   (9.6)%    715.3    810.3  (11.7)%
    Data(3)               466.2    435.0    7.2 %  1,771.9  1,642.5    7.9 %
    Other                  70.0     74.1   (5.5)%    259.0    250.5    3.4 %
    -------------------------------------------------------------------------
    External operating
     revenue            1,220.3  1,234.3   (1.1)%  4,810.6  4,823.1   (0.3)%
    Intersegment
     revenue               30.7     26.5   15.8 %    114.2     98.3   16.2 %
    -------------------------------------------------------------------------
    Total operating
     revenues           1,251.0  1,260.8   (0.8)%  4,924.8  4,921.4    0.1 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Voice local revenue decreased by approximately $70 million or 3.3%
        for the full year of 2007, excluding the impact of regulatory
        adjustments in the first-quarter of 2007.
    (2) Voice long distance revenue decreased by approximately $82 million or
        10.1% for the full year of 2007, excluding the impact from billing
        system conversion in the second quarter of 2007.
    (3) Data revenue grew by approximately $140 million or 8.5% for the full
        year of 2007, excluding the impact of two mandated retroactive
        competitor price reductions in the first quarter of 2007.
    -------------------------------------------------------------------------

    Wireline segment revenues decreased by $9.8 million in the fourth quarter
of 2007 when compared with the same period in 2006. For the full year of 2007,
revenues were essentially unchanged from 2006, increasing by $3.4 million.

    -   Voice local revenue decreased by $22.1 million and $55.4 million,
        respectively, in the fourth quarter and full year of 2007, when
        compared with the same periods in 2006. The decreases were due
        primarily to lower revenues from basic access and optional enhanced
        service revenues arising from increased competition for residential
        subscribers offset in part by growth in business local services and
        certain price increases. Declining local revenues for the full year
        of 2007 were partly offset by first quarter recoveries of
        approximately $14.5 million from the price cap deferral account. The
        recovery from the deferral account offset unfavourable mandated
        retroactive rate adjustments for basic data revenue pursuant to two
        recent CRTC (Canadian Radio-television and Telecommunications
        Commission) decisions and included recovery of previously incurred
        amounts associated with mandated local number portability and start-
        up costs.

    -------------------------------------------------------------------------
    Network access lines      As at December 31
    (000s)                 2007     2006   Change
    -------------------------------------------------------------------------
    Residential network
     access lines         2,596    2,775   (6.5)%
    Business network
     access lines         1,808    1,773    2.0 %
                        -------- -------- --------
    Total network
     access lines         4,404    4,548   (3.2)%

                               Quarters ended               Years ended
                                 December 31                December 31
    (000s)                 2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Change in residential
     network access lines   (47)     (34) (38.2)%     (179)    (153) (17.0)%
    Change in business
     network access lines     8        3    n.m.        35       10    n.m.
                        -------- -------- -------- -------- -------- --------
    Change in total
     network access lines   (39)     (31) (25.8)%     (144)    (143)  (0.7)%
    -------------------------------------------------------------------------

        Residential line losses include the effect of increased competition
        from resellers and VoIP competitors (including cable-TV companies,
        which have expanded their geographic coverage and introduced lower-
        priced telephony services), as well as technological substitution as
        customers utilize wireless services. To a lesser degree, residential
        second lines decreased from migration of dial-up Internet subscribers
        to high-speed Internet service. The number of residential lines lost
        in each quarter of 2007 exceeded the comparable losses in the same
        quarters of 2006. In contrast, the number of business lines gained
        each quarter in 2007 equalled or exceeded the comparable net business
        line gains in 2006. The increase in business lines was experienced in
        Ontario and Quebec urban non-incumbent areas.

    -   Voice long distance revenues decreased by $19.0 million and
        $95.0 million, respectively, in the fourth quarter and full year of
        2007, when compared with the same periods in 2006, due primarily to
        lower average per-minute rates, from industry-wide price competition,
        and lower business minute volumes, partly offset by increased
        consumer minute volumes. In addition, a one-time reduction of about
        $13 million was recorded in the second quarter of 2007 as a result of
        billing system enhancements, which provided better data for
        estimating earned, but unbilled revenue.

    -   Wireline segment data revenues increased by $31.2 million and
        $129.4 million, respectively, in the fourth quarter and full year of
        2007, when compared with the same periods in 2006. This growth was
        primarily due to increased Internet, enhanced data and hosting
        service revenues from growth in business services and high-speed
        Internet subscribers. Managed data revenues increased from the
        provision of business process outsourcing services to customers as
        well as digital entertainment services to consumers in larger urban
        incumbent markets.

        Pursuant to CRTC Decision 2007-6 (relating to digital network access
        link charges) and CRTC Decision 2007-10 (relating to basic service
        extension feature charges), retroactive rate reductions totalling
        approximately $11 million in basic data services revenues were
        recorded in the first quarter of 2007.

    -------------------------------------------------------------------------
    Internet subscribers      As at December 31
    (000s)                 2007     2006   Change
    -------------------------------------------------------------------------
    High-speed Internet
     subscribers        1,020.2    916.7   11.3 %
    Dial-up Internet
     subscribers          155.3    194.1  (20.0)%
                        -------- -------- --------
    Total Internet
     subscribers        1,175.5  1,110.8    5.8 %

                               Quarters ended               Years ended
                                 December 31                December 31
    (000s)                 2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    High-speed Internet
     net additions         26.2     44.4  (41.0)%    103.5    153.7  (32.7)%
    Dial-up Internet net
     reductions            (9.3)   (11.4)  18.4 %    (38.8)   (42.1)   7.8 %
                        -------- -------- -------- -------- -------- --------
    Total Internet
     subscriber net
     additions             16.9     33.0  (48.8)%     64.7    111.6  (42.0)%
    -------------------------------------------------------------------------

        High-speed Internet subscriber net additions were lower than one year
        earlier, reflecting competitive markets and the impact of the new
        billing and client care system, which temporarily reduced the
        Company's order processing capability in the second quarter and, to a
        lesser degree, in the third quarter. Monthly rates for high-speed
        Internet services were raised by $1 per month in the second quarter
        of 2006 for those customers not on rate protection plans, which
        contributed to an overall increase in average revenue per subscriber
        in 2007.

    -   Other revenue decreased by $4.1 million in the fourth quarter of 2007
        and increased by $8.5 million in the full year of 2007, when compared
        with the same periods in 2006. The full year increase was due mainly
        to a reduction in the provision for quality-of-service rate rebates,
        which resulted from improved service delivery, as measured by CRTC-
        defined quality-of-service indicators, and favourable decisions by
        the CRTC on exclusion applications for severe weather and other
        extraordinary events. Voice equipment sales decreased in the fourth
        quarter and full year.

    -   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(1)       Quarters ended               Years ended
    ($ millions,                 December 31                December 31
     except employees)     2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Salaries, benefits
     and other employee-
     related costs,
     before net-cash
     settlement feature   447.0    436.0    2.5 %  1,729.1  1,665.9    3.8 %
    Net-cash settlement
     feature expense        1.5        -      -      145.1        -      -
    Other operations
     expenses             334.2    367.3   (9.0)%  1,347.6  1,331.8    1.2 %
    -------------------------------------------------------------------------
    Operations expense    782.7    803.3   (2.6)%  3,221.8  2,997.7    7.5 %
    Restructuring costs     5.9      5.2   13.5 %     19.5     61.6  (68.3)%
    -------------------------------------------------------------------------
    Total operating
     expenses             788.6    808.5   (2.5)%  3,241.3  3,059.3    5.9 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(2)     781.2    803.3   (2.8)%  3,076.7  2,997.7    2.6 %
    Total operating
     expenses (as
     adjusted)(2)         787.1    808.5   (2.6)%  3,096.2  3,059.3    1.2 %

    Full-time equivalent
     employees, end of
     period(3)           25,731   23,884    7.7 %
    -------------------------------------------------------------------------
    (1) Salaries and benefits, Operations expense and total operating expense
        for fourth quarter and full year of 2006 were reduced by 5.7 million
        and $22.8 million, respectively, from previously reported amounts, as
        a result of the correction described in Section 1.3.
    (2) Excludes incremental charges for introducing a net-cash settlement
        feature for share option awards granted prior to 2005. Operations
        expense (as adjusted) and total operating expenses (as adjusted) are
        regularly reported to the chief operating decision-maker.
    (3) The number of full-time equivalent employees providing outsourcing
        services to the Company's customers was approximately 5,747 on
        December 31, 2007 and approximately 4,667 on December 31, 2006. Full-
        time equivalent staff elsewhere increased by 767 or 4%.
    -------------------------------------------------------------------------
    

    Total Wireline operating expenses decreased by $19.9 million in the
fourth quarter of 2007 and increased by $182.0 million in the full year of
2007, when compared with the same periods in 2006, primarily due to the
charges for introducing a net-cash settlement feature for share option awards
granted prior to 2005. Total operating expenses adjusted to exclude these
charges increased by $18.4 million and $36.9 million, respectively. Expenses
for the full year of 2007 included approximately $24 million related to the
Alberta consumer billing and client care system conversion (approximately
$8 million in salaries and benefits for customer contact centres and
approximately $16 million in other operations expenses primarily for external
labour costs). External labour for the full year of 2007 also included about
$4 million to deal with backlogs caused by severe weather events in late 2006
and early 2007, as well as preparation costs for expected flooding in British
Columbia in the second quarter of 2007.

    
    -   Salaries, benefits and employee-related expenses increased by
        $11.0 million and $63.2 million, respectively, in the fourth quarter
        and full year of 2007, when compared with the same periods in 2006.
        The increase was mainly due to increased staffing, scheduled
        compensation increases and customer contact centre costs for the
        billing system conversion, partly offset by a lower defined benefit
        pension plan expense.

