TELUS Reports Fourth Quarter Results



    2008 results consistent with latest guidance

    VANCOUVER, Feb. 13 /CNW/ - TELUS Corporation today reported fourth
quarter 2008 revenue of $2.45 billion, an increase of five per cent from a
year ago. The performance was driven primarily by seven per cent growth in
wireless revenue and 13 per cent growth in wireline data revenue, more than
offsetting declines in local and long distance wireline revenues. Consolidated
earnings before interest, taxes, depreciation and amortization (EBITDA),
decreased by $16 million due to increased investments in operating efficiency
initiatives that resulted in restructuring costs increasing by $32 million.
    Net income in the quarter was $285 million and earnings per share (EPS)
were $0.90, down 29 per cent and 27 per cent respectively. Net income and EPS
included favourable tax-related adjustments of approximately $32 million or 10
cents per share this quarter, compared to $143 million or 44 cents in the
quarter a year ago. Excluding tax related adjustments in 2007 and 2008, net
income and EPS were relatively unchanged.
    For the full year, TELUS reported revenue growth of six per cent to $9.65
billion and five per cent growth in EBITDA. EBITDA growth when adjusted to
exclude the 2007 net-cash settlement feature expense was one percent for the
year. Excluding the $882 million paid for AWS wireless spectrum licences,
TELUS generated free cash flow of $1.2 billion, which reflected a five per
cent increase in capital expenditures and lower cash tax recoveries. TELUS met
two of four original consolidated 2008 targets and three of four segmented
targets (set in December 2007). Consolidated revenue and capital expenditure
guidance was achieved, but a variance in wireless EBITDA caused a small miss
in consolidated EBITDA and a 3.7 per cent shortfall to targeted EPS.

    
    FINANCIAL HIGHLIGHTS
    -------------------------------------------------------------------------
    C$ in millions, except per share amounts        3 months ended
                                                      December 31
    (unaudited)                                     2008      2007  % Change
    -------------------------------------------------------------------------
    Operating revenues                             2,454     2,330       5.3
    EBITDA(1)                                        937       953      (1.7)
    Income before income taxes and
     non-controlling interest                        373       384      (2.9)
    Net income(2)                                    285       400       (29)
    Net income (excluding income
     tax-related adjustments)(2)                     253       257      (1.6)
    Earnings per share (EPS), basic(2)              0.90      1.23       (27)
    Cash provided by operating activities            747       818      (8.7)
    Capital expenditures                             631       472        34
    Free cash flow(3)                                 61       379       (84)

    (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) Net income and EPS for the three month period in 2008 included
        favourable income tax-related adjustments of $32 million or 10 cents
        per share, compared to $143 million or 44 cents for the same period
        in 2007.
    (3) See Section 6.2 of Management's review of operations.
    

    "Fourth quarter results reflect our previously communicated intent to
materially augment our ongoing operating efficiency program initiated in 2001,
and accordingly restructuring costs tripled in 2008 to $59 million, including
$38 million this quarter alone," said Darren Entwistle, TELUS president and
CEO. "In addition, increased capital expenditures reflect TELUS' capability to
fund future strategic growth initiatives such as the start of the joint build
of a next generation wireless network and implementation of large managed data
network contracts. The very fact we are able to invest in value-creating
projects during this time of economic uncertainty speaks to the efficacy and
robustness of our national growth strategy."
    "The very fact we are able to invest in value-creating projects such as a
new wireless network across Canada during this time of economic uncertainty
and change in our industry speaks both to the efficacy of our national growth
strategy focused on data solutions and to our company's financial strength,"
said Mr. Entwistle.
    "These results are consistent with our most recent annual guidance for
2008. TELUS is entering 2009 with enviable financial strength and balance
sheet flexibility, supported by long-standing, prudent financial policies and
strong investment grade ratings," said Robert McFarlane, TELUS executive
vice-president and CFO.

    
    -------------------------------------------------------------------------
    This news release contains statements about expected future events
    and financial and operating results of TELUS that are forward-looking. By
    their nature, forward-looking statements require the Company to make
    assumptions and are subject to inherent risks and uncertainties. There is
    significant risk that the forward-looking statements will not prove to be
    accurate. Readers are cautioned not to place undue reliance on forward-
    looking statements as a number of factors could cause actual future
    results and events to differ materially from that expressed in the
    forward-looking statements. Accordingly this news release is subject to
    the disclaimer and qualified by the assumptions (including assumptions
    for 2009 targets and share purchases), qualifications and risk factors
    referred to in the Management's discussion and analysis in the 2007
    annual report, the 2008 first, second and third quarter reports, and the
    2008 fourth quarter Management's review of operations, and in other TELUS
    public disclosure documents and filings with securities commissions in
    Canada (on www.sedar.com) and in the United States (on EDGAR at
    www.sec.gov). Except as required by law, TELUS disclaims any intention or
    obligation to update or revise forward-looking statements, and reserves
    the right to change, at any time at its sole discretion, its current
    practice of updating annual targets and guidance.
    -------------------------------------------------------------------------


    OPERATING HIGHLIGHTS

    TELUS wireless

    -   External revenues increased by $77 million or 6.9% to $1.2 billion in
        the fourth quarter of 2008, compared with the same period in 2007
    -   Wireless data revenue increased $72 million or 55% due to the
        continued adoption of full function smartphones and increased
        adoption of data services including messaging and social networking
    -   ARPU (average revenue per subscriber unit per month) declined by 2.4%
        to $62.16 compared to the same quarter a year ago. The fast-growing
        data component of $11.17, represented 18% of ARPU, while the voice
        component continued to decline as a result of competitive pricing
        pressure
    -   Net subscriber additions were 148,000 representing a decrease of 8.6%
        from the same period a year ago. Postpaid net additions were 119,000,
        an increase of 11%, while prepaid loading decreased by 47% to 29,000.
        Postpaid additions represented 80% of total net additions
    -   EBITDA of $492 million was unchanged over the fourth quarter of 2007,
        as increased network revenue was offset by higher cost of acquisition
        and retention expenses, and network and other expenses to support the
        10% growth in the wireless subscriber base, higher data revenue and
        the launch of the Koodo basic service brand. Retention expenses
        increased due to higher retention volumes and continued increases in
        smartphone adoption
    -   Cost of acquisition per gross addition increased 10% year-over-year
        to $388 reflecting slightly higher seasonal advertising, launch
        advertising for the BlackBerry Storm for which only limited shipments
        were received in 2008, and higher subsidies on smartphones in
        response to competitor pricing
    -   Blended monthly subscriber churn increased slightly to 1.62% from
        1.59% a year ago
    -   Simple cash flow (EBITDA less capital expenditures) decreased by 28%
        to $256 million in the quarter due to planned higher capital spending
        to support the start of the HSPA network build-out.

    TELUS wireline

    -   External revenues increased by $47 million or 3.9% to $1.27 billion
        in the fourth quarter of 2008, when compared with the same period in
        2007, as data and other growth more than offset the moderate declines
        in local and long distance revenues
    -   Data revenues increased by $62 million or 13% due to higher revenues
        primarily from the January acquisition of Emergis, increased enhanced
        data and hosting services, as well as high-speed Internet and TELUS
        TV subscriber growth. When adjusted for Emergis and mandated
        regulatory adjustments, underlying data growth was approximately 3%
    -   TELUS added 19,000 net high-speed Internet subscribers, a 27%
        decrease from a year ago, due to increased competition and a maturing
        market
    -   EBITDA of $445 million declined by $16 million or 3.5% due primarily
        to higher restructuring costs, increased cost of sales for TELUS TV,
        and upfront costs for implementing large complex enterprise customer
        services
    -   Network access lines (NALs) declined by 36,000 in the quarter, and
        3.6% from a year ago. Consistent with past experience, residential
        NAL losses include the effect of ongoing competitive activity and
        wireless substitution, partially mitigated by an increase in business
        access lines
    -   Simple cash flow (EBITDA less capital expenditures) decreased
        $74 million to $50 million in the quarter due to lower EBITDA and a
        $58 million increase in capital expenditures. The increase in capital
        primarily relates to supporting new enterprise customers and
        enhancing the broadband network.

    Corporate and Business Developments

    TELUS awarded Government of Quebec contract
    

    TELUS was selected by the Government of Quebec to deliver and manage the
province's next generation data network, the Réseau intégré de
télécommunication multimédia (RITM), through a competitive bid process. This
provincial infrastructure will provide data connections to some 160 ministries
and agencies, and 350 health institutions across the province. The initial
contract term is five years with the option to extend for another three years,
and a transition of two additional years. The contract is expected to be worth
up to approximately $900 million over 10 years.
    This project will consolidate the Government of Quebec's two largest
existing telecommunications networks, the Réseau de télécommunication
multimédia de l'administration publique (RETEM) and the Réseau de
télécommunications sociosanitaire (RTSS), into one that is secure, robust and
designed to accommodate the constantly growing needs of its new electronic
health and e.government services plans. In addition, the Government of Quebec
will make the RITM available to all provincial public and parapublic
institutions including municipalities and educational institutions.

    TELUS named 2008 Health Company of the Year

    The Information Technology Association of Canada named TELUS the 2008
Health Company of the Year. The award honours TELUS as a distinguished
for-profit healthcare information technology company that has demonstrated
excellence in the Canadian health informatics industry within the past 12
months. TELUS was nominated as a private sector company that has excelled in
corporate initiatives and client satisfaction, delivering exceptional quality
of service.

    Sunnybrook Health Sciences Centre contracts with TELUS

    In January, TELUS Health Solutions announced a multi-million dollar deal
with Sunnybrook Health Sciences Centre to upgrade the hospital's existing
electronic medical record system to TELUS' advanced web-based platform. The
new system, Oacis, allows healthcare providers to capture and display every
aspect of patient care from admission to discharge in one simple platform. At
Sunnybrook the technology has been used to support a patient-controlled
life-long health record.
    TELUS has also acquired the intellectual property rights for MyChart,
Sunnybrook Health Science's innovative electronic continuity-of-care record
system for patients. Personal electronic health records allow patients to
manage their health by giving them immediate access to their personal health
information as well as improving the information exchange between them and
their healthcare providers. MyChart currently has over 1,000 users including
doctors, clinicians, patients and family members.

    TELUS acquires Remote Patient Monitoring solution

    In January, TELUS announced the strategic acquisition of the rights to a
Remote Patient Monitoring solution developed by Quebec-based New IT
Technologies. The system gives Canadians receiving homecare tools to stay in
touch with their healthcare providers, and for those providers to actively
monitor critical data like blood pressure, insulin levels, vital signs
medication and fluid intakes. Patient information can be communicated via
phone, Internet and through wireless devices.

    TELUS inaugurates new call centre in Rimouski, Quebec

    After transforming four local offices into future friendly work spaces
for its 1,300 team members in Rimouski, TELUS inaugurated a new call centre in
the Edifice TELUS T.-A.-Bernier in early February. The remodelled location is
now home to 250 team members, most of whom are wireline customer care agents
for TELUS TV, Internet and home phone service subscribers. By uniting these
teams, TELUS has added capacity in its wireless call centre. TELUS remains a
leading employer for the region.

    
    TELUS expands international call centre capabilities providing
    Spanish-language support
    

    TELUS is opening a contact centre in Clark County, Nevada this spring to
provide bilingual English and Spanish language service for U.S.-based
corporate clients. We also augmented our contact centre outsourcing
capabilities recently by acquiring a minority investment in a company with
call centre operations in three Central American countries. These new sites
augment TELUS' existing international business process outsourcing (BPO)
capabilities allowing TELUS to offer clients Spanish-English language call
centre support from a variety of diverse locations, thereby enhancing TELUS'
ability to offer services from a variety of time zones and shift calls to
alternate sites in the case of a business interruption affecting one area of
the world.
    TELUS already provides a broad suite of call centre and BPO services to
some of the world's largest telecommunications companies, utilities, financial
services corporations, and consumer electronic companies. As the contact
centre and BPO industry evolves, more corporations are seeking one service
provider to meet their business needs. Spanish-English language service is
increasingly a prerequisite for meeting the needs of U.S.-based multinational
clients of TELUS and the new investments improve TELUS' competitive offering
for this growing line of business.

    
    Wireless Products & Services

    TELUS brings Canadians the BlackBerry Storm smartphone
    

    In December, TELUS launched the much anticipated touchscreen BlackBerry
Storm 9530 smartphone with exclusive content from independent music label Arts
& Craft. The BlackBerry Storm smartphone's SurePress touchscreen depresses
slightly when pressed, giving customers tactile feedback and making navigation
and typing more precise. It also sports the features and reliability
BlackBerry smartphone users have come to expect - easy-to-use email and
instant messaging, full HTML Internet browsing, and integrated access to
Facebook and MySpace, all on TELUS' 3G network. Limited supplies of the
handset received in mid-December, were boosted with further deliveries in late
December and January.
    Also in the quarter TELUS launched the BlackBerry Pearl 8130 in new
colours, red and blue, and the HTC Touch Pro with Windows Mobile 6.1.

    
    TELUS launches BlackBerry Curve 8350i smartphone with Push to Talk on
    Mike Network
    

    In January, TELUS launched the new BlackBerry Curve 8350i smartphone, the
ultimate productivity tool for professionals in the field and on the go who
need instant communication with their teams along with instant access to their
e-mail. The new smartphone is packed with functionality, including built-in
Wi-Fi and GPS, and combines the industry-leading BlackBerry communications and
multimedia capabilities with Mike's Direct Connect Push to Talk.

    Awards and Community Investment

    Aberdeen Group selects TELUS for case study

    In January, global research company the Aberdeen Group selected TELUS for
its annual case study on how technology improves learning. One company is
highlighted each year for best-in-class practices as a benchmark for other
companies. TELUS was selected from a pool of 535 companies due to its ability
to align business priorities with learning and performance development to
produce results. As a learning-focused technology company, TELUS is committed
to investing in professional growth for team members.

    
    Canadian Institute of Chartered Accountants presents TELUS with five
    awards
    

    In December, the Canadian Institute of Chartered Accountants (CICA)
presented TELUS with the Overall Award of Excellence for Corporate Reporting,
at its annual awards. The CICA judged TELUS' 2007 financial reporting package,
which includes its annual report to shareholders, information circular,
corporate social responsibility report and online investor relations and
corporate governance information, the best across all industries. TELUS also
received the Award of Excellence for Financial Reporting, the Award of
Excellence for Corporate Reporting in the Communications and Media category,
Honourable Mention for Corporate Governance Disclosure, and Honourable Mention
for Excellence in Sustainable Development Reporting.

    TELUS directory assistance service tops U.S. and Canadian ranking

    In November, TELUS was recognized by the Paisley Group, a directory
assistance and operator services consulting company, for the best wholesale
directory assistance service in both the United States and Canada. The Paisley
Group conducts annual audits of customer service in the directory assistance
industry and announced their 2008 results in November. In addition to being
ranked Canada's best national directory assistance provider for the sixth
consecutive year, and now the top wholesale directory assistance provider in
the U.S., TELUS won the 2008 award for Excellence in Automation in Directory
Information Services at the DIS Awards of Excellence and was named Best
Wholesaler at the Information Services Conference.

    TELUS and its team members donate $7.1 million to Canadian charities

    TELUS employees, retirees, board members and retailers pledged $3.4
million to more than 2,900 charities across Canada. As a result of these
pledges, $7.1 million will be donated in 2009 as part of the TELUS Employee
Charitable Giving program. TELUS team members and alumni make donations
through payroll and pension deduction to 48,000 eligible registered Canadian
charities such as the Canadian Cancer Society, BC Children's Hospital
Foundation and the Canadian Breast Cancer Foundation. TELUS matches donations
dollar for dollar to provide financial support for eligible charities. TELUS
and its team members have contributed $135 million to charitable and
not-for-profit organizations and volunteered more than 2.6 million hours of
service to local communities since 2000.

    TELUS employees contribute $1 million to juvenile diabetes research

    In November, to celebrate National Diabetes Awareness Month, the Juvenile
Diabetes Research Foundation (JDRF) announced nearly $8 million was raised in
2008 through the annual TELUS Walk to Cure Diabetes. Hundreds of TELUS
employees took part in the Walk, while TELUS matched each dollar they donated
for a total $1 million contribution towards research to find a cure for
juvenile diabetes. The annual TELUS Walk to Cure Diabetes is JDRF's biggest
fundraising event and took place in more than 60 communities across the
country this summer, raising money for much needed research to help the more
than 200,000 Canadians living with type 1 diabetes.

    National Junior Hockey's PK Subban joins HEROS kids in Toronto

    Adding to the excitement around Team Canada winning the IIHF World Junior
Championship, TELUS brought some of Canada's hockey heroes to children
involved in the HEROS (Hockey Education Reaching Out Society) program. In
January, the Toronto Community Board arranged for children at Brookview Middle
School, in the economically disadvantaged area of Jane and Finch, to meet Team
Canada hero PK Subban. PK communicated the importance of perseverance,
education and setting goals on and off the ice. TELUS is a sponsor of Hockey
Canada and a supporter of HEROS.

    Dividend Declaration

    The Board of Directors has declared a quarterly dividend of forty-seven
and one half cents ($0.475) Canadian per share on the issued and outstanding
Common shares and forty-seven and one half cents ($0.475) Canadian per share
on the issued and outstanding Non-Voting shares of the Company payable on
April 1, 2009 to holders of record at the close of business on March 11, 2009.
    This quarterly dividend represents a two and one half cent (ten cents
annualized) or 5.6 per cent increase from the $0.45 quarterly dividend paid on
April 1, 2008.

    About TELUS

    TELUS (TSX: T, T.A; NYSE:   TU) is a leading national telecommunications
company in Canada, with $9.7 billion of annual revenue and 11.6 million
customer connections including 6.1 million wireless subscribers, 4.2 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 $135 million to charitable and
not-for-profit organizations and volunteered more than 2.6 million hours of
service to local communities. Nine 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 and
    other comprehensive income                                    (unaudited)


    Periods ended December 31
    (millions except per              Three months           Twelve months
     share amounts)                 2008        2007        2008        2007
    -------------------------------------------------------------------------
    OPERATING REVENUES         $   2,454   $   2,330   $   9,653   $   9,074
    -------------------------------------------------------------------------
    OPERATING EXPENSES
      Operations                   1,479       1,371       5,815       5,465
      Restructuring costs             38           6          59          20
      Depreciation                   351         386       1,384       1,355
      Amortization of
       intangible assets              84          68         329         260
    -------------------------------------------------------------------------
                                   1,952       1,831       7,587       7,100
    -------------------------------------------------------------------------
    OPERATING INCOME                 502         499       2,066       1,974
      Other expense, net              11           6          36          36
      Financing costs                118         109         463         440
    -------------------------------------------------------------------------
    INCOME BEFORE INCOME
     TAXES AND NON-CONTROLLING
     INTEREST                        373         384       1,567       1,498
      Income taxes                    88         (19)        436         233
      Non-controlling interests        -           3           3           7
    -------------------------------------------------------------------------
    NET INCOME AND COMMON SHARE
     AND NON-VOTING SHARE
     INCOME                          285         400       1,128       1,258

    OTHER COMPREHENSIVE INCOME
      Change in unrealized fair
       value of derivatives
       designated as cash flow
       hedges                        (21)         18         (26)         82
      Foreign currency
       translation adjustment
       arising from translating
       financial statements of
       self-sustaining foreign
       operations                      4          (2)          2          (7)
      Change in unrealized fair
       value of
       available-for-sale
       financial assets                -          (1)         (2)         (1)
    -------------------------------------------------------------------------
                                     (17)         15         (26)         74
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME       $     268   $     415   $   1,102   $   1,332
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET INCOME PER COMMON
     SHARE AND NON-VOTING SHARE
      - Basic                  $    0.90   $    1.23   $    3.52   $    3.79
      - Diluted                $    0.89   $    1.22   $    3.51   $    3.76

    DIVIDENDS DECLARED PER
     COMMON SHARE AND
     NON-VOTING SHARE          $   0.475   $    0.45   $   1.825   $   1.575

    TOTAL WEIGHTED AVERAGE
     COMMON SHARES AND
     NON-VOTING SHARES
     OUTSTANDING
       - Basic                       318         326         320         332
       - Diluted                     319         328         322         334



    TELUS Corporation

    consolidated statements of financial position                 (unaudited)

    As at December 31 (millions)                            2008        2007
    -------------------------------------------------------------------------
    ASSETS
    Current Assets
      Cash and temporary investments, net              $       4   $      20
      Short-term investments                                   -          42
      Accounts receivable                                    966         711
      Income and other taxes receivable                       25         121
      Inventories                                            333         243
      Prepaid expenses and other                             220         200
      Derivative assets                                       10           4
    -------------------------------------------------------------------------
                                                           1,558       1,341
    -------------------------------------------------------------------------
    Capital Assets, Net
      Property, plant, equipment and other                 7,317       7,196
      Intangible assets subject to amortization            1,317         959
      Intangible assets with indefinite lives              3,849       2,967
    -------------------------------------------------------------------------
                                                          12,483      11,122
    -------------------------------------------------------------------------
    Other Assets
      Deferred charges                                     1,513       1,318
      Investments                                             42          39
      Goodwill                                             3,564       3,168
    -------------------------------------------------------------------------
                                                           5,119       4,525
    -------------------------------------------------------------------------
                                                       $  19,160   $  16,988
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Accounts payable and accrued liabilities         $   1,465   $   1,476
      Income and other taxes payable                         163           7
      Restructuring accounts payable and accrued
       liabilities                                            51          35
      Dividends payable                                      151           -
      Advance billings and customer deposits                 689         632
      Current maturities of long-term debt                     4           5
      Current portion of derivative liabilities               75          27
      Current portion of future income taxes                 459         504
    -------------------------------------------------------------------------
                                                           3,057       2,686
    -------------------------------------------------------------------------
    Long-Term Debt                                         6,348       4,584
    -------------------------------------------------------------------------
    Other Long-Term Liabilities                            1,295       1,718
    -------------------------------------------------------------------------
    Future Income Taxes                                    1,255       1,048
    -------------------------------------------------------------------------
    Non-Controlling Interests                                 23          26
    -------------------------------------------------------------------------
    Shareholders' Equity                                   7,182       6,926
    -------------------------------------------------------------------------
                                                       $  19,160   $  16,988
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    consolidated statements of cash flows                         (unaudited)


