TELUS Reports Second Quarter Results



    
    Operational efficiency initiatives continue to gain traction countering
    softening revenues
    

    VANCOUVER, Aug. 7 /CNW/ - TELUS Corporation reported second quarter 2009
revenue of $2.38 billion, a decrease of $22 million from last year. The one
per cent decrease reflects continued declines in voice revenues that more than
offset growth in data revenues. Consolidated earnings before interest, taxes,
depreciation and amortization (EBITDA) decreased by five per cent due
primarily to a $49 million increase in restructuring costs from ongoing
operating efficiency initiatives. Underlying EBITDA increased $34 million, or
nearly four per cent, excluding higher restructuring costs and defined benefit
pension plan expenses. The increase in underlying EBITDA reflects strong cost
containment as operations expense decreased two per cent.
    Net income in the second quarter was $244 million and earnings per share
(EPS) were $0.77, a decrease of nine and seven per cent respectively. Net
income and EPS this quarter included favourable income tax-related adjustments
of approximately $19 million or six cents per share, respectively. Excluding
the income tax-related adjustments, net income and EPS were down 16 and 14 per
cent, respectively.
    TELUS increased capital expenditures by $122 million to fund its ongoing
wireless and wireline broadband build-out initiatives. As a result, free cash
flow was down 43 per cent to $144 million this quarter, which was also lower
due to increased restructuring costs and pension contributions.

    
    FINANCIAL HIGHLIGHTS

    -------------------------------------------------------------------------
    C$ in millions, except per share amounts        3 months ended
                                                        June 30
    (unaudited)                                      2009     2008  % Change
    -------------------------------------------------------------------------
    Operating revenues                              2,377    2,399     (0.9)
    Operations expense                              1,451    1,477     (1.8)
    Restructuring costs                                53        4        -
    EBITDA(1)                                         873      918     (4.9)
    Income before income taxes                        332      382      (13)
    Net income(2)                                     244      268       (9)
    Earnings per share (EPS), basic(2)               0.77     0.83     (7.2)
    Cash provided by operating activities             852      462       84
    Capital expenditures                              557      435       28
    Free cash flow(3)                                 144      254      (43)


    (1) Earnings before interest, taxes, depreciation and amortization
        (EBITDA) is defined as Operating revenues less Operations expense
        less Restructuring costs. See Section 11.1 of Management's discussion
        and analysis.
    (2) Net income and EPS for the three month period in 2009 included
        favourable income tax-related adjustments of $19 million or 6 cents
        per share, compared to nil for the same period in 2008.
    (3) See Section 11.2 of Management's discussion and analysis.
    

    "The second quarter results continue to reflect the impacts of the
recession on our western and nationally based businesses," said Darren
Entwistle, TELUS president and CEO. "In light of moderating revenues, our
solid progress on operational efficiency initiatives has helped mitigate the
effect of current economic conditions and better position the organization for
accelerated performance when the economy recovers."
    Mr. Entwistle added, "We continue to improve our competitive offering for
our customers and enjoyed continued strong subscriptions to TELUS TV this
quarter. This IP delivered service is now being complemented by the commercial
launch in July of TELUS Satellite TV service across B.C. and Alberta, allowing
TELUS to offer bundled entertainment services to more than 90 per cent of
households."
    Robert McFarlane, TELUS executive vice-president and CFO added, "The
Company closed a $700 million debt offering at an attractive coupon rate and
with a wide distribution of buyers during the quarter. This successful debt
placement demonstrated TELUS' ongoing advantage of having access to the
capital markets aided by consistent and long-standing financial policies."
    Mr. McFarlane added, "TELUS' strong financial position enables the
company to continue making prudent strategic investments to improve its future
competitive position. Notable initiatives include significant investments to
enhance our broadband networks and implement large enterprise contracts."
    The Company has updated its 2009 full year guidance to reflect ongoing
impacts of increased operating efficiency initiatives on restructuring costs,
the ongoing Canadian recession, weaker than expected wireless ARPU at TELUS
and in the Canadian industry and our most recent outlook. The 2009 Wireless
revenue range is down between $50 and $100 million while EBITDA has been
lowered and narrowed to bottom end of the previous range. The wireline revenue
range is unchanged and EBITDA range is narrowed and lowered primarily due to
the $25 million increase in the estimated annual restructuring costs. The 2009
Basic EPS range has been narrowed at the top end to $3.35 to $3.55, while
Basic EPS excluding income tax-related adjustments is now $3.10 to $3.30. See
section 9 of the Management's discussion and analysis for full details
including updated assumptions.

    
    -------------------------------------------------------------------------
    This news release contains statements about expected future events and
    financial and operating results of TELUS that are forward-looking. By
    their nature, forward-looking statements require the Company to make
    assumptions and are subject to inherent risks and uncertainties. There is
    significant risk that the forward-looking statements will not prove to be
    accurate. Readers are cautioned not to place undue reliance on forward-
    looking statements as a number of factors could cause actual future
    results and events to differ materially from that expressed in the
    forward-looking statements. Accordingly this news release is subject to
    the disclaimer and qualified by the assumptions (including assumptions
    for 2009 guidance), qualifications and risk factors (including those
    associated with the shared build, operation and deployment of the
    national high-speed packet access network) referred to in the
    Management's discussion and analysis in the 2008 annual report, and in
    the 2009 first and second quarter reports. Except as required by law,
    TELUS disclaims any intention or obligation to update or revise forward-
    looking statements, and reserves the right to change, at any time at its
    sole discretion, its current practice of updating annual targets and
    guidance.
    -------------------------------------------------------------------------

    OPERATING HIGHLIGHTS

    TELUS wireless

    -   External revenues increased by $4 million or 0.4% to $1.1 billion in
        the second quarter of 2009, compared with the same period in 2008, as
        network revenue growth of 1.3% was largely offset by lower equipment
        sales.
    -   Wireless data revenue increased $58 million or 37% due to the
        continued adoption of full function smartphones and mobile Internet
        keys, and increased use of data services such as messaging and social
        networking.
    -   ARPU (average revenue per subscriber unit per month) declined by 6.6%
        to $58.61 compared to the same quarter a year ago, but up slightly
        from the first quarter. The fast-growing data component of $11.56
        represented 20% of ARPU, while the decline in the voice revenue
        worsened due to declining minutes of use and plan optimization by
        consumers and businesses, lower business-oriented Mike service
        revenue, decreased inbound roaming revenues, and increased sales of
        the Koodo service.
    -   Net subscriber additions were 111,000, a decrease of 37% from the
        same period a year ago but more than double the 48,000 added in the
        first quarter. Contributing to the decrease was current churn of
        Koodo subscribers at normal levels, whereas a year ago there was
        minimal Koodo churn given its then recent service launch. Postpaid
        net additions of 95,000 represented 86% of the total net additions.
    -   Blended monthly subscriber churn increased to 1.55% from 1.43% a year
        ago due to deactivations of customers impacted by the weaker economic
        environment, low prior year churn from the Koodo service due to its
        initial launch in March 2008, and continued competitive marketing
        intensity.
    -   EBITDA of $493 million increased by 1.9% as network revenue growth
        and lower cost of acquisition was partly offset by increased
        retention costs and higher bad debt expense.
    -   Cost of acquisition per gross addition decreased 9.1% year-over-year
        to $311 reflecting lower advertising and promotion expenses and
        commissions, partially offset by higher subsidies on smartphones.
    -   Simple cash flow (EBITDA less capital expenditures) decreased by $66
        million to $304 million in the quarter due to higher capital spending
        to support the next generation HSPA network build-out.

    TELUS wireline

    -   External revenues decreased by $26 million or 2.1% to $1.2 billion in
        the second quarter of 2009, when compared with the same period in
        2008, due to declines in voice local and long distance revenues.
    -   Data revenues increased by $8 million or 1.5% primarily due to TELUS
        TV subscriber growth and increased broadcast and videoconferencing
        revenues.
    -   TELUS added 3,000 high-speed Internet subscribers, a 21,000 decrease
        from a year ago, due to a maturing market and reduced promotional
        activity that resulted in market share losses to cable competitors.
    -   TELUS TV net additions were 17,000, an increase of 70% over the same
        period last year, due to enhanced broadband coverage and expanded
        marketing efforts.
    -   Network access lines (NALs) declined by 51,000 in the quarter to 4.14
        million, which is down 4.2% from a year ago. Residential NAL losses
        of 41,000 improved year-over-year because of more effective winback
        efforts and from the benefit of bundling services, including TELUS
        TV, and as cable-TV competitors' digital telephone coverage expansion
        slowed. A decrease in business NALs was experienced in Western Canada
        due to economic and competitive factors.
    -   EBITDA of $380 million decreased by 12% due primarily to higher
        restructuring costs and pension expenses. EBITDA excluding
        restructuring costs and pension expenses increased 4.8% benefitting
        from strong cost containment as operational expenses declined 2%
        compared to the same period one year earlier.
    -   Simple cash flow (EBITDA less capital expenditures) decreased $101
        million to $12 million in the quarter due to lower EBITDA and
        increased capital expenditures, which primarily relates to continued
        broadband network enhancements.

    CORPORATE AND BUSINESS DEVELOPMENTS

    Operating efficiency update
    

    TELUS' increased focus on its operating efficiency program continued in
the second quarter with an array of initiatives focused on reducing staffing
levels, rationalizing external supplier spending, simplifying processes and
decommissioning uneconomic products, leveraging business process outsourcing
and reducing expenses operation-wide.
    During the second quarter of 2009, full time equivalent employees
decreased by approximately 300 bringing total reductions to approximately
1,500 from December 31, 2008. Domestic reductions for the second quarter were
approximately 400 from efficiency initiatives, bringing the total reduction in
domestic team members to 900 for the first six months of 2009. Seasonal
changes in TELUS International business process outsourcing services were
reflected in an increase of 100 employees during the second quarter, and a
reduction of 600 for the first half of 2009.
    As a result of the efficiency initiatives, restructuring costs increased
$49 million to $53 million in the second quarter. During the first six months
of 2009, restructuring costs were $81 million compared to $11 million in the
same period in 2008. The annual costs are now expected to be approximately
$150 million for the year ($59 million in 2008), an increase of $25 million
from TELUS' previous estimate for 2009 of approximately $125 million.

    TELUS successfully issues $700 million in long-term debt

    In May, TELUS issued five-year Canadian dollar notes raising
approximately $700 million. The net proceeds of the 4.95% Series CF Notes due
May 15, 2014 were used for general corporate purposes, including repaying
amounts outstanding under the 2007 Credit Facility and outstanding commercial
paper. This transaction followed a presentation and meetings with debt
investors at a major fixed income conference in Toronto. The 4.95% coupon was
one per cent lower than last year's April debt issuance. The offering met with
strong demand, achieved wide distribution by both existing and new investors
and was purchased by more than 70 institutions.

    TELUS launches satellite TV in Western Canada

    TELUS Satellite TV service was launched commercially at the end of June
in B.C. and Alberta, adding to TELUS' growing entertainment portfolio that
includes the innovative and differentiated digital television service provided
over TELUS' wireline broadband network, TELUS mobile TV on wireless phones,
TELUS mobile radio, and TELUS mobile music. This satellite delivered service
complements TELUS' ongoing expansion of IP-based TV service and strengthens
our competitive offerings in B.C. and Alberta as we now reach more than 90 per
cent of homes.
    Bundling TELUS TV with Internet, home phone or long distance services
helps customers simplify their lives and save money at the same time, while
positively impacting the sale of other products, churn and retention. TELUS
Satellite TV is an all digital service which includes features such as
onscreen Call Display and more than 500 digital channels including over 80 in
HD. Much like they can with TELUS' existing all digital TV service, TELUS
Satellite TV clients can customize their TV experience with theme packs for
added flexibility (e.g. news, sports, family), international channels, premium
sports packages, and premium movie packages that include the latest
blockbuster films.

    
    TELUS expands its electronic health record contract with Montreal Region
    Health Authority
    

    At the end of May, TELUS announced a $31.5 million expansion of its
contract with the Montreal Region Health Authority to accelerate and expand
the implementation of TELUS' Oacis Electronic Health Record solution to
healthcare facilities across the region. Oacis is an electronic clinical
information system combined with a documentation imaging solution that
converts paper records and integrates them into a unified electronic patient
record. Montreal is one of the first regions in Canada to implement
standardized electronic health records across all points of service including
89 hospitals, health and social services centres, long-term care centres and
other public healthcare institutions, as well as family practices, network
clinics and integrated network clinics.

    
    Centre de Santé des Services Sociaux de Pointe-de-l'Ile of Montréal
    implementing TELUS' Remote Patient Monitoring
    

    Beginning in September, about 500 patients at the Centre de Santé des
Services Sociaux de Pointe-de-l'Ile of Montréal will be provided with TELUS'
Remote Patient Monitoring solution, allowing them to take more control over
management of their condition from their own homes. The goal of the five-year
project is to improve services to patients, while reducing emergency room
visits and in-patient hospitalizations. Each patient will receive a
touch-sensitive terminal and medical devices to collect and transmit routine
monitoring data between their home and their healthcare team. The team of
clinicians - comprised of multidisciplinary professionals from various sites -
will monitor, interpret and analyze the data received from each patient and
coordinate appropriate action using Remote Patient Monitoring's workflow and
clinical notes capabilities.

    Helping sick kids in Eastern Ontario and Western Quebec stay connected

    TELUS and Kids' Health Links Foundation launched Upopolis.com at the
Children's Hospital of Eastern Ontario (CHEO). Upopolis is a unique online
social network for young patients in hospital to stay connected to their
family and friends while in care. CHEO is the first hospital to launch the
social networking site in English and French to support the bilingual needs of
their patients. Upopolis is now available at four hospitals across the
country.

    TELUS launches three new smartphones

    In July, TELUS launched three new smartphones to keep travelers
connected, productive and entertained on-the-go, where ever they are. The
BlackBerry Tour 9630, with the robust and reliable email platform many
BlackBerry users find irresistible, provides access to the BlackBerry App
World, which offers access to boosting applications that help users stay
entertained and well informed. The HTC Touch Pro2 and Snap, with the Windows
Mobile 6.1 platform, enables users to synchronize their email, contacts and
calendar with TELUS mobile email, plus HTML web browsing on TELUS' 3G network
and almost anywhere they travel around the world with TELUS international
roaming. TELUS also launched the Mike Motorola Clutch i465 this quarter, a
full QWERTY keyboard device, making it an attractive productivity tool for
small and medium-sized businesses.

    TELUS and Universal Music Canada offer "TELUS Summer of Music"

    TELUS and Universal Music Canada joined forces to offer a "TELUS Summer
of Music". Music fans downloading mobile music from AKON, Lady GaGa or The
Tragically Hip get a chance to win one of three thrill-of-a-lifetime
experiences that could have them hanging-out with AKON, dancing with one of
Lady GaGa's dancers or blogging on a road trip with The Tragically Hip. TELUS
also introduced new music download pricing from $0.69, $0.99 to $1.29 per song
with most albums at $9.99.

    AWARDS AND RECOGNITION

    TELUS Executive VP Human Resources named one of Canada's Top 40 under 40

    Josh Blair, TELUS executive vice-president of Human Resources, has been
named one of Canada's Top 40 Under 40 for 2008. Mr. Blair is one of 40
Canadians honoured from the private, public and not-for-profit sectors who
have achieved a significant level of success while less than 40 years of age.
Mr. Blair and the other winners were chosen from more than 1,100 nominees by
an independent Advisory Board of 25 leaders from across Canada. Mr. Blair is
responsible for driving TELUS' strategy to attract, develop and retain the
best talent in the global communications industry; creating one of the best
workplaces in Canada; and supporting the 34,000 members of the TELUS team. As
a result of his leadership, earlier this year TELUS was named one of Canada's
Best Diversity Employers, recognizing TELUS as one of the nation's leaders in
creating diverse and inclusive workplaces. In 2008, SkillSoft, an
international leader in eLearning, honoured TELUS with an Industry Achievement
award for our commitment and global leadership in supporting team member
growth and professional development.

    TELUS is a business for the arts

    In June, TELUS was recognized with a Globe and Mail Business for the Arts
award for most Effective Corporate Program. TELUS was nominated for this award
by Luminato, Toronto's Festival of Arts and Creativity. The nomination
highlighted our support of Luminato and other arts organizations across the
community including the Royal Conservatory of Music, Soulpepper Theatre, the
National Ballet School of Canada and ongoing support of arts organizations
across Canada supported by TELUS Community Boards. The award will be
officially presented this October at the Art Gallery of Ontario.

    McGill/CHUM and TELUS win distinguished Concours des OCTAS award

    In May, the McGill University Health Centre and Centre hospitalier de
l'Universite de Montreal (CHUM) and TELUS jointly won a Concours des OCTAS
award for the Oacis Project, recognizing the implementation of a multilingual
electronic medical record at McGill/CHUM. The Oacis Project is a first in
North America. The award heralded the project for its creativity, vitality and
exceptional contribution to the growth of the industry. Awarded by Le Réseau
Action TI, OCTAS awards are the highest distinction for IT projects in the
province.

    TELUS recognized as one of Canada's most mom-friendly workplaces

    TELUS is among 30 Canadian organizations to make the inaugural 2009
Progressive Employers of Canada list. The list recognizes diverse companies
that offer flexibility, supportive leadership and progressive programs for
working parents and their families. TELUS was recognized for offering programs
enabling many team members to work at home or anywhere they are most
effective, flexible benefits, maternity benefits, child care options, leave of
absence and Thirsty Muse, a service company that provides personal assistance
for busy managers.

    TELUS wins four awards for social responsibility

    The Jantzi-Maclean's Corporate Social Responsibility Report 2009 named
TELUS among Canada's 50 Most Socially Responsible Corporations. In British
Columbia, TELUS received the award for social responsibility from the British
Columbia Technology Industry Association, and an appreciation award from
Computers for Schools, an organization that provides increased access to
computer technology for students of all ages, for contributing more than 2,000
computers during 2008. TELUS was also recognized for leadership in corporate
social responsibility. TELUS jumped to the eighth position in the Corporate
Knights' annual list of Canada's best corporate citizens. Criteria for
inclusion in the list included pension fund quality, board and executive
diversity, CEO-pay fairness, tax-dollar generation and environmental
practices.

    COMMUNITY INVESTMENT AND SUPPORT

    TELUS keeps services online, supports community during Kelowna fires

    When forest fires forced the evacuation of more than 17,000 Okanagan
residents starting Saturday July 18, TELUS quickly responded by significantly
increasing wireless capacity in the area and protecting communications
infrastructure from the spreading fires. These efforts, combined with public
service announcements to ask the public to limit calls into the area, helped
ensure firefighters, police and emergency personnel had the critical
communications needed to respond to this crisis situation. TELUS also
established a donation system to gather needed toiletries and money from team
members and the general public. The company flew and trucked relief supplies
to evacuation centres in the company's plane and community vans. TELUS kicked
off the campaign with the donation of 2,500 comfort kits created by the TELUS
Community Ambassadors. In the week that followed partners such as the
Vancouver Canucks, London Drugs, SkyTrain and Prospera Credit Union also
helped donate toiletries or money to this worthwhile cause.

    TELUS Day of Service

    On May 30, more than 9,000 TELUS employees, retirees, relatives and
friends answered the call of the community and took part in the fourth annual
TELUS Day of Service. On this one special day the TELUS team came together as
one to make a difference by volunteering their time and energy to help make
connections within their various communities across Canada. They did this by
participating in about 175 volunteer events. Results from the volunteer
activities included collecting 1000 garbage bags of waste from river valleys,
parks and fields, preparing 10,000 meals for the homeless, sorting 184,000
pounds of food at food banks, planting 8,700 trees, painting using over 300
litres of paint and assembling 12,000 Kits for Kids - school supplies for
inner city schools.

