TELUS Reports Second Quarter Results



    Strong data and wireless results with record wireless additions

    VANCOUVER, Aug. 8 /CNW/ - TELUS Corporation today reported its financial
results for the second quarter of 2008, including revenue of $2.4 billion, an
eight per cent increase from a year ago. The performance was driven by nine
per cent growth in wireless revenue and 20 per cent growth in wireline data
revenue. Wireless net additions were a second quarter record at 175,600.
Earnings before interest, taxes, depreciation and amortization (EBITDA) as
adjusted increased by 3.5 per cent when compared to the same period a year
ago.
    Net income in the quarter was $267 million and earnings per share (EPS)
were $0.83, up 5.5 per cent and nine percent, respectively, compared to the
same period in 2007. The second quarter of 2007 included favourable
tax-related adjustments of $10 million or three cents a share while there were
no tax-related adjustments in 2008. Free cash flow of $302 million increased
87 per cent, driven primarily by lower capital expenditures, improved EBITDA
and lower interest expense.

    
    FINANCIAL HIGHLIGHTS
    -------------------------------------------------------------------------
    C$ in millions,
     except per share amounts                   3 months ended
                                                    June 30
    (unaudited)                                 2008        2007    % Change
    -------------------------------------------------------------------------
    Operating revenues                       2,398.7     2,228.1       7.7
    EBITDA(1)                                  917.6       884.6       3.7
      EBITDA (as adjusted)(2)                  917.3       886.4       3.5

    Income before income taxes and
     non-controlling interest                  381.4       348.1       9.6
    Net income(3)                              267.0       253.1       5.5
    Earnings per share (EPS), basic(3)          0.83        0.76       9.2
    Cash provided by operating activities      461.0     1,061.9     (56.6)
    Capital expenditures                       435.6       481.8      (9.6)
    Free cash flow(4)                          302.3       161.7      87.0

    (1) Earnings before interest, taxes, depreciation and amortization
        (EBITDA) is defined as Operating revenues less Operations expense
        less Restructuring costs. See Section 11.1 of Management's discussion
        and analysis.
    (2) Excludes a charge (recovery) of $(0.3) million and $1.8 million to
        Operations expense in 2008 and 2007, respectively, for introducing a
        net-cash settlement feature for share option awards granted prior to
        2005.
    (3) Net income and EPS for the three month period in 2008 included no
        favourable tax related adjustments compared to $10 million or 3 cents
        for the same period in 2007.
    (4) See Section 11.2 of Management's discussion and analysis.
    

    Darren Entwistle, TELUS president and CEO said, "On strategy growth
continued in data and wireless this quarter with solid operational execution
on multiple fronts. This included strong second quarter wireless customer
additions and increased momentum on high-speed Internet additions. We are
updating annual guidance to reflect this positive performance, including
increased guidance for revenue. We are also pleased with the initial success
in converting more than one million residential customers in British Columbia
from various legacy systems to our recently developed integrated billing and
client care system."
    "We continue to urge the federal government to pursue its stated goal of
making Canada the most connected country in the world by investing a portion
of the $4.25 billion raised in the recently concluded wireless spectrum
auction," said Mr. Entwistle. "Canada has an unprecedented opportunity to
enhance our global competitiveness by bringing broadband Internet services to
hundreds of rural communities."
    Robert McFarlane, executive vice president and CFO, noted, "as a result
of good operational execution year to date, we have made upward revisions to
full year 2008 revenue guidance, as well as narrowing the ranges for EBITDA
and EPS guidance, while maintaining existing guidance for non-spectrum capital
expenditures."
    Mr. McFarlane also stated, "the 50 per cent expansion of our commercial
paper program to $1.2 billion announced today enhances our flexibility and
access to financing at attractive rates."

    
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    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 2008 guidance and share purchases), qualifications and risk factors
    referred to in the Management's discussion and analysis - August 6, 2008.
    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 guidance.
    -------------------------------------------------------------------------

    OPERATING HIGHLIGHTS

    TELUS wireless

    -   External revenues increased by $94 million or 9% to $1.14 billion in
        the second quarter of 2008, compared with the same period in 2007
    -   Wireless data revenue increased $55 million or 54% due to the
        continued adoption of full function smartphones and increased
        adoption of data services such as text messaging, web browsing and
        downloads
    -   ARPU (average revenue per subscriber unit per month) declined by 1.4%
        to $62.73 compared to the same quarter a year ago. The fast-growing
        data component of $9.17, represented 15% of ARPU, while the voice
        component continued to decline as a result of the increased prepaid
        subscriber base, lower pricing, including use of included-minute rate
        plans and lower inbound roaming
    -   Net subscriber additions increased 37% to 175,600 from the same
        quarter in 2007, a TELUS second quarter record. Postpaid net
        additions were 157,200, an increase of 59%, while net prepaid loading
        decreased 37% to 18,400. These results include those from TELUS'
        postpaid value brand and service which was launched in late March
        2008
    -   EBITDA as adjusted of $486 million is an increase of $34 million over
        the second quarter of 2007 representing 7% growth, due to increased
        network revenue and lower cost of acquisition (COA) expense,
        partially offset by increased customer retention costs and network
        and other expenses to support the 11% growth in the wireless
        subscriber base, data revenue and the launch of a value brand
    -   Cost of acquisition per gross addition decreased 22% year-over-year
        to $332 reflecting slightly higher advertising and promotions costs
        spread over the 19% increase in gross additions, a higher proportion
        of new subscribers from lower cost distribution channels and lower
        equipment subsidies
    -   Blended monthly subscriber churn decreased slightly to 1.43% from
        1.45% a year ago due to lower postpaid churn supported by successful
        retention activities. The second quarter of 2008 and 2007 reflect the
        first full comparable quarters with wireless number portability (WNP)
        in place
    -   Cash flow (EBITDA as adjusted less capital expenditures) increased
        $92 million or 33% to $371 million in the quarter due to an increase
        in EBITDA and lower capital spending.

    TELUS wireline

    -   External revenues increased by $76 million or 6.5% to $1.26 billion
        in the second quarter of 2008, when compared with the same period in
        2007, as data growth more than offset the declines in local revenues
    -   Data revenues increased by $87 million or 20% due to revenues from
        the two January acquisitions (Emergis and Fastvibe), increased
        enhanced data and hosting services, as well as high-speed Internet
        subscriber growth. When adjusted for the two acquisitions and a
        regulatory adjustment in the second quarter of 2007, underlying data
        growth was approximately 7%
    -   Long distance revenues increased by $7 million due to a one-time
        negative adjustment of $13 million recorded in the same period a year
        ago with the implementation of a new converged billing and client
        care system in Alberta
    -   TELUS added 23,600 net high-speed Internet subscribers, a 70%
        increase from a year ago. The prior year's additions were temporarily
        constrained by the implementation of a new billing and client care
        system in Alberta that temporarily reduced order processing
        capability
    -   EBITDA as adjusted of $431 million declined by $2.6 million or 0.6%
        due primarily to increased cost of sales, including TELUS TV, and
        initial costs for implementing enterprise customer contracts
    -   Network access lines (NALs) declined by 40,000 in the quarter, and
        3.4% from a year ago, reflecting a slight sequential improvement.
        Consistent with experience in recent years, residential NAL losses
        were due to ongoing competitive activity and wireless substitution,
        partially mitigated by an increase in business access lines
    -   Cash flow (EBITDA as adjusted less capital expenditures) decreased
        $15 million or 12% to $110 million in the quarter due to slightly
        lower EBITDA as adjusted and a small increase in capital
        expenditures.
    

    Corporate Developments

    B.C. billing and client care system conversion

    In mid-July, following a large trial, TELUS successfully converted more
than one million wireline residential customers in British Columbia to a new
billing and client care system. This converges to the system in Alberta, and
for the first time most customers in Alberta and B.C. are now on the same
billing and client care system. During the B.C. conversion, TELUS has applied
learnings from the Alberta conversion in 2007 and the early experience has
been positive. The expected customer service and cost benefits of this project
include streamlined and standardized processes and the elimination over time
of multiple legacy information systems.

    AWS spectrum auction concludes

    Industry Canada's Advanced Wireless Services (AWS) spectrum auction
concluded on July 21, 2008 raising more than $4.25 billion dollars for the
government with 282 licences conditionally assigned to 15 companies.
Successful bidders will be eligible to receive licences after making their
final payments and showing compliance with Canadian ownership and control
requirements.
    In line with TELUS' national growth strategy focused on wireless, data
and IP, the company bid to acquire additional spectrum across Canada for a
cost of approximately $880 million. AWS spectrum increases the depth of TELUS'
strong spectrum position, and is expected to provide capacity for the
introduction of future 4G (fourth generation) service offerings.
    TELUS expects to face new competition in the future as a result of the
recent auction. However, the number and long-term viability of all new
entrants in various markets remain uncertain because of build-out
requirements, spectrum and start-up costs, capital market conditions, and
restrictions on foreign investment.
    TELUS is encouraging the Government of Canada to invest a portion of the
$4.25 billion raised in the wireless spectrum auction to pursue its stated
goal of making Canada the most connected country in the world. The auction
raised almost three times the anticipated $1.5 billion, giving Canada an
unprecedented opportunity to bring broadband Internet services to thousands of
rural communities.

    TELUS expands commercial paper program by $400 million

    On August 7th, DBRS provided credit rating support for a 50 per cent
increase in TELUS' commercial paper (CP) program to $1.2 billion. This
provides increased flexibility and more attractive short term rates for TELUS,
including future funding of commitments related to the AWS wireless spectrum
from the recently concluded auction. At the end of the second quarter, there
was $800 million outstanding on TELUS' commercial paper program, demonstrating
strong demand for TELUS debt in the Canadian market.

    TELUS appeals deferral account decision

    TELUS filed appeals with the CRTC and the federal cabinet asking them to
consider allowing TELUS to connect more remote Canadian communities to
broadband Internet services using Deferral Account funds. TELUS believes this
is an opportunity to work with governments, rural and First Nations
communities to bring the benefits of broadband Internet to Canadians who live
and work in remote areas.
    TELUS believes all Canadians benefit when our nation's rural communities
have access to broadband Internet service and all of the business, economic
and educational opportunities it creates. TELUS continues to work with the
CRTC to find a way to place new communities on its deferral account list so
TELUS' entire $163 million fund is used for the purposes the CRTC determined
in 2006. TELUS has also filed a petition to the federal cabinet to ensure we
will retain the ability to ask the government to intervene should the CRTC not
reopen the process for new applications.

    Business Solutions

    TELUS enhances suite of GPS services for business

    TELUS launched three new Global Positioning System (GPS) services for
businesses - TELUS Asset Tracker, TELUS Resource Tracker, and TELUS Track and
Dispatch. TELUS Asset Tracker enables businesses to keep track of assets large
and small. TELUS Resource Tracker allows businesses to increase safety and
productivity through real-time location monitoring of workers. TELUS Track and
Dispatch gives head-office the ability to determine the closest mobile worker
to a new job assignment or to immediately dispatch help if a worker needs
assistance. The new solutions are part of TELUS' comprehensive suite of
wireless GPS services that also features TELUS Fleet Tracker, a fleet
monitoring and tracking solution, and TELUS Navigator, a GPS turn-by-turn
navigation solution.

    CritiCall Ontario selects TELUS iScheduler and CallCentreAnywhere

    CritiCall Ontario selected TELUS' iScheduler and CallCentreAnywhere to
provide the foundation of their integrated patient electronic referral
services. The five-year contract with Ontario's 24-hour emergency referral
service for hospital-based physicians is valued at $2.3 million. It is the
first implementation of TELUS iScheduler in Canada.
    The contract combines TELUS' CallCentreAnywhere application with the
TELUS iScheduler referral and waitlist capabilities. The joint service
provides CritiCall agents with a simplified patient referral process that
ensures the right information follows the patient wherever they travel to
receive medical attention. The solution also provides CritiCall with advanced
reporting capabilities to help organizations better understand their
operational needs and performance to help with business planning.

    TELUS Unified Communications make business easier

    TELUS enhanced its suite of Unified Communications solutions by launching
a new service enabling clients to use Outlook Voice Access to access email,
contacts and calendars over the phone to stay connected to the office
anywhere, anytime. The upgrade also provides business-class email and group
document sharing tools that can be securely accessed from a PC, web browser,
mobile device or a phone. Using Microsoft SharePoint, employees can share
documents, find company resources, search for experts and corporate
information, manage content and workflow, and make better-informed decisions
in a single, integrated location.

    Products and Services

    Smartphones do it all

    In May, TELUS launched its "the ultimate do-it-all" smartphone campaign.
With the handiest wireless functions available, TELUS' new generation of
smartphones are the ultimate communication devices to do-it-all. Whether it's
for texting Saturday night's latest hip party location, browsing the web to
know where this week's blockbuster movie is running, or using GPS location
services, TELUS smartphones are perfect for consumers looking for a phone that
gives them the ultimate freedom in the palm of their hand.
    One of the new smartphones is the HTC Touch Diamond. TELUS will be the
first carrier to bring this new handset to Canadians. The Diamond will allow
users to browse the Web, check out videos on YouTube and make plans on
Facebook with a simple one-touch interface. In addition, customers will be
able to store and listen to thousands of songs with the media player and 4GB
internal memory. TELUS also launched the Pink BlackBerry Curve 8330 smartphone
and the Sierra Wireless Compass 597 USB modem.

    TELUS sponsors Canadian Idol

    TELUS is bringing a new approach to product placement to season six of
Canadian Idol. As CTV's mobility sponsor, TELUS is introducing viewers to Ron
Ronn, a 23-year-old aspiring singer/songwriter character who relies on a lucky
dolphin, his best friend Mueller and a TELUS smartphone to manage his
burgeoning career. TELUS and TAXI created Ron Ronn specifically for "Canadian
Idol" as part of TELUS' sponsorship of the very popular show. Under terms of
the sponsorship agreement, each of the 30-second Ron Ronn clips will run at
the end of an "Idol" segment and before the regular commercial break. In
addition to the Ron Ronn content, TELUS is again running its award-winning
nature based campaign during Canadian Idol's scheduled commercial breaks.

    Alberta and B.C. embrace 10-digit dialing

    To meet growing demand for phone numbers, the telecommunications industry
has added new area codes to B.C. and Alberta - 778 in B.C.'s current 250 area
code region and 587 across Alberta. A second area code in these regions means
that people must add the area code and dial 10 digits for local calls. Just a
week into the first phase of the new area code introduction on June 23, a
sample of several million calls found that nearly 90 per cent were already
being placed using 10 digits.
    Existing customers are not required to change their current telephone
numbers, nor will the geographic boundaries that govern long-distance calling
be affected. All three-digit numbers, including 211, 311, 411, 611, and 911
emergency service (where applicable) remain the same and do not require the
inclusion of an area code.

    Awards and Community

    TELUS honoured for innovative learning and development

    TELUS received a prestigious Industry Achievement Award for global
leadership in supporting team member growth and professional development.
SkillSoft, the international leader in eLearning, presented the award to TELUS
at its 2008 Global Perspectives Awards gala. The award is presented to
organizations that have maintained a long-standing leadership role in training
and development. The judging panel reviewed the internal learning programs and
resources submitted by more than 100 companies around the world, and selected
only five companies as being true innovators. TELUS ranked first, with UPS,
Verizon, FedEx and Hitachi also taking home awards as well.

    Annual report recognized by international communicators

    For the fourth consecutive year, the TELUS annual report was recognized
by the International Association of Business Communications (IABC) with its
prestigious Gold Quill Award. The Gold Quill Awards are the mark of global
distinction and a hallmark of excellence in business communications. The
awards are the communication professional's equivalent of the Oscars and
recognize programs with clear strategies that demonstrate a full range of
planning and management such as research, analysis and evaluation as well as
the highest level of technical and creative skill.

    TELUS receives IT Hero Award

    The Information Technology Association of Canada (ITAC) handed TELUS the
Corporate IT Hero Award for its involvement with Upopolis - a secure online
social network designed exclusively for hospitalized children. Upopolis
empowers kids to learn about their illness and have access to their homework
while helping them stay connected with friends, teachers and family during a
challenging time in their lives. The website was created by the Kids' Health
Links Foundation (KHLF) using development and technology services donated by
TELUS. Through Upopolis, not only can children stay connected to friends and
family, they can connect with other children with the same condition. Upopolis
also provides young patients with a personal profile, secure mail, instant
chat, discussion boards, personal blogs and links to child-friendly games, as
well as a homework site, and kid-friendly health and wellness information.

    BC Children's Hospital Foundation hits the "green" with Skins caddie
auction

    Five Canadian golf fans had the chance of a lifetime to caddie for the
PGA pros at the TELUS World Skins Game in support of BC Children's Hospital
Foundation. This year's caddie auction brought in $45,000 for BC Children's
Hospital Foundation, adding up to a total of more than $126,000 that has now
been raised from TELUS World Skins Game caddie auctions in support of local
charities since the fundraiser was created. The annual charity caddie auction
allowed golf fans to bid at eBay.ca for the chance to caddie for one of their
favourite professional golfers. The five highest bidders were given the
opportunity to caddie at Predator Ridge June 16-17 for PGA golf stars Mike
Weir who represented Canada, Fred Couples - United States, Greg Norman -
Australia, Colin Montgomerie - Scotland, and rising young star Camilo Villegas
who represented Colombia. The TELUS Skins Game raised $185,000 for the
hospital foundation this year, which was increased to $250,000 by TELUS and
its team members.

    Thousands come out for TELUS Day of Service

    On May 31, more than 8,600 TELUS team members, alumni, family and friends
took a day out of their busy schedules to give where they live during the
TELUS Day of Service - a nation-wide volunteer drive designed to make a
difference in the communities where team members live and work. Team members
participated in more than 200 volunteer activities through 137 charitable
organizations in 23 regions across the country and the Phillipines. This
included Victoria, Vancouver, Prince George, Kamloops, Kelowna, Calgary,
Lethbridge, Red Deer, Edmonton, Grande Prairie, Toronto, Barrie, Ottawa,
Montreal, Quebec City, Rimouski and Manila. Participants logged more than
27,000 volunteer hours on this one special day to support worthwhile causes.
Volunteer efforts included ecological face lifts to city parks, sorting
thousands of pounds of food bank donations and planting dozens of trees.

    TELUS sponsors Walk to Cure Diabetes

    The TELUS Walk to Cure Diabetes took place across Canada between May and
June. TELUS' sponsorship of the Juvenile Diabetes Research Foundation's (JDRF)
biggest fundraising event underscores the commitment TELUS has made to this
partnership and to funding research to help the more than 200,000 Canadians
affected by Type 1 diabetes. This was the first year of a three year
partnership with JDRF. More than 2,100 TELUS team members took part, raising
$460,000 for this worthwhile cause.

    Dividend Declaration

    The Board of Directors has declared a quarterly dividend of forty-five
cents ($0.45) Canadian per share on the issued and outstanding Common shares
and forty-five cents ($0.45) Canadian per share on the issued and outstanding
Non-Voting shares of the Company payable on October 1, 2008 to holders of
record at the close of business on September 10, 2008.
    This quarterly dividend represents a 20 per cent increase from the $0.375
quarterly dividend paid in 2007.

    About TELUS

    TELUS (TSX: T, T.A; NYSE:   TU) is a leading national telecommunications
company in Canada, with $9.4 billion of annual revenue and 11.4 million
customer connections including 5.8 million wireless subscribers, 4.3 million
wireline network access lines and 1.2 million Internet subscribers. TELUS
provides a wide range of communications products and services including data,
Internet protocol (IP), voice, entertainment and video. Committed to being
Canada's premier corporate citizen, we give where we live. Since 2000, TELUS
and our team members have contributed $113 million to charitable and
not-for-profit organizations and volunteered more than 2.1 million hours of
service to local communities. Eight TELUS Community Boards across Canada lead
our local philanthropic initiatives. For more information about TELUS, please
visit telus.com.