    Periods ended                     Three months           Twelve months
    December 31 (millions)          2008        2007        2008        2007
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income                       285   $     400   $   1,128   $   1,258
    Adjustments to reconcile
     net income to cash
     provided by operating
     activities:
      Depreciation and
       amortization                  435         454       1,713       1,615
      Future income taxes           (129)        (16)        161         377
      Share-based compensation       (20)        (30)          5          96
      Net employee defined
       benefit plans expense         (27)        (23)       (102)        (92)
      Employer contributions
       to employee defined
       benefit plans                 (26)        (26)       (104)        (93)
      Restructuring costs,
       net of cash payments           30           3          16         (18)
    Amortization of deferred
     gains on sale-leaseback
     of buildings, amortization
     of deferred charges and
     other, net                        8           3           3           4
      Net change in non-cash
       working capital               191          53          (1)         25
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                      747         818       2,819       3,172
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Capital expenditures
     excluding advanced
     wireless services
     spectrum licences              (631)       (472)     (1,859)     (1,770)
    Payment for advanced
     wireless services
     spectrum licences                 -           -        (882)          -
    Acquisitions                       -           -        (696)          -
    Proceeds from the sale of
     property and other assets         -           2          13           7
    Change in non-current
     materials and supplies,
     purchase of investments
     and other                       (12)         (2)         (9)         (9)
    -------------------------------------------------------------------------
    Cash used by investing
     activities                     (643)       (472)     (3,433)     (1,772)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Common Shares and
     Non-Voting Shares issued          -           -           -           1
    Dividends to shareholders       (144)       (270)       (433)       (521)
    Purchase of Common Shares
     and Non-Voting Shares for
     cancellation                     (6)       (147)       (280)       (750)
    Long-term debt issued          3,438       2,989      12,983       7,763
    Redemptions and repayment
     of long-term debt            (3,424)     (2,899)    (11,667)     (7,857)
    Dividends paid by a
     subsidiary to
     non-controlling interests         -           -          (5)         (4)
    Other                              -           -           -          (1)
    -------------------------------------------------------------------------
    Cash provided (used) by
     financing activities           (136)       (327)        598      (1,369)
    -------------------------------------------------------------------------
    CASH POSITION
    Increase (decrease) in
     cash and temporary
     investments, net                (32)         19         (16)         31
    Cash and temporary
     investments, net,
     beginning of period              36           1          20         (11)
    -------------------------------------------------------------------------
    Cash and temporary
     investments, net, end of
     period                            4          20   $       4   $      20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    SUPPLEMENTAL DISCLOSURE
     OF CASH FLOWS
    Interest (paid)                 (193)       (171)  $    (457)  $    (454)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest received                  1          33   $       3   $      42
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income taxes (inclusive of
     Investment Tax Credits
     (paid) received, net             (2)        122   $     (10)  $     123
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    segmented information                                         (unaudited)


    Quarters ended December 31         Wireline                Wireless
     (millions)                     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating revenues
      External revenue         $   1,266   $   1,219   $   1,188   $   1,111
      Intersegment revenue            35          31           7           7
    -------------------------------------------------------------------------
                                   1,301       1,250       1,195       1,118
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense             824         783         697         626
      Restructuring costs             32           6           6           -
    -------------------------------------------------------------------------
                                     856         789         703         626
    -------------------------------------------------------------------------
    EBITDA(1)                  $     445   $     461   $     492   $     492
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $     395   $     337   $     236   $     135
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX          $      50   $     124   $     256   $     357
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses (as
     adjusted)(3)
      Operations expense (as
       adjusted)(3)                  824         781         697         627
      Restructuring costs             32           6           6           -
    -------------------------------------------------------------------------
                                     856         787         703         627
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)    $     445   $     463   $     492   $     491
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $     395   $     337   $     236   $     135
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                     $      50   $     126   $     256   $     356
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                                                 (unaudited)

    Quarters ended December 31        Eliminations            Consolidated
     (millions)                     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating revenues
      External revenue         $       -   $       -   $   2,454   $   2,330
      Intersegment revenue           (42)        (38)          -           -
    -------------------------------------------------------------------------
                                     (42)        (38)      2,454       2,330
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense             (42)        (38)      1,479       1,371
      Restructuring costs              -           -          38           6
    -------------------------------------------------------------------------
                                     (42)        (38)      1,517       1,377
    -------------------------------------------------------------------------
    EBITDA(1)                  $       -   $       -   $     937   $     953
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $       -   $       -   $     631   $     472
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX          $       -   $       -   $     306   $     481
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses (as
     adjusted)(3)
      Operations expense (as
       adjusted)(3)                  (42)        (38)      1,479       1,370
      Restructuring costs              -           -          38           6
    -------------------------------------------------------------------------
                                     (42)        (38)      1,517       1,376
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)    $       -   $       -   $     937   $     954
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $       -   $       -   $     631   $     472
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                     $       -   $       -   $     306   $     482
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                               EBITDA (as adjusted)
                                (from above)           $     937   $     954
                               Incremental charge(3)           -          (1)
                               ----------------------------------------------
                               EBITDA (from above)           937         953
                               Depreciation                  351         386
                               Amortization                   84          68
                               ----------------------------------------------
                               Operating income              502         499
                               Other expense, net             11           6
                               Financing costs               118         109
                               ----------------------------------------------
                               Income before income
                                taxes and
                                non-controlling
                                interests                    373         384
                               Income taxes                   88         (19)
                               Non-controlling
                                interests                      -           3
                               ----------------------------------------------
                               Net income              $     285   $     400
                               ----------------------------------------------
                               ----------------------------------------------

    (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) 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 $NIL (2007 - $1) and did not result in an immediate
        cash outflow. In respect of 2008 and 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)                      2008       2007        2008        2007
    -------------------------------------------------------------------------
    Operating revenues
      External revenue         $   5,021   $   4,810   $   4,632   $   4,264
      Intersegment revenue           131         114          28          27
    -------------------------------------------------------------------------
                                   5,152       4,924       4,660       4,291
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense           3,327       3,222       2,647       2,384
      Restructuring costs             51          19           8           1
    -------------------------------------------------------------------------
                                   3,378       3,241       2,655       2,385
    -------------------------------------------------------------------------
    EBITDA(1)                  $   1,774   $   1,683   $   2,005   $   1,906
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures       $   1,311   $   1,219   $     548   $     551
    Advanced wireless services
     spectrum licences                 -           -         882           -
    -------------------------------------------------------------------------
    CAPEX(2)                   $   1,311   $   1,219   $   1,430   $     551
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX          $     463   $     464   $     575   $   1,355
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses (as
     adjusted)(3)
      Operations expense (as
       adjusted)(3)                3,327       3,077       2,647       2,360
      Restructuring costs             51          19           8           1
    -------------------------------------------------------------------------
                                   3,378       3,096       2,655       2,361
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)    $   1,774   $   1,828   $   2,005   $   1,930
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures       $   1,311   $   1,219   $     548   $     551
    Advanced wireless services
     spectrum licences                 -           -         882           -
    -------------------------------------------------------------------------
    CAPEX(2)                   $   1,311   $   1,219   $   1,430   $     551
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                     $     463   $     609   $     575   $   1,379
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                                                 (unaudited)

    Years ended December 31           Eliminations            Consolidated
     (millions)                     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating revenues
      External revenue         $       -   $       -   $   9,653   $   9,074
      Intersegment revenue          (159)       (141)          -           -
    -------------------------------------------------------------------------
                                    (159)       (141)      9,653       9,074
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense            (159)       (141)      5,815       5,465
      Restructuring costs              -           -          59          20
    -------------------------------------------------------------------------
                                    (159)       (141)      5,874       5,485
    -------------------------------------------------------------------------
    EBITDA(1)                  $       -   $       -   $   3,779   $   3,589
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures       $       -   $       -   $   1,859   $   1,770
    Advanced wireless services
     spectrum licences                 -           -         882           -
    -------------------------------------------------------------------------
    CAPEX(2)                   $       -   $       -   $   2,741   $   1,770
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX          $       -   $       -   $   1,038   $   1,819
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses (as
     adjusted)(3)
      Operations expense (as
       adjusted)(3)                 (159)       (141)      5,815       5,296
      Restructuring costs              -           -          59          20
    -------------------------------------------------------------------------
                                    (159)       (141)      5,874       5,316
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)    $       -   $       -   $   3,779   $   3,758
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures       $       -   $       -   $   1,859   $   1,770
    Advanced wireless services
     spectrum licences                 -           -         882           -
    -------------------------------------------------------------------------
    CAPEX(2)                   $       -   $       -   $   2,741   $   1,770
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                     $       -   $       -   $   1,038   $   1,988
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                               EBITDA (as adjusted)
                                (from above)           $   3,779   $   3,758
                               Incremental charge(3)           -         169
                               ----------------------------------------------
                               EBITDA (from above)         3,779       3,589
                               Depreciation                1,384       1,355
                               Amortization                  329         260
                               ----------------------------------------------
                               Operating income            2,066       1,974
                               Other expense, net             36          36
                               Financing costs               463         440
                               ----------------------------------------------
                               Income before income
                                taxes and
                                non-controlling
                                interests                  1,567       1,498
                               Income taxes                  436         233
                               Non-controlling
                                interests                      3           7
                               ----------------------------------------------
                               Net income              $   1,128   $   1,258
                               ----------------------------------------------
                               ----------------------------------------------

    (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") are the sum of capital
        expenditures and advances wireless services spectrum licences.
    (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 $NIL (2007 - $169) and did not result in an immediate
        cash outflow. In respect of 2008 and 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

                      Management's review of operations

                                   2008 Q4
    -------------------------------------------------------------------------


    Caution regarding forward-looking statements

    -------------------------------------------------------------------------
    This report contains forward-looking statements about expected future
    events and financial and operating results of TELUS Corporation (TELUS or
    the Company, and where the context of the narrative permits, or requires,
    its subsidiaries). By their nature, forward-looking statements require
    the Company to make assumptions, and forward-looking statements are
    subject to inherent risks and uncertainties. There is significant risk
    that assumptions (see Section 1.5 Financial and operating targets for
    2009), predictions and other forward-looking statements will not prove to
    be accurate. Readers are cautioned not to place undue reliance on
    forward-looking statements as a number of factors could cause actual
    future results, conditions, actions or events to differ materially from
    the targets, expectations, estimates or intentions expressed. Except as
    required by law, the Company disclaims any intention or obligation to
    update or revise any forward-looking statements, and reserves the right
    to change, at any time at its sole discretion, its current practice of
    updating annual targets and guidance. Targets for 2009 and assumptions
    are described in Section 1.5.

    Factors that could cause actual results to differ materially include,
    ---------------------------------------------------------------------
    but are not limited to:
    -----------------------
    Competition (including more active price competition and from the
    likelihood of new wireless competitors beginning to offer services in
    late 2009 and into 2010 resulting from the 2008 advanced wireless
    services (AWS) spectrum auction); economic growth and fluctuations
    (including the global credit crisis, and pension performance, funding and
    expenses); capital expenditure levels (increased in 2009 and potentially
    future years due to the Company's fourth generation (4G) wireless
    deployment strategy and any new Industry Canada wireless spectrum
    auctions); financing and debt requirements (including ability to carry
    out refinancing activities and fund share repurchases); tax matters
    (including acceleration or deferral of required payments of significant
    amounts of cash taxes); human resource developments; business
    integrations and internal reorganizations (including ability to
    successfully implement cost reduction initiatives); technology (including
    reliance on systems and information technology, broadband and wireless
    technology options, choice of suppliers and suppliers' ability to
    maintain and service their product lines, expected technology and
    evolution path and transition to 4G technology, expected future benefits
    and performance of HSPA (high speed packet access)/LTE (long-term
    evolution) wireless technology, successful implementation of the network
    build and sharing arrangement with Bell Canada to achieve cost
    efficiencies and reduce deployment risks, successful deployment and
    operation of new wireless networks and successful introduction of new
    products, services and supporting systems); regulatory approvals and
    developments (including interpretation and application of tower sharing
    and roaming rules, the design and impact of future spectrum auctions, the
    review of new media and Internet traffic management practices, and
    possible changes to foreign ownership restrictions); process risks
    (including conversion of legacy systems and billing system integrations,
    and implementation of large complex deals); 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 in its 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' 2007 annual and 2008 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 11, 2009
    

    The following is a discussion of the consolidated financial position and
results of operations of TELUS Corporation for the three-month periods and
years ended December 31, 2008 and 2007. 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.
Accounting policies are consistent with those described in Note 1 of TELUS'
2007 Consolidated financial statements and developments set out in TELUS' 2008
first, second and third quarter Management's discussions and analyses.
    TELUS has issued guidance on and reports on certain non-GAAP measures
used by management to evaluate performance of business units, segments and the
Company. Non-GAAP measures are also used to determine compliance with debt
covenants and manage the capital structure. Because non-GAAP measures do not
have a standardized meaning, securities regulations require that non-GAAP
measures be clearly defined and qualified, and reconciled with their nearest
GAAP measure. For the reader's reference, the definition, calculation and
reconciliation of consolidated non-GAAP measures are provided in Section 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 results
        summary and targets        for 2008, performance against 2008
                                   targets, and presentation of targets for
                                   2009
    -------------------------------------------------------------------------
    2.  Results from operations    A detailed discussion of operating results
                                   for the fourth quarter and year ended
                                   December 31, 2008
    -------------------------------------------------------------------------
    3.  Changes in financial       A discussion of changes in the
        position                   consolidated statements of financial
                                   position for the year ending December 31,
                                   2008
    -------------------------------------------------------------------------
    4.  Liquidity and capital      A discussion of cash flow, liquidity,
        resources                  credit facilities and other disclosures
    -------------------------------------------------------------------------
    5.  Risks and risk management  An update of certain risks and
                                   uncertainties facing TELUS and how the
                                   Company manages these risks
    -------------------------------------------------------------------------
    6.  Reconciliation of          A description, calculation and
        non-GAAP measures and      reconciliation of certain measures used by
        definition of key          management
        operating indicators
    -------------------------------------------------------------------------
    

    1. Introduction, performance summary and targets

    The following discussion is qualified in its entirety by the Caution
regarding forward-looking statements at the beginning of Management's review
of operations and risk updates in Section 5. It is also qualified by Section
10: Risks and risk management of TELUS' 2007 annual Management's discussion
and analysis, and updates in TELUS' 2008 first, second and third quarter
Management's discussions and analyses.

    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 economy and telecommunications industry

    Economic and telecom industry growth
    

    In early 2009, economic uncertainty related to tightening of credit
markets worldwide remains. The credit situation remains fluid and it is
difficult to predict future outcomes. TELUS' capital structure financial
policies were designed with credit cycles in mind (see Capabilities - Section
4.3 Liquidity and capital resources in TELUS' annual 2007 Management's
discussion and analysis). The Company believes that these financial policies
and guidelines, and maintaining credit ratings in the range of BBB+ to A , or
the equivalent, provide reasonable access to capital markets.
    The Government of Canada, in its January 2009 public budget documents,
noted there was a broad-based consensus that the Canadian economy entered into
recession in the fourth quarter of 2008, and that private sector forecasters
expected the recession to last three quarters. The economic weakness and stock
market decline that began in 2008 is expected to increase TELUS' net defined
benefits plans expense and funding in 2009, as reflected in the Company's
public targets for 2009. See Section 1.5 Financial and operating targets for
2009.
    The Company estimates that revenues for the Canadian telecom industry
grew by approximately 4%, due to continued wireless growth, which more than
offset the declines of a mature wireline segment. TELUS' 2008 revenues
increased by 6% to $9.65 billion due to wireless growth and wireline data
revenue growth assisted by acquisitions completed in January.

    Key industry development

    In December 2008, the pending sale of Canada's largest incumbent
telecommunications company BCE (Bell Canada) was terminated due to its failure
to satisfy a solvency condition. BCE is taking action to attempt to recover a
$1.2 billion deal break fee from the acquiring consortium led by Teachers
Private Capital, the private investment arm of the Ontario Teachers' Pension
Plan. BCE in mid-2008 had a change in CEO, embarked on a reorganization and
efficiency program, and changed its branding. On the collapse of the
acquisition, dividend payments were resumed and a modest share repurchase
program was announced. Had the proposed acquisition been completed, BCE was
expected to be highly levered with debt and extremely focused on maximizing
short-term cash flow. BCE with less leverage is expected to remain a strong
competitor to TELUS and other communications companies in Canada.

    Wireless developments

    TELUS estimates that Canadian wireless revenues grew by 10% in 2008 and
that market penetration for the industry increased to approximately 65% of the
population. The expectation for 2009 is a further 4.5 percentage point gain in
the proportion of population using wireless services, which are increasingly
seen as non-discretionary services, and less likely than many other consumer
products to be cut in an economic downturn.
    In 2008, TELUS' wireless segment achieved 9% revenue growth (including
55% data revenue growth) and 10% subscriber growth. The Company's Mike(R)
service has exposure to the transport, construction, automotive and oil and
gas sectors, which have been particularly affected by the economic downturn,
resulting in a weakening in Mike service ARPU (average revenue per subscriber
unit). Overall wireless ARPU decreased 2% in the fourth quarter and 1% for the
full year of 2008 when compared to 2007. The economic downturn has also led to
reduced voice roaming revenues.
    As in recent years, a key driver of wireless growth continues to be the
increased smartphone adoption and usage of data services such as text
messaging and mobile computing. Canadian wireless providers continue the roll-
out of faster next generation high-speed wireless networks to capture this
growth opportunity. In 2008, TELUS announced its wireless technology evolution
strategy toward fourth generation (4G) LTE, including the current joint HSPA
network build and expected service launch by early 2010.
    Competition remains intense due to a number of factors including
introduction of TELUS' basic brand and service (Koodo Mobile(R)) in March
2008; the presence of mobile virtual network operators (MVNOs) such as Virgin
Mobile and Videotron Ltd.; and discount brand offerings by Bell (Solo) and
Rogers (Fido). Introduction of wireless number portability in March 2007
facilitates customers moving to a different provider while retaining their
existing phone number. Competition is expected to increase in future years as
a result of new entrants acquiring spectrum in the 2008 AWS spectrum auction.

    
    Advanced wireless services (AWS) and other spectrum auction in the
    2 GHz range
    

    Industry Canada conducted a wireless spectrum licence auction between May
27 and July 21, 2008 for 90 MHz of AWS spectrum (including 40 MHz set aside
for new entrants), 10 MHz for personal communications network (PCS) service
extension, and 5 MHz for another small band. The auction concluded after 331
rounds with Industry Canada reporting total proceeds of $4,255 million
(average of $1.55/MHz/POP for AWS and PCS spectrum, where POP refers to person
of population). Proceeds from the auction were up to three times more than
original expectations before the auction began.
    TELUS was the successful bidder on 59 spectrum licences, providing
additional spectrum depth nationally in markets TELUS already covers. Of the
59 licences acquired, 32 were 20 MHz licences covering geographic areas of
Quebec, Southwestern Ontario, Ottawa Region, Manitoba, Saskatchewan, Alberta
and B.C., while 27 were 10 MHz licences covering Toronto, Central and Northern
Ontario, Yukon, Northwest Territories and Nunavut, Newfoundland and Labrador,
Nova Scotia, New Brunswick, and P.E.I. The average spectrum acquired in the
AWS auction by TELUS was 16.2 MHz at a cost of $1.82/MHz/POP.
    TELUS paid Industry Canada $882 million for the licences and related
auction charges in the third quarter, through a combination of drawing on its
credit facilities and utilization of cash on hand. Each of the successful
spectrum bidders was required to demonstrate compliance with Canadian
ownership requirements and other licence conditions. TELUS received its
ownership compliance decision from Industry Canada effective December 2008.
    Wireless competition is expected to increase in the future as a result of
several entrants acquiring regional spectrum in the AWS spectrum auction, as
summarized below. Subject to meeting Industry Canada's eligibility
requirements, some entrants are expected to begin offering services in late
2009 and in 2010, as they establish operations, and build wireless networks in
areas where they have won spectrum.

