TELUS Reports Third Quarter Results



    
             Positive tax recovery contributes to earnings growth
             Guidance updated to reflect year-to-date results
                           Dividend increased 20%
    

    VANCOUVER, Nov. 2 /CNW/ - TELUS Corporation today reported that third
quarter 2007 revenue increased 4.5 per cent to $2.31 billion from a year ago.
The performance was driven by nine per cent growth in both wireless revenue
and wireline data revenue, partially offset by declines in local and long
distance wireline revenues. Consolidated earnings before interest, taxes,
depreciation and amortization (EBITDA) increased 3.6 per cent to $987 million
due to an increase in wireless EBITDA of eight per cent, while wireline EBITDA
decreased by one per cent.
    Net income in the quarter was $410 million and earnings per share (EPS)
were $1.24, up 28 per cent and 32 per cent respectively. Net income included
favourable tax related adjustments of approximately $93 million or 28 cents
per share, compared to $30 million or nine cents a year ago, as well as a
favourable expense recovery this quarter of $4.9 million or one cent per share
after tax for options with a net-cash settlement feature. Also contributing to
the increase in EPS were higher EBITDA, lower financing charges and a
reduction in shares outstanding as a result of the repurchases pursuant to the
normal course issuer bid. Excluding tax related adjustments in both periods
and the option expense recovery, net income was $312 million and EPS were
$0.95, up 7.7 per cent and 11 per cent, respectively.
    Free cash flow remained strong at $503 million, down three per cent due
to timing of cash interest payments and higher wireless capital expenditures.
During the third quarter TELUS continued to repurchase shares under its normal
course issuer bid program, completing $232 million of share buy backs. Average
shares outstanding were three per cent lower than a year ago.
    Full year 2007 guidance has been updated and includes a slightly lower
consolidated revenue range of $9.125 to $9.175 billion, a narrowing of the
consolidated EBITDA range (as adjusted) - now at $3.725 to $3.775 billion, as
well as an increase in the EPS (as adjusted) range to $3.55 to $3.65. Capital
expenditure guidance remains unchanged.

    
    FINANCIAL HIGHLIGHTS

    -------------------------------------------------------------------------
    C$ in millions, except per share amounts        3 months ended
                                                     September 30
                                                                         %
    (unaudited)                                      2007     2006    Change
    -------------------------------------------------------------------------
    Operating revenues                             2,309.9  2,210.7     4.5%
    EBITDA(1)                                        987.0    952.4     3.6%
      EBITDA (as adjusted)(2)                        979.8    952.4     2.9%
    Income before income taxes and
     non-controlling interest                        490.2    448.5     9.3%
    Net income(3)                                    409.9    319.6    28.3%
    Earnings per share (EPS), basic(3)                1.24     0.94    31.9%
    Cash provided by operating activities            831.8    570.4    45.8%
    Capital expenditures                             434.1    423.9     2.4%
    Free cash flow(4)                                502.9    519.8    (3.3%)

    (1) Earnings before interest, taxes, depreciation and amortization
        (EBITDA) is defined as Operating revenues less Operations expense
        less Restructuring costs. See Section 11.1 of Management's discussion
        and analysis.
    (2) Excludes a non-cash expense recovery of $7.2 million to Operations
        expense in 2007 for introducing a net cash settlement feature for
        share option awards granted prior to 2005.
    (3) Net income and EPS for the three month period in 2007 includes
        favourable tax related adjustments of $93 million or 28 cents per
        share, compared to $30 million or 9 cents for the same period in
        2006.
    (4) See Section 11.2 of Management's discussion and analysis.
    

    Darren Entwistle, TELUS president and CEO, said "The third quarter
results are a marked improvement compared to the second quarter due to TELUS'
continued strength in wireless and data combined with improved efficiency of
wireless marketing and retention. Also encouraging was a reduction in
incremental costs and improved performance associated with the new wireline
billing and client care system in Alberta."
    Mr. Entwistle stated "We experienced a sequential quarterly increase of
17,000 high speed customer additions, as improved order fulfillment and system
stability allowed us to renew our marketing efforts in Alberta during the
third quarter. I was also pleased to observe that we generated higher wireless
gross additions, whilst maintaining stable customer loyalty and retention and
strong net customer additions of 135,000. This was achieved with reduced
marketing costs of acquisition."
    Mr. Entwistle also noted "We remain committed to returning capital to our
shareholders as evidenced by our announcement today of a 20 per cent increase
to the next quarterly dividend - the fourth year in a row of sizeable
increases."
    Robert McFarlane, executive vice president and CFO, noted, "TELUS
continues to demonstrate considerable financial strength and strong cash flow.
Our financial policies have been reviewed and remain consistent. The strong
balance sheet of TELUS along with strong operating performance enables TELUS
to invest appropriately for future growth in our core telecom businesses while
returning significant capital to investors in the form of growing dividends
and substantial share repurchases. We now have a three year track record for
significant ongoing share repurchases, which in the past year alone has led to
a three per cent reduction in average shares outstanding. Notably, we intend
to again renew in December our normal course issuer bid share repurchase
program for 2008."
    "Further reflecting the financial strength of TELUS is the company's
healthy investment grade credit ratings, the successful mid-year refinancing
of $1.5 billion at much lower interest rates, and having no major maturities
of debt until 2011," McFarlane noted. "Furthermore, TELUS has no exposure to
asset backed commercial paper, either corporately or in our defined benefit
pension plans."

    -------------------------------------------------------------------------
    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 2007 guidance and share purchases), qualifications and risk factors
    referred to in the Management's discussion and analysis - October 31,
    2007.
    -------------------------------------------------------------------------


    
    OPERATING HIGHLIGHTS

    TELUS wireless

    -   Net subscriber additions remained strong at 134,500, a small 2.0%
        decrease from the same quarter in 2006. Postpaid additions were
        98,200, down 9.6%, while prepaid loading increased by 27% to 36,300
    -   Revenues increased by $95 million or 9.4% to $1.1 billion in the
        third quarter of 2007, when compared with the same period in 2006
    -   Wireless data revenue increased $42 million or 56% due to migration
        to full function personal data devices and increased text messaging
    -   ARPU (average revenue per subscriber unit per month) decreased by
        1.3% to $64.80 as a result of increased voice re-price due to
        competitive pressures. The data component continued to increase, up
        by 41% to $7.20
    -   EBITDA (as adjusted) increased by $40 million over the third quarter
        of 2006, representing 8.3% growth, due to network revenue growth
    -   Cost of acquisition per gross addition decreased 1.8% year-over-year
        and 11% sequentially to $379
    -   Blended monthly subscriber churn increased to 1.43% from 1.36% a year
        ago but was slightly lower than 1.45% in the second quarter. Postpaid
        churn remained low at 1.05%.
    -   Cash flow (EBITDA as adjusted less capital expenditures) increased
        $21 million or 5.7% to $391.5 million in the quarter due to an
        increase in EBITDA. Capital expenditures also increased with
        continued investments in higher speed wireless networks.

    TELUS wireline

    -   Revenues increased by $4 million or 0.4% to $1.2 billion in the third
        quarter of 2007, when compared with the same period in 2006. Strong
        data growth offset declines in local and long distance revenues
    -   Data revenues increased by $36 million or 8.7% due to strong year-
        over-year high-speed Internet growth and enhanced data and hosting
        services
    -   EBITDA (as adjusted) decreased by $13 million or 2.7%, due to higher
        expenses including $8 million of additional expenses related to the
        new billing and client care system implemented in Alberta in the
        second quarter
    -   TELUS added 31,300 net high-speed Internet subscribers, building
        TELUS' high-speed base to 994,000, a 14% increase from a year ago.
        High-speed Internet net additions recovered from the second quarter
        as improved system stability allowed Internet marketing efforts to be
        renewed in the third quarter
    -   Network access lines (NALs) declined by 35,000 in the quarter. Total
        NALs were down 3.0% from a year ago, reflecting continued residential
        line losses from ongoing competitive activity and wireless
        substitution partially mitigated by an increase in business access
        lines
    -   Cash flow (EBITDA as adjusted less capital expenditures) declined
        2.5% to $154 million, due to the decrease in EBITDA
    

    Corporate Developments

    Local phone service deregulated

    The CRTC accepted TELUS' application for deregulation of residential and
business phone service in several communities across British Columbia,
Alberta, and Quebec in the quarter. Residential phone service in Vancouver,
Victoria, Calgary, Edmonton, and Rimouski was deregulated, as was local
business service in all major centres in TELUS' operating territory.
    TELUS has applied for deregulation of residential phone service in
several dozen additional communities, and expects decisions from the CRTC in
the coming months.
    The rules announced by Industry Canada in the spring allow incumbent
telecommunications carriers to apply to the CRTC for deregulation in any
community where customers have a choice between service providers and where
they meet specific quality of service measures for six months. The new rules
state that local business services will be deregulated where there is a choice
of at least two phone providers with their own network infrastructure.
Deregulation for consumer services will occur where there is a choice of at
least three service providers with their own network infrastructure, one of
which can be a wireless provider.

    TELUS continues share repurchases

    During the third quarter, TELUS continued to purchase shares under its
Normal Course Issuer Bid (NCIB). Repurchases in the quarter totaled
approximately 4.3 million shares for a total outlay of $232 million. For nine
months this year, the total outlay has been $602 million. Since commencing in
December 2004, TELUS has repurchased a total of 49.9 million shares for
$2.37 billion under three NCIB programs, resulting in an 8.7 per cent
reduction in shares outstanding.

    Yellow Pages Group selects TELUS as IT provider in west

    TELUS announced on October 31 that the Yellow Pages Group (YPG) has
selected it to provide support services and manage information technology
infrastructure for their Western Canada-based operations. The long-term
contract with Canada's largest directory publisher is valued at approximately
$90 million.
    Under the agreement, TELUS will provide a range of services including IT
infrastructure operations, IP applications development, wireless services,
document services, and managed network services ranging from help desk to
desktop to computing operations. TELUS will also provide facilities and
managed services for YPG's online directory system in TELUS Internet Data
Centres.

    TELUS signs eight-year deal with Western Canada Lottery Corporation

    TELUS signed an eight-year contract with the Western Canada Lottery
Corporation to implement an Alberta-wide secure IP-based network. The network
will support approximately 2,350 on-line lottery ticket terminals, connecting
the machines throughout Alberta with the company's central computer system in
Winnipeg.
    The TELUS IP network will also provide the communications infrastructure
needed to support any network growth plans over the coming years.

    TELUS launches online assessment tool

    In September, TELUS launched a new strategic online assessment tool, the
TELUS Online Wireless Solutions Roadmap. The tool helps businesses evaluate
their plans for strategic wireless investments and ensure they will drive
business performance.
    The Wireless Solutions Roadmap addresses an anticipated shift in the
market. New research from TELUS and IDC Canada shows Canadian business is on
the cusp of a new wave of adoption in wireless business technology as firms
move beyond the basics of mobile email and web access. More than 90 per cent
of Canadian firms now have mobile email and web access.

    TELUS first in North America to launch two HTC smartphones

    TELUS and High Tech Computer Corp. (HTC), the world's leading provider of
Microsoft Windows Mobile-based smart devices, announced the first North
American availability of the HTC Touch and the HTC S640. The HTC Touch is a
deceptively small and stylish smartphone that ushers in an innovative new
concept in intuitive touch screen navigation. The HTC S640, with a full
QWERTY-keypad, is a smartphone that brings a variety of productivity and
entertainment solutions to clients. Both devices feature a variety of Windows
Mobile services and operate on the EVDO network, Canada's fastest
coast-to-coast mobile network.

    Wireless data add-on plan, sliver BlackBerry Pearl cater to consumer
    customers

    Today, TELUS introduced the BlackBerry Pearl 8130 with its
silver-coloured finish and a new $15 add-on wireless data plan delivering up
to two megabytes of email usage to consumers.
    The BlackBerry Pearl 8130 is tailored for consumers looking for email and
web access along with multimedia services in a single device. The Pearl gives
customers the ability to listen to music, record video, take photos and store
up to eight gigabytes of data. It is also the first smartphone in Canada
preloaded with the popular social network application Facebook.
    Complementing the Pearl, TELUS also introduced a new consumer wireless
data plan that can be added to existing packages. Email 15 provides up to two
megabytes of email monthly - the equivalent of 600 emails, perfect for clients
that want to stay connected while on the go.

    Led Zeppelin makes mobile debut only at TELUS in Canada

    TELUS and Led Zeppelin have partnered to provide wireless customers with
an entirely new way to access the legendary rock band's music. Starting
November 13, TELUS will be the exclusive wireless service provider in Canada
for the band's ring tones, wallpapers, and wireless song downloads.

    TELUS first to bring Canadians the LG Shine

    TELUS is the first Canadian company to offer the LG Shine mobile phone.
Part of LG's iconic series of phones has been a favourite of Canadian fashion
leaders. The LG Shine is the latest in phone fashion with a sleek metal
casing, cool reflective look and high definition screen. This phone also
features a high quality camera and full line-up of SPARK entertainment and
messaging services including access to TELUS Mobile Music, TELUS Mobile TV,
TELUS Mobile Radio and Instant Messaging.

    TELUS and ZTE launch award winning wireless phone

    In August, TELUS and ZTE announced the exclusive availability of the ZTE
D90, featuring Digit Wireless' Fastap keypad. The first mobile handset in the
world to feature both Zi Corporation's eZiType software for increased data
input speed and accuracy, and the Digit Wireless Fastap keyboard, the ZTE D90
is ideal for heavy messengers. With the announcement, ZTE became the first
wireless phone manufacturer from mainland China to directly offer a device for
sale in Canada.

    The Ontario College of Art & Design partnership fostering innovative
    phone design

    TELUS and the Ontario College of Art & Design (OCAD) have partnered to
introduce an innovative new design course that will help the school's
third-year students explore and develop their talents in wireless phone
design. Reflecting TELUS' commitment to delivering innovative products and
services, and to giving where we live, the OCAD/TELUS Handset Project is
unique in Canada, and aims to foster innovation in mobile phone design.
    To further assist in the development of Canadian design talent, one
deserving student will be offered a four-month summer internship with TELUS
working in product development.

    TELUS TV comes to Quebec

    TELUS TV was launched in several Quebec communities during the quarter,
including Saint-Georges-de-Beauce, Rimouski, Mont-Joli, Luceville, Sainte-Luce
and Sainte-Blandine. TELUS TV is a 100 per cent digital service bringing
customers exceptional sound and video quality for hundreds of TV channels,
video-on-demand, and other services. It is also available in an increasing
number of neighbourhoods of greater Vancouver, Calgary, and Edmonton.

    TELUS Day of Service

    On September 29, more than 6,000 TELUS team members took a day out of
their schedules to give where they live during the TELUS Day of Service. TELUS
employees, retirees, relatives and friends took part in a nation-wide
volunteer drive making a difference in the communities where they live and
work.
    Team members participated in more than 225 volunteer activities through
150 charitable organizations in 17 communities across Quebec, Ontario, Alberta
and B.C. TELUS Day of Service volunteer efforts included environmentally
themed projects such as clean-up efforts at Stanley Park in Vancouver, the
River Valley in Edmonton and the Soverdi in Montreal. Other volunteer projects
included stocking shelves at the Daily Bread Food Bank in Toronto, supporting
Habitat for Humanity and regional youth soccer clinics for underprivileged
children.
    On this day alone, more than 18,000 volunteer hours were logged in
support of worthwhile causes.

    TELUS executive Robert McFarlane named Canada's Top CFO by Canadian
    Business

    Robert McFarlane, executive vice-president and chief financial officer,
was named Top CFO by Canadian Business magazine at the All-Star awards
luncheon in Toronto in October. The All-Star Execs are drawn by Canadian
Business from a pool of Canada's largest publicly traded firms. To be eligible
for consideration for this program, a company must meet certain financial
performance measures including three-year revenue growth, three-year net
income growth and three-year total shareholder return. Robert was chosen from
among an exclusive group of business leaders as Canada's Top CFO by an
independent panel of experts. An interview with Robert is featured in the
current issue of Canadian Business, which hit newsstands on November 1.

    TELUS recognized for one of the best annual reports in world

    The 2006 TELUS annual report ranked among the top one percent in the
world by the Annual Report on Annual Reports, the only organization in the
world that compares, rates and ranks annual reports globally. TELUS is one of
three Canadian companies and the only telecommunications company to achieve
one of the top ratings.
    An independent panel evaluates more than 500 annual reports from a
selection of more than 1,000 listed corporations worldwide. The survey is
regarded as the most comprehensive and authoritative by evaluating each report
on 50 aspects of corporate reporting including financial, performance,
business and investor measures.

    TELUS named to global Dow Jones Sustainability Index for seventh straight
    year

    In September, the Dow Jones Sustainability World Index, a corporate
sustainability ranking, recognized TELUS as an economic, environmental and
social leader for the seventh consecutive year. TELUS is the only North
American telecommunications company and one of just 10 Canadian businesses
across all sectors included in the global index. TELUS' total score improved
this year and was among the highest awarded in the telecom sector. The judges
gave TELUS high marks for corporate governance, risk and crisis management,
privacy protection, environmental reporting, human capital development and
stakeholder engagement.

    TELUS helping kids with diabetes live better lives and partners to find a
    cure

    The 2007 TELUS President's Invitational Golf Tournament donated $115,000
to an innovative centre that helps kids with diabetes live healthier lives.
The Charles H. Best Diabetes Centre is the only registered charity in Canada
dedicated to making life better for kids with Type 1 diabetes. The donation
was raised at the TELUS Business Solutions annual charity golf event, which is
also a thank you from TELUS to some of its top Ontario customers for their
loyalty and business.
    TELUS in October announced a three-year partnership with the Juvenile
Diabetes Research Foundation (JDRF). The partnership will provide the JDRF
with $1.2 million to fund Canadian-based research programs hunting for a cure
for Type 1 diabetes. TELUS also announced its three-year title sponsorship of
the JDRF's primary fundraising event - the TELUS Walk to Cure Diabetes. This
partnership is an excellent representation of TELUS' community investment
approach, which is focused on youth, technology, and health and wellness.

    Support of Quebec Major Junior Hockey League delivers excitement of
    hockey to clients

    TELUS and the Quebec Major Junior Hockey League renewed their partnership
with a five-year deal in the quarter. Reflecting TELUS' continued support of
Canadian athletes and amateur sport, the agreement includes the webcasting of
all 630 games of the '07-'08 QMJHL season, a first in the history of the
league. All playoff games will also be webcast for the fans. In addition,
nearly 250 QMJHL-based ringtones, theme songs, pictures, interviews and videos
are being offered exclusively to TELUS subscribers for download to mobile
handsets during the season.

    Partnership greens Montreal

    The City of Montreal, Société de verdissement du Montréal métropolitain
(SOVERDI) and TELUS announced the completion of the first step in the greening
of Montréal. Thanks to a three-way partnership announced in 2006, more than
5,800 trees, shrubs and perennials have been planted in alleys and
schoolyards, in front of housing cooperatives, and along riverbanks and
highways throughout the Island of Montréal this year.

    TELUS Open raises $110,000 for Operation Enfant Soleil

    More than 250 TELUS clients, partners, and employees donated a total of
$109,718 to Operation Enfant Soleil during the TELUS Open on September 20. The
money raised will help improve the quality of paediatric care for thousands of
children across Quebec.

    TELUS renews Shelf Prospectus

    On August 3, TELUS filed a preliminary short form base shelf prospectus
with securities regulators in Canada and the United States. This enables TELUS
to sell up to C$3 billion of debt, equity and/or warrants should the Company
decide to issue such securities at any time during the next two years. The
shelf prospectus replaced an existing C$3 billion shelf prospectus that
expired on September 24, 2007. TELUS has no immediate intention to offer
securities pursuant to the shelf prospectus.

    Dividend Declaration raises level by 20%

    Board of Directors has declared a quarterly dividend of forty-five cents
($0.45) Canadian per share on the issued and outstanding Common shares and
forty-five cents ($0.45) Canadian per share on the issued and outstanding
Non-Voting shares of the Company payable on January 1, 2008 to holders of
record at the close of business on December 11, 2007.
    The dividends above are designated as "eligible" dividends for the
purposes of the Income Tax Act (Canada) and any similar provincial
legislation.
    This quarterly dividend represents a 7.5 cent increase or 20 per cent
from the $0.375 quarterly dividend paid on October 1, 2007 and the dividend
paid a year earlier on January 1, 2007.