    
                 ------------------------------------------
                              TELUS CORPORATION
                    Management's discussion and analysis
                                   2008 Q2
                 ------------------------------------------
    

    Caution regarding forward-looking statements
    -------------------------------------------------------------------------
    This document and Management's discussion and analysis contain forward-
looking statements about expected future events and financial and operating
results of TELUS Corporation (TELUS or the Company, and where the context of
the narrative permits or requires, its subsidiaries). By their nature,
forward- looking statements require the Company to make assumptions and are
subject to inherent risks and uncertainties. There is significant risk that
assumptions (see below), predictions and other forward-looking statements will
not prove to be accurate. Readers are cautioned not to place undue reliance on
forward- looking statements as a number of factors could cause actual future
results, conditions, actions or events to differ materially from the targets,
expectations, estimates or intentions expressed in the forward-looking
statements. The Company disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. In the case of annual
guidance, it is the current practice of the Company to evaluate and, where it
deems appropriate, provide updates (see Section 9). Subject to legal
requirements, this practice may be changed at any time at the Company's sole
discretion.

    Assumptions for 2008 guidance include:
    --------------------------------------
    Economic growth consistent with recent provincial and national estimates
by the Conference Board of Canada, including revised Canadian gross domestic
product (GDP) growth of 1.7% and above average growth in the provinces of
Alberta and British Columbia; forecast exchange rate between the Canadian
dollar and U.S. dollar at or near parity; increased wireline competition in
both business and consumer markets, particularly from cable-TV and VoIP (voice
over Internet protocol) companies; impact from the acquisition of Emergis in
mid-January; Canadian wireless industry market penetration gain of 4.5 to 5%;
the target for consolidated capital expenditures explicitly excluded the
purchase of wireless spectrum in the advanced wireless services (AWS) spectrum
auction; in addition to capital expenditures, AWS auction expenditures of
approximately $880 million are expected to be recognized in the third quarter
of 2008; no new wireless competitive entrants are assumed for 2008;
approximately $30 million restructuring expenses (up from $20.4 million in
2007); a blended statutory tax rate of approximately 30.5 to 31.5%; a discount
rate of 5.5% (50 basis points higher than 2007) and expected long-term return
of 7.25% for pension accounting (unchanged from 2007); and average shares
outstanding of approximately 320 million (down from 331.7 million in 2007).
Earnings per share (EPS), cash balances, net debt and common equity may be
affected by purchases of up to 20 million TELUS shares over a 12-month period
under the normal course issuer bid that commenced December 20, 2007.

    Factors that could cause actual results to differ materially include, but
    are not limited to:
    -------------------------------------------------------------------------
    Competition (including more active price competition and the likelihood
of new wireless competitors beginning to offer services in 2009 following the
AWS spectrum auction); economic growth and fluctuations (including pension
performance, funding and expenses); capital expenditure levels (increased in
2008 by purchases of wireless spectrum in the AWS auction); financing and debt
requirements (including funding share repurchases and debt financings); tax
matters (including acceleration or deferral of required payments of
significant amounts of cash taxes); human resource developments; business
integrations and internal reorganizations (including post-acquisition
integration of Emergis); technology (including reliance on systems and
information technology, evolving wireline broadband and wireless next
generation technology options and the possible need for prospective wireless
sharing arrangements to achieve cost efficiencies and reduce deployment
risks); regulatory approvals and developments (including interpretation and
application of tower sharing and roaming rules, the design and impact of
future spectrum auctions, the new media proceeding and possible changes to
foreign ownership restrictions); process risks (including conversion of legacy
systems and billing system integrations); health, safety and environmental
developments; litigation and legal matters; business continuity events
(including manmade and natural threats); any prospective acquisitions or
divestitures; and other risk factors discussed herein and listed from time to
time in TELUS' reports and public disclosure documents, including its annual
report, annual information form, and other filings with securities commissions
in Canada (on www.sedar.com) and in its filings in the United States,
including Form 40-F (on EDGAR at www.sec.gov).
    For further information, see Section 10: Risks and risk management of
TELUS' 2007 annual and first quarter 2008 Management's discussions and
analyses, as well as updates in Section 10 of this document.
    -------------------------------------------------------------------------

    
    Management's discussion and analysis
    August 6, 2008
    

    The following is a discussion of the consolidated financial condition and
results of operations of TELUS Corporation for the three-month and six-month
periods ended June 30, 2008 and 2007, and should be read together with TELUS'
interim Consolidated financial statements. This discussion contains forward-
looking information that is qualified by reference to, and should be read
together with, the Caution regarding forward-looking statements above.
    TELUS' interim Consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles (GAAP),
which differ in certain respects from U.S. GAAP. The principal differences
between Canadian and U.S. GAAP, as they relate to TELUS, are summarized in
Note 20 of the interim Consolidated financial statements. Management's
discussion and analysis and the interim Consolidated financial statements were
reviewed by TELUS' Audit Committee and approved by TELUS' Board of Directors.
All amounts are in Canadian dollars unless otherwise specified.
    TELUS has issued guidance on and reports on certain non-GAAP measures
used by management to evaluate performance of business units, segments and the
Company. Non-GAAP measures are also used to determine compliance with debt
covenants and manage the capital structure. Because non-GAAP measures do not
have a standardized meaning, securities regulations require that non-GAAP
measures be clearly defined and qualified, and reconciled with their nearest
GAAP measure. For the reader's reference, the definition, calculation and
reconciliation of consolidated non-GAAP measures are provided in Section 11:
Reconciliation of non-GAAP measures and definitions.

    
    Management's discussion and analysis contents

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    Section                        Contents
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    1.  Introduction               Introduction and summary of TELUS'
                                   consolidated results for the second
                                   quarter and first six months of 2008
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    2.  Core business, vision      A discussion of activities in support of
        and strategy               TELUS' six strategic imperatives
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    3.  Key performance drivers    A listing of corporate priorities for 2008
    -------------------------------------------------------------------------
    4.  Capability to deliver      A description of the factors that affect
        results                    the capability to execute strategies,
                                   manage key performance drivers and
                                   deliver results
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    5.  Results from operations    A detailed discussion of operating results
                                   for the second quarter and first six
                                   months of 2008
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    6.  Financial condition        A discussion of significant changes in
                                   TELUS' balance sheets for the six-month
                                   period ended June 30, 2008
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    7.  Liquidity and capital      A discussion of cash flow, liquidity,
        resources                  credit facilities and other disclosures
    -------------------------------------------------------------------------
    8.  Critical accounting        A description of accounting estimates that
        estimates and accounting   are critical to determining financial
        policy developments        results, and changes to accounting
                                   policies
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    9.  Annual guidance for 2008   TELUS' revised annual guidance
    -------------------------------------------------------------------------
    10. Risks and risk management  An update on certain risks and
                                   uncertainties facing TELUS and how the
                                   Company manages these risks
    -------------------------------------------------------------------------
    11. Reconciliation of          A description, calculation and
        non-GAAP measures and      reconciliation of certain measures used by
        definitions                management
    -------------------------------------------------------------------------

    1.  Introduction

    1.1 Materiality for disclosures

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

    1.2 Canadian telecommunications industry

        Key industry development
    

    On June 30, 2007, Canada's largest telecommunications service provider
BCE Inc. announced that it had entered into a definitive agreement to be
acquired by a consortium led by Teachers Private Capital, the private
investment arm of the Ontario Teachers' Pension Plan, and several co-
investors, recently confirmed by BCE to be the U.S.-based Providence Equity
Partners, Madison Dearborn Partners, LLC and Merrill Lynch Global Private
Equity. The BCE Board recommended that their common shareholders accept the
consortium's offer at an all-cash price of $42.75 per common share or
approximately $34 billion. On September 21, 2007, BCE shareholders
overwhelmingly approved the acquisition. In June 2008, the CRTC (Canadian
Radio-television and Telecommunications Commission) approved the change in
control of BCE's broadcasting licences. Industry Canada also approved the
acquisition. A challenge before the Supreme Court of Canada by certain BCE
bond holders was also dismissed in June. BCE has indicated that it expects the
transaction to close on or before December 11, 2008.

    
    Wireless developments - advanced wireless service (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).
    TELUS was advised that it was the provisionally successful bidder on 59
spectrum licences of 20 MHz or 10 MHz in the 1700/2100 MHz ranges, providing
additional spectrum depth nationally in markets TELUS already covers. The cost
of spectrum licences won was approximately $880 million. TELUS expects to
receive the licences after final payment and after demonstrating compliance
with Canadian ownership requirements, both expected to occur in the third
quarter of 2008. Each of the other AWS spectrum auction provisional winners
must also comply with both Canadian ownership and payment requirements. The
average spectrum acquired by TELUS was 16.2 MHz at an average cost of
$1.82/MHz/POP. See also Building national capabilities in Section 2, as well
as Section 4.1 Principal markets addressed and competitors and Section 10.1
Regulatory.
    In the third quarter of 2008, in accordance with the terms of the
auction, the Company expects that the amount of successful bids will be paid
through a combination of drawing on its credit facilities and utilization of
cash on hand.

    
    -------------------------------------------------------------------------
    Licences acquired by TELUS in the May 27 to July 21, 2008 Industry
    Canada spectrum auction
    -------------------------------------------------------------------------

                                    Number of
                                     licences
    Bandwidth                        acquired     Geographic areas
    -------------------------------------------------------------------------

    20 MHz comprised of 10 MHz           32       Quebec, SW Ontario, Ottawa
    in the 1700 MHz range paired                  Region, Manitoba,
    with 10 MHz in the 2100 MHz                   Saskatchewan, Alberta and
    range                                         B.C.

    10 MHz comprised of 5 MHz in         27       Yukon, Northwest
    the 1700 MHz range paired with                Territories & Nunavut,
    5 MHz in the 2100 MHz range                   Newfoundland & Labrador,
                                                  Nova Scotia, New Brunswick,
                                                  P.E.I., N. Ontario, Central
                                                  Ontario, and Toronto
    -------------------------------------------------------------------------

    1.3 Consolidated highlights

    The chief executive officer, who is the chief operating decision-maker,
regularly receives TELUS' consolidated reports on two bases: including and
excluding (as shown in the "as adjusted" calculations) an incremental charge
for introducing a net-cash settlement feature for share option awards granted
prior to 2005. The highlights table below presents both views.


    -------------------------------------------------------------------------
    Consolidated highlights
    ($ millions, except shares,
    per-share amounts,                            Quarters ended June 30
    subscribers and ratios)                       2008       2007     Change
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Consolidated statements of income
    -------------------------------------------------------------------------
    Operating revenues                         2,398.7    2,228.1      7.7 %

    Operating income                             498.1      493.8      0.9 %
    Net-cash settlement feature (recovery)
     expense                                      (0.3)       1.8        n.m.
                                              ---------  ---------  ---------
    Operating income (as adjusted)               497.8      495.6      0.4 %

    Income before income taxes                   381.4      348.1      9.6 %
    Net-cash settlement feature (recovery)
     expense                                      (0.3)       1.8        n.m.
                                              ---------  ---------  ---------
    Income before income taxes (as adjusted)     381.1      349.9      8.9 %

    Net income                                   267.0      253.1      5.5 %
    Net-cash settlement feature, after tax        (0.2)       1.3        n.m.
                                              ---------  ---------  ---------
    Net income (as adjusted)                     266.8      254.4      4.9 %

    Earnings per share, basic ($)                 0.83       0.76      9.2 %
    Net-cash settlement feature per share            -          -        - %
                                              ---------  ---------  ---------
    Earnings per share, basic (as adjusted) ($)   0.83       0.76      9.2 %

    Earnings per share, diluted ($)               0.83       0.75     10.7 %

    Cash dividends declared per share ($)         0.45      0.375     20.0 %
    -------------------------------------------------------------------------
    Consolidated statements of cash flows
    -------------------------------------------------------------------------
    Cash provided by operating activities        461.0    1,061.9    (56.6)%
    Cash used by investing activities            436.7      477.8     (8.6)%
    Capital expenditures                         435.6      481.8     (9.6)%
    Cash (used) provided by financing
     activities                                  (27.7)  (1,115.9)    97.5 %
    -------------------------------------------------------------------------
    Subscribers and other measures
    -------------------------------------------------------------------------
    Subscriber connections(1) (thousands)       11,363     10,885      4.4 %

    EBITDA(2)                                    917.6      884.6      3.7 %
    Net-cash settlement feature expense           (0.3)       1.8        n.m.
                                              ---------  ---------  ---------
    EBITDA (as adjusted)                         917.3      886.4      3.5 %

    Free cash flow(3)                            302.3      161.7     87.0 %
    -------------------------------------------------------------------------
    Debt and payout ratios(4)
    -------------------------------------------------------------------------
    Net debt to EBITDA - excluding
     restructuring costs                           1.7        1.8       (0.1)
    Dividend payout ratio (%)                       52         48      4 pts
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Consolidated highlights
    ($ millions, except shares,
     per-share amounts,                       Six-month periods ended June 30
     subscribers and ratios)                      2008       2007     Change
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Consolidated statements of income
    -------------------------------------------------------------------------
    Operating revenues                         4,749.3    4,433.7      7.1 %

    Operating income                           1,025.5      890.8     15.1 %
    Net-cash settlement feature (recovery)
     expense                                      (0.1)     175.3        n.m.
                                              ---------  ---------  ---------
    Operating income (as adjusted)             1,025.4    1,066.1     (3.8)%

    Income before income taxes                   782.6      623.7     25.5 %
    Net-cash settlement feature (recovery)
     expense                                      (0.1)     175.3        n.m.
                                              ---------  ---------  ---------
    Income before income taxes (as adjusted)     782.5      799.0     (2.1)%

    Net income                                   558.0      447.9     24.6 %
    Net-cash settlement feature, after tax        (0.1)     109.0        n.m.
                                              ---------  ---------  ---------
    Net income (as adjusted)                     557.9      556.9      0.2 %

    Earnings per share, basic ($)                 1.73       1.34     29.1 %
    Net-cash settlement feature per share            -       0.33   (100.0)%
                                              ---------  ---------  ---------
    Earnings per share, basic (as adjusted) ($)   1.73       1.67      3.6 %

    Earnings per share, diluted ($)               1.72       1.32     30.3 %

    Cash dividends declared per share ($)         0.90       0.75     20.0 %
    -------------------------------------------------------------------------
    Consolidated statements of cash flows
    -------------------------------------------------------------------------
    Cash provided by operating activities      1,086.2    1,522.5    (28.7)%
    Cash used by investing activities          1,437.1      870.1     65.2 %
    Capital expenditures                         755.3      863.7    (12.6)%
    Cash (used) provided by financing
     activities                                  376.7     (638.7)       n.m.
    -------------------------------------------------------------------------
    Subscribers and other measures
    -------------------------------------------------------------------------
    Subscriber connections(1) (thousands)

    EBITDA(2)                                  1,867.1    1,648.9     13.2 %
    Net-cash settlement feature expense           (0.1)     175.3        n.m.
                                              ---------  ---------  ---------
    EBITDA (as adjusted)                       1,867.0    1,824.2      2.3 %

    Free cash flow(3)                            882.1      642.5     37.3 %
    -------------------------------------------------------------------------
    Debt and payout ratios(4)
    -------------------------------------------------------------------------
    Net debt to EBITDA - excluding
     restructuring costs
    Dividend payout ratio (%)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    pt; pts - percentage point(s)

    (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.
    (2) EBITDA is a non-GAAP measure. See Section 11.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    (3) Free cash flow is a non-GAAP measure. See Section 11.2 Free cash
        flow.
    (4) See Section 7.4 Liquidity and capital resource measures and Section
        11.4 Definitions of liquidity and capital resource measures.
    -------------------------------------------------------------------------


    Highlights for the second quarter and first six months of 2008, as
discussed in Section 5: Results from operations, include the following:

    -   Subscriber connections increased by 478,000 in the twelve-month
        period ended June 30, 2008. The number of wireless subscribers grew
        by 10.6% to 5.83 million, the number of Internet subscribers grew by
        6.3% to 1.21 million and the number of network access lines decreased
        by 3.4% to 4.33 million.

    -   Wireless gross subscriber additions increased to a TELUS second
        quarter record of 422,200, or up 19%, when compared to the same
        period in 2007, and were positively influenced by the introduction of
        a new brand. Wireless average revenue per subscriber unit per month
        (ARPU) was $62.73 in the second quarter of 2008, up $0.85 from the
        first quarter of 2008, but $0.92 lower than the second quarter of
        2007.

    -   Operating revenues increased by $170.6 million and $315.6 million,
        respectively, in the second quarter and first six months of 2008,
        when compared to the same periods in 2007. The increases were due
        primarily to growth in wireless network revenues and wireline data
        revenues (including revenues from Emergis), which more than offset
        revenue declines in wireline voice local and long distance.

    -   Operating income adjusted to exclude the net-cash settlement feature
        increased by $2.2 million in the second quarter of 2008, when
        compared to the same period in 2007, as the increase in EBITDA (as
        adjusted) exceeded higher depreciation and amortization expenses.
        Operating income (as adjusted) decreased by $40.7 million for the
        first six months of 2008, primarily due to an additional three months
        amortization for a new billing system and increased depreciation,
        which partly offset increased EBITDA (as adjusted).

    -   Excluding the effect of the net-cash settlement feature, Income
        before income taxes (as adjusted) increased by $31.2 million in the
        second quarter and decreased by $16.5 million in the first six months
        of 2008, due to changes in operating income (as adjusted) noted above
        and lower financing and other expenses.

    -   Net income increased by $13.9 million or seven cents per share in the
        second quarter of 2008 when compared to the same period in 2007. For
        the first six months of 2008, Net income increased by $110.1 million
        or 39 cents per share when compared to the same period in 2007.

    -------------------------------------------------------------------------
    Net income changes                  Quarters ended     Six-month periods
    ($ millions)                               June 30         ended June 30
    -------------------------------------------------------------------------
    2007 Net income                              253.1                 447.9
    Tax-effected changes:
      Lower net-cash settlement feature            1.5                 109.1
      Higher EBITDA as adjusted(1)                21.4                  29.6
      Higher depreciation and
       amortization(1), excluding
       investment tax credits in 2007            (19.8)                (54.4)
      Lower interest expenses(1)                  10.8                  17.1
      Tax-related adjustments
       (see Section 5.2)                         (10.0)                  3.0
      Other                                       10.0                   5.7
    -------------------------------------------------------------------------

    2008 Net income                              267.0                 558.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) at 2008 blended statutory tax rates
    -------------------------------------------------------------------------

    -   Average shares outstanding during the first six months of 2008 were
        4% lower than the same period in 2007, due to repurchases under
        normal course issuer bid (NCIB) programs. The Company purchased
        0.95 million Common Shares and 3.69 million Non-Voting Shares for a
        total outlay of $199.2 million in the first half of 2008.

    Highlights for the second quarter and first six months of 2008, as
    discussed in Section 7: Liquidity and capital resources, include the
    following:

    -   Cash provided by operating activities decreased by $600.9 million and
        $436.3 million, respectively, in the second quarter and first six
        months of 2008, when compared to the same periods in 2007. For the
        second quarter period, a $350 million reduction in proceeds from
        securitized receivables during 2008 compared to a $350 million
        increase in proceeds in 2007, for a comparative reduction in cash
        flow of $700 million. For the six-month period, a $350 million
        reduction in proceeds from securitized receivables in 2008 compared
        to no change in 2007.

    -   Cash used by investing activities decreased by $41.1 million in the
        second quarter of 2008 and increased by $567.0 million during the
        first six months of 2008, when compared to the same periods in 2007.
        The decrease for the second quarter was mainly from higher wireless
        capital expenditures in the prior year to extend higher speed EVDO
        (evolution data optimized) coverage. The increase for the first six
        months of 2008 was due mainly to the January 2008 acquisition of
        Emergis, partly offset by lower wireless capital expenditures.

    -   Net cash used by financing activities decreased by $1,088.2 million
        during the second quarter of 2008, when compared to the same period
        in 2007, due to a number of factors, including repayment of
        $1.5 billion maturing Notes in June 2007, net of the April 2008 issue
        of $500 million Notes (see next paragraph). Net Cash provided by
        financing activities for the first six months of 2008 increased by
        $1,015.4 million when compared to the same period in 2007, due mainly
        to the April 2008 debt issue, increases in net amounts drawn from the
        2012 credit facility and commercial paper in 2008, as well as lower
        share purchases under NCIB programs.

        On April 9, 2008, TELUS successfully closed an offering of 5.95%,
        Series CE, Notes due April 15, 2015, for aggregate gross proceeds of
        approximately $500 million. The net proceeds of the offering were
        used for general corporate purposes including repayment of amounts
        under the 2012 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.