    
    -------------------------------------------------------------------------
    Existing and potential competitors acquiring licences in the 2008
    Industry Canada spectrum auction
    -------------------------------------------------------------------------
    Competitor                        Primary geographic focus
    -------------------------------------------------------------------------
    Incumbent national
    facilities-based competitors

       Rogers Communications Inc.     Expansion of existing national capacity
       Bell Mobility Inc.             Expansion of existing national capacity
       (Bell Canada)
       TELUS                          Expansion of existing national capacity
                                      for future LTE technology deployment
    -------------------------------------------------------------------------
    Incumbent provincial
    facilities-based competitors

      MTS Allstream                   Expansion of existing Manitoba capacity
      SaskTel                         Expansion of existing Saskatchewan
                                      capacity
    -------------------------------------------------------------------------
    Entrants(1)

      Globalive Wireless LP           Spectrum in most regions, but excluding
                                      most of Quebec
      Data & Audio-Visual             Spectrum in most major centres outside
      Enterprises                     of Saskatchewan, Manitoba, Quebec and
                                      Atlantic Canada
      BMV Holdings                    Spectrum in Southern and Eastern
      (6934579 Canada Inc.)           Ontario and Southern and Eastern Quebec
      Québecor Inc.                   Regional spectrum in Quebec and parts
      (9193-2962 Québec Inc.)         of Ontario, including Toronto
      Shaw Communications Inc.        Regional spectrum in Western Canada and
                                      Northern Ontario
      Bragg Communications Inc.       Regional spectrum in Atlantic Canada
                                      and Southwestern Ontario, as well as
                                      Grande Prairie, Alberta
      Novus Wireless Inc.             Provincial spectrum in B.C. and Alberta
      Blue Canada Wireless Inc.       Provincial spectrum in Nova Scotia and
                                      P.E.I.
      Others                          Three local areas in total
    -------------------------------------------------------------------------
    (1) Subject to building a wireless network in the geographic areas where
        they elect to complete.
    -------------------------------------------------------------------------
    

    Wireline developments

    As in 2007, the industry is continuing to focus its attention on
broadband services to moderate the losses in network access lines. 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 protocol (IP) telephony has
facilitated a growing revenue stream for cable-TV companies. Telecom companies
are strategically positioning themselves to encroach into the TV entertainment
market with existing satellite TV service and/or new IP TV offerings.
Consumers continue to substitute wireless and VoIP (voice over IP) services
for traditional wired telephony services. Competitive losses and substitution
have resulted in certain North American telecom companies having residential
access line losses around 12%. At December 31, 2008, TELUS' estimated wireline
share of the local residential telephony market in B.C. and Alberta was 66%.
Approximately 12% of households in B.C. and Alberta have only wireless
telephone service amongst all providers, including TELUS.
    The Company operates its incumbent wireline business in B.C., Alberta and
Eastern Quebec, which have been less exposed to the manufacturing downturn in
Central Canada and somewhat less to cyclical commodity businesses - oil and
lumber being an exception. The Company's national business growth strategy is
focused on four vertical markets that do not include manufacturing and TELUS
continues to see growth in the public sector and healthcare sectors in
particular.
    TELUS' wireline segment external revenues increased 4% in 2008. Growth
from wireline data services, including data revenues from two acquisitions,
more than offset losses in voice services. While business network access lines
increased by 2% in both 2008 and 2007 from the Company's focus on non-
incumbent growth, TELUS' residential access lines decreased by 7.5% in 2008
and 6.5% in 2007, due to continued strong competition particularly from cable
telephony and technological substitution.

    Building capability in business markets

    TELUS' approach to the business market is through growth in Central
Canada as well as nationally, with a focus on key vertical markets, including
the public sector, healthcare, financial services and energy. In 2008, TELUS
advanced its capabilities in the healthcare and financial services sectors
with the January 2008 acquisition of Emergis Inc., a business process
outsourcer specializing in these areas, and a leader in the automation of
electronic health records. TELUS has become a national leader in the provision
of advanced data solutions to the healthcare sector.
    TELUS continues to expand its broad suite of call centre and business
process outsourcing services for the benefit of a large roster of Canadian,
U.S. and international clients. These services are reliant on TELUS' growing
call centre operations that are located in various locations around the world
including the Philippines. More recently, bilingual Spanish and English
language capabilities have been added by acquiring a minority investment in a
company with call centre operations in three Central American countries, and
soon at a new TELUS call centre being opened in Clark County, Nevada. This
geographic expansion and augmented bilingual Spanish-English language support
improves the Company's competitive offering for this growing line of business.

    1.3 Consolidated highlights

    The chief executive officer, who is the chief operating decision-maker,
regularly received TELUS' 2008 and 2007 consolidated reports on two bases:
including and excluding (labelled "(as adjusted)") an incremental charge for
introducing a net-cash settlement feature for share option awards granted
prior to 2005. The net-cash settlement feature was introduced in the first
quarter of 2007. The highlights table below presents the unadjusted and
adjusted views.

    
    -------------------------------------------------------------------------
    Consolidated highlights
    ($ millions, except
     per share amounts,         Quarters ended              Years ended
     subscribers and             December 31                December 31
     ratios)                2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Consolidated statements of income
    -------------------------------------------------------------------------

    Operating revenues     2,454    2,330    5.3 %    9,653    9,074    6.4 %

    Operating income         502      499    0.6 %    2,066    1,974    4.7 %
    Net-cash settlement
     feature expense           -        1   (100)%        -      169   (100)%
                         -------- -------- -------  -------- -------- -------
    Operating income
     (as adjusted)           502      500    0.4 %    2,066    2,143   (3.6)%

    Income before
     income taxes            373      384   (2.9)%    1,567    1,498    4.6 %
    Net-cash settlement
     feature expense           -        1   (100)%        -      169   (100)%
                         -------- -------- -------  -------- -------- -------
    Income before income
     taxes (as adjusted)     373      385   (3.1)%    1,567    1,667   (6.0)%

    Net income               285      400    (29)%    1,128    1,258    (10)%
    Net-cash settlement
     feature expense,
     after tax                 -        1   (100)%        -      105   (100)%
                         -------- -------- -------  -------- -------- -------
    Net income
     (as adjusted)           285      401    (29)%    1,128    1,363    (17)%

    Earnings per share,
     basic ($)              0.90     1.23    (27)%     3.52     3.79   (7.1)%
    Net-cash settlement
     feature per share         -        -      - %        -     0.32   (100)%
                         -------- -------- -------  -------- -------- -------
    Earnings per share,
     basic
     (as adjusted) ($)      0.90     1.23    (27)%     3.52     4.11    (14)%

    Earnings per share,
     diluted ($)            0.89     1.22    (27)%     3.51     3.76   (6.6)%

    Cash dividends
     declared per
     share ($)             0.475     0.45    5.6 %    1.825    1.575     16 %
    -------------------------------------------------------------------------
    Consolidated statements of cash flows
    -------------------------------------------------------------------------
    Cash provided by
     operating
     activities              747      818   (8.7)%    2,819    3,172    (11)%
    Cash used by
     investing
     activities              643      472     36 %    3,433    1,772     94 %
      Capital
       expenditures          631      472     34 %    1,859    1,770    5.0 %
      Payment for
       advanced wireless
       spectrum licences       -        -      -        882        -    n.m.
      Acquisitions             -        -      -        696        -    n.m.
    Cash provided (used)
     by financing
     activities             (136)    (327)    58 %      598   (1,369)   n.m.
    -------------------------------------------------------------------------
    Subscribers and other measures
    -------------------------------------------------------------------------
    Subscriber
     connections(1)
     (thousands)                                     11,595   11,147    4.0 %

    EBITDA(2)                937      953   (1.7)%    3,779    3,589    5.3 %
    Net-cash settlement
     feature expense           -        1   (100)%        -      169   (100)%
                         -------- -------- -------  -------- -------- -------
    EBITDA (as adjusted)     937      954   (1.8)%    3,779    3,758    0.6 %

    Free cash flow(3)        114      427    (73)%      567    1,573    (64)%
    -------------------------------------------------------------------------
    Debt and payout ratios(4)
    -------------------------------------------------------------------------
    Net debt to EBITDA -
     excluding
     restructuring costs                                1.9      1.7    0.2
    Dividend payout
     ratio(5) (%)                                        56       54  2 pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    n.m. - not meaningful; pts - percentage points
    (1) The sum of wireless subscribers, network access lines and Internet
        access subscribers measured at the end of the respective periods
        based on information in billing and other systems. The measure
        excludes TELUS TV(R) subscriber connections.
    (2) EBITDA is a non-GAAP measure. See Section 6.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    (3) Based on defined benefits plans net recovery and including payment
        for AWS spectrum licences for the full year of 2008. See Section 6.2
        Free cash flow.
    (4) See Section 4.4 Liquidity and capital resource measures and Section
        6.4 Definitions of liquidity and capital resource measures.
    (5) Based on earnings per share excluding favourable tax-related
        adjustments and net-cash settlement feature expense.
    -------------------------------------------------------------------------

    Highlights from operations:

    -   The Company met two of four original consolidated targets, and met
        three of the four original segmented targets for 2008. See Section
        1.4 Performance scorecard for 2008 results.

    -   Subscriber connections reported exclude TELUS TV subscribers.
        Connections increased by 448,000 during 2008, net of approximately
        28,000 subscriber deactivations from turning down the analogue
        wireless network in September. The number of wireless subscribers
        grew by 10% to 6.13 million, the number of Internet subscribers grew
        by 3.8% to 1.22 million and the number of network access lines
        decreased by 3.6% to 4.25 million. Excluding the analogue wireless
        subscriber deactivations, subscriber connections increased by
        approximately 476,000.

    -   The Company's wireless gross subscriber additions for 2008 set TELUS
        fourth quarter and full year records, and were positively influenced
        by the introduction of the new postpaid basic service and brand Koodo
        Mobile earlier in 2008. Wireless average revenue per subscriber unit
        per month (ARPU) was $62.16 in the fourth quarter of 2008 and $62.73
        for the full year of 2008, down 2% and 1%, respectively, from 2007,
        reflecting price competition in voice services, offset by strong data
        ARPU growth.

    -   Operating revenues increased by $124 million and $579 million,
        respectively, in the fourth quarter and full year of 2008 when
        compared to the same periods in 2007, 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.
        Growth in wireline data revenues included revenues from two
        acquisitions, Emergis Inc. and, to a much lesser extent, Fastvibe,
        completed in January 2008.

    -   Operating income adjusted to exclude the net-cash settlement feature
        increased by $2 million in the fourth quarter of 2008 and decreased
        by $77 million in the full year of 2008, when compared to the same
        periods in 2007. The increase for the fourth quarter was primarily
        due to lower depreciation expenses, net of lower EBITDA (as adjusted)
        and increased amortization of software assets. The decrease in
        Operating income (as adjusted) for the full year was mainly due to
        additional software amortization from the January acquisition of
        Emergis and implementation of a new phase of the converged wireline
        billing and client care platform in July 2008, as well as a 2.1%
        increase in depreciation, net of higher EBITDA (as adjusted). EBITDA
        (as adjusted) decreased by $17 million in the fourth quarter of 2008,
        mainly due to increased restructuring charges. For the full year,
        EBITDA (as adjusted) increased by $21 million, as increased data
        revenues were partly offset by costs supporting the growth, including
        costs of acquisition supporting strong wireless subscriber additions
        and upfront implementation costs for new wireline enterprise
        customers.

    -   Income before income taxes (as adjusted) decreased by $12 million and
        $100 million, respectively, in the fourth quarter and full year of
        2008 when compared to the same periods in 2007. Decreases were due to
        lower operating income (as adjusted) and higher net financing costs.
        Net financing costs include increased interest expenses mainly from
        debt added in 2008 to help fund acquisitions in January and payment
        for AWS spectrum licences in the third quarter. Net financing costs
        also include interest income, which increased in the fourth quarter
        but decreased significantly for the full year primarily due to
        different amounts of interest on tax refunds in each year. The
        decrease in interest income for the full year was also due to lower
        cash and temporary investments in 2008.

    -   Net income decreased by $115 million or 33 cents per share (basic) in
        the fourth quarter of 2008, and decreased by $130 million or 27 cents
        per share (basic) for the full year of 2008, when compared to the
        same periods in 2007. The decreases included lower net income tax
        recoveries and related interest in the fourth quarter and full year
        of $111 million (34 cents per share) and $208 million (63 cents per
        share), respectively. Net income before income tax-related
        adjustments decreased by $4 million in the fourth quarter and
        increased by $78 million or 36 cents per share for the full year.
        Average shares outstanding in 2008 were 3.4% lower than 2007, due to
        market repurchases under normal course issuer bid (NCIB) programs.

    -------------------------------------------------------------------------
    Net income changes                          Quarters ended   Years ended
    ($ millions)                                   December 31   December 31
    -------------------------------------------------------------------------
    Net income in 2007                                     400         1,258
    Deduct favourable income tax-related
     adjustments in 2007 (see Section 2.2)                (143)         (257)
                                                   ------------  ------------
                                                           257         1,001
    Tax-effected changes:
      Lower net-cash settlement feature expense              1           105
      Change in EBITDA as adjusted(1)                      (12)           14
      Lower (higher) depreciation and
       amortization(1), excluding investment
       tax credits                                           9           (69)
      Interest expenses(1)                                  (8)            2
      Other                                                  6            26
                                                   ------------  ------------
                                                           253         1,079
    Favourable income tax-related adjustments
     in 2008 (see Section 2.2)                              32            49
    -------------------------------------------------------------------------
    Net income in 2008                                     285         1,128
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) For the purposes of this presentation, the 2008 blended statutory tax
        rate was used.
    -------------------------------------------------------------------------

    Highlights - liquidity and capital resources:

    -   At December 31, 2008, TELUS had unutilized credit facilities of
        $1.15 billion, as well as unutilized availability under its accounts
        receivable securitization program, consistent with its objective of
        generally maintaining more than $1 billion of unutilized liquidity.
        In addition, the Company continues to meet the two other key
        guidelines. Net debt to EBITDA at December 31, 2008 was 1.9 times,
        within the Company's long-term target policy range of 1.5 to 2.0
        times. The dividend payout ratio, based on the annualized fourth
        quarter dividend and earnings for 2008 (excluding favourable income
        tax-related adjustments), was 56%, slightly above the Company's
        prospective guideline of 45% to 55% of sustainable net earnings. In
        December, the Company renewed its $700 million, 364-day credit
        facility with a syndicate of Canadian banks, extending the term to
        March 1, 2010.

    -   The Company renewed its NCIB program for another year. Under Program
        5, which will expire on December 23, 2009, the maximum number of
        TELUS shares that may be purchased is eight million, or 2.5% of the
        shares outstanding at December 31, 2008. See Section 4.3 Cash used by
        financing activities.

    -   Cash provided by operating activities decreased by $71 million and
        $353 million, respectively, in the fourth quarter and full year of
        2008 when compared to the same periods in 2007, primarily due to
        lower recoveries of income taxes and related interest. In addition,
        during the fourth quarter of 2008, proceeds from securitized accounts
        receivable increased by $50 million, as compared to a reduction of
        $50 million in the same period of 2007. For the full year of 2008,
        proceeds from securitized accounts receivable were reduced by
        $200 million (as compared to no change for 2007).

    -   Cash used by investing activities increased by $171 million and
        $1,661 million, respectively, in the fourth quarter and full year of
        2008 when compared with the same periods in 2007. The increase for
        the fourth quarter was due primarily to higher capital expenditures.
        The full year increase was due to payment of $882 million for
        advanced wireless services spectrum licences, the January 2008
        acquisition of Emergis for $692 million (net of acquired cash) and
        higher capital expenditures. The increase in capital expenditures in
        2008 was directed to investments supporting high bandwidth services
        for business and residential customers, the next generation wireless
        HSPA network, healthcare and financial services solutions and upfront
        expenditures to support new enterprise customers.

    -   Net cash used by financing activities was $136 million in the fourth
        quarter of 2008, as compared to $327 million in the same period of
        2007, as fewer shares were repurchased under NCIB programs and the
        dividend for the fourth quarter of 2008 was remitted on the
        January 2, 2009 payment date (while the dividend for the fourth
        quarter of 2007 was remitted on December 31, 2007 for the January 1,
        2008 payment date).

        Net cash provided by financing activities was $598 million for the
        full year of 2008 and included higher utilization of the 2012 bank
        facility and the April 2008 issue of $500 million Notes maturing in
        2015, partly offset by a reduction in issued commercial paper. These
        activities helped support payment of $882 million for AWS spectrum
        licences in the third quarter and $692 million for January
        acquisitions, net of acquired cash. Net cash used by financing
        activities in 2007 was $1,369 million, and included the June 2007
        repayment of $1.5 billion of matured Notes.

    -   The dividend declared in the fourth quarter of 2008 increased 6% to
        47.5 cents per Common Share and Non-Voting Share, up from 45 cents
        per share declared in each of the four preceding quarters. This is
        the fifth consecutive annual increase in the quarterly dividend rate.

    -   Free cash flow decreased by $313 million and $1,006 million,
        respectively, in the fourth quarter and full year of 2008 when
        compared to the same periods in 2007. The decrease for the fourth
        quarter was due mainly to receipt of income tax recoveries and
        related interest in the fourth quarter of 2007, as well as higher
        capital expenditures in 2008. The decrease for the full year also
        included payment of $882 million for AWS spectrum licences in 2008.
        Financing activities in 2008 supplemented free cash flow to help fund
        January acquisitions and the purchase AWS spectrum licences.
    

    1.4 Performance scorecard

    Five of the eight original consolidated and segmented targets for 2008
were met, while three were not achieved. Targets for consolidated revenue,
wireline revenue and EBITDA, and wireless revenue were achieved. Consolidated
and wireless EBITDA fell below their respective target ranges due to several
factors, including lower wireless ARPU, higher subscriber acquisition and
retention expenses and costs associated with data growth. Earnings per share
(EPS) fell within the target range only as a result of favourable income tax
recoveries; hence, the 2008 EPS target was not achieved. The consolidated
capital expenditure target was achieved with actual expenditures 2% below the
$1.9 billion target.
    During the year, management provided revised annual 2008 guidance and
assumptions, when the results for the second and third quarters were
announced. Annual guidance revisions for 2008 were also provided for revenues
and capital expenditures in the 2009 targets news release and investor call on
December 16, 2008. Actual results met the eight metrics from the final
guidance, except for capital expenditures.
    In the following scorecard, TELUS' results for 2008 are compared to its
original targets. Targets for 2009 are also presented and are fully qualified
by the Caution regarding forward-looking statements at the beginning of
Management's review of operations and Section 5: Risks and risk management.

    
    -------------------------------------------------------------------------
    Scorecards                 Performance for 2008           2009 targets
    -------------------------------------------------------------------------
    Legend
    ++ Exceeded target                                               Change
       range                               Original                 from 2008
    +  Met target       Actual    Change     2008   Target           actual
    x  Missed target   results  from 2007  targets  result  Targets  results
    -------------------------------------------------------------------------
    Consolidated
      Revenues         $9.653      6.4 %   $9.6 to     +    $10.025  4 to 6 %
                       billion               $9.8              to
                                           billion          $10.275
                                                            billion

      EBITDA(1)(2)     $3.779      0.6 %   $3.8 to     x     $3.75    (1) to
                       billion              $3.95           to $3.9     3 %
                                           billion          billion

      EPS - basic(3)    $3.52      (14)%    $3.50      -     $3.40    (3) to
                                           to $3.80        to $3.70     5 %

      EPS - basic,(3)
       (excluding
       favourable
       income
       tax-related
       impacts)(4)      $3.37      1.2 %    $3.50      x     $3.40     1 to
                                           to $3.80        to $3.70    10 %

      Capital
       expenditures
       (excluding
       expenditures
       for AWS
       spectrum
       licences in
       2008)(5)        $1.859      5.0 %   Approx.     +    Approx.    10 %
                       billion              $1.9             $2.05
                                           billion          billion
    -------------------------------------------------------------------------
    Wireline segment
      Revenue
      (external)       $5.021      4.4 %   $4.975      +     $5.05   0 to 3 %
                       billion            to $5.075        to $5.175
                                           billion          billion

      EBITDA(2)        $1.774     (3.0)%   $1.725      +     $1.65    (3) to
                       billion             to $1.8         to $1.725   (7)%
                                           billion          billion
    -------------------------------------------------------------------------
    Wireless segment
      Revenue
      (external)       $4.632      8.6 %   $4.625      +     $4.975    7 to
                       billion            to $4.725         to $5.1    10 %
                                           billion          billion

      EBITDA(2)        $2.005      3.9 %   $2.075      x    $2.1 to  5 to 8 %
                       billion            to $2.15           $2.175
                                           billion          billion
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) See Section 6.1 Earnings before interest, taxes, depreciation and
        amortization (EBITDA) for the definition.
    (2) For comparative purposes, EBITDA for 2007 was adjusted to exclude an
        incremental pre-tax charge that related to the introduction of a
        net-cash settlement feature for share option awards granted prior to
        2005. Of the consolidated total $169 million, approximately
        $145 million was recorded in wireline and $24 million was recorded in
        wireless.
    (3) For comparative purposes, basic EPS for 2007 was adjusted to exclude
        an incremental after-tax charge of $0.32 per share for the
        introduction of a net-cash settlement feature.
    (4) A non-GAAP measure.
    (5) The target for 2008 capital expenditures was set excluding
        expenditures in the AWS spectrum auction held from May to July 2008.
    -------------------------------------------------------------------------

    The following key assumptions were made at the time the 2008 targets were
announced in December 2007.

    -------------------------------------------------------------------------
    Assumptions for 2008 targets      Actual or estimated result for 2008
    -------------------------------------------------------------------------
    Canadian real GDP growth          Growing economic uncertainty in 2008
    estimate of 2.8% and above        resulted in the Conference Board of
    average growth in the provinces   Canada, Canadian banks and others to
    of Alberta and B.C.               reduce forecasts several times. Real
                                      GDP growth rates for 2008 are estimated
                                      to be less than one per cent for Canada
                                      with above average growth for B.C. and
                                      Alberta. These estimates were
                                      aggregated from recent reports from the
                                      Bank of Canada and several Canadian
                                      banks.
    -------------------------------------------------------------------------
    Canadian dollar at or near        The Canadian dollar closed at U.S.
    parity with the U.S. dollar       $0.821 on December 31, 2008, after
                                      averaging U.S. $0.94 for the full year,
                                      based on daily closing rates.
                                      Influenced by declining commodity
                                      prices and growing economic
                                      uncertainty, the Canadian dollar
                                      averaged U.S. $0.825 in the fourth
                                      quarter of 2008, down from an average
                                      U.S. $0.98 for the first nine months.
                                      (Source: the Bank of Canada.)