    TELUS Ottawa Community Board announces three new members

    In May, the TELUS Ottawa Community Board announced the addition of three
new members to the Board to assist in making funding decisions in support of
local charities. Michael Allen, president and CEO of United Way / Centraide;
Dr. Robert Cushman, president of the Champlain Local Health Integrated
Network; and Vern White, Chief of Police - Ottawa Police Services, bring
valuable knowledge as the TELUS Ottawa Community Board funding continues to
make grants to assist worthy local charities.

    
    TELUS and Juvenile Diabetes Research Foundation take another step towards
    a cure
    

    In May and June, Juvenile Diabetes Research Foundation's (JDRF) biggest
fundraiser, the TELUS Walk to Cure Diabetes, took place in more than 75
communities across Canada. This year, the 2009 Walk brought together more than
3,700 TELUS team members and their families who raised approximately $400,000
for the cause. More than 45,000 Canadians joined in and raised an estimated $7
million dollars. The TELUS Walk helps make a difference in the lives of
240,000 Canadians living with Type 1 diabetes by raising both funds and
awareness of the disease to help continue research towards a cure. JDRF is the
leading charitable advocate and source of funding of Type 1 diabetes research
worldwide.

    TELUS celebrates military families

    In June, approximately 1,500 people from the TELUS family and Edmonton
area military families took part in a Support Our Troops rally in support of
Canadians serving in the Armed Forces at home and abroad. The Edmonton event
was hosted by Former Chief of Defence Staff General Rick Hillier, chair of the
TELUS Atlantic Canada Community Board, and the TELUS team. The rally showcased
Canadian heroes and the vital role they play around the world, while
celebrating the tireless work done by the Edmonton Garrison Military Family
Resource Centre in supporting and connecting Canadian Forces families.

    TELUS World Skins Game coming to Victoria

    Victoria, B.C. will welcome golfers and visitors from around the globe
when it hosts the TELUS World Skins Game at Bear Mountain Resort on June 21
and 22, 2010. The event will feature five top names in international golf,
each representing a different country. It will showcase great golf in Victoria
and the TELUS brand to millions of TV viewers across Canada and around the
world. As part of TELUS' ongoing commitment to 'give where we live' and the
event's long-standing tradition of benefiting local charities, TELUS and the
organizers selected The Queen Alexandra Foundation for Children in support of
Jeneece Place as the benefiting charity, which hopes to improve the quality of
life for Vancouver Island's sick kids and their families. For more information
about Jeneece Place please visit jeneeceplace.org.

    DIVIDEND DECLARATION

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

    Access to Quarterly results information

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

    Quarterly conference call and webcast presentation

    TELUS quarterly conference call is scheduled for Friday, August 7, 2009
at 11:00 am ET and will feature a presentation about our second quarter
results. It will be followed by a question and answer period with analysts.
Interested parties can access the call live on a listen-only basis at:
telus.com/investors. A transcript will be posted on the website within several
business days. Also, a recording will be available on August 7 until August
17, 2009 at: telus.com/investors or by telephone (1-403-205-4531 or
1-877-245-4531, reservation no. 895352 followed by the number sign).

    About TELUS

    TELUS (TSX: T, T.A; NYSE:   TU) is a leading national telecommunications
company in Canada, with $9.7 billion of annual revenue and 11.8 million
customer connections including 6.3 million wireless subscribers, 4.1 million
wireline network access lines, 1.2 million Internet subscribers and more than
100,000 TELUS TV customers. Led since 2000 by President and CEO, Darren
Entwistle, TELUS provides a wide range of communications products and services
including data, Internet protocol (IP), voice, entertainment and video. In
support of our philosophy to give where we live, TELUS, our team members and
retirees have contributed $137 million to charitable and not-for-profit
organizations and volunteered more than 2.6 million hours of service to local
communities since 2000. Nine TELUS Community Boards across Canada lead our
local philanthropic initiatives. For more information about TELUS, please
visit telus.com.

    
    TELUS Corporation

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


    Periods ended June 30
    (millions except per              Three months             Six months
     share amounts)                 2009        2008        2009        2008
    -------------------------------------------------------------------------
                                        (as adjusted)           (as adjusted)

    OPERATING REVENUES           $ 2,377     $ 2,399     $ 4,752     $ 4,749
    -------------------------------------------------------------------------
    OPERATING EXPENSES
      Operations                   1,451       1,477       2,892       2,871
      Restructuring costs             53           4          81          11
      Depreciation                   330         343         664         689
      Amortization of
       intangible assets              94          77         187         153
    -------------------------------------------------------------------------
                                   1,928       1,901       3,824       3,724
    -------------------------------------------------------------------------
    OPERATING INCOME                 449         498         928       1,025
      Other expense, net              11           2          16          19
      Financing costs                106         114         201         223
    -------------------------------------------------------------------------
    INCOME BEFORE INCOME TAXES       332         382         711         783
      Income taxes                    88         114         145         223
    -------------------------------------------------------------------------
    NET INCOME                       244         268         566         560
    OTHER COMPREHENSIVE INCOME
      Change in unrealized fair
       value of derivatives
       designated as cash
       flow hedges                    (2)        (14)         27         (10)
      Foreign currency
       translation adjustment
       arising from translating
       financial statements of
       self-sustaining foreign
       operations                     (9)         (2)         (8)         (4)
      Change in unrealized
       fair value of
       available-for-sale
       financial assets                1           5           1           4
    -------------------------------------------------------------------------
                                     (10)        (11)         20         (10)
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME         $   234     $   257     $   586     $   550
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET INCOME
     ATTRIBUTABLE TO:
      Common Shares and
       Non-Voting Shares         $   243     $   267     $   564     $   558
      Non-controlling
       interests                     1           1           2           2
    -------------------------------------------------------------------------
                                 $   244     $   268     $   566     $   560
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    TOTAL COMPREHENSIVE
     INCOME ATTRIBUTABLE TO:
      Common Shares and
       Non-Voting Shares         $   233     $   256     $   584     $   548
      Non-controlling
       interests                       1           1           2           2
    -------------------------------------------------------------------------
                                 $   234     $   257     $   586     $   550
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET INCOME PER COMMON
     SHARE AND NON-VOTING
     SHARE
      - Basic                    $  0.77     $  0.83     $  1.78     $  1.73
      - Diluted                  $  0.77     $  0.83     $  1.78     $  1.72
    DIVIDENDS DECLARED PER
     COMMON SHARE AND
     NON-VOTING SHARE            $ 0.475     $  0.45     $  0.95     $  0.90
    TOTAL WEIGHTED AVERAGE
     COMMON SHARES AND
     NON-VOTING SHARES
     OUTSTANDING
      - Basic                        318         321         318         322
      - Diluted                      318         322         318         324



    TELUS Corporation

    Interim consolidated statements of financial position         (unaudited)

                                                      June 30,   December 31,
    As at (millions)                                     2009           2008
    -------------------------------------------------------------------------
                                                                (as adjusted)
    ASSETS
    Current Assets
      Cash and temporary investments, net        $         26   $          4
      Accounts receivable                                 725            966
      Income and other taxes receivable                    58             25
      Inventories                                         200            333
      Prepaid expenses and other                          250            176
      Derivative assets                                     -             10
    -------------------------------------------------------------------------
                                                        1,259          1,514
    -------------------------------------------------------------------------
    Capital Assets, Net
      Property, plant, equipment and other              7,508          7,317
      Intangible assets subject to amortization         1,304          1,317
      Intangible assets with indefinite lives           3,849          3,849
    -------------------------------------------------------------------------
                                                       12,661         12,483
    -------------------------------------------------------------------------
    Other Assets
      Other long-term assets                            1,527          1,418
      Investments                                          43             42
      Goodwill                                          3,564          3,564
    -------------------------------------------------------------------------
                                                        5,134          5,024
    -------------------------------------------------------------------------
                                                 $     19,054   $     19,021
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Accounts payable and accrued liabilities   $      1,324   $      1,465
      Income and other taxes payable                       15            163
      Restructuring accounts payable and
       accrued liabilities                                 81             51
      Dividends payable                                   149            151
      Advance billings and customer deposits              650            689
      Current maturities of long-term debt                 52              4
      Current portion of derivative liabilities            93             75
      Current portion of future income taxes              525            459
    -------------------------------------------------------------------------
                                                        2,889          3,057
    -------------------------------------------------------------------------
    Long-Term Debt                                      6,085          6,348
    -------------------------------------------------------------------------
    Other Long-Term Liabilities                         1,403          1,295
    -------------------------------------------------------------------------
    Future Income Taxes                                 1,278          1,213
    -------------------------------------------------------------------------
    Shareholders' Equity (as adjusted)
      Common Share and Non-Voting Share equity          7,378          7,085
      Non-controlling interests                            21             23
    -------------------------------------------------------------------------
                                                        7,399          7,108
    -------------------------------------------------------------------------
                                                 $     19,054   $     19,021
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    Interim consolidated statements of cash flows                 (unaudited)

    Periods ended June 30             Three months             Six months
    (millions)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income (as adjusted)     $   244     $   268     $   566     $   560
    Adjustments to reconcile
     net income to cash
     provided by operating
     activities:
      Depreciation and
       amortization                  424         420         851         842
      Future income taxes            132         180         121         177
      Share-based compensation        11          10          20          16
      Net employee defined
       benefit plans expense           5         (25)          9         (50)
      Employer contributions
       to employee defined
       benefit plans                 (51)        (24)       (104)        (51)
      Restructuring costs,
       net of cash payments           31          (2)         30          (5)
      Amortization of deferred
       gains on sale-leaseback
       of buildings, amortization
       of deferred charges and
       other, net                      3          (5)         23          (6)
      Net change in non-cash
       working capital                53        (360)        (50)       (396)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                      852         462       1,466       1,087
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Capital expenditures            (557)       (435)     (1,031)       (755)
    Acquisitions                       -          (4)          -        (691)
    Proceeds from the sale of
     property and other assets         -           3           -           3
    Change in non-current
     materials and supplies,
     purchase of investments
     and other                         5          (1)          1           6
    -------------------------------------------------------------------------
    Cash used by investing
     activities                     (552)       (437)     (1,030)     (1,437)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Common Shares and
     Non-Voting Shares issued          -           -           1           -
    Dividends to shareholders       (151)       (289)       (302)       (289)
    Purchase of Common Shares
     and Non-Voting Shares for
     cancellation                      -         (77)          -        (199)
    Long-term debt issued          2,599       2,862       6,173       6,574
    Redemptions and repayment
     of long-term debt            (2,783)     (2,524)     (6,282)     (5,705)
    Dividends paid by a
     subsidiary to
     non-controlling interests        (4)          -          (4)         (5)
    -------------------------------------------------------------------------
    Cash provided (used) by
     financing activities           (339)        (28)       (414)        376
    -------------------------------------------------------------------------
    CASH POSITION
    Increase (decrease) in
     cash and temporary
     investments, net                (39)         (3)         22          26
    Cash and temporary
     investments, net,
     beginning of period              65          49           4          20
    -------------------------------------------------------------------------
    Cash and temporary
     investments, net,
     end of period               $    26     $    46     $    26      $   46
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    SUPPLEMENTAL DISCLOSURE
     OF CASH FLOWS
    Interest (paid)              $  (184)    $  (176)    $  (233)     $ (221)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest received            $    35     $     1     $    35      $    2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income taxes (inclusive
     of Investment Tax
     Credits) (paid) received,
     net                         $    (8)    $    (6)    $  (222)     $   (7)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    Segmented information                                         (unaudited)

    Three-month periods ended
     June 30                            Wireline                Wireless
    (millions)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    Operating revenues
      External revenue           $ 1,231     $ 1,257     $ 1,146     $ 1,142
      Intersegment revenue            31          32           7           7
    -------------------------------------------------------------------------
                                   1,262       1,289       1,153       1,149
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense             833         852         656         664
      Restructuring costs             49           3           4           1
    -------------------------------------------------------------------------
                                     882         855         660         665
    -------------------------------------------------------------------------
    EBITDA(1)                    $   380     $   434     $   493     $   484
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                     $   368     $   321     $   189     $   114
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX            $    12     $   113     $   304     $   370
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Three-month periods ended
     June 30                        Eliminations            Consolidated
    (millions)                    2009        2008        2009        2008
    -------------------------------------------------------------------------
    Operating revenues
      External revenue           $     -     $     -     $ 2,377     $ 2,399
      Intersegment revenue           (38)        (39)          -           -
    -------------------------------------------------------------------------
                                     (38)        (39)      2,377       2,399
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense             (38)        (39)      1,451       1,477
      Restructuring costs              -           -          53           4
    -------------------------------------------------------------------------
                                     (38)        (39)      1,504       1,481
    -------------------------------------------------------------------------
    EBITDA(1)                    $     -     $     -     $   873     $   918
    -------------------------------------------------------------------------
    CAPEX(2)                     $     -     $     -     $   557     $   435
    -------------------------------------------------------------------------
    EBITDA less CAPEX            $     -     $     -     $   316     $   483
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                EBITDA (from above)      $   873     $   918
                                Depreciation                 330         343
                                Amortization                  94          77
                                ---------------------------------------------
                                Operating income             449         498
                                Other expense, net            11           2
                                Financing costs              106         114
                                ---------------------------------------------
                                Income before income
                                 taxes                       332         382
                                Income taxes                  88         114
                                ---------------------------------------------
                                Net income
                                 (as adjusted)           $   244     $   268
                                ---------------------------------------------
                                ---------------------------------------------



    Six-month periods ended
     June 30                            Wireline                Wireless
    (millions)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    Operating revenues
      External revenue           $ 2,476     $ 2,507     $ 2,276     $ 2,242
      Intersegment revenue            64          63          14          14
    -------------------------------------------------------------------------
                                   2,540       2,570       2,290       2,256
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense           1,667       1,680       1,303       1,268
      Restructuring costs             75          10           6           1
    -------------------------------------------------------------------------
                                   1,742       1,690       1,309       1,269
    -------------------------------------------------------------------------
    EBITDA(1)                    $   798     $   880     $   981     $   987
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                     $   646     $   576     $   385     $   179
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX            $   152     $   304     $   596     $   808
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Six-month periods ended
     June 30                          Eliminations            Consolidated
    (millions)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    Operating revenues
      External revenue           $     -     $     -     $ 4,752     $ 4,749
      Intersegment revenue           (78)        (77)          -           -
    -------------------------------------------------------------------------
                                     (78)        (77)      4,752       4,749
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense             (78)        (77)      2,892       2,871
      Restructuring costs              -           -          81          11
    -------------------------------------------------------------------------
                                     (78)        (77)      2,973       2,882
    -------------------------------------------------------------------------
    EBITDA(1)                    $     -     $     -     $ 1,779     $ 1,867
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                     $     -     $     -     $ 1,031     $   755
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX            $     -     $     -     $   748     $ 1,112
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                EBITDA (from above)      $ 1,779     $ 1,867
                                Depreciation                 664         689
                                Amortization                 187         153
                                ---------------------------------------------
                                Operating income             928       1,025
                                Other expense, net            16          19
                                Financing costs              201         223
                                ---------------------------------------------
                                Income before income
                                 taxes                       711         783
                                Income taxes                 145         223
                                ---------------------------------------------
                                Net income
                                 (as adjusted)           $   566     $   560
                                ---------------------------------------------
                                ---------------------------------------------

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



    -------------------------------------------------------------------------

                              TELUS CORPORATION

                     Management's discussion and analysis

                                   2009 Q2

    -------------------------------------------------------------------------

    Caution regarding forward-looking statements

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

    Factors that could cause actual results to differ materially include, but
    -------------------------------------------------------------------------
    are not limited to:
    -------------------
    Competition (including more active price competition and the likelihood
    of new wireless competitors beginning to offer services in late 2009 and
    into 2010 as a result of the 2008 advanced wireless services (AWS)
    spectrum auction); economic growth and fluctuations (including the global
    credit crisis and economic recession in Canada, and pension performance,
    funding and expenses); capital expenditure levels (increasing in 2009 and
    potentially in future years due to the Company's fourth generation (4G)
    wireless deployment strategy and any new Industry Canada wireless
    spectrum auctions); financing and debt requirements (including ability to
    carry out refinancing activities and fund share repurchases); tax matters
    (including acceleration or deferral of required payments of significant
    amounts of cash taxes); human resource developments; business
    integrations and internal reorganizations (including ability to
    successfully implement cost reduction initiatives); technology (including
    reliance on systems and information technology, broadband and wireless
    technology options, choice of suppliers and suppliers' ability to
    maintain and service their product lines, expected technology and
    evolution path and transition to 4G technology, expected future benefits
    and performance of high-speed packet access (HSPA)/long-term evolution
    (LTE) wireless technology, successful implementation of the network build
    and sharing arrangement with Bell Canada to achieve cost efficiencies and
    reduce deployment risks, successful deployment and operation of new
    wireless networks and successful introduction of new products, services
    and supporting systems); regulatory approvals and developments (including
    interpretation and application of tower sharing and roaming rules, the
    design and impact of future spectrum auctions, the review of new media
    and Internet traffic management practices, new regulatory charges to
    broadcast distribution undertakings (BDUs) to compensate broadcasters for
    local signals, and possible changes to foreign ownership restrictions);
    process risks (including conversion of legacy systems and billing system
    integrations, and implementation of large complex enterprise deals that
    may be adversely impacted by available resources and degree of co-
    operation from other service providers); health, safety and environmental
    developments; litigation and legal matters; business continuity events
    (including manmade and natural threats); any future acquisitions or
    divestitures; and other risk factors discussed herein and listed from
    time to time in TELUS' reports and public disclosure documents including
    its annual report, annual information form, and other filings with
    securities commissions in Canada (on SEDAR at sedar.com) and in its
    filings in the United States, including Form 40-F (on EDGAR at sec.gov).

    For further information, see Section 10: Risks and risk management in
    TELUS' 2008 annual and 2009 first quarter Management's discussions and
    analyses, as well as updates in Section 10 of this document.
    -------------------------------------------------------------------------


    Management's discussion and analysis
    August 7, 2009

    The following is a discussion of the consolidated financial position and
results of operations of TELUS Corporation for the three-month and six-month
periods ended June 30, 2009 and 2008, and should be read together with TELUS'
interim Consolidated financial statements. This discussion contains
forward-looking information that is qualified by reference to, and should be
read together with, the Caution regarding forward-looking statements above.
    TELUS' Consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles (GAAP), which differ in
certain respects from U.S. GAAP. See Note 21 to the interim Consolidated
financial statements for a summary of the principal differences between
Canadian and U.S. GAAP as they relate to TELUS. The interim Consolidated
financial statements and Management's discussion and analysis were reviewed by
TELUS' Audit Committee and approved by TELUS' Board of Directors. All amounts
are in Canadian dollars unless otherwise specified.
    TELUS' Consolidated financial statements include the accounts of the
Company and all of the Company's subsidiaries, of which the principal one is
TELUS Communications Inc. (TCI). Currently, through the TELUS Communications
Company partnership and the TELE-MOBILE COMPANY partnership, TCI includes
substantially all of the Company's wireline segment's operations and all of
the wireless segment's operations.
    TELUS has issued guidance on and reports on certain non-GAAP measures used
by management to evaluate performance of business units, segments and the
Company. Non-GAAP measures are also used to determine compliance with debt
covenants and manage the capital structure. Because non-GAAP measures do not
have a standardized meaning, securities regulations require that non-GAAP
measures be clearly defined and qualified, and reconciled with their nearest
GAAP measure. For the reader's reference, the definition, calculation and
reconciliation of consolidated non-GAAP measures are provided in Section 11:
Reconciliation of non-GAAP measures and definition of key operating
indicators.