    -   Free cash flow increased by $140.6 million and $239.6 million,
        respectively, in the second quarter and first six months of 2008,
        when compared to the same periods in 2007. The increases were mainly
        due to lower capital expenditures, improved EBITDA (as adjusted), and
        lower paid interest. Free cash flow was supplemented in the first
        half of 2008 by financing activities to complete acquisitions
        totalling $691.3 million, net of acquired cash.

    -   Net debt to EBITDA at June 30, 2008 was 1.7, unchanged from the
        measure at December 31, 2007, continuing the achievement of the
        Company's long-term target policy range of 1.5 to 2.0 times.

    -   The dividend payout ratio, based on the annualized second quarter
        dividend and earnings for the 12-month trailing period ended June 30,
        2008 (excluding favourable tax-related adjustments), was 52%, within
        the Company's guideline.

    2.  Core business, vision and strategy
    

    The following discussion is qualified in its entirety by the Caution
regarding forward-looking statements at the beginning of Management's
discussion and analysis. It is also qualified by Section 10: Risks and risk
management of TELUS' 2007 annual and 2008 first quarter Management's
discussion and analyses, as well as updates reported in Section 10 of this
document.
    TELUS' core business, vision and strategy were detailed in its 2007
Management's discussion and analysis. Activities that supported the Company's
six strategic imperatives during the second quarter of 2008 include the
following:

    
        Building national capabilities across data, IP, voice and wireless
    

    TELUS successfully bid on 20 MHz and 10 MHz blocks of advanced wireless
services (AWS) spectrum in the 1700 MHz/2100 MHz ranges in the Industry Canada
auction concluded July 21. The average spectrum won by TELUS was 16.2 MHz
nationally, which increases TELUS' strong spectrum position, and is expected
to provide capacity for the introduction of future 4G (fourth generation)
service offerings.

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

    The second quarter of 2008 is the first full period including the
operations of TELUS' wireless postpaid value brand. In March, TELUS launched
this new brand and service to better address segments of the wireless market
and complement the fully featured TELUS brand service. The expected benefits
include more flexibility in serving various market segments, increasing
postpaid customer additions, protecting revenue on the premium TELUS brand,
and improving client retention programs.

    
        Building integrated solutions that differentiate TELUS from its
        competitors
    

    In June, the Company launched three new global positioning system (GPS)
solutions for businesses with mobile workers. TELUS Asset Tracker enables
businesses to keep track of assets, whether large or small. TELUS Resource
Tracker allows businesses to increase safety and productivity through real-
time location monitoring of workers. TELUS Track and Dispatch gives businesses
the ability to determine the closest mobile worker to a new job assignment or
to immediately dispatch help if a worker needs assistance. These new solutions
are part of the Company's suite of wireless GPS solutions on the PCS network
that also features TELUS Fleet Tracker, a fleet monitoring and tracking
solution, and TELUS Navigator, a GPS turn-by-turn navigation solution.

    
        Partnering, acquiring and divesting to accelerate the implementation
        of TELUS' strategy and focus TELUS' resources on core business
    

    TELUS Ventures received a very positive return from its 2001 minority
investment in Hostopia (TSX: H), a provider of private-branded web hosting,
email and e-commerce solutions to telecommunications and cable TV companies,
Internet service providers, domain registrars, and other Web service
providers. This arose from Deluxe Corporation's (NYSE:   DLX) all cash offer for
Hostopia in June, which was recommended for approval by Hostopia's Board of
Directors. Shareholder approval was obtained in late July and the deal closed
in early August. TELUS Ventures invested in Hostopia to complement TELUS'
existing services and to be its key supplier, as part of TELUS' strategy to
benefit from emerging technologies that fill the Company's capability gaps.

    
        Going to the market as one team under a common brand, executing a
        single strategy
    

    Acquired in January 2008 and re-branded "Emergis, a TELUS company," the
post-merger integration process continued into the second quarter in order to
ensure a seamless transition for team members and customers, while ensuring a
focus on achieving strategic business goals. This included the identification
of top joint-sales opportunities and working together to close multi-million
dollars of new contracts. The teams also initiated an update to the three-year
strategic business plans for healthcare and financial services. In addition,
during the quarter certain business functions were aligned, including Finance,
Human Resources and Marketing.

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

    In mid-July, following a large trial, TELUS successfully converted more
than one million wireline residential customers in British Columbia to a new
billing and client care system. This converges to the system in Alberta, and
for the first time most customers in Alberta and B.C. are now on the same
billing and client care system. During the B.C. conversion, TELUS has applied
learnings from the Alberta conversion in 2007 and early experience has been
positive. The expected customer service and cost benefits of this project
include streamlined and standardized processes and the elimination over time
of multiple legacy information systems. See Section 4.2 for additional
information on the July conversion.

    
    3.  Key performance drivers
    

    The following is qualified in its entirety by the Caution regarding
forward-looking statements at the beginning of Management's discussion and
analysis. It is also qualified by Section 10: Risks and risk management of
TELUS' 2007 annual and 2008 first quarter Management's discussions and
analyses, as well as updates reported in Section 10 of this document.
    Management sets new corporate priorities each year to advance TELUS'
strategy, focus on the near-term opportunities and challenges, and create
value for shareholders.

    
    -------------------------------------------------------------------------
    2008 corporate priorities
    -------------------------------------------------------------------------
    Drive profit from strategic services with a focus on data
    -------------------------------------------------------------------------
    Build scale in vertical markets and leverage the Emergis acquisition
    -------------------------------------------------------------------------
    Exact productivity gains from efficiency improvement initiatives
    -------------------------------------------------------------------------
    Elevate the client experience and build enhanced loyalty
    -------------------------------------------------------------------------
    Execute technology initiatives, including broadband and IT platforms
    -------------------------------------------------------------------------

    4.  Capability to deliver results
    

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

    4.1 Principal markets addressed and competitors

    At June 30, 2008, the principal markets addressed and competitors have
not changed significantly from those described in TELUS' 2007 Management's
discussion and analysis. Wireless competition is expected to increase in the
future, as several potential entrants have provisionally acquired spectrum
regionally in the AWS spectrum auction concluded in July 2008, as summarized
below. Under the auction rules, successful bidders are subject to confirmation
of eligibility and must complete payments within 30 business days of the
auction close. Potential new entrants are expected to begin offering services
in 2009 or later, as they establish operations, and build wireless networks in
areas where they have won spectrum. Some new entrants may form alliances with
one another. See Section 10.1 Regulatory,

    
    -------------------------------------------------------------------------
    Existing and potential competitors acquiring licences in the May 27 to
    July 21, 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
      TELUS                           Expansion of existing national capacity
    -------------------------------------------------------------------------

    Incumbent provincial facilities-
     based competitors
      MTS Allstream                   Expansion of existing Manitoba capacity
      SaskTel                         Expansion of existing Saskatchewan
                                       capacity
    -------------------------------------------------------------------------

    Potential new entrants(1)

    Globalive Wireless LP             Spectrum in most regions, but excluding
                                       most of Quebec
    Data & Audio-Visual Enterprises   Spectrum in most major centres, except
                                       in Quebec and Atlantic Canada
    6934579 Canada Inc.               Spectrum in S. and E. Ontario and S.
                                       and E. Quebec
    Québecor (9193-2962 Québec Inc.)  Regional spectrum in Quebec and parts
                                       of Ontario
    Shaw Communications Inc.          Regional spectrum in Western Canada and
                                       N. Ontario
    Bragg Communications Inc.         Regional spectrum in Atlantic Canada
                                       and SW Ontario; 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                            3 local areas in total
    -------------------------------------------------------------------------
    (1) Subject to building a wireless network in the geographic areas where
        they elect to complete.
    -------------------------------------------------------------------------

    4.2 Operational capabilities

        Development of a new billing and client care system in the wireline
        segment
    

    A pilot implementation for approximately 150,000 residential customers in
B.C. began in May 2008 and a subsequent system conversion for more than one
million B.C. residential customers was completed in mid-July 2008. The Company
applied key learnings from the Alberta conversion in 2007 and initial
indications are that the cutover went well. The critical billing function
performed as expected, while billing cycles were maintained. The order entry
system also performed well, without capacity and stability issues experienced
initially with the Alberta conversion in 2007. Service levels have not been
materially impacted following the 2008 conversion. See Section 10.2 Process
risks.

    4.3 Liquidity and capital resources

    
        Capital structure financial policies (Note 3 of the Consolidated
        financial statements)
    

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

    Liquidity and financing

    -------------------------------------------------------------------------
    TELUS' 2008 financing plan and results to-date
    -------------------------------------------------------------------------

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

    In the first six months of 2008, the Company repurchased for
    cancellation, 0.95 million Common Shares and 3.69 million Non-Voting
    Shares for a total outlay of $199.2 million. See Section 7.3 Cash used by
    financing activities.

    Pay dividends

    Dividends declared for the second quarter of 2008 were 45 cents per
    share, up by 20% from 37.5 cents per share in the same period in 2007.

    Use proceeds from securitized receivables and bank facilities, as needed,
    to supplement free cash flow and meet other cash requirements

    At June 30, 2008, the balance of proceeds from securitized accounts
    receivable was $150 million, a reduction of $350 million from March 31,
    2008 and December 31, 2007. The reduction in securitized accounts
    receivable in the current quarter was completed following the closing of
    the public debt issue described below. In January 2008, the Company
    increased utilization of its existing $2 billion credit facility. The
    proceeds were used for general corporate purposes, including the purchase
    of Emergis. At June 30, 2008, $162.0 million was drawn on the 2012
    revolving credit facility, down from $320.9 million at March 31, 2008,
    and up from the nil amount drawn at the beginning of the year.

    Maintain compliance with financial objectives, policies and guidelines

    Maintain a minimum $1 billion in unutilized liquidity - On March 3, 2008,
    the Company closed a new $700 million, 364-day credit facility with a
    select group of Canadian banks. 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 Company had unutilized credit facilities
    exceeding $1.5 billion at June 30, 2008, including the 364-day facility.
    See Section 7.5 Credit facilities.

    Net debt to EBITDA excluding restructuring costs ratio of 1.5 to 2.0
    times - actual result of 1.7 times at June 30, 2008.

    Dividend payout ratio of 45 to 55% of sustainable net earnings - the
    ratio was 43%, based on the annualized second quarter dividend rate and
    actual earnings for the 12-month trailing period ended June 30, 2008. The
    ratio was 52% when calculated to exclude the impacts of favourable tax-
    related adjustments from earnings for the 12-month trailing period ended
    June 30, 2008.

    Maintain position of fully hedging foreign exchange exposure for
    indebtedness

    Maintained for the 8.00% U.S. dollar Notes due 2011, the one remaining
    foreign currency-denominated debt issue.

    Give consideration to accessing the public debt markets in 2008 to
    refinance short-term financing sources with long-term financing

    On April 9, TELUS successfully closed its offering of 5.95%, Series CE,
    Notes due April 15, 2015, for aggregate gross proceeds of approximately
    $500 million. The net proceeds of the offering were used for general
    corporate purposes including repayment of amounts under the 2012 credit
    facility, and to refinance short-term financing sources.

    Preserve access to the capital markets at a reasonable cost by
    maintaining investment grade credit ratings and targeting improved credit
    ratings in the range of BBB+ to A-, or the equivalent, in the future

    At August 6, 2008, investment grade credit ratings from the four rating
    agencies that cover TELUS were in the desired range. TELUS' April 2008
    debt issue was assigned credit ratings of: A (low) by DBRS Ltd., Baa1 by
    Moody's Investors Service, BBB+ by Fitch Ratings, and BBB+ by Standard
    and Poor's, all with a stable trend or outlook and all consistent with
    the agencies' existing ratings for TELUS debt securities. See Section 7.7
    Credit ratings.
    -------------------------------------------------------------------------

    
    4.4 Disclosure controls and procedures and internal control over
        financial reporting

        Changes in internal control over financial reporting
    

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

    
    5.  Results from operations

    5.1 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, customer characteristics, 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, who is the chief operating decision-
maker. See Note 5 of the interim Consolidated financial statements.

    
    5.2 Quarterly results summary

    -------------------------------------------------------------------------
    ($ in millions, except per
    share amounts)                  2008 Q2    2008 Q1    2007 Q4    2007 Q3
    -------------------------------------------------------------------------
    Operating revenues              2,398.7    2,350.6    2,330.8    2,309.9
      Operations expense,
       excluding net-cash
       settlement feature           1,476.9    1,394.2    1,370.7    1,323.7
      Net-cash settlement feature      (0.3)       0.2        0.6       (7.2)
      Restructuring costs               4.5        6.7        6.1        6.4
    -------------------------------------------------------------------------
    EBITDA(1)                         917.6      949.5      953.4      987.0
      Depreciation                    343.5      345.7      386.2      332.5
      Amortization of intangible
       assets                          76.0       76.4       68.1       70.1
    -------------------------------------------------------------------------
    Operating income                  498.1      527.4      499.1      584.4
      Other expense (income)            2.4       16.8        5.8        8.0
      Financing costs                 114.3      109.4      109.1       86.2
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling interest     381.4      401.2      384.2      490.2
      Income taxes                    113.5      109.4      (18.0)      78.6
      Non-controlling interests         0.9        0.8        2.1        1.7
    -------------------------------------------------------------------------
    Net income                        267.0      291.0      400.1      409.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income per Common Share and
     Non-Voting Share    - basic       0.83       0.90       1.23       1.24
                         - diluted     0.83       0.90       1.22       1.23
    Dividends declared per Common
     Share and Non-Voting Share        0.45       0.45       0.45      0.375
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ in millions, except per
    share amounts)                  2007 Q2    2007 Q1    2006 Q4    2006 Q3
    -------------------------------------------------------------------------
    Operating revenues              2,228.1    2,205.6    2,254.6    2,210.7
      Operations expense,
       excluding net-cash
       settlement feature           1,338.5    1,263.1    1,362.4    1,239.7
      Net-cash settlement feature       1.8      173.5          -          -
      Restructuring costs               3.2        4.7        7.9       12.5
    -------------------------------------------------------------------------
    EBITDA(1)                         884.6      764.3      884.3      958.5
      Depreciation                    318.3      317.7      353.2      325.8
      Amortization of intangible
       assets                          72.5       49.6       53.9       57.5
    -------------------------------------------------------------------------
    Operating income                  493.8      397.0      477.2      575.2
      Other expense (income)           18.5        3.8       10.1        4.0
      Financing costs                 127.2      117.6      133.6      116.6
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling interest     348.1      275.6      333.5      454.6
      Income taxes                     93.7       79.3       91.6      128.3
      Non-controlling interests         1.3        1.5        1.4        2.4
    -------------------------------------------------------------------------
    Net income                        253.1      194.8      240.5      323.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income per Common Share and
     Non-Voting Share    - basic       0.76       0.58       0.71       0.95
                         - diluted     0.75       0.57       0.70       0.94
    Dividends declared per Common
     Share and Non-Voting Share       0.375      0.375      0.375      0.275
    -------------------------------------------------------------------------

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

        Trends
    

    The consolidated revenue trend continues to reflect growth in wireless
network revenues generated from an increasing subscriber base. Wireless ARPU
(average revenue per subscriber unit per month) for the second quarter of 2008
was up $0.85 from the first quarter of 2008, but declined $0.92 on a
year-over- year basis. The decrease is a result of declining voice ARPU more
than offsetting strong data growth. The voice ARPU decline reflects a shifting
product mix, pricing competition and increased use of in-bucket, or included-
minute service plans.
    The trend in consolidated revenues also reflects strong growth in
wireline data revenue, including new revenues from two January 2008
acquisitions. For the 2007 and 2006 periods shown above, growth in data
revenue 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. Second quarter 2008 residential network access line losses
improved when compared to the same period one-year earlier - the first
quarterly improvement year-over-year since the fourth quarter of 2004.
Partially offsetting the continuing line losses on the residential side were
gains in business network access lines.
    Historically, there is significant fourth quarter seasonality with higher
wireless subscriber additions and related acquisition costs and equipment
sales, resulting in lower wireless EBITDA. There is a less pronounced fourth
quarter seasonal effect for wireline high-speed Internet subscriber additions
and related costs.
    The sequential increase in Operations expenses beginning with the first
quarter 2008 (excluding the net-cash settlement feature) included expenses
from January acquisitions. As described in Section 1.3, beginning with the
first quarter of 2007, quarterly Operations expenses include expenses or
recoveries for introducing a net-cash settlement feature for share option
awards granted prior to 2005.
    The downward trend in depreciation expense ended in the second half of
2007 with a reduction in estimated useful service lives for certain circuit
switching and network management assets, resulting in write-downs of
approximately $20 million and $47 million, respectively, in the third and
fourth quarters of 2007. The previous downward trend was interrupted by a
provision of approximately $17 million in the fourth quarter of 2006 to align
estimated useful lives for TELUS Québec assets, resulting from integration of
financial systems. Depreciation is expected to increase slightly for the full
year of 2008 as compared to 2007, due to a planned increase in capital assets
and a reduction in the estimated useful lives for certain circuit-switching
and other assets. See Caution regarding forward-looking statements.
    The sequential increase in amortization of intangible assets in the first
quarter of 2008 was due mainly to acquisitions. A major new wireline billing
and client care system was put into service for Alberta residential customers
in March 2007, resulting in $18 million of additional amortization each period
beginning in the second quarter of 2007. In addition, amortization expenses in
the fourth quarter of 2006 and the first quarter of 2007 were each reduced by
approximately $5 million for investment tax credits relating to assets
capitalized in prior years that are now fully amortized, following a
determination of eligibility by a government tax authority. Amortization is
expected to increase significantly for the full year of 2008 as compared to
2007, due to the Emergis acquisition and the July 2008 implementation of new
phases of converged client care and billing system. See Caution regarding
forward-looking statements.
    Within Financing costs shown in the preceding table, interest expenses
trended lower as financing activities have lowered the effective interest
rate. The sequential decline in financing costs in the third quarter of 2007
was due to lower effective interest rates and debt balances plus increased
interest income from tax refunds. Financing costs in the eight periods shown
are net of varying amounts of interest income.
    The generally upward 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.

    
    -------------------------------------------------------------------------
    Tax-related adjustments
    ($ in millions, except
    EPS amounts)                    2008 Q2    2008 Q1    2007 Q4    2007 Q3
    -------------------------------------------------------------------------
    Approximate Net income impact         -         17        143         93
    Approximate EPS impact                -       0.05       0.44       0.28
    Approximate basic EPS
     excluding tax-related impacts     0.83       0.85       0.79       0.96
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Tax-related adjustments
    ($ in millions, except
    EPS amounts)                    2007 Q2    2007 Q1    2006 Q4    2006 Q3
    -------------------------------------------------------------------------
    Approximate Net income impact        10          4         20         30
    Approximate EPS impact             0.03       0.01       0.06       0.09
    Approximate basic EPS
     excluding tax-related impacts     0.73       0.57       0.65       0.86
    -------------------------------------------------------------------------

    5.3 Consolidated results from operations

    -------------------------------------------------------------------------
    ($ in millions except EBITDA margin             Quarters ended June 30
    in % and employees)                           2008       2007     Change
    -------------------------------------------------------------------------
    Operating revenues                         2,398.7    2,228.1      7.7 %
    Operations expense                         1,476.6    1,340.3     10.2 %
    Restructuring costs                            4.5        3.2     40.6 %
    -------------------------------------------------------------------------
    EBITDA(1)                                    917.6      884.6      3.7 %
    Depreciation                                 343.5      318.3      7.9 %
    Amortization of intangible assets             76.0       72.5      4.8 %
    -------------------------------------------------------------------------
    Operating income                             498.1      493.8      0.9 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense (as adjusted)(2)        1,476.9    1,338.5     10.3 %
    EBITDA (as adjusted)(2)                      917.3      886.4      3.5 %
    Operating income (as adjusted)(2)            497.8      495.6      0.4 %

    EBITDA margin(3)                              38.3       39.7   (1.4)pts
    EBITDA margin (as adjusted)(3)                38.2       39.8   (1.6)pts
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ in millions except EBITDA margin      Six-month periods ended June 30
    in % and employees)                           2008       2007     Change
    -------------------------------------------------------------------------
    Operating revenues                         4,749.3    4,433.7      7.1 %
    Operations expense                         2,871.0    2,776.9      3.4 %
    Restructuring costs                           11.2        7.9     41.8 %
    -------------------------------------------------------------------------
    EBITDA(1)                                  1,867.1    1,648.9     13.2 %
    Depreciation                                 689.2      636.0      8.4 %
    Amortization of intangible assets            152.4      122.1     24.8 %
    -------------------------------------------------------------------------
    Operating income                           1,025.5      890.8     15.1 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense (as adjusted)(2)        2,871.1    2,601.6     10.4 %
    EBITDA (as adjusted)(2)                    1,866.9    1,824.2      2.3 %
    Operating income (as adjusted)(2)          1,025.4    1,066.1     (3.8)%

    EBITDA margin(3)                              39.3       37.2    2.1 pts
    EBITDA margin (as adjusted)(3)                39.3       41.1   (1.8)pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) EBITDA is a non-GAAP measure. See Section 11.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    (2) Excluding net-cash settlement feature (recoveries) expenses of
        $(0.3) million and $(0.1) million, respectively, in the second
        quarter and first six months of 2008 and $1.8 million and
        $175.3 million, respectively, in the second quarter and first six
        months 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 5.4 Wireline segment results,
Section 5.5 Wireless segment results and Section 7.2 Cash used by investing
activities - capital expenditures.