                                      TELUS maintained its position of fully
                                      hedging foreign exchange exposure for
                                      the 8.00% U.S. dollar Notes due 2011.
                                      The Company's foreign exchange risk
                                      management also includes the use of
                                      foreign currency forward contracts and
                                      currency options to fix the exchange
                                      rates on short-term U.S. dollar
                                      transactions and commitments
    -------------------------------------------------------------------------
    Increased wireline competition    Confirmed by: (i) a western cable-TV
    in both business and consumer     competitor reporting strong high-speed
    markets, particularly from        Internet and telephone net additions
    cable-TV and VoIP companies       and expansion of its product offerings
                                      to appeal to a wider consumer and
                                      small/medium business base in more
                                      locations; and (ii) TELUS' network
                                      access line losses of 3.6% in 2008
    -------------------------------------------------------------------------
    The impact from the acquisition   The transaction closed in mid-January
    of Emergis was assumed to begin   2008 and had only a minor impact on
    in March 2008                     TELUS' 2008 targets
    -------------------------------------------------------------------------
    Canadian wireless industry        Wireless market penetration gain is
    market penetration gain           estimated to be within this range
    estimate is 4.5 to five
    percentage points for the year
    -------------------------------------------------------------------------
    The capital expenditures target   Actual results were as noted above.
    explicitly excluded potential     Payments of $882 million for AWS
    purchases of wireless spectrum    spectrum licences were recorded in the
    in the AWS spectrum auction       third quarter
    -------------------------------------------------------------------------
    No new wireless competitive       Correct assumption. Eight regional
    entrant assumed for 2008          competitive entrants have acquired
                                      spectrum licences in the AWS auction
                                      concluded July 2008, but it is expected
                                      that entrants are not likely to offer
                                      services until late 2009 or 2010
    -------------------------------------------------------------------------
    Restructuring expenses of         Actual result of $59 million for the
    approximately $50 million         full year supported efforts aimed at
    include the integration of        improving cost structures and enhancing
    Emergis                           efficiency that gained traction towards
                                      the end of the year
    -------------------------------------------------------------------------
    A blended statutory income        The blended statutory rate was 31% as a
    tax rate of 31% to 32%            result of enacted British Columbia tax
                                      rate changes
    -------------------------------------------------------------------------
    A discount rate of 5.5% (50       Pension accounting assumptions are set
    basis points higher than 2007)    at the beginning of the year. See
    and expected long-term return     Section 1.5 for the 2009 assumptions
    of 7.25% for pension accounting
    (unchanged from 2007)
    -------------------------------------------------------------------------
    Average shares outstanding of     Average shares for 2008 were
    approximately 320 million         320 million, or 3.4% lower than in
                                      2007.
    -------------------------------------------------------------------------
    

    1.5 Financial and operating targets for 2009

    The following discussion is qualified in its entirety by the Caution
regarding forward-looking statements at the beginning of Management's review
of operations, as well as Section 5: Risks and risk management. The following
assumptions apply to TELUS' 2009 targets shown in the table in the previous
section. The 2009 targets and assumptions were originally announced on
December 16, 2008.
    For 2009, TELUS is targeting 4 to 6% consolidated revenue growth, an
increase of $372 to $622 million. EBITDA growth is expected to be in a range
of up to 3%, moderated by an increased pension expense in 2009 due to equity
market weakness in 2008. Restructuring costs in 2009 have been estimated
between $50 million and $75 million. EPS are targeted to be $3.40 to $3.70,
similar to 2008, which was positively impacted by income tax adjustments.
Excluding positive 2008 tax adjustments, 2009 EPS is targeted to increase up
to 10%.
    Wireless revenues are forecast to increase 7 to 10% in 2009 due to
continued growth in subscribers, increased smartphone adoption and increased
wireless data service adoption and usage. Wireless EBITDA is expected to
increase 5 to 8% in 2009.
    Wireline revenue is expected to increase by up to 3% in 2009, driven by
data growth. Wireline EBITDA is expected to decrease 3 to 7% as a result of
increased pension expenses, upfront expenses associated with growth services
(including early phase implementation costs for large business contracts), and
expected increased restructuring charges, being somewhat offset by results
from ongoing efficiency initiatives.
    TELUS expects its 2009 EPS to be impacted by slightly increased
depreciation and amortization expenses, and higher financing costs. The
expected increase in financing costs is caused by a higher average debt level
from the payment for AWS spectrum licences in the third quarter of 2008.
    Capital expenditures in 2009 are forecast to be approximately $2.05
billion, in part due to deferral of some expenditures from 2008. The higher
level of capital expenditures in 2009 also reflects significant investment in
TELUS' shared national next generation wireless network build, investments in
network infrastructure to improve wireline broadband capabilities, and the
development of new applications. In addition, this spending will support the
capital required to implement new large enterprise contracts in Ontario and
Quebec that are expected to generate significant revenues in future years.
    TELUS has reaffirmed 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% of sustainable net earnings. The 2009 targets align with these
guidelines. EPS, cash balances, net debt and common equity may be affected by
the purchase of up to eight million TELUS shares under the Company's NCIB
program.

    
    -------------------------------------------------------------------------
    Assumptions for 2009 targets
    -------------------------------------------------------------------------
    Ongoing wireline competition in both business and consumer markets,
    particularly from cable-TV and VoIP companies
    -------------------------------------------------------------------------
    Canadian wireless industry market penetration gain estimate of
    approximately 4.5 percentage points for the year, similar to estimated
    growth in 2008
    -------------------------------------------------------------------------
    Downward pressure on wireless average revenue per subscriber unit (ARPU)
    -------------------------------------------------------------------------
    New competitive wireless entry beginning in the fourth quarter of 2009
    with most entrants starting in 2010
    -------------------------------------------------------------------------
    Approximately $50 million to $75 million restructuring expenses
    ($59 million in 2008)
    -------------------------------------------------------------------------
    A blended statutory tax rate of approximately 30 to 31% (31% in 2008)
    -------------------------------------------------------------------------
    Net income tax payments of approximately $320 to $350 million
    ($10 million in 2008)
    -------------------------------------------------------------------------
    Forecast average exchange rate of U.S. $0.80 per Canadian dollar
    (U.S. $0.94 in 2008)
    -------------------------------------------------------------------------
    A pension accounting discount rate estimated at 7.00% (subsequently set
    at 7.25%) and expected long-term return of 7.25% (unchanged from 2008,
    and consistent with the Company's long-run returns and its future
    expectations). Defined benefits pension plans net expenses and funding
    were both estimated to increase in 2009, mainly due to the decline in
    value of defined benefits pension plans assets in 2008.

    -   Defined benefits pension plans net expenses were estimated to be $nil
        in 2009, subsequently revised to approximately $18 million (compared
        to a $100 million recovery in 2008)
    -   Defined benefits pension plans contributions were estimated to be
        approximately $200 million in 2009, subsequently revised to
        $211 million ($102 million in 2008).
    -------------------------------------------------------------------------

    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

    -------------------------------------------------------------------------
    ($ in millions, except
     per share amounts)                   2008 Q4  2008 Q3  2008 Q2  2008 Q1
    -------------------------------------------------------------------------
    Operating revenues                      2,454    2,450    2,399    2,350
    -------------------------------------------------------------------------
      Operations expense(1)                 1,479    1,465    1,477    1,394
      Restructuring costs                      38       10        4        7
    -------------------------------------------------------------------------
    EBITDA(2)                                 937      975      918      949
      Depreciation                            351      344      343      346
      Amortization of intangible assets        84       92       77       76
    -------------------------------------------------------------------------
    Operating income                          502      539      498      527
      Other expense (income)                   11        6        2       17
      Financing costs                         118      122      114      109
    -------------------------------------------------------------------------
    Income before income taxes and
     non-controlling interest                 373      411      382      401
      Income taxes (recovery)                  88      125      114      109
      Non-controlling interests                 -        1        1        1
    -------------------------------------------------------------------------
    Net income                                285      285      267      291
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income per Common Share and
     Non-Voting Share
      - basic                                0.90     0.89     0.83     0.90
      - diluted                              0.89     0.89     0.83     0.90
    Dividends declared per Common
     Share and Non-Voting Share             0.475     0.45     0.45     0.45
    -------------------------------------------------------------------------
    (1) Includes net-cash settlement
        feature expense (recovery)              -        -        -        -
    (2) EBITDA is a non-GAAP measure. See Section 6.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    ($ in millions, except
     per share amounts)                   2007 Q4  2007 Q3  2007 Q2  2007 Q1
    -------------------------------------------------------------------------
    Operating revenues                      2,330    2,310    2,228    2,206
    -------------------------------------------------------------------------
      Operations expense(1)                 1,371    1,317    1,340    1,437
      Restructuring costs                       6        6        3        5
    -------------------------------------------------------------------------
    EBITDA(2)                                 953      987      885      764
      Depreciation                            386      333      318      318
      Amortization of intangible assets        68       70       73       49
    -------------------------------------------------------------------------
    Operating income                          499      584      494      397
      Other expense (income)                    6        8       18        4
      Financing costs                         109       86      127      118
    -------------------------------------------------------------------------
    Income before income taxes and
     non-controlling interest                 384      490      349      275
      Income taxes (recovery)                 (19)      79       94       79
      Non-controlling interests                 3        1        2        1
    -------------------------------------------------------------------------
    Net income                                400      410      253      195
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
    (1) Includes net-cash settlement
        feature expense (recovery)              1       (7)       1      174
    (2) 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 both growth in
wireless network revenues generated from an increasing subscriber base, as
well as strong growth in wireline data revenue, which includes new revenues
from two January 2008 acquisitions. In 2008, wireless ARPU (average revenue
per subscriber unit per month) decreased one per cent from 2007, as declining
voice ARPU more than offset strong growth in data ARPU. The voice ARPU decline
reflects pricing competition, increased use of in-bucket, or included-minute
service plans, and the recent launch of the postpaid basic brand. TELUS' Mike
service has a significant exposure to the transport, construction, automotive
and oil & gas sectors, which have been affected by the economic downturn in
2008, resulting in a weakening in Mike ARPU, particularly later in the year.
    Prior to 2008, wireline data revenue growth was 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. Residential network
access line losses continue at recent run rate levels, as TELUS' main cable-TV
competitor expanded its product offerings, competitive pricing and coverage.
Partially offsetting the residential line losses were continued gains in
business network access lines.
    Historically, there has been significant fourth quarter seasonality with
respect to higher wireless subscriber additions, related acquisition costs and
equipment sales, resulting in lower fourth quarter wireless EBITDA. The third
quarter is becoming more significant as well, with back-to-school offers.
Historically, there was a less pronounced fourth quarter seasonal effect for
wireline high-speed Internet subscriber additions and related costs, which is
no longer significant.
    Starting in 2008, consolidated Operations expense includes expenses from
two January acquisitions. Beginning with the first quarter of 2007, Operations
expenses include expenses or recoveries for introducing a net-cash settlement
feature for share option awards granted prior to 2005.
    Depreciation expense increased beginning in the second half of 2007 with
a reduction in estimated useful service lives for certain circuit switching,
network management and other assets in the third and fourth quarters of 2007
and first quarter of 2008.
    Amortization of intangible assets in the fourth quarter of 2008 and first
quarter of 2007 are net of investment tax credits of $6 million and $5
million, respectively. The investment tax credits were each applied following
a determination of eligibility by a government tax authority and relate to
assets capitalized in prior years that are now fully amortized. Amortization
increased by $18 million beginning in the second quarter of 2007 from a major
new wireline billing and client care platform put into service for Alberta
residential customers in March 2007. The sequential increase in amortization
of intangible assets in the first quarter of 2008 was due mainly to
acquisitions. Implementation of the new phase of the billing platform for B.C.
residential customers in mid-July 2008 increased amortization in the third
quarter of 2008 by $5 million and an additional $3 million in the fourth
quarter of 2008.
    Financing costs shown in the preceding table are net of varying amounts
of interest income, including interest from the settlement of prior years'
income tax-related matters, particularly in the third quarter of 2007.
Interest expenses had been trending lower due primarily to a lower effective
interest rate from financing activities in the first half of 2007 and April
2008. An increase in interest expenses in the third and fourth quarters of
2008 resulted from a higher debt balance that helped fund January acquisitions
and the payment for advanced wireless services spectrum licences.
    The trends in Net income and earnings per share (EPS) reflect the items
noted above, as well as adjustments arising from legislated income tax
changes, settlements and tax reassessments for prior years, including any
related interest on reassessments. EPS has been positively impacted by
decreased shares outstanding from ongoing share re-purchases.

    
    -------------------------------------------------------------------------
    Income tax-related adjustments
    ($ in millions,
     except EPS amounts)                  2008 Q4  2008 Q3  2008 Q2  2008 Q1
    -------------------------------------------------------------------------
    Approximate Net income impact              32        -        -       17
    Approximate EPS impact ($)               0.10        -        -     0.05
    Approximate basic EPS excluding
     tax-related impacts ($)                 0.80     0.89     0.83     0.85
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Income tax-related adjustments
    ($ in millions,
     except EPS amounts)                  2007 Q4  2007 Q3  2007 Q2  2007 Q1
    -------------------------------------------------------------------------
    Approximate Net income impact             143       93       17        4
    Approximate EPS impact ($)               0.44     0.28     0.05     0.01
    Approximate basic EPS excluding
     tax-related impacts ($)                 0.79     0.96     0.71     0.57
    -------------------------------------------------------------------------

    In addition to income tax-related adjustments, unfavourable adjustments
for sales tax reassessments for prior years were recorded in the third quarter
of 2008 and second quarter of 2007. The after-tax adjustments were
approximately $8 million (two cents per share) in the third quarter of 2008,
and approximately $7 million (two cents per share) in the second quarter of
2007.

    2.3 Consolidated results from operations

    -------------------------------------------------------------------------
    ($ in millions,             Quarters ended              Years ended
     except EBITDA               December 31                December 31
     margin in %)           2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Operating revenues     2,454    2,330    5.3 %    9,653    9,074    6.4 %
    Operations expense     1,479    1,371    7.9 %    5,815    5,465    6.4 %
    Restructuring costs       38        6    n.m.        59       20    195 %
    -------------------------------------------------------------------------
    EBITDA(1)                937      953   (1.7)%    3,779    3,589    5.3 %
    Depreciation             351      386   (9.1)%    1,384    1,355    2.1 %
    Amortization of
     intangible assets        84       68     24 %      329      260     27 %
    -------------------------------------------------------------------------
    Operating income         502      499    0.6 %    2,066    1,974    4.7 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(2)      1,479    1,370    8.0 %    5,815    5,296    9.8 %
    EBITDA (as
     adjusted)(2)            937      954   (1.8)%    3,779    3,758    0.6 %
    Operating income
     (as adjusted)(2)        502      500    0.4 %    2,066    2,143   (3.6)%

    EBITDA margin(3)        38.2     40.9 (2.7)pts     39.1     39.6 (0.5)pts
    EBITDA margin
     (as adjusted)(3)       38.2     40.9 (2.7)pts     39.1     41.4 (2.3)pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) EBITDA is a non-GAAP measure. See Section 6.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    (2) Excluding net-cash settlement feature expense of $1 million and
        $169 million, respectively, in the fourth quarter and full year of
        2007.
    (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

    Operating revenues increased by $124 million and $579 million,
respectively, in the fourth quarter and full year of 2008 when compared to the
same periods in 2007. Revenue and subscriber growth continued to occur in
wireless operations and wireline data services. Wireline data revenue was also
positively impacted by two acquisitions completed in January 2008. Voice long
distance revenues continued to erode, while voice local revenue showed a year-
over-year decrease due to the effects of local competition and technological
substitution.

    Operations expense

    Operations expense for 2008 increased by $108 million and $350 million,
respectively, for the fourth quarter and full year of 2008 when compared to
the same periods in 2007. Operations expense adjusted to exclude the net-cash
settlement feature increased by $109 million and $519 million, respectively.
Wireline expense increases were due to acquisitions, increased cost of sales,
and initial implementation costs for new wireline enterprise customers, partly
offset by the absence of post-conversion expenses recorded in 2007 for a new
Alberta wireline billing and client care platform. Wireless expenses increased
to support the 10% year-over-year growth in the wireless subscriber base and
9% growth in wireless network revenue, and included support costs for growing
data service adoption and start up costs associated with the launch of the new
Koodo(R) brand. Expense increases in both segments were net of lower accrued
year-end employee performance bonuses resulting from below plan operational
performance.
    TELUS' defined benefit pension plan net amortization did not change
significantly in 2008. In 2009, management expects the net expense for, and
contributions to, defined benefits plans to increase. See assumptions for 2009
in Section 1.5 Financial and operating targets for 2009. Bad debt expenses
increased $12 million and $28 million, respectively, in the fourth quarter and
full year of 2008 when compared to the same periods in 2007. The increases
were mainly due to growing and broadening subscriber bases.

    Restructuring costs

    Restructuring costs increased by $32 million and $39 million,
respectively, in the fourth quarter and full year of 2008 when compared to the
same periods in 2007. Restructuring expenses in 2008 were in respect of
approximately 35 efficiency initiatives, which included a reorganization of
three enabling business units (Technology strategy, Network operations, and
Business transformation) into two integrated teams, redirection of efforts to
growing parts of the business, optimization of layers of management and spans
of control to reduce staff, increased use of business process outsourcing,
rationalization of products in low-value activities, re-alignment of sales
forces, simplification of marketing strategies, and consolidation of vendor
management. An expense between $50 million to $75 million is expected for
efficiency initiatives in 2009.

    EBITDA

    Consolidated EBITDA decreased by $16 million in the fourth quarter of
2008 and increased by $190 million for the full year of 2008 when compared to
the same periods in 2007. Excluding the net-cash settlement feature,
consolidated EBITDA (as adjusted) decreased by $17 million in the fourth
quarter, mainly due to an $18 million decrease in wireline EBITDA (as
adjusted), which was caused by higher restructuring costs. For the full year
of 2008, consolidated EBITDA (as adjusted) increased by $21 million, as the
$75 million increase in wireless EBITDA (as adjusted) more than offset the $54
million decrease in wireline EBITDA (as adjusted).

    Depreciation

    Depreciation decreased by $35 million in the fourth quarter of 2008 and
increased by $29 million for the full year of 2008 when compared to the same
periods in 2007. The decrease for the quarter was due mainly to: (i) $47
million accelerated depreciation in the fourth quarter of 2007, resulting from
a reduction in estimated useful service lives for certain digital remote
circuit switching, network management and other assets; and (ii) an increase
in fully depreciated assets; partly offset by (iii) increased depreciation
from a reduction in estimated useful service lives for certain digital circuit
switching assets in 2008. The increase for the full year of 2008 was from the
reduction in estimated useful service lives for certain digital circuit
switching assets, partly offset by $67 million in accelerated depreciation
recorded in 2007 from a reduction in estimated useful service lives for
certain digital remote circuit switching, network management and other assets.

    Amortization of intangible assets

    Amortization increased by $16 million and $69 million, respectively, for
the fourth quarter and full year of 2008 when compared to the same periods in
2007. The increases included: (i) $13 million and $51 million, respectively,
for January 2008 acquisitions (primarily software amortization); (ii) $8
million and $13 million, respectively, for the July 2008 implementation of the
new B.C. phase of the converged wireline billing and client care platform;
(iii) $19 million additional amortization for the full year of 2008 arising
from phase one Alberta implementation of the new wireline billing and client
care platform put into service in March 2007; and (iv) net increases in other
intangible assets subject to amortization. The increases were partly offset by
lower amortization of wireless subscriber base assets, which are now fully
amortized, as well as accelerated amortization in 2007 related to the
discontinuation of AMP'D Mobile Canada services.
    In addition, amortization was reduced through application of investment
tax credits (ITCs) of $6 million in the fourth quarter and full year of 2008,
and $5 million in the full year of 2007. The ITCs were applied following
determination of eligibility by the taxation authority, and were for assets
capitalized in prior years that were fully amortized.
    Amortization is expected to increase for the full year of 2009 as
compared to 2008, mainly due to an additional seven months amortization for
the B.C. phase of the converged wireline client care and billing platform. See
Caution regarding forward-looking statements.

    Operating income

    Operating income increased by $3 million and $92 million, respectively,
in the fourth quarter and full year of 2008 when compared to the same periods
in 2007. Excluding the net-cash settlement feature in 2007, operating income
(as adjusted) increased by $2 million in the fourth quarter as lower
depreciation more than offset lower EBITDA (as adjusted) and increased
amortization of intangible assets. Operating income (as adjusted) decreased by
$77 million for the full year, as increased depreciation and amortization more
than offset higher EBITDA (as adjusted).

    
    Other income statement items

    -------------------------------------------------------------------------
                                Quarters ended              Years ended
    Other expense, net           December 31                December 31
    ($ millions)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
                              11        6     83 %       36       36      - %
    -------------------------------------------------------------------------
    

    Other expense includes accounts receivable securitization expense, income
(losses) or impairments in equity or portfolio investments, gains and losses
on disposal of real estate, and charitable donations. Accounts receivable
securitization expenses were $3 million and $11 million, respectively, in the
fourth quarter and full year of 2008, as compared to $5 million and $21
million, respectively, in the same periods in 2007. The decreases in 2008 were
caused by lower proceeds from securitized accounts receivable (see Section 4.6
Accounts receivable sale). Net losses on investments were $2 million and $10
million, respectively, in the fourth quarter and full year of 2008. For the
full year of 2007, a $12 million write-off of an equity investment in AMP'D
Mobile, Inc. was largely offset by other net gains. In addition, approximately
$4 million was recorded in the full year of 2007 for various costs of
assessing whether to acquire BCE, which ultimately led to the decision to not
bid for BCE. Charitable donations were $6 million and $17 million,
respectively, in fourth quarter and full year of 2008, as compared to $3
million and $16 million, respectively, in the same periods in 2007.