    Management's discussion and analysis contents

    -------------------------------------------------------------------------
    Section                        Contents
    -------------------------------------------------------------------------
    1.  Introduction               A summary of TELUS' consolidated results
                                   for the second quarter and first six
                                   months of 2009
    -------------------------------------------------------------------------
    2.  Core business, vision      A discussion of activities in support of
        and strategy               TELUS' six strategic imperatives
    -------------------------------------------------------------------------
    3.  Key performance drivers    A list of corporate priorities for 2009
    -------------------------------------------------------------------------
    4.  Capabilities               A description of the factors that affect
                                   the capability to execute strategies,
                                   manage key performance drivers and deliver
                                   results
    -------------------------------------------------------------------------
    5.  Results from operations    A detailed discussion of operating
                                   results for the second quarter and first
                                   six months of 2009
    -------------------------------------------------------------------------
    6.  Changes in financial       A discussion of changes in the
        position                   Consolidated statements  of
                                   financial position for the six-month
                                   period ended June 30, 2009
    -------------------------------------------------------------------------
    7.  Liquidity and capital      A discussion of cash flow, liquidity,
        resources                  credit facilities and other disclosures
    -------------------------------------------------------------------------
    8.  Critical accounting        Accounting estimates that are critical
        estimates and accounting   to determining financial results, and
        policy developments        changes to accounting policies
    -------------------------------------------------------------------------
    9.  Annual guidance for 2009   TELUS' revised guidance for the full year,
                                   and related assumptions
    -------------------------------------------------------------------------
    10. Risks and risk management  An update on certain risks and
                                   uncertainties facing TELUS and how the
                                   Company manages these risks
    -------------------------------------------------------------------------
    11. Reconciliation of          A description, calculation and
        non-GAAP measures and      reconciliation of certain measures used
        definition of key          by management
        operating indicators
    -------------------------------------------------------------------------
    

    1.  Introduction

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

    1.1 Materiality for disclosures

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

    1.2 Canadian economic environment

    Global economic uncertainty and tightening credit markets, particularly
in the latter half of 2008, resulted in Canada's economy entering into
recession in the fourth quarter of 2008. In its July 23, 2009 Monetary Policy
Report, the Bank of Canada projected that Canada's economy will contract by
2.3 per cent in 2009, and then grow by 3.0 per cent in 2010 and 3.5 per cent
in 2011, reaching productive capacity in the middle of 2011. The Bank of
Canada also stated that growth in Canada's economy should resume in the third
quarter of 2009. See TELUS' risks discussion in Section 10.3 Economic growth
and fluctuations.

    Economic effects on TELUS in the second quarter

    Wireless results for the second quarter of 2009 reflect usual historical
seasonal effects when compared to the first quarter of 2009, including
sequential growth in gross and net subscriber additions, a sequential increase
in average revenue per subscriber unit (ARPU), and a sequentially lower
subscriber churn rate. However, wireless results continue to be affected by
the weak macro-economic environment, as reflected in year-over-year decreases
in gross and net additions of subscribers, decreased ARPU, and a higher
subscriber churn rate. Year-over-year wireless gross subscriber additions
decreased by 4.7% in the second quarter of 2009, while net subscriber
additions decreased by 37%. Fewer subscriber net additions in the second
quarter of 2009 compared to one year earlier is attributable to a lack of
customary growth in gross additions combined with an increase in
deactivations. This trend in deactivations was due to a larger subscriber
base, lower prior year churn in Koodo(R) subscribers due to its initial launch
in March 2008, and increased churn rate among business customers impacted
adversely by the current economic environment.
    The 4.7% year-over-year decrease in wireless subscriber gross additions
in the second quarter compares to year-over-year growth rates of 0.3% for the
first quarter of 2009, 4.8% for the fourth quarter of 2008 and 15% for the
year ended December 31, 2008. The worsening growth trend for gross subscriber
additions is believed to be primarily due to competitive pressures, as well as
the weaker Canadian economy leading to deferral of buying decisions by
customers, lower and more cautious business spending, and lower employment
levels.
    The decline in wireless ARPU is being impacted by decreasing voice
revenues largely due to an increased proportion and use of lower per-minute
rate plans (including increased use of in-bucket minutes), lower service
revenue from the Company's Mike(R) service, and decreased roaming revenues.
Voice revenue declines can be attributed to the continued highly competitive
market and the ongoing global economic recession being experienced in Canada.
This is particularly acute for the Company's Mike Push To Talk(TM)
business-oriented service, which is commonly used in economically sensitive
business sectors such as manufacturing, automotive, construction,
transportation dispatch, and energy. Mike service subscribers represent less
than 10% of TELUS' total wireless subscriber base, as at June 30, 2009.
    The wireline segment has been impacted in the second quarter of 2009 by
slower year-over-year data revenue growth and faster erosion in voice
revenues. In comparison, year-over-year data revenue growth in the first
quarter of 2009 nearly offset the decrease in voice revenues, while in 2008
data growth significantly exceeded voice revenue erosion, in part due to the
acquisition of Emergis. Strong price competition in both data and voice
services, as well as more cautious spending by consumers and businesses, are
contributing factors. In 2009, the Company has observed a larger number of
disconnections and fewer installations of business network access lines
(NALs), particularly in B.C. and Alberta, attributed partly to economic
conditions and partly to competition. Business NALs decreased by 0.2% over the
past 12 months, the first 12-month decrease since the first quarter of 2006.
The number of residential NAL losses in B.C. and Alberta has moderated in the
most recent three quarters.
    Considering the economic impacts evident during the second quarter and
weaker than expected results, the Company has revised its full year guidance.
See Section 9: Annual guidance for 2009.
    TELUS' capital structure financial policies, which are discussed under
Capabilities - Section 4.3 Liquidity and capital resources, were designed with
credit cycles in mind. The Company believes that these financial policies and
guidelines, and maintaining credit ratings in the range of BBB+ to A -, or the
equivalent, provide reasonable access to capital markets. The economic
weakness and stock market decline that began in 2008 are expected to increase
TELUS' net defined benefit pension plans expense and funding for the full
year, which is reflected in the Company's public guidance for 2009. See
Section 9.

    
    1.3 Consolidated highlights

    -------------------------------------------------------------------------
                                                           Six-month periods
    ($ millions, unless    Quarters ended June 30              ended June 30
     noted otherwise)      2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Consolidated statements
     of income
    -------------------------------------------------------------------------
    Operating revenues    2,377    2,399   (0.9)%    4,752    4,749    0.1 %
    Operating income        449      498   (9.8)%      928    1,025   (9.5)%
    Income before
     income taxes           332      382    (13)%      711      783   (9.2)%
    Net income(1)           244      268   (9.0)%      566      560     1.1%

    Earnings per share(2)
     (EPS) basic ($)       0.77     0.83   (7.2)%     1.78     1.73     2.9%
    EPS(2) diluted ($)     0.77     0.83   (7.2)%     1.78     1.72     3.5%
    Cash dividends declared
     per share(2) ($)     0.475     0.45     5.6%     0.95     0.90     5.6%

    Average shares(2)
     outstanding - basic
     (millions)             318      321   (0.9)%      318      322   (1.2)%
    -------------------------------------------------------------------------
    Consolidated statements
     of cash flows
    -------------------------------------------------------------------------
    Cash provided by
     operating activities   852      462      84%    1,466    1,087      35%
    Cash used by investing
     activities             552      437      26%    1,030    1,437    (28)%
      Capital expenditures  557      435      28%    1,031      755      37%
      Acquisitions            -        4   (100)%     n.m.      691     n.m.
    Cash (used) provided by
     financing activities  (339)     (28)    n.m.     (414)     376     n.m.
    -------------------------------------------------------------------------
    Subscribers and other
     measures
    -------------------------------------------------------------------------
    Subscriber connections(3)
     (thousands)                                    11,760   11,414     3.0%
    EBITDA(4)               873      918   (4.9)%    1,779    1,867   (4.7)%
    Free cash flow(4)       144      254    (43)%      269      782    (66)%
    -------------------------------------------------------------------------
    Debt and payout ratios(5)
    -------------------------------------------------------------------------
    Net debt to EBITDA -
     excluding restructuring
     costs (times)                                     1.9      1.7     0.2
    Dividend payout
     ratio(6) (%)                                       59       52   7 pts
    -------------------------------------------------------------------------

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

    (1) Net income for the second quarter and six-month period ended June 30,
        2008 has been adjusted. See Section 5.2.
    (2) Includes Common Shares and Non-Voting Shares.
    (3) The sum of wireless subscribers, network access lines, Internet
        access subscribers and TELUS TV(R) subscribers measured at the end of
        the respective periods, based on information in billing and other
        systems. Subscriber connections at June 30, 2009 have been reduced by
        five thousand to reflect prior period reporting adjustments to high-
        speed Internet subscribers.
    (4) EBITDA and free cash flow are non-GAAP measures. See Section 11.1
        Earnings before interest, taxes, depreciation and amortization
        (EBITDA) and Section 11.2 Free cash flow.
    (5) See Section 7.4 Liquidity and capital resource measures and Section
        11.4 Definitions of liquidity and capital resource measures.
    (6) Based on 12-month trailing earnings per share excluding favourable
        tax-related adjustments of 36 cents per share for the period ended
        June 30, 2009 and 77 cents per share for the period ended June 30,
        2008, and minor impacts from a net-cash settlement feature.
    -------------------------------------------------------------------------

    Highlights from operations, comparing results for the second quarter and
first six months of 2009, or measures at June 30, 2009, to those one year
earlier:

    -   Subscriber connections increased by 346,000 in the 12-month period
        ended June 30, 2009. This includes 7.8% growth in wireless
        subscribers, 125% growth in TELUS TV subscribers and 0.6%
        growth in Internet subscribers, partly offset by a 4.2% decrease in
        total network access lines.

    -   Wireless ARPU was $58.61 in the current quarter, or $0.22 higher than
        the first quarter of 2009, but reflected a decrease of $4.12 or 6.6%
        when compared to the second quarter of 2008. Wireless subscriber net
        additions were 111,000 in the second quarter of 2009, reflecting an
        increase of 63,000 from the first quarter of 2009 and a decrease of
        65,000 or 37% from the second quarter of 2008.

    -   Consolidated operating revenues decreased by $22 million in the
        second quarter and increased by $3 million for the first six months,
        when compared to the same periods in 2008. Growth in data revenues
        was more than offset by declining voice revenues in the second
        quarter, while for the six-month period, data revenue growth and
        voice revenue declines were offsetting. Strong price competition and
        economic impacts, described in Section 1.2, have reduced data revenue
        growth and accelerated voice revenue declines.

    -   Operating income decreased by $49 million and $97 million,
        respectively, in the second quarter and six-month period, primarily
        due to lower EBITDA caused by significantly higher restructuring
        charges (up by $49 million and $70 million, respectively) and
        increased defined benefit pension plan (DBPP) expenses (up by
        $30 million and $59 million, respectively).

        EBITDA decreased by $45 million and $88 million, respectively, in the
        second quarter and first six months. Excluding restructuring and DBPP
        impacts, EBITDA increased by $34 million in the second quarter and
        $41 million in the first six months. This underlying improvement
        included 8% lower expenditures on salaries, other benefits and
        employee-related expenditures for both the quarter and six month
        periods. It also included lower advertising, promotion and marketing
        expenditures, net of higher costs for delivery of TELUS TV services
        and to support implementation of services for new wireline enterprise
        customers, as well as higher wireless subscriber retention costs and
        bad debt expenses.

    -   Income before income taxes decreased by $50 million and $72 million,
        respectively, in the second quarter and six-month period, reflecting
        lower Operating income that was partly offset in the six-month period
        by lower total financing and other expenses. Total financing and
        other expenses increased by $1 million in the second quarter and
        decreased by $25 million for the first six months, when compared to
        the same periods in 2008. The decrease in financing and other
        expenses for the six-month period primarily reflects interest income
        from the settlement of prior years' tax matters. Interest expense on
        long-term and short-term debt did not change significantly in the
        quarter and six-month periods, as lower effective interest rates
        offset higher average long-term debt balances.

    -   Net income decreased by $24 million in the second quarter of 2009 and
        increased by $6 million in the first six months of 2009 when compared
        to the same periods in 2008. Net income in the second quarter and
        first six months of 2009, as well as the first six months of 2008,
        include income tax-related adjustments arising from legislated income
        tax changes, settlements and tax reassessments for prior years, and
        any related interest on reassessments (see Section 5.2). Net income
        before income tax-related adjustments was $225 million and
        $485 million, respectively, in the second quarter and first six
        months of 2009, or decreases of $43 million and $58 million,
        respectively, when compared to the same periods in 2008.

        Basic earnings per share decreased by six cents in the second quarter
        of 2009 when compared to the same period in 2008, while basic
        earnings per share for the first six months of 2009 increased by five
        cents in part due to fewer average shares outstanding. Earnings per
        share excluding income tax-related adjustments decreased by 12 cents
        and 16 cents per share, respectively, in the second quarter and first
        six months of 2009 when compared to the same periods in 2008. Market
        repurchases under the 2008 normal course issuer bid (NCIB) program
        reduced average shares outstanding by four million in the first
        six months of 2009, when compared to the same period in 2008.

    -------------------------------------------------------------------------
                                                     Quarters      Six-month
    Net income analysis                                 ended  periods ended
    ($ millions)                                      June 30        June 30
    -------------------------------------------------------------------------
    Net income in 2008                                    268            560
    Deduct net favourable income tax-related
     adjustments in 2008 (see Section 5.2)                  -            (17)
                                                    ----------     ----------
                                                          268            543

    Higher defined benefit pension plan expenses
     (in EBITDA)(1)                                       (21)           (41)
    Higher restructuring charges (in EBITDA)(1)           (34)           (49)
    Other changes in EBITDA(1)(2)                          24             28
    Higher depreciation and amortization(1)(2)             (4)            (7)
    Other                                                  (8)            11
                                                    ----------     ----------
                                                          225            485
    Net favourable income tax-related adjustments
     in 2009 (see Section 5.2)                             19             81
                                                    ----------     ----------
    Net income in 2009                                    244            566
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) For the purposes of this presentation, the 2009 blended statutory tax
        rate was used.
    (2) Excluding investment tax credits that are including in tax-related
        adjustments.
    -------------------------------------------------------------------------

    Liquidity and capital resources highlights, including a comparison of
results for the second quarter and first six months of 2009, or measures as at
June 30, 2009, to those one year earlier:

    -   In May 2009, the Company successfully closed an offering of 4.95%
        Notes due May 2014, for aggregate gross proceeds of $700 million. The
        net proceeds of the offering were used for corporate purposes,
        including repayment of amounts outstanding under the 2012 credit
        facility and reducing outstanding commercial paper. The Company also
        extended the term of its accounts receivable securitization agreement
        by three years, for an amount up to a maximum of $500 million.

    -   In June, the Company extended the term of its unutilized 365-day
        revolving credit facility to December 31, 2010, with the available
        amount becoming $300 million.

    -   At June 30, 2009, TELUS had unutilized credit facilities exceeding
        $1.5 billion, as well as additional unutilized availability under its
        accounts receivable securitization program, consistent with its
        objective of generally maintaining more than $1 billion of unutilized
        liquidity.

    -   Net debt to EBITDA at June 30, 2009 was 1.9 times, within the
        Company's long-term target policy range of 1.5 to 2.0 times.

    -   The dividend payout ratio, based on the annualized second quarter
        dividend and earnings for the twelve-month period ended June 30, 2009
        (excluding favourable income tax-related adjustments and minimal
        impact from a net-cash settlement feature), was 59%, while the ratio
        based on actual earnings for the 12-month period ended June 30, 2009
        was 53%. The Company's prospective guideline is 45% to 55% of
        sustainable net earnings.

    -   Cash provided by operating activities increased by $390 million and
        $379 million, respectively, due primarily to comparative changes in
        proceeds from securitized accounts receivable, partly offset by
        increased funding of defined benefit pension plans and payments under
        restructuring plans, and for the six-month period, an increase in
        income tax payments. Income tax instalment payments during the second
        quarter of 2009 were more than offset by a recovery of income taxes
        and related interest from the settlement of prior years' tax matters.

    -   Cash used by investing activities increased by $115 million in the
        second quarter and decreased by $407 million for the first six months
        of 2009, when compared to the same periods in 2008. The increase for
        the second quarter resulted mainly from capital investments in
        wireless and wireline broadband infrastructure to enhance the
        Company's competitive position and support long-term growth. The
        decrease for the first six months was mainly due to the acquisition
        of Emergis in January 2008 for $691 million net of acquired cash,
        which more than offset increased capital investments in the first
        half of 2009.

    -   Cash used by financing activities was $339 million and $414 million,
        respectively, in the second quarter and first six months of 2009.
        During the second quarter, the Company reduced amounts drawn on the
        2012 credit facility and reduced outstanding commercial paper with
        proceeds from the May debt issue and cash-on-hand. In comparison,
        during the first six months of 2008, $376 million of cash was
        provided by debt financing activities used for corporate purposes
        including the January acquisition of Emergis and anticipated funding
        requirements for the third quarter AWS spectrum auction.

    -   Free cash flow decreased by $110 million and $513 million,
        respectively, in the second quarter and first six months of 2009,
        largely due to higher capital expenditures, increased payments under
        restructuring plans, and for the six-month period, higher income tax
        payments net of recoveries. Increased capital expenditures and the
        net increase in income tax payments are consistent with the Company's
        2009 public targets and guidance (see Section 9: Annual guidance for
        2009). Free cash flow for the second quarter of 2009 was favourably
        impacted by $35 million of interest received for settlement of prior
        years' tax matters, while second quarter 2009 income tax instalment
        payments were largely offset by the receipt of income tax settlement
        amounts in the period, and were similar to net instalment payments in
        the second quarter of 2008.
    

    2.  Core business, vision and strategy

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

    
        Building national capabilities across data, IP, voice and wireless
    

    TELUS continues to invest in broadband networks and services to enhance
its competitive position and support future growth opportunities. The
construction of the Company's advanced wireless network continues, based on
the latest version of high-speed packet access (HSPA) technology, with
HSPA-based service expected to be launched in B.C., Alberta, Quebec and
nationally by early 2010 including network-sharing agreements with Bell
Canada. The investment in HSPA technology is expected to ensure an optimal
future transition to long-term evolution (LTE) technology, the emerging
world-wide standard for fourth generation or 4G wireless networks. The
Company's wireline broadband investments are expanding the reach of high-speed
Internet and digital TELUS TV service in incumbent regions, as well as
supporting new business and government contracts.

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

    TELUS is incurring upfront costs in 2009 to implement services for
several new large enterprise customers, for which revenues are expected to be
increasingly realized in future periods. This includes a seven-to-ten year
contract worth up to $900 million with the Government of Quebec, to deliver
and manage the province's next generation data network. Revenues in this
contract are expected to be recognized beginning in 2010.

    
        Providing integrated solutions that differentiate TELUS from its
        competitors; and
        Partnering, acquiring and divesting to accelerate the implementation
        of TELUS' strategy and focus TELUS' resources on core business
    

    On June 29, 2009, the all digital TELUS Satellite TV service was
commercially launched in B.C. and Alberta and is available to more than 90 per
cent of households in these provinces. The new satellite TV service
complements TELUS' Internet protocol (IP) based TV service by enabling the
Company to immediately expand the addressable market with wireline, wireless,
Internet and entertainment services. TELUS Satellite TV includes more than 500
digital channels with more than 80 high definition (HD) channels, and features
such as on-screen call display, pay per view, an interactive programming
guide, and time shifting. While TELUS Satellite TV service is made possible by
an agreement with Bell Canada, Bell TV remains a competitor to TELUS'
satellite and IP TV service offerings in B.C. and Alberta, and TELUS' IP TV
service offerings in Eastern Quebec.