    
        Operating revenues
    

    Operating revenues increased by $170.6 million and $315.6 million,
respectively, in the second quarter and first six months 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
    

    Consolidated Operations expense increased by $136.3 million and
$94.1 million, respectively, in the second quarter and first six months of
2008, when compared to the same periods in 2007. Operations expense adjusted
to exclude the net-cash settlement feature expense increased by $138.4 million
and $269.5 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 absence of system
conversion expenses recorded in the second quarter of 2007 for a new Alberta
wireline billing and client care system. Wireless expenses increased to
support the 10.6% year-over-year growth in the wireless subscriber base and 9%
growth in wireless network revenue, and the continued start up costs
associated with the launch of a new brand. TELUS' defined benefit pension plan
net amortization did not change significantly.

    
        Restructuring costs
    

    Restructuring costs increased by $1.3 million and $3.3 million,
respectively, in the second quarter and first six months of 2008, when
compared to the same periods in 2007. An aggregate annual expense of
approximately $30 million is expected for several small efficiency initiatives
in 2008.

    
        EBITDA
    

    Consolidated EBITDA increased by $33.0 million and 218.2 million,
respectively, in the second quarter and first six months of 2008 when compared
to the same periods in 2007. Excluding the net-cash settlement feature,
consolidated EBITDA (as adjusted) increased by $30.9 million and
$42.8 million, respectively, due mainly to increased wireless EBITDA (as
adjusted).

    
        Depreciation
    

    Depreciation increased by $25.2 million and $53.2 million, respectively,
in the second quarter and first six months of 2008, when compared to the same
periods in 2007. The increases were due primarily to the reduction in
estimated useful service lives for certain digital circuit switching and other
assets, as well as growth in capital assets, partly offset by an increase in
other fully depreciated assets.

    
        Amortization of intangible assets
    

    Amortization increased by $3.5 million and $30.3 million, respectively,
in the second quarter and first six months of 2008, when compared to the same
periods in 2007. The increases included $13 million and $24 million,
respectively, for new acquisitions, partly offset by a lower expense due to
other software and subscriber base assets becoming fully amortized, as well as
accelerated amortization for Amp'd Mobile in the second quarter of 2007
following discontinuation of Amp'd services.
    The increase for the first six months also includes: (i) $18 million
additional amortization for a new wireline billing and client care system for
Alberta residential customers that was put into service in March 2007; and
(ii) the effect of amortization in the first quarter of 2007 being reduced by
approximately $5 million to recognize investment tax credits, then determined
eligible by the tax authority, for assets capitalized in prior years that were
fully amortized. Amortization is expected to increase significantly for the
full year of 2008 as compared to 2007, due to the Emergis acquisition and the
July 2008 implementation of the new converged client care and billing system
for residential wireline customers in B.C. See Caution regarding forward-
looking statements.

    
        Operating income
    

    Operating income increased by $4.3 million and $134.7 million,
respectively, in the second quarter and first six months of 2008, when
compared to the same periods in 2007. Excluding net-cash settlement feature
expenses in both years, operating income (as adjusted) increased by
$2.2 million in the second quarter of 2008, when compared to the same period
in 2007, as the $30.9 million increase in EBITDA (as adjusted) exceeded higher
depreciation and amortization expenses. Operating income (as adjusted)
decreased by $40.7 million for the first six months of 2008, primarily due to
an additional three months amortization for a new billing system and increased
depreciation, partly offset by the $42.8 million increase in EBITDA (as
adjusted).

    
        Other income statement items

    -------------------------------------------------------------------------
                                                         Six-month periods
    Other expense, net        Quarters ended June 30       ended June 30
    ($ millions)              2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
                               2.4    18.5  (87.0)%    19.2    22.3  (13.9)%
    -------------------------------------------------------------------------
    

    Other expense includes accounts receivable securitization expense,
charitable donations, gains and losses on disposal of real estate, and income
(loss) or impairments in equity or portfolio investments. Accounts receivable
securitization expenses were $1.0 million and $6.9 million, respectively, in
the second quarter and first six months of 2008, or decreases of $3.9 million
and $1.2 million from the same periods in 2007, which were caused by the
reduction in proceeds from securitized accounts receivable by June 30, 2008
(see Section 7.6 Accounts receivable sale). Net gains and losses on
investments in 2008, including valuation adjustments on investments held for
trading, were gains of $3.3 million in the second quarter and losses of
$6.2 million for the first six months. An $11.8 million write-off of an equity
investment in AMP'D Mobile, Inc. was recorded in the second quarter of 2007.

    
    -------------------------------------------------------------------------
                                                         Six-month periods
    Financing costs           Quarters ended June 30       ended June 30
    ($ millions)              2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    Interest on long-term
     debt, short-term
     obligations and other   116.6   126.8   (8.0)%   228.4   246.1   (7.2)%
    Foreign exchange losses
     (gains)                   0.2     5.7  (96.5)%     0.5     7.6  (93.4)%
    Capitalized interest
     during construction      (1.3)      -     n.m.    (2.6)      -     n.m.
    Interest income           (1.2)   (5.3)  77.4 %    (2.6)   (8.9)  70.8 %
    -------------------------------------------------------------------------
                             114.3   127.2  (10.1)%   223.7   244.8   (8.6)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    n.m. - not meaningful
    -------------------------------------------------------------------------
    

    Interest expenses decreased $10.2 million and $17.7 million,
respectively, in the second quarter and first six months of 2008 when compared
to the same periods in 2007. Decreased interest expenses were due primarily to
financing activities that lowered the effective interest rate. For the first
six months, lower interest was partly offset by the initial application in
2007 of the effective rate method for issue costs.
    Interest income decreased $4.1 million and $6.3 million, respectively, in
second quarter and first six months of 2008, when compared to the same periods
in 2007. Lower interest income was due primarily to lower average temporary
investment and bank balances.

    
    -------------------------------------------------------------------------
                                                         Six-month periods
    Income taxes              Quarters ended June 30       ended June 30
    ($ millions)              2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    Basic blended federal
     and provincial tax at
     statutory income tax
     rates                   117.8   116.9    0.8 %   241.8   209.2   15.6 %
    Revaluation of future
     income tax liability
     to reflect future
     statutory income tax
     rates                    (7.9)  (24.2)       -   (26.1)  (27.9)       -
    Share option award
     compensation              1.5     1.2        -     2.9    (6.5)       -
    Other                      2.1    (0.2)       -     4.3    (1.8)       -
    -------------------------------------------------------------------------
                             113.5    93.7   21.1 %   222.9   173.0   28.8 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Blended federal and
     provincial statutory
     tax rates (%)            30.9    33.6 (2.7)pts    30.9    33.5 (2.6)pts
    Effective tax rates (%)   29.8    26.9  2.9 pts    28.5    27.7  0.8 pts
    -------------------------------------------------------------------------
    

    The blended federal and provincial statutory income tax expense increased
in the second quarter and first six months of 2008 when compared to the same
periods in 2007, due to the respective 9.6% and 25.5% increases in income
before taxes, partly offset by the lower blended statutory tax rates. 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. Reductions to federal
income tax rates for 2008 to 2012 were enacted in the second and fourth
quarters of 2007. The effective tax rates 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, as well
as future tax rates being applied to temporary differences.
    Based on the assumption of the continuation of the rate of TELUS
earnings, the existing legal entity structure, and no substantive changes to
tax regulations, the Company currently expects cash income tax payments to be
relatively low in 2008 with expected cash collections exceeding expected
payments. In 2009, income tax payments are expected to increase substantially.
The blended statutory income tax rate is expected to be 30.5 to 31.5% in 2008.
See Caution regarding forward-looking statements at the beginning of
Management's discussion and analysis.

    
    -------------------------------------------------------------------------
    Non-controlling                                      Six-month periods
    interests                 Quarters ended June 30       ended June 30
    ($ millions)              2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
                               0.9     1.3  (30.8)%     1.7     2.8  (39.3)%
    -------------------------------------------------------------------------

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

    5.4 Wireline segment results

    -------------------------------------------------------------------------
    Operating revenues -                                 Six-month periods
    wireline segment          Quarters ended June 30       ended June 30
    ($ millions)              2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    Voice local(1)           496.9   515.6   (3.6)%   998.6 1,047.7   (4.7)%
    Voice long distance(2)   174.7   167.7    4.2 %   353.8   355.3   (0.4)%
    Data(3)                  521.5   434.6   20.0 % 1,027.7   859.4   19.6 %
    Other                     63.2    62.2    1.6 %   126.8   123.3    2.8 %
    -------------------------------------------------------------------------
    External operating
     revenue(4)            1,256.3 1,180.1    6.5 % 2,506.9 2,385.7    5.1 %
    Intersegment revenue      32.3    28.7   12.5 %    63.1    53.8   17.3 %
    -------------------------------------------------------------------------
    Total operating
     revenues(4)           1,288.6 1,208.8    6.6 % 2,570.0 2,439.5    5.3 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Voice local revenue decreased by approximately 3.5% in the first
        six months of 2008 when the impact of first quarter regulatory
        adjustments are excluded from both 2008 and 2007.

    (2) Voice long distance revenue decreased by 3.5% and 4.0%, respectively,
        in the second quarter and first six months of 2008 when the impact of
        the second quarter 2007 adjustment is excluded.

    (3) Data revenue increased by approximately 7% and 8%, respectively, in
        the second quarter and first six months of 2008, when revenues from
        acquisitions are excluded from 2008 and the impact of first quarter
        mandated retroactive competitor price reductions are excluded from
        both 2008 and 2007.

    (4) External and total operating revenue increased by approximately 1% in
        the second quarter and first six months of 2008, when excluding
        revenues from acquisitions and regulatory adjustments.
    -------------------------------------------------------------------------

    Wireline revenues increased $79.8 million and $130.5 million in the second
quarter and first six months of 2008, when compared with the same period in
2007, due to the following:

    -   Voice local revenue decreased by $18.7 million and $49.1 million,
        respectively, in the second quarter and first six months of 2008,
        when compared with the same periods in 2007. The decreases were
        mainly due to two factors: (i) lower revenues from basic access and
        optional enhanced service revenues caused by increased competition
        for residential subscribers, offset in part by growth in business
        local services; and (ii) for the six-month periods, approximately
        $13 million 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 decisions (see the discussion for
        wireline data revenue below).

    -------------------------------------------------------------------------
    Network access lines                                   As at June 30
    (000s)                                             2008    2007   Change
    -------------------------------------------------------------------------
    Residential network access lines                  2,497   2,685   (7.0)%
    Business network access lines                     1,828   1,793    2.0 %
                                                    ------- -------  --------
    Total network access lines                        4,325   4,478   (3.4)%

                                                         Six-month periods
                              Quarters ended June 30       ended June 30
    (000s)                    2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    Change in residential
     network access lines      (48)    (56)  14.3 %     (99)    (90) (10.0)%
    Change in business
     network access lines        8       8      - %      20      20      - %
                            ------- ------- -------- ------- ------- --------
    Change in total network
     access lines              (40)    (48)  16.7 %     (79)    (70) (12.9)%
    -------------------------------------------------------------------------

    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 was experienced in incumbent areas as well as Ontario and Quebec urban
non-incumbent areas.

    -   Voice long distance revenues increased by $7.0 million in the second
        quarter of 2008, and decreased by $1.5 million for the first six
        months of 2008, when compared with the same periods in 2007. Long
        distance revenue in the second quarter of 2007 included a $13 million
        negative one-time adjustment associated with implementation of a new
        billing system for Alberta residential customers. Excluding the one-
        time adjustment last year, revenue decreased by $6.0 million and
        $14.5 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 segment data revenues increased by $86.9 million and
        $168.3 million, respectively, in the second quarter and first six
        months 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 (see next paragraph);
        and (v) increased provision of digital entertainment services to
        consumers in urban incumbent markets. The underlying growth absent
        acquisitions and regulatory adjustments was approximately 8%.

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

    -------------------------------------------------------------------------
    Internet subscribers                                   As at June 30
    (000s)                                             2008    2007   Change
    -------------------------------------------------------------------------
    High-speed Internet subscribers                 1,064.1   962.7   10.5 %
    Dial-up Internet subscribers                      142.0   172.2  (17.5)%
                                                    ------- -------  --------
    Total Internet subscribers                      1,206.1 1,134.9    6.3 %

                                                         Six-month periods
                              Quarters ended June 30       ended June 30
    (000s)                    2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    High-speed Internet net
     additions                23.6    13.9   69.8 %    43.9    46.0   (4.6)%
    Dial-up Internet net
     reductions               (4.4)   (9.4)  53.2 %   (13.3)  (21.9)  39.3 %
                            ------- ------- -------- ------- ------- --------
    Total Internet
     subscriber net
     additions                19.2     4.5     n.m.    30.6    24.1   27.0 %
    -------------------------------------------------------------------------
    

    High-speed Internet subscriber net additions increased during the second
quarter of 2008, when compared to the same period in 2007, as the prior year's
net additions were temporarily constrained by reduced order processing
capability after the March 2007 implementation of a new billing and client
care system for Alberta residential customers. High-speed Internet subscriber
net additions decreased slightly for the first six months of 2008, when
compared to the same period in 2007, due to competitive activity and a
maturing market.

    
    -   Other revenue increased by $1.0 million and $3.5 million,
        respectively, in the second quarter and first six months of 2008,
        when compared with the same periods in 2007. The increase was due
        mainly to increased voice equipment sales.

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

    -------------------------------------------------------------------------
    Operating expenses -
     wireline segment                                    Six-month periods
    ($ millions, except       Quarters ended June 30       ended June 30
     employees)               2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    Salaries, benefits and
     other employee-related
     costs, before net-cash
     settlement feature      480.7   428.0   12.3 %   940.4   856.9    9.7 %
    Net-cash settlement
     feature                  (1.3)      -      n.m.   (0.7)  153.1      n.m.
    Other operations
     expenses                372.5   344.1    8.3 %   740.2   667.5   10.9 %
    -------------------------------------------------------------------------
    Operations expense       851.9   772.1   10.3 % 1,679.9 1,677.5    0.1 %
    Restructuring costs        4.1     2.8   46.4 %    10.6     7.2   47.2 %
    -------------------------------------------------------------------------
    Total operating
     expenses                856.0   774.9   10.5 % 1,690.5 1,684.7    0.3 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(1)        853.2   772.1   10.5 % 1,680.6 1,524.4   10.2 %
    Total operating
     expenses
     (as adjusted)(1)        857.3   774.9   10.6 % 1,691.2 1,531.6   10.4 %
    -------------------------------------------------------------------------
    (1) Excluding net-cash settlement feature expenses.
    -------------------------------------------------------------------------
    

    Total operating expenses adjusted to exclude the net-cash settlement
feature expense increased by $82.4 million and $159.6 million, respectively,
in the second quarter and first six months of 2008, when compared with the
same periods in 2007. The increases were mainly due to acquisitions,
compensation increases, increased cost of sales, and initial costs incurred to
implement services for several new enterprise customers, partly offset by
system conversion expenses recorded in 2007 for an Alberta wireline billing
and client care system. The billing conversion expenses in the second quarter
of 2007 were approximately $16 million for temporary labour to perform system
fixes and maintain service levels.

    
    -   Salaries, benefits and employee-related costs increased by
        $52.7 million and $83.5 million, respectively, in the second quarter
        and first six months of 2008, when compared with the same periods in
        2007. The increase resulted from more staff for the provision of
        outsourcing services to customers, including Emergis operations
        beginning in 2008, and compensation increases.

    -   Other operations expenses increased by $28.4 million and
        $72.7 million, respectively, in the second quarter and first six
        months of 2008, when compared with the same periods in 2007. The
        increases were due to higher costs of sales for increased data
        equipment sales with lower margins, expenses in acquired companies,
        increased advertising and promotions expenses, and higher costs for
        the provision of digital entertainment services, partly offset by
        higher capitalized labour. In addition, regulated revenue-based
        contribution expenses in 2008 do not include a recovery recorded in
        the second quarter of 2007. External labour costs increased to
        maintain higher service levels and to implement services for new
        enterprise customers, but were offset by the absence in the second
        quarter of 2008 of system conversion expenses recorded in 2007 for
        the new Alberta wireline billing and client care system. Offnet
        facility costs also increased to support new enterprise customers.

    -   Restructuring costs increased by $1.3 million and $3.4 million,
        respectively, in the second quarter and first six months of 2008,
        when compared with the same periods in 2007. Restructuring charges in
        2008 were for a number of smaller initiatives under the Company's
        competitive efficiency program.

    -------------------------------------------------------------------------
    EBITDA ($ millions) and                              Six-month periods
     EBITDA margin (%)        Quarters ended June 30       ended June 30
     Wireline segment         2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    EBITDA                   432.6   433.9   (0.3)%   879.5   754.8   16.5 %
    EBITDA (as adjusted)(1)  431.3   433.9   (0.6)%   878.8   907.9   (3.2)%
    EBITDA margin             33.6    35.9 (2.3)pts    34.2    30.9  3.3 pts
    EBITDA margin
     (as adjusted)            33.5    35.9 (2.4)pts    34.2    37.2 (3.0)pts
    -------------------------------------------------------------------------
    (1) Excluding net-cash settlement feature (recoveries) expenses of
        $(1.3) million and $(0.7) million, respectively, in the second
        quarter and first six months of 2008 and $nil and $153.1 million,
        respectively, in the second quarter and first six months of 2007.
    -------------------------------------------------------------------------
    

    Wireline segment EBITDA decreased by $1.3 million and in the second
quarter of 2008 and increased by $124.7 million for the first six months of
2008, when compared with the same periods in 2007. The increase for the six-
month period was mainly due to the net-cash settlement feature expense
recorded in 2007. Wireline EBITDA (as adjusted) decreased by $2.6 million and
$29.1 million, respectively, due to lower margins on increased data equipment
sales, initial costs to implement services for new enterprise customers,
increased advertising and promotions, and higher costs for the provision of
digital entertainment services.