    About TELUS

    TELUS (TSX: T, T.A; NYSE:   TU) is a leading national telecommunications
company in Canada, with $9.0 billion of annual revenue and 11.0.million
customer connections including 5.4 million wireless subscribers, 4.4 million
wireline network access lines and 1.2 million Internet subscribers. TELUS
provides a wide range of communications products and services including data,
Internet protocol (IP), voice, entertainment and video. Committed to being
Canada's premier corporate citizen, we give where we live. Since 2000, TELUS
and our team members have contributed more than $91 million to charitable and
non-profit organizations and volunteered more than 1.7 million hours of
service to local communities. Eight TELUS Community Boards across Canada lead
our local philanthropic initiatives. For more information about TELUS, please
visit telus.com.

    
    TELUS Corporation

    interim consolidated statements of income                     (unaudited)


    Periods ended September 30         Three months          Nine months
     (millions except per
     share amounts)                  2007       2006       2007       2006
    -------------------------------------------------------------------------
                                             (restated)            (restated)

    OPERATING REVENUES             $2,309.9   $2,210.7   $6,743.6   $6,426.4
    -------------------------------------------------------------------------
    OPERATING EXPENSES
      Operations                    1,316.5    1,245.8    4,093.4    3,654.3
      Restructuring costs               6.4       12.5       14.3       59.9
      Depreciation                    332.5      325.8      968.5    1,000.2
      Amortization of intangible
       assets                          70.1       57.5      192.2      168.3
    -------------------------------------------------------------------------
                                    1,725.5    1,641.6    5,268.4    4,882.7
    -------------------------------------------------------------------------
    OPERATING INCOME                  584.4      569.1    1,475.2    1,543.7
      Other expense, net                8.0        4.0       30.3       17.9
      Financing costs                  86.2      116.6      331.0      371.1
    -------------------------------------------------------------------------
    INCOME BEFORE INCOME TAXES
     AND NON-CONTROLLING INTEREST     490.2      448.5    1,113.9    1,154.7
      Income taxes                     78.6      126.5      251.6      261.3
      Non-controlling interests         1.7        2.4        4.5        7.1
    -------------------------------------------------------------------------
    NET INCOME AND COMMON SHARE
     AND NON-VOTING SHARE INCOME      409.9      319.6      857.8      886.3
    OTHER COMPREHENSIVE INCOME
      Change in unrealized fair
       value of derivatives
       designated as cash flow
       hedges                           8.5          -       64.3          -
      Foreign currency translation
       adjustment arising from
       translating financial
       statements of self-
       sustaining foreign operations   (1.1)       0.4       (4.9)       1.2
      Change in unrealized fair
       value of available-for-sale
       financial assets                (0.2)         -       (0.3)         -
    -------------------------------------------------------------------------
                                        7.2        0.4       59.1        1.2
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME           $  417.1   $  320.0   $  916.9   $  887.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET INCOME PER COMMON SHARE
     AND NON-VOTING SHARE
      - Basic                      $   1.24   $   0.94   $   2.57   $   2.57
      - Diluted                    $   1.23   $   0.92   $   2.55   $   2.54
    DIVIDENDS DECLARED PER COMMON
     SHARE AND NON-VOTING SHARE    $  0.375   $  0.275   $  1.125   $  0.825
    TOTAL WEIGHTED AVERAGE COMMON
     SHARES AND NON-VOTING SHARES
     OUTSTANDING
      - Basic                         330.1      341.4      333.5      345.2
      - Diluted                       332.8      346.0      336.2      348.8



    TELUS Corporation
    interim consolidated balance sheets                           (unaudited)

                                                   September 30, December 31,
    As at (millions)                                    2007          2006
    -------------------------------------------------------------------------
                                                                   (restated)
    ASSETS
    Current Assets
      Cash and temporary investments, net           $      1.0    $        -
      Short-term investments                              44.1         110.2
      Accounts receivable                                590.7         707.2
      Income and other taxes receivable                  269.0          95.4
      Inventories                                        170.6         196.4
      Prepaid expenses and other                         209.0         195.3
      Current portion of derivative assets                16.4          40.4
    -------------------------------------------------------------------------
                                                       1,300.8       1,344.9
    -------------------------------------------------------------------------
    Capital Assets, Net
     Property, plant, equipment and other              7,354.0       7,466.5
      Intangible assets subject to amortization          779.0         549.2
      Intangible assets with indefinite lives          2,966.5       2,966.4
    -------------------------------------------------------------------------
                                                      11,099.5      10,982.1
    -------------------------------------------------------------------------
    Other Assets
      Deferred charges                                 1,098.2         956.6
      Investments                                         30.3          35.2
      Goodwill                                         3,168.5       3,169.5
    -------------------------------------------------------------------------
                                                       4,297.0       4,161.3
    -------------------------------------------------------------------------
                                                    $ 16,697.3    $ 16,488.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Cash and temporary investments, net           $        -    $     11.5
      Accounts payable and accrued liabilities         1,438.5       1,363.6
      Income and other taxes payable                       5.1          10.3
      Restructuring accounts payable and accrued
       liabilities                                        32.1          53.1
      Dividends payable                                  123.4             -
      Advance billings and customer deposits             614.5         606.3
      Current maturities of long-term debt                 6.0       1,433.5
      Current portion of derivative liabilities           13.6         165.8
      Current portion of future income taxes             426.5         137.2
    -------------------------------------------------------------------------
                                                       2,659.7       3,781.3
    -------------------------------------------------------------------------
    Long-Term Debt                                     4,496.6       3,474.7
    -------------------------------------------------------------------------
    Other Long-Term Liabilities                        1,760.8       1,257.3
    -------------------------------------------------------------------------
    Future Income Taxes                                1,076.8       1,023.3
    -------------------------------------------------------------------------
    Non-Controlling Interests                             23.8          23.6
    -------------------------------------------------------------------------
    Shareholders' Equity                               6,679.6       6,928.1
    -------------------------------------------------------------------------
                                                    $ 16,697.3    $ 16,488.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    TELUS Corporation
    interim consolidated statements of cash flows                 (unaudited)

                                       Three months          Nine months
    Periods ended September 30
     (millions)                      2007       2006       2007       2006
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income                     $  409.9   $  319.6   $  857.8   $  886.3
    Adjustments to reconcile net
     income to cash provided by
     operating activities:
      Depreciation and amortization   402.6      383.3    1,160.7    1,168.5
      Future income taxes             222.7      146.3      393.4      284.8
      Share-based compensation         (3.3)      14.2      126.4       35.3
      Net employee defined benefit
       plans expense                  (24.0)      (1.5)     (69.0)      (4.4)
      Employer contributions to
       employee defined benefit
       plans                          (18.9)     (28.8)     (67.5)    (104.3)
      Restructuring costs, net of
       cash payments                    3.3       (1.2)     (21.0)       2.2
      Amortization of deferred gains
       on sale-leaseback of
       buildings, amortization of
       deferred charges and
       other, net                       5.9        3.9        1.1       12.5
      Net change in non-cash
       working capital               (166.4)    (265.4)     (27.6)    (224.4)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                       831.8      570.4    2,354.3    2,056.5
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Capital expenditures             (434.1)    (423.9)  (1,297.8)  (1,203.2)
    Acquisitions                          -      (25.0)         -      (44.5)
    Proceeds from the sale of
     property and other assets          4.1        6.9        5.4       14.9
    Change in non-current materials
     and supplies, purchase of
     investments and other                -       (9.0)      (7.7)     (20.4)
    -------------------------------------------------------------------------
    Cash used by investing
     activities                      (430.0)    (451.0)  (1,300.1)  (1,253.2)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Common Shares and Non-Voting
     Shares issued                      0.1       37.2        0.7       82.9
    Dividends to shareholders             -      (93.8)    (250.9)    (284.5)
    Purchase of Common Shares and
     Non-Voting Shares for
     cancellation                    (232.2)    (119.7)    (602.4)    (600.7)
    Long-term debt issued           2,679.9      499.0    4,771.5    1,341.8
    Redemptions and repayment of
     long-term debt                (2,850.8)    (448.9)  (4,955.4)  (1,064.4)
    Partial repayment of deferred
     hedging liability                    -          -          -     (309.4)
    Dividends paid by a subsidiary
     to non-controlling interests         -          -       (4.3)      (3.0)
    Other                                 -          -       (0.9)         -
    -------------------------------------------------------------------------
    Cash used by financing
     activities                      (403.0)    (126.2)  (1,041.7)    (837.3)
    -------------------------------------------------------------------------
    CASH POSITION
    Increase (decrease) in cash
     and temporary investments, net    (1.2)      (6.8)      12.5      (34.0)
    Cash and temporary investments,
     net, beginning of period           2.2      (18.6)     (11.5)       8.6
    -------------------------------------------------------------------------
    Cash and temporary investments,
     net, end of period            $    1.0   $  (25.4)  $    1.0   $  (25.4)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    SUPPLEMENTAL DISCLOSURE OF
     CASH FLOWS
    Interest (paid)                $  (41.1)  $  (13.0)  $ (283.2)  $ (297.6)
    -------------------------------------------------------------------------
    Interest received              $    1.4   $    0.6   $    8.9   $   23.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income taxes (inclusive of
     Investment Tax Credits (paid)
     received, net                 $   (1.7)  $   (0.6)  $    0.9   $   94.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    TELUS Corporation
    segmented information                                         (unaudited)

    Three-month periods ended
    September 30                         Wireline              Wireless
    (millions)                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Operating revenues
      External revenue             $1,204.6   $1,200.3   $1,105.3   $1,010.4
      Intersegment revenue             29.7       23.5        7.0        6.0
    -------------------------------------------------------------------------
                                    1,234.3    1,223.8    1,112.3    1,016.4
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense              761.6      742.5      591.6      532.8
      Restructuring costs               6.4       11.7          -        0.8
    -------------------------------------------------------------------------
                                      768.0      754.2      591.6      533.6
    -------------------------------------------------------------------------
    EBITDA(1)                      $  466.3   $  469.6   $  520.7   $  482.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $  302.6   $  311.4   $  131.5   $  112.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX              $  163.7   $  158.2   $  389.2   $  370.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses
     (as adjusted)(3)
      Operations expense
       (as adjusted)(3)               771.1      742.5      589.3      532.8
      Restructuring costs               6.4       11.7          -        0.8
    -------------------------------------------------------------------------
                                      777.5      754.2      589.3      533.6
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)        $  456.8   $  469.6   $  523.0   $  482.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $  302.6   $  311.4   $  131.5   $  112.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                         $  154.2   $  158.2   $  391.5   $  370.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Three-month periods ended
    September 30                       Eliminations          Consolidated
    (millions)                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Operating revenues
      External revenue             $      -   $      -   $2,309.9   $2,210.7
      Intersegment revenue            (36.7)     (29.5)         -          -
    -------------------------------------------------------------------------
                                      (36.7)     (29.5)   2,309.9    2,210.7
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense              (36.7)     (29.5)   1,316.5    1,245.8
      Restructuring costs                 -          -        6.4       12.5
    -------------------------------------------------------------------------
                                      (36.7)     (29.5)   1,322.9    1,258.3
    -------------------------------------------------------------------------
    EBITDA(1)                      $      -   $      -   $  987.0   $  952.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $      -   $      -   $  434.1   $  423.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX              $      -   $      -   $  552.9   $  528.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses
     (as adjusted)(3)
      Operations expense
       (as adjusted)(3)               (36.7)     (29.5)   1,323.7    1,245.8
      Restructuring costs                 -          -        6.4       12.5
    -------------------------------------------------------------------------
                                      (36.7)     (29.5)   1,330.1    1,258.3
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)        $      -   $      -   $  979.8   $  952.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $      -   $      -   $  434.1   $  423.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                         $      -   $      -   $  545.7   $  528.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                            EBITDA (as adjusted)
                             (from above)                $  979.8   $  952.4
                            Incremental charge
                             (recovery)(3)                   (7.2)         -
                           --------------------------------------------------
                            EBITDA (from above)             987.0      952.4
                            Depreciation                    332.5      325.8
                            Amortization                     70.1       57.5
                           --------------------------------------------------
                            Operating income                584.4      569.1
                            Other expense, net                8.0        4.0
                            Financing costs                  86.2      116.6
                           --------------------------------------------------
                            Income before income taxes
                             and non-controlling interests  490.2      448.5
                            Income taxes                     78.6      126.5
                            Non-controlling interests         1.7        2.4
                           --------------------------------------------------
                            Net income                   $  409.9   $  319.6
                           --------------------------------------------------
                           --------------------------------------------------
    (1) Earnings Before Interest, Taxes, Depreciation and Amortization
        ("EBITDA") is a measure that does not have any standardized meaning
        prescribed by GAAP and is therefore unlikely to be comparable to
        similar measures presented by other issuers; EBITDA is defined by the
        Company as operating revenues less operations expense and
        restructuring costs. The Company has issued guidance on, and reports,
        EBITDA because it is a key measure used by management to evaluate
        performance of its business segments and is utilized in measuring
        compliance with certain debt covenants.
    (2) Total capital expenditures ("CAPEX").
    (3) Substantially all of the Company's share option awards that were
        granted prior to January 1, 2005, and which were outstanding on
        January 1, 2007, were amended by adding a net-cash settlement
        feature; such amendment resulted in an incremental charge to
        (recovery from) operations of $(7.2) and did not result in an
        immediate cash outflow (inflow). In respect of 2007 results provided
        to the Company's chief operating decision maker, operations expense
        and EBITDA are being presented both with, and without, the impact of
        such amendment.


    TELUS Corporation
    segmented information (unaudited)

    Nine-month periods ended
    September 30                         Wireline              Wireless
    (millions)                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Operating revenues
      External revenue             $3,590.3   $3,588.8   $3,153.3   $2,837.6
      Intersegment revenue             83.5       71.8       20.0       17.1
    -------------------------------------------------------------------------
                                    3,673.8    3,660.6    3,173.3    2,854.7
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense            2,439.1    2,211.5    1,757.8    1,531.7
      Restructuring costs              13.6       56.4        0.7        3.5
    -------------------------------------------------------------------------
                                    2,452.7    2,267.9    1,758.5    1,535.2
    -------------------------------------------------------------------------
    EBITDA(1)                      $1,221.1   $1,392.7   $1,414.8   $1,319.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $  882.0   $  881.8   $  415.8   $  321.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX              $  339.1   $  510.9   $  999.0   $  998.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses
     (as adjusted)(3)
      Operations expense (as
       adjusted)(3)                 2,295.5    2,211.5    1,733.3    1,531.7
      Restructuring costs              13.6       56.4        0.7        3.5
    -------------------------------------------------------------------------
                                    2,309.1    2,267.9    1,734.0    1,535.2
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)        $1,364.7   $1,392.7   $1,439.3   $1,319.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $  882.0   $  881.8   $  415.8   $  321.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                         $  482.7   $  510.9   $1,023.5   $  998.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Nine-month periods ended
    September 30                       Eliminations          Consolidated
    (millions)                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Operating revenues
      External revenue             $      -   $      -   $6,743.6   $6,426.4
      Intersegment revenue           (103.5)     (88.9)         -          -
    -------------------------------------------------------------------------
                                     (103.5)     (88.9)   6,743.6    6,426.4
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense             (103.5)     (88.9)   4,093.4    3,654.3
      Restructuring costs                 -          -       14.3       59.9
    -------------------------------------------------------------------------
                                     (103.5)     (88.9)   4,107.7    3,714.2
    -------------------------------------------------------------------------
    EBITDA(1)                      $      -   $      -   $2,635.9   $2,712.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $      -   $      -   $1,297.8   $1,203.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX              $      -   $      -   $1,338.1   $1,509.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses
     (as adjusted)(3)
      Operations expense (as
       adjusted)(3)                  (103.5)     (88.9)   3,925.3    3,654.3
      Restructuring costs                 -          -       14.3       59.9
    -------------------------------------------------------------------------
                                     (103.5)     (88.9)   3,939.6    3,714.2
    -------------------------------------------------------------------------
    EBITDA (as adjusted)(3)        $      -   $      -   $2,804.0   $2,712.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CAPEX(2)                       $      -   $      -   $1,297.8   $1,203.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     CAPEX                         $      -   $      -   $1,506.2   $1,509.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                            EBITDA (as adjusted)
                             (from above)                $2,804.0   $2,712.2
                            Incremental charge(3)           168.1          -
                           --------------------------------------------------
                            EBITDA (from above)           2,635.9    2,712.2
                            Depreciation                    968.5    1,000.2
                            Amortization                    192.2      168.3
                           --------------------------------------------------
                            Operating income              1,475.2    1,543.7
                            Other expense, net               30.3       17.9
                            Financing costs                 331.0      371.1
                           --------------------------------------------------
                            Income before income taxes and
                             non-controlling interests    1,113.9    1,154.7
                            Income taxes                    251.6      261.3
                            Non-controlling interests         4.5        7.1
                           --------------------------------------------------
                            Net income                   $  857.8   $  886.3
                           --------------------------------------------------
                           --------------------------------------------------
    (1) Earnings Before Interest, Taxes, Depreciation and Amortization
        ("EBITDA") is a measure that does not have any standardized meaning
        prescribed by GAAP and is therefore unlikely to be comparable to
        similar measures presented by other issuers; EBITDA is defined by the
        Company as operating revenues less operations expense and
        restructuring costs. The Company has issued guidance on, and reports,
        EBITDA because it is a key measure used by management to evaluate
        performance of its business segments and is utilized in measuring
        compliance with certain debt covenants.
    (2) Total capital expenditures ("CAPEX").
    (3) Substantially all of the Company's share option awards that were
        granted prior to January 1, 2005, and which were outstanding on
        January 1, 2007, were amended by adding a net-cash settlement
        feature; such amendment resulted in an incremental charge to
        operations of $168.1 and did not result in an immediate cash outflow.
        In respect of 2007 results provided to the Company's chief operating
        decision maker, operations expense and EBITDA are being presented
        both with, and without, the impact of such amendment.
    

    Caution regarding forward-looking statements

    -------------------------------------------------------------------------
    This report and Management's discussion and analysis contain statements
    about expected future events and financial and operating results of TELUS
    Corporation (TELUS or the Company) that are forward-looking. By their
    nature, forward-looking statements require the Company to make
    assumptions and are subject to inherent risks and uncertainties. There is
    significant risk that predictions, assumptions (see below) 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 financial and operating targets,
    expectations, estimates or intentions expressed in the forward-looking
    statements.

    Assumptions for 2007 guidance purposes include: economic growth
    consistent with recent provincial and national estimates by the
    Conference Board of Canada, including 2007 real GDP (gross domestic
    product) growth of approximately 2.6% in Canada; increased wireline
    competition in both business and consumer markets, particularly from
    cable-TV and voice over Internet Protocol (VoIP) companies; forbearance
    for local retail wireline services in major urban incumbent markets by
    the second half of 2007; no further price cap mandated consumer price
    reductions; a wireless industry market penetration gain of approximately
    4.5 to five percentage points (excluding competitors' subscriber write-
    offs in the first half of 2007); restructuring expenses of approximately
    $25 million; statutory tax rate of 33 to 34%; a discount rate of 5.0% and
    an expected long-term average return of 7.25% for pension accounting,
    unchanged from 2006; average shares outstanding of 330 to 335 million;
    and no prospective significant acquisitions or divestitures. Earnings per
    share (EPS), cash balances, net debt and common equity may be affected by
    the potential purchases of up to 24 million TELUS shares over a 12-month
    period under the normal course issuer bid that commenced December 20,
    2006.