    -   Other operations expenses decreased by $33.1 million in the fourth
        quarter of 2007 and increased by $15.8 million for the full year of
        2007, when compared with the same periods in 2006. The decrease in
        the fourth quarter was due mainly to lower costs of sales associated
        with voice and data equipment sales, including lower loadings of
        high-speed Internet subscribers, as well as increased capitalization
        of labour related to the higher capital expenditure activity in 2007.
        The increase in the full year included higher external labour costs
        for billing/client care system support and installation/repair
        activity to improve and maintain service levels, and higher external
        labour costs for weather-related events, partly offset by: (i) lower
        transit and termination charges due to lower per-minute rates partly
        offset by higher outbound minute volumes; (ii) lower expenses arising
        from CRTC decisions on basic service extension features and network
        access link charges; and (iii) increased capitalization of labour
        related to the higher capital expenditure activity in 2007.

    -   Restructuring costs in 2007 were for several small efficiency
        initiatives. Restructuring costs increased by $0.7 million in the
        fourth quarter of 2007 and decreased by $42.1 million for the full
        year of 2007, when compared with the same periods in 2006.

    -------------------------------------------------------------------------
    EBITDA ($ millions)        Quarters ended               Years ended
     and EBITDA margin (%)       December 31                December 31
     wireline segment      2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    EBITDA                462.4    452.3    2.2 %  1,683.5  1,862.1   (9.6)%
    EBITDA (as
     adjusted)(1)         463.9    452.3    2.6 %  1,828.6  1,862.1   (1.8)%
    EBITDA margin          37.0     35.9  1.1 pts     34.2     37.8 (3.6)pts
    EBITDA margin
     (as adjusted)         37.1     35.9  1.2 pts     37.1     37.8 (0.7)pts
    -------------------------------------------------------------------------
    (1) Excludes incremental charges of $1.5 million and $145.1 million,
        respectively, in the fourth quarter and full year of 2007 for
        introducing a net-cash settlement feature for share option awards
        granted prior to 2005. EBITDA (as adjusted) is regularly reported to
        the chief operating decision-maker and corresponds to the definition
        used in setting TELUS' 2007 EBITDA targets and revised guidance.
    -------------------------------------------------------------------------
    

    Wireline EBITDA increased by $10.1 million in the fourth quarter of 2007
and decreased by $178.6 million in the full year of 2007, when compared with
the same periods in 2006. Wireline EBITDA (as adjusted) increased by
$11.6 million in the fourth quarter of 2007 and decreased by $33.5 million in
the full year of 2007, when compared with the same periods in 2006. The
increase for the fourth quarter was mainly due to increased capitalization of
labour related to the higher capital expenditure activity in 2007. The
decrease for the full year was mainly due to billing system conversion impacts
of about $37 million (including a one-time long distance revenue adjustment of
$13 million) and increased external labour costs of about $4 million to deal
with weather-related backlogs and emergency preparations.

    2.5  Wireless segment results

    
    -------------------------------------------------------------------------
    Operating revenues -       Quarters ended               Years ended
     wireless segment            December 31                December 31
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Network revenue     1,039.4    952.3    9.1 %  4,008.5  3,605.5   11.2 %
    Equipment revenue      71.1     68.0    4.6 %    255.3    252.4    1.1 %
    -------------------------------------------------------------------------
    External operating
     revenue            1,110.5  1,020.3    8.8 %  4,263.8  3,857.9   10.5 %
    Intersegment
     revenue                6.9      6.3    9.5 %     26.9     23.4   15.0 %
    -------------------------------------------------------------------------
    Total operating
     revenues           1,117.4  1,026.6    8.8 %  4,290.7  3,881.3   10.5 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Key operating
     indicators -
     wireless segment        As at December 31
    (000s)                 2007     2006   Change
    -------------------------------------------------------------------------
    Subscribers -
     postpaid(1)        4,440.5  4,078.6    8.9 %
    Subscribers -
     prepaid            1,127.4    977.3   15.4 %
                        -------- -------- --------
    Subscribers -
     total              5,567.9  5,055.9   10.1 %

    Digital POPs(2)
     covered including
     roaming/resale
     (millions)(3)         31.6     31.0    1.9 %

                               Quarters ended               Years ended
                                 December 31                December 31
    (000s)                 2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Subscriber gross
     additions -
     postpaid             240.4    236.3    1.7 %    850.0    837.5    1.5 %
    Subscriber gross
     additions -
     prepaid              180.7    142.8   26.5 %    584.0    455.5   28.2 %
                        -------- -------- -------- -------- -------- --------
    Subscriber gross
     additions - total    421.1    379.1   11.1 %  1,434.0  1,293.0   10.9 %

    Subscriber net
     additions -
     postpaid             106.4    129.5  (17.8)%    364.6    411.8  (11.5)%
    Subscriber net
     additions -
     prepaid(4)            55.0     52.1    5.6 %    150.0    123.4   21.6 %
                        -------- -------- -------- -------- -------- --------
    Subscriber net
     additions - total    161.4    181.6  (11.1)%    514.6    535.2   (3.8)%

    ARPU ($)(5)           63.70    64.50   (1.2)%    63.56    63.46    0.2 %
    Churn, per month
     (%)(4)(5)             1.59     1.33 0.26 pts     1.45     1.33 0.12 pts
    Lifetime revenue per
     subscriber ($)(5)    4,015    4,850  (17.2)%    4,373    4,771   (8.3)%

    COA (6) per gross
     subscriber
     addition ($)(5)        352      436  (19.3)%      395      412   (4.1)%
    COA per gross
     subscriber addition
     to lifetime
     revenue (%)(5)         8.8      9.0 (0.2)pts      9.0      8.6  0.4 pts
    Average minutes of
     use per subscriber
     per month (MOU)        411      404    1.7 %      404      403    0.2 %

    EBITDA ($ millions)   491.0    432.0   13.7 %  1,905.8  1,752.9    8.7 %
    EBITDA (as adjusted)
     (7) ($ millions)     490.1    432.0   13.4 %  1,929.4  1,752.9   10.1 %
    EBITDA to network
     revenue (%)           47.2     45.4  1.8 pts     47.5     48.6 (1.1)pts
    EBITDA (as adjusted)
     to network
     revenue (%)           47.2     45.4  1.8 pts     48.1     48.6 (0.5)pts
    Retention spend to
     network revenue(5)
     (%)                    8.6      7.7  0.9 pts      7.6      6.7  0.9 pts
    EBITDA excluding COA
     ($ millions)(5)      639.4    597.2    7.1 %  2,471.6  2,285.5    8.1 %
    EBITDA (as adjusted)
     excluding COA
     ($ millions)         638.5    597.2    6.9 %  2,495.1  2,285.5    9.2 %
    -------------------------------------------------------------------------
    pts - percentage points
    (1) A one-time adjustment was made to the postpaid subscriber base.
        Cumulative subscribers were reduced by approximately 2,600 to reflect
        the discontinuation of network service to its cellular digital packet
        data (CDPD) subscribers effective January 31, 2007.
    (2) POPs is an abbreviation for population. A POP refers to one person
        living in a population area, which in whole or substantial part is
        included in the coverage areas.
    (3) At December 31, 2007, TELUS' wireless PCS digital population coverage
        included expanded coverage of approximately 7.5 million PCS POPs due
        to roaming/resale agreements principally with Bell Mobility (Bell
        Canada).
    (4) Prepaid net subscriber additions in the fourth quarter of 2007
        include a one-time reduction in the subscriber base of 5,124, which
        increased the fourth quarter blended churn rate by 0.03 percentage
        points. The adjustment was for a clean-up of deactivation records.
    (5) See Section 6.3 Definition 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.
    (6) Cost of acquisition.
    (7) Excludes an incremental (recovery) charge of $(0.9) million and
        $23.6 million, respectively, in the fourth quarter and full year of
        2007 for introducing a net-cash settlement feature for share option
        awards granted prior to 2005. EBITDA (as adjusted) is regularly
        reported to the chief operating decision-maker and corresponds to the
        definition used in setting TELUS' 2007 EBITDA targets and revised
        guidance.
    -------------------------------------------------------------------------

    Wireless segment revenues increased by $90.8 million and $409.4 million,
respectively, in the fourth quarter and full year of 2007 when compared with
the same periods in 2006, due to the following:

    -   Network revenue increased by $87.1 million and $403.0 million in the
        fourth quarter and full year of 2007, respectively, when compared
        with the same periods in 2006. The increase was the result of a 10%
        expansion in the subscriber base during 2007. Data revenues increased
        to 12.5% of Network revenue, or $130.8 million, in the fourth quarter
        of 2007 as compared with 9.6% of Network revenues, or $91.7 million,
        in the fourth quarter of 2006 - reflecting a growth rate of 42.6%.
        Similarly, data revenues for the full year of 2007 increased to 11.1%
        of Network revenue, or $446.1 million, as compared with 7.7% of
        Network revenue, or $279.9 million, in 2006 - reflecting a growth
        rate of 59.4%. This growth, driven by continued migration of existing
        subscribers to full function smartphones and EVDO-capable handsets as
        well as increased EVDO coverage, was principally related to text
        messaging, mobile computing activities and RIM/BlackBerry service
        revenues.

        Data ARPU increased by 29% to $7.95 and 44% to $7.02, respectively,
        in the fourth quarter and year as compared to the same periods in
        2006. Increased Data ARPU largely offset the decline from traditional
        voice service, as total ARPU decreased by $0.80 in the fourth quarter
        when compared to the same period in 2006 and showed a slight
        improvement from the $0.87 year-over-year decrease in the third
        quarter. The change in total ARPU reflects the shifting product mix
        driven by higher net prepaid loading and a slight impact from Mike
        service, combined with declining Voice ARPU. Voice ARPU was $55.75 in
        the fourth quarter of 2007, a decrease of $2.59 or 4.4% from the same
        period in 2006, caused mainly by lower per-minute rates, increased
        price competition in the business and discount segments of the market
        and a decrease in roaming. Overall, ARPU increased by $0.10 to $63.56
        for the full year 2007 when compared to 2006, as the $2.13 increase
        in Data ARPU exceeded the $2.03 Voice ARPU decline.