    
    5.5 Wireless segment results


    -------------------------------------------------------------------------
    Operating revenues -                                 Six-month periods
     wireless segment         Quarters ended June 30       ended June 30
    ($ millions)              2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    Network revenue        1,076.7   989.8    8.8 % 2,113.9 1,934.3    9.3 %
    Equipment revenue         65.7    58.2   12.9 %   128.5   113.7   13.0 %
    -------------------------------------------------------------------------
    External operating
     revenue               1,142.4 1,048.0    9.0 % 2,242.4 2,048.0    9.5 %
    Intersegment revenue       7.2     6.7    7.5 %    14.2    13.0    9.2 %
    -------------------------------------------------------------------------
    Total operating
     revenues              1,149.6 1,054.7    9.0 % 2,256.6 2,061.0    9.5 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Key wireless operating indicators                      As at June 30
    (000s)                                             2008    2007   Change
    -------------------------------------------------------------------------

    Subscribers - postpaid                          4,670.1 4,236.0   10.2 %
    Subscribers - prepaid                           1,161.8 1,036.0   12.1 %
                                                    ------- ------- ---------
    Subscribers - total                             5,831.9 5,272.0   10.6 %

    Proportion of subscriber base that is
     postpaid (%)                                      80.1    80.3  (0.2)pts
    Digital POPs(1) covered including
     roaming/resale (millions)(2)                      32.4    31.5    2.9 %

                                                         Six-month periods
                              Quarters ended June 30       ended June 30
                              2008    2007   Change    2008    2007   Change
                            -------------------------------------------------

    Subscriber gross
     additions - postpaid    278.9   219.2   27.2 %   483.1   392.5   23.1 %
    Subscriber gross
     additions - prepaid     143.3   134.8    6.3 %   284.3   257.5   10.4 %
                            ------  ------  -------- ------  ------  --------
    Subscriber gross
     additions - total       422.2   354.0   19.3 %   767.4   650.0   18.1 %

    Subscriber net
     additions - postpaid    157.2    99.2   58.5 %   229.6   160.0   43.5 %
    Subscriber net
     additions - prepaid      18.4    29.0  (36.6)%    34.4    58.7  (41.4)%
                            ------  ------  -------- ------  ------  --------
    Subscriber net
     additions - total       175.6   128.2   37.0 %   264.0   218.7   20.7 %

    ARPU ($)(3)              62.73   63.65   (1.4)%   62.31   62.85   (0.9)%
    Churn, per month (%)(3)   1.43    1.45 (0.02)pts   1.48    1.40  0.08 pts

    COA(4) per gross
     subscriber
     addition ($)(3)           332     425  (21.9)%     326     431  (24.4)%
    Average minutes of use
     per subscriber per
     month (MOU)               420     411    2.2 %     408     397    2.8 %

    EBITDA (as adjusted)(5)
     to network revenue (%)   45.1    45.7  (0.6)pts   46.7    47.4  (0.7)pts
    Retention spend to
     network revenue(3) (%)    9.4     8.2   1.2 pts    9.1     7.8   1.3 pts
    EBITDA (as adjusted)
     excluding COA(3)
     ($ millions)            626.0   602.9    3.8 % 1,238.2 1,196.2    3.5 %
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    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) At June 30, 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) See Section 11.3 Definitions of key wireless operating indicators.
        These are industry measures useful in assessing operating performance
        of a wireless company, but are not defined under accounting
        principles generally accepted in Canada and the U.S.
    (4) Cost of acquisition.
    (5) EBITDA excluding net-cash settlement feature expenses of $1.0 million
        and $0.6 million, respectively, in the second quarter and first six
        months of 2008 and $1.8 million and $22.2 million, respectively, in
        the second quarter and first six months of 2007.
    -------------------------------------------------------------------------

    Wireless segment revenues increased by $94.9 million and $195.6 million,
respectively, in the second quarter and first six months of 2008 when compared
with the same period in 2007, due to the following:

    -   Network revenue increased by $86.9 million and $179.6 million,
        respectively, in the second quarter and first six months of 2008 when
        compared to the same periods in 2007. Network revenue increased due
        primarily to the 10.6% expansion in the subscriber base over the past
        twelve months. Wireless data revenues were $158.6 million in the
        second quarter of 2008, up 54% from the same period in 2007, and now
        represent 14.6% of network revenue. This compares to 10.4% of network
        revenue in the same period in 2007. For the first six months of 2008,
        wireless data revenues were $305.8 million, up 53% from the previous
        year. This growth reflects strength in text messaging and
        RIM/BlackBerry service revenues driven by increased usage and data
        roaming, as well as continued migration of existing subscribers to
        full function smartphones and EVDO-capable handsets.

        Blended ARPU of $62.73 in the second quarter of 2008 was down by
        $0.92, when compared to the same period in 2007. Data ARPU increased
        $2.59 or 39% to $9.17 in the second quarter of 2008, as compared to
        the same period in 2007, but was more than offset by declining Voice
        ARPU. Voice ARPU decreased $3.51 or 6.2% to $53.56 in the second
        quarter of 2008, as compared to the same period in 2007, as the
        cumulative subscriber base shifted slightly to prepaid, increased use
        of included-minute rate plans, pricing competition, and lower inbound
        voice roaming. Lower volume non-push-to-talk-centric Mike(R)
        subscribers and higher-value prepaid subscribers continue to be
        actively migrated to PCS smartphones for the enhanced data
        applications, contributing to future revenue growth prospects.

        Gross and net subscriber additions this quarter include the results
        of TELUS' postpaid value brand launch in March 2008. Consistent with
        industry practice, the Company does not breakout the results for this
        service for competitive reasons. Gross subscriber additions of
        422,200 in the second quarter of 2008 were a TELUS second quarter
        record, increasing 19% from the same period in 2007, and were
        positively affected by the introduction of the new brand. The
        proportion of postpaid gross subscriber additions was 66.1% in the
        second quarter of 2008, up 4.2 percentage points when compared to the
        second quarter of 2007. For the first six months of 2008, gross
        subscriber additions were 767,400, up 18% when compared to the same
        period in 2007. The proportion of postpaid gross additions for the
        first half of 2008 was 63.0%, up 2.6 percentage points when compared
        to the same period in 2007.

        Net additions of 175,600 in the second quarter of 2008 were a TELUS
        second quarter record, increasing 37% from the same period in 2007.
        Postpaid subscriber net additions for the same period represented
        89.5% of total net additions as compared with 77% of total net
        additions for the second quarter of 2007. Net additions for the first
        six months of 2008 were 264,000, up almost 21% from the same period
        in 2007 and were comprised of 87% postpaid subscribers, up from 73%
        in the same period in 2007.

        The blended churn rate of 1.43% in the second quarter decreased
        slightly from 1.45% in the same period in 2007, and improved from the
        1.53% in the first quarter of 2008. These blended churn improvements
        were driven by lower postpaid churn that was supported by successful
        retention activities. The blended churn rate of 1.48% for the first
        six months of 2008 increased from 1.40% in the same period in 2007,
        reflecting increased prepaid churn and absence of the wireless number
        portability impact in the first quarter of 2007. Total deactivations
        were 246,600 and 503,400, respectively, in the second quarter and
        first six months of 2008 as compared to 225,800 and 431,300,
        respectively, for the same periods in 2007. The increase in
        deactivations primarily reflects higher prepaid churn rate and a
        larger subscriber base.

    -   Equipment sales, rental and service revenue increased by $7.5 million
        and $14.8 million, respectively, in the second quarter and first six
        months of 2008 when compared to the same periods in 2007. Equipment
        sales were up due to the increase in gross subscriber additions and
        incremental handset migrations to full function smartphones to
        support data revenue growth.

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


    -------------------------------------------------------------------------
    Operating expenses -
    wireless segment(1)                                  Six-month periods
    ($ millions, except       Quarters ended June 30       ended June 30
    employees)                2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------

    Equipment sales expenses 176.7   166.6    6.1 %   329.3   312.0    5.5 %
    Network operating
     expenses                149.4   126.7   17.9 %   290.1   241.3   20.2 %
    Marketing expenses       121.3   114.6    5.8 %   224.5   215.4    4.2 %
    General and
     administration expenses 216.8   195.7   10.8 %   424.5   397.5    6.8 %
    -------------------------------------------------------------------------
    Operations expense       664.2   603.6   10.0 % 1,268.4 1,166.2    8.8 %
    Restructuring costs        0.4     0.4        -     0.6     0.7  (14.3)%
    -------------------------------------------------------------------------
    Total operating expenses  664.6  604.0   10.0 % 1,269.0 1,166.9    8.7 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(1)         663.2  601.8   10.2 % 1,267.8 1,144.0   10.8 %
    Total operating expenses
     (as adjusted)(1)         663.6  602.2   10.2 % 1,268.4 1,144.7   10.8 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Excluding net-cash settlement feature expenses of $1.0 million and
        $0.6 million, respectively, in the second quarter and first six
        months of 2008 and $1.8 million and $22.2 million, respectively, in
        the second quarter and first six months of 2007.
    -------------------------------------------------------------------------


    Wireless segment total operating expenses increased by $60.6 million and
$102.1 million, respectively, in the second quarter and first six months of
2008 when compared with the same period in 2007. Total operating expenses
adjusted to exclude the net-cash settlement feature increased by $61.4 million
and $123.7 million, respectively, to promote, acquire, support and retain the
10.6% year-over-year growth in the subscriber base, as well as the 9% growth
in Network revenue.

    -   Equipment sales expenses increased by $10.1 million and
        $17.3 million, respectively, in the second quarter and first six
        months of 2008, when compared to the same periods in 2007, due to
        higher gross subscriber additions and incremental handset migrations
        to full function smartphones to support the more than 50% increase
        data revenues, partly offset by lower handset costs from a stronger
        Canadian dollar.

    -   Network operating expenses increased by $22.7 million and
        $48.8 million, respectively, in the second quarter and first six
        months of 2008 when compared with the same periods in 2007. The
        increases resulted from a combination of higher roaming, content and
        licensing costs in support of the strong increase in data revenues.

    -   Marketing expenses increased by $6.7 million and $9.1 million,
        respectively, in the second quarter and first six months of 2008,
        when compared to the same periods in 2007. The increases were due to
        higher advertising and promotion costs in support of successful gross
        subscriber loading and the March introduction of new postpaid value
        brand in the market. COA per gross subscriber addition decreased by
        $93 or 21.9% in the second quarter of 2008, and decreased by $105 or
        24.4% for the first six months of 2008, when compared to the same
        periods in 2007, in part due to lower advertising and promotion costs
        on a per unit basis, the mix of gross subscriber loading towards
        lower variable costs channels, and lower equipment subsidies.

        Retention costs as a percentage of network revenue were 9.4% and 9.1%
        in the second quarter and first six months of 2008, respectively, up
        from 8.2% and 7.8%, respectively, in the same periods in 2007. The
        increase was due primarily to handset upgrades to full function
        smartphones to support data revenue growth and the continued
        migration of non-push-to-talk-centric Mike service clients and high-
        value prepaid clients to PCS postpaid services, with an emphasis on
        smartphones.

    -   General and administration increased by $21.1 million and
        $27.0 million, respectively, in the second quarter and first six
        months of 2008 when compared with the same periods in 2007. General
        and administration expenses adjusted to exclude the net-cash
        settlement feature, increased by $21.9 million and $48.6 million,
        respectively, due to employee and contracted labour costs to support
        increasingly complex data products and service offerings, growth in
        the subscriber base, expansion of company-owned retail stores, and to
        a lesser extent, an increase in bad debt expense.

    -   Restructuring costs were for a number of smaller initiatives under
        the Company's competitive efficiency program.

    -------------------------------------------------------------------------
    EBITDA ($ millions) and                              Six-month periods
    EBITDA margin (%)         Quarters ended June 30       ended June 30
    Wireless segment          2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    EBITDA                   485.0   450.7    7.6 %   987.6   894.1   10.5 %
    EBITDA (as adjusted)(1)  486.0   452.5    7.4 %   988.2   916.3    7.8 %
    EBITDA margin             42.2    42.7  (0.5)pts   43.8    43.4   0.4 pts
    EBITDA margin
     (as adjusted)            42.3    42.9  (0.6)pts   43.8    44.5  (0.7)pts
    -------------------------------------------------------------------------
    (1) Excluding net-cash settlement feature expenses of $1.0 million and
        $0.6 million, respectively, in the second quarter and first six
        months of 2008 and $1.8 million and $22.2 million, respectively, in
        the second quarter and first six months of 2007.
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Wireless segment EBITDA increased by $34.3 million and $93.5 million,
respectively, in the second quarter and first six months of 2008, when
compared with the same periods in 2007. Wireless EBITDA adjusted to exclude
the net-cash settlement feature, increased by $33.5 million and $71.9 million,
respectively. The increase in EBITDA (as adjusted) was due to higher Network
revenue and a lower COA expense, partially offset by higher retention spend
(supporting smartphone upgrades), increased network costs related to data
usage, and higher general and administrative costs to support business growth.

    6. Financial condition

    The following are changes in the Consolidated balance sheets in the six-
month period ended June 30, 2008.

    
    -------------------------------------------------------------------------
                  June 30,   Dec. 31,       Changes      Explanation of the
    As at        --------------------                    change in balance
    ($ millions)     2008     2007
    -------------------------------------------------------------------------

    Current Assets
      Cash and       45.7      19.9       25.8   129.6 % See Section 7:
       temporary                                         Liquidity and
       investments,                                      capital resources
       net

      Short-term        -      42.4      (42.4) (100.0)% Liquidation of
       investments                                       short-term
                                                         investments

      Accounts    1,007.4     710.9      296.5    41.7 % Mainly due to a
       receivable                                        $350 million
                                                         reduction in
                                                         proceeds from
                                                         securitized accounts
                                                         receivable and an
                                                         increase from
                                                         acquisitions, partly
                                                         offset by a seasonal
                                                         decrease in accounts
                                                         receivable turnover
                                                         (approximately 46
                                                         days versus 49 days)

      Income and     80.4     120.9       (40.5) (33.5)% Mainly due to
       other taxes                                       current income tax
       receivable                                        expense booked
                                                         during the first
                                                         half of 2008

      Inventories   262.5     243.3        19.2    7.9 % Mainly increased
                                                         wireless handset
                                                         inventory for new
                                                         handset launches

      Prepaid       295.0     199.5        95.5   47.9 % Primarily prepayment
       expenses                                          of annual wireless
       and other                                         licence fees,
                                                         employee benefits,
                                                         property taxes, and
                                                         maintenance
                                                         contracts, net of
                                                         amortization

      Current         5.1       3.8         1.3   34.2 % Fair value
       portion of                                        adjustments to
       derivative                                        handset, restricted
       assets                                            share units and
                                                         other operational
                                                         hedges
    -------------------------------------------------------------------------

    Current Liabilities

      Accounts    1,384.7   1,476.6       (91.9)  (6.2)% Mainly lower
       payable and                                       payables for handset
       accrued                                           purchases, as well
       liabil-                                           as lower payroll and
       ities                                             other employee-
                                                         related liabilities,
                                                         net of liabilities
                                                         for acquisitions

      Income and     11.8       7.3         4.5   61.6 % Mainly due to income
       other                                             taxes payable from
       taxes                                             acquisitions
       payable

      Restructuring  30.2      34.9        (4.7) (13.5)% Payments under
       accounts                                          previous and current
       payable                                           programs exceeded
       and accrued                                       new obligations
       liabilities

      Advance       634.7     631.6         3.1    0.5 % -
       billings
       and customer
       deposits

      Current         6.5       5.4         1.1   20.4 % An increase in
       maturities                                        capital leases,
       of long-term                                      primarily from the
       debt                                              acquisition of
                                                         Emergis

      Current        50.0      26.6        23.4   88.0 % Fair value
       portion of                                        adjustments for
       derivative                                        share option hedges
       liabilities

      Current       638.3     503.6       134.7   26.7 % An increase in
       portion of                                        temporary
       future                                            differences for
       income                                            current assets and
       taxes                                             liabilities, as well
                                                         as changes in
                                                         partnership taxable
                                                         income that will be
                                                         allocated in the
                                                         next 12 months
    -------------------------------------------------------------------------

    Working      (1,060.1) (1,345.3)      285.2   21.2 % Includes a reduction
     capital(1)                                          in proceeds from
                                                         securitized accounts
                                                         receivable following
                                                         the second quarter
                                                         $500 million Note
                                                         issue
    -------------------------------------------------------------------------
    Capital      11,379.4  11,122.0       257.4    2.3 % Includes
     Assets,                                             $326.2 million for
     Net                                                 acquired software,
                                                         customer contracts
                                                         and related customer
                                                         relationships and
                                                         other capital
                                                         assets, plus capital
                                                         expenditures for the
                                                         first half of 2008,
                                                         net of depreciation
                                                         and amortization.
                                                         See also Section 5.3
                                                         Consolidated results
                                                         from operations -
                                                         Depreciation,
                                                         Amortization of
                                                         intangible assets,
                                                         as well as Section
                                                         7.2 Cash used by
                                                         investing activities
    -------------------------------------------------------------------------
    Other Assets

      Deferred    1,418.1   1,318.0       100.1    7.6 % Primarily related to
       charges                                           pension plan
                                                         funding, favourable
                                                         cumulative returns
                                                         on plan assets and
                                                         continued
                                                         amortization of
                                                         transitional pension
                                                         assets

      Investments    32.4      38.9        (6.5) (16.7)% Mainly the value of
                                                         Emergis shares
                                                         purchased in the
                                                         open market in
                                                         December 2007 that
                                                         were exchanged at
                                                         the close of
                                                         acquisition in
                                                         January 2008, partly
                                                         offset by other
                                                         sales, purchases and
                                                         revaluation of
                                                         investments

      Goodwill    3,540.4   3,168.0       372.4   11.8 % Primarily January
                                                         2008 acquisitions of
                                                         Emergis and Fastvibe
    -------------------------------------------------------------------------

    Long-Term     5,512.3   4,583.5       928.8   20.3 % Includes the April
     Debt                                                2008 publicly issued
                                                         $500 million, seven-
                                                         year Notes, a
                                                         $212.8 million
                                                         increase in
                                                         commercial paper,
                                                         draws of
                                                         $162.0 million from
                                                         the 2012 credit
                                                         facility, as well as
                                                         an increase in the
                                                         Canadian dollar
                                                         value of 2011 U.S.
                                                         dollar Notes
    -------------------------------------------------------------------------
    Other         1,680.7   1,717.9       (37.2)  (2.2)% Primarily changes in
     Long-Term                                           U.S. dollar exchange
     Liabil-                                             rates and a fair
     ities                                               value adjustment of
                                                         the derivative
                                                         liabilities
                                                         associated with 2011
                                                         U.S. dollar Notes
    -------------------------------------------------------------------------
    Future        1,100.8   1,048.1        52.7    5.0 % An increase in
     Income                                              temporary
     Taxes                                               differences for
                                                         long-term assets and
                                                         liabilities, partly
                                                         offset by a
                                                         revaluation
                                                         resulting from
                                                         reductions in future
                                                         provincial income
                                                         tax rates
    -------------------------------------------------------------------------
    Non-             22.0      25.9        (3.9) (15.1)% Primarily payment of
     Controlling                                         dividends by a
     Interests                                           subsidiary to a non-
                                                         controlling
                                                         interest, net of
                                                         non-controlling
                                                         interests' share of
                                                         earnings
    -------------------------------------------------------------------------
    Shareholders'
     Equity

      Common      6,994.4   6,926.2        68.2    1.0 % Primarily Net income
       equity                                            of $558 million,
                                                         less dividends
                                                         declared of
                                                         $289.5 million and
                                                         NCIB purchases of
                                                         $199.2 million
    -------------------------------------------------------------------------
    (1) Current assets subtracting Current liabilities - an indicator of the
        ability to finance current operations and meet obligations as they
        fall due.
    -------------------------------------------------------------------------

    7. Liquidity and capital resources

    In 2008, the balance of Cash and temporary investments decreased by $3.4
million during the second quarter and increased by $25.8 million during the
first six months.
    In 2007, the balance of Cash and temporary investments decreased by $531.8
million during the second quarter and increased slightly during the first six
months, primarily due to repayment of $1.5 billion of maturing Notes on June
1, funded by $1 billion of debt issues in the first quarter and initiation of
a commercial paper program in the second quarter.

    -------------------------------------------------------------------------
                                                         Six-month periods
                              Quarters ended June 30       ended June 30
    ($ millions)              2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    Cash provided by
     operating activities    461.0 1,061.9  (56.6)% 1,086.2 1,522.5  (28.7)%
    Cash used by investing
     activities             (436.7) (477.8)   8.6 %(1,437.1) (870.1) (65.2)%
    Cash (used) provided
     by financing
     activities              (27.7)(1,115.9) 97.5 %    376.7  (638.7)    n.m.
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and temporary
     investments, net         (3.4)  (531.8) 99.4 %     25.8    13.7  88.3 %
    Cash and temporary
     investments, net,
     beginning of period      49.1    534.0 (90.8)%     19.9   (11.5)    n.m.
    Cash and temporary
     investments, net,
     end of period            45.7      2.2     n.m.    45.7     2.2     n.m.
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.1 Cash provided by operating activities

    Cash provided by operating activities decreased by $600.9 million and
$436.3 million, respectively, in the second quarter and first six months of
2008 when compared with the same periods in 2007, mainly due to the following:

    -   A reduction in proceeds from securitized accounts receivable of
        $350 million for the second quarter and first six month of 2008, as
        compared to a $350 million increase in proceeds during the second
        quarter of 2007 and no change for the first six months of 2007. The
        year-over-year comparative reductions in cash flow from changes in
        securitized accounts receivables were $700 million in the second
        quarter and $350 million for the first six months.