    Factors that could cause actual results to differ materially include but
    are not limited to: competition (including more active price
    discounting); economic growth and fluctuations (including pension
    performance, funding and expenses); capital expenditure levels (including
    possible spectrum asset purchases); financing and debt requirements
    (including share repurchases); tax matters (including acceleration or
    deferral of required payments of significant amounts of cash taxes);
    human resource developments (including possible labour disruptions);
    technology (including reliance on systems and information technology);
    regulatory developments (including local forbearance, wireless number
    portability, the timing, rules, process and cost of future spectrum
    auctions, and possible changes to foreign ownership restrictions);
    process risks (including internal reorganizations, conversion of legacy
    systems and billing system integrations); health, safety and
    environmental developments; litigation and legal matters; business
    continuity events (including manmade and natural threats); any
    prospective acquisitions or divestitures; and other risk factors
    discussed herein and listed from time to time in TELUS' public disclosure
    documents including its annual report, annual information form, and other
    filings with securities commissions in Canada (at www.sedar.com) and
    filings in the United States including Form 40-F (on EDGAR at
    www.sec.gov).

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

    Management's discussion and analysis

    October 31, 2007

    The following is a discussion of the consolidated financial condition and
results of operations of TELUS Corporation for the three-month and nine-month
periods ended September 30, 2007 and 2006, 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 discussion regarding forward-looking statements above.
    TELUS' interim Consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles (GAAP),
which differ in certain respects from U.S. GAAP. See Note 19 to the interim
Consolidated financial statements for a summary of the principal differences
between Canadian and U.S. GAAP as they relate to TELUS. The interim
Consolidated financial statements and Management's discussion and analysis
were reviewed by TELUS' Audit Committee and approved by TELUS' Board of
Directors. All amounts are in Canadian Dollars unless otherwise specified.
    TELUS has issued guidance on and reports on certain non-GAAP measures
that are used by management to evaluate performance of business units,
segments and the Company. In addition, non-GAAP measures are used in measuring
compliance with debt covenants and are used to manage the capital structure.
Because non-GAAP measures do not have a standardized meaning, securities
regulations require that non-GAAP measures be clearly defined and qualified,
and reconciled with their nearest GAAP measure. For the readers' reference,
the definition, calculation and reconciliation of consolidated non-GAAP
measures is provided in Section 11: Reconciliation of non-GAAP measures and
definition of key operating indicators.

    
    Management's discussion and analysis contents

    -------------------------------------------------------------------------
    Section                      Description
    -------------------------------------------------------------------------
    1.  Introduction and         A summary of TELUS' consolidated results for
        performance summary      the third quarter and first nine months of
                                 2007
    -------------------------------------------------------------------------
    2.  Core business, vision    Examples of TELUS' activities in support of
        and strategy             its six strategic imperatives
    -------------------------------------------------------------------------
    3.  Key performance drivers  TELUS' 2007 priorities
    -------------------------------------------------------------------------
    4.  Capability to deliver    An update on TELUS' capability to deliver
        results                  results
    -------------------------------------------------------------------------
    5.  Results from operations  A detailed discussion of operating results
                                 for the third quarter and first nine months
                                 of 2007
    -------------------------------------------------------------------------
    6.  Financial condition      A discussion of changes in the balance sheet
                                 for the nine-month period ended
                                 September 30, 2007
    -------------------------------------------------------------------------
    7.  Liquidity and capital    A discussion of cash flow, liquidity, credit
        resources                facilities and other disclosures
    -------------------------------------------------------------------------
    8.  Critical accounting      A description of accounting estimates and
        estimates and            changes to accounting policies
        accounting policy
        developments
    -------------------------------------------------------------------------
    9.  Annual guidance          TELUS' revised annual guidance for 2007
        for 2007
    -------------------------------------------------------------------------
    10. Risks and risk           An update of risks and uncertainties facing
        management               TELUS and how it manages these risks
    -------------------------------------------------------------------------
    11. Reconciliation of        A description, calculation and
        non-GAAP measures and    reconciliation of certain measures used by
        definition of key        management
        operating indicators
    -------------------------------------------------------------------------
    

    1. Introduction and performance summary

    1.1 Materiality for disclosures

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

    1.2 Canadian telecommunications industry developments

    In mid-April 2007, Canada's largest telecommunications service provider
BCE Inc. announced a strategic review process. Three consortia signed non-
disclosure and standstill agreements to gain access to a BCE data room in
order to enable them to potentially prepare an offer to BCE shareholders under
a competitive auction process. On June 21, 2007, TELUS confirmed that it had
entered into a mutual non-disclosure and standstill agreement and was pursuing
non-exclusive discussions to acquire BCE. On June 26, the three consortia
submitted bids to acquire BCE, while TELUS announced that inadequacies in
BCE's bid process did not make it possible for TELUS to submit an offer as
part of the strategic review process announced by BCE. On June 30, BCE
announced that it had entered into a definitive agreement to be acquired by a
consortium led by Teachers Private Capital, the private investment arm of the
Ontario Teachers' Pension Plan, and the U.S.-based Providence Equity Partners
and Madison Dearborn Partners, LLC. The consortium also included TD Securities
Inc. who, with several other institutions, agreed to provide equity financing
for the purchase. The BCE Board recommended that their common shareholders
accept the offer at an all-cash price of $42.75 per common share. In September
2007, BCE Inc. announced that its shareholders overwhelmingly approved the
plan of arrangement, which involves the acquisition by the consortium of all
outstanding common and preferred shares of BCE. The closing of the transaction
is subject to receipt of regulatory approvals widely expected to occur in the
first half of 2008.
    The CRTC continues to process and approve certain applications from
incumbent telecommunications companies for regulatory forbearance of both
residential and business local services. This provides more flexibility in
pricing and bundling of services for incumbents as they compete with other
service providers.

    
    1.3 Consolidated highlights

    -------------------------------------------------------------------------
    ($ millions, except
    shares, per share          Quarters ended          Nine-month periods
    amounts, subscribers        September 30             ended Sept. 30
    and ratios)            2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Consolidated statements of income
    -------------------------------------------------------------------------
    Operating revenues  2,309.9  2,210.7    4.5 %  6,743.6  6,426.4    4.9 %

    Operating income      584.4    569.1    2.7 %  1,475.2  1,543.7   (4.4)%
    Net-cash settlement
     feature (recovery)
     expense(1)            (7.2)       -      -      168.1        -      -
                        -------- ------- -------- -------- -------- --------
    Operating income
     (as adjusted)        577.2    569.1    1.4 %  1,643.3  1,543.7    6.5 %

    Income before
     income taxes         490.2    448.5    9.3 %  1,113.9  1,154.7   (3.5)%
    Net-cash settlement
     feature (recovery)
     expense               (7.2)       -      -      168.1        -      -
                        -------- ------- -------- -------- -------- --------
    Income before
     income taxes
     (as adjusted)        483.0    448.5    7.7 %  1,282.0  1,154.7   11.0 %

    Net income            409.9    319.6   28.3 %    857.8    886.3   (3.2)%
    Net-cash settlement
     feature (recovery)
     expense, after tax    (4.9)       -      -      104.1        -       -
                        -------- ------- -------- -------- -------- --------
    Net income
     (as adjusted)        405.0    319.6   26.7 %    961.9    886.3    8.5 %

    Earnings per share,
     basic ($)             1.24     0.94   31.9 %     2.57     2.57      - %
    Net-cash settlement
     feature per share    (0.01)       -      -       0.31        -      -
                        -------- ------- -------- -------- -------- --------
    Earnings per share,
     basic (as
     adjusted)(2) ($)      1.23     0.94   30.9 %     2.88     2.57   12.1 %

    Earnings per share,
     diluted ($)           1.23     0.92   33.7 %     2.55     2.54    0.4 %

    Cash dividends
     declared per
     share ($)            0.375    0.275   36.4 %    1.125    0.825   36.4 %
    -------------------------------------------------------------------------
    Consolidated statements of cash flows
    -------------------------------------------------------------------------
    Cash provided by
     operating
     activities           831.8    570.4   45.8 %  2,354.3  2,056.5   14.5 %
    Cash used by
     investing
     activities           430.0    451.0   (4.7)%  1,300.1  1,253.2    3.7 %
      Capital
       expenditures       434.1    423.9    2.4 %  1,297.8  1,203.2    7.9 %
    Cash used by
     financing
     activities           403.0    126.2    n.m.   1,041.7    837.3   24.4 %
    -------------------------------------------------------------------------
    Subscribers and other measures
    -------------------------------------------------------------------------
    Subscriber
     connections(3)
     (thousands) at
     Sept. 30            11,008   10,531    4.5 %

    EBITDA(4)             987.0    952.4    3.6 %  2,635.9  2,712.2   (2.8)%
    Net-cash settlement
     feature (recovery)
     expense               (7.2)       -      -      168.1        -      -
                        -------- ------- -------- -------- -------- --------
    EBITDA (as
     adjusted)(4)         979.8    952.4    2.9 %  2,804.0  2,712.2    3.4 %

    Free cash flow(5)     502.9    519.8   (3.3)%  1,145.4  1,346.4  (14.9)%
    -------------------------------------------------------------------------
    Debt and payout ratios
    -------------------------------------------------------------------------
    Net debt to
     EBITDA - excluding
     restructuring(6)       1.7      1.7      -
    Dividend payout
     ratio (%)(7)            46       39    7 pts
    -------------------------------------------------------------------------
    n.m. - not meaningful; pts - percentage point(s)
    (1) A non-cash (recovery) expense recorded in 2007 for introducing a net-
        cash settlement feature for share option awards granted prior to
        2005.
    (2) Earnings per share - basic (as adjusted) excludes the charge for
        introducing the net-cash settlement feature, is regularly reported to
        the chief operating decision-maker and corresponds to the definition
        used in setting TELUS' 2007 basic earnings per share target and
        revised guidance.
    (3) The sum of wireless subscribers, network access lines and Internet
        subscribers measured at the end of the respective periods.
    (4) EBITDA is a non-GAAP measure. See Section 11.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA). EBITDA (as
        adjusted) is regularly reported to the chief operating decision-maker
        and corresponds to the definition used in setting TELUS' 2007 EBITDA
        targets and revised guidance.
    (5) Free cash flow is a non-GAAP measure. See Section 11.2 Free cash
        flow.
    (6) See Section 11.4 Definition of liquidity and capital resource
        measures.
    (7) The current annualized rate of dividend declared per share divided by
        basic earnings per share for the 12-month trailing period.
    -------------------------------------------------------------------------
    

    TELUS' annual guidance for 2007, described in Section 9 of its 2007 first
and second quarter Management's discussion and analysis, included the
expectation that a non-cash charge of approximately $180 million would be
recorded in Operations expense as a result of introducing a net-cash
settlement feature for share option awards granted prior to 2005. For the
nine- month period ended September 30, 2007, $168.1 million in respect of this
charge was recorded in Operations expense ($104.1 million after-tax impact in
Net income or 31 cents per share). The recovery in the third quarter was an
adjustment to the initial estimate recorded. The net-cash settlement feature
expense for full year of 2007 is expected to be approximately $170 million.
See Caution regarding forward looking statements as well as Section 9 for
TELUS' guidance for the full year.
    Highlights for the third quarter and first nine months of 2007, as
discussed in Section 5: Results from operations, include the following:

    
    -   Subscriber connections increased by 477,000 during the 12-month
        period ended September 30, 2007. The number of wireless subscribers
        grew by 10.9% to 5.41 million, the number of Internet subscribers
        grew by 7.5% to 1.16 million and the number of network access lines
        decreased by 3.0% to 4.44 million.

    -   Operating revenues increased by $99.2 million and $317.2 million,
        respectively, in the third quarter and first nine months of 2007,
        when compared to the same periods in 2006, due primarily to growth in
        wireless network revenues and wireline data revenues, which more than
        offset declines in wireline voice local and long distance revenue.

    -   Operating income increased by $15.3 million in the third quarter of
        2007 and decreased by $68.5 million in the first nine months of 2007,
        when compared to the same periods in 2006. Excluding the net-cash
        settlement feature expense recorded in 2007, operating income (as
        adjusted) increased by $8.1 million and $99.6 million, respectively,
        in the third quarter and the first nine months, primarily due to
        growth in wireless EBITDA partly offset by higher amortization
        expenses.

    -   Income before income taxes increased by $41.7 million in the third
        quarter of 2007 and decreased by $40.8 million in the first nine
        months of 2007, when compared to the same periods in 2006. Excluding
        the effect of the net-cash settlement feature, Income before income
        taxes increased by $34.5 million and $127.3 million, respectively, in
        the third quarter and the first nine months, due to lower financing
        costs and growth in operating income (as adjusted).

    -   Net income in 2007 included favourable tax-related adjustments of
        approximately $93 million or 28 cents per share in the third quarter
        and approximately $107 million or 32 cents per share in the first
        nine months. In 2006, favourable tax-related adjustments of
        approximately $30 million or nine cents per share were recorded in
        the third quarter and $145 million or 42 cents per share were
        recorded in the first nine months.

    -   Net income and EPS - basic for the third quarter of 2007 increased by
        $90.3 million and 30 cents, respectively, when compared to the same
        period in 2006. Net income for the first nine months of 2007
        decreased by $28.5 million when compared to the same period in 2006,
        while EPS - basic was unchanged. Excluding the effect of the net-cash
        settlement feature for first nine months of 2007, Net income (as
        adjusted) increased by $75.6 million while EPS - basic (as adjusted)
        increased by 31 cents.

    -   The average numbers of shares outstanding during third quarter and
        first nine months of 2007 were 3% lower than in same periods in 2006.
        The decrease in shares was due to repurchases under normal course
        issuer bid (NCIB) programs as well as fewer shares being issued from
        treasury following the introduction of the net-cash settlement
        feature for options.

    Highlights for the third quarter and first nine months of 2007, as
discussed in Section 7: Liquidity and capital resources, include the
following:

    -   Cash provided by operating activities increased by $261.4 million and
        $297.8 million, respectively, in the third quarter and first nine
        months of 2007, when compared to the same periods in 2006. In 2007,
        proceeds from securitized accounts receivable increased by $50
        million during the third quarter and first nine months of 2007, while
        in 2006, proceeds decreased by $185 million and $150 million,
        respectively, for comparative increases in 2007 operating cash flow
        of $235 million and $200 million, respectively.

    -   Cash used by investing activities decreased by $21.0 million in the
        third quarter and increased by $46.9 million in the first nine months
        of 2007, when compared to the same periods in 2006. The decrease for
        the quarter was primarily due to acquisitions in the prior year
        period. Capital expenditure intensity ratios were consistent at about
        19% of consolidated revenues in the third quarter and first nine
        months of both 2007 and 2006. Capital expenditures increased by
        $10.2 million and $94.6 million, respectively, in the third quarter
        and first nine months of 2007, when compared with the same periods in
        2006 due to primarily to increased investment in digital wireless
        capacity and coverage.

    -   Cash used by financing activities increased by $276.8 million and
        $204.4 million, respectively, in the third quarter and first nine
        months of 2007, when compared to the same periods in 2006. Under its
        NCIB programs, the Company repurchased 4.3 million shares for
        cancellation for an outlay of $232.2 million in the third quarter of
        2007 (2006: 2.1 million shares for $119.7 million), while for the
        first nine months of 2007, the Company repurchased 10.5 million
        shares for cancellation for outlay of $602.4 million (2006: 12.7
        million shares for $600.7 million). The increase cash used by
        financing activities for the first nine-months included the June 1,
        2007 repayment of $1,483.3 million (US$1,166.5 million) for matured
        7.50% Notes, net of $1 billion debt issue in March 2007 and
        outstanding commercial paper issue of $293.9 million.

    -   Free cash flow decreased by $16.9 million and $201.0 million,
        respectively, in the third quarter and first nine months of 2007,
        when compared to the same periods in 2006. The decrease for the third
        quarter was caused by higher interest payments (mainly from March
        2007 debt issues with semi-annual interest payments), higher capital
        expenditures and higher share-based compensation payments, net of
        improved EBITDA and lower restructuring payments. The decrease for
        the first nine months of 2007 was caused by lower EBITDA, higher
        capital expenditures, and lower recoveries of cash taxes and related
        interest, partly offset by lower restructuring payments, share-based
        compensation expense in excess of payments and lower interest
        payments.

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

    -   The dividend payout ratio based on actual earnings at September 30,
        2007 was 46% and the dividend payout ratio calculated to exclude the
        impacts of tax-related adjustments and the charge for introducing the
        net-cash feature was also 46% - within the target guideline of 45 to
        55% of net sustainable earnings.
    

    2. Core business, vision and strategy

    The following discussion is qualified in its entirety by the Caution
regarding forward-looking statements at the beginning of Management's
discussion and analysis. It is also qualified by Section 10: Risks and risk
management of TELUS' 2006 annual and 2007 first and second quarter
Management's discussions and analyses, as well as updates reported in Section
10 of this document.
    TELUS' core business, vision and strategy were detailed in its 2006
Management's discussion and analysis. Recent activities supporting, and events
affecting, the Company's six strategic imperatives include the following:

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

    The Company expanded the number of urban areas where TELUS TV(R) service
is offered. On September 17, TELUS TV was officially launched in the Eastern
Québec communities of Luceville, Mont-Joli, Rimouski, Sainte-Blandine, Saint-
Georges-de-Beauce and Sainte-Luce. TELUS' digital television and entertainment
service is made possible by investments in broadband infrastructure. The
service is also available in select areas of Calgary, Greater Edmonton and the
Lower Mainland of B.C.
    In August, TELUS signed an eight-year contract with the Western Canada
Lottery Corporation to implement an Alberta-wide Internet Protocol (IP)
lottery terminal network. The IP network will connect more than 2,300 lottery
ticket machines in Alberta to each other and to the WCLC headquarters in
Winnipeg.

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

    On June 21, 2007, TELUS had confirmed that it had entered into a mutual
non-disclosure and standstill agreement and was pursuing non-exclusive
discussions to acquire BCE. On June 26, TELUS announced that inadequacies in
BCE's bid process did not make it possible for TELUS to submit an offer as
part of the strategic review process announced by BCE. In its second quarter
results news release on August 3, TELUS announced it had concluded its
assessment and did not intend to submit a competing offer to acquire BCE. An
expense of approximately $4 million related to various costs of this
assessment was recorded in Other expense in the third quarter.

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

    TELUS recognizes that training is a key element for success and has
implemented many training programs. By the end of the quarter, close to
100 per cent of TELUS team members completed the mandatory online ethics and
respect course. The course is designed to help team members in their ethical
decisions at work, point them to TELUS' related policies and to teach with
case situations and dilemmas to apply judgement. Underlying this initiative is
an "Ask First, Act Later" approach when a proper course of action is unclear.
    TELUS' mandatory security awareness course was also being completed by
team members. This online course interactively promotes a safe, secure
environment for clients and employees alike. It is also designed to protect
company assets, sensitive information and our client's privacy.
    TELUS has hundreds of training courses including the Premier Sales
Organization training program and the training programs for the Connections
Women's Network, and the Spirited Teamwork - Stronger Together program.
Recently, the American Society for Training & Development recognized these
TELUS initiatives with a BEST award and recognized TELUS as one of the top
organizations when it comes to using employee learning and development to
enable enterprise-wide success.

    3. Key performance drivers

    The following discussion is qualified in its entirety by the Caution
regarding forward-looking statements at the beginning of Management's
discussion and analysis. It is also qualified by Section 10: Risks and risk
management of TELUS' 2006 annual and 2007 first and second quarter
Management's discussions and analyses, as well as updates reported in Section
10 of this document.

    
    -------------------------------------------------------------------------
           2007 corporate priorities across wireline and wireless
    -------------------------------------------------------------------------

    Advancing TELUS' leadership position in the consumer market

    -   Combining TELUS' suite of data applications with deregulated heritage
        services
    -   Attaining best-in-class customer loyalty and growth through
        unparalleled customer experiences
    -   Achieving customer addition targets by expanding distribution
        channels and addressing key market segments with new service
        offerings.

    Advancing TELUS' leadership position in the business market

    -   Progressing further in key industry verticals with specific
        applications that provide non-price-based differentiation
    -   Leveraging wireless number portability to expand TELUS' business
        market share in Central Canada
    -   Focusing on small business customer loyalty and growth with
        innovative solutions.

    Advancing TELUS' leadership position in the wholesale market

    -   Growing in domestic and international markets through recognition
        that TELUS is Canada's IP leader
    -   Achieving excellence in customer service to support local forbearance
        in key incumbent markets
    -   Expanding the Company's markets, channels and products by focusing on
        strategic relationships with TELUS' partners.