    
    -------------------------------------------------------------------------
                                Quarters ended              Years ended
    Financing costs              December 31                December 31
    ($ millions)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Interest on long-
     term debt, short-
     term obligations
     and other               128      109     17 %      481      464    3.7 %
    Foreign exchange
     (gains) losses            -        2    n.m.        (1)      13    n.m.
    Capitalized interest
     during construction       -        -      -         (3)       -      -
    Interest income          (10)      (2)   n.m.       (14)     (37)    62 %
    -------------------------------------------------------------------------
                             118      109    8.3 %      463      440    5.2 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Interest expenses on long-term and short-term debt and other increased
$19 million and $17 million, respectively, in the fourth quarter and full year
of 2008 when compared to the same periods in 2007. The increases were mainly
due to a higher debt balance used to finance acquisitions and pay for AWS
spectrum licences, partly offset by a lower effective interest rate. An
adjustment recorded in 2007 for application of the effective rate method for
issue costs required under CICA Handbook Section 3855 (recognition and
measurement of financial instruments) also contributed to the increase in
2008.
    Interest income increased $8 million in the fourth quarter and decreased
$23 million for the full year of 2008 when compared to the same periods in
2007. The increase for the quarter was primarily interest on settlement of tax
matters in 2008. The decrease for the full year was largely due to lower
interest from tax settlements and lower average temporary investment and bank
balances in 2008.

    
    -------------------------------------------------------------------------
                                Quarters ended              Years ended
    Income taxes                 December 31                December 31
    ($ millions)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Basic blended federal
     and provincial tax
     at statutory income
     tax rates               116      129    (10)%      486      503   (3.4)%
    Revaluation of future
     income tax liability
     to reflect future
     statutory income
     tax rates                (9)    (141)     -        (41)    (177)     -
    Tax rate differential
     on, and consequential
     adjustments from,
     reassessments of
     prior years' tax
     issues                  (20)      (3)     -        (21)     (79)     -
    Share option award
     compensation              2        1      -          6       (4)     -
    Other                     (1)      (5)     -          6      (10)     -
    -------------------------------------------------------------------------
                              88      (19)   n.m.       436      233     87 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Blended federal and
     provincial statutory
     tax rates (%)          31.2     33.6 (2.4)pts     31.0     33.6 (2.6)pts
    Effective tax
     rates (%)              23.5     (4.9)   n.m.      27.8     15.6 12.2 pts
    -------------------------------------------------------------------------
    

    For the fourth quarter of 2008, blended federal and provincial statutory
income tax decreased when compared to the same period in 2007, due to lower
income before taxes and lower blended statutory tax rates. For the full year
of 2008, blended statutory income taxes decreased due to lower blended
statutory tax rates, partly offset by the 5% increase in income before taxes.
A one per cent reduction in B.C. provincial income tax rates beginning July 1,
2008 was substantively enacted in the first quarter of 2008. Previous
reductions to federal income tax rates for 2008 to 2012 were enacted in 2007.
The effective tax rates in both years were lower than the statutory tax rates
due to revaluations of future income tax liabilities resulting from enacted
reductions to future provincial and federal income tax rates, future tax rates
being applied to temporary differences, and reassessments of prior years' tax
matters.
    Income tax instalment payments were $14 million in 2008 ($10 million net
of tax refunds received). Based on the assumption of the continuation of the
rate of the Company's earnings, the existing legal entity structure, and no
substantive changes to tax regulations, TELUS expects net income tax payments
to increase substantially in 2009, in respect of final 2008 tax year
remittances and 2009 instalments. See Section 1.5 Financial and operating
targets for 2009.

    
    -------------------------------------------------------------------------
    Non-controlling             Quarters ended              Years ended
     interests                   December 31                December 31
    ($ millions)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
                               -        3   (100)%        3        7    (57)%
    -------------------------------------------------------------------------
    

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

    Comprehensive income

    Currently, the concept of comprehensive income for purposes of Canadian
GAAP, in the Company's specific instance, is primarily to include changes in
shareholders' equity arising from unrealized changes in the fair values of
financial instruments. 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)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Voice local              480      505   (5.0)%    1,973    2,064   (4.4)%
    Voice long
     distance(1)             173      179   (3.4)%      700      715   (2.1)%
    Data(2)                  528      466     13 %    2,072    1,772     17 %
    Other                     85       69     23 %      276      259    6.6 %
    -------------------------------------------------------------------------
    External operating
     revenue(3)            1,266    1,219    3.9 %    5,021    4,810    4.4 %
    Intersegment revenue      35       31     13 %      131      114     15 %
    -------------------------------------------------------------------------
    Total operating
     revenues(3)           1,301    1,250    4.1 %    5,152    4,924    4.6 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Voice long distance revenue decreased by 4% for the full year of 2008
        when the impact of a second quarter 2007 adjustment, associated with
        the Alberta billing system conversion, is excluded.
    (2) Data revenue increased by approximately 3% and 6%, respectively, for
        the fourth quarter and full year of 2008, when revenues from
        acquisitions are excluded from 2008 and the impact of mandated
        retroactive competitor price reductions are excluded from both years.
    (3) External and total operating revenue growth was essentially flat in
        2008, when excluding revenues from acquisitions and regulatory
        adjustments.
    -------------------------------------------------------------------------

    Wireline revenues increased $51 million and $228 million, respectively, in
the fourth quarter and full year of 2008 when compared with the same periods
in 2007, due to the following:

    -   Voice local revenue decreased by $25 million and $91 million,
        respectively. The decreases were mainly due to: (i) lower revenues
        from basic access and optional enhanced service revenues caused by
        increased competition for residential subscribers and consequent
        decline in local residential access lines, offset in part by growth
        in business local services and access lines; and (ii) for the full
        year, lower recoveries from the price cap deferral account.

        The 2007 deferral account recovery of approximately $14.5 million
        included previously incurred amounts associated with mandated local
        number portability and start-up costs, and it offset unfavourable
        mandated retroactive rate adjustments in the same period for basic
        data revenue pursuant to two CRTC regulatory decisions (see the
        discussion for wireline data revenue below).

    -------------------------------------------------------------------------
    Network access lines (NALs)                          As at December 31
    (000s)                                             2008     2007  Change
    -------------------------------------------------------------------------
    Residential NALs                                  2,402    2,596   (7.5)%
    Business NALs                                     1,844    1,808    2.0 %
                                                    -------- -------- -------
    Total NALs                                        4,246    4,404   (3.6)%


                                Quarters ended              Years ended
                                 December 31                December 31
    (000s)                  2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Change in
     residential NALs        (42)     (47)    11 %     (194)    (179)  (8.4)%
    Change in business
     NALs                      6        8    (25)%       36       35    2.9 %
                         -------- -------- -------  -------- -------- -------
    Change in total NALs     (36)     (39)   7.7 %     (158)    (144)  (9.7)%
    -------------------------------------------------------------------------

        Residential line losses include the effect of increased competition
        from resellers and VoIP competitors (including cable-TV companies),
        as well as technological substitution to wireless services. The
        increase in business lines for the full year was experienced in
        Ontario and Quebec urban areas.

    -   Voice long distance revenues decreased by $6 million and $15 million,
        respectively, in the fourth quarter and full year of 2008 when
        compared with the same periods in 2007. The decrease in long distance
        revenue for the full year was partly offset by a $13 million negative
        one-time adjustment in the second quarter of 2007, associated with
        implementation of a new billing platform for Alberta residential
        customers. Excluding the one-time adjustment in 2007, revenue
        decreased by $6 million and $28 million, respectively, due mainly to
        lower average per-minute rates from industry-wide price competition
        and a lower base of residential subscribers, partly offset by higher
        minute volumes.

    -   Wireline data revenues increased by $62 million and $300 million,
        respectively, in the fourth quarter and full year of 2008 when
        compared with the same periods in 2007. Data revenue increased
        primarily due to: (i) revenues from two acquisitions in January 2008;
        (ii) increased Internet, enhanced data and hosting service revenues
        from growth in business services and high-speed Internet subscribers;
        (iii) increased broadcast, videoconferencing and data equipment
        sales; (iv) mandatory retroactive rate reductions recorded in 2007
        (as noted in the next paragraph); and (v) increased provision of
        digital entertainment services to consumers in urban incumbent
        markets. The underlying growth in 2008, absent acquisitions and
        regulatory adjustments, was approximately 6%.

        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)                                             2008     2007  Change
    -------------------------------------------------------------------------
    High-speed Internet subscribers                   1,096    1,020    7.5 %
    Dial-up Internet subscribers                        124      155    (20)%
                                                    -------- -------- -------
    Total Internet subscribers                        1,220    1,175    3.8 %

                                Quarters ended              Years ended
                                 December 31                December 31
    (000s)                  2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    High-speed Internet
     net additions            19       26    (27)%       76      103    (26)%
    Dial-up Internet
     net reductions          (10)      (9)   (11)%      (31)     (39)    21 %
                         -------- -------- -------  -------- -------- -------
    Total Internet
     subscriber net
     additions                 9       17    (47)%       45       64    (30)%
    -------------------------------------------------------------------------

        High-speed Internet subscriber net additions were lower in 2008 when
        compared to the same period in 2007, due to a maturing market and a
        cable-TV competitor's expanded product offerings.

    -   Other revenue increased by $16 million and $17 million, respectively,
        in the fourth quarter and full year of 2008 when compared with the
        same periods in 2007. The increases were due primarily to higher
        voice equipment sales, net of 2007 recoveries for quality of service
        rate rebates following CRTC decisions that clarified the application
        of such rebate rules to TELUS.

    -   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 -        Quarters ended              Years ended
     wireline segment            December 31                December 31
    ($ millions)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Salaries, benefits
     and other employee-
     related costs,
     before net-cash
     settlement feature      443      447   (0.9)%    1,853    1,729    7.2 %
    Net-cash settlement
     feature expense           -        2   (100)%        -      145   (100)%
    Other operations
     expenses                381      334     14 %    1,474    1,348    9.3 %
    -------------------------------------------------------------------------
    Operations expense       824      783    5.2 %    3,327    3,222    3.3 %
    Restructuring costs       32        6    n.m.        51       19    168 %
    -------------------------------------------------------------------------
    Total operating
     expenses                856      789    8.5 %    3,378    3,241    4.2 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(1)        824      781    5.5 %    3,327    3,077    8.1 %
    Total operating
     expenses
     (as adjusted)(1)(2)     856      787    8.8 %    3,378    3,096    9.1 %
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Excluding net-cash settlement feature expense.
    (2) Total operating expenses (as adjusted), excluding acquisitions in
        2008, increased by approximately 4% in the fourth quarter and full
        year.
    -------------------------------------------------------------------------
    

    Total operating expenses excluding the net-cash settlement feature
expense increased by $69 million and $282 million, respectively, in the fourth
quarter and full year of 2008 when compared with the same periods in 2007. The
increases were mainly due to acquisitions, increased cost of sales, base
compensation increases in the first quarter, and initial costs incurred to
implement services for new enterprise customers. These increases were partly
offset by a reduction of year-end employee performance bonuses in the fourth
quarter from below plan operational performance, and absence in 2008 of
billing system post-conversion expenses recorded in the second and third
quarters of 2007. The 2007 system post-conversion expenses totalled $24
million for temporary labour to perform system fixes and maintain service
levels after implementation of the wireline billing and client care platform
in Alberta.

    
    -   Salaries, benefits and employee-related costs decreased by $4 million
        in the fourth quarter of 2008 and increased by $124 million for the
        full year of 2008 when compared with the same periods in 2007. The
        decrease for the fourth quarter was primarily a reduction in year-end
        employee performance bonuses, as well as efficiency initiatives
        targeting discretionary employee-related expenses such as travel in
        the latter part of the year, partly offset by factors that increased
        full year costs. The full year increase included Emergis operations
        acquired in January 2008, implementation of new services for
        enterprise customers, as well as base compensation increases earlier
        in the year.

    -   Other operations expenses increased by $47 million and $126 million,
        respectively, in the fourth quarter and full year of 2008 when
        compared with the same periods in 2007. The increases were due to:
        (i) higher costs of sales for increased data equipment sales with
        lower margins; (ii) expenses in acquired companies; (iii) higher
        costs for the provision of digital entertainment services; (iv)
        higher U.S. and international transit and termination costs in the
        fourth quarter due to a lower Canadian dollar; and (v) higher off-net
        facility costs to support new enterprise customers. These increases
        were partly offset by lower advertising and promotional costs and,
        for the full year, higher capitalized labour costs that increased in
        parallel with higher wireline capital expenditures. Due to a
        successful conversion of B.C. residential subscribers to the
        converged wireline billing platform in 2008, conversion costs did not
        have the extra system post-conversion expenses required in 2007 for
        implementing the wireline billing and client care platform in
        Alberta.

    -   Restructuring costs increased by $26 million and $32 million,
        respectively, in the fourth quarter and full year of 2008, when
        compared with the same periods in 2007. Restructuring charges in 2008
        were for a number of initiatives under the Company's competitive
        efficiency program.

    -------------------------------------------------------------------------
    EBITDA ($ millions)         Quarters ended              Years ended
     and EBITDA margin (%)       December 31                December 31
     wireline segment       2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    EBITDA                   445      461   (3.5)%    1,774    1,683    5.4 %
    EBITDA
     (as adjusted)(1)        445      463   (3.9)%    1,774    1,828   (3.0)%
    EBITDA margin           34.2     36.9 (2.7)pts     34.4     34.2  0.2 pts
    EBITDA margin
     (as adjusted)          34.2     37.0 (2.8)pts     34.4     37.1 (2.7)pts
    -------------------------------------------------------------------------
    (1) Excluding net-cash settlement feature expense of $2 million and
        $145 million, respectively, in the fourth quarter and full year of
        2007.
    (2) EBITDA (as adjusted), excluding acquisitions in 2008, decreased by
        approximately 6% and 5%, respectively, in the fourth quarter and full
        year.
    -------------------------------------------------------------------------
    

    Wireline segment EBITDA decreased by $16 million in the fourth quarter of
2008 and increased by $91 million for the full year of 2008 when compared with
the same periods in 2007. The increase for the full year was mainly due to the
net-cash settlement feature expense recorded in 2007. Wireline EBITDA (as
adjusted) decreased by $18 million and $54 million, respectively, due to
increased restructuring charges, lower margins on increased data equipment
sales, initial costs to implement services for new enterprise customers, and
higher costs for the provision of digital entertainment services.
    The EBITDA margin increase for the full year of 2008 resulted mainly from
the significant net-cash settlement feature expense recorded in 2007. EBITDA
margin (as adjusted) decreased due to early stage expenses for implementing
large complex deals, as well as lower incremental margins on growing data
services and higher restructuring charges.

    
    2.5 Wireless segment results

    -------------------------------------------------------------------------
    Operating revenues -        Quarters ended              Years ended
     wireless segment            December 31                December 31
    ($ millions)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Network revenue        1,122    1,040    7.9 %    4,369    4,008    9.0 %
    Equipment revenue         66       71   (7.0)%      263      256    2.7 %
    -------------------------------------------------------------------------
    External operating
     revenue               1,188    1,111    6.9 %    4,632    4,264    8.6 %
    Intersegment revenue       7        7      - %       28       27    3.7 %
    -------------------------------------------------------------------------
    Total operating
     revenues              1,195    1,118    6.9 %    4,660    4,291    8.6 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    Key wireless operating indicators                    As at December 31
    (000s)                                             2008     2007  Change
    -------------------------------------------------------------------------
    Subscribers - postpaid                            4,922    4,441     11 %
    Subscribers - prepaid                             1,207    1,127    7.1 %
                                                    -------- -------- -------
    Subscribers - total                               6,129    5,568     10 %

    Proportion of subscriber base
     that is postpaid (%)                              80.3     79.8  0.5 pts
    Digital POPs(1) covered
     (millions)(2)                                     32.6     31.6    3.2 %


                                Quarters ended              Years ended
                                 December 31                December 31
                            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Subscriber gross
     additions - postpaid    279      241     16 %    1,062      850     25 %
    Subscriber gross
     additions - prepaid     162      180    (10)%      593      584    1.5 %
                         -------- -------- -------  -------- -------- -------
    Subscriber gross
     additions - total       441      421    4.8 %    1,655    1,434     15 %

    Subscriber net
     additions - postpaid    119      107     11 %      481      365     32 %
    Subscriber net
     additions - prepaid      29       55    (47)%       80      150    (47)%
                         -------- -------- -------  -------- -------- -------
    Subscriber net
     additions - total(3)    148      162   (8.6)%      561      515    8.9 %

    Subscriber net
     additions - total
     adjusted(3)               -        -      -        588      515     14 %

    ARPU ($)(4)            62.16    63.70   (2.4)%    62.73    63.56   (1.3)%

    Churn, per month
     (%)(3)(4)              1.62     1.59 0.03 pts     1.57     1.45 0.12 pts
    Adjusted churn,
     per month (%)(3)          -        -      -       1.52     1.45 0.07 pts

    COA(5) per gross
     subscriber
     addition ($)(4)         388      352     10 %      346      395    (12)%
    Average minutes of
     use per subscriber
     per month (MOU)         412      411    0.2 %      411      404    1.7 %

    EBITDA (as
     adjusted)(6) to
     network revenue (%)    43.9     47.2 (3.3)pts     45.9     48.2 (2.3)pts
    Retention spend
     to network
     revenue(4) (%)          8.7      8.6  0.1 pts      9.1      7.6  1.5 pts
    EBITDA (as adjusted)
     excluding COA(4)
     ($ millions)            664      639    3.9 %    2,579    2,495    3.4 %
    -------------------------------------------------------------------------
    pts - percentage points
    (1) 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.
    (2) Including roaming/resale agreements. At December 31, 2008, 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).
    (3) Net Additions and blended churn for 2008 include the impact of TELUS'
        analogue network turndown on September 15, 2008. Adjusted subscriber
        net additions and churn exclude the impact of 27,600 subscriber
        deactivations resulting from turning down the analogue network.
    (4) See Section 6.3 Definitions of key wireless operating indicators.
        These are industry measures useful in assessing operating performance
        of a wireless company, but are not defined under accounting
        principles generally accepted in Canada and the U.S.
    (5) Cost of acquisition.
    (6) Excluding net-cash settlement feature (recovery) expense of
        $(1) million and $24 million, respectively, in the fourth quarter and
        full year of 2007.
    -------------------------------------------------------------------------

    Wireless segment revenues increased by $77 million and $369 million,
respectively, in the fourth quarter and full year of 2008 when compared with
the same periods in 2007, due to the following:

    -   Network revenue increased by $82 million and $361 million,
        respectively, due primarily to strong wireless data revenues and the
        10% growth in the subscriber base over the past year. Wireless data
        revenues were $203 million in the fourth quarter of 2008, up 55% from
        the same period in 2007, and now represent 18% of network revenue
        (13% of network revenue in the same period in 2007). For the full
        year of 2008, wireless data revenues were $690 million, up 55% from
        2007. Growth in data revenues continues to reflect strength in text
        messaging (including incoming text messages) and smartphone service
        revenues driven by increased usage and features, data roaming,
        migration of existing subscribers to full-function smartphones and
        EVDO-capable handsets.

        Blended ARPU of $62.16 and $62.73, respectively, in the fourth
        quarter and full year of 2008 were down by $1.54 and $0.83,
        respectively, when compared to the same periods in 2007, as
        competitive pressures on voice revenues and strong growth in the
        basic service were largely offset by growth in data services. Data
        ARPU was $11.17 in the fourth quarter of 2008, up $3.22 or 41% as
        compared to the fourth quarter of 2007. For the full year of 2008,
        data ARPU was $9.84, up $2.82 or 40% as compared to 2007. Voice ARPU
        was $50.99 in the fourth quarter of 2008, down $4.76 or 8.5% as
        compared to the fourth quarter of 2007. For the full year of 2008,
        voice ARPU was $52.89, down $3.65 or 6.5% as compared to 2007. The
        decrease in voice ARPU was due to pricing competition, lower Mike
        service ARPU, increased use of included-minute rate plans,
        penetration of the basic brand, and lower voice roaming revenue. This
        was partially offset by strong feature upsell, including long
        distance and calling packages. Lower volume non-push-to-talk-centric
        Mike subscribers continue to be actively migrated to PCS smartphones
        for the enhanced data applications, contributing to future revenue
        growth opportunities.

        Gross and net subscriber additions in the fourth quarter of 2008
        include the results of TELUS' postpaid basic brand first launched in
        March 2008. Consistent with industry practice, the Company does not
        breakout the results for this service for competitive reasons.
        Despite softening economic conditions, gross subscriber additions of
        441,000 in the fourth quarter of 2008 (including 279,000 gross
        postpaid subscriber additions) were a TELUS fourth quarter record,
        increasing 5% from the same period in 2007. The proportion of
        postpaid gross subscriber additions was 63% in the fourth quarter of
        2008, up six percentage points when compared to the fourth quarter of
        2007. For the full year of 2008, gross subscriber additions were a
        TELUS record 1.66 million, up 15% when compared to 2007. The
        proportion of postpaid gross additions for the full year of 2008 was
        64%, up five percentage points when compared to 2007.