        At December 31, 2007, the mix of postpaid subscribers declined
        slightly to 79.8% of the total cumulative subscriber base, as
        compared to 80.7% from one year earlier. The 106,400 postpaid
        subscriber net additions for the fourth quarter of 2007 represented
        65.9% of all net additions as compared with 129,500 or 71.3% of all
        net additions for the same period in 2006. Moreover, the 364,600
        postpaid subscriber net additions for the full year of 2007
        represented 70.9% of all net additions as compared with 411,800 or
        76.9% of all net additions for the same period in 2006. Total net
        subscriber additions were down slightly in the fourth quarter and
        full year of 2007 as compared with the same periods in 2006, mostly
        attributable to increased churn rates, partly offset by higher
        prepaid loading.

        The blended churn rate increased in the fourth quarter and full year
        of 2007 when compared with the respective periods in 2006. Total
        deactivations were 259,700 for the fourth quarter and 919,400 for the
        full year of 2007 as compared with 197,500 and 757,800, respectively,
        for the same periods in 2006. Deactivations in the fourth quarter of
        2007 included 5,124 for a clean-up of prepaid subscriber deactivation
        records. Monthly blended churn rates of 1.59% and 1.45%,
        respectively, in the fourth quarter and full year of 2007, increased
        from the same periods in 2006 due to the product mix shifting towards
        prepaid, combined with increased deactivations. WNP porting was a
        minor source of net positive subscriber loading for TELUS, but
        contributed to the higher churn level.

    -   Equipment sales, rental and service revenue increased by $3.1 million
        and $2.9 million, respectively, in the fourth quarter and full year
        of 2007 when compared with the same periods in 2006 due largely to
        the 11% increase in gross subscriber additions.

    -   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(1)       Quarters ended               Years ended
    ($ millions,                 December 31                December 31
     except employees)     2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Equipment sales
     expenses             180.3    163.6   10.2 %    655.5    574.9   14.0 %
    Network operating
     expenses             140.7    118.8   18.4 %    513.7    451.2   13.9 %
    Marketing expenses    119.7    134.7  (11.1)%    439.5    422.5    4.0 %
    General and
     administration
     expenses             185.5    174.8    6.1 %    775.3    673.6   15.1 %
    -------------------------------------------------------------------------
    Operations expense    626.2    591.9    5.8 %  2,384.0  2,122.2   12.3 %
    Restructuring costs     0.2      2.7  (92.6)%      0.9      6.2  (85.5)%
    -------------------------------------------------------------------------
    Total operating
     expenses             626.4    594.6    5.3 %  2,384.9  2,128.4   12.1 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(2)     627.1    591.9    5.9 %  2,360.4  2,122.2   11.2 %
    Total operating
     expenses
     (as adjusted)(2)     627.3    594.6    5.5 %  2,361.3  2,128.4   10.9 %

    Full-time equivalent
     employees at end
     of period            7,643    7,210    6.0 %
    -------------------------------------------------------------------------
    (1) General and administration expenses, Operations expense and total
        operating expenses for fourth quarter and full year of 2006 were
        reduced by $0.5 million and $1.9 million, respectively, from
        previously reported amounts, as a result of the correction described
        in Section 1.3.
    (2) Excludes an incremental (recovery) charge of $(0.9) million and
        $23.6 million, respectively, in the fourth quarter and full year of
        2007 for introducing a net-cash settlement feature for share option
        awards granted prior to 2005. Operations expense (as adjusted) and
        total operating expenses (as adjusted) are regularly reported to the
        chief operating decision-maker.
    -------------------------------------------------------------------------

    Wireless segment total operating expenses increased by $31.8 million and
$256.5 million, respectively, in the fourth quarter and full year of 2007 when
compared with the same periods in 2006. Total operating expenses as adjusted
to exclude the 2007 net-cash settlement feature increased by $32.7 million and
$232.9 million, respectively, to promote, acquire, retain and support the
10.1% annual growth in the subscriber base and the 11.2% growth in Network
revenue during 2007.

    -   Equipment sales expenses increased by $16.7 million and
        $80.6 million, respectively, in the fourth quarter and full year of
        2007 when compared with the same periods in 2006, due primarily to an
        increase in the costs to support current and future data revenue
        growth in upgrading subscribers to full function smartphones combined
        with an increase in gross subscriber additions.

    -   Network operating expenses increased by $21.9 million and
        $62.5 million in the fourth quarter and full year of 2007,
        respectively, when compared with the same periods in 2006. The
        increases were principally due to higher revenue share with third
        party data content providers, licensing costs on data services,
        higher Canadian and U.S. roaming costs due to in-bucket usage plans
        and site-related expenses to support cell sites. Expenses for the
        full year of 2007 were net of a reduction arising from CRTC Decision
        2007-6 related to retail network access link charges.

    -   Marketing expenses decreased by $15.0 million or 11.1% in the fourth
        quarter of 2007, when compared to the same period in 2006, due to
        lower advertising and promotions spending and lower commissions on
        sales of handsets, as increased loading volume was offset by a higher
        mix of prepaid subscriber additions. For the full year of 2007,
        marketing expenses increased by $17.0 million or 4.0% when compared
        to 2006, due primarily to higher advertising and promotions costs,
        increased dealer compensation costs related to the 10.9% increase in
        gross subscriber additions and increased retention activity. COA per
        gross subscriber addition decreased by $84 or 19% in the fourth
        quarter and decreased by $17 or 4% for the full year of 2007, as
        compared the same periods in 2006 due primarily to a greater
        weighting of prepaid gross subscriber additions. COA was
        $148.4 million and $565.7 million, respectively, for the fourth
        quarter and full year of 2007 as compared to $165.2 million and
        $532.6 million, respectively, in the same periods in 2006.

        Retention costs as a percentage of network revenue increased to 8.6%
        and 7.6%, respectively, in the fourth quarter and full year of 2007,
        up from 7.7% and 6.7% for the same periods in 2006, to support
        current and future period data revenue growth, including the
        migration of voice-centric Mike subscribers to PCS, and to a lesser
        extent, retain customers with the advent of wireless number
        portability. Upgrades to fully functional smart phones increased by
        210% in the fourth quarter and more than doubled for the full year,
        as compared to the same periods in 2006, providing enhanced
        functionality for potential future revenue growth.

    -   General and administration expense increased by $10.7 million and
        $101.7 million in the fourth quarter and full year of 2007,
        respectively, when compared with the same periods in 2006. Excluding
        non-cash charges for share option awards granted before 2005, general
        and administration expenses grew by $11.6 million and $78.1 million
        for the fourth quarter and full year of 2007, respectively. The
        increases were primarily due to a 6% increase in full-time equivalent
        employees to support the growth in Network revenue, subscribers, and
        expansion of the client care and company-owned retail stores teams to
        manage customer service levels.

    -   Restructuring costs for the first nine months of 2007 were in respect
        of the Company's operational efficiency program.

    -------------------------------------------------------------------------
    Wireless segment
    EBITDA ($ millions)        Quarters ended               Years ended
     and EBITDA                  December 31                December 31
     margin (%)            2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    EBITDA                491.0    432.0   13.7 %  1,905.8  1,752.9    8.7 %
    EBITDA (as
     adjusted)(1)         490.1    432.0   13.4 %  1,929.4  1,752.9   10.1 %
    EBITDA margin          43.9     42.1  1.8 pts     44.4     45.2 (0.8)pts
    EBITDA margin
     (as adjusted)         43.9     42.1  1.8 pts     45.0     45.2 (0.2)pts
    -------------------------------------------------------------------------
    (1) Excludes an incremental (recovery) charge of $(0.9) million and
        $23.6 million, respectively, in the fourth quarter and full year of
        2007 for introducing a net-cash settlement feature for share option
        awards granted prior to 2005. EBITDA (as adjusted) is regularly
        reported to the chief operating decision-maker and corresponds to the
        definition used in setting TELUS' 2007 EBITDA targets and revised
        guidance.
    -------------------------------------------------------------------------
    

    Wireless segment EBITDA increased by $59.0 million and $152.9 million,
respectively, in the fourth quarter and full year of 2007 when compared with
the same periods in 2006. EBITDA (as adjusted) increased by $58.1 million and
$176.5 million, respectively, due to Network revenue growth and a lower fourth
quarter COA expense, partially offset by higher retention spend due to
increased voice to data migrations, increased network costs related to revenue
share with third party data content providers, and higher general and
administration costs to support growth in subscriber base.

    
    3.   Financial condition

    The following are changes in the Consolidated balance sheets for the year
ended December 31, 2007.