    Driving TELUS' technology evolution and improvements in productivity and
    service excellence

    -   Implementing technology roadmaps for Future Friendly Home and
        wireless service offerings that simplify TELUS' product portfolio and
        improve service development and execution
    -   Rolling out consolidated customer care systems to replace multiple
        legacy systems in Alberta and B.C.
    -   Accelerating customer service delivery dates.

    Strengthening the spirit of the TELUS team and brand, and developing the
    best talent in the global communications industry

    -   Growing TELUS' business ownership culture with a team philosophy of
        "our business, our customers, our team, my responsibility" thereby
        attracting, developing and retaining great talent
    -   Leading the way in corporate social responsibility as TELUS strives
        to be Canada's premier corporate citizen.
    -------------------------------------------------------------------------
    

    4. Capability to deliver results

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

    4.1 Principal markets addressed and competitors

    The principal markets addressed and competitors have not changed
significantly from those described in TELUS' annual 2006 Management's
discussion and analysis. After two full quarters of wireless number
portability (WNP), implemented March 2007, indications are that WNP has been a
net contributing factor to increased subscriber loading (inbound porting
exceeded outbound porting). WNP initially contributed to increased wireless
customer retention costs as a percentage of revenues in the second quarter of
2007 (8.2% compared to 6.2% in 2006) and continues to contribute to a small
increase in subscriber churn (total churn was 1.45% and 1.43% in the second
and third quarters of 2007 compared to 1.30% and 1.36% in the same periods in
2006).

    4.2 Operational capabilities

    
        Regulation
    

    To the end of September, the CRTC has granted forbearance for residential
local services in Calgary, Edmonton, Fort McMurray, Rimouski, Victoria and
most Greater Vancouver exchanges, as well as nine additional exchanges in
Eastern Quebec. The areas forborne from regulation cover more than one million
residential subscribers of TELUS. As communities are deregulated, TELUS for
the first time will be able to bring promotions and bundles of services that
are better tailored to the needs of community residents. TELUS expects to
receive decisions on a number of other applications in the near future.
    In September, the CRTC granted forbearance for eligible business local
services in 35 exchanges, including Calgary, Edmonton, Fort McMurray and
Rimouski, Victoria and most of Greater Vancouver, or approximately two-thirds
of TELUS' total business lines. For further discussion, see Section 10.1
Regulatory.

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

    In late-March 2007, the Company converted more than one million wireline
customers in Alberta to a new billing and client care system. The expected
customer service and cost benefits of this project include streamlined and
standardized processes and the elimination over time of multiple legacy
information systems. During the second quarter of 2007, the transition from
pilot to full scale implementation, while largely successful, resulted in
initial system difficulties that reduced order processing capability, which
caused increased installation backlogs and higher than expected costs such as
extra call centre resources to maintain service levels. The critical billing
function performed as expected. At this time the backlogs have been
significantly reduced and additional call centre resources are being reduced.
The additional expenses in the third quarter were approximately $8 million or
half of the $16 million expenses recorded in the second quarter. See Section
10.3 Process risks.
    Transition to the new system in 2007 reduced Wireline EBITDA by
approximately $8 million in the third quarter and $37 million in the nine-
month period. This included costs primarily related to additional temporary
labour to perform system fixes and maintain service levels were $8 million in
the third quarter and $24 million for the nine-month period. It also included
a one-time reduction of $13 million in long distance revenue recorded in the
second quarter of 2007. The one-time revenue reduction resulted from system
enhancements, which provided management with better data for estimating
earned, but unbilled revenue.

    
        AMP'D Mobile Canada
    

    In the second quarter, the U.S. based parent company AMP'D Mobile, Inc.
entered bankruptcy proceedings in the U.S. As a result, AMP'D Mobile sales
were discontinued in Canada. In the second quarter, TELUS recorded a pre-tax
write-off of its $11.8 million equity investment in AMP'D Mobile, Inc. (in
Other expense, net) along with pre-tax adjustments of approximately $5 million
for accelerated depreciation and amortization and approximately $2 million in
Operations expense. Operations expense in the third quarter included
approximately $3 million for a write-down of subscriber equipment and write-
off of prepaid marketing costs.

    4.3 Liquidity and capital resources

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

    The Company monitors capital on a number of bases, including: net debt to
total capitalization; net debt to EBITDA - excluding restructuring costs; and
dividend payout ratio of sustainable net earnings. For further discussion and
specific guidelines, see Section 7.4 Liquidity and capital resource measures.
TELUS' 2007 financing plan was described in Section 9.3 of its 2006
Management's discussion and analysis. Progress against the financing plan is
outlined below.

    
    ---------------------------------------------------------------------
        TELUS' 2007 financing plan and results
    ---------------------------------------------------------------------
        Repurchase TELUS Common Shares and TELUS Non-Voting Shares under the
        normal course issuer bid (NCIB)

        During the third quarter of 2007, approximately 350,000 Common Shares
        and 3.97 million Non-Voting Shares were repurchased for cancellation
        for an outlay totalling $232.2 million. From December 20, 2004 to
        September 30, 2007 under three NCIB programs, approximately 19
        million Common Shares and 30.9 million Non-Voting Shares were
        repurchased for cancellation for an outlay totalling $2.37 billion.
        See Section 7.3 Cash used by financing activities.

        Pay dividends

        The dividend declared in the third quarter of 2007, payable on
        October 1, was 37.5 cents per share, an increase of 36.4% from the
        dividend declared in the third quarter of 2006. The dividend declared
        for the fourth quarter of 2007 increased by 7.5 cents per share, or
        20%, to 45 cents per share, which is payable on January 1, 2008.

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

        The balance of proceeds from securitized accounts receivable
        increased by a net $50 million during the third quarter of 2007,
        closing at $550 million. During the second quarter, proceeds
        increased from $150 million to $550 million at May 31 and were
        reduced to $500 million at June 30. Increases in proceeds were used
        for general corporate purposes.

        Maintain a minimum $1 billion in unutilized liquidity

        TELUS had more than $1.4 billion of available liquidity from
        unutilized credit facilities at September 30, 2007. See Section 7.5
        Credit facilities.

        Maintain position of fully hedging foreign exchange exposure for
        indebtedness

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

        Give consideration to refinancing all or a portion of U.S. Dollar
        Notes in advance of its June 1, 2007 scheduled maturity

        In March 2007, the Company publicly issued $300 million 4.50%, Series
        CC, 2012 Canadian Dollar Notes and $700 million, 4.95%, Series CD,
        2017 Canadian Dollar Notes. Proceeds from these debt issues, combined
        with a second quarter commercial paper issue of $663.5 million and
        the second quarter increase in proceeds from securitized accounts
        receivable, were used for general corporate purposes and repayment of
        $1,483.3 million for the June 1 maturity of US$1,166.5 million, 7.50%
        Notes.

        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

        Three of four rating agencies put their outlooks to under review in
        the second quarter due to TELUS being in non-exclusive discussions to
        acquire BCE. With the TELUS' announcement in August that it did not
        intend to submit a competing offer to acquire BCE, the rating
        agencies in the third quarter reinstated their stable trend outlooks.
        At October 31, 2007, investment grade credit ratings from the four
        rating agencies that cover TELUS were in the desired range. See
        Section 7.7 Credit Ratings.
        ---------------------------------------------------------------------
    

    4.4 Changes in internal control over financial reporting

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

    5. Results from operations

    5.1 General

    The Company has two reportable segments: wireline and wireless.
Segmentation is based on similarities in technology, the technical expertise
required to deliver the products and services, 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). See Note 5 of the
interim Consolidated financial statements.

    
    5.2 Quarterly results summary

    -------------------------------------------------------------------------
    ($ in millions, except
     per share amounts)                2007 Q3   2007 Q2   2007 Q1   2006 Q4
    -------------------------------------------------------------------------
    Segmented revenue (external)
      Wireline segment                 1,204.6   1,180.1   1,205.6   1,234.3
      Wireless segment                 1,105.3   1,048.0   1,000.0   1,020.3
    -------------------------------------------------------------------------
    Operating revenues (consolidated)  2,309.9   2,228.1   2,205.6   2,254.6
      Operations expense               1,316.5   1,340.3   1,436.6   1,368.6
      Restructuring costs                  6.4       3.2       4.7       7.9
    -------------------------------------------------------------------------
    EBITDA(1)                            987.0     884.6     764.3     878.1
      Depreciation                       332.5     318.3     317.7     353.2
      Amortization of intangible assets   70.1      72.5      49.6      53.9
    -------------------------------------------------------------------------
    Operating income                     584.4     493.8     397.0     471.0
      Other expense (income)               8.0      18.5       3.8      10.1
      Financing costs                     86.2     127.2     117.6     133.6
    -------------------------------------------------------------------------
    Income before income taxes and
     non-controlling interest            490.2     348.1     275.6     327.3
      Income taxes                        78.6      93.7      79.3      89.7
      Non-controlling interests            1.7       1.3       1.5       1.4
    -------------------------------------------------------------------------
    Net income                           409.9     253.1     194.8     236.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income per Common Share
     and Non-Voting Share
      - basic                             1.24      0.76      0.58      0.70
      - diluted                           1.23      0.75      0.57      0.69
    Dividends declared per Common
     Share and Non-Voting Share          0.375     0.375     0.375     0.375
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ in millions, except
     per share amounts)                2006 Q3   2006 Q2   2006 Q1   2005 Q4
    -------------------------------------------------------------------------
    Segmented revenue (external)
      Wireline segment                 1,200.3   1,189.9   1,198.6   1,209.9
      Wireless segment                 1,010.4     945.3     881.9     876.8
    -------------------------------------------------------------------------
    Operating revenues (consolidated)  2,210.7   2,135.2   2,080.5   2,086.7
      Operations expense               1,245.8   1,207.4   1,201.1   1,316.8
      Restructuring costs                 12.5      30.7      16.7      35.5
    -------------------------------------------------------------------------
    EBITDA(1)                            952.4     897.1     862.7     734.4
      Depreciation                       325.8     335.2     339.2     346.2
      Amortization of intangible assets   57.5      46.9      63.9      67.0
    -------------------------------------------------------------------------
    Operating income                     569.1     515.0     459.6     321.2
      Other expense (income)               4.0       9.6       4.3       9.3
      Financing costs                    116.6     127.5     127.0     171.7
    -------------------------------------------------------------------------
    Income before income taxes and
     non-controlling interest            448.5     377.9     328.3     140.2
      Income taxes                       126.5      18.7     116.1      58.8
      Non-controlling interests            2.4       2.6       2.1       2.9
    -------------------------------------------------------------------------
    Net income                           319.6     356.6     210.1      78.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income per Common Share
     and Non-Voting Share
        - basic                           0.94      1.03      0.60      0.22
        - diluted                         0.92      1.02      0.60      0.22
    Dividends declared per Common
     Share and Non-Voting Share          0.275     0.275     0.275     0.275
    -------------------------------------------------------------------------
    (1) EBITDA is a non-GAAP measure. See Section 11.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA) for the
        definition.
    -------------------------------------------------------------------------
    

    The consolidated revenue trend continues to reflect strong growth in
wireless network revenues generated from an increasing subscriber base.
Wireless ARPU (average revenue per subscriber unit per month) declined 1.3% in
third quarter following 18 successive quarters of year-over-year increases, as
strong data growth was offset by declining voice revenues, due to shifting
product mix, pricing competition and an increase in-bucket (included minute)
usage. The consolidated revenue trend also reflected growth in wireline
segment data revenue, while wireline voice local and long distance revenues
continue to decline due to substitution for wireless and Internet services, as
well as competition from VoIP service providers, resellers and facilities-
based competitors.
    Historically, there is significant fourth quarter seasonality with higher
wireless subscriber additions and related acquisition costs and equipment
sales, resulting in lower wireless EBITDA. The seasonality affects, to a
lesser extent, the wireline high-speed Internet subscriber additions and
related costs.
    As described in Section 4.2, quarterly Operations expenses in 2007
include an expense for introducing a net-cash settlement feature for share
option awards. The net-cash settlement feature expense (recovery) for the
first, second and third quarters of 2007 were $173.5 million, $1.8 million and
$(7.2) million, respectively. The credit in the third quarter was an
adjustment to the initial estimate recorded. Operations expense in the fourth
quarter of 2005 was affected by temporary net labour disruption expenses of
approximately $52 million. Restructuring costs varied by quarter, depending on
the progress of ongoing initiatives underway.
    The downward trend in depreciation expense was interrupted by: (i) a
provision of approximately $20 million in the third quarter of 2007 for a
reduction in estimated useful service lives for certain network assets; and
(ii) a provision of approximately $17 million in the fourth quarter of 2006 to
align estimated useful lives for TELUS Québec assets, resulting from
integration of financial systems. With a major new wireline billing and client
care system put into service in March 2007, $18 million of additional
amortization was recorded in each of the second and third quarters of 2007,
reversing the downward trend in Amortization of intangible assets. In
addition, Amortization expenses in the second and fourth quarters of 2006 and
the first quarter of 2007 were reduced by approximately $12 million, $5
million and $5 million, respectively, for investment tax credits relating to
assets capitalized in prior years that are now fully amortized, following a
determination of eligibility by a government tax authority.
    Within Financing costs shown in the table above, interest expenses
trended lower except for the following items: (i) interest expense in respect
of a court decision in a lawsuit related to a 1997 BC TEL bond redemption
matter (including $7.8 million in the fourth quarter of 2006); and (ii) a
charge of $33.5 million in the fourth quarter of 2005 for early redemption of
$1.578 billion of Notes. The early redemption of Notes on December 1, 2005,
contributed to lower financing costs in the first half of 2006. The sequential
decline in financing costs in the third quarter 2007 is due to lower effective
interest rates and debt balances plus increased interest income from tax
refunds. Financing costs in the eight periods shown are net of varying amounts
of interest income.
    The generally upward trend in Net income and earnings per share reflect
the items noted above as well as adjustments arising from legislated income
tax changes and tax reassessments for prior years, including any related
interest on reassessments.

    
    -------------------------------------------------------------------------
    Tax-related adjustments
    ($ in millions, except
     EPS amounts)                      2007 Q3   2007 Q2   2007 Q1   2006 Q4
    -------------------------------------------------------------------------
    Approximate Net income impact           93        10         4        20
    Approximate EPS impact                0.28      0.03      0.01      0.06
    Approximate basic EPS
     excluding tax-related impacts        0.96      0.73      0.57      0.64
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Tax-related adjustments
    ($ in millions, except             2006 Q3   2006 Q2   2006 Q1   2005 Q4
     EPS amounts)
    -------------------------------------------------------------------------
    Approximate Net income impact           30       118        (3)       (3)
    Approximate EPS impact                0.09      0.34     (0.01)    (0.01)
    Approximate basic EPS
     excluding tax-related impacts        0.85      0.69      0.61      0.23
    -------------------------------------------------------------------------

    5.3 Consolidated results from operations

    -------------------------------------------------------------------------
    ($ in millions except      Quarters ended          Nine-month periods
     EBITDA margin in %         September 30             ended Sept. 30
     and Employees)        2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Operating revenues  2,309.9  2,210.7    4.5 %  6,743.6  6,426.4    4.9 %
    Operations expense  1,316.5  1,245.8    5.7 %  4,093.4  3,654.3   12.0 %
    Restructuring costs     6.4     12.5  (48.8)%     14.3     59.9  (76.1)%
    -------------------------------------------------------------------------
    EBITDA(1)             987.0    952.4    3.6 %  2,635.9  2,712.2   (2.8)%
    Depreciation          332.5    325.8    2.1 %    968.5  1,000.2   (3.2)%
    Amortization of
     intangible assets     70.1     57.5   21.9 %    192.2    168.3   14.2 %
    -------------------------------------------------------------------------
    Operating income      584.4    569.1    2.7 %  1,475.2  1,543.7   (4.4)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(2)   1,323.7  1,245.8    6.3 %  3,925.3  3,654.3    7.4 %
    EBITDA
     (as adjusted)(2)     979.8    952.4    2.9 %  2,804.0  2,712.2    3.4 %
    Operating income
     (as adjusted)(2)     577.2    569.1    1.4 %  1,643.3  1,543.7    6.5 %

    EBITDA margin(3)       42.7     43.1 (0.4)pts     39.1     42.2 (3.1)pts
    EBITDA margin
     (as adjusted)(4)      42.4     43.1 (0.7)pts     41.6     42.2 (0.6)pts

    Full-time equivalent
     employees at end of
     period              33,282   29,754   11.9 %
    -------------------------------------------------------------------------
    (1) EBITDA is a non-GAAP measure. See Section 11.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    (2) Excludes non-cash (recovery) charge of $(7.2) million and
        $168.1 million, respectively, in the third quarter and first
        nine months of 2007 for introducing a net-cash settlement feature for
        share option awards granted prior to 2005. Operations expense (as
        adjusted) and EBITDA (as adjusted) are regularly reported to the
        chief operating decision-maker. EBITDA (as adjusted) corresponds to
        the definition used in setting TELUS' 2007 EBITDA target and revised
        guidance.
    (3) EBITDA divided by Operating revenues.
    (4) EBITDA (as adjusted) divided by Operating revenues.
    -------------------------------------------------------------------------

    The following discussion is for the consolidated results of TELUS. Further
detail by segment is provided for Operating revenues, Operations expense,
Restructuring costs, EBITDA and Capital expenditures 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 increased by $99.2 million and
$317.2 million, respectively, in the third quarter and first nine months of
2007 when compared to the same periods in 2006. Growth in wireless network
revenue and wireline data revenue continue to exceed erosion in wireline voice
local and long distance revenues. Consolidated operating revenues for the
first nine months of 2007 include a one-time reduction of about $13 million in
long distance revenues, recorded in the second quarter. The second quarter
adjustment resulted from billing system enhancements, which provided
management with better data for estimating earned, but unbilled revenue.

    
        Operations expense
    

    Consolidated Operations expense increased by $70.7 million and
$439.1 million in the third quarter and first nine months of 2007,
respectively, when compared to the same periods in 2006. The increases include
non-cash charges for introducing a net-cash settlement feature for share
option awards granted before 2005. Operations expense adjusted to exclude
these non-cash charges increased by $77.9 million and $271.0 million,
respectively, primarily to support the 10.9% year-over-year growth in the
wireless subscriber base and growth in wireless network revenue. In addition,
expenses in the wireline segment increased primarily due to billing system
conversion costs and external labour costs to improve service levels, as well
as from increased staffing. TELUS' net defined benefit pension plan expense
decreased by approximately $22 million and $66 million, respectively, due
primarily to favourable returns on plan assets in 2006.
    The number of employees increased to support the wireline segment's
provision of outsourcing services to TELUS' customers, including human
resources outsourcing services and international call centre services, and to
support the growing wireless segment subscriber base. The number of full-time
equivalent employees providing outsourcing services to the Company's customers
increased by about 1,730 at September 30, 2007 when compared to one year
earlier, while elsewhere in the wireline segment the increase was 1,222. In
the wireless segment, the number of full-time equivalent employees increased
by 576 to support growth over the same period.

    
        Restructuring costs
    

    Restructuring costs decreased by $6.1 million and $45.6 million in the
third quarter and first nine months of 2007, respectively, when compared to
the same periods in 2006. Restructuring expenses in 2007 were in respect of
several smaller efficiency initiatives. The Company expects restructuring
costs for the full year to be approximately $25 million.

    
        EBITDA
    

    Consolidated EBITDA increased by $34.6 million in the third quarter of
2007 and decreased by $76.3 million in the first nine months of 2007, when
compared to the same periods in 2006. EBITDA adjusted to exclude the net-cash
settlement feature increased by $27.4 million and $91.8 million, respectively,
in the third quarter and first nine months of 2007, when compared to the same
periods in 2006. Wireline EBITDA (as adjusted) decreased mainly due to
implementation impacts of a new wireline billing and client care system
(described in Section 4.2 Operational capabilities). Wireless segment EBITDA
(as adjusted) increased as growth in the subscriber base increased network
revenues, but was partially offset by higher operations costs to support
subscriber growth, and for the nine month period, increased cost of
acquisition (COA) related to the higher gross subscriber additions and higher
retention spend related to the implementation of wireless number portability.