        Net additions in the fourth quarter of 2008 were 148,000, down 9%
        from the same period in 2007. Postpaid subscriber net additions for
        the same period represented 80% of total net additions as compared
        with 66% of total net additions for the fourth quarter of 2007. Net
        additions for the full year of 2008 (excluding deactivation of
        analogue subscribers) were 588,000, up 14% from 2007 and were
        comprised of 86% postpaid subscribers, up from 71% postpaid
        subscribers in 2007.

        The blended churn rate was 1.62% in the fourth quarter of 2008, or an
        increase of 0.03 percentage points from the same period in 2007.
        Blended churn (excluding deactivation of analogue subscribers) for
        the full year of 2008 was 1.52%, increasing from 1.45% in 2007. The
        increase reflected higher competitive intensity, including the impact
        of higher prepaid churn, in part due to the growth of basic postpaid
        brands in the market. The blended churn rate including deactivation
        of analogue subscribers was 1.57% in the full year of 2008.

    -   Equipment sales, rental and service revenue decreased by $5 million
        in the fourth quarter of 2008 and increased by $7 million for the
        full year of 2008 when compared to the same periods in 2007.
        Equipment sales decreased in the fourth quarter as higher gross
        subscriber additions and retention volumes were more than offset by
        lower per-unit revenues. Lower per-unit revenues were due to
        increased promotional activity driving smartphone adoption, including
        lower industry-wide smartphone pricing and penetration of the Koodo
        brand. Equipment sales increased for the full year mainly due to
        higher gross subscriber additions, partly offset by smartphone
        adoption and per-unit pricing and penetration of the Koodo brand.

    -   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 -        Quarters ended              Years ended
     wireless segment            December 31                December 31
    ($ millions)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Equipment sales
     expenses                198      181    9.4 %      720      656    9.8 %
    Network operating
     expenses                158      141     12 %      603      514     17 %
    Marketing expenses       124      119    4.2 %      470      439    7.1 %
    General and
     administration
     expenses                217      185     17 %      854      775     10 %
    -------------------------------------------------------------------------
    Operations expense       697      626     11 %    2,647    2,384     11 %
    Restructuring costs        6        -    n.m.         8        1    n.m.
    -------------------------------------------------------------------------
    Total operating
     expenses                703      626     12 %    2,655    2,385     11 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(1)        697      627     11 %    2,647    2,360     12 %
    Total operating
     expenses
     (as adjusted)(1)        703      627     12 %    2,655    2,361     12 %
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Excluding net-cash settlement feature (recovery) expense of
        $(1) million and $24 million, respectively, in the fourth quarter and
        full year of 2007.
    -------------------------------------------------------------------------

    Wireless segment total operating expenses increased by $77 million and
$270 million, respectively, in the fourth quarter and full year of 2008 when
compared with the same periods in 2007. Total operating expenses adjusted to
exclude the net-cash settlement feature increased by $76 million and $294
million, respectively, to promote, acquire, support and retain the 10% and 9%
year-over-year growth in the subscriber base and Network revenue,
respectively.

    -   Equipment sales expenses increased by $17 million and $64 million,
        respectively, in the fourth quarter and full year of 2008 when
        compared with the same periods in 2007. Higher combined gross
        subscriber additions and retention volumes, including smartphone
        activity, were partially offset by lower smartphone per-unit costs
        and sales of the Koodo service.

    -   Network operating expenses increased by $17 million and $89 million,
        respectively, in the fourth quarter and full year of 2008 when
        compared with the same periods in 2007. In addition to supporting the
        larger subscriber base, the increases were principally in support of
        the 55% growth in data revenues and were primarily volume in nature,
        as increased usage and smartphone adoption drove increases in roaming
        costs, revenue share to third parties and licensing costs to service
        providers.

    -   Marketing expenses increased by $5 million and $31 million,
        respectively, in the fourth quarter and full year of 2008 when
        compared to the same periods in 2007. The increase for the fourth
        quarter was primarily due to higher advertising in support of the
        BlackBerry Storm, which had delayed deliveries that negatively
        impacted gross additions and COA. The increase for the full year was
        primarily due to higher advertising in support of the 15% increase in
        gross subscriber additions and introduction of a new brand.

        COA per gross subscriber addition increased by $36 or 10% in the
        fourth quarter of 2008 due to the marketing expense increase as well
        as a handset inventory valuation adjustment. COA per gross subscriber
        addition decreased by $49 or 12% for the full year of 2008, when
        compared to 2007, due to the combination of mix in gross subscriber
        loading towards lower variable cost channels and efficiency in
        marketing spend, partly offset by higher subsidies on smartphones in
        response to competitor pricing.

        Retention costs as a percentage of network revenue were up marginally
        to 8.7% in the fourth quarter of 2008, as compared to 8.6% in the
        same period of 2007, and were 9.1% for the full year of 2008, as
        compared to 7.6% for 2007. The increase in retention costs was due
        primarily to continued handset upgrades to full function smartphones
        to support data revenue growth and the continued migration of non-
        push-to-talk-centric Mike service clients to PCS postpaid services.

    -   General and administration increased by $32 million and $79 million,
        respectively, in the fourth quarter and full year of 2008 when
        compared with the same periods in 2007. General and administration
        expenses adjusted to exclude the net-cash settlement feature
        increased by $31 million and $103 million, respectively, due to
        higher costs associated with restructuring efforts, contracted labour
        costs to support data products and service offerings, growth in the
        subscriber base, expansion of company-owned retail stores and Koodo
        outlets, and an increase in bad debt expense. These increases were
        partly offset by a reduction of year-end employee performance bonuses
        in the fourth quarter from below plan operational performance, as
        well as efficiency initiatives targeting discretionary employee-
        related expenses such as travel in the latter part of the year.

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

    -------------------------------------------------------------------------
    Wireless segment
    EBITDA ($ millions)         Quarters ended              Years ended
     and EBITDA                  December 31                December 31
     margin (%)             2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    EBITDA                   492      492      - %    2,005    1,906    5.2 %
    EBITDA
     (as adjusted)(1)        492      491    0.2 %    2,005    1,930    3.9 %
    EBITDA margin           41.2     44.0 (2.8)pts     43.0     44.4 (1.4)pts
    EBITDA margin
     (as adjusted)          41.2     43.9 (2.7)pts     43.0     45.0 (2.0)pts
    -------------------------------------------------------------------------
    (1) Excluding net-cash settlement feature (recovery) expense of
        $(1) million and $24 million, respectively, in the fourth quarter and
        full year of 2007.
    -------------------------------------------------------------------------
    

    Wireless segment EBITDA remained the same in the fourth quarter of 2008
and increased by $99 million in the full year of 2008 when compared with the
same periods in 2007. Wireless EBITDA adjusted to exclude the net-cash
settlement feature increased by $1 million and $75 million, respectively. The
increase in EBITDA (as adjusted) was due to higher Network revenue offset by
increased COA expenses in the fourth quarter (associated with higher gross
loading), higher retention spend (continued smartphone and voice upgrades),
increased network costs related to data usage and outbound roaming activities,
as well as higher general and administrative costs to support business growth.
    EBITDA margins (as adjusted) decreased mainly due to lower incremental
margins on growing data service adoption and higher retention expenses.

    
    3. Changes in financial position

    Changes in the Consolidated statements of financial position for the year
ended December 31, 2008, are as follows:

    -------------------------------------------------------------------------
                   As at December 31
                  -------------------      Changes      Explanation of
    ($ millions)      2008      2007                    the change
    -------------------------------------------------------------------------
    Current Assets

      Cash and           4        20     (16)    (80)%  See Section 4:
       temporary                                        Liquidity and capital
       investments,                                     resources
       net

      Short-term         -        42     (42)   (100)%  Liquidation of short-
       investments                                      term investments in
                                                        the second quarter

      Accounts         966       711     255      36 %  Mainly due to a
       receivable                                       $200 million
                                                        reduction in proceeds
                                                        from securitized
                                                        accounts receivable
                                                        and increases from
                                                        higher revenues
                                                        including
                                                        acquisitions, partly
                                                        offset by a faster
                                                        accounts receivable
                                                        turnover
                                                        (approximately
                                                        48 days versus
                                                        49 days) and
                                                        increased provisions
                                                        for bad debts

      Income and        25       121     (96)    (79)%  Most jurisdictions
       other taxes                                      moved into a
       receivable                                       liability position
                                                        with the current
                                                        income tax expense
                                                        recorded in 2008

      Inventories      333       243      90      37 %  Primarily receipt of
                                                        new wireless handset
                                                        models for new
                                                        product launches and
                                                        dealers accepting
                                                        lower volumes in the
                                                        fourth quarter of
                                                        2008, as well as a
                                                        separate line of
                                                        handsets for the new
                                                        basic wireless brand

      Prepaid          220       200      20      10 %  Mainly an increase in
       expenses                                         deferred wireless
       and other                                        customer activation
                                                        and connection fees
                                                        associated with
                                                        subscriber growth

      Derivative        10         4       6     150 %  Fair value
       assets                                           adjustments to
                                                        foreign exchange
                                                        hedges, restricted
                                                        share units and other
                                                        operational hedges
    -------------------------------------------------------------------------
    Current
     Liabilities

      Accounts       1,465     1,476     (11)     (1)%  Includes lower
       payable and                                      accrued payroll costs
       accrued                                          from seven fewer
       liabilities                                      year-end payroll days
                                                        outstanding, and a
                                                        reduction in accrued
                                                        employee performance
                                                        bonuses, partly
                                                        offset by increases
                                                        from acquisitions

      Income and       163         7     156     n.m.   Mainly due to current
       other taxes                                      income tax expense
       payable                                          booked during 2008
                                                        and income taxes
                                                        payable from
                                                        acquisitions, less
                                                        instalments paid

      Restructuring     51        35      16      46 %  New obligations in
       accounts                                         2008 exceeded
       payable and                                      payments under
       accrued                                          previous and current
       liabilities                                      programs

      Dividends        151         -     151     n.m.   Dividends payable as
       payable                                          at December 31, 2008
                                                        were remitted on the
                                                        January 2, 2009
                                                        payment date. In
                                                        2007, dividends were
                                                        remitted on
                                                        December 31 for the
                                                        January 1, 2008
                                                        payment date

      Advance          689       632      57       9 %  Includes an increase
       billings and                                     in billings for new
       customer                                         enterprise customers
       deposits                                         and wireless postpaid
                                                        subscribers from
                                                        subscriber growth,
                                                        and higher wireless
                                                        deferred customer
                                                        activation and
                                                        connection fees, net
                                                        of a reduction in
                                                        customer deposits

      Current            4         5      (1)    (20)%  Primarily a net
       maturities                                       decrease in capital
       of long-                                         leases
       term debt

      Current           75        27      48     178 %  Fair value
       portion of                                       adjustments for share
       derivative                                       option, restricted
       liabilities                                      share unit and
                                                        operational hedges,
                                                        net of options
                                                        exercised or
                                                        forfeited

      Current          459       504     (45)     (9)%  A decrease in
       portion of                                       temporary differences
       future                                           for current assets
       income taxes                                     and liabilities, as
                                                        well as changes in
                                                        partnership taxable
                                                        income that will be
                                                        allocated in the next
                                                        12 months
    -------------------------------------------------------------------------
    Working         (1,499)   (1,345)   (154)    (11)%  Includes dividends
     capital(1)                                         payable at
                                                        December 31, 2008,
                                                        that were paid on
                                                        January 2, 2009 and
                                                        income taxes payable
                                                        over the next
                                                        12 months, net of
                                                        reduced
                                                        securitization of
                                                        accounts receivable.
    -------------------------------------------------------------------------
    Capital         12,483    11,122   1,361      12 %  Includes $882 million
     Assets, Net                                        for advanced wireless
                                                        services spectrum
                                                        licences acquired in
                                                        Industry Canada's
                                                        2008 auction,
                                                        $326 million for
                                                        acquired software,
                                                        customer contracts
                                                        and related customer
                                                        relationships and
                                                        other capital assets,
                                                        as well as capital
                                                        expenditures net of
                                                        depreciation and
                                                        amortization. See
                                                        Section 2.3
                                                        Consolidated results
                                                        from operations -
                                                        Depreciation,
                                                        Amortization of
                                                        intangible assets, as
                                                        well as Section 4.2
                                                        Cash used by
                                                        investing activities
    -------------------------------------------------------------------------
    Other Assets

      Deferred       1,513     1,318     195      15 %  Primarily related to
       charges                                          pension plan funding,
                                                        favourable cumulative
                                                        returns on plan
                                                        assets to the end of
                                                        2007 and continued
                                                        amortization of
                                                        transitional pension
                                                        assets

      Investments       42        39       3       8 %  Purchases,
                                                        revaluations and
                                                        sales of small
                                                        investments, net of
                                                        the value of Emergis
                                                        shares purchased in
                                                        the open market in
                                                        December 2007 that
                                                        were exchanged at the
                                                        close of acquisition
                                                        in January 2008, as
                                                        well as the sale of a
                                                        minority stake in
                                                        Hostopia

      Goodwill       3,564     3,168     396      13 %  Primarily the January
                                                        2008 acquisition of
                                                        Emergis
    -------------------------------------------------------------------------
    Long-Term Debt   6,348     4,584   1,764      38 %  Includes the April
                                                        2008 publicly issued
                                                        $500 million, seven-
                                                        year Notes, and draws
                                                        of $980 million from
                                                        the 2012 credit
                                                        facility, partly
                                                        offset by a reduction
                                                        of $155 million in
                                                        issued commercial
                                                        paper. Also included
                                                        is a $436 million
                                                        increase in the
                                                        Canadian dollar value
                                                        of the 2011 U.S.
                                                        dollar Notes, which
                                                        is largely offset by
                                                        a lower derivative
                                                        liability (see Other
                                                        Long-Term
                                                        Liabilities)
    -------------------------------------------------------------------------
    Other Long-      1,295     1,718    (423)    (25)%  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 Income    1,255     1,048     207      20 %  An increase in
     Taxes                                              temporary differences
                                                        for long-term assets
                                                        and liabilities,
                                                        partly offset by
                                                        lower tax rates being
                                                        applied
    -------------------------------------------------------------------------
    Non-Controlling     23        26      (3)    (12)%  Payment of dividends
     Interests                                          by a subsidiary to a
                                                        non-controlling
                                                        interest and an
                                                        increase in the
                                                        Company's total
                                                        effective economic
                                                        interest in TELUS
                                                        International
                                                        Philippines Inc. from
                                                        97.4% to 100.0%, net
                                                        of non-controlling
                                                        interests' share of
                                                        earnings
    -------------------------------------------------------------------------
    Shareholders'
     Equity

      Common         7,182     6,926     256       4 %  Primarily Net income
       equity                                           of $1,128 million,
                                                        less dividends
                                                        declared of
                                                        $584 million and NCIB
                                                        purchases of
                                                        $280 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

    In 2008, cash provided by operating activities was supplemented by
financing activities as the Company made two strategic acquisitions in January
(Emergis and Fastvibe) and acquired 59 spectrum licences in the AWS auction,
which ended in July.

    -------------------------------------------------------------------------
                                Quarters ended              Years ended
                                 December 31                December 31
    ($ millions)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Cash provided by
     operating
     activities              747      818   (8.7)%    2,819    3,172    (11)%
    Cash (used) by
     investing
     activities             (643)    (472)   (36)%   (3,433)  (1,772)   (94)%
    Cash (used)
     provided by
     financing
     activities             (136)    (327)    58 %      598   (1,369)   n.m.
    -------------------------------------------------------------------------
    (Decrease)
     Increase
     in cash and
     temporary
     investments, net        (32)      19      -        (16)      31      -
    Cash and temporary
     investments, net,
     beginning
     of period                36        1      -         20      (11)     -
    -------------------------------------------------------------------------
    Cash and
     temporary
     investments,
     net, end of
     period                    4       20    (75)%        4       20    (75)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    4.1 Cash provided by operating activities

    Cash provided by operating activities decreased by $71 million and $353
million, respectively, in the fourth quarter and full year of 2008 when
compared to the same periods in 2007. Changes in the fourth quarter and full
year include the following:

    -   Changes in proceeds from securitized accounts receivable (which are
        included in non-cash working capital changes) contributed a
        $100 million comparative increase in cash flow in the fourth quarter
        and a $200 million reduction in cash flow for the full year.
        Specifically, proceeds from securitized accounts receivable increased
        by $50 million during the fourth quarter of 2008 as compared to a
        decrease of $50 million during this period in 2007. For the full year
        of 2008, proceeds were reduced by $200 million, as compared no change
        in 2007. Utilized proceeds from securitized accounts receivable were
        lower in 2008 as other sources of funding were used. See Section 4.6
        Accounts receivable sale;

    -   EBITDA decreased by $16 million in the fourth quarter of 2008 and
        increased by $190 million for the full year of 2008, as described in
        Section 2 Results from operations;

    -   Share-based compensation expense in excess of payments decreased by
        $91 million for the full year of 2008, due to recording of the net-
        cash settlement feature expense in 2007 and lower cash outflows
        resulting from fewer option exercises;

    -   Contributions to employee defined benefits plans in excess of the net
        employee defined benefits plans recovery increased by $21 million for
        the full year of 2008, when compared to 2007. Net contributions are
        expected to increase in 2009. See assumptions in Section 1.5
        Financial and operating targets for 2009;

    -   Interest paid increased by $22 million and $3 million, respectively,
        in the fourth quarter and full year of 2008. The increases were due
        to higher outstanding debt in 2008, partly offset by a lower
        effective interest rate. The increase in interest paid for the full
        year of 2008 was partly offset by repayment of forward starting
        interest rate swaps in 2007.

    -   Interest received decreased by $32 million and $39 million,
        respectively, for the fourth quarter and full year of 2008, due
        mainly to receipt of interest on income tax refunds in 2007;

    -   Income tax recoveries received net of instalments paid decreased by
        $124 million and $133 million, respectively, in the fourth quarter
        and full year of 2008, as a result of larger settlements of income
        tax-related matters in 2007; and

    -   Other changes in non-cash working capital, including (i) liquidation
        of short-term investments of $42 million in 2008 as compared to
        liquidations of $68 million in 2007; and (ii) increases in
        inventories, net of increases in advanced billings and customer
        deposits in 2008.
    

    4.2 Cash used by investing activities

    Cash used by investing activities increased by $171 million and $1,661
million, respectively, in the fourth quarter and full year of 2008 when
compared with the same periods in 2007. The increase for the quarter resulted
from higher capital expenditures and changes in non-current materials and
supplies. The increase for the full year was due to the payment of $882
million for AWS spectrum licences, acquisitions totalling $696 million net of
acquired cash, and higher capital expenditures.
    Assets under construction were $682 million at December 31, 2008, up by
$123 million from December 31, 2007, primarily reflecting a $110 million
increase in property, plant and equipment under construction, including
construction of the wireless HSPA network. Software intangible assets under
construction increased by $13 million over the year, as expenditures in 2008
for the billing platform and other systems exceeded the transfer of $117
million to software subject to amortization resulting from implementation of
the British Columbia phase of the converged wireline billing and client care
platform in July.

    
    -------------------------------------------------------------------------
    Capital expenditures,
     excluding AWS              Quarters ended              Years ended
     spectrum licences           December 31                December 31
    ($ millions)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Wireline segment         395      337     17 %    1,311    1,219    7.5 %
    Wireless segment         236      135     75 %      548      551   (0.5)%
    -------------------------------------------------------------------------
    TELUS consolidated       631      472     34 %    1,859    1,770    5.0 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted)
     less capital
     expenditures(1)         306      482    (37)%    1,920    1,988   (3.4)%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) See Section 6.1 EBITDA for the calculation and description.
    -------------------------------------------------------------------------

    Capital expenditures for the full year of 2008 increased by $89 million
when compared to 2007, and were in line with targeted annual expenditures of
approximately $1.9 billion. For the full year of 2008, EBITDA (as adjusted)
after deducting capital expenditures (excluding payment for the AWS spectrum
licences) decreased by $68 million.

    -   Wireline segment capital expenditures increased by $58 million and
        $92 million, respectively, in the fourth quarter and full year of
        2008 when compared to the same periods in 2007. The increases
        included investment to support high bandwidth services for business
        and residential customers, investment in healthcare and financial
        services solutions, and upfront expenditures to support new
        enterprise customers, partly offset by lower demand in 2008 for
        network access builds resulting from more moderate residential
        construction activity in B.C. and Alberta. Wireline cash flows
        (EBITDA as adjusted less capital expenditures) were $50 million and
        $463 million, respectively, in the fourth quarter and full year of
        2008, or decreases of 60% and 24%, respectively, when compared to the
        same periods in 2007. The decreases reflect higher capital
        expenditure levels and lower EBITDA (as adjusted).

    -   Wireless segment capital expenditures increased by $101 million in
        the fourth quarter and decreased by $3 million in the full year of
        2008, when compared to the same periods in 2007. Expenditures
        increased in the fourth quarter due to initiatives supporting the new
        HSPA network build that commenced in 2008. For the full year,
        expenditures were relatively unchanged as new spending on the HSPA
        program was offset by lower expenditures for the CDMA wireless
        network (including the EVDO RevA data network rollout). Wireless cash
        flows (EBITDA as adjusted less capital expenditures) were
        $256 million and $1,457 million, respectively, in the fourth quarter
        and full year of 2008, or a decrease of 28% and an increase of 6%,
        respectively, when compared to the same periods in 2007.