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

    The Company increased its focus on its ongoing operating efficiency
program beginning in the third quarter of 2008, continuing into 2009.
Restructuring costs were $81 million in the first six months of 2009 as
compared to $11 million in the same period in 2008 and are expected to be
approximately $150 million for the full year of 2009 ($59 million in 2008).
See Section 5.3 Consolidated results from operations - Restructuring costs.

    
    An array of initiatives is in various stages of deployment that are
improving efficiency and reducing costs, including:

    -   rationalizing external supplier spending;
    -   simplifying processes and decommissioning uneconomic products;
    -   reducing staffing levels, freezing management compensation increases
        and containing benefit costs;
    -   leveraging business process outsourcing; and
    -   reducing expenses operation-wide.
    

    Full time equivalent (FTE) employees decreased by approximately 300
during the second quarter and approximately 1,500 since December 31, 2008. FTE
staff reductions from efficiency initiatives were approximately 400 during the
second quarter, offset in part by an increase of approximately 100 in staffing
of business process outsourcing services for customers. FTE staff reductions
from efficiency initiatives were approximately 900 since the beginning of the
year, and seasonal reductions in staffing of business process outsourcing
services were 600 during this six-month period.

    3.  Key performance drivers

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

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

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

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

    4.  Capabilities

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

    4.1 Principal markets addressed and competition

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

    4.2 Operational resources

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

    
    4.3 Liquidity and capital resources

        Capital structure financial policies
    

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

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

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

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

    The dividend declared for the second quarter of 2009 (paid July 2, 2009)
    was 47.5 cents per share as compared to 45 cents per share in the same
    period in 2008, or an increase of 5.6%.
    -------------------------------------------------------------------------
    Use proceeds from securitized receivables, bank facilities and commercial
    paper, as needed, to supplement free cash flow and meet other cash
    requirements

    In May 2009, TELUS extended the termination date for its accounts
    receivable securitization program to 2012. Proceeds from securitized
    accounts receivable were $400 million at June 30, 2009, an increase of
    $100 million from March 31, 2009. The Company used increased proceeds
    from securitized receivables and proceeds received from the $700 million
    May 2009 Note issue to reduce amounts drawn against its 2012 credit
    facility to $nil from $300 million at March 31, 2009, and to reduce
    issued commercial paper to $604 million from $1,188 million at March 31,
    2009. Since December 31, 2008, amounts drawn against the 2012 credit
    facility were reduced by $980 million, while proceeds from securitized
    accounts receivable increased by $100 million and issued commercial paper
    increased by $172 million.
    -------------------------------------------------------------------------
    Maintain compliance with financial objectives, policies and guidelines

    Maintain a minimum $1 billion in unutilized liquidity - The Company had
    unutilized credit facilities exceeding $1.5 billion at June 30, 2009, as
    well as additional availability under its accounts receivable
    securitization program.

    Net debt to EBITDA excluding restructuring costs ratio of 1.5 to 2.0
    times - Actual result of 1.9 times at June 30, 2009.

    Dividend payout ratio of 45 to 55% of sustainable net earnings on a
    prospective basis - The historical ratio was 59% when calculated based on
    the annualized second quarter dividend and 12-month trailing earnings,
    excluding favourable tax-related adjustments and minimal impacts from a
    net-cash settlement feature. The ratio was 53% based on actual earnings
    for the 12-month period ended June 30, 2009.
    -------------------------------------------------------------------------
    Maintain position of fully hedging foreign exchange exposure for
    indebtedness

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

    In May 2009, the Company successfully closed an offering of 4.95% Notes
    due May 2014, for aggregate gross proceeds of $700 million. The net
    proceeds of the offering were used for corporate purposes, including
    repayment of amounts outstanding under the 2012 credit facility and
    outstanding commercial paper. In June, the Company extended the term of
    its 365-day revolving credit facility to December 31, 2010, with the
    available amount becoming $300 million. The Company has access to a shelf
    prospectus pursuant to which it can offer $1.8 billion of debt and
    equity.
    -------------------------------------------------------------------------
    Preserve access to the capital markets at a reasonable cost by
    maintaining investment grade credit ratings and targeting improved credit
    ratings in the range of BBB+ to A -, or the equivalent, in the future

    At August 7, 2009, investment grade credit ratings from the four rating
    agencies that cover TELUS were in the desired range. TELUS' May 2009 debt
    issue was assigned credit ratings of: A(low) by DBRS Ltd., BBB+ by
    Standard and Poor's, Baa1 by Moody's Investors Service, and BBB+ by Fitch
    Ratings, all with a stable trend or outlook and consistent with the
    agencies' existing ratings of TELUS debt securities.
    -------------------------------------------------------------------------

    The following table reflects debt maturities after the May 2009 debt issue
and second quarter reductions in utilized bank facilities and issued
commercial paper.

    -------------------------------------------------------------------------
    Debt maturities as at June 30, 2009

                  Long-term debt maturities(1), principal
                 -----------------------------------------
                            All except                      Interest and like
    ($ millions)          capital leases   Capital leases   carrying costs(2)
    -------------------------------------------------------------------------
    2009 balance of year           -                   1                 234
    2010                          80                   2                 463
    2011                       2,950                   -                 334
    2012                         904                   -                 198
    2013                         300                   -                 182
    Thereafter                 2,649                   -                 767
    -------------------------------------------------------------------------
    Total                      6,883                   3               2,178
    -------------------------------------------------------------------------
    (1) Where applicable, principal-related maturities reflect foreign
        currency exchange rates at June 30, 2009.
    (2) Interest and like carrying costs for commercial paper have been
        calculated based upon rates in effect as at June 30, 2009.
    -------------------------------------------------------------------------

    4.4 Internal control over financial reporting

        Changes in internal control over financial reporting
    

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

    5. Results from operations

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

    5.1 General

    The Company has two reportable segments: wireline and wireless.
Segmentation is based on similarities in technology, the technical expertise
required to deliver the products and services, the distribution channels used
and regulatory treatment. Intersegment sales are recorded at the exchange
value. Segmented information is regularly reported to the Company's Chief
Executive Officer (the chief operating decision-maker). Segmented disclosure
is reported in Note 5 of the interim Consolidated financial statements.

    
    5.2 Quarterly results summary

    -------------------------------------------------------------------------
                                                2009    2009    2008    2008
    ($ in millions, except per share amounts)     Q2      Q1      Q4      Q3
    -------------------------------------------------------------------------
    Operating revenues                         2,377   2,375   2,454   2,450
    -------------------------------------------------------------------------
      Operations expenses                      1,451   1,441   1,479   1,465
      Restructuring costs                         53      28      38      10
    -------------------------------------------------------------------------
    EBITDA(1)                                    873     906     937     975
      Depreciation                               330     334     351     344
      Amortization of intangible assets           94      93      84      92
    -------------------------------------------------------------------------
    Operating income                             449     479     502     539
      Other expense                               11       5      11       6
      Financing costs                            106      95     118     122
    -------------------------------------------------------------------------
    Income before income taxes                   332     379     373     411
      Income taxes (recovery)                     88      57      88     125
    -------------------------------------------------------------------------
    Net income(2)                                244     322     285     286
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income attributable to Common
     Shares and Non-Voting Shares(2)             243     321     285     285
    Income per Common Share and
     Non-Voting Share - basic                   0.77    1.01    0.90    0.89
                      - diluted                 0.77    1.01    0.89    0.89
    Dividends declared per Common Share
     and Non-Voting Share                      0.475   0.475   0.475    0.45
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                2008    2008    2007    2007
    ($ in millions, except per share amounts)     Q2      Q1      Q4      Q3
    -------------------------------------------------------------------------
    Operating revenues                         2,399   2,350   2,330   2,310
    -------------------------------------------------------------------------
      Operations expenses                      1,477   1,394   1,371   1,317
      Restructuring costs                          4       7       6       6
    -------------------------------------------------------------------------
    EBITDA(1)                                    918     949     953     987
      Depreciation                               343     346     386     333
      Amortization of intangible assets           77      76      68      70
    -------------------------------------------------------------------------
    Operating income                             498     527     499     584
      Other expense                                2      17       6       8
      Financing costs                            114     109     109      86
    -------------------------------------------------------------------------
    Income before income taxes                   382     401     384     490
      Income taxes (recovery)                    114     109     (19)     79
    -------------------------------------------------------------------------
    Net income(2)                                268     292     403     411
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income attributable to Common
     Shares and Non-Voting Shares(2)             267     291     400     410
    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
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) EBITDA is a non-GAAP measure. See Section 11.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    (2) Net income has been adjusted for the periods prior to 2009 Q1, and no
        longer includes a deduction for non-controlling interests. As
        described further in Section 8.2 Accounting policy developments, the
        change results from the January 1, 2009 adoption of the new
        recommendations for business combinations (Canadian Institute of
        Chartered Accountants (CICA) Handbook Section 1582), consolidations
        (CICA Handbook Section 1601) and non-controlling interests (CICA
        Handbook Section 1602). Net income attributable to Common Shares and
        Non-Voting Shares is equivalent to Net income previously reported in
        the 2008 and 2007 periods shown above.
    -------------------------------------------------------------------------

        Trends
    

    The consolidated revenue trend continues to reflect growth in wireless
network revenues generated from an increasing subscriber base; however, this
growth has moderated significantly since the onset of the economic downturn in
Canada in late 2008. Wireless ARPU in the second quarter of 2009 increased
slightly from the first quarter of 2009, but the year-over-year decrease was
6.6%, as strong growth in data ARPU was more than offset by declining voice
ARPU. The voice ARPU decline includes pricing competition, greater spending
restraint and price optimization on the part of customers, increased use of
in-bucket or included-minute service plans, significant deterioration in Mike
service ARPU, lower roaming revenues and to a lesser extent, the growing base
of Koodo postpaid basic subscribers.
    Continuation of economic uncertainty could disrupt usual seasonal
patterns for wireless subscriber additions in future quarters. Historically,
there has been significant fourth quarter seasonality with respect to higher
wireless subscriber additions, related acquisition costs and equipment sales,
resulting in lower fourth quarter wireless EBITDA. The third quarter has
recently become more significant with back-to-school offers. In addition,
wireless subscriber additions have typically been higher in the second quarter
than in the first quarter.
    Consolidated revenues also continue to reflect growth in wireline data
revenue, which includes new revenues from the acquisition of Emergis beginning
in mid-January 2008; however, data revenue growth has moderated in 2009 from
strong price competition and was more than offset by declining wireline voice
local and long distance revenues. The decline in wireline voice revenues is
due to substitution to wireless and Internet services, as well as competition
from VoIP service providers, resellers and facilities-based competitors. The
number of residential network access line (NAL) losses has moderated in the
three most recent quarters because of more effective winback efforts and
synergies from bundling services, while TELUS' main cable-TV competitor's
digital telephone coverage expansion slowed. The Company has observed a larger
number of disconnections and fewer installations of business NALs attributed
partly to economic conditions and partly to competition. However, changes in
business NALs do not reflect growth from certain data services, such as
private networks.
    Consolidated Operations expenses include Emergis expenses beginning in
mid-January 2008. The sequential decrease in operations expenses in the first
quarter of 2009 resulted mainly from lower accrued performance bonuses.
Restructuring costs have increased beginning in the second half of 2008, as
management refocused its efforts on accelerating efficiency initiatives,
primarily in the wireline segment.
    The sequential decline in depreciation in the first quarter of 2009 was
due to certain assets becoming fully depreciated. Depreciation expenses were
sequentially higher in the fourth quarter of 2007 as a result of reductions to
estimated useful service lives of certain asset classes.
    Amortization of intangible assets in the fourth quarter of 2008 is net of
investment tax credits of $6 million. The investment tax credits were applied
following a determination of eligibility by a government tax authority and
relate to assets capitalized in prior years that are now fully amortized. The
sequential increase in amortization of intangible assets in the third quarter
of 2008 was due to implementation of the converged billing platform for B.C.
residential customers in mid-July 2008, while the sequential increase in
amortization in the first quarter of 2008 was due mainly to the January 2008
acquisition of Emergis.
    Financing costs shown in the preceding table are net of varying amounts
of interest income, including interest from the settlement of prior years'
income tax-related matters, particularly in the first and second quarters of
2009 and the third quarter of 2007. Interest expenses in the first and second
quarters of 2009 decreased, when compared to the third and fourth quarters of
2008, due to lower effective interest rates. Interest expenses in the third
and fourth quarters of 2008 had increased from preceding quarters due to a
higher debt balance that helped fund the third quarter 2008 payment for
advanced wireless services (AWS) spectrum licences.
    The trends in Net income and earnings per share (EPS) reflect the items
noted above, as well as adjustments arising from legislated income tax
changes, settlements and tax reassessments for prior years, including any
related interest on reassessments. EPS has also been positively impacted by
decreased shares outstanding from share repurchases in 2008 and 2007.

    
    -------------------------------------------------------------------------
    Income tax-related adjustments              2009    2009    2008    2008
    ($ in millions, except EPS amounts)           Q2      Q1      Q4      Q3
    -------------------------------------------------------------------------
    Approximate Net income impact                 19      62      32       -
    Approximate EPS impact                      0.06    0.20    0.10       -
    Approximate basic EPS excluding
     tax-related impacts                        0.71    0.81    0.80    0.89
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Income tax-related adjustments              2008    2008    2007    2007
    ($ in millions, except EPS amounts)           Q2      Q1      Q4      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
    -------------------------------------------------------------------------

    5.3 Consolidated results from operations

    -------------------------------------------------------------------------
    ($ in millions, except                                 Six-month periods
     EBITDA margin)        Quarters ended June 30              ended June 30
                           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Operating revenues    2,377    2,399   (0.9)%    4,752    4,749     0.1%
    -------------------------------------------------------------------------
    Operations expenses   1,451    1,477   (1.8)%    2,892    2,871     0.7%
    Restructuring costs      53        4     n.m.       81       11     n.m.
    -------------------------------------------------------------------------
    EBITDA(1)               873      918   (4.9)%    1,779    1,867   (4.7)%
    Depreciation            330      343   (3.8)%      664      689   (3.6)%
    Amortization of
     intangible assets       94       77      22%      187      153      22%
    -------------------------------------------------------------------------
    Operating income        449      498   (9.8)%      928    1,025   (9.5)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA margin (%)(2)   36.7     38.3 (1.6)pts     37.4     39.3 (1.9)pts
    -------------------------------------------------------------------------

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

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

        Operating revenues
    

    Consolidated Operating revenues decreased by $22 million in the second
quarter of 2009, but increased by $3 million in the first six months of 2009,
when compared to the same periods in 2008. Wireless segment network revenues
increased by $14 million in the second quarter and $49 million in the first
six months, resulting from strong data revenue growth that was partly offset
by ongoing declines in voice revenues. Wireless equipment revenues decreased
by $10 million in the second quarter and $15 million in the first six months,
mainly from lower smartphone and handset prices and reduced accessory sales.
In the wireline segment, data and other revenues increased by $13 million in
the second quarter and $53 million in the first six months, but this growth
was surpassed by erosion in voice local and long distance revenues caused by
local competition and technological substitution.

    
    Operations expenses
    -------------------------------------------------------------------------
                                                           Six-month periods
                           Quarters ended June 30              ended June 30
    ($ millions)           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Salaries, benefits
     except DBPP,(1) and
     employee-related
     expenses               607      662   (8.3)%    1,194    1,296   (7.9)%
    DBPP expense (recovery)   5      (25)    n.m.        9      (50)    n.m.
    Other operations
     expenses               839      840   (0.1)%    1,689    1,625     3.9%
    -------------------------------------------------------------------------
                          1,451    1,477   (1.8)%    2,892    2,871     0.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Salaries, benefits (except DBPP benefits) and employee-related expenses
decreased by $55 million in the second quarter of 2009 and decreased by $102
million in the first six months of 2009, when compared to the same periods in
2008. These decreases resulted mainly from lower accrued performance bonuses
arising from lower than originally planned operating performance, as well as a
decrease in full-time equivalent (FTE) employees during the first half of
2009, while management base salaries were frozen at 2008 levels.
    TELUS' defined benefit pension plans expense increased by $30 million in
the second quarter and $59 million in the first six months. The increase was
mainly due to the decline in value of defined benefit pension plans assets in
2008.
    Other operations expenses decreased by $1 million in the second quarter
of 2009 and increased by $64 million in the first six months of 2009, when
compared to the same periods in 2008. The decrease for the second quarter
included lower wireless roaming and marketing costs and lower wireline
advertising and promotions costs. The increases for the six-month period
included higher wireless subscriber retention costs and bad debt expense,
increased wireline TELUS TV programming and customer acquisition costs, as
well as costs to implement services for new wireline enterprise customers,
partly offset by lower wireless roaming and marketing costs, and wireline
advertising and promotions costs.

    
        Restructuring costs
    

    Restructuring costs were $53 million and $81 million, respectively, in
the second quarter and first six months of 2009, or increases of $49 million
and $70 million, respectively, when compared to the same periods in 2008.
Restructuring costs in 2009 were primarily severance costs in respect of
efficiency initiatives described in Section 2: Investing in internal
capabilities. Restructuring costs are currently expected to be approximately
$150 million for the full year of 2009. See Section 9: Annual guidance for
2009.

    
        EBITDA
    

    Consolidated EBITDA decreased by $45 million and $88 million,
respectively in the second quarter and first six months of 2009, when compared
to the same periods in 2008, primarily due to increased restructuring costs
and defined benefit pension plan expenses. EBITDA, excluding the impacts of
higher pension and restructuring costs, increased by $34 million and $41
million, respectively, in the second quarter and six-month period, primarily
from lower performance bonus accruals, and increasing traction from efficiency
initiatives. Excluding higher pension and restructuring costs, wireline EBITDA
increased by $20 million and $38 million, respectively, while wireless EBITDA
increased by $14 million and $3 million, respectively.

    
        Depreciation; Amortization of intangible assets
    

    Combined depreciation and amortization expenses increased by $4 million
and $9 million, respectively, in the second quarter and first six months of
2009, when compared to the same periods in 2008.
    Depreciation decreased by $13 million and $25 million, respectively, in
the second quarter and first six months of 2009, when compared to the same
period in 2008. The decrease primarily reflects accelerated depreciation
during 2008 from a reduction in estimated useful service lives for certain
digital switching assets, as well as certain digital cell sites becoming fully
depreciated. This was slightly offset by growth in capital assets over the
past 12 months.
    Amortization increased by $17 million and $34 million, respectively in
the second quarter and first six months of 2009 when compared to the same
period in 2008. The increases include $7 million and $15 million,
respectively, arising from the July 2008 implementation of the converged
wireline billing and client care platform in B.C., as well as net increases in
other intangible assets subject to amortization. Amortization is expected to
increase for the full year of 2009 as compared to 2008, mainly due to an
additional seven months of amortization for the B.C. client care and billing
platform. See Caution regarding forward-looking statements.

    
        Operating income

    Operating income decreased by $49 million and $97 million, respectively,
in the second quarter and first six months of 2009 when compared to the same
periods in 2008, due to lower EBITDA, as well as the net increase in
depreciation and amortization, described above.