    -   Increases in EBITDA of $33.0 million and $218.2 million,
        respectively, as described in Section 5.3 Consolidated results from
        operations;

    -   An increase in share-based compensation expense in excess of payments
        of $19.0 million for the second quarter, which adds to increased
        EBITDA for the same period;

    -   A decrease of $113.3 million in share-based compensation expense in
        excess of payments for the first six months, which partly offsets the
        increase in EBITDA for the same period;

    -   A decrease of interest paid of $42.7 million and $21.3 million,
        respectively, due to financing activities that lowered the effective
        interest rate, net of repayment of forward starting interest rate
        swaps in the first quarter of 2007;

    -   Cash provided from liquidation of Short-term investments was
        $116.0 million and $42.4 million, respectively, during the second
        quarter and first six months of 2008, compared with approximately
        $55 million for the second quarter and first six months of 2007; and

    -   Other changes in non-cash working capital including reduced accounts
        payable and accrued liabilities for the six-month period ended
        June 30, 2008.
    

    7.2 Cash used by investing activities

    Cash used by investing activities decreased by $41.1 million in the
second quarter of 2008 and increased by $567.0 million in the first six months
of 2008, when compared with the same periods in 2007. The decrease for the
quarter was mainly due to lower capital expenditures. The increase for the
six- month period was due to acquisitions for a total of $691.3 million, net
of acquired cash. This was partly offset by lower capital expenditures, as
discussed further below.
    Assets under construction were $722.4 million at June 30, 2008, up by
$163.4 million from December 31, 2007, reflecting increases in property, plant
and equipment under construction and new phases of the converged wireline
billing and client care system.

    
    -------------------------------------------------------------------------
    Capital expenditures                                 Six-month periods
    ($ in millions,           Quarters ended June 30       ended June 30
     ratios in %)              2008    2007   Change    2008    2007   Change
    -------------------------------------------------------------------------
    Wireline segment         320.9   308.7    4.0 %   576.1   579.4   (0.6)%
    Wireless segment         114.7   173.1  (33.7)%   179.2   284.3  (37.0)%
    -------------------------------------------------------------------------
    TELUS consolidated       435.6   481.8   (9.6)%   755.3   863.7  (12.6)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditure
     intensity ratio(1)       18.2    21.6 (3.4)pts    15.9    19.5 (3.6)pts
    EBITDA (as adjusted)
     less capital
     expenditures(2)         481.7   404.6   19.1 % 1,111.7   960.5   15.7 %
    -------------------------------------------------------------------------

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

    The consolidated capital intensity for the first six months of 2008
reflects a Wireline capital intensity level of 22% (versus 24% in the same
period in 2007) and a Wireless capital intensity level of 8% (versus 14% in
the same period in 2007). TELUS' EBITDA (as adjusted) less capital
expenditures increased by $77.1 million and $151.2 million, respectively, in
the second quarter and first six months of 2008 when compared to the same
periods in 2007, mainly due to the lower total capital spending and higher
Wireless EBITDA (as adjusted).

    -   Wireline segment capital expenditures increased by $12.2 million in
        the second quarter of 2008 and decreased by $3.3 million in the first
        six months of 2008, when compared to the same periods in 2007. The
        increase for the second quarter was primarily for upfront
        expenditures to support new enterprise customers. The decrease for
        the first six months was due primarily to the high-speed broadband
        (ADSL2+) network builds in 2007, as well as lower demand in 2008 for
        network access builds resulting from more moderate residential
        construction activity in B.C. and Alberta, partly offset by an
        increase in upfront expenditures to support new enterprise customers.
        Wireline cash flows (EBITDA as adjusted less capital expenditures)
        were $110.4 million and $302.7 million, respectively, in the second
        quarter and first six months of 2008, or decreases of 11.8% and 7.9%,
        when compared to the same periods in 2007. The decreases were due to
        lower adjusted EBITDA, as well as higher capital expenditures in the
        second quarter.

    -   Wireless segment capital expenditures decreased by $58.4 million and
        $105.1 million, respectively, in the second quarter and first six
        months of 2008 when compared to the same periods in 2007.
        Expenditures in 2007 were higher than in 2008 due to cell site
        capacity and coverage spending, including network upgrades for
        higher-speed EVDO RevA service, as well as expenditures to implement
        wireless number portability in March 2007. Wireless cash flows
        (EBITDA as adjusted less capital expenditures) were $371.3 million
        and $809.0 million, respectively, in the second quarter and first six
        months of 2008, or increases of 32.9% and 28.0%, respectively, when
        compared to the same periods in 2007. The increases resulted from
        lower capital spending and increased adjusted EBITDA.
    

    Subsequent to quarter-end on July 21, the Company provisionally acquired
59 licences in Industry Canada's wireless spectrum auction for approximately
$880 million that is expected to be reflected as a third quarter capital
expenditure. The Company expects that the amount of successful bids will be
paid through a combination of drawing on its credit facilities and utilization
of cash on hand.

    7.3 Cash (used) provided by financing activities

    Net cash used by financing activities decreased by $1,088.2 million
during the second quarter of 2008, when compared to the same period in 2007,
while net Cash provided by financing activities for the first six months of
2008 increased by $1,015.4 million when compared to the same period in 2007.
Changes in financing activities included:

    
    -   Cash dividends paid were $289.5 million for both the second quarter
        and first six months of 2008, and were in respect of the first
        quarter dividend paid April 1 and the second quarter dividend
        remitted June 30. Cash dividends paid in during the second quarter
        and first six months of 2007 were $125.0 million and $250.9 million,
        respectively. Increased dividend payments for the six-month period
        reflected a higher quarterly dividend rate (45 cents per share in
        2008 compared to 37.5 cents per share in 2007), partly offset by
        lower shares outstanding from NCIB share repurchase programs.

    -   Purchases of shares under NCIB programs decreased by $92.8 million
        and $171.0 million, respectively, in the second quarter and first six
        months of 2008, when compared to the same periods in 2007. Fewer
        shares were repurchased at a lower average price.
    

    The Company's renewed NCIB program (Program 4) came into effect on
December 20, 2007 and is set to expire on December 19, 2008. At June 30, 2008,
the Company has repurchased 12% of the maximum eight million Common Shares and
32% of the maximum 12 million Non-Voting Shares under Program 4. Since
December 20, 2004, TELUS has repurchased 20.2 million of its Common Shares and
37.4 million of its Non-Voting Shares for $2.7 billion under four NCIB
programs, consistent with the Company's intent to return cash to shareholders.

    Shares repurchased for cancellation under normal course issuer bid
    programs

    
    -------------------------------------------------------------------------
                                                            Purchase cost
                             Shares repurchased             ($ millions)
                   ------------------------------- --------------------------
                                                   Charged  Charged
                                                        to       to
                                   Non-              Share Retained
                      Common     Voting              capi-    earn-
                      Shares     Shares      Total   tal(1)  ings(2)    Paid
    ---------------------------------------------- --------------------------
    2007 -
     Program 3
      First
       quarter     1,975,000  1,530,000  3,505,000    57.8    142.9    200.7
      Second
       quarter       330,000  2,367,300  2,697,300    55.0    114.5    169.5
    ---------------------------------------------- --------------------------
      Six months
       ended
       June 30     2,305,000  3,897,300  6,202,300   112.8    257.4    370.2
    ---------------------------------------------- --------------------------

    2008 -
     Program 4
      First
       quarter       950,000  1,968,900  2,918,900    54.3     68.2    122.5
      Second
       quarter             -  1,716,300  1,716,300    36.8     39.9     76.7
    -------------------------------------------------------------------------
      Six months
       ended
       June 30       950,000  3,685,200  4,635,200    91.1    108.1    199.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    -   In April 2008, the Company publicly issued $500 million, 5.95%,
        Series CE, Canadian dollar Notes at a price of $998.97 per $1,000.00
        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 are redeemable at the option of the Company, in
        whole at any time, or in part from time to time, on not fewer than 30
        and not more than 60 days' prior notice, at a redemption price equal
        to the greater of (i) the present value of the Notes discounted at
        the Government of Canada yield plus 66 basis points, or (ii) 100% of
        the principal amount thereof. In addition, accrued and unpaid
        interest, if any, will be paid to the date fixed for redemption.

        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.

    -   During the first quarter, the Company increased utilization of the
        2012 bank facility from $nil to $320.9 million and increased
        commercial paper by $212.8 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 $162.0 million at June 30, 2008. Commercial paper
        outstanding was $800 million at June 30, unchanged from March 31,
        2008.

    -   In comparison, debt financing activities in the first half 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.

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

    7.4 Liquidity and capital resource measures

    -------------------------------------------------------------------------
    Liquidity and capital resource measures
    As at, or 12-month periods ended,
    June 30                                         2008      2007    Change
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Components of debt and coverage ratios(1)
     ($ millions)
    -------------------------------------------------------------------------

    Net debt                                     6,644.4   6,239.7     404.7
    Total capitalization - book value           13,775.0  13,122.3     652.7

    EBITDA - excluding restructuring costs       3,831.2   3,520.0     311.2
    Net interest cost                              419.0     495.0     (76.0)

    -------------------------------------------------------------------------
    Debt ratios
    -------------------------------------------------------------------------

    Fixed-rate debt as a proportion of total
     indebtedness (%)                               83.4      81.4      2 pts
    Average term to maturity of debt (years)         4.8       5.7      (0.9)

    Net debt to total capitalization (%)(1)         48.2      47.6    0.6 pts
    Net debt to EBITDA - excluding
     restructuring costs(1)                          1.7       1.8      (0.1)

    -------------------------------------------------------------------------
    Coverage ratios(1)
    -------------------------------------------------------------------------

    Interest coverage on long-term debt              4.7       3.8       0.9
    EBITDA - excluding restructuring costs
     interest coverage                               9.1       7.1       2.0

    -------------------------------------------------------------------------
    Other measures
    -------------------------------------------------------------------------

    Free cash flow ($ millions)(2)               1,812.8   1,399.5     413.3
    Dividend payout ratio(3), excluding
     tax-related adjustments and the net-cash
     settlement feature (%)                           52        48      4 pts
    Dividend payout ratio (%)(3)                      43        50     (7)pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) See Section 11.4 Definitions of liquidity and capital resource
        measures.
    (2) Twelve-month trailing measurement. See Section 11.2 Free cash flow
        for the definition.
    (3) Twelve-month trailing measurement. See Section 11.4 Definitions of
        liquidity and capital resource measures.
    -------------------------------------------------------------------------
    

    Net debt at June 30, 2008 increased from one year earlier due to the
$500 million debt issue in April 2008, as well as increased use of commercial
paper and amounts drawn on the 2012 credit facility, net of lower proceeds
from securitized accounts receivable and a higher cash balance. Total
capitalization increased because of higher net debt, retained earnings and
accumulated other comprehensive income, partly offset by lower share capital
due to share repurchases.
    The average term to maturity of debt of 4.8 years at June 30, 2008
decreased from 5.7 years at June 30, 2007 due to shorter average long-term
debt maturity, increased commercial paper and amounts drawn against the 2012
credit facility, partly offset by the issuance in April 2008 of $500 million,
Series CE, seven-year Notes. The proportion of debt on a fixed rate basis
increased mainly due to the April 2008 Note issue, as increased commercial
paper and drawn amounts against the 2012 credit facility were offset by a
decrease in proceeds from securitized accounts receivable.
    When compared to one year earlier, the interest coverage on long-term
debt ratio increased by 0.9, of which, 0.6 resulted from lower long-term
interest and 0.3 resulted from higher income before income taxes and long-term
interest. The EBITDA interest coverage ratio increased by 2.0, of which, 1.3
resulted from a lower net interest cost and 0.7 resulted from higher EBITDA
before restructuring. Free cash flow for the 12-month period ended June 30,
2008, increased by 29.5% when compared to the measure one year earlier, due to
higher income tax recoveries and interest income, higher EBITDA after share-
based compensation and restructuring payments, lower paid interest and lower
capital expenditures.
    The Company's strategy is to maintain the financial policies and
guidelines set out below. The Company believes that these measures are
currently at the optimal level and provide access to capital at a reasonable
cost by maintaining credit ratings in the range of BBB+ to A-, or the
equivalent.

    TELUS' long-term financial guidelines and policies are:

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

        The ratio was 1.7 times at June 30, 2008, or a decrease of 0.1 from
        one year earlier, as higher net debt was more than offset by improved
        12-month trailing EBITDA before restructuring costs. The ratio
        remained within the long- term target range.

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

        The ratio calculated to exclude favourable tax-related adjustments
        and the net-cash settlement feature from earnings for the 12-month
        period ended June 30, 2008 was 52%, as compared to 48% one year
        earlier. The adjusted ratios are more representative of a sustainable
        calculation. The ratios based on actual earnings were 43% and 50%,
        respectively.
    

    7.5 Credit facilities

    On March 3, 2008, TELUS Corporation closed a new $700 million, 364-day
credit facility with a select group of Canadian banks. 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 new credit facility is unsecured and bears interest at Canadian prime and
Canadian bankers' acceptance rates, plus applicable margins.
    At June 30, 2008, TELUS had available liquidity exceeding $1.5 billion
from unutilized credit facilities, consistent with the Company's objective of
maintaining at least $1 billion of available liquidity.

    
    TELUS Credit Facilities at June 30, 2008
    -------------------------------------------------------------------------
                                                      Out- Backstop
                                                  standing     for
                                                   undrawn commer-
                                                   letters    cial
                                                        of   paper Available
    ($ in millions)      Expiry     Size    Drawn   credit program liquidity
    -------------------------------------------------------------------------
    Five-year
     revolving
     facility(1)    May 1, 2012  2,000.0   (162.0)  (272.3)  (800.0)   765.7
    364-day
     revolving
     facility(2)  March 2, 2009    700.0        -        -        -    700.0
    Other bank
     facilities               -    137.2        -    (65.5)       -     71.7
    -------------------------------------------------------------------------
    Total                     -  2,837.2   (162.0)  (337.8)  (800.0) 1,537.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    TELUS' revolving credit facilities contain customary covenants, including
a requirement that TELUS not permit its consolidated Leverage Ratio (debt to
trailing 12-month EBITDA) to exceed 4 to 1 (approximately 1.7 to 1 at June 30,
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
9.1 to 1 at June 30, 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.

    7.6 Accounts receivable sale

    On July 26, 2002, TELUS Communications Inc. (TCI), a wholly owned
subsidiary of TELUS, entered into an agreement, which was amended September
30, 2002, March 1, 2006, November 30, 2006 and March 31, 2008, 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. The 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. (DBRS) or the securitization trust may require the sale program to be
wound down. The necessary credit rating was exceeded by three levels at A
(low) as of August 6, 2008.

    
    -------------------------------------------------------------------------
    Balance of proceeds from
     securitized receivables          2008,      2008,      2007,       2007,
     ($ millions)                  June 30    Mar. 31    Dec. 31    Sept. 30
    -------------------------------------------------------------------------
                                     150.0      500.0      500.0       550.0
    -------------------------------------------------------------------------


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

    7.7 Credit ratings

    There were no changes to the Company's investment grade credit ratings
since TELUS' 2007 Management's discussion and analysis. On March 27, 2008,
DBRS confirmed its credit ratings and trend for TELUS and TCI, 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. 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 new Series CE Notes.

    
    -------------------------------------------------------------------------
    Credit rating summary     DBRS           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-             -             -
    -------------------------------------------------------------------------
    

    7.8 Financial instruments, commitments and contingent liabilities

    Financial instruments

    The Company's financial instruments, and the nature of risks that they
may be subject to, were described in the Company's 2007 Management's
discussion and analysis. Commencing with the Company's 2008 fiscal year, the
new recommendations of the CICA for financial instrument disclosures (CICA
handbook section 3862) apply to the Company and result in incremental
disclosures, relative to those previously, with an emphasis on risks
associated with both recognized and unrecognized financial instruments to
which an entity is exposed during the period and at the balance sheet date,
and how an entity manages those risks. This information is in Note 4 of the
interim Consolidated financial statements.

    Commitments and contingent liabilities (Note 18 of the interim
    Consolidated financial statements)

    Price cap deferral accounts

    On January 17, 2008, the CRTC issued Decision Telecom 2008-1 Use of
deferral account funds to improve access to telecommunications services for
persons with disabilities and to expand broadband services to rural and remote
communities. This decision approved TELUS' use of its deferral account for
expansion of broadband services to an additional 119 rural and remote
communities (cumulatively 234 rural and remote communities), and confirmed
approximately five per cent of the deferral account balance was to be used to
enhance accessibility to telecommunications services for individuals with
disabilities. The decision also confirmed that the remaining balance of
accumulated balance of TELUS' deferral account was to be rebated to local
residential customers in non-high cost serving areas.
    On April 16, 2008, the Company petitioned to the Federal Cabinet seeking
to rescind those parts of Decision 2008-1 that prevent the use of the
remaining deferral account funds for broadband expansion. The petition also
seeks to vary the decision to allow incumbent local exchange carriers to file
additional proposals to use all of the available remaining deferral account
for the purpose of broadband extension in their respective areas where it
would otherwise be uneconomic to do so, except for the five per cent of the
deferral account designated to improve access for persons with disabilities.
On February 11, 2008, Bell Canada applied to the Federal Court of Appeal for
leave to appeal, and for a stay of, Decision 2008-1. The stay was granted on
April 23, 2008, and applies to the rebate and broadband expansion
determinations in Decision 2008-1.
    The Federal Court of Appeal heard two appeals of the CRTC's initial
decision on disposition of funds in the deferral account (Decision 2006-9) in
January 2008. The Consumers Association of Canada and the National Anti-
Poverty Organization sought rebates from the deferral account direct to
consumers rather than have the account used for purposes designated by the
CRTC. Bell Canada's appeal grounds were that the CRTC exceeded its
jurisdiction to the extent that the CRTC approved rebates from the deferral
account. Within that hearing, the Federal Court of Appeal further granted Bell
Canada a motion for a stay of Decision 2006-9 in so far as it requires the
disposition of funds in the deferral accounts for any purpose other than
improvement of accessibility to communications services for individuals with
disabilities. In March 2008, the Federal Court of Appeal dismissed both
appeals. On May 6, 2008, TELUS applied to the Supreme Court of Canada for
leave to appeal Decision 2006-9, in so far as the decision requires rebates of
funds in the deferral accounts. The Company argued that the Federal Court of
Appeal erred in upholding the CRTC's jurisdiction to order rebates of the
funds in the ILEC deferral accounts. Bell Canada and the Consumer Groups also
applied to the Supreme Court for leave to appeal the Federal Court of Appeal's
ruling alleging various jurisdictional errors.

    Claims and lawsuits

    A number of claims and lawsuits seeking damages and other relief are
pending against the Company. It is impossible at this time for the Company to
predict with any certainty the outcome of such litigation. However, management
is of the opinion, based upon legal assessment and information presently
available, that it is unlikely that any liability, to the extent not provided
for through insurance or otherwise, would be material in relation to the
Company's consolidated financial position, other than as disclosed in Note
18(d) of the interim Consolidated financial statements and Section 10.3
Litigation and legal matters.

    7.9 Outstanding share information

    The table below contains a summary of the outstanding shares for each
class of equity at June 30, 2008. The total number of outstanding and issuable
shares is also presented, assuming full conversion of outstanding options and
shares reserved for future option grants. The number of issuable shares at
July 31, 2008 was not materially different from June 30.

    
    -------------------------------------------------------------------------
                                                        Non-
    Outstanding shares                       Common   Voting    Total
    (millions of shares)                     Shares   Shares   shares
    -------------------------------------------------------------------------

    Common equity                                                         (1)
      Outstanding shares at June 30, 2008     174.8    145.0    319.8
      Options outstanding and issuable(2)
       at June 30, 2008                         0.4     15.4     15.8
    -------------------------------------------------------------------------

                                              175.2    160.4    335.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) For the purposes of calculating diluted earnings per share, the
        number of shares was 322.0 million for the three-month period ended
        June 30, 2008.
    (2) Assuming full conversion and ignoring exercise prices.
    -------------------------------------------------------------------------
    

    8. Critical accounting estimates and accounting policy developments

    8.1 Critical accounting estimates

    Critical accounting estimates are described in Section 8.1 of TELUS' 2007
Management's discussion and analysis. The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

    8.2 Accounting policy developments (Note 2 of the interim Consolidated
    financial statements)

    Accounting policies are consistent with those described in Note 1 of
TELUS' 2007 Consolidated financial statements, other than for developments set
out below.