    -------------------------------------------------------------------------
                   At December 31,        Changes       Explanation of the
                  ----------------                      change in balance
                   2007      2006
    ($ millions)          (restated)
    -------------------------------------------------------------------------

    Current Assets

      Cash and     19.9     (11.5)      31.4     n.m.   See Section 4:
       temporary                                        Liquidity and
       investments,                                     capital resources
       net

      Short-term   42.4     110.2      (67.8) (61.5)%   Liquidation of some
       investments                                      investments of
                                                        surplus cash

      Accounts    710.9     707.2        3.7    0.5 %   Primarily increased
       receivable                                       wireless receivables
                                                        related to growth in
                                                        network revenue, net
                                                        of the receipt of
                                                        lease inducements for
                                                        renegotiated leases

      Income and  120.9      95.4       25.5   26.7 %   Increased recovery
       other taxes                                      and interest
       receivable                                       receivable for
                                                        favourable tax
                                                        reassessments of
                                                        prior years, net of
                                                        refunds and interest
                                                        received

      Inventories 243.3     196.4       46.9   23.9 %   Includes inventories
                                                        for customer services
                                                        expected to be
                                                        implemented in 2008

      Prepaid     199.5     195.3        4.2    2.2 %   -
       expenses
       and other

      Current       3.8      40.4      (36.6) (90.6)%   Primarily new net-
       portion                                          cash settled equity
       derivative                                       swaps offset by the
       assets                                           maturity of cross
                                                        currency swaps
                                                        related to the notes
                                                        that matured
                                                        June 1, 2007
    -------------------------------------------------------------------------
    Current
     Liabilities

      Accounts  1,476.6   1,363.6      113.0    8.3 %   Primarily an increase
       payable                                          in the liability for
       and accrued                                      net-cash settled
       liabilities                                      share options net of
                                                        payments and an
                                                        increased payroll
                                                        liability accrual for
                                                        one additional day,
                                                        net of reductions in
                                                        quality-of-service
                                                        rate rebate accruals

      Income and    7.3      10.3       (3.0) (29.1)%   Periodic instalment
       other taxes                                      payments made
       payable

      Restruct-    34.9      53.1      (18.2) (34.3)%   Payments under
       uring                                            previous programs
       accounts                                         exceeded new
       payable and                                      obligations
       accrued
       liabilities

      Advance     631.6     606.3       25.3    4.2 %   Primarily increased
       billings and                                     customer deposits and
       customer                                         wireless billings,
       deposits                                         net of draw-downs
                                                        from price cap
                                                        deferred revenue

      Current       5.4   1,433.5   (1,428.1) (99.6)%   Repayment of U.S.
       maturities                                       dollar Notes that
       of long-                                         matured June 1 and
       term debt                                        medium-term TCI Notes
                                                        that matured in
                                                        February

      Current      26.6     165.8     (139.2) (84.0)%   Maturity of cross
       portion of                                       currency swaps
       derivative                                       related to the Note
       liabilities                                      maturing June 1,
                                                        partly offset by fair
                                                        value adjustments for
                                                        share option hedges

      Current     503.6     137.2      366.4     n.m.   An increase in
       portion of                                       temporary differences
       future                                           for current assets
       income                                           and liabilities as
       taxes                                            well as partnership
                                                        taxable income that
                                                        will be allocated in
                                                        the next 12 months
    -------------------------------------------------------------------------
    Working    (1,345.3) (2,436.4)   1,091.1   44.8 %   Mainly the repayment
     capital(1)                                         of long-term debt
                                                        that matured June 1
                                                        with proceeds from
                                                        new long-term debt.
                                                        See Section 4.3 Cash
                                                        used by financing
                                                        activities
    -------------------------------------------------------------------------
    Capital    11,122.0  10,982.1      139.9    1.3 %   See Section 2.3
     Assets,                                            Consolidated results
     Net                                                from operations -
                                                        Depreciation,
                                                        Amortization as well
                                                        as Section 4.2 Cash
                                                        used by investing
                                                        activities
    -------------------------------------------------------------------------
    Other Assets

      Deferred  1,318.0   1,129.7      188.3   16.7 %   Primarily pension
       charges                                          plan contributions
                                                        and pension
                                                        recoveries resulting
                                                        from favourable
                                                        returns on plan
                                                        assets

      Investments  38.9      35.2        3.7   10.5 %   Includes new
                                                        investments and fair
                                                        value adjustments,
                                                        net of an $11.8
                                                        million writeoff of
                                                        an equity investment
                                                        in AMP'D Mobile, Inc.

      Goodwill  3,168.0   3,169.5       (1.5)   0.0 %   -
    -------------------------------------------------------------------------
    Long-Term   4,583.5   3,474.7    1,108.8   31.9 %   Includes $1 billion
     Debt                                               of Notes issued in
                                                        March and commercial
                                                        paper issued under a
                                                        program established
                                                        in May, partly offset
                                                        by a decrease in
                                                        utilized bank
                                                        facilities and
                                                        reduction in the
                                                        Canadian dollar value
                                                        of 2011 U.S. dollar
                                                        Notes
    -------------------------------------------------------------------------
    Other Long- 1,717.9   1,257.3      460.6   36.6 %   Primarily changes in
     Term                                               U.S. dollar exchange
     Liabilities                                        rates and a fair
                                                        value adjustment of
                                                        the derivative
                                                        liabilities
                                                        associated with 2011
                                                        U.S. dollar Notes
    -------------------------------------------------------------------------
    Future      1,048.1   1,076.5      (28.4)  (2.6)%   Revaluation resulting
     Income                                             from enacted
     Taxes                                              reductions in future
                                                        federal income tax
                                                        rates, partly offset
                                                        by an increase in
                                                        temporary differences
                                                        for long-term assets
                                                        and liabilities
    -------------------------------------------------------------------------
    Non-           25.9      23.6        2.3    9.7 %   -
     Controlling
     Interests
    -------------------------------------------------------------------------
    Shareholders'
     Equity

      Common    6,926.2   7,048.0     (121.8)  (1.7)%   Decreased primarily
       equity                                           due to NCIB
                                                        expenditures of
                                                        $749.9 million,
                                                        dividends of
                                                        $520.8 million and
                                                        transitional amounts
                                                        for accumulated other
                                                        comprehensive income
                                                        of $176.2 million;
                                                        partly offset by Net
                                                        income of
                                                        $1,257.9 million
                                                        and Other
                                                        comprehensive income
                                                        of $74.2 million
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Current assets subtracting Current liabilities - an indicator of the
        ability to finance current operations and meet obligations as they
        fall due.
    -------------------------------------------------------------------------


    4.   Liquidity and capital resources

    4.1  Cash provided by operating activities

    -------------------------------------------------------------------------
    ($ millions)               Quarters ended               Years ended
                                 December 31                December 31
                           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
                          817.4    747.2    9.4 %  3,171.7  2,803.7   13.1 %
    -------------------------------------------------------------------------

    Cash provided by operating activities increased by $70.2 million and
$368.0 million, respectively, in the fourth quarter and full year of 2007,
when compared with the same periods in 2006. Changes in cash provided by
operating activities included:

    -   EBITDA increased by $69.1 million in the fourth quarter of 2007 and
        decreased by $25.7 million in the full year of 2007, when compared to
        the same periods in 2006 (as described in Section 2: Results from
        operations);

    -   Share-based compensation payments in excess of the expense included
        in EBITDA increased by $20.4 million in the fourth quarter of 2007
        when compared with the same period in 2006 for a comparative
        reduction in cash flow. Share-based compensation expense in excess of
        payments in the full year of 2007 increased by $70.7 million when
        compared with 2006, for a comparative increase in cash flow;

    -   Employer contributions to employee defined benefit plans decreased by
        $30.5 million for the full year of 2007, when compared to the same
        period in 2006, mainly due to updated actuarial valuations;

    -   Payments under restructuring plans decreased by $10.8 million and
        $33.2 million, respectively, in the fourth quarter and full year of
        2007, when compared to the same periods in 2006;

    -   Interest paid decreased by $47.3 million and $61.7 million,
        respectively, in the fourth quarter and full year of 2007 when
        compared to the same periods in 2006. The decrease in the fourth
        quarter was primarily due to new debt issues in March 2007, which
        have semi-annual interest payments in September as well as the
        maturity in June of notes that had semi-annual interest payments in
        December. The decrease for the full year was due to lower effective
        interest rates in 2007, while 2006 payments included $31.2 million
        for terminating cross currency interest rate swaps and partial
        payment of interest in respect of a court decision in a lawsuit
        regarding a 1997 BC TEL bond redemption matter, partly offset by
        repayment of forward starting interest rate swaps in the first
        quarter of 2007;

    -   Interest received increased by $32.4 million and $17.4 million,
        respectively, in the fourth quarter and full year of 2007 when
        compared to the same period in 2006 due mainly to the receipt of
        interest on tax refunds in the fourth quarter of 2007;

    -   Income taxes received net of instalment payments increased by
        $117.9 million and $24.4 million, respectively, in the fourth quarter
        and full year of 2007 when compared to the same periods in 2006, due
        mainly to collection of income taxes receivable in the fourth quarter
        of 2007, partly offset by collections during first quarter of 2006;

    -   Proceeds from securitized accounts receivable decreased by a net
        $50 million during the fourth quarter of 2007 as compared to an
        increase of $150 million in proceeds during the fourth quarter of
        2006. Consequently, operating cash flow in the fourth quarter of 2007
        decreased by $200 million when compared to the same period in 2006.
        The balance of proceeds from securitized accounts receivable at
        December 31, 2007 was $500.0 million, unchanged from the balances at
        December 31, 2006 and 2005. See Section 4.6 Accounts receivable sale;

    -   Cash provided by a decrease in Short-term investments was
        $67.8 million in 2007 as compared to an increase of $110.2 million in
        2006, for a comparative increase in cash flow of $178.0 million; and

    -   Other changes in non-cash working capital for the respective periods.

    4.2  Cash used by investing activities

    -------------------------------------------------------------------------
    ($ millions)               Quarters ended               Years ended
                                 December 31                December 31
                           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
                          471.5    422.0   11.7 %  1,771.6  1,675.2    5.8 %
    -------------------------------------------------------------------------
    

    Cash used by investing activities increased by $49.5 million and
$96.4 million, respectively, in the fourth quarter and full year of 2007 when
compared with the same periods in 2006, due to increased capital expenditures
and lower proceeds from the sale of property and other assets, partly offset
by acquisitions in 2006 and changes in other investing activities.
    Assets under construction were $559.0 million at December 31, 2007, a
decrease of $166.4 million from one year earlier. The decrease primarily
reflects a transfer of $342.1 million to intangible assets subject to
amortization in the first quarter of 2007 for activation of certain phases of
the new consolidated wireline billing and client care system, net of increases
in other assets under construction during 2007, including new phases of the
consolidated wireline billing and client care system.