    -------------------------------------------------------------------------
    Payment for AWS             Quarters ended              Years ended
     spectrum licences           December 31                December 31
    ($ millions)            2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Capital expenditures
     for AWS spectrum
     licences                  -        -      -        882        -      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted)
     less capital
     expenditures and
     payment for AWS
     spectrum licences(1)      -        -      -      1,038    1,988    (48)%
    -------------------------------------------------------------------------
    (1) See Section 6.1 EBITDA for the calculation and description.
    -------------------------------------------------------------------------
    

    The Company acquired 59 licences in Industry Canada's advanced wireless
services spectrum auction that concluded in July for $880 million plus auction
process charges of $2 million. The amount of successful bids was paid through
a combination of drawing on credit facilities and utilization of cash on hand.
Industry Canada advised the Company that it had met eligibility conditions of
the AWS spectrum licences effective December 31, 2008. The licences are now
classified as intangible assets with indefinite lives. For the full year of
2008, EBITDA (as adjusted) less capital expenditures and payment for the AWS
spectrum licences decreased by $950 million. Wireless cash flows for the full
year of 2008, including the payment for AWS spectrum, were $575 million, down
58% from 2007.

    
    -------------------------------------------------------------------------
                                Quarters ended              Years ended
    Capital intensity(1)         December 31                December 31
    (in %)                  2008     2007  Change      2008     2007  Change
    -------------------------------------------------------------------------
    Capital expenditure
     intensity                26       20    6 pts       19       20  (1) pt
    Capital expenditure
     intensity, including
     payment for AWS
     spectrum licences
     in 2008                   -        -      -         28       20   8 pts
    -------------------------------------------------------------------------
    (1) Capital intensity is the measure of capital expenditures divided by
        operating revenues. This measure provides a basis for comparing the
        level of capital expenditures to other companies of varying size
        within the same industry.
    -------------------------------------------------------------------------
    

    TELUS' capital expenditure intensity ratio for the full year of 2008,
excluding payment for spectrum licences, reflects intensity levels of 25% for
wireline and 12% for wireless, consistent with intensity levels of 25% and
13%, respectively, in 2007. Payment for AWS spectrum licences in 2008
temporarily increased TELUS' overall capital intensity ratio to 28% and the
wireless capital intensity ratio to 31%.

    4.3 Cash used by financing activities

    Net cash used by financing activities in the fourth quarter of 2008 was
$136 million, down $191 million from the fourth quarter of 2007. For the full
year of 2008, net cash provided by financing activities was $598 million, as
compared to net cash used by financing activities of $1,369 million in 2007.

    
    -   Cash dividends paid to shareholders in 2008 were $144 million and
        $433 million, respectively, in the fourth quarter and full year of
        2008 as compared to $270 million and $521 million, respectively, in
        2007. The decrease in dividend payments in 2008 resulted from
        different remittance dates for dividends declared in the fourth
        quarter of 2008 and 2007. The fourth quarter dividend for 2008 was
        remitted on the January 2, 2009 payment date, while the fourth
        quarter dividend for 2007 was remitted on December 31, 2007, for the
        January 1, 2008 payment date. Otherwise, dividend payments in 2008
        reflected higher quarterly declared dividend rates (see Section 2.2
        Quarterly results summary), partly offset by lower shares outstanding
        from NCIB share repurchase programs.

    -   The Company purchased 34% of the maximum 20 million shares allowed
        under the fourth NCIB program ended December 19, 2008. Purchases of
        shares under NCIB programs decreased by $141 million and
        $470 million, respectively in the fourth quarter and full year of
        2008 when compared to the same periods in 2007, as fewer shares were
        repurchased at a lower average price. During the fourth quarter of
        2008, the Company repurchased 155,000 TELUS Non-Voting Shares for a
        total cost of $6 million.

        In December 2008, the Company renewed its NCIB program, which has
        been in place since December 2004. The renewed program (Program 5)
        came into effect on December 23, 2008 and is set to expire on
        December 22, 2009. The maximum number of shares that may be purchased
        under Program 5 is four million Common Shares and four million Non-
        Voting Shares. Daily purchases under Program 5 may not exceed 462,444
        Common Shares and 254,762 Non-Voting Shares until March 31, 2009, and
        thereafter may not exceed 231,222 Common Shares and 127,381 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.

    Shares repurchased for cancellation under normal course issuer bid
    programs

    -------------------------------------------------------------------------
                          Shares repurchased       Purchase cost ($ millions)
                    ------------------------------ --------------------------
                                                    Charged  Charged
                                                         to       to
                                    Non-              Share Retained
                     Common      Voting             capital earnings
                     Shares      Shares      Total       (1)      (2)   Paid
    ---------------------------------------------- --------------------------
    2007
      Program 3
       ended
       Dec. 19    2,904,900  10,571,800 13,476,700      264      480     744
      Program 4
       beginning
       Dec. 20            -     134,200    134,200        3        3       6
    ---------------------------------------------- --------------------------
                  2,904,900  10,706,000 13,610,900      267      483     750
    ---------------------------------------------- --------------------------
    2008
      Program 4
       ended
       Dec. 19      950,300   5,810,400  6,760,700      137      143     280
      Program 5
       beginning
       Dec. 23            -           -          -        -        -       -
    ---------------------------------------------- --------------------------
                    950,300   5,810,400  6,760,700      137      143     280
    -------------------------------------------------------------------------

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

    Long-term debt issues net of redemptions and repayments were $14 million
and $1,316 million, respectively, in the fourth quarter and full year 2008,
and resulted from the following:

    -   In April 2008, the Company publicly issued $500 million, 5.95%,
        Series CE Notes at a price of $998.97 per $1,000 of principal. The
        Notes mature in April 2015. The net proceeds of the offering were
        used for general corporate purposes, including repayment of amounts
        under the 2012 revolving credit facility, and to refinance short-term
        financing sources, which had been utilized in January for purchase of
        the then issued and outstanding Emergis common shares for
        $743 million. The Series CE Notes require that the Company make an
        offer to repurchase the Notes at a price equal to 101% of their
        principal plus accrued and unpaid interest to the date of repurchase
        upon the occurrence of a change in control triggering event, as
        defined in the supplemental trust indenture.

    -   On August 6, 2008, the Board of Directors approved an increase in the
        authorized commercial paper program from $800 million to
        $1.2 billion.

    -   Amounts drawn on the 2012 bank facility increased to $980 million at
        December 31, 2008 from $nil one year earlier, while commercial paper
        issues decreased by $155 million during the year.

        During the first quarter of 2008, the Company increased utilization
        of the 2012 bank facility from $nil to $321 million and increased
        commercial paper by $213 million for general corporate purposes,
        including acquisitions in January. During the second quarter of 2008,
        the Company reduced the amount drawn from the 2012 bank facility to
        $162 million. Utilized bank facilities increased to $430 million
        during the third quarter to help pay for the AWS spectrum licences.
        In the fourth quarter, amounts drawn on the 2012 facility increased
        by $550 million, offsetting a reduction in outstanding commercial
        paper. Commercial paper outstanding was $432 million at December 31,
        2008, as compared to $968 million at September 30, $800 million at
        June 30 and March 31, and $587 million at December 31, 2007.

    In comparison, debt financing activities for the full year of 2007
included the March issue of Series CC and CD Notes totalling $1 billion,
establishment of a commercial paper program in May, and repayment of
approximately $1.5 billion of maturing Notes in June. These activities
contributed to a lower effective interest rate in subsequent periods.

    4.4 Liquidity and capital resource measures

    -------------------------------------------------------------------------
    Liquidity and capital resource measures

    As at, or years ended, December 31            2008       2007     Change
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Components of debt and coverage
     ratios(1) ($ millions)
    -------------------------------------------------------------------------
    Net debt                                     7,286      6,141      1,145
    Total capitalization - book value           14,621     13,197      1,424

    EBITDA - excluding restructuring costs       3,838      3,609        229
    Net interest cost                              463        440         23
    -------------------------------------------------------------------------
    Debt ratios
    -------------------------------------------------------------------------
    Fixed-rate debt as a proportion of
     total indebtedness (%)                         77         82     (5)pts
    Average term to maturity of debt (years)       4.0        5.3       (1.3)

    Net debt to total capitalization (%)(1)       49.8       46.5    3.3 pts
    Net debt to EBITDA - excluding
     restructuring costs(1)                        1.9        1.7        0.2
    -------------------------------------------------------------------------
    Coverage ratios(1)
    -------------------------------------------------------------------------
    Interest coverage on long-term debt            4.3        4.2        0.1
    EBITDA - excluding restructuring
     costs interest coverage                       8.3        8.2        0.1
    -------------------------------------------------------------------------
    Other measures
    -------------------------------------------------------------------------
    Free cash flow ($ millions)(2)
      - based on defined benefits plans
         net recovery                              567      1,573     (1,006)
      - based on defined benefits plans
         contributions                             361      1,388     (1,027)

    Dividend payout ratio of sustainable
     net earnings guideline - 45 to 55%(1)
    Dividend payout ratio - actual earnings (%)     54         47      7 pts
    Dividend payout ratio - actual earnings
     excluding income tax-related adjustments
     and net-cash settlement feature (%)            56         54      2 pts
    ------------------------------------------------------------------------
    (1) See Section 6.4 Definitions of liquidity and capital resource
        measures.
    (2) See Section 6.2 Free cash flow for the definitions.
    -------------------------------------------------------------------------
    

    Net debt at December 31, 2008 increased from one year earlier mainly due
to the $500 million debt issue in April 2008, $980 million drawn on the 2012
credit facility and $16 million lower cash balance, net of a $200 million
decrease in proceeds from securitized accounts receivable and $155 million
lower amounts of commercial paper issued. The net increase in debt supported
payment of $882 million for AWS spectrum licences in the third quarter and
$692 million (net of acquired cash) for January acquisitions. Total
capitalization increased because of higher net debt and retained earnings,
partly offset by lower share capital due to share repurchases.
    The average term to maturity of debt of four years at December 31, 2008
decreased from 5.3 years at December 31, 2007 due to increased amounts drawn
against the 2012 credit facility, partly offset by the issuance in April 2008
of $500 million, Series CE, seven-year Notes and lower amounts of issued
commercial paper. The proportion of debt on a fixed rate basis decreased
mainly due to amounts drawn against the 2012 credit facility, partly offset by
a decrease in proceeds from securitized accounts receivable and the April 2008
seven-year Note issue and lower issues of commercial paper.
    The interest coverage on long-term debt ratio was 4.3 for 2008,
reflecting an increase of 0.1 from 2007 (+0.2 from higher income before income
taxes and long-term interest, net of -0.1 from increased long-term interest).
The EBITDA interest coverage ratio of 8.3 for 2008 reflected an increase of
0.1 from 2007 (+0.5 from higher EBITDA before restructuring, net of -0.4 from
higher net interest costs).
    Free cash flow for 2008, calculated using the net defined benefits plans
recovery as reported previously, decreased by $1,006 million when compared to
the measure one year earlier, largely due to $882 million payment for AWS
spectrum licences and higher capital expenditures, as well as lower income tax
recoveries and interest income, partly offset by higher EBITDA after share-
based compensation and restructuring payments. Prospectively, the Company has
chosen to present free cash flow adjusted for funding of defined benefit
plans, as the funding requirements are largely non-discretionary and
calculated independently of the net defined benefit plans recovery reflected
in the calculation previously. Free cash flow for 2008, based on defined
benefits plans contributions decreased by an additional $21 million.
    The Company's strategy is to maintain the financial policies and
guidelines set out below. The Company believes that these measures are
currently at the optimal level and by maintaining credit ratings in the range
of BBB+ to A-, or the equivalent, provide reasonable access to capital
markets.

    
    TELUS' long-term financial guidelines and policies are:

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

        The ratio for 2008 was 1.9 times, an increase of 0.2 from 2007, as
        higher net debt was partly offset by improved EBITDA before
        restructuring costs.

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

        The target guideline for the annual dividend payout ratio is on a
        prospective basis, rather than on a trailing basis, and is 45 to 55%
        of sustainable net earnings. The ratios based on actual earnings for
        2008 and 2007 were 54% and 47%, respectively. The ratio calculated to
        exclude income tax-related adjustments from earnings in 2008 was 56%.
        The comparable ratio for 2007, also excluding the net-cash settlement
        feature expense was 54%.
    

    4.5 Credit facilities

    On March 3, 2008, TELUS Corporation closed a new $700 million, 364-day
credit facility with a select group of Canadian banks. On December 15, the
Company renewed this credit facility, extending the term to March 1, 2010,
under substantially the same terms and conditions, except for increased cost.
This new facility provides incremental liquidity to TELUS and allows the
Company to continue to meet one of its financial objectives, which is to
generally maintain $1 billion in available liquidity. The financial ratio
tests in the new facility are substantially the same as those in the 2012 $2
billion syndicated facility, which states that the borrower will not permit
its net debt to operating cash flow ratio to exceed 4 to 1 and may not permit
its operating cash flow to interest expense ratio to be less than 2 to 1, each
as defined. The 364-day credit facility is unsecured and bears interest at
Canadian prime and Canadian bankers' acceptance rates, plus applicable
margins.
    At December 31, 2008, TELUS had available liquidity of $1.15 billion from
unutilized credit facilities, as well as unutilized availability under its
accounts receivable securitization program, consistent with the Company's
objective of maintaining at least $1 billion of available liquidity.

    
    TELUS credit facilities at December 31, 2008
    -------------------------------------------------------------------------
                                                        Backstop
                                           Outstanding     for
                                             undrawn    commercial
    ($ in                                    letters      paper    Available
     millions)    Expiry     Size    Drawn  of credit    program   liquidity
    -------------------------------------------------------------------------
    Five-year
     revolving     May 1,
     facility(1)    2012     2,000    (980)    (201)      (432)          387
    364-day
     revolving   March 1,
     facility(2)    2010       700       -        -          -           700
    Other bank
     facilities        -        78     (11)      (3)         -            64
    -------------------------------------------------------------------------
    Total              -     2,778    (991)    (204)      (432)        1,151
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Canadian dollars or U.S. dollar equivalent.
    (2) Canadian dollars only. Originally due March 2, 2009, the term of this
        facility was extended in December 2008.
    -------------------------------------------------------------------------
    

    TELUS' revolving credit facilities contain customary covenants, including
a requirement that TELUS not permit its consolidated Leverage Ratio (debt to
trailing 12-month EBITDA) to exceed 4 to 1 (approximately 1.9 to 1 at December
31, 2008) and not permit its consolidated Coverage Ratio (EBITDA to Interest
Expense on a trailing 12-month basis) to be less than 2 to 1 (approximately
8.3 to 1 at December 31, 2008) at the end of any financial quarter. There are
certain minor differences in the calculation of the Leverage Ratio and
Coverage Ratio under the credit agreements as compared with the calculation of
Net debt to EBITDA and EBITDA interest coverage. Historically, the
calculations have not been materially different. The covenants are not
impacted by revaluation of capital assets, intangible assets and goodwill for
accounting purposes. Continued access to TELUS' credit facilities is not
contingent on the maintenance by TELUS of a specific credit rating.

    4.6 Accounts receivable sale

    TELUS Communications Inc. (TCI), a wholly owned subsidiary of TELUS, is a
party to an agreement with an arm's-length securitization trust associated
with a major Schedule I 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. A March 31, 2008 amendment resulted in the term being extended to
July 17, 2009, for this revolving-period securitization agreement.
    TCI is required to maintain at least a BBB (low) credit rating by DBRS
Ltd. or the securitization trust may require the sale program to be wound
down. The necessary credit rating was exceeded by three levels at A (low) as
of February 11, 2009.

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

    4.7 Credit ratings

    There were no changes to the Company's investment grade credit ratings in
2008. DBRS Ltd. confirmed its credit ratings and trend for TELUS and TCI on
March 27, 2008, and on April 7, assigned a rating and trend of A (low),
stable, to TELUS' new $500 million, 5.95%, seven-year unsecured Note issue.
DBRS confirmed its rating for TELUS Corporation's commercial paper program at
R-1 (low), stable, on August 7, 2008.
    On April 2, Moody's Investors Service (Moody's) assigned a Baa1 rating
with a stable outlook to TELUS' new debt issue, while confirming the same for
TELUS' existing senior unsecured Notes. On April 3, FitchRatings assigned a
BBB+ rating with a stable outlook to the new TELUS debt issue. Standard and
Poor's assigned a BBB+ rating with a stable outlook to the new Series CE
Notes. On December 17, FitchRatings re-affirmed its ratings with a stable
outlook.

    
    -------------------------------------------------------------------------
    Credit rating summary    DBRS Ltd.         S&P      Moody's  FitchRatings
    -------------------------------------------------------------------------
    Trend or outlook           Stable       Stable       Stable       Stable
    -------------------------------------------------------------------------
    TELUS Corporation
      Senior bank debt              -            -            -         BBB+
      Notes                    A (low)        BBB+         Baa1         BBB+
      Commercial paper       R-1 (low)           -            -            -

    TELUS Communications
     Inc. (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' 2007 annual and 2008 interim first, second and third quarter
Management's discussions and analyses.

    5.1 Regulatory

    Implementation of phase II wireless enhanced 911 (E9-1-1) services
    

    On February 2, 2009, the CRTC issued Telecom Policy CRTC 2009-40,
directing Canadian wireless service providers to implement wireless phase II
E9-1-1 service by February 1, 2010 and ruling that wireless service providers
are responsible for their own costs of implementation. Wireless phase II E9-1-
1 services will automatically provide E9-1-1 call centres with more precise
location information when a person calls 9-1-1 emergency services from their
wireless handsets. Wireless phase II E9-1-1 services will provide the caller's
location using a GPS-based system, a triangulation method using the nearest
cellular towers, or a combination thereof. The CRTC has ordered all Canadian
wireless providers to implement wireless phase II E9-1-1 services in the same
areas where wireline E9-1-1 services were already available by February 1,
2010 (stage 1). The CRTC is expected to issue a decision on stage 2 of phase
II E9-1-1 (providing mid-call location updates) after a working group tables
its recommendations later in 2009. TELUS is working to meet the requirements
from this CRTC decision, but there can be no assurance that TELUS can
successfully implement the first stage of wireless phase II E9-1-1 services
across its entire wireless operating territory by February 1, 2010.

    Additional forbearance decisions

    In 2008, the CRTC continued to take steps to forbear from regulating
prices, particularly for services offered in competitive markets.

    Residential and business local exchange services: Cumulatively, TELUS has
received approval for deregulation of local phone services for residential
markets covering approximately 80% of its residential lines in non-high cost
serving areas (urban and suburban areas) and approximately 70% of its business
lines. In aggregate, approximately 67% of total lines are deregulated.

    Retail quality of service in non-forborne markets: In Telecom Decision
2008-15, the CRTC reduced the requirement for incumbent local exchange
carriers (ILECs) to track and report retail quality of service measures in
non- forborne markets from 17 measures to three: Installation appointments
met, Out- of-service trouble reports cleared within 24 hours, and Repair
appointments met. The requirement to track and monitor these indicators is
expected to continue at least until the conclusion of a follow-up CRTC process
examining whether any quality of service regime should remain in non-forborne
areas. The CRTC also removed, in its entirety, the retail rate adjustment plan
that previously required ILECs to make rate rebates to their customers if
their annual performance for certain quality of service indicators failed to
meet a designated standard.

    High capacity/digital data services inter-exchange private lines: In
November 2008, the CRTC forbore, with some conditions, from regulating 193
additional TELUS inter-exchange private line routes, where competitor presence
tests were met. In May 2008, forbearance was granted on some 70 TELUS inter-
exchange private line routes.

    
    5.2 Technology risks

    Restructuring of equipment vendors may impact the services and solutions
    TELUS provides
    

    TELUS has a number of relationships with equipment vendors, which are
important to providing the services and solutions TELUS provides to its retail
and business customers. TELUS faces the risk that some equipment vendors may
experience business difficulties, may not remain viable or may have to
restructure their operations, which could impact their ability to support all
of their products in future. This may negatively impact the services and
solutions TELUS provides.
    In January 2009, Nortel Networks filed for creditor protection, which was
soon approved by the Ontario Superior Court, shielding the company from
creditors and lawsuits while it attempts to restructure. Nortel has advised
TELUS that it does not expect this process to impact the normal, day-to-day
operations and has assured the Company that maintenance contracts in place
with TELUS will continue to be supported and Nortel will continue to perform
the services and support under these agreements without interruption. In
addition, TELUS sells/resells Nortel solutions to its business customers and
as a result may be impacted.

    Risk mitigation: TELUS planned for this possibility in terms of future
growth, maintenance and support of existing Nortel equipment and services.
TELUS has a comprehensive contingency plan for multiple scenarios that might
be realized if the situation changes, including exposure to multiple
suppliers, and ongoing strong vendor relations. TELUS has selected Nokia
Siemens Networks and Huawei Technologies as its vendors for its next
generation HSPA network build occurring in 2009 and 2010. There can be no
guarantee that the outcome of the Nortel restructuring will not affect the
services that TELUS provides to its customers, or that TELUS will not incur
additional costs to continue providing services.

    Implementation of HSPA and 4G network technologies and systems

    TELUS and Bell have previously announced a joint HSPA network build with
service expected by early 2010, demonstrating TELUS' commitment to a
technology path that provides an optimal transition to 4G LTE. Though this
agreement builds the foundation for reducing capital and operating costs,
there is no limitation on either party from building further network
infrastructure to meet future and changing business requirements. Accordingly,
there is the risk that TELUS' future capital expenditures may be higher than
those recorded historically and expected for 2009.
    In addition, the expected timing and completion of the HSPA network are
subject to various risks and uncertainties, including vendor performance and
delivery related to completion of the network build and sharing agreement with
Bell Canada; risks of relying on Bell Canada to complete its respective HSPA
network build-out on schedule; handset incompatibility with network
technology; expected benefits, efficiencies and cost savings from the new HSPA
or LTE technology or related services may not be fully realized; roaming
revenue risk from foreign carriers; transition of services or technology will
be more difficult than expected; new HSPA services may lead to faster than
expected transition from TELUS' existing services; risks associated with the
integration of billing and IT systems; LTE may not emerge as the worldwide 4G
technology standard as expected; and other anticipated and unanticipated
costs, expenses and risk factors relating to TELUS or affecting Bell Canada or
the selected suppliers.
    While TELUS plans to leverage the HSPA economies of scale found in the
family of Third Generation Partnership Project (3GPP) technologies, there can
be no assurance that these economies of scale will be better or worse than
past experiences with CDMA2000-based technologies.