    
        Depreciation
    

    Depreciation increased by $6.7 million in the third quarter of 2007 and
decreased by $31.7 million in the first nine months of 2007, when compared to
the same periods in 2006. The increase in the third quarter of 2007 included
approximately $20 million for a reduction in estimated useful service lives
for certain network assets. The decrease for nine-month period was primarily
due to write-downs in 2006, partly offset by the 2007 write-downs as well as
accelerated depreciation of $1.5 million in the second quarter of 2007 for
assets related to the discontinuation of AMP'D Mobile Canada services. The
2006 adjustments included a reduction in the estimated useful service lives
for computer servers and furniture as well as write-offs of certain other
network assets.

    
        Amortization of intangible assets
    

    Amortization increased by $12.6 million and $23.9 million, respectively,
in the third quarter and first nine months of 2007, when compared to the same
periods in 2006. A new wireline billing and client care system was put into
service in March 2007, increasing amortization by $18.0 million and
$36.0 million, respectively. Accelerated amortization of $3.5 million was
recorded in the second quarter of 2007 for assets related to the
discontinuation of AMP'D Mobile Canada services. These increases were partly
offset by lower amortization for other fully amortized software assets. In
addition, amortization expenses were reduced by approximately $5 million for
the first nine months of 2007 and reduced by approximately $12 million in the
first nine months of 2006 to recognize investment tax credits, now determined
eligible by the tax authority, relating to assets capitalized in prior years
that are now fully amortized.

    
        Operating income
    

    Operating income increased by $15.3 million in the third quarter of 2007
and decreased by $68.5 million in the first nine months of 2007, when compared
to the same periods in 2006. When adjusted to exclude the net-cash settlement
feature recorded in 2007, operating income (as adjusted) increased by
$8.1 million and $99.6 million, respectively, in the third quarter and the
first nine months. The increase was due mainly to growth in Wireless EBITDA.

    
        Other income statement items

    -------------------------------------------------------------------------
                               Quarters ended          Nine-month periods
    Other expense, net          September 30             ended Sept. 30
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
                            8.0      4.0  100.0 %     30.3     17.9   69.3 %
    -------------------------------------------------------------------------
    

    Other expense increased by $4.0 million and $12.4 million, respectively,
in the third quarter and first nine months of 2007, when compared to the same
periods in 2006. Accounts receivable securitization expenses were $7.2 million
and $15.4 million in the third quarter and first nine months of 2007, which
increased by $3.5 million and $3.0 million, respectively, from the same
periods in 2006 (see Section 7.6 Accounts receivable sale). In the third
quarter of 2007, the Company expensed approximately $4 million for various
costs of assessing whether to acquire BCE, which ultimately led to the
decision in August to not bid for BCE. For the first nine months of 2007,
increased expenses includes an $11.8 million second quarter write-off was
taken for the Company's equity investment of in AMP'D Mobile Inc.

    
    -------------------------------------------------------------------------
                              Quarters ended           Nine-month periods
    Financing costs            September 30              ended Sept. 30
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Interest on long-
     term debt, short-
     term obligations
     and other            108.8    125.6  (13.4)%    354.9    378.1   (6.1)%
    Foreign exchange
     losses (gains)         3.5     (0.3)   n.m.      11.1      4.5  146.7 %
    Interest income       (26.1)    (8.7)   n.m.     (35.0)   (11.5)   n.m.
    -------------------------------------------------------------------------
                           86.2    116.6  (26.1)%    331.0    371.1  (10.8)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Interest expenses decreased by $16.8 million and $23.2 million,
respectively, in the third quarter and first nine months of 2007, when
compared to the same periods in 2006. The decreases were primarily due to
financing activities in the first half of 2007 (see Section 7.3 Cash used by
financing activities), which resulted in a lower effective interest rate for
the third quarter and first nine months of 2007 as well as a lower average
debt balance for the third quarter, when compared to the same periods in 2006.
Partly offsetting the lower effective interest rate was a higher average debt
balance for the first nine months of 2007 as debt issues were completed in
March 2007 and commercial paper was issued in May ahead of the June 1 maturity
of $1,483.3 million (US$1,166.5 million) Notes. The Company's net debt, as
calculated in Section 11.4, was $6,121 million at September 30, 2007, down
slightly from $6,147 million one year earlier.
    The decrease in interest expenses for the first nine months of 2007 also
included an adjustment for application of the effective rate method for issue
costs as required under CICA Handbook Section 3855 (recognition and
measurement of financial instruments). In March 2007, forward starting
interest rate swaps were terminated resulting in prepaid interest of
approximately $10 million being deferred and amortized over 10 years, which is
the term of the new debt.
    Interest income increased by $17.4 million and $23.5 million,
respectively, in the third quarter and first nine months of 2007, when
compared with the same periods in 2006, due primarily to recognition of
increased interest on tax refunds, and for the first nine months, increased
interest from investments.

    
    -------------------------------------------------------------------------
                               Quarters ended          Nine-month periods
    Income taxes                September 30             ended Sept. 30
    ($ millions)          2007     2006    Change     2007     2006   Change
    -------------------------------------------------------------------------
    Blended federal
     and provincial
     statutory income
     tax based on net
     income before tax   164.6    150.7     9.2 %    373.8    388.0   (3.7)%
    Tax rate
     differential on,
     and consequential
     adjustments from,
     reassessments for
     prior years         (76.3)   (24.9)    n.m.     (76.3)   (23.9)   n.m.
    Revaluation of
     future income tax
     liability            (8.6)       -     n.m.     (36.5)  (107.0)  65.9 %
    Share option award
     compensation          1.1      1.8   (38.9)%     (5.4)     4.9    n.m.
    Other                 (2.2)    (1.1) (100.0)%     (4.0)    (0.7)   n.m.
    -------------------------------------------------------------------------
                          78.6    126.5   (37.9)%    251.6    261.3   (3.7)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Blended federal and
     provincial statutory
     tax rates (%)        33.6     33.6     - pts     33.6     33.6    - pts
    Effective tax
     rates (%)            16.0     28.2 (12.2)pts     22.6     22.6    - pts
    -------------------------------------------------------------------------
    

    The blended federal and provincial statutory income tax expense increased
in the third quarter of 2007 and decreased in first nine months of 2007, when
compared with the same periods in 2006, due primarily to the comparable
changes in income before taxes of 9.3 per cent and (3.5) per cent,
respectively. The effective tax rates were lower than the statutory tax rates
due to favourable reassessments of prior years' tax matters and revaluation of
future income tax liabilities. Revaluations of future tax liabilities resulted
from reductions to future federal income tax rates (during the second quarters
of 2007 and 2006) as well as future tax rates being applied to temporary
differences.
    Based on the assumption of the continuation of the rate of TELUS
earnings, the existing legal entity structure, and no substantive changes to
tax regulations, the Company expects to be able to substantially utilize its
non-capital losses before the end of 2007. The Company's assessment is that
the risk of expiry of such non-capital losses is remote. Under the existing
legal entity structure, TELUS currently expects cash tax payments to be
minimal in 2007, increasing in 2008, with substantial cash tax payments in
2009. The blended federal and provincial statutory tax rate for 2007 is
expected to be approximately 33 to 34%.

    
    -------------------------------------------------------------------------
    Non-controlling           Quarters ended           Nine-month periods
     interests                 September 30              ended Sept. 30
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
                            1.7      2.4  (29.2)%      4.5      7.1  (36.6)%
    -------------------------------------------------------------------------

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

        Comprehensive income
    

    As discussed in Section 8.2 Accounting policy developments, commencing
with the 2007 fiscal year, the Company adopted the recommendations of the
Canadian Institute of Chartered Accountants (CICA) for accounting for
comprehensive income (CICA Handbook Section 1530). Currently, the concept of
comprehensive income for purposes of Canadian GAAP, in the Company's specific
instance, is primarily to include changes in shareholders' equity arising from
unrealized changes in the fair values of financial instruments (see Section
7.8). The calculation of earnings per share is based on Net income and Common
Share and Non-Voting Share income, as required by GAAP.

    
    5.4 Wireline segment results

    -------------------------------------------------------------------------
    Operating revenues -      Quarters ended           Nine-month periods
     wireline segment          September 30              ended Sept. 30
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Voice local(1)        511.3    533.4   (4.1)%  1,559.0  1,592.3   (2.1)%
    Voice long
     distance(2)          181.3    199.1   (8.9)%    536.6    612.6  (12.4)%
    Data(3)               446.3    410.8    8.6 %  1,305.7  1,207.5    8.1 %
    Other                  65.7     57.0   15.3 %    189.0    176.4    7.1 %
    -------------------------------------------------------------------------
    External operating
     revenue            1,204.6  1,200.3    0.4 %  3,590.3  3,588.8    0.0 %
    Intersegment
     revenue               29.7     23.5   26.4 %     83.5     71.8   16.3 %
    -------------------------------------------------------------------------
    Total operating
     revenues           1,234.3  1,223.8    0.9 %  3,673.8  3,660.6    0.4 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Voice local revenue for the first nine months of 2007, after
        adjusting to exclude the impact of first-quarter 2007 regulatory
        adjustments, decreased by approximately $48 million or 3%.
    (2) Voice long distance revenue for first nine months of 2007, after
        adjusting to exclude the second quarter 2007 impact from billing
        system conversion, decreased by approximately $63 million or 10%.
    (3) Data revenue for the first nine months of 2007, after adjusting to
        exclude the impact of two mandated retroactive competitor price
        reductions in the first quarter of 2007, grew by approximately $110
        million or 9%.
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Network access lines     As at September 30
    (000s)                 2007     2006   Change
    -------------------------------------------------------------------------
    Residential network
     access lines         2,643    2,809   (5.9)%
    Business network
     access lines         1,800    1,770    1.7 %
                        ------- -------- --------
    Total network
     access lines(1)      4,443    4,579   (3.0)%

                              Quarters ended           Nine-month periods
                               September 30              ended Sept. 30
    (000s)                 2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Change in residential
     network access lines   (42)     (39)  (7.7)%     (132)    (119) (10.9)%
    Change in business
     network access lines     7       (1)   n.m.        27        7    n.m.
                         ------- -------- -------- -------- -------- --------
    Change in total
     network access lines   (35)     (40)  12.5 %     (105)    (112)   6.3 %
    -------------------------------------------------------------------------
    (1) Network access lines are measured at the end of the reporting period
        based on information in billing and other systems.
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Internet subscribers    As at September 30
    (000s)                 2007     2006   Change
    -------------------------------------------------------------------------
    High-speed Internet
     subscribers          994.0    872.3   14.0 %
    Dial-up Internet
     subscribers          164.6    205.5  (19.9)%
                        -------- -------- --------
    Total Internet
     subscribers(1)     1,158.6  1,077.8    7.5 %


                              Quarters ended           Nine-month periods
                               September 30              ended Sept. 30
    (000s)                 2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    High-speed Internet
     net additions         31.3     41.5  (24.6)%     77.3    109.3  (29.3)%
    Dial-up Internet
     net reductions        (7.6)   (11.4)  33.3 %    (29.5)   (30.7)   3.9 %
                        -------- -------- -------- -------- -------- --------
    Total Internet
     subscriber net
     additions             23.7     30.1  (21.3)%     47.8     78.6  (39.2)%
    -------------------------------------------------------------------------
    (1) Internet subscribers are measured at the end of the reporting period
        based on Internet access counts from billing and other systems.
    -------------------------------------------------------------------------

    Revenues in the Wireline segment increased by $10.5 million and
$13.2 million, respectively, in the third quarter and first nine months of
2007, when compared with the same periods in 2006.

    -   Voice local revenue decreased by $22.1 million and $33.3 million,
        respectively, in the third quarter and first nine months of 2007,
        when compared with the same periods in 2006. The decreases were due
        primarily to lower revenues from basic access and optional enhanced
        services arising from ncreased competition for residential
        subscribers offset in part by growth in business local services and
        price increases allowed under regulation. For the first nine months
        of 2007, this was partly offset by first quarter recoveries of
        approximately $14.5 million from the price cap deferral account,
        which offset unfavourable mandated retroactive rate adjustments for
        basic data revenue pursuant to two recent CRTC (Canadian Radio-
        television and Telecommunications Commission) decisions and included
        recovery of previously incurred amounts associated with mandated
        local number portability and start-up costs.

        Residential line losses include the effect of increased competition
        from resellers and VoIP competitors (including cable-TV companies,
        which have expanded their geographic coverage and introduced lower-
        priced telephony services), as well as technological substitution to
        wireless services. To a lesser degree, residential second lines
        decreased from migration of dial-up Internet subscribers to high-
        speed Internet service. Residential line losses of 42,000 in the
        third quarter of 2007 reflected a sequential improvement from losses
        of 56,000 in the second quarter of 2007. The net increase in business
        lines was experienced in Ontario and Quebec urban non-incumbent
        areas.

    -   Voice long distance revenues decreased by $17.8 million and
        $76.0 million, respectively, in the third quarter and first nine
        months of 2007, when compared with the same periods in 2006 due
        primarily to lower average per-minute rates (due to industry-wide
        price competition) and lower business minute volumes, partly offset
        by increased consumer minute volumes. In addition, a one-time
        reduction of about $13 million was recorded in the second quarter of
        2007 as a result of system enhancements, which provided management
        with better data for estimating earned, but unbilled revenue.

    -   Wireline segment data revenues increased by $35.5 million and
        $98.2 million, respectively, in the third quarter and first nine
        months of 2007, when compared with the same periods in 2006. This
        growth was primarily due to increased Internet, enhanced data and
        hosting service revenues from growth in business services and high-
        speed Internet subscribers. High-speed Internet subscriber net
        additions were lower than one year earlier, reflecting competitive
        markets and the impact of the new billing and client care system,
        which temporarily reduced the Company's order processing capability
        in the second quarter and to a lesser degree, in the third quarter.
        Monthly rates for high-speed Internet services were raised by one
        dollar per month in the second quarter of 2006 for those customers
        not on rate protection plans, which contributed to an overall
        increase in average revenue per subscriber. Managed data revenues
        increased from the provision of business process outsourcing services
        to customers as well as digital entertainment services to consumers
        in larger urban incumbent markets.

        Pursuant to CRTC Decision 2007-6 (relating to digital network access
        link charges) and CRTC Decision 2007-10 (relating to basic service
        extension feature charges), retroactive rate reductions totalling
        approximately $11 million in basic data services revenues were
        recorded in the first quarter of 2007. Data revenue for the first
        nine months of 2007 grew by approximately $110 million or 9% once
        adjusted to exclude the impact of these two mandated retroactive
        competitor price reductions.

    -   Other revenue increased by approximately $8.7 million and
        $12.6 million, respectively, in the third quarter and first nine
        months of 2007, when compared with the same periods in 2006. The
        increases were due mainly to a reduction in the provision for
        quality-of-service rate rebates, which resulted from improved service
        delivery, as measured by CRTC-defined quality-of-service indicators,
        and favourable decisions by the CRTC on exclusion applications for
        severe weather and other extraordinary events. Voice equipment sales
        increased in the third quarter, but decreased in the nine-month
        period.

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

    -------------------------------------------------------------------------
    Operating expenses -
     wireline segment        Quarters ended            Nine-month periods
    ($ millions, except       September 30               ended Sept. 30
     employees)            2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Salaries, benefits
     and other employee-
     related costs,
     before net-cash
     settlement feature   425.2    416.8    2.0 %  1,282.1  1,247.0    2.8 %
    Net-cash settlement
     feature (recovery)
     expense               (9.5)       -        -    143.6        -        -
    Other operations
     expenses             345.9    325.7    6.2 %  1,013.4    964.5    5.1 %
    -------------------------------------------------------------------------
    Operations expense    761.6    742.5    2.6 %  2,439.1  2,211.5   10.3 %
    Restructuring costs     6.4     11.7  (45.3)%     13.6     56.4  (75.9)%
    -------------------------------------------------------------------------
    Total operating
     expenses             768.0    754.2    1.8 %  2,452.7  2,267.9    8.1 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(1)     771.1    742.5    3.9 %  2,295.5  2,211.5    3.8 %
    Total operating
     expenses
     (as adjusted)(1)     777.5    754.2    3.1 %  2,309.1  2,267.9    1.8 %
    Full-time equivalent
     employees, end of
     period(2)           25,828   22,876   12.9 %
    -------------------------------------------------------------------------
    (1) Excludes the net-cash settlement feature (recovery) expense.
        Operations expense (as adjusted) and total operating expenses (as
        adjusted) are regularly reported to the chief operating decision-
        maker.
    (2) The number of full-time equivalent employees providing outsourcing
        services to the Company's customers was approximately 5,820 on
        September 30, 2007 and approximately 4,090 on September 30, 2006.
        Full-time equivalent staff elsewhere increased by 1,222 or 6.5%.
    -------------------------------------------------------------------------
    

    Total Wireline operating expenses increased by $13.8 million and
$184.8 million, respectively, in the third quarter and first nine months of
2007, when compared with the same periods in 2006. Expenses in the third
quarter included approximately $8 million of additional costs ($24 million for
the first nine months) related to the March billing and client care system
conversion. Of the additional costs, approximately $2 million ($8 million for
the first nine months) was recorded in salaries and benefits for customer
contact centres and approximately $6 million ($16 million for the first nine
months) was recorded in other operations expenses primarily for external
labour costs. External labour for the first nine-months of 2007 also included
about $4 million to deal with severe winter weather-related backlogs in early
2007 and preparation costs for expected flooding in British Columbia in the
second quarter.

    
    Operations expense:

    -   Salaries, benefits and employee-related expenses increased by
        $8.4 million and $35.1 million, respectively, in the third quarter
        and first nine months of 2007, when compared with the same periods in
        2006. The increase was mainly due to increased staffing and scheduled
        compensation increases, partly offset by a lower defined benefit
        pension plan expense.

    -   Introduction of a net-cash settlement feature for share option awards
        granted prior to 2005 resulted in a non-cash charge of $143.6 million
        being recorded for the first nine months of 2007. In the third
        quarter of 2007, a recovery of $9.5 million was recorded for an
        adjustment to the initial estimate as well as forfeitures in the
        current quarter.

    -   Other operations expenses increased by $20.2 million and
        $48.9 million, respectively, in the third quarter and first nine
        months of 2007, when compared with the same periods in 2006. The
        increases in the third quarter and first nine months included higher
        external labour costs for billing/client care system support and
        installation/repair activity to improve service levels. The remaining
        third quarter increases were due to network facility costs from
        higher customer demand, increased cost of sales as well as
        inflationary increases. The increase for the nine-month period also
        included external labour costs to help clear backlogs caused by
        severe winter weather on the west coast early in 2007 and flood
        preparation costs in the second quarter, partly offset by: (i) lower
        transit and termination charges due to lower per-minute rates partly
        offset by higher outbound minute volumes; (ii) lower expenses arising
        from CRTC decisions on basic service extension features and network
        access link charges; and (iii) increased capitalization of labour
        related to the higher capital expenditure activity in 2007.

    Restructuring costs in 2007 were for several small efficiency initiatives
and decreased by $5.3 million and $42.8 million, respectively, in the third
quarter and first nine months of 2007, when compared with the same periods in
2006.

    -------------------------------------------------------------------------
    EBITDA ($ millions)       Quarters ended           Nine-month periods
     and EBITDA margin (%)     September 30              ended Sept. 30
     wireline segment      2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    EBITDA                466.3    469.6   (0.7)%  1,221.1  1,392.7  (12.3)%
    EBITDA
     (as adjusted)(1)     456.8    469.6   (2.7)%  1,364.7  1,392.7   (2.0)%
    EBITDA margin          37.8     38.4 (0.6)pts     33.2     38.0 (4.8)pts
    EBITDA margin
     (as adjusted)         37.0     38.4 (1.4)pts     37.1     38.0 (0.9)pts
    -------------------------------------------------------------------------
    (1) Excludes a non-cash (recovery) charge of $(9.5) million and
        $143.6 million, respectively, in the third quarter and first nine
        months of 2007 for introducing a net-cash settlement feature for
        share option awards granted prior to 2005. EBITDA (as adjusted) is
        regularly reported to the chief operating decision-maker and
        corresponds to the definition used in setting TELUS' 2007 EBITDA
        targets and revised guidance.
    -------------------------------------------------------------------------

    Wireline EBITDA decreased by $3.3 million and $171.6 million,
respectively, in the third quarter and first nine months of 2007, when
compared with the same periods in 2006. Wireline EBITDA (as adjusted)
decreased by $12.8 million and $28.0 million, respectively, mainly due to
billing system conversion impacts of about $8 million and $37 million,
respectively. In addition, increased labour costs to deal with weather-related
backlogs and emergency preparations were approximately $4 million in the first
nine months of 2007.