    
    -------------------------------------------------------------------------
    Capital expenditures       Quarters ended               Years ended
    ($ in millions,              December 31                December 31
     ratios in %)          2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------

    Wireline segment      337.0    309.2    9.0 %  1,219.0  1,191.0    2.4 %
    Wireless segment      135.5    106.0   27.8 %    551.3    427.4   29.0 %
    -------------------------------------------------------------------------
    TELUS consolidated
     capital
     expenditures         472.5    415.2   13.8 %  1,770.3  1,618.4    9.4 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditure
     intensity ratio(1)    20.3     18.4  1.9 pts     19.5     18.6  0.9 pts
    EBITDA less capital
     expenditures(2)      480.9    469.1    2.5 %  1,819.0  1,996.6   (8.9)%
    EBITDA (as adjusted)
     less capital
     expenditures(2)      481.5    469.1    2.6 %  1,987.7  1,996.6   (0.4)%
    -------------------------------------------------------------------------
    (1) Capital expenditure intensity is measured by dividing capital
        expenditures by operating revenues. This measure provides a method of
        comparing the level of capital expenditures to other companies of
        varying size within the same industry.
    (2) See Section 6.1 EBITDA for the calculation and description.
    -------------------------------------------------------------------------
    

    Capital expenditures for the full year of 2007 were in line with TELUS
target expenditures of approximately $1.75 billion, reflecting an increase of
$151.9 million when compared to 2006. For the fourth quarter of 2007, capital
expenditures increased by $57.3 million. Capital intensity in 2007 increased
from 2006 due to the planned increase in capital spending. TELUS' EBITDA (as
adjusted) less capital expenditures increased by $12.4 million in the fourth
quarter of 2007, when compared to the same period in 2006, as growth in
wireless and wireline EBITDA (as adjusted) exceeded the increase in total
capital expenditures. For the full year of 2007, TELUS' EBITDA (as adjusted)
less capital expenditures decreased by $8.9 million as a lower wireline EBITDA
(as adjusted) and increased total capital expenditures more than offset growth
in wireless EBITDA (as adjusted).

    
    -   Wireline segment capital expenditures increased by $27.8 million and
        $28.0 million, respectively, in the fourth quarter and full year of
        2007 when compared to the same periods in 2006, due primarily to
        upfront capital investment to support new enterprise customers,
        partly offset by lower expenditures for billing and client care
        system development. Wireline capital expenditure intensity levels
        were 26.9% and 24.8%, respectively, in the fourth quarter and full
        year of 2007, as compared to 24.5% and 24.2%, respectively, for the
        same periods in 2006. Wireline cash flow (EBITDA less capital
        expenditures) was $125.4 million and $464.5 million, respectively,
        for the fourth quarter and full year of 2007, or decreases of 12.4%
        and 30.8%, respectively, when compared to 2006. Wireline cash flow
        based on EBITDA (as adjusted) for the full year of 2007 was
        $609.6 million, a decrease of 9.2% from 2006.

    -   Wireless segment capital expenditures increased by $29.5 million and
        $123.9 million, respectively, in the fourth quarter and full year of
        2007 when compared to the same periods in 2006. The increases were
        principally related to continued enhancement of digital wireless
        capacity and coverage. Wireless capital expenditure intensity levels
        in 2007 were 12.1% for the fourth quarter and 12.8% for the full year
        of 2007 as compared to 10.3% and 11.0%, respectively, for the same
        periods in 2006. Wireless cash flows (EBITDA less capital
        expenditures) were $355.5 million in the fourth quarter and
        $1,354.5 million for the full year of 2007, representing an increase
        of 9.0% for the quarter and 2.2% for the full year. Wireless cash
        flow based on EBITDA (as adjusted) was $1,378.1 million for the full
        year of 2007, an increase of 4.0% from 2006.

    4.3  Cash used by financing activities

    -------------------------------------------------------------------------
    ($ millions)               Quarters ended               Years ended
                                 December 31                December 31
                           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
                          327.0    311.3    5.0 %  1,368.7  1,148.6   19.2 %
    -------------------------------------------------------------------------

    Cash used by financing activities increased by $15.7 million and
220.1 million, respectively, in the fourth quarter and full year of 2007, when
compared with the same periods in 2006.

    -   Proceeds from Common Shares and Non-Voting Shares issued were
        $0.2 million in the fourth quarter of 2007 and $0.9 million for the
        full year of 2007, as compared to $21.6 million and $104.5 million,
        respectively, in the same periods in 2006. The decreases were due to
        implementation of the net-cash settlement feature for share option
        awards granted prior to 2005 and the introduction of the net equity
        settlement feature in May 2006.

    -   Cash dividends paid to shareholders increased by $142.7 million and
        $109.1 million, respectively, in the fourth quarter and full year of
        2007, when compared to the same periods in 2006. Cash dividends paid
        during the fourth quarter of 2007 were for the dividend payable on
        October 1, 2007 as well as remittance on December 31, 2007 for
        dividends payable on January 1, 2008. The increase in dividends paid
        for the full year of 2007 was due to the increased dividend rate in
        2007 partly offset by fewer shares outstanding.

    -   The Company repurchased 57% of the maximum 24 million shares allowed
        under its third NCIB program in effect from December 20, 2006 to
        December 19, 2007. Consistent with its intent to return surplus cash
        to shareholders, the Company renewed its NCIB program, which has been
        in place since December 2004. The renewed program (Program 4) came
        into effect on December 20, 2007 and is set to expire on December 19,
        2008. The maximum number of shares that may be purchased under
        Program 4 is eight million Common Shares and 12 million Non-Voting
        Shares. The shares are to be purchased on the Toronto Stock Exchange
        (TSX) and all repurchased shares will be cancelled. Investors may
        obtain a copy of the notice filed with the TSX without charge by
        contacting TELUS Investor Relations. During the fourth quarter of
        2007, the Company repurchased 250,000 Common shares and 2.8 million
        Non-voting shares under the NCIB programs for a purchase cost of
        $147.5 million.

    Normal course issuer bid programs

    -------------------------------------------------------------------------
    By fiscal year and program                    Shares repurchased
                                         ------------------------------------

                                            Common    Non-Voting
                                            Shares      Shares      Total
    -------------------------------------------------------------------------
    2004 and 2005,
      Programs 1 and 2                    10,893,480  12,107,700  23,001,180
    -------------------------------------------------------------------------
    2006
      Program 2 ended Dec. 19              5,490,600  10,701,400  16,192,000
      Program 3 beginning Dec. 20                  -     186,723     186,723
    -------------------------------------------------------------------------
                                           5,490,600  10,888,123  16,378,723
    -------------------------------------------------------------------------
    2007
      Program 3 ended Dec. 19              2,904,900  10,571,800  13,476,700
      Program 4 beginning Dec. 20                  -     134,200     134,200
    -------------------------------------------------------------------------
                                           2,904,900  10,706,000  13,610,900
    -------------------------------------------------------------------------
    Cumulative total                      19,288,980  33,701,823  52,990,803
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    By fiscal year and program               Purchase cost ($ millions)
                                         ------------------------------------

                                          Charged to  Charged to
                                            Share      Retained
                                          capital(1)  earnings(2)    Paid
    ------------------------------       ------------------------------------
    2004 and 2005,
      Programs 1 and 2                         390.4       579.7       970.1
    ------------------------------       ------------------------------------
    2006
      Program 2 ended Dec. 19                  297.6       492.8       790.4
      Program 3 beginning Dec. 20                4.0         5.8         9.8
    ------------------------------       ------------------------------------
                                               301.6       498.6       800.2
    ------------------------------       ------------------------------------
    2007
      Program 3 ended Dec. 19                  263.7       480.0       743.7
      Program 4 beginning Dec. 20                2.9         3.3         6.2
    ------------------------------       ------------------------------------
                                               266.6       483.3       749.9
    ------------------------------       ------------------------------------
    Cumulative total                           958.6     1,561.6     2,520.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Represents the book value of shares repurchased.
    (2) Represents the cost in excess of the book value of shares
        repurchased.
    -------------------------------------------------------------------------

    -   A major debt issue was completed in March 2007 with five-year and 10-
        year maturities:

        2012 Canadian dollar Notes: the Company publicly issued $300 million
        4.50%, Series CC, Notes at a price of $999.91 per $1,000.00 of
        principal;

        2017 Canadian dollar Notes: the Company publicly issued $700 million
        4.95%, Series CD, Notes at a price of $999.53 per $1,000.00 of
        principal;

        The notes are redeemable at the option of the Company, in whole at
        any time, or in part from time to time, on not fewer than 30 and not
        more than 60 days' prior notice, at a redemption price equal to the
        greater of (i) the present value of the notes discounted at the
        Government of Canada yield plus 15 basis points for the 2012 notes
        and 24 basis points for the 2017 notes, or (ii) 100% of the principal
        amount thereof. In addition, accrued and unpaid interest, if any,
        will be paid to the date fixed for redemption.

    -   On May 15, 2007, TELUS entered into an unsecured commercial paper
        program, which is backstopped by a portion of its credit facility,
        enabling it to issue commercial paper up to a maximum aggregate of
        $800 million (or U.S. dollar equivalent), to be used for general
        corporate purposes. Commercial paper of $584.9 million was
        outstanding at December 31, 2007, an increase of $292.4 million from
        September 30, 2007.

    -   Bank facilities were undrawn at December 31, 2007, as compared to
        $200 million at September 30, 2007 and $120 million at December 31,
        2006.