    Risk mitigation: By reaching an agreement with Bell to jointly build out
an HSPA network, TELUS is better able to manage its capital expenditures and
more quickly deliver a commercial network than it could otherwise accomplish
individually. TELUS' continued roaming/resale agreements with Bell are
possible because both companies have a similar mobile technology path,
vendors, and an existing relationship in this arena. TELUS' continued
partnership with Bell is expected to provide cost savings beyond the initial
network build, and flexibility to invest in service differentiation.

    
    5.3 Process risks

    Large complex deals
    

    TELUS' operating efficiency and earnings may be negatively impacted by
challenges with (or ineffective) implementation of large, complex deals for
enterprise customers, which may be characterized by significant, upfront
expenses and capital expenditures, and a need to anticipate, understand and
respond to complex and multi-faceted enterprise customer specific requirements
and stakeholders. There can be no assurance that service implementation will
proceed as planned and expected efficiencies achieved, which may impact return
on investment or desired margins to be realized. The Company may also be
constrained by available staff, system resources and cooperation of existing
service providers, which can limit the number of large contracts that can be
implemented concurrently in a given period.

    Risk mitigation for large complex deals: TELUS has recently implemented
internal reorganizations, such as one that consolidated three enabling units,
Technology strategy, Network operations and Business transformation, into two
integrated teams: Technology strategy and Business transformation & Technology
operations. The expected future benefits include streamlined operations, more
effective deployment of technologies and supporting systems, cost efficiencies
and improved customer service, and better capability to implement large
complex deals. TELUS follows industry standard practices for rigorous project
management including executive (senior) level governance and project
oversight; appropriate project resources, tools and supporting processes; and
proactive project specific risk assessments and risk mitigation planning.
TELUS also conducts independent project reviews to help monitor progress and
identify areas which may require additional focus, and to identify systemic
issues and learnings in project implementations which may be shared between
projects.

    
    5.4 Financing and debt requirements

    TELUS' business plans and growth could be negatively affected if existing
    financing is not sufficient to cover funding requirements
    

    Risk factors such as disruptions in the capital markets, increased bank
capitalization regulations, reduced lending in general, or a reduced number of
active Canadian chartered banks as a result of reduced activity or
consolidation, could reduce capital available, or increase the cost of such
capital, for investment grade corporate credits such as TELUS.

    Risk mitigation: TELUS may finance future capital requirements with
internally generated funds as well as, from time to time, borrowings under the
unutilized portion of its bank credit facility, use of securitized accounts
receivable, use of commercial paper or the issuance of debt or equity
securities. TELUS has access to a shelf prospectus pursuant to which it can
offer $2.5 billion of debt and equity. TELUS believes its adherence to its
stated financial policies and resulting investment grade credit ratings,
coupled with its efforts to maintain a constructive relationship with banks,
investors and credit rating agencies, continue to provide reasonable access to
capital markets.

    On March 3, 2008, the Company closed a new $700 million, 364-day credit
facility with a select group of Canadian banks. This facility provides
incremental liquidity to TELUS and allows the Company to continue to meet one
of its financial objectives, which is to generally maintain $1 billion in
available liquidity. The Company had unutilized credit facilities of $1.15
billion at December 31, 2008, including the 364-day facility. On December 15,
2008, TELUS reached agreement with the participating banks to extend this
agreement to March 1, 2010. This extension of the credit agreement in the
current difficult credit markets demonstrates TELUS capability to finance
itself in a challenging environment.
    As described in Section 4.6 Accounts receivable securitization, TCI
entered into an agreement with an arm's-length securitization trust under
which it is able to sell an interest in certain of its trade receivables up to
a maximum of $650 million. At December 31, 2008, TCI had received aggregate
cash proceeds of $300 million. TCI is required to maintain at least a BBB(low)
credit rating by DBRS Ltd - currently A(low) - failing which, the Company may
be required to wind down the program prior to the July 2009 termination date
of the agreement. The Company has routinely extended the termination date of
the agreement in the past and plans to seek an extension or establish a
replacement agreement prior to the current termination date but there can be
no assurance it will be successful.

    Ability to refinance maturing debt

    On August 6, 2008, TELUS' commercial paper program was increased from a
maximum of $800 million to a maximum $1.2 billion to permit increased access
to low cost funding. At December 31, 2008, TELUS had $432 million of
commercial paper issued, which will need to be refinanced on an ongoing basis
to enable the cost savings relative to borrowing on the 2012 credit facility
to be realized. Capital market conditions may prohibit the rolling of
commercial paper at low rates.

    Risk mitigation: The Company's commercial paper program is fully
backstopped by the 2012 credit facility. TELUS may refinance amounts drawn on
its credit facilities with longer-term maturities. At December 31, 2008, TELUS
had no significant amounts of long-term debt maturing until 2011 and 2012.
Consistent with past practice, TELUS may also pre-fund or refinance long-term
debt prior to maturity. TELUS could also reduce repurchase activity under its
NCIB share repurchase plan to conserve funds for operations or servicing debt.
The NCIB program annual approved maximum amount to December 2009 is eight
million shares or approximately 2.5% of TELUS' outstanding shares (2008
program for a maximum 20 million shares with 6.8 million purchased).

    
    A reduction in TELUS credit ratings could impact TELUS' cost of capital
    and access to capital
    

    TELUS' cost of capital could increase and access to capital might be
affected by a reduction in TELUS' and/or TCI's credit ratings. There can be no
assurance that TELUS can maintain or improve current credit ratings.

    Risk mitigation: TELUS seeks to achieve, over time, debt credit ratings
in the range of BBB+ to A-, or equivalent. The four credit rating agencies
that rate TELUS currently have ratings that are in line with this target with
a stable outlook. TELUS has financial policies in place that were established
to help maintain or improve existing credit ratings. TELUS' credit ratings
were confirmed in 2008 by the four credit rating agencies that cover the
Company.

    
    Lower than expected free cash flow could constrain ability to invest in
    operations or make purchases under NCIB share repurchase programs
    

    TELUS expects to generate free cash flow in 2009, which would be
available to, among other things, pay dividends to shareholders and possibly
repurchase shares. While anticipated cash flow is expected to be more than
sufficient to meet current requirements and remain in compliance with TELUS'
financial policies, these intentions could constrain TELUS' ability to invest
in its operations for future growth or to complete share repurchases. TELUS
has set its financial policies with the expectation that taxable income will
be generated and that substantial net cash tax payments of approximately $320
to $350 million will commence in 2009, in respect of payments for the 2008 tax
year in February 2009 and on an instalment basis for 2009. In addition, the
Company expects funding of employee defined benefits plans to increase in
2009, as described in Section 1.5. Payment of net cash income taxes and
funding of defined benefits plans in the future will reduce the after-tax cash
flow otherwise available to return capital to shareholders. If actual results
are different from TELUS' expectations, there can be no assurance that TELUS
will not need to change its financing plans, including its intention to
repurchase TELUS shares, or pay dividends according to the target payout
guideline.

    Risk mitigation: From December 2004 through December 2008, TELUS had
sufficient cash flow to repurchase shares under five NCIB programs. See
Section 4.3 Cash used by financing activities. As the Company begins paying
cash income taxes, it may choose to not renew or to reduce the size of the
NCIB share repurchase program, as warranted.

    The TELUS Board reviews the dividend each quarter, based on a number of
factors including a target dividend payout ratio guideline of 45 to 55% of
sustainable net earnings. This review resulted in a 2.5 cent or 5.6% increase
in the quarterly dividend payout rate effective with the dividend paid on
January 2, 2009. Based on the beginning of year level of quarterly dividend
and shares outstanding, dividend payments would total approximately $600
million in 2009.

    5.5 Litigation and legal matters

    Uncertified class actions

    TELUS and certain subsidiaries are defendants in a number of uncertified
class actions. The Company has observed an increased willingness on the part
of claimants to launch class actions whereby a representative plaintiff seeks
to pursue a legal claim on behalf of a large group of persons. A successful
class action lawsuit, by its nature, could result in a sizable damage award
that negatively affects a defendant's results.
    One such lawsuit is a class action was brought on June 26, 2008, in the
Saskatchewan Court of Queen's Bench alleging that, among other things,
Canadian telecommunications carriers including the Company have failed to
provide proper notice of 9-1-1 charges to the public and have been deceitfully
passing it off as government charges. The Plaintiffs seek restitution and
direct and punitive damages in an unspecified amount. The Company is assessing
the merits of this claim, but the potential for liability and magnitude of
potential loss cannot be readily determined at this time.
    Risk mitigation: The Company is vigorously defending certification of
these actions. Certification is a procedural step that determines whether a
particular lawsuit may be prosecuted by a representative plaintiff on behalf
of a class of individuals. Certification of a class action does not determine
the merits of the claim, so that if the Company were unsuccessful in defeating
certification, the plaintiffs would still be required to prove the merits of
their claims. In addition, the Company believes that it has put in place
reasonable policies, processes and awareness designed to enable compliance
with legal obligations and reduce exposure to legal claims.

    5.6 Economic growth and fluctuations

    It is expected that the slower Canadian economic growth in the fourth
quarter of 2008 will continue into much of 2009, reflecting a significant
reduction in commodity prices, a U.S. economy in recession, weakened global
economic growth, and continued tight global credit conditions. The principal
risk to the current view of the Canadian economy is the impact of the
continued negative developments occurring globally on Canadian business and
consumer confidence, and thus is expected to impact both the business and
consumer sectors.

    
    Continuation of economic uncertainty or recessions may adversely impact
    TELUS
    

    An extended economic downturn may cause residential and business
telecommunications customers to delay new service purchases, reduce volumes of
use, discontinue use of services or seek lower-priced alternatives.
Significant economic downturns or recessions could adversely impact TELUS'
profitability, free cash flow and bad debt expense, and potentially require
the Company to record impairments to the carrying value of its assets
including, but not limited to, its intangible assets with indefinite lives
(spectrum licences) and its goodwill. Impairments to the carrying value of
assets would result in a charge to earnings and a reduction in shareholders'
equity, but would not affect cash flow.
    Risk mitigation: The Company cannot completely mitigate economic risks.
TELUS has continued to benefit from healthy ongoing growth in the Canadian
wireless sector. Through most of 2008, TELUS continued to benefit from growth
in the cyclical resource economies in B.C. and Alberta, which are now expected
to experience lower future growth. TELUS has continued to add business
customers in Central Canada, focussing on four key vertical markets of the
public sector, healthcare, financial services and energy, which are generally
expected to be less exposed to the economic downturn than the manufacturing
and export-oriented industries in Ontario and Quebec. To mitigate worsening
economic impacts, TELUS may pursue additional cost reduction and efficiency
initiatives, as well as reduce NCIB share repurchases and/or capital
expenditures.

    Pension funding

    Economic fluctuations could also adversely impact the funding and expense
associated with the defined benefit pension plans that TELUS sponsors. There
can be no assurance that TELUS' pension expense and funding of its defined
benefit pension plans will not increase in the future and thereby negatively
impact earnings and/or cash flow. Defined benefit funding risks may occur if
total pension liabilities exceed the total value of the respective trust
funds. Unfunded differences may arise from lower than expected investment
returns, reductions in the discount rate used to value pension liabilities,
and actuarial loss experiences.
    Risk mitigation: TELUS seeks to mitigate this risk through the
application of policies and procedures designed to control investment risk and
ongoing monitoring of its funding position. Pension expense and funding for
2009 were largely determined by the rates of return on the plans' assets for
2008 and interest rates at year-end 2008. As at December 31, 2008, the
Company's best estimate for defined benefits pension plans expense in 2009 is
$18 million, as compared to a recovery of approximately $100 million in 2008,
and the Company's estimate of cash contributions to its defined benefit
pension plans in 2009 is $211 million ($102 million in 2008).

    
    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 and
EBITDA (as adjusted) are regularly reported to the chief operating decision-
maker.

    
    -------------------------------------------------------------------------
                         Quarters ended December 31  Years ended December 31
                                                    -------------------------
    ($ millions)                   2008        2007         2008        2007
    -------------------------------------------------------------------------
    Net income                      285         400        1,128       1,258
      Other expense (income)         11           6           36          36
      Financing costs               118         109          463         440
      Income taxes                   88         (19)         436         233
      Non-controlling interest        -           3            3           7
    -------------------------------------------------------------------------
    Operating income                502         499        2,066       1,974
      Depreciation                  351         386        1,384       1,355
      Amortization of intangible
       assets                        84          68          329         260
    -------------------------------------------------------------------------
    EBITDA                          937         953        3,779       3,589
    Net-cash settlement feature
     expense                          -           1            -         169
    -------------------------------------------------------------------------
    EBITDA (as adjusted)            937         954        3,779       3,758
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    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 December 31  Years ended December 31
                                                    -------------------------
    ($ millions)                   2008        2007         2008        2007
    -------------------------------------------------------------------------
    EBITDA                          937         953        3,779       3,589
    Capital expenditures           (631)       (472)      (1,859)     (1,770)
    -------------------------------------------------------------------------
    EBITDA less capital
     expenditures                   306         481        1,920       1,819
    Net-cash settlement feature
     expense                          -           1            -         169
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     capital expenditures           306         482        1,920       1,988
    Payment for AWS spectrum
     licences                         -           -         (882)          -
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     capital expenditures and
     payment for AWS spectrum
     licences                       306         482        1,038       1,988
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    6.2 Free cash flow

    TELUS reports free cash flow because it is a key measure used by
management to evaluate its performance. Free cash flow excludes certain
working capital changes and other sources and uses of cash, as found in the
Consolidated statements of cash flows. Free cash flow is not a calculation
based on Canadian or U.S. GAAP and should not be considered an alternative to
the Consolidated statements of cash flows. Free cash flow is a measure that
can be used to gauge TELUS' performance over time. Investors should be
cautioned that free cash flow as reported by TELUS may not be comparable in
all instances to free cash flow as reported by other companies. While the
closest GAAP measure is Cash provided by operating activities less Cash used
by investing activities, free cash flow is considered relevant because it
provides an indication of how much cash generated by operations is available
after capital expenditures, but before acquisitions, proceeds from divested
assets and changes in certain working capital items (such as trade
receivables, which can be significantly distorted by securitization changes
that do not reflect operating results, and trade payables).
    Prospectively, the Company has chosen to present free cash flow adjusted
for contributions to employee defined benefit plans, as the contributions have
a significant non-discretionary component and are determined separately from
the net defined benefit plans expense previously included in the calculation.
The following tables present free cash flow on both bases.
    The following reconciles free cash flow with Cash provided by operating
activities less Cash used by investing activities:

    
    -------------------------------------------------------------------------
                         Quarters ended December 31  Years ended December 31
                        -----------------------------------------------------
    ($ millions)                   2008        2007         2008        2007
    -------------------------------------------------------------------------

    Cash provided by operating
     activities                     747         818        2,819       3,172
    Cash (used) by investing
     activities                    (643)       (472)      (3,433)     (1,772)
    -------------------------------------------------------------------------
                                    104         346         (614)      1,400

    Amortization of deferred
     gains on sale-leaseback
     of buildings, amortization
     of deferred charges and
     other, net                      (8)         (3)          (3)         (4)
    Reduction (increase) in
     securitized accounts
     receivable                     (50)         50          200           -
    Non-cash working capital
     changes except changes
     from income tax payments
     (receipts), interest
     payments (receipts) and
     securitized accounts
     receivable, and other            3         (14)          86         (10)
    Acquisitions                      -           -          696           -
    Proceeds from the sale of
     property and other assets        -          (2)         (13)         (7)
    Other investing activities       12           2            9           9
    -------------------------------------------------------------------------
    Free cash flow based on
     defined benefit plans
     employer contributions          61         379          361       1,388
    Net employee defined benefit
     plans recovery (expense)        27          23          102          92
    Employer contributions to
     employee defined benefit
     plans                           26          25          104          93
    -------------------------------------------------------------------------
    Free cash flow based on
     defined benefit plans net
     expense                        114         427          567       1,573
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
                         Quarters ended December 31  Years ended December 31
                        -----------------------------------------------------
    ($ millions)                   2008        2007         2008        2007
    -------------------------------------------------------------------------

    EBITDA                          937         953        3,779       3,589

    Share-based compensation        (20)        (30)           5          96
    Net employee defined benefit
     plans expense (recovery)       (27)        (23)        (102)        (92)
    Employer contributions to
     employee defined benefit
     plans                          (26)        (25)        (104)        (93)
    Restructuring costs net of
     cash payments                   30           3           16         (18)
    Donations and securitization
     fees included in Other
     expense                         (8)         (9)         (30)        (37)
    Cash interest paid             (193)       (171)        (457)       (454)
    Cash interest received            1          33            3          42
    Income taxes received (paid)
     and other                       (2)        120           (8)        125
    Capital expenditures           (631)       (472)      (1,859)     (1,770)
    Payment for advanced
     wireless spectrum licences       -           -         (882)          -
    -------------------------------------------------------------------------
    Free cash flow based on
     defined benefit plans
     employer contributions          61         379          361       1,388
    Employer contributions to
     employee defined benefit
     plans in excess of net
     employee defined benefit
     plans expense (recovery)        53          48          206         185
    -------------------------------------------------------------------------
    Free cash flow based on
     defined benefit plans net
     expense                        114         427          567       1,573
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    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.
    EBITDA excluding COA is a measure of operational profitability normalized
for the period costs of adding new customers.
    Retention spend to Network revenue represents direct costs associated
with marketing and promotional efforts aimed at the retention of the existing
subscriber base divided by Network revenue.

    6.4 Definition of liquidity and capital resource measures

    Dividend payout ratio and dividend payout ratio of sustainable net
earnings: For actual earnings, the measure is defined as the most recent
quarterly dividend declared per share multiplied by four and divided by 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. The dividend
payout ratio on an actual basis, excluding income tax-related adjustments and
the net-cash settlement feature, is considered more representative of a
sustainable calculation.
    EBITDA - excluding restructuring costs is used in the calculation of Net
debt to EBITDA and EBITDA interest coverage, consistent with the calculation
of the Leverage Ratio and the Coverage Ratio in credit facility covenants.
Restructuring costs were $59 million and $20 million, respectively, for the
years ended December 31, 2008 and 2007.
    EBITDA - excluding restructuring costs interest coverage is defined as
EBITDA excluding restructuring costs divided by Net interest cost.
Historically, this measure is substantially the same as the Coverage Ratio
covenant in TELUS' credit facilities.
    Interest coverage on long-term debt is calculated on a 12-month trailing
basis as Net income before interest expense on long-term debt and income tax
expense, divided by interest expense on long-term debt.
    Net debt is a non-GAAP measure whose nearest GAAP measure is Long-term
debt, including Current maturities of long-term debt, as reconciled below. Net
debt is one component of a ratio used to determine compliance with debt
covenants (refer to the description of Net debt to EBITDA below).

    
    -------------------------------------------------------------------------
                                                           As at December 31
                                                          -------------------
    ($ millions)                                            2008        2007
    -------------------------------------------------------------------------
    Long-term debt including current portion               6,352       4,589
    Debt issuance costs netted against long-term debt         28          30
    Derivative liability                                     778       1,179
    Accumulated other comprehensive income amounts
     arising from financial instruments used to manage
     interest rate and currency risks associated with
     U.S. dollar denominated debt                           (168)       (137)
    Cash and temporary investments                            (4)        (20)
    Proceeds from securitized accounts receivable            300         500
    -------------------------------------------------------------------------
    Net debt                                               7,286       6,141
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The derivative liability in the table above relates to cross currency
interest rate swaps that effectively convert principal repayments and interest
obligations to Canadian dollar obligations, and is in respect of the US$1,925
million debenture maturing June 1, 2011. Management believes that Net debt is
a useful measure because it incorporates the exchange rate impact of cross
currency swaps put into place that fix the value of U.S. dollar denominated
debt, and because it represents the amount of long-term debt obligations that
are not covered by available cash and temporary investments.
    Net debt to EBITDA - excluding restructuring costs is defined as Net debt
as at the end of the period divided by the 12-month trailing EBITDA excluding
restructuring costs. TELUS' guideline range for Net debt to EBITDA is from 1.5
to 2.0 times. Historically, Net debt to EBITDA excluding restructuring costs
is substantially the same as the Leverage Ratio covenant in TELUS' credit
facilities.
    Net debt to total capitalization provides a measure of the proportion of
debt used in the Company's capital structure.
    Net interest cost is defined as Financing costs before gains on
redemption and repayment of debt, calculated on a 12-month trailing basis. No
gains on redemption and repayment of debt were recorded in the respective
periods. Should they occur, losses recorded on the redemption of long-term
debt are included in net interest costs. Net interest costs for the years
ended December 31, 2008 and 2007 are equivalent to reported financing costs
for those periods.
    Total capitalization - book value excludes accumulated other
comprehensive income or loss and is calculated as follows:

    
    -------------------------------------------------------------------------
                                                           As at December 31
                                                          -------------------
    ($ millions)                                            2008        2007
    -------------------------------------------------------------------------

    Net debt                                               7,286       6,141
    Non-controlling interests                                 23          26
    Shareholders equity                                    7,182       6,926
    Accumulated other comprehensive loss                     130         104
    -------------------------------------------------------------------------
    Total capitalization - book value                     14,621      13,197
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    






For further information:

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

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