    Convergence with International Financial Reporting Standards (IFRS)
    as issued by the International Accounting Standards Board (IASB)

    In 2006, Canada's Accounting Standards Board ratified a strategic plan
that will result in Canadian GAAP, as used by publicly accountable
enterprises, being fully converged with International Financial Reporting
Standards as issued by the International Accounting Standards Board (IFRS-
IASB) over a transitional period to be complete by 2011. TELUS will be
required to report using the converged standards effective for interim and
annual financial statements relating to fiscal years beginning no later than
on or after January 1, 2011, the date that the Company has selected for
adoption.
    Canadian GAAP will be fully converged with IFRS-IASB through a
combination of two methods: (i) as current joint-convergence projects of the
United States Financial Accounting Standards Board and the International
Accounting Standards Board are agreed upon, they will be adopted by Canada's
Accounting Standards Board and may be introduced in Canada before the publicly
accountable enterprises' transition date to IFRS-IASB; and (ii) standards not
subject to a joint-convergence project will be exposed in an omnibus manner
for introduction at the time of the publicly accountable enterprises'
transition date to IFRS-IASB. The first convergence method may, or will,
result in the Company either having the option to, or being required to,
effectively, change over certain accounting policies to IFRS-IASB prior to
2011.
    The International Accounting Standards Board currently, and expectedly,
has projects underway that are expected to result in new pronouncements that
continue to evolve IFRS-IASB, and, as a result, IFRS-IASB as at the transition
date is expected to differ from its current form. There are several phases
that the Company will have to complete on the path to changing over to
IFRS-IASB:

    
    -------------------------------------------------------------------------
    Implementation phase     Description and status
    -------------------------------------------------------------------------

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

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

                             Currently underway are the identification,
                             evaluation and selection of accounting policies
                             necessary for the Company to changeover to IFRS-
                             IASB; consideration of impacts on operational
                             elements, such as information technology and
                             internal control over financial reporting, are
                             integral to this process. Targeted training
                             activities, which leveraged both internal and
                             external resources, occurred during the current
                             reporting period.

                             Although its impact assessment activities are
                             underway and progressing according to plan,
                             continued progress is necessary before the
                             Company can prudently increase the specificity
                             of the disclosure of pre- and post-IFRS-IASB
                             changeover accounting policy differences.
    -------------------------------------------------------------------------
    Embedding                This phase will integrate the solutions into the
                             Company's underlying financial system and
                             processes that are necessary for the Company to
                             change over to IFRS-IASB.
    -------------------------------------------------------------------------
    

    The Company is required to qualitatively disclose its implementation
impacts in conjunction with its 2008 and 2009 financial reporting. As
activities progress, disclosure on pre- and post-IFRS-IASB implementation
accounting policy differences is expected to increase.
    The Company will present its results for fiscal 2010 using contemporary
Canadian GAAP. The Company will also present supplementary disclosure for
fiscal 2010 according to IFRS-IASB. To accomplish this, in 2010 the Company
will effectively maintain two parallel books of account: one using the
contemporary version of Canadian GAAP and the other using the contemporary
IFRS-IASB.

    Financial instruments - disclosure; presentation

    As an activity consistent with Canadian GAAP being evolved and converged
with IFRS-IASB, the existing recommendations for financial instrument
disclosure were replaced with new recommendations (CICA Handbook Section
3862); the existing recommendations for financial instrument presentation were
carried forward, unchanged (as CICA Handbook Section 3863).
    Commencing with the Company's 2008 fiscal year, the new recommendations
of the CICA for financial instrument disclosures apply to the Company. As set
out in Note 4 of the interim Consolidated financial statements, the new
recommendations result in incremental disclosures, relative to those
previously, with an emphasis on risks associated with both recognized and
unrecognized financial instruments to which an entity is exposed during the
period and at the balance sheet date, and how an entity manages those risks.
The transitional provisions provide that certain of the incremental
disclosures need not be provided on a comparative basis in the year of
adoption.

    Inventories

    Commencing with the Company's 2008 fiscal year, the new, IFRS-IASB
converged recommendations of the CICA for accounting for inventories (CICA
Handbook Section 3031) apply to the Company. The new recommendations provide
more guidance on the measurement and disclosure requirements for inventories;
significantly, the new recommendations allow the reversals of previous write-
downs to net realizable value where there is a subsequent increase in the
value of inventories. The Company's results of operations and financial
position are not materially affected by the new recommendations.

    9. Annual guidance for 2008

    The following discussion is qualified in its entirety by the Caution
regarding forward-looking statements at the beginning of Management's
discussion and analysis, Section 10: Risks and risk management of TELUS' 2007
and first quarter 2008 Management's discussions and analyses, as well as
updates reported in Section 10 of this document. The Company has revised its
full year guidance for 2008. The revised guidance for the full year considers
the Company's performance for the first half of 2008, including strong
wireless subscriber growth. The revised guidance is in compliance with the
Company's long-term policy guidelines for Net debt to EBITDA and dividend
payout, as described in Section 7.4.


    
                             ------------------------------------------------
                                                                    Expected
                                                                      change
    Annual                                                         from 2007
    guidance                        Original          Revised    for revised
    for 2008                          target         guidance       guidance
    -------------------------------------------------------------------------
    Consolidated
      Revenues                       $9.6 to        $9.675 to        7 to 8%
                                $9.8 billion   $9.825 billion

      EBITDA(1) (2007 as             $3.8 to          $3.8 to
       adjusted(2))            $3.95 billion     $3.9 billion        1 to 4%


      EPS - basic (2007
       as adjusted(3))        $3.50 to $3.80   $3.50 to $3.70  (10) to (15)%

      EPS - basic (2007
       as adjusted),
       excluding
       favourable tax-
       related impacts        $3.50 to $3.80   $3.50 to $3.70       4 to 10%

      Capital
       expenditures,
       excluding                     Approx.          Approx.
       spectrum auction         $1.9 billion     $1.9 billion             7%
    -------------------------------------------------------------------------

    Wireline segment
      Revenue                      $4.975 to        $5.025 to
       (external)             $5.075 billion     $5.1 billion        4 to 6%


      EBITDA (2007 as              $1.725 to         $1.75 to
       adjusted(2))             $1.8 billion     $1.8 billion    (4) to (2)%
    -------------------------------------------------------------------------

    Wireless segment
      Revenue                      $4.625 to         $4.65 to
       (external)             $4.725 billion   $4.725 billion       9 to 11%


      EBITDA (2007 as              $2.075 to         $2.05 to
       adjusted(2))            $2.15 billion     $2.1 billion        6 to 9%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) See Section 11.1 Earnings before interest, taxes, depreciation and
        amortization (EBITDA) for the definition.
    (2) EBITDA for 2007 adjusted to exclude an incremental pre-tax charge of
        $168.7 million that related to the introduction of a net-cash
        settlement feature for share option awards granted prior to 2005. Of
        the total amount, $145.1 million was recorded in wireline and
        $23.6 million was recorded in wireless.
    (3) Basic EPS for 2007 adjusted to exclude an incremental after-tax
        charge of $0.32 per share for the introduction of a net-cash
        settlement feature.
    -------------------------------------------------------------------------

    The following key assumptions were made at the time the original 2008
targets were announced in December 2007. Expectations for GDP growth and the
expected statutory tax have been revised and actual or expected results to
date are reported for each assumption as follows:

    -------------------------------------------------------------------------
    Assumptions for 2008 original     Actual result to-date or revised
     targets                           expectation for 2008
    -------------------------------------------------------------------------
    Canadian real GDP growth          The Summer Outlook of the Conference
     estimate of 2.8% and above       Board of Canada (CBOC) revised the 2008
     average growth in the provinces  Canadian GDP growth estimate to 1.7%,
     of Alberta and B.C.              down from the Spring Outlook of 2.2%.
                                      The CBOC provincial outlook published
                                      early this year predicted above average
                                      growth in Alberta and B.C.
    -------------------------------------------------------------------------
    Canadian dollar at or near        The Canadian dollar closing exchange
     parity with the U.S. dollar      rate varied between U.S. $0.972 and
                                      U.S. $1.016 during the three-month
                                      period ended June 30, 2008 (between
                                      U.S. $0.968 and U.S. $1.024 during the
                                      first six months of 2008). The average
                                      close was approximately U.S. $0.99 for
                                      both periods. (Source: the Bank of
                                      Canada.)
    -------------------------------------------------------------------------
    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      for their quarter ended February 2008;
                                      and (ii) TELUS' network access line
                                      losses of 3.4% for the 12-month period
                                      ended June 30, 2008
    -------------------------------------------------------------------------
    The impact from the acquisition   The transaction closed in mid-January
     of Emergis was assumed to begin  2008 instead of the beginning of March
     in March 2008                    and is expected to have a minor impact
                                      on TELUS' 2008 targets
    -------------------------------------------------------------------------
    Canadian wireless industry        No change
     market penetration gain
     estimate is 4.5 to five
     percentage points for the year
    -------------------------------------------------------------------------
    The capital expenditures target   No change to capital expenditure
     explicitly excluded potential    guidance excluding the spectrum
     purchases of wireless spectrum   auction. The AWS spectrum auction costs
     in the AWS spectrum auction      of approximately $880 million are
                                      expected to be recorded in the third
                                      quarter
    -------------------------------------------------------------------------
    No new wireless competitive       Several regional competitive entrants
     entrant assumed for 2008         have provisionally acquired spectrum in
                                      the AWS auction concluded July 2008,
                                      but it is expected that entrants are
                                      not likely to offer services until
                                      2009. See Section 10.1 Regulatory
    -------------------------------------------------------------------------
    Restructuring expenses of         Assumption is revised to approximately
     approximately $50 million        $30 million
     include the integration of
     Emergis
    -------------------------------------------------------------------------
    A blended statutory income tax    The blended statutory rate is expected
     rate of 31 to 32%                to be approximately 30.5 to 31.5% as a
                                      result of enacted British Columbia tax
                                      rate changes
    -------------------------------------------------------------------------
    A discount rate of 5.5% (50       Assumptions are set at the beginning of
     basis points higher than 2007)   the year for pension accounting
     and expected long-term return
     of 7.25% for pension accounting
     (unchanged from 2007)
    -------------------------------------------------------------------------
    Average shares outstanding of     Average shares for the six-month period
     approximately 320 million (down  ended June 30, 2008 were 322.3 million,
     3.5% from 331.7 million in       or 3.9% lower than the same period in
     2007).                           2007, consistent with the assumption
                                      for the full year
    -------------------------------------------------------------------------

    10. Risks and risk management

    The following are updates to the risks and risk management discussions in
Section 10 of TELUS' annual 2007 and first quarter 2008 Management's
discussions and analyses.

    10.1 Regulatory

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

    Industry Canada conducted a spectrum auction between May 27 and July 21,
2008, for 90 MHz of AWS spectrum in 1.7/2.1 GHz ranges, of which 40 MHz was
set aside for new entrants. Also auctioned were 10 MHz for PCS service
extension, and 5 MHz in the 1670-1675 MHz range. Licence terms: The rules for
the spectrum auction were released February 29, 2008, by Industry Canada in
Conditions of Licence for Mandatory Roaming and Antenna Tower and Site Sharing
and to Prohibit Exclusive Site Arrangements. The rules endorsed a continued
facilities-based regulatory orientation and included the following:

    
    -   licence terms began at the conclusion of the auction;
    -   entrants shall be entitled to roam on incumbents' networks within
        their licensed areas for five years and outside their licensed areas
        for 10 years on commercial terms;
    -   entrants shall be entitled to utilize incumbents' towers at
        commercial rates (and subject to space availability);
    -   new entrants must build facilities in areas where they have won
        spectrum (no roaming on competitors' networks within their own areas
        until they have built their own networks);
    -   no mandatory resale of incumbents' services outside new entrants'
        coverage areas;
    -   a subscriber cannot roam unless he or she is already served on
        another radio access network;
    -   new entrants have no right to roam through incumbents' international
        roaming agreements;
    -   data service roaming need only be provided at a comparable quality to
        a new entrant's service;
    -   mandated roaming is not available to incumbents if they have licences
        in the service area;
    -   there are 90-day time limits to respond to tower/site sharing
        requests; and
    -   where there are disputes between service providers, a binding
        arbitration process will apply, with arbitrators appointed from a
        list of retired judges and lawyers.
    

    While TELUS successfully acquired additional spectrum to facilitate its
own long-term growth, the availability of AWS spectrum to competitors, as well
as mandatory roaming and tower and site sharing rules may increase competitive
intensity. Several apparent new regional competitors have acquired spectrum,
as summarized in Section 4.1. The long-term viability of all new entrants in
the market remains uncertain because of network build-out and spectrum costs,
capital market conditions, and restrictions on foreign investment. The
presence of new regional entrants in the marketplace may negatively affect the
future market share of wireless incumbents such as TELUS and may impact
pricing of services.

    
      TELUS Communications Company (TCC) - Network access charge (Telecom
      Decision 2008-33)
    

    In late 2007, TCC introduced a $2.95 monthly long distance network access
fee for the Company's long distance subscribers who were not on a rate plan
(basic toll subscribers). Subscribers could avoid the charge by subscribing
free of charge to a toll restrict service (subject to a $10 termination fee),
or enrolling in a TCC long distance rate plan.
    On April 17, 2008, Decision 2008-33 stated that TCC should not have
imposed this monthly charge in certain circumstances. For basic toll
subscribers who had not used TCC's long distance network during the applicable
period, the CRTC found that the network access charge was equivalent to an
unauthorized residential local rate increase. TCC was directed to reimburse or
credit those affected customers. Basic toll subscribers who did use TCC's long
distance network in a particular month continue to be subject to the charge
for that month. The CRTC also directed that customers who subscribed to a toll
restrict service since TCC implemented the long distance network access
charge, and who wished to be removed that service, should be allowed to do so
without charge, within three months of April 17, 2008.
    The Company is configuring its billing systems to reflect this charge
only when long distance services were used in the service period. The Company
has started issuing credits where charges were applied and no long distance
services were used. The amounts to be reimbursed are not material to TELUS'
financial results.

    
      Additional forbearance decisions
    

    In 2008, the CRTC continues to take steps to forbear from regulating
prices, particularly for services offered in competitive markets. Recent
decisions include forbearance from regulation of certain local exchange
services, promotions, and high capacity inter-exchange private line routes.
    Residential and business local exchange services: In the first seven
months of 2008, the CRTC approved TELUS' forbearance applications for
residential local services in 26 exchanges in B.C., Alberta and Eastern
Quebec. The CRTC also determined that the competitor presence test was not met
in nine Eastern Quebec exchanges and denied applications for forbearance in
those communities. In July 2008, the CRTC approved TELUS' forbearance
applications for business local exchange services in Langley and West
Vancouver, B.C., but denied two other applications for smaller centres.
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, and for approximately two-thirds of its
business lines.
    Promotions for residential and business local wireline services in non-
forborne areas: The CRTC decided to forbear from regulation of residential and
business promotions offered in non-forborne areas when three criteria are met.
The three criteria are: the combined enrolment and benefit period of the
promotion does not exceed 12 months; there is a cooling-off period of at least
one-half of the combined enrolment and benefit period; and there are no
existing or recently elapsed promotions that involve any of the same tariffed
services or underlying services in the same geographic areas.
    High capacity/digital data services inter-exchange private lines: In May
2008, following a semi-annual review, the CRTC forbore from regulating more
than 70 additional TELUS inter-exchange private line routes, where competitor
presence tests were met.

    10.2 Process risks

    TELUS continues to develop new phases of a wireline billing and customer
care system. In 2007, TELUS converted its wireline consumer customers in
Alberta to the new integrated billing and client care system. Initial system
difficulties were experienced, which temporarily reduced order processing
capability and caused increased installation backlogs and higher costs, such
as extra call centre resources to maintain service levels.
    Building on the experience gained with the 2007 conversion, a pilot
implementation for approximately 150,000 residential customers in B.C. began
in the second quarter of 2008, followed by a system conversion for more than
one million B.C. residential customers in mid-July. While it is early in the
post-conversion period, the billing and order entry functions have performed
well and service levels have not been materially impacted. However, there can
be no assurance that system difficulties will not occur over the next few
months of billing experience.

    10.3 Litigation and legal matters

    Uncertified class action: 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 them off as a government charge. 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 reliably determined at this time.

    
    11. Reconciliation of non-GAAP measures and definitions

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

    TELUS has issued guidance on and reports EBITDA because it is a key
measure used by management to evaluate performance of business units, segments
and the Company. EBITDA is also utilized in measuring compliance with debt
covenants - see Section 11.4 - EBITDA excluding restructuring costs. EBITDA is
a measure commonly reported and widely used by investors as an indicator of a
company's operating performance and ability to incur and service debt, and as
a valuation metric. The Company believes EBITDA assists investors in comparing
a company's performance on a consistent basis without regard to depreciation
and amortization, which are non-cash in nature and can vary significantly
depending upon accounting methods or non-operating factors such as historical
cost.
    EBITDA is not a calculation based on Canadian or U.S. GAAP and should not
be considered an alternative to Operating income or Net income in measuring
the Company's performance, nor should it be used as an exclusive measure of
cash flow, because it does not consider the impact of working capital growth,
capital expenditures, debt principal reductions and other sources and uses of
cash, which are disclosed in the Consolidated statements of cash flows.
Investors should carefully consider the specific items included in TELUS'
computation of EBITDA. While EBITDA has been disclosed herein to permit a more
complete comparative analysis of the Company's operating performance and debt
servicing ability relative to other companies, investors should be cautioned
that EBITDA as reported by TELUS may not be comparable in all instances to
EBITDA as reported by other companies.
    The following is a reconciliation of EBITDA with Net income and Operating
income. EBITDA (as adjusted) excludes a charge for introducing a net-cash
settlement feature for share option awards granted prior to 2005. EBITDA (as
adjusted) is regularly reported to the chief operating decision-maker.

    
    -------------------------------------------------------------------------
                                                           Six-month periods
                                  Quarters ended June 30      ended June 30
                                  -------------------------------------------
    ($ millions)                         2008      2007       2008      2007
    -------------------------------------------------------------------------
    Net income                          267.0     253.1      558.0     447.9
      Other expense (income)              2.4      18.5       19.2      22.3
      Financing costs                   114.3     127.2      223.7     244.8
      Income taxes                      113.5      93.7      222.9     173.0
      Non-controlling interest            0.9       1.3        1.7       2.8
    -------------------------------------------------------------------------
    Operating income                    498.1     493.8    1,025.5     890.8
      Depreciation                      343.5     318.3      689.2     636.0
      Amortization of intangible
       assets                            76.0      72.5      152.4     122.1
    -------------------------------------------------------------------------

    EBITDA                              917.6     884.6    1,867.1   1,648.9
    Net-cash settlement feature
     (recovery) expense                  (0.3)      1.8       (0.1)    175.3
    -------------------------------------------------------------------------

    EBITDA (as adjusted)                917.3     886.4    1,867.0   1,824.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    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.