    5.5 Wireless segment results

    -------------------------------------------------------------------------
    Operating revenues -      Quarters ended           Nine-month periods
     wireless segment          September 30              ended Sept. 30
    ($ millions)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Network revenue     1,034.8    944.5    9.6 %  2,969.1  2,653.2   11.9 %
    Equipment revenue      70.5     65.9    7.0 %    184.2    184.4   (0.1)%
    -------------------------------------------------------------------------
    External operating
     revenue            1,105.3  1,010.4    9.4 %  3,153.3  2,837.6   11.1 %
    Intersegment
     revenue                7.0      6.0   16.7 %     20.0     17.1   17.0 %
    -------------------------------------------------------------------------
    Total operating
     revenues           1,112.3  1,016.4    9.4 %  3,173.3  2,854.7   11.2 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Key operating indicators
     - wireless segment      As at September 30
    (000s)                 2007     2006   Change
    -------------------------------------------------------------------------
    Subscribers -
     postpaid(1)        4,334.2  3,949.1    9.8 %
    Subscribers -
     prepaid            1,072.3    925.2   15.9 %
                        -------- -------- --------
    Subscribers -
     total(2)           5,406.5  4,874.3   10.9 %

    Digital POPs(3)
     covered including
     roaming/resale
     (millions)(4)         31.6     31.0    1.9 %

                              Quarters ended           Nine-month periods
                               September 30              ended Sept. 30
                           2007     2006   Change     2007     2006   Change
                         ----------------------------------------------------
    Subscriber gross
     additions - postpaid 217.1    215.8    0.6 %    609.6    601.2    1.4 %
    Subscriber gross
     additions - prepaid  145.8    116.7   24.9 %    403.3    312.7   28.9 %
                         ------- -------- -------- -------- -------- --------
    Subscriber gross
     additions - total    362.9    332.5    9.1 %  1,012.9    913.9   10.8 %

    Subscriber net
     additions - postpaid  98.2    108.6   (9.6)%    258.2    282.3   (8.5)%
    Subscriber net
     additions - prepaid   36.3     28.6   26.9 %     95.0     71.3   33.2 %
                         ------- -------- -------- -------- -------- --------
    Subscriber net
     additions - total    134.5    137.2   (2.0)%    353.2    353.6   (0.1)%

    ARPU($)(5)            64.80    65.67   (1.3)%    63.52    63.10    0.7 %
    Churn, per
     month(%)(5)           1.43     1.36  0.07pts     1.41     1.33  0.08pts
    Lifetime revenue
     per subscriber($)(5) 4,546    4,845   (6.2)%    4,515    4,744   (4.8)%

    COA(6) per gross
     subscriber
     addition ($)(5)        379      386   (1.8)%      412      402    2.5 %
    COA per gross
     subscriber addition
     to lifetime
     revenue (%)(5)         8.3      8.0  0.3 pts      9.1      8.5  0.6 pts
    Average minutes of
     use per subscriber
     per month (MOU)        410      409    0.2 %      401      403   (0.5)%

    EBITDA ($ millions)   520.7    482.8    7.9 %  1,414.8  1,319.5    7.2 %
    EBITDA (as adjusted)
     (7) ($ millions)     523.0    482.8    8.3 %  1,439.3  1,319.5    9.1 %
    EBITDA to network
     revenue (%)           50.3     51.1 (0.8)pts     47.7     49.7 (2.0)pts
    EBITDA (as adjusted)
     to network
     revenue (%)           50.5     51.1 (0.4)pts     48.5     49.7 (1.2)pts
    Retention spend
     to network
     revenue(5) (%)         6.3      6.7 (0.4)pts      7.2      6.4  0.8 pts
    EBITDA excluding COA
     ($ millions)(5)      658.1    611.4    7.6 %  1,832.1  1,686.9    8.6 %
    EBITDA (as adjusted)
     excluding COA
     ($ millions)         660.4    611.4    8.0 %  1,856.6  1,686.9   10.1 %
    -------------------------------------------------------------------------
    pts - percentage points
    (1) A one-time adjustment was made to the postpaid subscriber base.
        Cumulative subscribers were reduced by approximately 2,600 in the
        period to reflect the discontinuation of network service to its
        cellular digital packet data (CDPD) subscribers effective January 31,
        2007.
    (2) Subscribers are measured at the end of the reporting period based on
        information from billing systems.
    (3) POPs is an abbreviation for population. A POP refers to one person
        living in a population area, which in whole or substantial part is
        included in the coverage areas.
    (4) At September 30, 2007, TELUS' wireless PCS digital population
        coverage included expanded coverage of approximately 7.5 million PCS
        POPs due to roaming/resale agreements principally with Bell Mobility
        (Bell Canada).
    (5) See Section 11.3 Definition of key operating indicators. These are
        industry measures useful in assessing operating performance of a
        wireless company, but are not defined under accounting principles
        generally accepted in Canada and the U.S.
    (6) Cost of acquisition.
    (7) Excludes non-cash charges of $2.3 million and $24.5 million,
        respectively, in the third quarter and first nine months of 2007 for
        introducing a net-cash settlement feature for share option awards
        granted prior to 2005. EBITDA (as adjusted) is regularly reported to
        the chief operating decision-maker and corresponds to the definition
        used in setting TELUS' 2007 EBITDA targets and revised guidance.
    -------------------------------------------------------------------------

    Wireless segment revenues increased by $95.9 million and $318.6 million,
respectively, in the third quarter and first nine months of 2007 when compared
with the same periods in 2006, due to the following:

    -   Network revenue increased by $90.3 million and $315.9 million in the
        third quarter and first nine months of 2007, respectively, when
        compared with the same periods in 2006. The increase was the result
        of a 10.9% expansion in the subscriber base during this period. While
        data ARPU increased by 40.9% to $7.20 for the third quarter and
        increased by 50.7% to $6.69 for the first nine months of 2007 as
        compared with $5.11 and $4.44, respectively, for the same periods in
        2006, total ARPU decreased by 87 cents in the third quarter of 2007,
        when compared to the same period in 2006. The change is attributed to
        a shifting product mix driven by successful prepaid net additions and
        maturity of the iDEN business, combined with a decline in voice ARPU.
        Voice ARPU was $57.60 in the third quarter of 2007, a decrease of
        $2.96 or 4.5% from the same period in 2006, caused mainly by a
        greater mix of included-minute rate plans as voice MOU remained
        relatively steady at 410 and increased pricing competition in the
        business and discount segments of the market. Similarly, voice ARPU
        declined by $1.83 or 3.1% to $56.83 for the first nine months of
        2007.

        Data revenues increased to 11.1% of Network revenue, or $115.9
        million, in the third quarter of 2007 as compared with 7.8% of
        Network revenues, or $74.1 million, in the third quarter of 2006 -
        reflecting a growth rate of 56.3%. Similarly, data revenues for the
        first nine months of 2007 increased to 10.6% of Network revenue, or
        $315.3 million, as compared with 7.0% of Network revenue, or $188.2
        million, for the same period in 2006 - reflecting a growth rate of
        67.6%. This growth, driven by continued migration to full function
        personal digital assistants (PDA) and EVDO-capable handsets as well
        as increased EVDO coverage, was principally related to text
        messaging, Internet browser activities and RIM/BlackBerry service
        revenues.

        At September 30, 2007, the mix of postpaid subscribers declined
        slightly to 80.2% of the total cumulative subscriber base, as
        compared to 81.0% from one year earlier. The 98,200 postpaid
        subscriber net additions for the third quarter of 2007 represented
        73.0% of all net additions as compared with 108,600 or 79.2% of all
        net additions for the same period in 2006. Moreover, the 258,200
        postpaid subscriber net additions for the first nine months of 2007
        represented 73.1% of all net additions as compared with 282,300 or
        79.8% of all net additions for the same period in 2006. Total net
        subscriber additions remained strong and were down only marginally in
        the third quarter and first nine months of 2007 as compared with the
        same periods in 2006 as growth in prepaid largely offset the decline
        in postpaid.

        The blended churn rate increased in the third quarter and first nine
        months of 2007 when compared with the respective periods in 2006. The
        postpaid monthly churn rates for the third quarter and first nine
        months of 2007 were approximately one per cent, increasing slightly
        over the same periods last year. The prepaid churn rates also
        increased slightly in the third quarter and first nine months of 2007
        when compared with the same periods in 2006. Total deactivations were
        228,400 for the third quarter and 659,700 for the first nine months
        of 2007 as compared with 195,300 and 560,300, respectively, for the
        same periods last year. Wireless number portability continued to have
        an impact on churn and deactivations in the quarter and first nine
        months of 2007, as compared to the prior year. However, churn at
        1.43% has improved slightly from 1.45% reported in second quarter of
        2007, despite a reduction in retention costs as described below.

    -   Equipment sales, rental and service revenue increased by $4.6 million
        in the third quarter and decreased by $0.2 million, respectively, in
        the third quarter and first nine months of 2007 when compared with
        the same periods in 2006. The increase in the third quarter is due to
        higher gross additions and related handset and accessory revenue. The
        marginal decrease for the first nine months was due principally to an
        increase in gross subscriber additions offset by higher retention
        costs in the form of increased discounts on upgrades. Gross
        subscriber additions were 362,900 for the third quarter of 2007 and
        1,012,900 for the first nine months of 2007 as compared with 332,500
        and 913,900, respectively, for the same periods in 2006. The higher
        gross additions include the impact of increased promotional offerings
        and competitive porting-in resulting from wireless number
        portability. Handset revenues associated with gross subscriber
        activations are included in COA per gross subscriber addition.

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

    -------------------------------------------------------------------------
    Operating expenses -
     wireless segment           Quarters ended           Nine-month periods
    ($ millions, except          September 30              ended Sept. 30
     employees)             2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Equipment sales
     expenses              163.3    148.2   10.2 %    475.3    411.3   15.6 %
    Network operating
     expenses              131.7    114.9   14.6 %    373.0    332.4   12.2 %
    Marketing expenses     104.4    102.0    2.4 %    319.8    287.8   11.1 %
    General and
     administration
     expenses              192.2    167.7   14.6 %    589.7    500.2   17.9 %
    -------------------------------------------------------------------------
    Operations expense     591.6    532.8   11.0 %  1,757.8  1,531.7   14.8 %
    Restructuring costs        -      0.8 (100.0)%      0.7      3.5  (80.0)%
    -------------------------------------------------------------------------
    Total operating
     expenses              591.6    533.6   10.9 %  1,758.5  1,535.2   14.5 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operations expense
     (as adjusted)(1)      589.3    532.8   10.6 %  1,733.3  1,531.7   13.2 %
    Total operating
     expenses
     (as adjusted)(1)      587.0    533.6   10.0 %  1,734.0  1,535.2   12.9 %
    Full-time equivalent
     employees at end of
     period                7,454    6,878    8.4 %
    -------------------------------------------------------------------------
    (1) Excludes non-cash charges of $2.3 million and $24.5 million,
        respectively, in the third quarter and first nine months of 2007 for
        introducing a net-cash settlement feature for share option awards
        granted prior to 2005. Operations expense (as adjusted) and total
        operating expenses (as adjusted) are regularly reported to the chief
        operating decision-maker.
    -------------------------------------------------------------------------

    Wireless segment total operating expenses increased by $58.0 million and
$223.3 million, respectively, in the third quarter and first nine months of
2007 when compared with the same periods in 2006. Total operating expenses as
adjusted to exclude the 2007 net-cash settlement feature increased by
$55.7 million and $198.8 million, respectively, to promote, acquire, retain
and support the 10.9% year-over-year growth in the subscriber base and the
11.9% growth in Network revenue during the first nine months of 2007.

    -   Equipment sales expenses increased by $15.1 million and
        $64.0 million, respectively, in the third quarter and first nine
        months of 2007 when compared with the same periods in 2006, due
        primarily to an increase in gross subscriber activations and
        increased retention activity related to wireless number portability
        combined with a greater mix of data devices, partly offset by reduced
        handset costs from the strong appreciation of the Canadian Dollar
        against the U.S. Dollar in the third quarter of 2007. Handset costs
        including data equipment associated with gross subscriber activations
        are included in COA per gross subscriber addition.

    -   Network operating expenses increased by $16.8 million and
        $40.6 million in the third quarter and first nine months of 2007,
        respectively, when compared with the same periods in 2006. The
        increases were principally due to higher revenue share with third
        party data content providers, licensing costs on data services, site-
        related expenses to support cell sites, a larger subscriber base and
        higher Canadian and U.S. roaming costs. Expenses for the first nine
        months of 2007 were net of a reduction arising from CRTC Decision
        2007-6 related to retail network access link charges.

    -   Marketing expenses increased by only $2.4 million or 2.4% in the
        third quarter when compared to 2006, to support a 9.1% increase in
        gross subscriber additions reflecting strong efficiencies in
        marketing spending. For the first nine months, marketing expenses
        increased by $32.0 million when compared to 2006, due primarily to
        higher advertising and promotions costs driven by wireless number
        portability and increased dealer compensation costs related to the
        higher gross subscriber additions and increased retention activity.
        COA per gross subscriber addition decreased by $7 or 2.1% in the
        third quarter as compared with the same period last year as an
        increase in data units as a percentage of total gross subscriber
        additions was offset by a favourable rate on prepaid gross subscriber
        additions. COA per gross subscriber addition increased by $10 or 2.5%
        for the first nine months of 2007, due principally to higher
        subsidies on data units, higher advertising and promotion on new
        product launches and spending related to wireless number portability.
        COA was $137.4 million and $417.3 million, respectively, for the
        third quarter and first nine months of 2007 as compared to
        $128.6 million and $367.4 million, respectively, for the same periods
        in 2006.

        Retention costs as a percentage of network revenue decreased to 6.3%
        in the third quarter, down from 6.7% in the same period in 2006, with
        a continued focus on re-contracting high value clients. Retention
        costs to Network Revenue were 7.2% in the first nine months of 2007
        as compared to 6.4% in the same period in 2006, due mainly to the
        impact of Wireless number portability. The lifetime revenue per
        subscriber decreased in the third quarter and first nine months of
        2007, when compared to the same periods in 2006 because of the
        increased churn rates and lower ARPU. Consequently, COA as a
        percentage of lifetime revenue increased in the third quarter and
        first nine months of 2007. Lifetime revenue per subscriber and COA as
        a percentage of lifetime revenue improved by $156 and 1.4 points,
        respectively, compared to the second quarter of 2007.

    -   General and administration expense increased by $24.5 million and
        $89.5 million in the third quarter and first nine months of 2007,
        respectively, when compared with the same periods in 2006. Excluding
        non-cash charges for share option awards granted before 2005, general
        and administration expenses grew by $22.2 million and $65.0 million
        for the third quarter and first nine months of 2007, respectively.
        The increases were primarily due to a 8.4% increase in employees to
        support the growth in Network revenue, subscriber base, and expansion
        of the client care and company-owned retail stores teams to manage
        customer service levels.

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

    -------------------------------------------------------------------------
    Wireless segment           Quarters ended            Nine-month periods
     EBITDA ($ millions)        September 30               ended Sept. 30
     and EBITDA margin (%)  2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    EBITDA                 520.7    482.8    7.9 %  1,414.8  1,319.5    7.2 %
    EBITDA
     (as adjusted)(1)      523.0    482.8    8.3 %  1,439.3  1,319.5    9.1 %
    EBITDA margin           46.8     47.5 (0.7)pts     44.6     46.2 (1.6)pts
    EBITDA margin
     (as adjusted)          47.0     47.5 (0.5)pts     45.4     46.2 (0.8)pts
    -------------------------------------------------------------------------
    (1) Excludes non-cash charges of $2.3 million and $24.5 million,
        respectively, in the third quarter and first nine months of 2007 for
        introducing a net-cash settlement feature for share option awards
        granted prior to 2005. EBITDA (as adjusted) is regularly reported to
        the chief operating decision-maker and corresponds to the definition
        used in setting TELUS' 2007 EBITDA targets and revised guidance.
    -------------------------------------------------------------------------
    

    Wireless segment EBITDA increased by $37.9 million and $95.3 million,
respectively, in the third quarter and first nine months of 2007 when compared
with the same periods in 2006. EBITDA (as adjusted) increased by $40.2 million
and $119.8 million, respectively, due to Network revenue growth partially
offset by increased COA expense related to higher gross additions, higher
retention spend due to increased data device upgrades, increased network
costs, and higher general and administration costs to support growth in
subscriber base. EBITDA in the third quarter of 2007 represents a sequential
improvement of $70.0M from EBITDA in the second quarter of 2007, while the
EBITDA margin (as adjusted) showed a sequential improvement of 4.1 percentage
points in the third quarter of 2007.

    
    6.  Financial condition

    The following are changes in the Consolidated balance sheets in the nine-
month period ended September 30, 2007.

    -------------------------------------------------------------------------
               Sept. 30, Dec. 31,        Changes       Explanation of the
                   2007     2006                        change in balance
    ($ millions)       (adjusted)
    -------------------------------------------------------------------------
    Current Assets
      Cash and      1.0    (11.5)     12.5      n.m.   See Section 7.
       temporary                                       Liquidity and
       investments,                                    capital resources
       net

      Short-term   44.1    110.2     (66.1)   (60.0)%  Liquidation of some
       investments                                     investments of
                                                       surplus cash

      Accounts    590.7    707.2    (116.5)   (16.5)%  Decreased by
       receivable                                      $50 million for the
                                                       net increase in
                                                       securitized accounts
                                                       receivable (see
                                                       Section 7.6), lower
                                                       days outstanding on
                                                       wireline receivables,
                                                       and receipt of
                                                       inducements for
                                                       renegotiated building
                                                       leases

      Income and  269.0     95.4     173.6    182.0 %  Increased recovery and
       other taxes                                     interest receivable
       receivable                                      for favourable tax
                                                       reassessments of prior
                                                       years, net of
                                                       approximately
                                                       $10 million refunds
                                                       and interest received

      Inventories 170.6    196.4     (25.8)   (13.1)%  Primarily a seasonal
                                                       reduction of wireless
                                                       handset inventories
                                                       net of an increase to
                                                       wireline work-in-
                                                       progress inventories

      Prepaid     209.0    195.3      13.7      7.0 %  Primarily prepayment
       expenses                                        of annual property
       and other                                       taxes and wireless
                                                       licence fees net of
                                                       amortization

      Current      16.4     40.4     (24.0)    (59.4)% Primarily new net-
       portion                                         cash-settled equity
       derivative                                      swaps offset by the
       assets                                          maturity of cross-
                                                       currency swaps related
                                                       to the notes that
                                                       matured June 1, 2007
    -------------------------------------------------------------------------
    Current
     Liabilities
      Accounts  1,438.5  1,363.6      74.9      5.5 %  Primarily an increase
       payable                                         in the liability for
       and                                             net-cash settled share
       accrued                                         options and increased
       liabilities                                     interest payable,
                                                       partly offset by
                                                       reduced payables for
                                                       inventories and
                                                       capital expenditures,
                                                       as well as reductions
                                                       in quality-of-service
                                                       rate rebate accruals

      Income and    5.1     10.3      (5.2)   (50.5)%  Periodic instalment
       other taxes                                     payments made
       payable

      Restruct-    32.1     53.1     (21.0)   (39.5)%  Payments under
       uring                                           previous and current
       accounts                                        programs exceeded new
       payable and                                     obligations
       accrued
       liabilities

      Dividends   123.4        -     123.4      n.m.   Dividends payable on
       payable                                         September 30 were
                                                       remitted on the
                                                       October 1 dividend
                                                       payment date. See
                                                       Section 7.3 Cash used
                                                       by financing
                                                       activities

      Advance     614.5    606.3       8.2      1.4 %  Primarily increased
       billings                                        customer deposits and
       and                                             wireless billings, net
       customer                                        of draw-downs from
       deposits                                        price cap deferred
                                                       revenue