    Other income statement items

    -------------------------------------------------------------------------
                                                           Six-month periods
    Other expense, net     Quarters ended June 30              ended June 30
    ($ millions)           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
                             11        2     n.m.       16       19    (16)%
    -------------------------------------------------------------------------
    

    Other expense, net includes accounts receivable securitization expense,
income (losses) or impairments in equity or portfolio investments, gains and
losses on disposal of real estate, and charitable donations. Accounts
receivable securitization expenses were $2 million and $4 million,
respectively, in the second quarter and first six months of 2009 as compared
to $1 million and $7 million, respectively, in the same periods of 2008. The
increase for the second quarter period primarily reflects higher average
proceeds from securitized accounts receivable, while the decrease for the
six-month period reflects both lower average proceeds and a lower rate (see
Section 7.6 Accounts receivable sale). Losses from market value adjustments to
short-term investments held for trading were $1 million in the second quarter
of 2009 and $2 million for the first six months of 2009, as compared to net
gains of $3 million in the second quarter of 2008 and a net loss of $6 million
in the first six months of 2008. The balance of expenditures in both years was
primarily charitable donations.

    
    -------------------------------------------------------------------------
                                                           Six-month periods
    Financing costs        Quarters ended June 30              ended June 30
    ($ millions)           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Interest on long-term
     debt, short-term
     obligations and other  116      117   (0.9)%      231      229     0.9%
    Foreign exchange (gains)
     losses                   4        -     n.m.       (3)       -     n.m.
    Capitalized interest
     during construction      -       (2)    n.m.        -       (3)    n.m.
    Interest income         (14)      (1)    n.m.      (27)      (3)    n.m.
    -------------------------------------------------------------------------
                            106      114   (7.0)%      201      223   (9.9)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Interest expenses on long-term and short-term debt and other decreased by
$1 million in the second quarter of 2009 and increased by $2 million in the
first six months of 2009 when compared to the same periods in 2008. Higher
average debt balances in 2009, resulting primarily from payment for AWS
spectrum licences in the third quarter of 2008, were largely offset by a lower
effective interest rate. Interest income arising from the settlement of prior
years' tax matters was $14 million in the second quarter of 2009 and $26
million for the first six months of 2009. Interest income in the prior year
periods was primarily interest on temporary investments and cash balances.

    
    -------------------------------------------------------------------------
    Income taxes                                           Six-month periods
    ($ millions, except    Quarters ended June 30              ended June 30
     tax rates)            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Basic blended federal
     and provincial tax at
     statutory income tax
     rates                  100      118    (15)%      215      242    (11)%
    Tax rate differential on,
     and consequential
     adjustments from,
     reassessments of prior
     years' tax issues       (8)      -        -       (48)      (1)       -
    Revaluation of future
     income tax liability to
     reflect future statutory
     income tax rates        (7)     (8)       -       (26)     (26)       -
    Share option award
     compensation             2       2        -         3        3        -
    Other                     1       2        -         1        5        -
    -------------------------------------------------------------------------
                             88     114    (23)%       145      223    (35)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Blended federal and
     provincial statutory
     tax rates (%)         30.1    30.9 (0.8)pts      30.2     30.9 (0.7)pts
    Effective tax
     rates (%)             26.5    29.8 (3.3)pts      20.4     28.5 (8.1)pts
    -------------------------------------------------------------------------
    

    Blended statutory income taxes decreased in the second quarter and first
six months of 2009 due to lower income before taxes and lower blended
statutory tax rates. The effective tax rates in both years were lower than the
statutory tax rates due to the tax rate differential and consequential
adjustments from reassessments of prior years' tax issues, revaluations of
future income tax liabilities resulting from reductions to future B.C.
provincial income tax rates, as well as future tax rates being applied to
temporary differences. Changes to future B.C. income tax rates were enacted in
the first quarter of 2009, reducing rates beginning July 1, 2010. In 2008, a
rate decrease was enacted for B.C. provincial income taxes, effective July 1,
2008.

    
        Comprehensive income
    

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

    
    5.4 Wireline segment results

    -------------------------------------------------------------------------
    Operating revenues -                                   Six-month periods
     wireline segment      Quarters ended June 30              ended June 30
    ($ millions)           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Voice local             470      497   (5.4)%      940      999   (5.9)%
    Voice long distance     163      175   (6.9)%      329      354   (7.1)%
    Data                    530      522     1.5%    1,068    1,028     3.9%
    Other                    68       63     7.9%      139      126      10%
    -------------------------------------------------------------------------
    External operating
     revenue               1,231   1,257   (2.1)%    2,476    2,507   (1.2)%
    Intersegment revenue      31      32   (3.1)%       64       63     1.6%
    -------------------------------------------------------------------------
    Total operating
     revenues              1,262   1,289   (2.1)%    2,540    2,570   (1.2)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Wireline revenues decreased by $27 million in the second quarter of 2009
and decreased by $30 million in the first six months of 2009, when compared to
the same periods in 2008.

    -   Voice local revenue decreased by $27 million and $59 million,
        respectively, in the second quarter and first six months of 2009,
        when compared to the same periods in 2008. Decreases were mainly due
        to lower revenues from basic access and optional enhanced services
        caused by competition for residential subscribers, the consequent
        decline in local residential access lines and matching of competitive
        offers, as well as decreases in business lines from economic impacts.

    -------------------------------------------------------------------------
    Network access lines (NALs)                           As at June 30
    (000s)                                            2009     2008   Change
    -------------------------------------------------------------------------
    Residential                                      2,320    2,497   (7.1)%
    Business                                         1,824    1,828   (0.2)%
    -------------------------------------------------------------------------
    Total                                            4,144    4,325   (4.2)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net (losses) additions                                 Six-month periods
     in NALs               Quarters ended June 30              ended June 30
    (000s)                 2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Residential             (41)     (48)     15%      (82)     (99)     17%
    Business                (10)       8     n.m.      (20)      20     n.m.
    -------------------------------------------------------------------------
    Total                   (51)     (40)   (28)%     (102)     (79)   (29)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

    
    -   Voice long distance revenues decreased by $12 million and
        $25 million, respectively, in the second quarter and first six months
        of 2009, when compared to the same periods in 2008. The decreases
        were due mainly to lower average per-minute rates resulting from
        ongoing industry-wide price competition, a lower base of residential
        subscribers, and lower billed retail minute volumes, partly offset by
        higher volumes of inbound terminating traffic at favourable foreign
        exchange rates.

    -   Wireline data revenues increased by $8 million and $40 million,
        respectively, in the second quarter and first six months of 2009,
        when compared to the same periods in 2008. The second quarter
        increase was primarily due to subscriber growth in digital
        entertainment services, increased broadcast and videoconferencing
        revenues, as well as increased Internet, enhanced data and hosting
        services, partly offset by lower data equipment sales. The increase
        for the first six months included: (i) higher managed workplace
        revenues from growth in outsourcing services for business customers;
        (ii) subscriber growth in digital entertainment services; (iii)
        increased Internet, enhanced data and hosting services, partly offset
        by lower average pricing from competitive pressures; (iv) growth in
        basic data services from higher volumes of competitor digital network
        access and rate increases; partly offset by lower broadcast and
        videoconferencing revenues and lower data equipment sales, including
        the effect of a larger equipment sale in the first quarter of 2008.

    -------------------------------------------------------------------------
    Wireline Internet and
    TELUS TV subscribers                                  As at June 30
    (000s)                                            2009     2008   Change
    -------------------------------------------------------------------------
    High-speed Internet subscribers(1)               1,108    1,064     4.1%
    Dial-up Internet subscribers                       105      142    (26)%
    -------------------------------------------------------------------------
    Total Internet subscribers(1)                    1,213    1,206     0.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    TELUS TV subscribers                               115       51     125%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Net additions (losses)
    of wireline Internet and
    TELUS TV subscribers                                   Six-month periods
                           Quarters ended June 30              ended June 30
    (000s)                 2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    High-speed Internet
     subscriber net
     additions                3       24    (88)%       17       44    (61)%
    Dial-up Internet
     subscriber net losses   (9)      (4)  (125)%      (19)     (13)   (46)%
    -------------------------------------------------------------------------
    Total Internet
     subscriber net
     additions (losses)      (6)      20   (130)%       (2)      31   (106)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    TELUS TV subscriber
     net additions           17       10      70%       37       16     131%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Opening balances for high-speed Internet subscribers and total
        Internet subscribers for the second quarter of 2009, were reduced by
        five thousand to reflect prior period reporting adjustments.
    -------------------------------------------------------------------------
    

    High-speed Internet subscriber net additions were lower in the second
quarter and first six months of 2009 when compared to the same periods in
2008, due to a maturing market and slower household formation, as well as a
cable-TV competitors' expanded product offerings, promotional pricing and
winback offers. Growth in subscriptions to digital TELUS TV service continued
at a strong pace, as the Company has improved installation capability, rolled
out high-definition TV (HDTV) channels and personal video recorders, increased
geographic coverage and had success with bundle offers.

    
    -   Other revenue increased by $5 million and $13 million, respectively,
        in the second quarter and first six months of 2009, when compared to
        the same periods in 2008, primarily due to higher voice equipment
        sales.

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

    -------------------------------------------------------------------------
    Operating expenses -                                   Six-month periods
     wireline segment      Quarters ended June 30              ended June 30
    ($ millions)           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Salaries, benefits
     except DBPP(1)
     expense (recovery),
     and employee-related
     costs                  456      501   (9.0)%      907      985   (7.9)%
    DBPP expense
     (recovery)               6      (22)    n.m.       10      (45)    n.m.
    Other operations
     expenses               371      373   (0.5)%      750      740     1.4%
    -------------------------------------------------------------------------
    Operations expenses     833      852   (2.2)%    1,667    1,680   (0.8)%
    Restructuring costs      49        3     n.m.       75       10     n.m.
    -------------------------------------------------------------------------
    Total operating
     expenses               882      855     3.2%    1,742    1,690     3.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Total operating expenses increased by $27 million and $52 million,
respectively, in the second quarter and first six months of 2009 when compared
to the same periods in 2008.

    -   Salaries, benefits and employee-related costs decreased by
        $45 million and $78 million, respectively, in the second quarter and
        first six months of 2009 when compared to the same periods in 2008.
        The decreases resulted from a significant reduction in performance
        bonus pay accruals from lower than originally planned operating
        performance for 2009, and efficiency initiatives including those
        targeting discretionary employee-related expenses such as travel and
        training.

    -   The defined benefits pension plans expense increased by $28 million
        and $55 million, respectively, in the second quarter and first
        six months of 2009 when compared to the same periods in 2008, mainly
        due to the decline in value of these plans' assets in 2008.

    -   Other operations expenses decreased by $2 million in the second
        quarter of 2009, and increased by $10 million in the first six months
        of 2009, when compared to the same periods in 2008. Other operations
        expenses in the second quarter reflected expense control initiatives,
        while the increase for the six-month period was primarily due to:
        TELUS TV programming and customer acquisition costs; access facility
        costs associated with implementing new contracts; transit and
        termination charges resulting from higher outbound call volumes to
        U.S. and international destinations and unfavourable foreign exchange
        rates; partly offset by lower advertising and promotional expenses.

    -   Restructuring costs increased by $46 million and $65 million,
        respectively, in the second quarter and first six months of 2009 when
        compared to the same periods in 2008. The increases reflect an array
        of initiatives under the Company's competitive efficiency program.

    -------------------------------------------------------------------------
    Wireline segment - EBITDA                              Six-month periods
                           Quarters ended June 30              ended June 30
                           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    EBITDA ($ millions)     380      434    (12)%      798      880   (9.3)%
    EBITDA margin (%)      30.1     33.7 (3.6)pts     31.4     34.2 (2.8)pts
    -------------------------------------------------------------------------
    

    Wireline segment EBITDA decreased by $54 million and $82 million,
respectively, in the second quarter and first six months of 2009 when compared
to the same periods in 2008, due primarily to higher restructuring costs and
defined benefit pension plan expenses. Excluding the increases in
restructuring costs and pension expenses, wireline EBITDA increased by $20
million and $38 million, respectively, due to lower performance bonus accruals
and cost containment efforts that drove down discretionary employee-related
costs and advertising and promotions costs, partly offset by increased costs
to provision TV services and implement services for new enterprise customers.
The EBITDA margin pressure is generally impacted by declining voice revenues
having higher margins than the growing data services.

    
    5.5 Wireless segment results

    -------------------------------------------------------------------------
    Operating revenues -                                   Six-month periods
     wireless segment      Quarters ended June 30              ended June 30
    ($ millions)           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Network revenue       1,091    1,077     1.3%    2,163    2,114     2.3%
    Equipment revenue        55       65    (15)%      113      128    (12)%
    -------------------------------------------------------------------------
    External operating
     revenue              1,146    1,142     0.4%    2,276    2,242     1.5%
    Intersegment revenue      7        7       -%       14       14       -%
    -------------------------------------------------------------------------
    Total operating
     revenues             1,153    1,149     0.3%    2,290    2,256     1.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Wireless operating indicators
    -------------------------------------------------------------------------
                                                          As at June 30
                                                      2009     2008   Change
    -------------------------------------------------------------------------
    Subscribers (000s)
    Postpaid                                         5,061    4,670     8.4%
    Prepaid                                          1,227    1,162     5.6%
    -------------------------------------------------------------------------
    Total                                            6,288    5,832     7.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Proportion of subscriber base that is
     postpaid (%)                                     80.5     80.0  0.5 pts
    Digital POPs(1) covered (millions)(2)             32.7     32.4     0.9%


                                                           Six-month periods
                           Quarters ended June 30              ended June 30
                           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Subscriber gross
     additions (000s)
    Postpaid                247      279    (11)%      462      483   (4.3)%
    Prepaid                 155      143     8.4%      286      284     0.7%
    -------------------------------------------------------------------------
    Total                   402      422   (4.7)%      748      767   (2.5)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Subscriber net
     additions (000s)
    Postpaid                 95      157    (39)%      139      229    (39)%
    Prepaid                  16       19    (16)%       20       35    (43)%
    -------------------------------------------------------------------------
    Total                   111      176    (37)%      159      264    (40)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ARPU(3) ($)           58.61    62.73   (6.6)%    58.50    62.31   (6.1)%
    Churn, per
     month(3) (%)          1.55     1.43 0.12 pts     1.59     1.48 0.11 pts
    Average monthly minutes
     of use per subscriber
     (MOU)                  402      420   (4.3)%      392      408   (3.8)%
    COA(4) per gross
     subscriber
     addition(3)(5) ($)     311      342   (9.1)%      322      336   (4.2)%
    Retention spend to
     network
     revenue(3)(5) (%)     10.6      9.1  1.5 pts     10.5      8.7  1.8 pts
    EBITDA excluding COA
     ($ millions)           618      629   (1.7)%    1,222    1,245   (1.8)%
    EBITDA to network
     revenue (%)           45.2     44.9  0.3 pts     45.4     46.7 (1.3)pts
    -------------------------------------------------------------------------

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

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

    Wireless segment revenues increased by $4 million and $34 million,
respectively, in the second quarter and first six months of 2009 when compared
to the same periods in 2008. The increases were due to the following:

    -   Network revenue increased by $14 million or 1.3% in the second
        quarter of 2009 and increased by $49 million or 2.3% in the first six
        months of 2009, when compared to the same periods in 2008. The
        increases were due primarily to continuing strong wireless data
        revenue growth and the 7.8% growth in the subscriber base. Overall
        network revenues increased as data revenue growth of $58 million or
        36% in the second quarter was partially offset by lower voice
        revenues of $44 million or 4.8%. Similarly, data revenue growth of
        $119 million or 39% in the first six months was partially offset by
        lower voice revenues of $70 million or 3.9%. Wireless data revenues
        in the second quarter of 2009 represent 20% of network revenue as
        compared to 15% in the same period in 2008. This growth in data
        revenues continues to reflect strength in text messaging and
        smartphone service revenues driven by increased usage and features,
        and increased penetration of smartphones, higher-speed EVDO-capable
        handsets, and mobile Internet keys, partially offset by lower inbound
        data roaming rates.

    -   Blended ARPU of $58.61 decreased by $4.12 or 6.6% in the second
        quarter of 2009 when compared to the same period in 2008, but was
        relatively stable when compared to $58.39 in the first quarter of
        2009. Blended ARPU of $58.50 for the first six months of 2009
        decreased $3.81 or 6.1% when compared to the same period in 2008.
        Second quarter data ARPU of $11.56 increased by $2.39 or 26% when
        compared to the same period in 2008, while voice ARPU of $47.05
        decreased $6.51 or 12%. Data ARPU for the first six months of 2009
        was $11.41, an increase of $2.46 or 28%, while voice ARPU of $47.09
        decreased $6.27 or 12%. Declining voice ARPU is a continuing trend,
        but accelerated due to continued economic weakness in Canada. The
        trend in voice ARPU included a combination of factors: declining
        minutes of use by both consumers and businesses, increased use of
        included-minute rate plans as subscribers shift usage patterns and
        move to optimize price plans, lower Mike service ARPU, decreased
        inbound roaming rates and increased penetration of the Koodo brand
        supporting network revenue and subscriber growth, partly offset by
        higher service feature revenues.
    

    Gross and net subscriber additions include the results of the Koodo brand
launched in March 2008. Postpaid subscriber gross additions represented
approximately 62% of total gross additions for the second quarter and first
six months of 2009. This compares to 66% and 63%, respectively, in the same
periods in 2008.
    Net additions for the second quarter and first six months of 2009 were
111,000 and 159,000, respectively, or down 37% and 40%, respectively. Net
additions were negatively impacted by slower economic activity and higher
overall churn as compared to 2008. Postpaid subscriber net additions
represented 86% and 87%, respectively, of total net additions for the second
quarter and first six months of 2009, as compared to 89% and 87%,
respectively, in the same periods of 2008.
    The blended churn rate increase year-over-year reflects higher
involuntary churn due to rising unemployment levels, lower prior year churn in
the Koodo brand due to its initial launch in March 2008, and continued
competitive marketing intensity within both the postpaid and prepaid market
segments. The blended churn rate for the second quarter of 2009 increased to
1.55% when compared to 1.43% in the second quarter of 2008, but decreased from
1.62% in the first quarter of 2009. The blended churn rate for the first six
months of 2009 was 1.59%, up from 1.48% in the first six months of 2008.

    
    -   Equipment sales, rental and service revenue decreased by $10 million
        or 15% in the second quarter of 2009 and decreased by $15 million or
        12% in the first six months of 2009, when compared to the same
        periods in 2008. The decreases were due to lower per-unit revenues
        resulting from a change in product mix (higher postpaid Koodo
        volumes, higher prepaid volumes and higher penetration of mobile
        Internet keys in 2009), and overall decrease in combined acquisition
        and retention volumes, contributing to lower activation and accessory
        revenues.

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

    -------------------------------------------------------------------------
    Operating expenses -                                   Six-month periods
     wireless segment      Quarters ended June 30              ended June 30
    ($ millions)           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Equipment sales
     expenses               190      176     8.0%      373      329      13%
    Network operating
     expenses               150      149     0.7%      304      290     4.8%
    Marketing expenses       93      121    (23)%      186      224    (17)%
    General and
     administration (G&A)
     expenses
      Salaries, benefits(1)
       and employee-
       related costs        146      157   (7.0)%      285      306   (6.9)%
      Other G&A expenses     77       61      26%      155      119      30%
    -------------------------------------------------------------------------
    Operations expense      656      664   (1.2)%    1,303    1,268     2.8%
    Restructuring costs       4        1     n.m.        6        1     n.m.
    -------------------------------------------------------------------------
    Total operating
     expenses               660      665   (0.8)%    1,309    1,269     3.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Includes defined benefit pension plans recovery of $1 million for the
        second quarter and first six months of 2009, as compared to
        recoveries of $3 million for the second quarter of 2008 and
        $5 million for the first six months of 2008.
    -------------------------------------------------------------------------
    

    Wireless segment total operating expenses decreased by $5 million in the
second quarter of 2009 and increased by $40 million in the first six months of
2009 when compared to the same periods in 2008. The decrease in the quarter
reflects traction from the ongoing cost efficiency programs, restructuring
efforts and much lower marketing spending. The increase for the first six
months supported subscriber acquisition and retention efforts, growth in data
services, and the 8% year-over-year growth in the subscriber base.