    -   Debt repayments in 2007 included the $1,483.3 million to repay
        US$1,166.5 million 7.50% Notes that matured on June 1, and
        $70 million to repay TCI 7.10% Medium-Term Notes that matured in
        February.

    4.4  Liquidity and capital resource measures

    -------------------------------------------------------------------------
    Liquidity and capital resource measures       2007       2006     Change
    As at, or years ended, December 31
    -------------------------------------------------------------------------
    Components of debt and coverage ratios(1)
     ($ millions)
    -------------------------------------------------------------------------
    Net debt                                   6,141.6    6,278.1     (136.5)
    Total capitalization - book value         13,197.2   13,349.7     (152.5)

    EBITDA - excluding restructuring costs     3,609.7    3,682.8      (73.1)
    Net interest cost                            440.1      504.7      (64.6)
    -------------------------------------------------------------------------
    Debt ratios
    -------------------------------------------------------------------------
    Fixed-rate debt as a proportion of
     total indebtedness (%)                       82.4       90.6  (8.2) pts
    Average term to maturity of debt (years)       5.3        4.5        0.8

    Net debt to total capitalization (%)(1)       46.5       47.0  (0.5) pts
    Net debt to EBITDA - excluding
     restructuring costs(1)                        1.7        1.7          -
    -------------------------------------------------------------------------
    Coverage ratios(1)
    -------------------------------------------------------------------------
    Interest coverage on long-term debt            4.2        3.9        0.3
    EBITDA - excluding restructuring
     costs interest coverage                       8.2        7.3        0.9
    -------------------------------------------------------------------------
    Other measures
    -------------------------------------------------------------------------
    Free cash flow ($ millions)(2)             1,573.2    1,596.0      (22.8)
    Dividend payout ratio (%)(1)                    47         45      2 pts
    -------------------------------------------------------------------------
    (1) See Section 6.4 Definition of liquidity and capital resource
        measures.
    (2) See Section 6.2 Free cash flow for the definition.
    -------------------------------------------------------------------------
    

    Total capitalization decreased because of lower share capital and lower
net debt, partly offset by higher retained earnings. Changes in Net debt and
12-month trailing EBITDA did not have a significant impact on the net debt to
EBITDA ratio at December 31, 2007 when compared to one year earlier. The
average term to maturity of debt of 5.3 years at December 31, 2007 represents
an increase from 4.5 years at December 31, 2006 due to repayment of maturing
notes on June 1 and the March debt issue, net of commercial paper issues in
beginning in May. The proportion of debt on a fixed-rate basis decreased from
one year earlier with the issue of commercial paper.
    Interest coverage on long-term debt improved by 0.3 because of lower
interest expenses. The EBITDA interest coverage ratio improved by 1.0 due to
lower net interest costs and decreased by 0.1 due to lower EBITDA excluding
restructuring costs. The decrease in free cash flow resulted from higher
capital expenditures and cash payments as a result of introducing the net-cash
settlement feature, net of higher recoveries of income tax and related
interest and lower interest paid. The dividend payout ratio based on actual
earnings at December 31, 2007 was 47% and the ratio calculated to exclude the
impacts of tax-related adjustments and the charge for introducing the net-cash
settlement feature was 54%.
    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 provide access to capital at a reasonable
cost by maintaining credit ratings in the range of BBB+ to A-, or the
equivalent.

    TELUS' long-term financial policies and guidelines are:

    
    -   Net debt to EBITDA - excluding restructuring costs of 1.5 to
        2.0 times; and
    -   Dividend payout ratio of 45 to 55% of sustainable net earnings.
    

    Management expects to maintain its policy guidelines following the
acquisition of Emergis in mid-January 2008. The pro forma Net debt to EBITDA -
excluding restructuring costs for December 31, 2007 was 1.9 times.
    The Company no longer considers the ratio Net debt to total
capitalization to be a long-term policy measure. The measure is based on book
values of net debt and equity, however, the book value of equity has been
reduced significantly by the cumulative effect of normal course issuer bids,
which include the market value of equity in excess of book value.

    
    4.5  Credit facilities
    
    On March 2, 2007, TELUS closed a new five-year $2 billion credit facility
with a syndicate of 18 financial institutions. The new facility replaced
$1.6 billion of existing credit facilities, of which $800 million would have
expired in 2008 and $800 million would have expired in 2010. The new facility
may be used for general corporate purposes including the backstop of
commercial paper. The new facility has no substantial changes in terms and
conditions other than reduced pricing and extended term, which reflects
favourable market conditions and TELUS' financial position. Notably, the
May 2012 maturity date of the new credit facility extends beyond the maturity
date of TELUS' June 2011 Notes.
    At December 31, 2007, TELUS had available liquidity exceeding
$1.3 billion from unutilized credit facilities, consistent with the Company's
objective of maintaining at least $1 billion of unutilized liquidity.

    
    TELUS Credit Facilities at December 31, 2007
    -------------------------------------------------------------------------
                                                     Out-   Backstop
                                                  standing    for
                                                   undrawn   commer-
                                                   letters    cial     Avai-
                                                      of     paper     lable
    ($ in millions)      Expiry    Size    Drawn    credit  program liquidity
    -------------------------------------------------------------------------
    Five-year
     revolving
     facility(1)    May 1, 2012  2,000.0        -   (103.7)  (587.2) 1,309.1
    Other bank
     facilities               -     77.3        -     (2.9)       -     74.4
    -------------------------------------------------------------------------
    Total                     -  2,077.3        -   (106.6)  (587.2) 1,383.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
     (1) Canadian dollars or U.S. dollar equivalent.
    -------------------------------------------------------------------------
    

    TELUS' revolving credit facility contains customary covenants including a
requirement that TELUS not permit its consolidated Leverage Ratio (debt to
trailing 12-month EBITDA) to exceed 4.0:1 (approximately 1.7:1 at December 31,
2007) and not permit its consolidated Coverage Ratio (EBITDA to Interest
Expense on a trailing 12-month basis) to be less than 2.0:1 (approximately
8.4:1 at December 31, 2007) 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 agreement 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 facility is not
contingent on the maintenance by TELUS of a specific credit rating.
    On February 12, 2008, TELUS Corporation accepted a committed term sheet
from a small group of Canadian banks to provide a new $700 million 364-day
revolving credit facility. The provision of this new facility provides
incremental liquidity to TELUS and allows TELUS to continue to meet one of its
financial objectives, which is to maintain $1 billion in liquidity at all
times. TELUS expects to fully document the new facility by the end of the
first quarter of 2008. Availability of the new facility is conditional on
entering into the final definitive documentation, including customary
representations and warranties and no existing default or events of default.
    The new credit facility is unsecured and bears interest at Canadian prime
and Canadian bankers' acceptances rates, plus applicable margins. The
financial ratio tests in the new facility will be substantially the same as
those in the existing $2 billion syndicated facility, which states that the
borrower will not permit its net debt to operating cash flow ratio to exceed
4.0:1 and may not permit its operating cash flow to interest expense ratio to
be less than 2.0:1, each as defined.

    
    4.6  Accounts receivable sale
    

    On July 26, 2002, TCI, a wholly owned subsidiary of TELUS, entered into
an agreement, which was amended September 30, 2002, and March 1, 2006, and
November 30, 2006, with an arm's-length securitization trust associated with a
major Schedule I bank, under which TCI is able to sell an interest in certain
of its trade receivables up to a maximum of $650 million. 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.
This revolving-period securitization agreement had an initial term ending
July 18, 2007; the November 30, 2006 amendment resulted in the term being
extended to July 18, 2008.
    TCI is required to maintain at least a BBB (low) credit rating by
Dominion Bond Rating Service (DBRS) 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 February 13, 2008.

    
    -------------------------------------------------------------------------
    Balance of
     proceeds from
     securitized       2007   2007   2007   2007   2006   2006   2006   2006
     receivables        Dec.  Sept.  June    Mar.   Dec.  Sept.  June    Mar.
    ($ millions)         31     30     30     31     31     30     30     31
    -------------------------------------------------------------------------
                      500.0  550.0  500.0  150.0  500.0  350.0  535.0  400.0
    -------------------------------------------------------------------------


    4.7  Credit ratings
    

    On February 26, 2007, Moody's Investors Service upgraded its rating for
TELUS by one level to Baa1 (equivalent to BBB+) and assigned an outlook of 
stable. On March 5, 2007, DBRS upgraded the rating of TELUS Notes to A (low)
from BBB (high) and confirmed its A (low) ratings for TCI, all with a stable
trend. In addition, DBRS confirmed its preliminary rating of R-1 (low) for
TELUS' commercial paper program.
    On June 21, 2007, TELUS announced that it was in non-exclusive
discussions to acquire BCE. This was followed by a second announcement by
TELUS on June 26 that inadequacies in BCE's bid process did not make it
possible for TELUS to submit an offer as part of the strategic review process
announced by BCE. Following the June 21 announcement, DBRS placed the credit
ratings for TELUS Corporation and TCI "under review with developing
implications." Similarly, Moody's affirmed its Baa1 rating for TELUS and
changed its outlook to "developing" and Standard and Poors (S&P) placed the
credit ratings of TELUS Corporation and TCI on "credit watch with negative
implications."
    Following TELUS' earnings announcement on August 3, 2007, in which
management indicated that TELUS did not intend to make a competing offer for
BCE, DBRS affirmed its ratings and restored its trend to stable. On August 7,
Moody's affirmed its ratings and restored the outlook to stable. On
September 26, S&P removed TELUS and TCI from credit watch, affirmed the
ratings for TELUS and TCI and changed the outlook to stable.
    In late November, after TELUS' announced offer for Emergis Inc. and the
Federal Industry Minister's announcement of AWS spectrum auction framework,
DBRS, FitchRatings and S&P confirmed their respective ratings for TELUS and
TCI, with stable outlooks or trends.