    
    -------------------------------------------------------------------------
                                                           Six-month periods
                                  Quarters ended June 30      ended June 30
                                  -------------------------------------------
    ($ millions)                         2008      2007       2008      2007
    -------------------------------------------------------------------------
    EBITDA                              917.6     884.6    1,867.1   1,648.9
    Capital expenditures               (435.6)   (481.8)    (755.3)   (863.7)
    -------------------------------------------------------------------------
    EBITDA less capital expenditures    482.0     402.8    1,111.8     785.2
    Net-cash settlement feature
     (recovery) expense                  (0.3)      1.8       (0.1)    175.3
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     capital expenditures               481.7     404.6    1,111.7     960.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    11.2 Free cash flow

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

    
    -------------------------------------------------------------------------
                                                           Six-month periods
                                  Quarters ended June 30      ended June 30
                                  -------------------------------------------
    ($ millions)                         2008      2007       2008      2007
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                         461.0   1,061.9    1,086.2   1,522.5
    Cash (used) by investing
     activities                        (436.7)   (477.8)  (1,437.1)   (870.1)
    -------------------------------------------------------------------------
                                         24.3     584.1     (350.9)    652.4

    Net employee defined benefit
     plans expense                       24.6      21.0       49.5      45.0
    Employer contributions to
     employee defined benefit plans      24.3      14.7       51.3      48.6
    Amortization of deferred gains
     on sale-leaseback of buildings,
     amortization of deferred
     charges and other, net               4.5      (4.3)       5.6       4.8
    Reduction (increase) in
     securitized accounts receivable    350.0    (350.0)     350.0         -
    Non-cash working capital
     changes except changes from
     income tax payments (receipts),
     interest payments (receipts)
     and securitized accounts
     receivable, and other             (126.5)    (99.8)      94.8    (114.7)
    Acquisitions                          4.4         -      691.3         -
    Proceeds from the sale of
     property and other assets           (3.3)     (1.3)      (3.3)     (1.3)
    Other investing activities              -      (2.7)      (6.2)      7.7
    -------------------------------------------------------------------------
    Free cash flow                      302.3     161.7      882.1     642.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
                                                           Six-month periods
                                  Quarters ended June 30      ended June 30
                                  -------------------------------------------
    ($ millions)                         2008      2007       2008      2007
    -------------------------------------------------------------------------
    EBITDA                              917.6     884.6    1,867.1   1,648.9

    Restructuring costs net of
     cash payments                       (1.5)     (7.3)      (4.7)    (24.3)
    Share-based compensation             10.1      (8.9)      16.4     129.7
    Donations and securitization
     fees included in Other expense      (7.3)     (9.1)     (17.1)    (18.4)
    Cash interest paid                 (175.8)   (218.5)    (220.8)   (242.1)
    Cash interest received                0.7       5.6        2.0       7.5
    Income taxes received (paid),
     less investment tax credits
     received that were previously
     recognized in either EBITDA
     or capital expenditures, and
     other                               (5.9)     (2.9)      (5.5)      4.9
    Capital expenditures               (435.6)   (481.8)    (755.3)   (863.7)
    -------------------------------------------------------------------------
    Free cash flow                      302.3     161.7      882.1     642.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    11.3 Definitions of key wireless operating indicators

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

    11.4 Definitions of liquidity and capital resource measures

    Dividend payout ratio is defined as the most recent quarterly dividend
declared per share multiplied by four and divided by basic earnings per share
for the 12-month trailing period. The target guideline for the annual dividend
payout ratio is on a prospective basis, rather than on a trailing basis, and
is 45 to 55% of sustainable net earnings.
    EBITDA - excluding restructuring costs is used in the calculation of Net
debt to EBITDA and EBITDA interest coverage, consistent with the calculation
of the Leverage Ratio and the Coverage Ratio in credit facility covenants.
Restructuring costs were $23.7 million and $28.3 million, respectively, for
the 12-month periods ended June 30, 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 June 30
                                                        ---------------------
    ($ millions)                                             2008       2007
    -------------------------------------------------------------------------
    Long-term debt including current portion              5,518.8    4,806.9
    Debt issuance costs netted against long-term debt        30.8       32.5
    Derivative liability                                  1,137.0    1,081.8
    Accumulated Other comprehensive income amounts
     arising from financial instruments used to manage
     interest rate and currency risks associated with
     U.S. dollar denominated debt                          (146.5)    (179.3)
    Cash and temporary investments                          (45.7)      (2.2)
    Proceeds from securitized accounts receivable           150.0      500.0
    -------------------------------------------------------------------------
    Net debt                                              6,644.4    6,239.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The derivative liability in the table above relates to cross currency
interest rate swaps that effectively convert principal repayments and interest
obligations to Canadian dollar obligations, which is in respect of the
US$1,925.0 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. Losses recorded on the redemption of long-term debt are included in
net interest cost. Net interest costs for the 12-months ended June 30, 2008
and 2007 are the same as reported quarterly financing costs over those
periods.
    Total capitalization - book value excludes accumulated Other
comprehensive income or loss and is calculated as follows:

    
    -------------------------------------------------------------------------
                                                               As at June 30
                                                        ---------------------
    ($ millions)                                             2008       2007
    -------------------------------------------------------------------------
    Net debt                                              6,644.4    6,239.7
    Non-controlling interests                                22.0       22.1
    Shareholders equity                                   6,994.4    6.734.7
    Accumulated other comprehensive loss                    114.2      125.8
    -------------------------------------------------------------------------
    Total capitalization - book value                    13,775.0   13,122.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

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

    Periods ended June 30           Three months             Six months
    (millions except per
     share amounts)               2008        2007        2008        2007
    -------------------------------------------------------------------------
    OPERATING REVENUES         $ 2,398.7   $ 2,228.1   $ 4,749.3   $ 4,433.7
    -------------------------------------------------------------------------
    OPERATING EXPENSES
      Operations                 1,476.6     1,340.3     2,871.0     2,776.9
      Restructuring costs            4.5         3.2        11.2         7.9
      Depreciation                 343.5       318.3       689.2       636.0
      Amortization of
       intangible assets            76.0        72.5       152.4       122.1
    -------------------------------------------------------------------------
                                 1,900.6     1,734.3     3,723.8     3,542.9
    -------------------------------------------------------------------------
    OPERATING INCOME               498.1       493.8     1,025.5       890.8
      Other expense, net             2.4        18.5        19.2        22.3
      Financing costs              114.3       127.2       223.7       244.8
    -------------------------------------------------------------------------
    INCOME BEFORE INCOME TAXES
     AND NON-CONTROLLING
     INTEREST                      381.4       348.1       782.6       623.7
      Income taxes                 113.5        93.7       222.9       173.0
      Non-controlling interests      0.9         1.3         1.7         2.8
    -------------------------------------------------------------------------
    NET INCOME AND COMMON
     SHARE AND NON-VOTING
     SHARE INCOME                  267.0       253.1       558.0       447.9
    OTHER COMPREHENSIVE INCOME
      Change in unrealized
       fair value of
       derivatives designated
       as cash flow hedges         (13.8)       27.9       (10.3)       55.8
      Foreign currency
       translation adjustment
       arising from translating
       financial statements of
       self-sustaining foreign
       operations                   (2.3)       (6.2)       (3.9)       (3.8)
      Change in unrealized
       fair value of
       available-for-sale
       financial assets              4.6        (0.1)        3.5        (0.1)
    -------------------------------------------------------------------------
                                   (11.5)       21.6       (10.7)       51.9
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME       $   255.5   $   274.7   $   547.3   $   499.8
    -------------------------------------------------------------------------
    NET INCOME PER COMMON SHARE
     AND NON-VOTING SHARE
      - Basic                  $    0.83   $    0.76   $    1.73   $    1.34
      - Diluted                $    0.83   $    0.75   $    1.72   $    1.32
    DIVIDENDS DECLARED PER
     COMMON SHARE AND
     NON-VOTING SHARE          $    0.45   $   0.375   $    0.90   $    0.75
    TOTAL WEIGHTED AVERAGE
     COMMON SHARES AND
     NON-VOTING SHARES
     OUTSTANDING
      - Basic                      321.0       333.5       322.3       335.3
      - Diluted                    322.0       336.9       323.7       338.3



    TELUS Corporation

    interim consolidated balance sheets                           (unaudited)

                                                      June 30,   December 31,
    As at (millions)                                     2008           2007
    -------------------------------------------------------------------------
    ASSETS
    Current Assets
      Cash and temporary investments, net        $       45.7   $       19.9
      Short-term investments                                -           42.4
      Accounts receivable                             1,007.4          710.9
      Income and other taxes receivable                  80.4          120.9
      Inventories                                       262.5          243.3
      Prepaid expenses and other                        295.0          199.5
      Derivative assets                                   5.1            3.8
    -------------------------------------------------------------------------
                                                      1,696.1        1,340.7
    -------------------------------------------------------------------------
    Capital Assets, Net
      Property, plant, equipment and other            7,124.0        7,196.1
      Intangible assets subject to amortization       1,288.9          959.4
      Intangible assets with indefinite lives         2,966.5        2,966.5
    -------------------------------------------------------------------------
                                                     11,379.4       11,122.0
    -------------------------------------------------------------------------
    Other Assets
      Deferred charges                                1,418.1        1,318.0
      Investments                                        32.4           38.9
      Goodwill                                        3,540.4        3,168.0
    -------------------------------------------------------------------------
                                                      4,990.9        4,524.9
    -------------------------------------------------------------------------
                                                 $   18,066.4   $   16,987.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Accounts payable and accrued liabilities   $    1,384.7   $    1,476.6
      Income and other taxes payable                     11.8            7.3
      Restructuring accounts payable and accrued
       liabilities                                       30.2           34.9
      Advance billings and customer deposits            634.7          631.6
      Current maturities of long-term debt                6.5            5.4
      Current portion of derivative liabilities          50.0           26.6
      Current portion of future income taxes            638.3          503.6
    -------------------------------------------------------------------------
                                                      2,756.2        2,686.0
    -------------------------------------------------------------------------
    Long-Term Debt                                    5,512.3        4,583.5
    -------------------------------------------------------------------------
    Other Long-Term Liabilities                       1,680.7        1,717.9
    -------------------------------------------------------------------------
    Future Income Taxes                               1,100.8        1,048.1
    -------------------------------------------------------------------------
    Non-Controlling Interests                            22.0           25.9
    -------------------------------------------------------------------------
    Shareholders' Equity                              6,994.4        6,926.2
    -------------------------------------------------------------------------
                                                 $   18,066.4   $   16,987.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    interim consolidated statements of cash flows                 (unaudited)

    Periods ended June 30             Three months             Six months
    (millions)                      2008        2007        2008        2007
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income                 $   267.0   $   253.1   $   558.0   $   447.9
    Adjustments to reconcile
     net income to cash
     provided by operating
     activities:
      Depreciation and
       amortization                419.5       390.8       841.6       758.1
      Future income taxes          179.2        92.5       176.9       170.7
      Share-based
       compensation                 10.1        (8.9)       16.4       129.7
      Net employee defined
       benefit plans expense       (24.6)      (21.0)      (49.5)      (45.0)
      Employer contributions
       to employee defined
       benefit plans               (24.3)      (14.7)      (51.3)      (48.6)
      Restructuring costs,
       net of cash payments         (1.5)       (7.3)       (4.7)      (24.3)
      Amortization of deferred
       gains on sale-leaseback
       of buildings,
       amortization of deferred
       charges and other, net       (4.5)        4.3        (5.6)       (4.8)
      Net change in non-cash
       working capital            (359.9)      373.1      (395.6)      138.8
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                    461.0     1,061.9     1,086.2     1,522.5
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Capital expenditures          (435.6)     (481.8)     (755.3)     (863.7)
    Acquisitions                    (4.4)          -      (691.3)          -
    Proceeds from the sale of
     property and other assets       3.3         1.3         3.3         1.3
    Change in non-current
     materials and supplies,
     purchase of investments
     and other                         -         2.7         6.2        (7.7)
    -------------------------------------------------------------------------
    Cash used by investing
     activities                   (436.7)     (477.8)   (1,437.1)     (870.1)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Common Shares and
     Non-Voting Shares issued        0.2         0.2         0.3         0.6
    Dividends to shareholders     (289.5)     (125.0)     (289.5)     (250.9)
    Purchase of Common Shares
     and Non-Voting Shares for
     cancellation                  (76.7)     (169.5)     (199.2)     (370.2)
    Long-term debt issued        2,862.0       993.8     6,574.3     2,091.6
    Redemptions and repayment
     of long-term debt          (2,523.7)   (1,811.1)   (5,704.6)   (2,104.6)
    Dividends paid by a
     subsidiary to
     non-controlling
     interests                         -        (4.3)       (4.6)       (4.3)
    Other                              -           -           -        (0.9)
    -------------------------------------------------------------------------
    Cash provided (used) by
     financing activities          (27.7)   (1,115.9)      376.7      (638.7)
    -------------------------------------------------------------------------
    CASH POSITION
    Increase (decrease) in
     cash and temporary
     investments, net               (3.4)     (531.8)       25.8        13.7
    Cash and temporary
     investments, net,
     beginning of period            49.1       534.0        19.9       (11.5)
    -------------------------------------------------------------------------
    Cash and temporary
     investments, net, end of
     period                    $    45.7   $     2.2   $    45.7   $     2.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    SUPPLEMENTAL DISCLOSURE
     OF CASH FLOWS
    Interest (paid)            $  (175.8)  $  (218.5)  $  (220.8)  $  (242.1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest received          $     0.7   $     5.6   $     2.0   $     7.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income taxes (inclusive
     of Investment Tax
     Credits (paid) received,
     net                       $    (5.9)  $    (3.6)  $    (6.6)  $     2.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    segmented information                                         (unaudited)

    Three-month periods ended
     June 30                           Wireline                Wireless
    (millions)                     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating revenues
      External revenue         $ 1,256.3   $ 1,180.1   $ 1,142.4   $ 1,048.0
      Intersegment revenue          32.3        28.7         7.2         6.7
    -------------------------------------------------------------------------
                                 1,288.6     1,208.8     1,149.6     1,054.7
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense           851.9       772.1       664.2       603.6
      Restructuring costs            4.1         2.8         0.4         0.4
    -------------------------------------------------------------------------
                                   856.0       774.9       664.6       604.0
    -------------------------------------------------------------------------
    EBITDA(1)                  $   432.6   $   433.9   $   485.0   $   450.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $   320.9   $   308.7   $   114.7   $   173.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX          $   111.7   $   125.2   $   370.3   $   277.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses (as
     adjusted)(3)
      Operations expense (as
       adjusted)(3)                853.2       772.1       663.2       601.8
      Restructuring costs            4.1         2.8         0.4         0.4
    -------------------------------------------------------------------------
                                   857.3       774.9       663.6       602.2
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)    $   431.3   $   433.9   $   486.0   $   452.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $   320.9   $   308.7   $   114.7   $   173.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                     $   110.4   $   125.2   $   371.3   $   279.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Three-month periods ended
     June 30                         Eliminations            Consolidated
    (millions)                     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating revenues
      External revenue         $       -   $       -   $ 2,398.7   $ 2,228.1
      Intersegment revenue         (39.5)      (35.4)          -           -
    -------------------------------------------------------------------------
                                   (39.5)      (35.4)    2,398.7     2,228.1
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense           (39.5)      (35.4)    1,476.6     1,340.3
      Restructuring costs              -           -         4.5         3.2
    -------------------------------------------------------------------------
                                   (39.5)      (35.4)    1,481.1     1,343.5
    -------------------------------------------------------------------------
    EBITDA(1)                  $       -   $       -   $   917.6   $   884.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $       -   $       -   $   435.6   $   481.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX          $       -   $       -   $   482.0   $   402.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses (as
     adjusted)(3)
      Operations expense (as
       adjusted)(3)                (39.5)      (35.4)    1,476.9     1,338.5
      Restructuring costs              -           -         4.5         3.2
    -------------------------------------------------------------------------
                                   (39.5)      (35.4)    1,481.4     1,341.7
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)    $       -   $       -   $   917.3   $   886.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $       -   $       -   $   435.6   $   481.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                     $       -   $       -   $   481.7   $   404.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                EBITDA (as adjusted)
                                 (from above)          $   917.3   $   886.4
                                Incremental charge(3)       (0.3)        1.8
                                ---------------------------------------------
                                EBITDA (from above)        917.6       884.6
                                Depreciation               343.5       318.3
                                Amortization                76.0        72.5
                                ---------------------------------------------
                                Operating income           498.1       493.8
                                Other expense, net           2.4        18.5
                                Financing costs            114.3       127.2
                                ---------------------------------------------
                                Income before income
                                 taxes and
                                 non-controlling
                                 interests                 381.4       348.1
                                Income taxes               113.5        93.7
                                Non-controlling
                                 interests                   0.9         1.3
                                ---------------------------------------------
                                Net income             $   267.0   $   253.1
                                ---------------------------------------------
                                ---------------------------------------------

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

    (2) Total capital expenditures ("CAPEX").

    (3) Substantially all of the Company's share option awards that were
        granted prior to January 1, 2005, and which were outstanding on
        January 1, 2007, were amended by adding a net-cash settlement
        feature; such amendment resulted in an incremental charge to
        (recovery from) operations of $(0.3) (2007 - $1.8) 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)

    Six-month periods ended
     June 30                           Wireline                Wireless
    (millions)                     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating revenues
      External revenue         $ 2,506.9   $ 2,385.7   $ 2,242.4   $ 2,048.0
      Intersegment revenue          63.1        53.8        14.2        13.0
    -------------------------------------------------------------------------
                                 2,570.0     2,439.5     2,256.6     2,061.0
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense         1,679.9     1,677.5     1,268.4     1,166.2
      Restructuring costs           10.6         7.2         0.6         0.7
    -------------------------------------------------------------------------
                                 1,690.5     1,684.7     1,269.0     1,166.9
    -------------------------------------------------------------------------
    EBITDA(1)                  $   879.5   $   754.8   $   987.6   $   894.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $   576.1   $   579.4   $   179.2   $   284.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX          $   303.4   $   175.4   $   808.4   $   609.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses (as
     adjusted)(3)
      Operations expense (as
       adjusted)(3)              1,680.6     1,524.4     1,267.8     1,144.0
      Restructuring costs           10.6         7.2         0.6         0.7
    -------------------------------------------------------------------------
                                 1,691.2     1,531.6     1,268.4     1,144.7
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)    $   878.8   $   907.9   $   988.2   $   916.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $   576.1   $   579.4   $   179.2   $   284.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                     $   302.7   $   328.5   $   809.0   $   632.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Six-month periods ended
     June 30                         Eliminations            Consolidated
    (millions)                     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating revenues
      External revenue         $       -   $       -   $ 4,749.3   $ 4,433.7
      Intersegment revenue         (77.3)      (66.8)          -           -
    -------------------------------------------------------------------------
                                   (77.3)      (66.8)    4,749.3     4,433.7
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense           (77.3)      (66.8)    2,871.0     2,776.9
      Restructuring costs              -           -        11.2         7.9
    -------------------------------------------------------------------------
                                   (77.3)      (66.8)    2,882.2     2,784.8
    -------------------------------------------------------------------------
    EBITDA(1)                  $       -   $       -   $ 1,867.1   $ 1,648.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $       -   $       -   $   755.3   $   863.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX          $       -   $       -   $ 1,111.8   $   785.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses (as
     adjusted)(3)
      Operations expense (as
       adjusted)(3)                (77.3)      (66.8)    2,871.1     2,601.6
      Restructuring costs              -           -        11.2         7.9
    -------------------------------------------------------------------------
                                   (77.3)      (66.8)    2,882.3     2,609.5
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)    $       -   $       -   $ 1,867.0   $ 1,824.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                   $       -   $       -   $   755.3   $   863.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                     $       -   $       -   $ 1,111.7   $   960.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                EBITDA (as adjusted)
                                 (from above)          $ 1,867.0   $ 1,824.2
                                Incremental charge(3)       (0.1)      175.3
                                ---------------------------------------------
                                EBITDA (from above)      1,867.1     1,648.9
                                Depreciation               689.2       636.0
                                Amortization               152.4       122.1
                                ---------------------------------------------
                                Operating income         1,025.5       890.8
                                Other expense, net          19.2        22.3
                                Financing costs            223.7       244.8
                                ---------------------------------------------
                                Income before income
                                 taxes and
                                 non-controlling
                                 interests                 782.6       623.7
                                Income taxes               222.9       173.0
                                Non-controlling
                                 interests                   1.7         2.8
                                ---------------------------------------------
                                Net income             $   558.0   $   447.9
                                ---------------------------------------------
                                ---------------------------------------------

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

    (2) Total capital expenditures ("CAPEX").

    (3) Substantially all of the Company's share option awards that were
        granted prior to January 1, 2005, and which were outstanding on
        January 1, 2007, were amended by adding a net-cash settlement
        feature; such amendment resulted in an incremental charge to
        (recovery from) operations of $(0.1) (2007 - $175.3) 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.
    





For further information:

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

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TELUS Corporation

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