    
    -   Equipment sales expenses increased by $14 million and $44 million,
        respectively, in the second quarter and first six months of 2009 as
        compared with the same periods in 2008. The increases were due in
        part to higher retention volumes and higher per-unit costs to support
        migration of clients to smartphones and multimedia devices, combined
        with the impact of an unfavourable U.S. dollar exchange rate
        (compared to 2008), partly offset by lower acquisition volumes.

    -   Network operating expenses increased by $1 million and $14 million,
        respectively, in the second quarter and first six months of 2009 as
        compared with the same periods in 2008. The increases in network
        operating expenses were in support of the growth in data revenues
        (36% for the second quarter), relating to continued penetration of
        smartphones, multimedia devices and mobile Internet keys that drove
        increases in revenue share costs to third parties and licensing costs
        to service providers, partly offset by lower roaming costs from
        reduced rates, particularly in the second quarter.

    -   Marketing expenses decreased by $28 million and $38 million,
        respectively, in the second quarter and first six months of 2009, as
        compared with the same periods in 2008, resulting from lower
        advertising and promotion expenditures relating to the initial launch
        of the Koodo brand in March 2008 as well as more efficient spending.
        Decreased commissions resulted from lower combined acquisition and
        retention volumes, as well as lower rates from a change in product
        mix and loading through variable cost channels. COA per gross
        subscriber addition decreased by $31 and $14, respectively, in the
        second quarter and first six months of 2009 when compared to the same
        periods in 2008. The decrease in COA reflects lower advertising and
        promotion expenditures and commissions, partially offset by higher
        per-unit subsidy costs (reflecting unfavourable foreign exchange
        rates and promotional pricing to support smartphone and multimedia
        penetration).

        Retention costs as a percentage of network revenue increased to 10.6%
        and 10.5% in the second quarter and first six months of 2009 as
        compared to 9.1% and 8.7%, respectively, for the same periods in
        2008. The increase in retention costs was primarily related to
        continued focus on migration of clients to smartphones and multimedia
        devices, unfavourable foreign exchange rates and higher device
        repairs resulting from more complex service offerings.

    -   In G&A expenses, salaries, benefits and employee-related costs
        decreased by $11 million and $21 million, respectively, in the second
        quarter and first six months of 2009, as compared to the same periods
        in 2008, which reflects lower performance bonus accruals and traction
        from competitive efficiency programs. Other G&A expenses increased by
        $16 million and $36 million, respectively, including higher bad debt
        expenses of $6 million and $17 million, respectively. The increase in
        bad debts is reflective of a broader subscriber base, current
        economic conditions and increased involuntary subscriber churn. Other
        G&A expenses also included higher external labour costs.

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

    -------------------------------------------------------------------------
    Wireless segment -                                     Six-month periods
     EBITDA                Quarters ended June 30              ended June 30
                           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    EBITDA ($ millions)     493      484     1.9%      981      987   (0.6)%
    EBITDA margin (%)      42.8     42.1  0.7 pts     42.8     43.8 (1.0)pts
    -------------------------------------------------------------------------
    

    Wireless segment EBITDA increased by $9 million in the second quarter of
2009 and decreased by $6 million in the first six months of 2009, when
compared to the same periods in 2008. Wireless EBITDA, before the increase in
pension and restructuring expenses, increased by $14 million and $3 million,
respectively, resulting from higher network revenue and lower COA expenses,
partly offset by increased retention and network costs supporting data growth
and higher bad debts expense as a result of current economic conditions. The
improvement in EBITDA margin in the second quarter of 2009 reflected increased
network revenues, while network costs were relatively flat and COA expenses
decreased.

    6. Changes in financial position

    Changes in the Consolidated statements of financial position for the
six-month period ended June 30, 2009, are as follows:

    
    -------------------------------------------------------------------------
    Financial
     position
     as at:        June 30,  Dec. 31,       Change             Explanation
    ($ millions)      2009      2008                          of the change
    -------------------------------------------------------------------------
    Current Assets
    Cash and            26         4       22     n.m.  See Section 7:
     temporary                                          Liquidity and capital
     investments,                                       resources
     net

    Accounts           725       966     (241)   (25)%  Reduced by a
     receivable                                         $100 million increase
                                                        in proceeds from
                                                        securitized accounts
                                                        receivable, a
                                                        decrease in wireless
                                                        customer accounts
                                                        receivable due to a
                                                        decrease in postpaid
                                                        ARPU, and seasonally
                                                        lower receivables
                                                        from wireless
                                                        dealers. Accounts
                                                        receivable turnover
                                                        was 43 days at
                                                        June 30, 2009
                                                        compared to 48 days
                                                        at December 31, 2008.

    Income and other    58        25       33     132%  Reflects an increase
     taxes                                              in accrued income and
     receivable                                         other taxes
                                                        receivable, net of
                                                        refunds received.

    Inventories        200       333     (133)   (40)%  Mainly a decrease in
                                                        wireless handset
                                                        volumes, parts and
                                                        accessories, partly
                                                        offset by a higher
                                                        proportion of higher-
                                                        priced data capable
                                                        devices.

    Prepaid expenses   250       176       74      42%  Prepayment of federal
     and other(1)                                       payroll taxes, and
                                                        annual payment of
                                                        property taxes,
                                                        wireless licence
                                                        fees, and maintenance
                                                        contracts, all net of
                                                        amortization.

    Derivative           -        10      (10)  (100)%  Fair value
     assets                                             adjustments to
                                                        foreign exchange
                                                        hedges.
    -------------------------------------------------------------------------
    Current
     Liabilities
    Accounts payable 1,324     1,465     (141)   (10)%  Includes a decrease
     and accrued                                        in accrued capital
     liabilities                                        expenditures,
                                                        licences and
                                                        material, lower
                                                        wireless dealer
                                                        commissions payable,
                                                        and lower payroll and
                                                        accrued employee
                                                        benefits.

    Income and other    15       163     (148)   (91)%  Reflects final income
     taxes payable                                      tax payments in 2009
                                                        for the 2008 tax year
                                                        as well as 2009
                                                        instalments, offset
                                                        by the current income
                                                        tax expense for the
                                                        period.

    Restructuring       81        51       30      59%  New obligations under
     accounts                                           current restructuring
     payable and                                        initiatives exceeded
     accrued                                            payments under
     liabilities                                        previous
                                                        restructuring
                                                        initiatives.

    Dividends payable  149       151       (2)    (1)%  -

    Advance billings   650       689      (39)    (6)%  Primarily a decrease
     and customer                                       in deferred revenue
     deposits                                           from lower wireless
                                                        handset volumes held
                                                        by external channels.

    Current             52         4          48  n.m.  Reflects the May 2010
     maturities of                                      maturity of
     long-term debt                                     $50 million TELUS
                                                        Communications Inc.
                                                        12% Series 1
                                                        debentures, net of a
                                                        small reduction in
                                                        capital leases.

    Derivative          93        75          18   24%  Fair value
     liabilities                                        adjustments for share
                                                        options and
                                                        restricted share unit
                                                        hedges, net of
                                                        options exercised or
                                                        forfeited.

    Current portion    525       459          66   14%  Primarily changes in
     of future                                          TELUS Communications
     income taxes                                       Company and TELE-
                                                        MOBILE COMPANY
                                                        partnerships' income
                                                        that will be
                                                        allocated over the
                                                        next 12 months.
    -------------------------------------------------------------------------
    Working         (1,630)   (1,543)        (87) (6)%  The reduction in
     capital(2)                                         working capital
                                                        contributed to a
                                                        reduction in long-
                                                        term debt.
    -------------------------------------------------------------------------
    Capital Assets, 12,661    12,483         178    1%  See Capital
     Net                                                expenditures in
                                                        Section 7.2 Cash used
                                                        by investing
                                                        activities and
                                                        Depreciation and
                                                        Amortization in
                                                        Section 5.3
                                                        Consolidated results
                                                        from operations.

    Other Assets
    Other          1,527       1,418         109    8%  Primarily pension
     long-term                                          plan funding and
     assets(1)                                          continued
                                                        amortization of
                                                        transitional pension
                                                        assets.

    Investments         43        42           1    2%  Reflects a minor new
                                                        investment.

    Goodwill         3,564     3,564           -    -%  -

    Long-Term Debt   6,085     6,348        (263) (4)%  Includes:
                                                        - Net proceeds of
                                                          $697 million from
                                                          the issue of 4.95%
                                                          five-year notes in
                                                          May,
                                                        - A $172 million
                                                          increase in
                                                          commercial paper,
                                                        - A net reduction of
                                                          $980 million in
                                                          amounts drawn
                                                          against the 2012
                                                          credit facility
                                                          ($nil at June 30),
                                                        - $50 million
                                                          debentures
                                                          reclassified to
                                                          current
                                                          liabilities; and
                                                        - A $104 million
                                                          decrease in the
                                                          Canadian dollar
                                                          value of the 2011
                                                          U.S. dollar Notes,
                                                          which is largely
                                                          offset by a lower
                                                          derivative
                                                          liability (see
                                                          Other Long-Term
                                                          Liabilities).

    Other Long-Term  1,403     1,295         108    8%  Primarily changes in
     Liabilities                                        U.S. dollar exchange
                                                        rates and a fair
                                                        value adjustment of
                                                        the derivative
                                                        liability associated
                                                        with the 2011 U.S.
                                                        dollar Notes.

    Future Income    1,278     1,213          65    5%  An increase in future
     Taxes(1)                                           taxes on long-term
                                                        assets and
                                                        liabilities,
                                                        including unrealized
                                                        gains and losses on
                                                        derivatives and
                                                        reassessments for
                                                        prior year tax
                                                        issues, partly offset
                                                        by a revaluation for
                                                        statutory tax rate
                                                        changes.

    Shareholders' Equity
    Common Share     7,378     7,085         293    4%  Mainly Net income of
     and Non-Voting                                     $564 million and
     Share equity(1)                                    Other comprehensive
                                                        income of $20 million
                                                        attributable to
                                                        holders of Common
                                                        Shares and Non-Voting
                                                        Shares, less $300
                                                        million of dividends
                                                        paid or payable in
                                                        cash.

    Non-controlling
     interests          21        23          (2) (9)%  Dividends paid by a
                                                        subsidiary to non-
                                                        controlling
                                                        interests, net of
                                                        Comprehensive income
                                                        of $2 million
                                                        attributable to non-
                                                        controlling
                                                        interests.
    -------------------------------------------------------------------------
    (1) Commencing in 2009, the new recommendations of the CICA for goodwill
        and intangible assets (Handbook Section 3064) apply to the Company.
        The application of this standard resulted in adjustments to the
        Consolidated statements of financial position. See Section 8.2
        Accounting policy developments.
    (2) Current assets subtracting Current liabilities - an indicator of the
        ability to finance current operations and meet obligations as they
        fall due.
    -------------------------------------------------------------------------
    

    7. Liquidity and capital resources

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

    
    -------------------------------------------------------------------------
    Summary of Consolidated
     statements of cash                                    Six-month periods
     flows                 Quarters ended June 30              ended June 30
    ($ millions)           2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Cash provided by
     operating activities   852      462      84%    1,466    1,087      35%
    Cash (used) by
     investing activities  (552)    (437)   (26)%   (1,030)  (1,437)     28%
    Cash (used) provided
     by financing
     activities            (339)     (28)    n.m.     (414)     376     n.m.
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and temporary
     investments, net       (39)      (3)       -       22       26        -
    Cash and temporary
     investments, net,
     beginning of period     65       49        -        4       20        -
    -------------------------------------------------------------------------
    Cash and temporary
     investments, net,
     end of period           26       46        -       26       46    (43)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    7.1 Cash provided by operating activities

    Cash provided by operating activities increased by $390 million and $379
million, respectively, in the second quarter and first six months of 2009 when
compared to the same periods in 2008. The year-over-year net increases
included the following changes:

    -   Changes in proceeds from securitized accounts receivable (included in
        Net change in non-cash working capital on the Consolidated statements
        of cash flow), increased cash flow by $450 million in the second
        quarter and first six months of 2009 when compared to the same
        periods in 2008. Specifically, the Company increased proceeds from
        securitized accounts receivable by $100 million in the second quarter
        of 2009, while in the second quarter of 2008, the Company reduced
        such proceeds by $350 million.

    -   EBITDA decreased by $45 million and $88 million, respectively, in the
        second quarter and first six months, as described in Section 5:
        Results from operations. The decrease in EBITDA included increases in
        employee defined benefit pension plan expenses and restructuring
        costs. Excluding these non-cash items, EBITDA increased by
        $34 million and $41 million, respectively.

    -   Contributions to employee defined benefit plans increased by
        $27 million and $53 million, respectively, in the second quarter and
        first six months of 2009 when compared to the same periods in 2008.
        See assumptions for defined benefits pension plans in Section 9:
        Annual guidance for 2009.

    -   Payments under restructuring programs increased by $16 million and
        $35 million, respectively, in the second quarter and first six months
        of 2009 when compared to the same periods in 2008.

    -   Interest paid increased by $8 million and $12 million, respectively,
        in the second quarter and first six months of 2009 when compared to
        the same periods in 2008.

    -   Interest of $35 million was received in the second quarter of 2009,
        for the settlement of prior years' tax matters.

    -   Net income tax payments of $8 million in the second quarter of 2009
        included a $54 million recovery for settlement of prior years' tax
        matters. Net income tax payments of $222 million for the first six
        months of 2009 included the second quarter recovery as well as final
        instalment payments in respect of the 2008 tax year made in the first
        quarter. In comparison, net income tax payments in the second quarter
        and first six months of 2008 were $6 million and $7 million,
        respectively. The Company has commenced to make significant income
        tax payments in 2009 (see income tax payment assumptions in
        Section 9).

    -   In 2008, the Company liquidated short-term investments of
        $116 million during the second quarter, which, net of short-term
        investments made during the first quarter, provided $42 million for
        the first half of 2008.

    -   Other changes in non-cash working capital, including reduced customer
        and dealer accounts receivable and inventory in the first half of
        2009.
    

    7.2 Cash used by investing activities

    Cash used by investing activities increased by $115 million in the second
quarter of 2009 when compared to the same period in 2008 as a result of
increased capital expenditures. Cash used by investing activities decreased by
$407 million in the first six months of 2009 when compared to the same period
in 2008, due to the acquisition of Emergis in the prior year, partly offset by
increased capital expenditures.
    Assets under construction were $1,049 million at June 30, 2009, up $367
million from December 31, 2008. The increase related mainly to the Company's
wireline and wireless broadband initiatives, described further below.

    
    -------------------------------------------------------------------------
    Capital expenditures                                   Six-month periods
    ($ millions, except    Quarters ended June 30              ended June 30
     capital intensity)    2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Wireline segment        368      321      15%      646      576      12%
    Wireless segment        189      114      66%      385      179     115%
    -------------------------------------------------------------------------
    TELUS consolidated      557      435      28%    1,031      755      37%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less capital
     expenditures(1)        316      483    (35)%      748    1,112    (33)%
    Capital
     intensity (%)(2)        23       18    5 pts       22       16    6 pts
    -------------------------------------------------------------------------

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

    Capital expenditures increased by $122 million and $276 million,
respectively, in the second quarter and first six months of 2009, when
compared to the same periods in 2008. Capital expenditures levels for the
first half of 2009 are on a run rate consistent with the annual guidance of
approximately $2.05 billion. Capital intensity of 22% for the first half of
2009 reflects a wireline intensity level of 25% (22% in the first half of
2008) and a wireless intensity level of 17% (8% in the first half of 2008).
EBITDA less capital expenditures decreased by $167 million and $364 million
respectively, due mainly to these increased capital intensity levels, as well
as lower EBITDA as described in Section 5.3.

    
    -   Wireline segment capital expenditures increased by $47 million and
        $70 million, respectively, in the second quarter and first six months
        of 2009, relative to expenditures in the same periods in 2008. The
        increases were mainly due to investments in broadband and TELUS TV
        initiatives primarily in B.C. and Alberta. Partly offsetting this
        were expenditures in 2008 for the billing and client care platform
        implemented for B.C. residential customer accounts in July 2008.
        Wireline cash flow (EBITDA less capital expenditures) was $12 million
        in the second quarter of 2009, reflecting a decrease of $101 million
        or 89% when compared to the same period in 2008. Wireline cash flow
        for the first six months of 2009 was $152 million, a decrease of
        $152 million or 50% from the same period in 2008. Wireline cash flow
        was significantly impacted in 2009 by increased restructuring charges
        and increased defined benefit plan pension expenses.

    -   Wireless segment capital expenditures increased by $75 million and
        $206 million, respectively, in the second quarter and first
        six months of 2009, due mainly to new investments in HSPA technology
        and service capability for a planned launch by early 2010.
        Expenditures in the second quarter and first half of 2008 were
        relatively low, pending the outcome of the July 2008 AWS spectrum
        auction and finalization of the Company's wireless technology
        evolution plans. Wireless cash flow (EBITDA less capital
        expenditures) was $304 million in the second quarter of 2009,
        reflecting a decrease of $66 million or 18% when compared to the same
        period in 2008. Wireless cash flow for the first six months of 2009
        was $596 million, a decrease of $212 million or 26% from the same
        period in 2008.

    7.3 Cash provided (used) by financing activities

    Net cash used by financing activities was $339 million in the second
quarter of 2009, as compared to $28 million in the same period of 2008. For
the first six months of 2009, net cash used by financing activities was $414
million, as compared to net cash provided by financing activities of $376
million in the same period of 2008.

    -   Cash dividends paid to shareholders in the second quarter of 2009
        totalled $151 million, in respect of the first quarter declared
        dividend (47.5 cents per share) that was remitted and paid April 1,
        2009. In comparison, $289 million in cash dividends paid during the
        second quarter of 2008 were in respect of remitted 2008 first and
        second quarter declared dividends (45 cents per share, each).

        Cash dividends paid to shareholders in the first six months of 2009
        totalled $302 million and included remittance and payment on
        January 2 of the fourth quarter 2008 declared dividend (47.5 cents
        per share). In comparison, $289 million in dividends paid for the
        first six months of 2008 were in respect of the 2008 first and second
        quarter dividends.

    -   There have been no purchases of TELUS shares under the NCIB program
        in 2009. The maximum number of shares that may be repurchased under
        the current program, before December 22, 2009, is four million Common
        Shares and four million Non-Voting Shares. During the second quarter
        of 2008, the Company repurchased approximately 1.7 million shares for
        $77 million, while over the first six months of 2008 the Company
        repurchased approximately 4.6 million shares for $199 million.

    -   Long-term debt issues

        In May 2009, the Company successfully closed a public offering of
        4.95%, Series CF Notes maturing May 2014, for aggregate gross
        proceeds of $700 million. Net proceeds of approximately $697 million
        were used for corporate purposes, including repayment of amounts
        outstanding under the 2012 Credit Facility and reducing outstanding
        commercial paper. The Series CF 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 71 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 CF 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. Credit rating agencies assigned the
        same investment-grade ratings to these Notes as TELUS' previous
        Notes. See Section 7.7 Credit ratings.

        In 2008, during the second quarter, the Company publicly issued
        $500 million, 5.95% Series CE Notes maturing in April 2015. Net
        proceeds were used for corporate purposes including a net reduction
        in utilized 2012 bank facilities and a reduction in proceeds from
        securitized accounts receivable, with the latter reflected as a
        change in non-cash working capital (see Section 7.1 Cash provided by
        operating activities).