    
    -------------------------------------------------------------------------
    Credit rating summary              DBRS        S&P     Moody's     Fitch
    -------------------------------------------------------------------------
    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. (TCI)
      Debentures                     A (low)      BBB+           -      BBB+
      Medium-term notes              A (low)      BBB+           -      BBB+
      First mortgage bonds           A (low)        A-           -         -
    -------------------------------------------------------------------------

    5.   Risks and risk management
    

    The following are significant updates to the risks described in
Section 10 of TELUS' 2006 annual and 2007 interim first, second and third
quarter Management's discussions and analyses.

    
    5.1  Regulatory
    

    The outcome of any existing or future regulatory reviews, proceedings,
court appeals, Federal Cabinet appeals or other regulatory developments could
have a material impact on TELUS' operating procedures, costs and revenues.

    
         Future availability of wireless spectrum
    

    Between 2008 and 2011, Industry Canada has signaled intentions to auction
spectrum for mobile wireless services at 1.7/2.1 GHz (AWS), 2.5/2.6 GHz and at
700 MHz. The recent 2007 Policy Framework for the Auction for Spectrum
Licences for Advanced Wireless Services suggests an AWS auction of 105 MHz in
May 2008 and conditions favourable to entrants, such as spectrum set asides
(40 MHz) and mandated roaming and mandated tower and site sharing under terms
and conditions that could be unfavourable to TELUS. While this is expected to
increase competitive intensity, the number and viability of new entrants in
the market remains uncertain because of build-out costs, capital market
conditions and restrictions on foreign investment. The presence of new
regional or national entrants in the marketplace may negatively affect the
future market share of wireless incumbents. TELUS is participating in a round
of public comments and the government is expected to announce the final rules
for the spectrum auction at the end of March 2008.

    
         Wireless Interconnection
    

    The CRTC has listed Wireless Interconnection/Bill and Keep on its agenda
of possible regulatory activities for 2008. Wireless carriers currently
interconnect under a wireless service provider (WSP) tariff and pay the
telephone company for origination and termination of traffic. The CRTC may
implement a bill and keep alternative similar to the interconnection regime
for competitive local exchange carriers (CLECs), which could reduce future
revenue. CLEC bill and keep status also entails obligations under the
Commission's rules for local exchange carriers. While there is no guarantee
that the CRTC will initiate this proceeding in 2008, or implement a bill and
keep regime for WSPs, there is a risk that this will occur.

    
         Local forbearance
    

    On November 23, the CRTC issued decisions granting forbearance from
regulation of incumbent residential local services provided by TELUS in 40
additional exchanges in B.C., Alberta and Eastern Quebec. Also on November 23,
2007, the CRTC eliminated bundling rules, which previously required TELUS to
obtain tariff approval to offer bundles that contained both regulated and
forborne services. The rule no longer applies to bundles of services where the
retail price at least equals the sum of the rates of its tariffed elements.
    Overall, TELUS has obtained forbearance for local residential service in
63 exchanges in B.C., Alberta and Quebec (about 75% of residential lines in
non-high-cost serving areas). TELUS has also obtained forbearance for local
business service in 35 exchanges in B.C., Alberta and Quebec (about two-thirds
of business lines).
    As a result of the forbearance granted for local residential and business
services, TELUS believes it has significantly enhanced flexibility in pricing,
promotions and bundling to compete with other providers of these services.
However, TELUS has no assurance that it will be able to prevent further market
share loss in these markets or that it will be able to obtain forbearance in
other exchanges where it is facing competition for residential and business
customers.

    
         Wireless number portability
    

    Phase one of WNP (sometimes referred to as local number portability, or
LNP) was implemented successfully on March 14, 2007 in the majority of
populated centres in Canada by the wireless carriers, including TELUS.
Implementation of WNP in most remaining areas was achieved in September 2007.
In 2007, WNP porting was a minor source of net positive subscriber loading for
TELUS, but contributed to a higher churn level and greater wireless customer
retention costs. Subscriber churn and retention costs may be permanently
higher in the future.
    WNP could also lead to an increase in the migration of network access
lines to wireless services, as well as present opportunities for TELUS to
market more effectively in the business/enterprise market in Central Canada
where TELUS has a lower market share than its competitors. There can be no
assurance that this will be the case.

    
         Review of certain Phase II costing issues
    

    In November 2007, the CRTC completed the proceeding to review cost
calculation methods, referred to as Phase II costs, for regulated
telecommunications services provided by ILECs and cable companies (under
Public Notice 2007 4). The decision is expected in the first quarter of 2008.
TELUS has proposed that Phase II costs continue to follow general principles
of causality, that all forward-looking costs need to be categorized
appropriately, and that costs should be based on individual company
measurements. Unless the CRTC determines otherwise on all these proposals, the
outcome of this proceeding would not be expected to have a material adverse
impact on TELUS in the near term.

    
         Essential services
    

    In December 2007, the CRTC completed an extensive review of the
regulatory framework for essential services (wholesale services) initiated by
Public Notice 2006-14. In this proceeding, the CRTC reviewed the current
definition of an essential service and the classifications and pricing
principles for these services and non-essential services made available by the
ILECs to their competitors. A CRTC decision in this proceeding is expected by
May 2008. TELUS has no assurance that the regulatory regime for the provision
of essential and non-essential services to competitors will not be more
onerous than the current regime.

    
    5.2  Technology risks
    

    The technology standards for broadband access over copper loops to
customer premises are evolving rapidly. This evolution enables higher
broadband access speeds and is fuelled by user appetite for faster
connectivity, the threat of increasing competitor capabilities and offerings,
and the desire of service providers like TELUS to offer new services, such as
IP TV, that require greater bandwidth. The introduction of technologies and
the pace of adoption could result in increased requirements for capital
funding not currently planned.
    With Canada's large geographic area and relatively small population of
33 million, the deployment of emerging wireless technologies may require two
or more Canadian wireless carriers to deploy the same future technology
choices and sign new network sharing agreements to reduce costs and speed up
deployment.

    
    5.3  Process risks

         TELUS systems and processes could negatively impact financial
         results and customer service - Billing/revenue assurance and
         efficiency programs
    

    TELUS converted all of its wireline consumer customers in Alberta to a
new integrated billing and client care system in late-March 2007. The new
system includes re-engineered processes for order entry, pre-qualification,
service fulfillment and assurance, customer care, collections/credit, customer
contract and information management. During the second quarter, and to a
lesser degree, in the third quarter of 2007, initial system difficulties were
experienced that reduced order processing capability, causing increased
installation backlogs and higher costs for extra call centre resources in
order to maintain service levels. Additional post-conversion expenses were
approximately $16 million and $8 million, respectively, in the second and
third quarters. The critical billing function performed as expected and order
processing returned to business-as-usual levels by year-end. There can be no
assurance that this undertaking will not negatively impact, on an extended
basis, TELUS' customer service levels, competitive position and financial
results.
    Additional phases of development and conversion are planned over the next
several years including a similar system conversion for B.C. consumers planned
for the first half of 2008. Although the Company expects to benefit from
lessons learned in the Alberta conversion, the legacy systems in B.C. are
sufficiently different, such that there is no assurance that the B.C.
conversion will be successful. For the B.C. billing system conversion, TELUS
plans to conduct a larger pilot than the one used in Alberta, with larger
number of customers for a longer duration and a wider range customer profiles,
prior to completing the full conversion.
    This customer-focused project required extensive system development and,
in itself, presents future implementation risks due to the complexity of the
implementation task and resource constraints, as well as reliance on newly
developed third party software code. Significant time delays in implementing
new phases of this system, or system instability, could negatively impact
TELUS' competitive ability to quickly and effectively launch new products,
services and promotions; achieve and maintain a competitive cost structure;
and deliver better information and analytics to management.

    
         Integration of acquisitions
    

    Post-merger and post-acquisition activities, including reviewing and
aligning accounting policies, employee transfers/moves, information systems
integration, optimizing service offerings and establishing control over new
operations may not be handled efficiently and effectively. This could
negatively impact service levels, competitive position and financial results.
There can be no assurance that the expected revenue, operating expenses,
restructuring charges, savings, capital expenditure levels and income taxes
from the January 2008 acquisition of Emergis will be as anticipated by
management and as reflected in the Company's 2008 financial targets.
    Risk mitigation: TELUS has a team that performs a post-merger integration
(PMI) function. The PMI team applies an integration model, based on learnings
from numerous previous post-acquisition integrations, which enhances TELUS'
ability to accelerate the standardization of business processes and preserve
the unique qualities of acquired operations. It begins with rigorous
strategic, pre-close analysis and planning, and continues after closing with a
focused, simultaneous execution of this plan against competing critical
imperatives. Initial plans are re-evaluated and assessed regularly based on
direct and timely feedback received from the integration teams. For example,
an integration team and governance structure has been established with senior
team members from both TELUS and Emergis Inc. to oversee and execute the
integration plan with a view to minimizing negative impacts on their
operations. Functional integration teams have been established with members
from both companies to deliver interlocking charters and objectives.

    
    5.4  Litigation and legal matters

         Emergis Inc.
    

    In April 2005, MultiPlan, Inc. filed in federal court in New York a
complaint seeking, among other relief, compensation in excess of US$64 million
for damages allegedly incurred in connection with its purchase of the U.S.
health subsidiary of Emergis Inc. The complaint alleges a variety of claims
relating to the sales agreement. Part of the complaint related to an
indemnification for alleged claims by hospitals amounting to US$14 million.
MultiPlan, Inc. has advised Emergis Inc. that it has settled these hospital
claims for an amount of US$750,000.
    In July 2005, Emergis filed a motion to dismiss certain claims in the
complaint. This motion was substantially granted by the court on June 11,
2007, and a number of claims were dismissed. However, the court granted
Multiplan, Inc. the right to file an amended complaint to correct, if
possible, the deficiencies highlighted in the court judgment regarding these
claims. An amended complaint was filed on July 20, 2007. No new facts have
been alleged. On August 20, 2007, Emergis Inc. filed a motion to dismiss these
claims that were modified in the amended complaint. In October 2007, this
motion was fully briefed. It is uncertain as to when the court will rule on
this motion.
    Although the outcome cannot be reasonably determined at this time,
Emergis Inc. management remains of the view that the allegations are without
merits. Should the ultimate resolution of this action differ from Emergis Inc.
management's assessments and assumptions, a material adjustment to the
Company's financial position and the results of its operations could result;
management's assessments and assumptions include that a reliable estimate of
the exposure cannot be made at this stage of the lawsuit.