      Current       6.0  1,433.5  (1,427.5)   (99.6)%  Repayment of U.S.
       maturities                                      Dollar Notes that
       of long-                                        matured June 1 and
       term debt                                       medium-term TCI notes
                                                       that matured in
                                                       February

      Current      13.6    165.8    (152.2)   (91.8)%  Maturity of cross-
       portion                                         currency swaps related
       of                                              to the note maturing
       derivative                                      June 1, partly offset
       liabilities                                     by changes to U.S.
                                                       currency forward
                                                       contracts

      Current     426.5    137.2     289.3      n.m.   An increase in
       portion                                         temporary differences
       of                                              for current assets and
       future                                          liabilities as well as
       income                                          partnership taxable
       taxes                                           income that will be
                                                       allocated in the next
                                                       12 months. The
                                                       December 31, 2006
                                                       balance includes a
                                                       reclassification of
                                                       $44 million from long-
                                                       term future income
                                                       taxes. See Note 2(c)
                                                       of the interim
                                                       Consolidated financial
                                                       statements
    -------------------------------------------------------------------------
    Working    (1,358.9)(2,436.4)  1,077.5     44.2 %  Mainly the repayment
     capital(1)                                        of long-term debt that
                                                       matured June 1 with
                                                       proceeds from new
                                                       long-term debt. See
                                                       Section 7.3 Cash used
                                                       by financing
                                                       activities
    -------------------------------------------------------------------------
    Capital    11,099.5 10,982.1     117.4      1.1 %  See Sections 5.3
     Assets,                                           Consolidated results
     Net                                               from operations -
                                                       Depreciation,
                                                       Amortization as well
                                                       as 7.2 Cash used by
                                                       investing activities
    -------------------------------------------------------------------------
    Other Assets
      Deferred  1,098.2    956.6     141.6     14.8 %  Primarily pension plan
       charges                                         contributions and
                                                       pension recoveries
                                                       resulting from
                                                       favourable returns on
                                                       plan assets

      Investments  30.3     35.2      (4.9)   (13.9)%  Includes an
                                                       $11.8 million write-
                                                       off of an equity
                                                       investment in AMP'D
                                                       Mobile, Inc., net of
                                                       new investments and
                                                       fair value adjustments

      Goodwill  3,168.5  3,169.5      (1.0)     0.0 %  -
    -------------------------------------------------------------------------
    Long-Term   4,496.6  3,474.7   1,021.9     29.4 %  Includes notes issued
     Debt                                              in March, commercial
                                                       paper issues under a
                                                       program established in
                                                       May, and an increase
                                                       in utilized bank
                                                       facilities, partly
                                                       offset by a reduction
                                                       in the Canadian dollar
                                                       value of 2011 U.S.
                                                       Dollar Notes. At Dec.
                                                       31, 2006, the current
                                                       portion of long-term
                                                       debt was
                                                       $1,433.5 million.
    -------------------------------------------------------------------------
    Other       1,760.8  1,257.3     503.5     40.0 %  Primarily changes in
     Long-Term                                         U.S. Dollar exchange
     Liabilities                                       rates and a fair value
                                                       adjustment of the
                                                       derivative liabilities
                                                       associated with 2011
                                                       U.S. Dollar Notes
    -------------------------------------------------------------------------
    Future      1,076.8  1,023.3      53.5      5.2 %  An increase in
     Income                                            temporary differences
     Taxes                                             for long-term assets
                                                       and liabilities
    -------------------------------------------------------------------------
    Non-           23.8     23.6       0.2      0.8 %  -
     Controlling
     Interests
    -------------------------------------------------------------------------
    Shareholders'
     Equity
      Common    6,679.6  6,928.1    (248.5)    (3.6)%  Decreased primarily
       equity                                          due to NCIB
                                                       expenditures of $602.4
                                                       million, dividends of
                                                       $374.3 million and
                                                       transitional amounts
                                                       for accumulated other
                                                       comprehensive income
                                                       of $176.2 million;
                                                       partly offset by Net
                                                       income of $857.7
                                                       million and Other
                                                       comprehensive income
                                                       of $59.1 million
    -------------------------------------------------------------------------
    (1) Current assets subtracting Current liabilities - an indicator of the
        ability to finance current operations and meet obligations as they
        fall due.
    -------------------------------------------------------------------------

    7.  Liquidity and capital resources

    7.1 Cash provided by operating activities

    -------------------------------------------------------------------------
    ($ millions)              Quarters ended            Nine-month periods
                               September 30               ended Sept. 30
                            2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
                           831.8    570.4    45.8 % 2,354.3  2,056.5   14.5 %
    -------------------------------------------------------------------------

    Cash provided by operating activities increased by $261.4 million and
$297.8 million, respectively, in the third quarter and first nine months of
2007, when compared with the same periods in 2006. Changes in cash provided by
operating activities included:

    -   EBITDA increased by $34.6 million in the third quarter of 2007 and
        decreased by $76.3 million in the first nine months of 2007, when
        compared to the same periods in 2006 (as described in Section 5:
        Results from operations);

    -   Share-based compensation payments in excess of the expense included
        in EBITDA increased by $17.5 million in the third quarter of 2007
        when compared with the same period in 2006 for a comparative
        reduction in cash flow. Share-based compensation expense in excess of
        payments in the first nine months of 2007 increased by $91.1 million
        when compared with the same period in 2006, for a comparative
        increase in cash flow;

    -   Employer contributions to employee defined benefit plans decreased by
        $9.9 million and $36.8 million, respectively, in the third quarter
        and first nine months of 2007, when compared to the same periods in
        2006 mainly due to updated actuarial valuations;

    -   Interest paid increased by $28.1 million in the third quarter of 2007
        and decreased by $14.4 million in the first nine months of 2007 when
        compared to the same periods in 2006. The increase in the third
        quarter was primarily due to new debt issues in March 2007, which
        have semi-annual interest payments in September, and use of
        commercial paper in the third quarter of 2007. The decrease for the
        nine-month period was due to the paid amounts in the second quarter
        of 2006 including $31.2 million for terminating cross currency
        interest rate swaps as well as partial payment of interest in respect
        of a court decision in a lawsuit regarding a 1997 BC TEL bond
        redemption matter, partly offset by repayment of forward starting
        interest rate swaps in the first quarter of 2007;

    -   Interest received decreased by $15.0 million in the first nine months
        of 2007 when compared to the same period in 2006, due mainly to the
        receipt of interest on tax refunds in the first quarter of 2006;

    -   Income taxes received net of instalment payments decreased by
        $93.5 million in the first nine months of 2007 when compared to the
        same period in 2006, due mainly to collection of income taxes
        receivable during first quarter of 2006;

    -   Proceeds from securitized accounts receivable increased by a net
        $50 million during the third quarter and first nine months of 2007.
        In the comparable periods in 2006, proceeds were reduced by
        $185 million and $150 million, respectively. Consequently, operating
        cash flow increased by $235 million and $200 million, respectively,
        in the third quarter and first nine months of 2007 when compared to
        the same periods in 2006. See Section 7.6 Accounts receivable sale;

    -   Cash provided by a decrease in Short-term investments was
        $10.7 million and $66.1 million, respectively, in the third quarter
        and first nine months of 2007, for a comparative increase in cash
        flow of $109.5 million and $164.9 million, respectively, when
        compared with $98.8 million cash used for Short-term investments in
        the third quarter and first nine months of 2006; and

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

    7.2 Cash used by investing activities

    -------------------------------------------------------------------------
     ($ millions)             Quarters ended            Nine-month periods
                               September 30               ended Sept. 30
                            2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
                           430.0    451.0   (4.7)%  1,300.1  1,253.2    3.7 %
    -------------------------------------------------------------------------
    

    Cash used by investing activities decreased by $21.0 million in the third
quarter of 2007 and increased by $46.9 million in the first nine months of
2007, when compared with the same periods in 2006. The decrease in the third
quarter was primarily due to $25 million for acquisitions in 2006. The
increase for the first nine months was primarily due to increased capital
expenditures (see below), partly offset by $44.5 million for acquisitions in
2006 and changes in other investing activities.
    Assets under construction were $655.2 million at September 30, 2007, a
decrease of $70.2 million from December 31, 2006. The decrease primarily
reflects a transfer of $342.1 million to intangible assets subject to
amortization in the first quarter of 2007 for activation of certain phases of
the new consolidated wireline billing and client care system, net of increases
in other assets under construction during 2007.

    
    -------------------------------------------------------------------------
    Capital expenditures        Quarters ended           Nine-month periods
    ($ in millions,              September 30              ended Sept. 30
     ratios in %)           2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
    Wireline segment       302.6    311.4   (2.8)%    882.0    881.8    0.0 %
    Wireless segment       131.5    112.5   16.9 %    415.8    321.4   29.4 %
    -------------------------------------------------------------------------
    TELUS consolidated
     capital
     expenditures          434.1    423.9    2.4 %  1,297.8  1,203.2    7.9 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditure
     intensity ratio(1)     18.8     19.2 (0.4)pts     19.2     18.7   0.5pts
    EBITDA less capital
     expenditures(2)       552.9    528.5    4.6 %  1,338.1  1,509.0  (11.3)%
    EBITDA (as adjusted)
     less capital
     expenditures(2)       545.7    528.5    3.3 %  1,506.2  1,509.0   (0.2)%
    -------------------------------------------------------------------------
    (1) Capital expenditure intensity is measured by dividing capital
        expenditures by operating revenues. This measure provides a method of
        comparing the level of capital expenditures to other companies of
        varying size within the same industry.
    (2) See Section 11.1 EBITDA for the calculation and description.
    -------------------------------------------------------------------------

    Capital expenditures increased by $10.2 million and $94.6 million,
respectively, in the third quarter and first nine months of 2007, when
compared to the same periods in 2006. The capital intensity level was
consistent at about 19% of consolidated revenues in 2007 and 2006. TELUS'
EBITDA (as adjusted) less capital expenditures increased by $10.4 million in
the third quarter of 2007, when compared to the same period in 2006, as
wireless EBITDA (as adjusted) growth exceeded the increase in wireless capital
expenditures.

    -   Wireline segment capital expenditures decreased by $8.8 million in
        the third quarter and increased by $0.2 million in first nine months
        of 2007 when compared to the same periods in 2006. Expenditures
        decreased for billing and client care system development in both the
        third quarter and first nine months of 2007, when compared to the
        same periods in 2006, because the Alberta phase of the system was put
        into service in March 2007. Increases in capital expenditures
        included up-front capital investment to support new enterprise
        customers, network sustainment, and non-incumbent growth. Wireline
        capital expenditure intensity levels were in the 24 to 25% range for
        the third quarter and first nine months of 2007 and 2006. Wireline
        cash flow (EBITDA less capital expenditures) was $339.1 million in
        the first nine months of 2007, or a decrease of 33.6% when compared
        to the same period in 2006. Wireline cash flow based on EBITDA (as
        adjusted) for the first nine months of 2007 was $482.7 million, a
        decrease of 5.5% from the same period in 2006.

    -   Wireless segment capital expenditures increased by $19.0 million and
        $94.4 million, respectively, in the third quarter and first nine
        months of 2007 when compared to the same periods in 2006. The
        increases were principally related to continued enhancement of
        digital wireless capacity and coverage. Wireless capital expenditure
        intensity levels in 2007 were 11.8% for the third quarter and 13.1%
        for the first nine months of 2007 as compared to 11.1% and 11.3%,
        respectively, for the same periods in 2006. Wireless cash flows
        (EBITDA less capital expenditures) were $389.2 million in the third
        quarter and $999.0 million for the first nine months of 2007
        representing an increase of 5.1% for the quarter and no change for
        the nine-month period. Wireless cash flows based on EBITDA (as
        adjusted) were $391.5 million and $1,023.5 million, respectively, for
        the third quarter and first nine months of 2007, or increases of 5.7%
        and 2.5%, respectively, from the same periods in 2006.

    7.3 Cash used by financing activities

    -------------------------------------------------------------------------
     ($ millions)             Quarters ended            Nine-month periods
                               September 30               ended Sept. 30
                            2007     2006   Change     2007     2006   Change
    -------------------------------------------------------------------------
                           403.0    126.2      n.m. 1,041.7    837.3   24.4 %
    -------------------------------------------------------------------------

    Cash used by financing activities increased by $276.8 million and
$204.4 million, respectively, in the third quarter and first nine months of
2007, when compared with the same periods in 2006.

    -   Proceeds from Common Shares and Non-Voting Shares issued were $0.1
        million in the third quarter of 2007 and $0.7 million for the first
        nine months of 2007, as compared to $37.2 million and $82.9 million,
        respectively, in the same periods in 2006. The decreases were due to
        implementation of the net-cash settlement feature for share option
        awards granted prior to 2005 and the introduction of the net equity
        settlement feature in May 2006.

    -   Cash dividends paid for the third quarter of 2007 were zero because
        the declared dividend for the third quarter was paid on Monday,
        October 1, 2007. For the third quarter of 2006, cash dividends of
        $93.8 million were remitted at the end of September and recorded in
        the third quarter because the dividend payment date of October 1,
        2006 was on a weekend. Cash dividends paid to shareholders in the
        first nine months of 2007 were $250.9 million, compared to $284.5
        million in the same period of 2006, with the decrease due primarily
        to the different remittance dates for the third quarter dividend,
        partly offset by an increased dividend rate for dividends paid in
        2007. The fourth quarter of 2007 is expected to reflect remittance of
        the declared dividends for both the third and fourth quarters.

    -   The Company's renewed NCIB program (Program 3) came into effect on
        December 20, 2006 and is set to expire on December 19, 2007. At
        September 30, 2007, the Company has purchased 22% of the maximum 12
        million Common shares and 67% of the maximum 12 million Non-Voting
        Shares under this program. From December 20, 2004 to September 30,
        2007, TELUS repurchased approximately 19.0 million Common Shares and
        30.9 million Non-Voting Shares for $2.37 billion under three NCIB
        programs. The Company intends to renew in December the normal course
        issuer bid share repurchase program for 2008.

    The following table shows quarterly purchases under NCIB programs for 2007
and 2006.

    Normal course issuer bid programs
    -------------------------------------------------------------------------
                                                           Purchase cost
                           Shares repurchased              ($ millions)
                    --------------------------------- -----------------------
                                                      Charged Charged
                                                         to      to
                                                       Share  Retained
                       Common  Non-Voting             capital earnings
    By program         Shares    Shares      Total       (1)     (2)    Paid
    --------------- --------------------------------- -----------------------
    2006 (Program 2)
      First quarter  1,783,300  3,334,500  5,117,800    93.3   138.3   231.6
      Second quarter 2,913,600  2,643,300  5,556,900    93.0   156.4   249.4
      Third quarter    743,700  1,328,600  2,072,300    37.9    81.8   119.7
    -------------------------------------------------------------------------
      Nine months    5,440,600  7,306,400 12,747,000   224.2   376.5   600.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    2007 (Program 3)
      First quarter  1,975,000  1,530,000  3,505,000    57.8   142.9   200.7
      Second quarter   330,000  2,367,300  2,697,300    55.0   114.5   169.5
      Third quarter    349,900  3,967,100  4,317,000    89.6   142.6   232.2
    -------------------------------------------------------------------------
      Nine months    2,654,900  7,864,400 10,519,300   202.4   400.0   602.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Represents the book value of shares repurchased
    (2) Represents the cost in excess of the book value of shares repurchased
    -------------------------------------------------------------------------

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

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

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

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

    -   On May 15, 2007, TELUS entered into an unsecured commercial paper
        program, which is backstopped by a portion of its credit facility,
        enabling it to issue commercial paper up to a maximum aggregate of
        $800 million (or U.S. Dollar equivalent), to be used for general
        corporate purposes. Commercial paper of $293.9 million was
        outstanding at September 30, 2007, a decrease of $369.6 million from
        June 30, 2007.

    -   During the third quarter of 2007, utilized bank facilities increased
        from $0 at June 30, 2007 to $200 million at September 30, or an
        increase of $80 million since December 31, 2006.

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

    The following are anticipated requirements to meet long-term debt
repayments, including related hedge amounts and calculated upon such long-term
debts owing as at September 30, 2007, during each of the five years ending
December 31. Interest obligations are not included.

    Long-term debt maturities
    -------------------------------------------------------------------------
                                                        Derivative
    ($ millions)                               Principal liability  Total(1)
    -------------------------------------------------------------------------
    2007 (balance of year)                           1.2         -       1.2
    2008                                             5.6         -       5.6
    2009                                             1.5         -       1.5
    2010                                            80.8         -      80.8
    2011                                         1,916.1   1,035.5   2,951.6
    -------------------------------------------------------------------------
    (1) Where applicable, principal repayments reflect foreign exchange rates
        at September 30, 2007.
    -------------------------------------------------------------------------

    7.4 Liquidity and capital resource measures

    -------------------------------------------------------------------------
    As at, or 12-month periods ended,
     September 30                                   2007      2006    Change
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Components of debt and coverage
     ratios(1) ($ millions)
    -------------------------------------------------------------------------
    Net debt (including securitized accounts
     receivables)                                6,121.4   6,147.2     (25.8)
    Total capitalization - book value           12,943.4  13,157.4    (214.0)

    EBITDA - excluding restructuring costs -
     12-month trailing                           3,536.2   3,542.0      (5.8)
    Net interest cost - 12-month trailing          464.6     542.8     (78.2)
    -------------------------------------------------------------------------
    Debt ratios
    -------------------------------------------------------------------------
    Fixed-rate debt as a proportion of total
     indebtedness (%)                               83.0      92.6   (9.6)pts
    Average term to maturity of debt (years)         5.8       4.8       1.0

    Net debt to total capitalization (%)(1)         47.3      46.7     0.6pts
    Net debt to EBITDA - excluding
     restructuring costs(1)                          1.7       1.7         -
    -------------------------------------------------------------------------
    Coverage ratios(1)
    -------------------------------------------------------------------------
    Interest coverage on long-term debt              3.9       3.3       0.6
    EBITDA - excluding restructuring costs
     interest coverage                               7.6       6.5       1.1
    -------------------------------------------------------------------------
    Other measures - 12-month trailing
    -------------------------------------------------------------------------
    Free cash flow ($ millions)(2)               1,370.3   1,449.4     (79.1)
    Dividend payout ratio (%)(1)                      46        39      7pts
    -------------------------------------------------------------------------
    (1) See Section 11.4 Definition of liquidity and capital resource
        measures.
    (2) See Section 11.2 Free cash flow for the definition.
    -------------------------------------------------------------------------
    

    Net debt and total capitalization are calculated on a basis generally
consistent with the Company's credit agreements. Net debt excludes accumulated
comprehensive income amounts arising from financial instruments used to manage
interest rate and currency risks associated with U.S. Dollar denominated debt.
Total capitalization also excludes accumulated other comprehensive income. See
Section 11.4.
    Total capitalization decreased because of lower share capital and lower
net debt, partly offset by higher retained earnings. Changes in Net debt and
12-month trailing EBITDA did not have a significant impact on the net debt to
EBITDA ratio at September 30, 2007 when compared to one year earlier. The
average term to maturity of debt of 5.8 years at September 30, 2007 represents
an increase from 4.5 years at December 31, 2006 due to repayment of maturing
notes on June 1 and the March debt issue, net of commercial paper issues in
beginning in May. The proportion of debt on a fixed-rate basis decreased from
one year-earlier with the issue of commercial paper as well as higher
outstanding balances of bank facilities and securitized accounts receivable.
    Interest coverage on long-term debt improved by 0.3 because of lower
interest expenses, and improved by 0.3 because of increased income before
taxes and interest expense. The EBITDA interest coverage ratio improved by 1.1
due to lower net interest costs. The decrease in 12-month trailing free cash
flow resulted from higher capital expenditures and lower recoveries of income
tax and related interest, net of lower interest paid and improved EBITDA
before share-based compensation. The dividend payout ratio based on actual
earnings at September 30, 2007 was 46% and the ratio calculated to exclude the
impacts of tax-related adjustments and the charge for introducing the net-cash
feature was also 46%.
    The Company's strategy is to maintain the financial policies and
guidelines set out below. The Company believes that these measures are
currently at the optimal level and provide access to capital at a reasonable
cost by maintaining credit ratings in the range of BBB+ to A-, or the
equivalent.
    TELUS' long-term financial policies and guidelines are:

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

    The Company no longer considers the ratio Net debt to total
capitalization to be a long-term policy measure. The measure is based on book
values of net debt and equity; however, the book value of equity has been
reduced significantly by cumulative effect of normal course issuer bids, which
includes the market value of equity in excess of book value.