    -   Bank facilities and commercial paper

        The Company often shifts among short-term financing sources to take
        advantage of interest cost differentials. In the first quarter of
        2009, net amounts drawn on the 2012 credit facility decreased by
        $680 million to $300 million, while issued commercial paper increased
        by $756 million to $1,188 million. Due primarily to the successful
        issue of new Notes in May 2009, during the second quarter the Company
        reduced net amounts drawn on the 2012 credit facility to $nil and
        reduced commercial paper to $604 million.

        In 2008, during the first quarter, the Company increased utilization
        of the 2012 credit facility from $nil to $321 million and increased
        the amount of issued commercial paper by $213 million to $800 million
        for general corporate purposes, including the January acquisition of
        Emergis. During the second quarter of 2008, the Company reduced the
        amount drawn on the 2012 credit facility by $159 million to a balance
        of $162 million at June 30, while the balance of commercial paper was
        unchanged.

    -   TELUS Communications Inc. long-term debt

        Effective June 12, 2009, TELUS Corporation has guaranteed the payment
        of TCI debentures' principal and interest and TCI first mortgage
        bonds' principal and interest.

    7.4 Liquidity and capital resource measures

    -------------------------------------------------------------------------
    Liquidity and capital resource measures
    As at, or 12-month periods ended, June 30         2009     2008   Change
    -------------------------------------------------------------------------
    Components of debt and coverage ratios(1)
     ($ millions)
    -------------------------------------------------------------------------
    Net debt                                         7,255    6,644      611
    Total capitalization - book value(2)            14,764   13,678    1,086
    EBITDA - excluding restructuring costs           3,820    3,830      (10)
    Net interest cost                                  441      419       22
    -------------------------------------------------------------------------
    Debt ratios
    -------------------------------------------------------------------------
    Fixed-rate debt as a proportion of
     total indebtedness (%)                             86       83    3 pts
    Average term to maturity of debt (years)           4.4      4.8     (0.4)
    Net debt to total capitalization (%)(1)           49.1     48.6  0.5 pts
    Net debt to EBITDA - excluding
     restructuring costs(1)                            1.9      1.7      0.2
    -------------------------------------------------------------------------
    Coverage ratios(1)
    -------------------------------------------------------------------------
    Interest coverage on long-term debt
     (Earnings coverage)                               4.2      4.7     (0.5)
    EBITDA - excluding restructuring costs
     interest coverage                                 8.7      9.1     (0.4)
    -------------------------------------------------------------------------
    Other measures(3)
    -------------------------------------------------------------------------
    Free cash flow ($ millions)(4)                    (152)   1,621   (1,773)

    Dividend payout ratio(1) of sustainable
     net earnings guideline - 45 to 55%
    ---------------------------------------
    Dividend payout ratio - actual earnings,
     excluding income tax-related adjustments
     and net-cash settlement feature (%)                59       52    7 pts
    Dividend payout ratio - actual earnings (%)         53       43   10 pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) See Section 11.4 Definitions of liquidity and capital resource
        measures.
    (2) The figure for June 30, 2008 reflects an adjustment to retained
        earnings, resulting from adoption of the new recommendations of the
        CICA for goodwill and intangible assets. See Section 8.2.
    (3) Twelve-month trailing figures.
    (4) See Section 11.2 Free cash flow for the definition.
    -------------------------------------------------------------------------
    

    Net debt at June 30, 2009 increased from one year earlier, with the
majority of the increase having occurred in the third quarter of 2008 to
facilitate payment for AWS spectrum licences. Total capitalization increased
primarily from increased net debt and higher Common Share and Non-Voting Share
equity, as NCIB share repurchases have decreased over the past twelve months.
    The average term to maturity of debt was 4.4 years at June 30, 2009,
decreasing by 0.4 years from one year earlier due to the elapse of time,
partly offset by the May 2009 $700 million debt issue, reduced commercial
paper and repayment of amounts drawn on the 2012 credit facility. The
proportion of debt on a fixed-rate basis was 86% at June 30, 2009, up from 83%
one year earlier due to the May 2009 debt issue, reduced commercial paper and
repayment of amounts drawn on the 2012 credit facility, partly offset by
increased securitization of accounts receivable.
    The interest coverage on long-term debt ratio was 4.2 times for the
12-month period ended June 30, 2009, down from 4.7 times one year earlier. The
decrease primarily reflected lower income before income taxes and long-term
interest expense, as well as an increase in long-term interest expense. The
EBITDA interest coverage ratio for the 12-month period ended June 30, 2009 was
8.7 times, down from 9.1 times one year earlier due to an increase in net
interest cost.
    Free cash flow for the 12-month period ended June 30, 2009, decreased by
$1.77 billion when compared to free cash flow for the 12-month period ended
June 30, 2008. The decrease was largely due to the $882 million payment for
AWS spectrum licences in the third quarter of 2008, $474 million increased
general capital spending, a $338 million increase in income tax payments net
of recoveries, and $56 million higher payments under restructuring
initiatives.
    The Company's strategy is to maintain the financial policies and
guidelines set out below. The Company believes that these measures are
currently at the optimal level, and by maintaining credit ratings in the range
of BBB+ to A-, or the equivalent, are expected to provide reasonable access to
capital markets.

    
    TELUS' long-term financial guidelines and policies are:

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

        The ratio at June 30, 2009 was 1.9 times.

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

        The target guideline is on a prospective basis, rather than on a
        trailing basis. The ratio calculated for the 12-month trailing period
        ended June 30, 2009, excluding income tax-related adjustments and a
        minimal effect from a net-cash settlement feature from earnings, was
        59%. The measure calculated based on actual earnings for the same
        period was 53%.
    

    7.5 Credit facilities

    At June 30, 2009, TELUS had available liquidity exceeding $1.5 billion
from unutilized credit facilities, as well as unutilized availability under
its accounts receivable securitization program, consistent with the Company's
objective of generally maintaining at least $1 billion of available liquidity.
On June 19, 2009, the terms of the 364-day credit facility were amended such
that the amount available became $300 million and the expiry date was extended
to December 31, 2010.

    
    TELUS credit facilities at June 30, 2009
    -------------------------------------------------------------------------
                                                    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      -     (220)    (604)   1,176
    364-day
     revolving
     facility(2)  December 31, 2010    300      -        -        -      300
    Other bank
     facilities                   -     64      -       (6)       -       58
    -------------------------------------------------------------------------
    Total                         -  2,364      -     (226)    (604)   1,534
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    TELUS' revolving credit facilities contain customary covenants, including
a requirement that TELUS not permit its consolidated Leverage Ratio (debt to
trailing 12-month EBITDA) to exceed 4 to 1 (approximately 1.9 to 1 at June 30,
2009) and not permit its consolidated Coverage Ratio (EBITDA to interest
expense on a trailing 12-month basis) to be less than 2 to 1 (approximately
8.7 to 1 at June 30, 2009) at the end of any financial quarter. There are
certain minor differences in the calculation of the Leverage Ratio and
Coverage Ratio under the credit agreements as compared with the calculation of
Net debt to EBITDA and EBITDA interest coverage. Historically, the
calculations have not been materially different. The covenants are not
impacted by revaluation of capital assets, intangible assets and goodwill for
accounting purposes. Continued access to TELUS' credit facilities is not
contingent on the maintenance by TELUS of a specific credit rating.

    7.6 Accounts receivable sale

    TELUS Communications Inc. (TCI), a wholly owned subsidiary of TELUS, is a
party to an agreement with an arm's-length securitization trust associated
with a major Schedule I Canadian bank, under which TCI is able to sell an
interest in certain of its trade receivables. As a result of selling the
interest in certain of the trade receivables on a fully serviced basis, a
servicing liability is recognized on the date of sale and is, in turn,
amortized to earnings over the expected life of the trade receivables. An
amendment in May 2009 resulted in the term of this revolving-period
securitization agreement being extended three years, for an amount up to a
maximum of $500 million.
    TCI is required to maintain at least a BBB (low) credit rating by DBRS
Ltd. or the securitization trust may require the sale program to be wound
down. The necessary credit rating was exceeded by three levels at A (low) as
of August 7, 2009.

    
    -------------------------------------------------------------------------
    Balance of proceeds from
     securitized receivables                 2009,    2009,    2008,    2008,
    ($ millions)                          June 30  Mar. 31  Dec. 31  Sept. 30
    -------------------------------------------------------------------------
                                              400      300      300      250
    -------------------------------------------------------------------------


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

    7.7 Credit ratings

    There were no changes to the Company's investment grade credit ratings in
the first six months of 2009. Four credit rating agencies that cover TELUS
assigned their existing ratings, all with a stable outlook or trend, to the
Company's May 2009 $700 million Note issue. DBRS Ltd. confirmed its ratings
for TELUS Corporation and TELUS Communications Inc. on June 17, 2009.

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

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

    7.8 Financial instruments, commitments and contingent liabilities

        Financial instruments (Note 4 of the interim Consolidated financial
        statements)

    The Company's financial instruments, and the nature of risks that they may
be subject to, are described in the Company's 2008 Management's discussion and
analysis. Certain updates are provided below.

        Credit risk - Accounts receivable/allowance for doubtful accounts
    

    Credit risk associated with accounts receivable is minimized by the
Company's large and diverse customer base, which covers substantially all
consumer and business sectors in Canada. The Company follows a program of
credit evaluations of customers and limits the amount of credit extended when
deemed necessary. The Company maintains allowances for potential credit
losses, and any such losses to date have been within management's
expectations. The weighted average life of past-due customer accounts
receivable is 70 days, increased from 64 days at December 31, 2008.

    
        Liquidity risk
    

    As a component of capital structure financial policies, discussed under
Capabilities - Section 4.3 Liquidity and capital resources, the Company
manages liquidity risk by maintaining a daily cash pooling process which
enables the Company to manage its liquidity surplus and liquidity requirements
according to the actual needs of the Company and its subsidiaries, by
maintaining bilateral bank facilities and syndicated credit facilities, by
maintaining a commercial paper program, by the sales of trade receivables to
an arm's length securitization trust, by continuously monitoring forecast and
actual cash flows and by managing maturity profiles of financial assets and
financial liabilities.
    TELUS has significant debt maturities in future years. The Company has
access to a shelf prospectus, in effect until September 2009, pursuant to
which it can offer $1.8 billion of debt or equity securities. The Company
intends to renew the shelf prospectus and believes that its investment grade
credit ratings provide reasonable access to capital markets.

    
        Market risk

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

    Commitments and contingent liabilities

        Price cap deferral accounts

    There are no significant changes affecting the price cap deferral account
balance of $145 million, since the discussion in TELUS' 2008 Management's
discussion and analysis.

        Guarantees
    

    Canadian GAAP requires the disclosure of certain types of guarantees and
their maximum, undiscounted amounts. As at June 30, 2009, the Company's
maximum undiscounted guarantee amounts, without regard for the likelihood of
having to make such payment, were not material.

    Indemnification obligations: In the normal course of operations, the
Company may provide indemnification in conjunction with certain transactions.
Other than obligations recorded as liabilities at the time of the transaction,
historically the Company has not made significant payments under these
indemnifications.

    In connection with its 2001 disposition of TELUS' directory business, the
Company agreed to bear a proportionate share of the new owner's increased
directory publication costs if the increased costs were to arise from a change
in the applicable CRTC regulatory requirements. The Company's proportionate
share would have been 80% through May 2006, declining to 40% in the next
five-year period and then to 15% in the final five years. Should the CRTC take
any action that would result in the owner being prevented from carrying on the
directory business as specified in the agreement, TELUS would indemnify the
owner in respect of any losses that the owner incurred.
    As at June 30, 2009, the Company has no liability recorded in respect of
indemnification obligations.

    
        Claims and lawsuits
    

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

    7.9 Outstanding share information

    The table below contains a summary of the outstanding shares for each
class of equity at June 30, 2009. The total number of outstanding and issuable
shares is also presented, assuming full conversion of outstanding options and
shares reserved for future option grants. The number of outstanding and
issuable shares at August 7, 2009 was not materially different from June 30,
2009.

    
    -------------------------------------------------------------------------
                                                        Non-
    Outstanding shares                       Common   Voting    Total
    (millions of shares)                     Shares   Shares   shares
    -------------------------------------------------------------------------
    Common equity
      Outstanding shares at June 30, 2009       175      143      318     (1)
      Options outstanding and issuable(2)
       at June 30, 2009                           -       15       15
    -------------------------------------------------------------------------
                                                175      158      333
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) For the purposes of calculating diluted earnings per share, the
        number of shares was 318 million for the three-month and six-month
        periods ended June 30, 2009.
    (2) Assuming full conversion and ignoring exercise prices.
    -------------------------------------------------------------------------
    

    8. Critical accounting estimates and accounting policy developments

    8.1 Critical accounting estimates

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

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

    Accounting policies are consistent with those described in Note 1 of
TELUS' 2008 Consolidated financial statements, other than for developments set
out below. The discussion in this section includes expectations at the
reporting date about the transition from Canadian GAAP to International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB). The discussion is qualified by the Caution regarding
forward-looking statements at the beginning of Management's discussion and
analysis.

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

    In 2006, Canada's Accounting Standards Board ratified a strategic plan
that will result in Canadian GAAP, as used by publicly accountable
enterprises, being replaced with International Financial Reporting Standards
as issued by the International Accounting Standards Board (IFRS-IASB) over a
transitional period to be complete by 2011. TELUS will be required to report
using the IFRS-IASB standards effective for interim and annual financial
statements relating to fiscal years beginning no later than on or after
January 1, 2011, the date that the Company has selected for adoption.

    
    Canada's Accounting Standards Board will phase in or transition to
IFRS-IASB through a combination of three methods:

    (i)   As current joint-convergence projects of the United States
          Financial Accounting Standards Board and the IASB are agreed upon,
          they will be adopted by Canada's Accounting Standards Board and may
          be introduced in Canada before the publicly accountable
          enterprises' transition date to IFRS-IASB.

    (ii)  Standards identified by Canada's Accounting Standards Board as key
          or significant in which the Accounting Standards Board has
          undertaken a project to converge Canadian GAAP with the related
          IFRS prior to transition date and issued as Canadian GAAP.

    (iii) Standards not subject to a joint-convergence project have been
          exposed in an omnibus manner for introduction at the time of the
          publicly accountable enterprises' transition date to IFRS-IASB.
    

    The first two transition methods may, or will, result in the Company
either having the option to, or being required to, effectively, change over
certain accounting policies to IFRS-IASB prior to 2011 in the event a new
standard is issued or early adoption is permitted.
    The IASB's work plan currently, and expectedly, has projects underway
that are expected to result in new pronouncements that continue to evolve
IFRS-IASB, and as a result, IFRS-IASB as at the transition date is expected to
differ from its current form. In November 2008, the United States Securities
and Exchange Commission issued a proposed road map, with seven milestones,
that would permit certain United States reporting issuers to use IFRS-IASB in
their filings. This proposal is a significant development as it also
contemplates mandatory usage of IFRS-IASB by United States reporting issuers
as early as 2014 (such a mandatory usage decision - Milestone 6 - is
anticipated to be made by the United States Securities and Exchange Commission
in 2011). It is not possible to currently assess the impact, if any, this
proposal will have on the IASB's work plan; however, Milestone 1 is a
requirement for improvements in accounting standards and a subsequent
consideration by the United States Securities and Exchange Commission of
whether IFRS-IASB are of high quality and sufficiently comprehensive.

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

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

    Initial impact           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 was completed in the first quarter of
                             2008. The Company used a diagnostic process, and
                             identified a modest number of topics possibly
                             impacting either the Company's financial results
                             and/or the Company's effort necessary to change
                             over to IFRS-IASB. This diagnostic resulted in
                             the development of a detailed plan under which
                             activities are being conducted. The IASB has
                             activities currently underway which may, or
                             will, change IFRS-IASB and such change may, or
                             will, impact the Company. The Company will
                             assess any such change as a component of its key
                             elements phase.
    -------------------------------------------------------------------------

    Key elements             This phase includes identification, evaluation
                             and selection of accounting policies necessary
                             for the Company to change over to IFRS-IASB. As
                             well, this phase includes other operational
                             elements such as information technology,
                             internal control over financial reporting and
                             training.

                             As at June 30, 2009, the identification,
                             evaluation and selection of accounting policies
                             necessary for the Company to change over to
                             IFRS-IASB, considering impacts on operational
                             elements, such as information technology, are
                             largely completed. The evaluation of the impact
                             on the Company's internal control over financial
                             reporting will be considered in the later part
                             of the year.

                             Communications activities leveraging internal
                             resources occurred during the current reporting
                             period, and training has been made available by
                             way of an internal IFRS website dedicated to the
                             conversion. Targeted training will be provided
                             on standards that are applicable to TELUS'
                             transition.

                             The Company has regularly updated its Audit
                             Committee of the Board of Directors on the
                             status of the project, implications and expected
                             range of impacts.
    -------------------------------------------------------------------------

    Embedding                This phase will integrate the solutions into the
                             Company's underlying financial system and
                             processes that are necessary for the Company to
                             change over to IFRS-IASB.
    -------------------------------------------------------------------------
    

    The Company will present its results for fiscal 2010 using contemporary
Canadian GAAP. In 2011, the Company will present its comparative results for
fiscal 2010 using contemporary IFRS-IASB. To accomplish this, in 2010 the
Company will effectively maintain two parallel books of account.
    For the balance of 2009, the Company will conclude on accounting policy
choices and begin preparing its accounting systems accordingly, to enable
preparation of its opening financial position under IFRS-IASB for 2010.
Although its impact assessment activities are well underway and commencing
according to plan, continued progress is necessary before the Company can
prudently increase the specificity of the disclosure of pre- and
post-IFRS-IASB changeover accounting policy differences, other than as set out
below:

    
        Goodwill and intangible assets
    

    As an activity consistent with Canadian GAAP being converged with
IFRS-IASB, the previously existing recommendations for goodwill and intangible
assets and research and development costs were replaced with new
recommendations (CICA Handbook Section 3064).
    Commencing with the Company's 2009 fiscal year, the new recommendations
of the CICA for goodwill and intangible assets apply to the Company. This
change in accounting policy has been made in accordance with the transitional
provisions of the new recommendations.
    The new recommendations provide extensive guidance on when expenditures
qualify for recognition as intangible assets. Prior to the Company's 2009
fiscal year, upfront wireline customer activation and connection fees, along
with the corresponding direct costs not in excess of revenues, were deferred
and recognized by the Company over the average expected term of the customer
relationship; the impact of the new recommendations on the Company is that
these direct costs do not qualify for recognition as intangible assets.
    The effects of the application of this new standard on the Company's
Consolidated statements of income and other comprehensive income for the
three-month and six-month periods ended June 30, 2009, and the effects of the
application of this new standard on the Company's Consolidated statements of
financial position as at June 30, 2009, and December 31, 2008 are presented in
Note 2(b) of the interim consolidated financial statements. Due to the nature
of these direct costs and the periods of time over which they have been
deferred and recognized, the Company's results of operations for the periods
currently presented are not materially affected by these new recommendations.

    
        Business combinations and non-controlling interests
    

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

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

    -   acquisition costs being expensed;

    -   acquisition-created restructuring costs being expensed;

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

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

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

    -   the Consolidated statements of financial position now recognizes non-
        controlling interest as a separate component of shareholders' equity;
        and

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

        Accounting policy developments in fiscal 2008

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

        Financial instruments - disclosure; presentation
    

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

    
        Inventories
    

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

    9. Annual guidance for 2009

    The discussion in this section is qualified by the Caution regarding
forward-looking statements at the beginning of Management's discussion and
analysis.
    The Company has revised its 2009 annual guidance, last updated in the
first quarter 2009 Management's discussion and analysis. Revisions this
quarter reflect weaker than expected results, higher expected full-year
restructuring costs, and the Company's revised outlook for the full year.