    
         Intellectual property and proprietary rights
    

    Technology evolution also brings additional legal risks and
uncertainties. The intellectual property and proprietary rights of owners and
developers of hardware, software, business processes, and other technologies
may be protected under statute, such as patent, copyright and industrial
design legislation, or under common law, such as trade secrets. With the
growth and development of technology-based industries, the value of these
intellectual property and proprietary rights has increased. Significant
damages may be awarded in intellectual property infringement claims advanced
by rights holders. In addition, defendants may incur significant costs to
defend such claims and that possibility may prompt defendants to settle claims
more readily in part to mitigate those costs. Both of these factors may incent
intellectual property rights holders to more aggressively pursue infringement
claims.
    Given the vast array of technologies and systems used by TELUS or its
affiliates to deliver their products and services, and with the rapid change
and complexity of such technologies, disputes over intellectual property and
proprietary rights can reasonably be expected to increase. As a user of
technology, TELUS and its affiliates receive from time to time communications,
ranging from solicitations to demands and legal actions, from third parties
claiming ownership rights over intellectual property used by TELUS and its
affiliates and asking them to pay a settlement or licensing fees for the
continued use of such intellectual property. There can be no assurance that
TELUS and its affiliates will not be faced with significant claims based on
the alleged infringement of intellectual property rights, whether such claims
are based on a legitimate dispute over the validity of the intellectual
property rights or their infringement, or whether such claims are advanced
against TELUS or its affiliates for the primary purpose of extracting a
settlement. TELUS and its affiliates may incur significant costs in defending
infringement claims, and may suffer significant damages and lose the right to
use technologies that are essential to their operations should any
infringement claim prove successful.

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

    6.1  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 6.4 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. EBITDA (as adjusted) excludes a charge for introducing a net-cash
settlement feature for share option awards granted prior to 2005. EBITDA (as
adjusted) is regularly reported to the chief operating decision-maker and
corresponds to the definition used in setting TELUS' 2007 EBITDA targets and
revised guidance.

    
    -------------------------------------------------------------------------
                                          Quarters ended        Years ended
                                            December 31         December 31
                                                          -------------------
                                          2007      2006      2007      2006
    ($ millions)                               (restated)          (restated)
    -------------------------------------------------------------------------
    Net income                           400.1     240.5   1,257.9   1,145.0
      Other expense (income)               5.8      10.1      36.1      28.0
      Financing costs                    109.1     133.6     440.1     504.7
      Income taxes                       (18.0)     91.6     233.6     353.2
      Non-controlling interest             2.1       1.4       6.6       8.5
    -------------------------------------------------------------------------
    Operating income                     499.1     477.2   1,974.3   2,039.4
      Depreciation                       386.2     353.2   1,354.7   1,353.4
      Amortization of intangible assets   68.1      53.9     260.3     222.2
    -------------------------------------------------------------------------
    EBITDA                               953.4     884.3   3,589.3   3,615.0
    Charge in 2007 for introducing a
     net-cash settlement feature for
     share option awards granted
     prior to 2005                         0.6         -     168.7         -
    -------------------------------------------------------------------------
    EBITDA (as adjusted)                 954.0     884.3   3,758.0   3,615.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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        Years ended
                                            December 31         December 31
                                       --------------------------------------
                                          2007      2006      2007      2006
    ($ millions)                               (restated)          (restated)
    -------------------------------------------------------------------------
    EBITDA                               953.4     884.3   3,589.3   3,615.0
    Capital expenditures                (472.5)   (415.2) (1,770.3) (1,618.4)
    -------------------------------------------------------------------------
    EBITDA less capital expenditures     480.9     469.1   1,819.0   1,996.6
    Charge in 2007 for introducing a
     net-cash settlement feature for
     share option awards granted
     prior to 2005                         0.6         -     168.7         -
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     capital expenditures                481.5     469.1   1,987.7   1,996.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6.2  Free cash flow
    

    The Company 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, which are
disclosed 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 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        Years ended
                                            December 31         December 31
                                       --------------------------------------
                                          2007      2006      2007      2006
    ($ millions)                               (restated)          (restated)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                          817.4     747.2   3,171.7   2,803.7
    Cash (used) by investing
     activities                         (471.5)   (422.0) (1,771.6) (1,675.2)
    -------------------------------------------------------------------------
                                         345.9     325.2   1,400.1   1,128.5

    Net employee defined benefit
     plans expense                        23.1       7.2      92.1      30.1
    Employer contributions to employee
     defined benefit plans                25.3      19.0      92.8     123.3
    Amortization of deferred gains on
     sale-leaseback of buildings,
     amortization of deferred charges
     and other, net                       (3.1)    (39.2)     (4.2)    (51.7)
    Reduction (increase) in securitized
     accounts receivable                  50.0    (150.0)        -         -
    Non-cash working capital changes
     except changes from income tax
     payments (receipts), interest
     payments (receipts) and
     securitized accounts receivable,
     and other                           (12.4)     62.1      (8.9)    309.0
    Acquisitions                             -       4.5         -      49.0
    Proceeds from the sale of
     property and other assets            (2.1)        -      (7.5)    (14.9)
    Other investing activities             1.1       2.3       8.8      22.7
    -------------------------------------------------------------------------
    Free cash flow                       427.8     231.1   1,573.2   1,596.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
                                          Quarters ended        Years ended
                                            December 31         December 31
                                       --------------------------------------
                                          2007      2006      2007      2006
    ($ millions)                               (restated)          (restated)
    -------------------------------------------------------------------------
    EBITDA                               953.4     884.3   3,589.3   3,615.0

    Restructuring costs net
     of cash payments                      2.8      (6.2)    (18.2)     (4.0)
    Share-based compensation             (30.6)    (10.2)     95.8      25.1
    Donations and securitization fees
     included in Other expense            (9.1)     (8.5)    (36.7)    (29.1)
    Cash interest paid                  (171.2)   (218.5)   (454.4)   (516.1)
    Cash interest received                32.7       0.3      41.6      24.2
    Income taxes received (paid),
     less investment tax credits
     received that were previously
     recognized in either EBITDA or
     capital expenditures, and other     122.3       5.1     126.1      99.3
    Capital expenditures                (472.5)   (415.2) (1,770.3) (1,618.4)
    -------------------------------------------------------------------------
    Free cash flow                       427.8     231.1   1,573.2   1,596.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    6.3  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.

    COA per gross subscriber addition to lifetime revenue is calculated as
cost of acquisition for new subscribers divided by expected lifetime revenue
of the subscriber base, expressed as a percentage.

    EBITDA excluding COA is a measure of operational profitability normalized
for the period costs of adding new customers.

    Lifetime revenue per subscriber is calculated as ARPU divided by the
churn per month. The metric provides a means of estimating the average total
revenue expected from existing subscribers.

    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.

    
    6.4  Definition of liquidity and capital resource measures
    

    Dividend payout ratio is defined as the most recent quarterly dividend
declared per share multiplied by four and divided by basic earnings per share
for the 12-month trailing period. 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.

    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 $20.4 million and $67.8 million, respectively, for
the years ended December 31, 2007 and 2006.

    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. The 12-month period
ended December 31, 2006 includes an accrual for estimated costs to settle a
lawsuit.

    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 December 31
                                                         --------------------
                                                              2007      2006
    ($ millions)                                                   (restated)
    -------------------------------------------------------------------------
    Long-term debt including current portion               4,588.9   4,908.2
    Debt issuance costs netted against long-term debt         30.4      19.9
    Derivative liability                                   1,179.5     838.5
    Accumulated other comprehensive income amounts
     arising from financial instruments used to manage
     interest rate and currency risks associated with
     U.S. dollar denominated debt                           (137.3)        -
    Cash and temporary investments                           (19.9)     11.5
    Proceeds from securitized accounts receivable            500.0     500.0
    -------------------------------------------------------------------------
    Net debt                                               6,141.6   6,278.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    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, which at December 31, 2007, is in
respect of the US$1,925.0 million debenture maturing June 1, 2011. At
December 31, 2006, the derivative liability was in respect of the 2011
debenture and the US$1,166.5 million debenture that matured June 1, 2007.
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. Losses recorded on the redemption of long-term debt are included in
net interest cost. Net interest costs for the years ended December 31, 2007
and 2006 are equivalent to reported quarterly financing costs over those
periods.

    Total capitalization - book value excludes accumulated other
comprehensive income or loss and is calculated as follows.

    
    -------------------------------------------------------------------------
                                                           As at December 31
                                                         --------------------
                                                              2007      2006
    ($ millions)                                                   (restated)
    -------------------------------------------------------------------------
    Net debt                                               6,141.6   6,278.1
    Non-controlling interests                                 25.9      23.6
    Shareholders equity                                    6,926.2   7,048.0
    Accumulated other comprehensive loss                     103.5         -
    -------------------------------------------------------------------------
    Total capitalization - book value                     13,197.2  13,349.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Media relations: Allison Vale, (416) 629-6425,
allison.vale@telus.com; Investor relations: Robert Mitchell, (416) 279-3219,
ir@telus.com

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TELUS Corporation

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