    
                         ----------------------------------------------------
                                                              Previous annual
    Revised annual          Annual guidance   Expected change     guidance,
     guidance                   for 2009        from 2008        May 7, 2009
    -------------------------------------------------------------------------
    Consolidated
      Revenues                     $9.65 to                          $9.7 to
                              $9.80 billion        0 to 2 %     $9.9 billion

      EBITDA(1)                    $3.6 to                         $3.625 to
                               $3.7 billion     (5) to (2)%   $3.775 billion

      EPS - basic, excluding
       income tax-related
       adjustments(2)        $3.10 to $3.30     (8) to (2)%   $3.15 to $3.45

      EPS - basic(3)         $3.35 to $3.55      (5) to 1 %   $3.35 to $3.65

      Capital
       expenditures          Unchanged at                            Approx.
                      approx. $2.05 billion            10 %    $2.05 billion

    Wireline segment
      Revenue
       (external)         Unchanged at $5.0                          $5.0 to
                            to $5.1 billion        0 to 2 %     $5.1 billion

      EBITDA                      $1.625 to
                             $1.675 billion     (8) to (6)%  $1.65 to $1.725
                                                                     billion

    Wireless segment
      Revenue (external)           $4.65 to                          $4.7 to
                              $4.70 billion        0 to 1 %     $4.8 billion

      EBITDA                      $1.975 to                        $1.975 to
                             $2.025 billion      (1) to 1 %    $2.05 billion
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) See Section 11.1 Earnings before interest, taxes, depreciation and
        amortization (EBITDA) for the definition, which includes
        restructuring costs.
    (2) A non-GAAP measure.
    (3) Guidance for basic EPS includes income tax-related adjustments
        recorded in the first and second quarters of 2009.
    -------------------------------------------------------------------------

    The following key assumptions were made at the time the original 2009
targets were announced on December 16, 2008. Management's revised expectations
are noted.

    -------------------------------------------------------------------------
    Assumptions for 2009 original     Actual result to date, and confirmed or
     targets                           revised expectations for 2009 guidance
    -------------------------------------------------------------------------
    Ongoing wireline competition in   Expectation unchanged, as evident by a
    both business and consumer        major cable-TV competitor's continued
    markets, particularly from        digital telephone and Internet
    cable-TV and VoIP companies       subscriber additions and increasing
                                      penetration among business customers.
    -------------------------------------------------------------------------
    Canadian wireless industry        Expectation may be too high given
    market penetration gain of        Canadian economic contraction
    approximately 4.5 percentage      experienced in the first half of 2009.
    points for the year
    -------------------------------------------------------------------------
    Downward pressure on wireless     Expectation confirmed by 6%
    ARPU                              year-over-year decrease in TELUS'
                                      blended ARPU in the first half of 2009,
                                      which is more than originally expected.
                                      See Section 5.5 Wireless segment
                                      results.
    -------------------------------------------------------------------------
    New competitive wireless entry    Expectation unchanged.
    beginning in the fourth quarter
    of 2009 with most entrants
    starting in 2010
    -------------------------------------------------------------------------
    Restructuring expenses of         Revised to approximately $150 million
    approximately $50 million to      to reflect increased operational
    $75 million                       efficiency activities (previously
                                      revised with the release of first
                                      quarter 2009 financial results to
                                      approximately $125 million for the full
                                      year of 2009).
    -------------------------------------------------------------------------
    A blended statutory tax rate of   Expectation unchanged. The blended
    approximately 30 to 31%           statutory income tax rate for the first
                                      six months of 2009 was 30.2%.
    -------------------------------------------------------------------------
    Net income tax payments of        The current estimate for 2009 income
    approximately $320 to             tax payments net of recoveries is
    $350 million                      approximately $270 to $310 million.
                                      Income tax payments in the first six
                                      months of 2009 were $222 million,
                                      including final payments for 2008 and
                                      instalments for 2009 less income tax
                                      recoveries received in the second
                                      quarter.
    -------------------------------------------------------------------------
    Forecast average exchange rate    The current expectation is that the
    of U.S. $0.80 per Canadian        Canadian dollar exchange rate will
    dollar                            average U.S. $0.85 in 2009, based on a
                                      composite of forecasts by Canadian
                                      chartered banks, the Bank of Canada,
                                      Conference Board of Canada and internal
                                      forecasts.

                                      The average closing exchange
                                      rate for the six-month period ended
                                      June 30, 2009 was approximately U.S.
                                      $0.829, per Canadian dollar. The
                                      closing rate at June 30, 2009 was
                                      U.S. $0.860, while the daily closing
                                      rate varied between approximately
                                      U.S. $0.770 and U.S. $0.925 over the
                                      first six months of 2009. (Source: Bank
                                      of Canada)

                                      Most of 2009 capital expenditures,
                                      including wireless HSPA network
                                      expenditures, are priced in Canadian
                                      dollars. The Company employs currency
                                      hedges for a varying portion of
                                      wireless handset purchases, as
                                      circumstances warrant. The principal
                                      repayments and interest obligations on
                                      the Company's U.S. dollar denominated
                                      debt are effectively fixed by cross-
                                      currency interest rate swap agreements.
    -------------------------------------------------------------------------
    A pension accounting discount     The assumptions for defined benefit
    rate was estimated at 7.00%       pension plan accounting are set at
    (subsequently set at 7.25%) and   the beginning of each year. The
    expected long-term return of      Company's estimate for contributions
    7.25% (consistent with the        to defined benefit pension plans has
    Company's long-run returns and    been revised to $191 million for 2009,
    its future expectations).         based on recent actuarial reports.
    Defined benefit pension plans
    net expenses and funding were
    both estimated to increase in
    2009, mainly due to the decline
    in value of defined benefits
    pension plans assets in 2008.

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

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

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

    10. Risks and risk management

    The following are updates to the risks and risk management discussion in
Section 10 of TELUS' Management's discussion and analysis for 2008 and the
first quarter of 2009.

    10.1 Regulatory

        CRTC review of broadcasting in new media - Broadcasting Regulatory
        Policy CRTC 2009-329
    

    On June 4, 2009, the CRTC issued its determinations regarding
broadcasting in new media following a public hearing initiated by Broadcasting
Notice of Public Hearing 2008-11. Some proposals considered by the CRTC
included mandating a contribution requirement for Internet service providers
to create a fund to subsidize the creation of Canadian new media content and
implementing incentives for the promotion of Canadian new media content on the
Internet. These proposals raised significant jurisdictional, public policy and
enforcement issues for the CRTC.
    The CRTC rejected all these new proposals for the regulation of new media
and instead determined that the current exemption order remains appropriate
with a few minor changes, such as introducing some reporting requirements, for
which the details will be determined in a follow-up proceeding. The CRTC has a
policy of reviewing its exemption orders every five years and it will continue
to monitor the new media environment during this time. Also, the CRTC
indicated that it will refer to the Federal Court of Appeal the legal issue as
to the applicability of the Broadcasting Act to Internet service providers so
that this legal issue is no longer uncertain at the time of the next review of
the new media exemption order. The CRTC also endorsed a proposal for the
Government of Canada to develop a national digital strategy.

    
        CRTC confirmation of its intention that broadcast distribution
        undertakings (BDUs) compensate broadcasters for local signals
        (Broadcasting Regulatory Policy CRTC 2009-406 and Broadcasting Notice
        of Consultation CRTC 2009-411)
    

    On July 6, 2009, the CRTC made announcements concerning subsidies and new
revenue sources for local television. First, the CRTC increased the amount
paid by BDUs into a fund to assist local programming to 1.5% of gross
broadcasting revenues of all BDUs. This contribution is over and above the 5%
of gross revenues paid by BDUs to the Canadian Media Fund or required to be
spent on their own community programming services. Second, the CRTC reversed
its previous determinations rejecting the payment of subscriber fees by BDUs
for the local television signals available for reception free over-the-air and
has now determined that broadcasters should be compensated for the value of
their signals which are required to be carried by all BDUs. In a public
hearing scheduled to commence on September 29, 2009, the CRTC expects to
examine the mechanics of a negotiated solution.
    The value for signal regime introduced by the CRTC is expected to result
in increased consumer costs without an increase in value of services received.
The expected increase in cost to consumers could negatively impact growth in
the broadcasting distribution sector, including TELUS TV services, in future.

    10.2 Human resources

    
        Collective bargaining at TELUS Québec
    

    In the second quarter of 2009, an agreement was signed with the Syndicat
des agents de maîtrise de TELUS (SAMT), covering a small number of
professional and supervisory team members in Quebec. The new agreement expires
on December 31, 2012. Collective bargaining in the TELUS Québec region is
expected to continue in 2009 for an agreement with the Syndicat québécois des
employés de TELUS (SQET) covering approximately 1,050 trades, clerical and
operator services team members. The current agreement with the SQET expires on
December 31, 2009. Under the terms of the Canada Labour Code, no legal work
stoppage can occur until after certain statutory conditions are met, including
expiration of the collective agreement. Risks associated with a legal work
stoppage in 2009 are considered low.

    10.3 Economic growth and fluctuations

    
        Continuation of economic recessions may adversely impact TELUS
    

    An extended economic downturn may cause residential and business
telecommunications customers to delay new service purchases, reduce volumes of
use, discontinue use of services or seek lower-priced alternatives.
Significant economic downturns or recessions could adversely impact TELUS'
profitability, free cash flow and bad debt expense, and potentially require
the Company to record impairments to the carrying value of its assets
including, but not limited to, its intangible assets with indefinite lives
(spectrum licences) and its goodwill. Impairments to the carrying value of
assets would result in a charge to earnings and a reduction in shareholders'
equity, but would not affect cash flow.

    Risk mitigation: The Company cannot completely mitigate economic risks.
Through 2008, TELUS benefited from strong growth in the Canadian wireless
sector. Wireless results for the first quarter of 2009 were significantly
affected by the economic downturn, and while stabilized in the second quarter
of 2009, wireless subscriber growth and ARPU continue to be affected. In
addition, the cyclical resource economies in B.C. and Alberta are now
experiencing contraction or lower growth. TELUS continues to focus on four key
vertical markets of the public sector, healthcare, financial services and
energy. The public sector, healthcare and financial services vertical markets
are generally expected to be less exposed to the economic downturn than the
manufacturing and export-oriented industries in Ontario and Quebec and the
cyclical resource economies in B.C. and Alberta. To mitigate worsening
economic impacts, TELUS is pursuing additional cost reduction and efficiency
initiatives, and may defer NCIB share repurchases and/or reduce capital
expenditures.

    
        Pension funding
    

    Economic and capital market fluctuations could also adversely impact the
funding and expense associated with the defined benefit pension plans that
TELUS sponsors. There can be no assurance that TELUS' pension expense and
funding of its defined benefit pension plans will not increase in the future
and thereby negatively impact earnings and/or cash flow. Defined benefit
funding risks may occur if total pension liabilities exceed the total value of
the respective trust funds. Unfunded differences may arise from lower than
expected investment returns, reductions in the discount rate used to value
pension liabilities, and actuarial loss experiences.

    Risk mitigation: TELUS seeks to mitigate this risk through the
application of policies and procedures designed to control investment risk and
ongoing monitoring of its funding position. Pension expense and funding for
2009 were largely determined by the rates of return on the plans' assets for
2008 and interest rates at year-end 2008, with revisions to expected funding
based on recent actuarial reports. As at June 30, 2009, the Company's best
estimate for defined benefit pension plans expense in 2009 is $18 million, as
compared to a recovery of $100 million in 2008, and the Company's estimate of
cash contributions to its defined benefit pension plans in 2009 is $191
million ($102 million in 2008).

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

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

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

    
    -------------------------------------------------------------------------
                                                                   Six-month
                                                  Quarters           periods
                                             ended June 30     ended June 30
                                         ------------------------------------
    ($ millions)                             2009     2008     2009     2008
    -------------------------------------------------------------------------
    Net income                                244      268      566      560
      Other expense (income)                   11        2       16       19
      Financing costs                         106      114      201      223
      Income taxes                             88      114      145      223
    -------------------------------------------------------------------------
    Operating income                          449      498      928    1,025
      Depreciation                            330      343      664      689
      Amortization of intangible assets        94       77      187      153
    -------------------------------------------------------------------------
    EBITDA                                    873      918    1,779    1,867
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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
                                                  Quarters           periods
                                             ended June 30     ended June 30
                                         ------------------------------------
    ($ millions)                             2009     2008     2009     2008
    -------------------------------------------------------------------------
    EBITDA                                    873      918    1,779    1,867
    Capital expenditures                     (557)    (435)  (1,031)    (755)
    -------------------------------------------------------------------------
    EBITDA less capital expenditures          316      483      748    1,112
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    11.2 Free cash flow

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

    
    -------------------------------------------------------------------------
                                                                   Six-month
                                                  Quarters           periods
                                             ended June 30     ended June 30
                                         ------------------------------------
    ($ millions)                             2009     2008     2009     2008
    -------------------------------------------------------------------------
    Cash provided by operating activities     852      462    1,466    1,087
    Cash (used) by investing activities      (552)    (437)  (1,030)  (1,437)
    -------------------------------------------------------------------------
                                              300       25      436     (350)
    Adjustments
      Amortization of deferred gains on
       sale-leaseback of buildings,
       amortization of deferred charges
       and other, net                          (3)       5      (23)       6
      Reduction (increase) in securitized
       accounts receivable                   (100)     350     (100)     350
      Non-cash working capital changes
       except changes from income tax
       payments (receipts), interest
       payments (receipts) and securitized
       accounts receivable, and other         (48)    (128)     (43)      94
      Acquisitions                              -        4        -      691
      Proceeds from the sale of assets          -       (3)       -       (3)
      Other investing activities               (5)       1       (1)      (6)
    -------------------------------------------------------------------------
    Free cash flow                            144      254      269      782
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
                                                                   Six-month
                                                  Quarters           periods
                                             ended June 30     ended June 30
                                         ------------------------------------
    ($ millions)                             2009     2008     2009     2008
    -------------------------------------------------------------------------
    EBITDA                                    873      918    1,779    1,867
    Share-based compensation                   11       10       20       16
    Net employee defined benefit plans
     expense (recovery)                         5      (25)       9      (50)
    Employer contributions to employee
     defined benefit plans                    (51)     (24)    (104)     (51)
    Restructuring costs net of cash payments   31       (2)      30       (5)
    Donations and securitization fees
     included in Other expense                (11)      (7)     (14)     (17)
    Cash interest paid                       (184)    (176)    (233)    (221)
    Cash interest received                     35        1       35        2
    Income taxes paid; and other               (8)      (6)    (222)      (4)
    Capital expenditures                     (557)    (435)  (1,031)    (755)
    -------------------------------------------------------------------------
    Free cash flow                            144      254      269      782
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    11.3 Definition of key wireless operating indicators

    These measures are industry metrics and are useful in assessing the
operating performance of a wireless company.

    Average revenue per subscriber unit per month (ARPU) is calculated as
Network revenue divided by the average number of subscriber units on the
network during the period and expressed as a rate per month. Data ARPU is a
component of ARPU, calculated on the same basis for revenues derived from
services such as text messaging, mobile computing, personal digital assistance
devices, Internet browser activity and pay-per-use downloads.

    Churn per month is calculated as the number of subscriber units
disconnected during a given period divided by the average number of subscriber
units on the network during the period, and expressed as a rate per month. A
prepaid subscriber is disconnected when the subscriber has no usage for 90
days following expiry of the prepaid card.

    Cost of acquisition (COA) consists of the total of handset subsidies,
commissions, and advertising and promotion expenses related to the initial
subscriber acquisition during a given period. As defined, COA excludes costs
to retain existing subscribers (retention spend).

    COA per gross subscriber addition is calculated as cost of acquisition
divided by gross subscriber activations during the period.

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

    Retention spend to Network revenue represents direct costs associated
with marketing and promotional efforts aimed at the retention of the existing
subscriber base divided by Network revenue.

    11.4 Definition of liquidity and capital resource measures

    Dividend payout ratio and dividend payout ratio of sustainable net
earnings: For actual earnings, the measure is defined as the most recent
quarterly dividend declared per share multiplied by four and divided by the
sum of basic earnings per share for the most recent four quarters. The target
guideline for the annual dividend payout ratio is on a prospective basis,
rather than on a trailing basis, and is 45 to 55% of sustainable net earnings.
The dividend payout ratio on an actual basis, excluding income tax-related
adjustments and ongoing impacts of a net-cash settlement feature introduced in
2007, is considered more representative of a sustainable calculation.

    EBITDA - excluding restructuring costs is used in the calculation of Net
debt to EBITDA and EBITDA interest coverage, consistent with the calculation
of the Leverage Ratio and the Coverage Ratio in credit facility covenants.
Restructuring costs were $129 million and $23 million, respectively, for the
12-month periods ended June 30, 2009 and 2008.

    EBITDA - excluding restructuring costs interest coverage is defined as
EBITDA excluding restructuring costs divided by Net interest cost.
Historically, this measure is substantially the same as the Coverage Ratio
covenant in TELUS' credit facilities.

    Interest coverage on long-term debt is calculated on a 12-month trailing
basis as Net income before interest expense on long-term debt and income tax
expense, divided by interest expense on long-term debt. The calculation is
based on total long-term debt, including long-term debt due within one year.

    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)                                               2009     2008
    -------------------------------------------------------------------------
    Long-term debt including current portion                  6,137    5,519
    Debt issuance costs netted against long-term debt            29       31
    Derivative liability                                        835    1,137
    Accumulated other comprehensive income amounts arising
     from financial instruments used to manage interest
     rate and currency risks associated with U.S. dollar
     denominated debt (excluding tax effects)                  (120)    (147)
    Cash and temporary investments                              (26)     (46)
    Proceeds from securitized accounts receivable               400      150
    -------------------------------------------------------------------------
    Net debt                                                  7,255    6,644
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The derivative liability in the table above relates to cross currency
interest rate swaps that effectively convert principal repayments and interest
obligations to Canadian dollar obligations, and is in respect of the U.S.
$1,925 million debenture maturing June 1, 2011. Management believes that Net
debt is a useful measure because it incorporates the exchange rate impact of
cross currency swaps put into place that fix the value of U.S. dollar
denominated debt, and because it represents the amount of long-term debt
obligations that are not covered by available cash and temporary investments.

    Net debt to EBITDA - excluding restructuring costs is defined as Net debt
as at the end of the period divided by the 12-month trailing EBITDA -
excluding restructuring costs. TELUS' long-term guideline range for Net debt
to EBITDA is from 1.5 to 2.0 times. Historically, Net debt to EBITDA -
excluding restructuring costs is substantially the same as the Leverage Ratio
covenant in TELUS' credit facilities.

    Net debt to total capitalization provides a measure of the proportion of
debt used in the Company's capital structure.

    Net interest cost is defined as Financing costs before gains on
redemption and repayment of debt, calculated on a 12-month trailing basis. No
gains on redemption and repayment of debt were recorded in the respective
periods. Should they occur, losses recorded on the redemption of long-term
debt are included in net interest cost. Net interest costs for the 12-month
periods ended June 30, 2009 and 2008 are equivalent to reported financing
costs for those periods.

    Total capitalization - book value is calculated as Net debt plus
Shareholders' equity, excluding accumulated other comprehensive income or
loss:

    
    -------------------------------------------------------------------------
                                                               As at June 30
                                                          -------------------
    ($ millions)                                               2009     2008
    -------------------------------------------------------------------------
    Net debt                                                  7,255    6,644
    Shareholders' equity (2008 - as adjusted)
      Common Share and Non-Voting Share equity                7,378    6,898
      Add back Accumulated other comprehensive loss             110      114
      Non-controlling interests                                  21       22
    -------------------------------------------------------------------------
    Total capitalization - book value                        14,764   13,678
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

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

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