    7.5 Credit facilities

    On March 2, 2007, TELUS closed a new five-year $2 billion credit facility
with a syndicate of 18 financial institutions. The new facility replaced
$1.6 billion of existing credit facilities, of which $800 million would have
expired in 2008 and $800 million would have expired in 2010. The new facility
may be used for general corporate purposes including the backstop of
commercial paper. The new facility has no substantial changes in terms and
conditions other than reduced pricing and extended term, which reflects
favourable market conditions and TELUS' financial position. Notably, the
May 2012 maturity date of the new credit facility extends beyond the maturity
date of TELUS' June 2011 Notes.
    At September 30, 2007, TELUS had available liquidity exceeding
$1.4 billion from unutilized credit facilities, consistent with the Company's
objective of maintaining at least $1 billion of unutilized liquidity.

    
    TELUS Credit Facilities at September 30, 2007
    -------------------------------------------------------------------------
                                                           Backstop
                                                Outstanding  for
                                                   undrawn  commer-
                                                   letters   cial
                                                      of     paper  Available
    ($ in millions)       Expiry     Size    Drawn  credit  program liquidity
    -------------------------------------------------------------------------
    Five-year
     revolving             May 1,
     facility(1)            2012  2,000.0   (200.0)  (103.7)  (293.9) 1,402.4
    Other bank
     facilities                -     77.2        -     (2.9)       -     74.3
    -------------------------------------------------------------------------
    Total                      -  2,077.2   (200.0)  (106.6)  (293.9) 1,476.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Canadian dollars or U.S. dollar equivalent.
    -------------------------------------------------------------------------
    

    TELUS' revolving credit facility contains customary covenants including a
requirement that TELUS not permit its consolidated Leverage Ratio (debt to
trailing 12-month EBITDA) to exceed 4.0:1 (approximately 1.7:1 at September
30, 2007) and not permit its consolidated Coverage Ratio (EBITDA to Interest
Expense on a trailing 12-month basis) to be less than 2.0:1 (approximately
7.6:1 at September 30, 2007) at the end of any financial quarter. There are
certain minor differences in the calculation of the Leverage Ratio and
Coverage Ratio under the credit agreement as compared with the calculation of
Net debt to EBITDA and EBITDA interest coverage. Historically, the
calculations have not been materially different. The covenants are not
impacted by revaluation of capital assets, intangible assets and goodwill for
accounting purposes. Continued access to TELUS' credit facility is not
contingent on the maintenance by TELUS of a specific credit rating.

    7.6 Accounts receivable sale

    On July 26, 2002, TCI, a wholly owned subsidiary of TELUS, entered into
an agreement, which was amended September 30, 2002, and March 1, 2006, and
November 30, 2006, with an arm's-length securitization trust associated with a
major Schedule I bank, under which TCI is able to sell an interest in certain
of its trade receivables up to a maximum of $650 million. As a result of
selling the interest in certain of the trade receivables on a fully serviced
basis, a servicing liability is recognized on the date of sale and is, in
turn, amortized to earnings over the expected life of the trade receivables.
This revolving-period securitization agreement had an initial term ending
July 18, 2007; the November 30, 2006 amendment resulted in the term being
extended to July 18, 2008.
    TCI is required to maintain at least a BBB (low) credit rating by
Dominion Bond Rating Service (DBRS) or the securitization trust may require
the sale program to be wound down. The necessary credit rating was exceeded by
three levels at A (low) as of August 1, 2007.

    
    -------------------------------------------------------------------------
    Balance of proceeds from   2007  2007  2007  2006  2006  2006  2006  2005
    securitized receivables    Sept. June   Mar.  Dec. Sept. June   Mar. Dec.
    ($ millions)                 30    30    31    31    30    30    31    31
    -------------------------------------------------------------------------
                              550.0 500.0 150.0 500.0 350.0 535.0 400.0 500.0
    -------------------------------------------------------------------------
    

    7.7 Credit ratings

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

    
    -------------------------------------------------------------------------
    Credit rating summary              DBRS      S&P       Moody's   Fitch
    -------------------------------------------------------------------------
    TELUS Corporation
      Senior bank debt                 -         -         -         BBB+
      Notes                            A (low)   BBB+      Baa1      BBB+
      Commercial paper                 R-1 (low) -         -         -

    TELUS Communications Inc. (TCI)
      Debentures                       A (low)   BBB+      -         BBB+
      Medium-term notes                A (low)   BBB+      -         BBB+
      First mortgage bonds             A (low)   A-        -         -

    Trend or outlook                   Stable    Stable    Stable    Stable
    -------------------------------------------------------------------------

    7.8 Financial instruments; Commitments and contingent liabilities

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

    The Company's financial instruments consist of cash and temporary
investments, accounts receivable, investments accounted for using the cost
method, accounts payable, restructuring accounts payable, short-term
obligations, long-term debt, interest rate swap agreements, share-based
compensation cost hedges, as further discussed in Note 10(b)-(c) of the
interim Consolidated financial statements, and foreign exchange hedges.
    Fair value: The carrying value of cash and temporary investments,
accounts receivable, accounts payable, restructuring accounts payable and
short-term obligations approximates their fair values due to the immediate or
short-term maturity of these financial instruments. The carrying values of the
Company's investments accounted for using the cost method would not exceed
their fair values.
    The carrying value of short-term investments equals their fair value as
they are classified as held for trading. The fair value is determined directly
by reference to quoted market prices.
    The fair values of the Company's long-term debt are estimated based on
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same maturity as well as the use of
discounted future cash flows using current rates for similar financial
instruments subject to similar risks and maturities. The fair values of the
Company's derivative financial instruments used to manage exposure to interest
rate and currency risks are estimated similarly.
    The fair values of the Company's derivative financial instruments used to
manage exposure to increases in compensation costs arising from certain forms
of share-based compensation are estimated based upon fair value estimates of
the related cash-settled equity forward agreements provided by the
counterparty to the transactions.
    The effect of the adoption of comprehensive income on the Company's
derivatives was to record them at their fair values rather than at their
carrying amounts. The primary change was in derivatives classified as held for
hedging and used to manage interest rate and currency risks associated with
U.S. Dollar denominated debt, as shown in the table below.

    
    -------------------------------------------------------------------------
    As at ($ millions)                           September 30, 2007
    -------------------------------------------------------------------------
                                       Hedging
                                        item
                                       maximum
                                      maturity  Notional  Carrying     Fair
                                        date     amount    amount     value
    -------------------------------------------------------------------------
    Liabilities
    Long-term debt
      Principal                                            4,502.6   4,886.1
      Derivatives(1) classified as held
       for hedging and used to manage
       interest rate and currency risks
       associated with U.S. Dollar
       denominated debt
        - Derivative asset               2007          -         -
        - Derivative liability
          - Current                      2007          -         -
          - Non-current                  2011    2,950.5   1,201.5
                                                          ---------
                                                           1,201.5
        - Interest payable                                    32.3
                                                          ---------
      Net                                                  1,233.8   1,233.8
    Derivatives(1) used to manage
     interest rate risk associated
     with planned refinancing of debt
     maturing June 1, 2007               2007          -         -         -
    -------------------------------------------------------------------------
                                                           5,736.4   6,119.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    As at ($ millions)                            December 31, 2006
    -------------------------------------------------------------------------
                                       Hedging
                                        item
                                       maximum
                                      maturity  Notional  Carrying    Fair
                                        date     amount    amount     value
    -------------------------------------------------------------------------
    Liabilities
    Long-term debt
      Principal                                            4,908.2   5,535.9
      Derivatives(1) classified as held
       for hedging and used to manage
       interest rate and currency risks
       associated with U.S. Dollar
       denominated debt
        - Derivative asset               2007      809.9     (40.4)
        - Derivative liability
          - Current                      2007      673.4     165.8
          - Non-current                  2011    2,950.5     710.3
                                                          ---------
                                                             835.7
        - Interest payable                                     6.3
                                                          ---------
      Net                                                    842.0   1,090.6
    Derivatives(1) used to manage
     interest rate risk associated
     with planned refinancing of debt
     maturing June 1, 2007               2007      500.0         -       6.5
    -------------------------------------------------------------------------
                                                           5,750.2   6,633.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Designated as cash flow hedging items.
    -------------------------------------------------------------------------

        Commitments and contingent liabilities (Note 17 of the interim
        Consolidated financial statements)
    

    The Company's commitments and contingent liabilities have not changed
significantly in the nine-month period ended September 30, 2007. Changes to
maturities of long-term debt as a result of financing activities in the first
nine months of 2007 were described in Section 7.3 above. Uncertain income tax
positions are substantially funded.
    On July 6, 2007, the CRTC issued Decision Telecom 2007-50, Use of
deferral account to expand broadband services to certain rural and remote
communities. In this decision, the CRTC approved the use of the deferral
account for the purpose of expanding broadband services to 115 communities in
British Columbia and Quebec. The Company is currently reviewing the
implications of this decision in conjunction with its previously filed
submission for use of the deferral account funds and, as directed by the CRTC,
filed an update to the previously filed submission on September 4, 2007.
    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, excepting the items enumerated in
Note 17(c) of the interim Consolidated financial statements and updated in
Section 10.4 Litigation and legal matters.

    7.9 Outstanding share information

    The following is a summary of the outstanding shares for each class of
equity at September 30 and October 12, 2007. In addition, for October 12,
2007, the total number of outstanding and issuable shares is presented
assuming full conversion of outstanding options as well as options not yet
granted, but for which shares have been reserved.

    
    -------------------------------------------------------------------------
    Class of equity security                      Common  Non-Voting   Total
    (millions of shares)                          Shares    Shares    shares
    -------------------------------------------------------------------------
    Common equity
      Outstanding shares at Sept. 30 and
       Oct. 12, 2007                               176.0     151.4   327.4(1)
      Options outstanding and issuable(2)(3)
       at Oct. 12, 2007                              0.5      16.1      16.6
    -------------------------------------------------------------------------
      Outstanding and issuable shares at
       Oct. 12, 2007                               176.5     167.5     344.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For the purposes of calculating diluted earnings per share, the
        number of shares for the third quarter of 2007 was 332.8.
    (2) Assuming full conversion and ignoring exercise prices.
    (3) Not reduced for any options that may have been forfeited or expired
        in the period October 1 to 12, 2007.
    -------------------------------------------------------------------------
    

    8. Critical accounting estimates and accounting policy developments

    8.1 Critical accounting estimates

    TELUS' critical accounting estimates are described Section 8.1 of its
2006 Management's discussion and analysis. The preparation of financial
statements in conformity with generally accepted accounting principles
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)

    The interim Consolidated financial statements follow the same accounting
policies and methods of their application as set out in Note 1 of TELUS' 2006
Consolidated financial statements for the year ended December 31, 2006, other
than as set out below, including that certain of the comparative amounts have
been reclassified to conform with the presentation adopted currently.

    
        Convergence with International Financial Reporting Standards
    

    In 2006, Canada's Accounting Standards Board ratified a strategic plan
that will result in Canadian GAAP, as used by public companies, being evolved
and converged with International Financial Reporting Standards (IFRS) over a
transitional period currently expected to be complete by 2011. The precise
timing of convergence will depend on an Accounting Standards Board progress
review to be undertaken and released by March 31, 2008.
    Canadian GAAP will be converged with IFRS through a combination of two
methods: as current joint-convergence projects of the United States' Financial
Accounting Standards Board and the International Accounting Standards Board
are agreed upon, they will be adopted by Canada's Accounting Standards Board
and may be introduced in Canada before the complete changeover to IFRS; and
standards not subject to a joint-convergence project will be exposed in an
omnibus manner for introduction at the time of the complete changeover to
IFRS.
    As the International Accounting Standards Board currently, and
expectedly, has projects underway that should result in new pronouncements
that continue to evolve IFRS, and that this Canadian convergence initiative is
very much in its infancy as of the date of these consolidated financial
statements, it is premature to currently assess the impact of the Canadian
initiative, if any, on the Company.

    
        Comprehensive income; recognition and measurement of financial
        instruments
    

    Commencing with the Company's 2007 fiscal year, the recommendations of
the Canadian Institute of Chartered Accountants (CICA) for accounting for
comprehensive income (CICA Handbook Section 1530), for the recognition and
measurement of financial instruments (CICA Handbook Section 3855) and for
hedges (CICA Handbook Section 3865) apply to the Company. Currently, the
concept of comprehensive income for purposes of Canadian GAAP, in the
Company's specific instance, is to include changes in shareholders' equity
arising from unrealized changes in the values of financial instruments. The
implementation and the application of Handbook Sections 1530, 3855 and 3865
were described in the Company's 2007 first quarter Management's discussion and
analysis. See Note 2(b) of the interim Consolidated financial statements.

    
        Income taxes arising from partnership income
    

    In mid-2006, Canada's Accounting Standards Board's Emerging Issues
Committee issued a Draft Abstract (D59) regarding the accounting for income
taxes related to entities that consolidate partnership interests that have a
different year end than the consolidating entity. The Company has applied the
guidance therein contained through its 2006 year-end. In March 2007, the
Emerging Issues Committee issued a revised Draft Abstract (RD59) which changed
the approach to determination of the classification of future income taxes
between current and non-current. In May 2007, the Emerging Issues Committee
removed this issue from its agenda.
    Given the absence of specific guidance on the issue, the Company has
adopted the policy of accounting for the current portion of the future income
tax liability for partnerships to include the tax effect of differences
between the accounting and tax bases of current assets and current liabilities
and the tax on partnership income to be allocated during the next twelve
months. The Company has retrospectively applied this policy, which has, in the
Company's specific current instance, the net effect of increasing the current
portion of future income tax liabilities. The consolidated balance sheet
reclassification is as set out in Note 2(c) of the interim Consolidated
financial statements.

    
        Financial instruments - disclosure; presentation
    

    In respect of its 2007 fiscal year, the Company must comply with the
recommendations of the CICA for financial instrument disclosure and
presentation (CICA Handbook Section 3861). As an activity consistent with
Canadian GAAP being evolved and converged with IFRS, the existing
recommendations for financial instrument disclosure will be replaced with new
recommendations (CICA Handbook Section 3862); the existing recommendations for
financial instrument presentation will be carried forward, unchanged (CICA
Handbook Section 3863).
    Commencing with the Company's 2008 fiscal year, the new recommendations
of the CICA for financial instrument disclosures will apply to the Company.
The new recommendations will result in incremental disclosures, relative to
those currently, with an emphasis on risks associated with both recognized and
unrecognized financial instruments to which an entity is exposed during the
period and at the balance sheet date, and how an entity manages those risks.
The Company is assessing how it will be affected by these new recommendations.

    
        Inventories
    

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

    9. Annual guidance for 2007

    The following discussion is qualified in its entirety by the Caution
regarding forward-looking statements at the beginning of Management's
discussion and analysis. It is also qualified by Section 10: Risks and risk
management of TELUS' 2006 annual and 2007 first and second quarter
Management's discussion and analyses, as well as this report.
    The Company has revised its annual guidance for 2007 to reflect tax-
related recoveries, continuing focus on profitable subscriber growth, and the
impact on high-speed Internet net additions from temporarily reduced order
processing capability resulting from the billing and client care system
conversion, and other factors.

    
    -------------------------------------------------------------------------
                          Revised guidance  Previous guidance      Change
                              for 2007          for 2007

                                         (Second quarter MD&A)
    -------------------------------------------------------------------------
    Consolidated
                                                              Narrowed range
                                                              and reduced by
      Revenues                $9.125 to         $9.175 to        $50 to
                           $9.175 billion    $9.275 billion   $100 million

      EBITDA(1)               $3.725 to         $3.725 to      Reduced upper
       (as adjusted)(2)    $3.775 billion    $3.825 billion   end of range by
                                                                $50 million
      Earnings per share
       (as adjusted)(3)    $3.55 to $3.65    $3.25 to $3.45   Increased 20 to
                                                               30 cents and
                                                              narrowed range

      Capital expenditures   No Change           Approx.         No Change
                                              $1.75 billion
    -------------------------------------------------------------------------
    Wireline segment

      Revenue (external)      $4.85 to          $4.85 to       Reduced upper
                           $4.875 billion     $4.9 billion    end of range by
                                                                $25 million

      EBITDA                  $1.80 to          $1.775 to        Increased
       (as adjusted)(2)    $1.825 billion   $1.825 billion     lower end of
                                                                  range by
                                                                $25 million

      Capital expenditures    No Change          Approx.         No Change
                                              $1.2 billion

      High-speed Internet      Approx.          More than       Reduced by
       net additions           110,000           125,000      approx. 15,000
    -------------------------------------------------------------------------

    Wireless segment
                                                              Narrowed range
                                                              and reduced by
      Revenue (external)      $4.275 to         $4.325 to         $50 to
                           $4.30 billion     $4.375 billion     $75 million

                                                              Narrowed range
                                                              and reduced by
      EBITDA                  $1.925 to         $1.95 to          $25 to
       (as adjusted)(2)    $1.95 billion      $2.0 billion      $50 million

      Capital expenditures    No Change          Approx.          No Change
                                              $550 million

      Wireless subscriber     Approx.           More than        Reduced by
       net additions          530,000            550,000           20,000
    -------------------------------------------------------------------------
    (1) See Section 11.1 Earnings before interest taxes depreciation and
        amortization (EBITDA) for the definition.
    (2) Excluding a cash-settled share option expense of approximately
        $170 million in 2007 for introducing the net-cash settlement feature,
        of which, approximately $145 million is in wireline and approximately
        $25 million is in wireless.
    (3) Excluding an after-tax charge per share of approximately $0.32 for
        introducing the net-cash settlement feature.
    -------------------------------------------------------------------------

    The following key assumptions were made at the time the original targets
for 2007 were announced in December 2006. Where applicable, updates are
provided for the key assumptions.

    -------------------------------------------------------------------------
    Key assumption for 2007 targets   Actual result for the year to-date
    -------------------------------------------------------------------------
    Canadian real GDP growth of 2.7%  In its Autumn outlook, the Conference
     (revised to 2.6%)                 Board of Canada issued revised
                                       estimates for Canadian real GDP growth
                                       of 2.6% for 2007 and 2.8% for 2008

    Increased wireline competition    Evidence of healthy competition within
     in both business and consumer     TELUS' incumbent business and consumer
     markets, particularly from        markets are forbearance decisions from
     cable-TV and VoIP companies       the CRTC that cover urban areas with
                                       more than one million residential
                                       subscribers and 35 business exchanges
                                       that serve more than two-thirds of
                                       TELUS total business lines.

    Forbearance for local retail      Assumption confirmed for residential
     wireline services in major        services by early August and for
     urban markets by the second       retail business services by late
     half of 2007                      September. See Section 10.1 Regulatory

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

    Canadian wireless industry        Based on Company estimates and Canadian
     market penetration gain of        industry net additions in the first
     4.5 to five percentage points     half of 2007 (excluding any impacts of
                                       competitors' subscriber write-offs),
                                       the industry penetration gain for 2007
                                       is trending within the key assumption
                                       range

    TELUS would record approximately  Restructuring costs are expected to be
     $50 million of restructuring      approximately $25 million in 2007
     expenses (see revision)

    TELUS' statutory income tax rate  Assumptions unchanged. See Section 5:
     is expected to be 33 to 34%       Consolidated results from operations -
     with minimal cash tax payments    Income taxes
     in 2007

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

    Average TELUS shares outstanding  Average shares outstanding of
     of 330 to 335 million shares      333.5 million for the first nine
     for the full year                 months of 2007 was 3% lower than the
                                       same period in 2006, and is within the
                                       range of the 2.5 to 4% reduction
                                       implied by the key assumption for the
                                       full year
    -------------------------------------------------------------------------
    

    TELUS continues to have long-term policy guidelines for Net debt to
EBITDA and dividend payout, described in Section 7.4. The 2007 annual guidance
is in compliance with these policy guidelines.

    10. Risks and risk management

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

    10.1 Regulatory

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

    
        Local forbearance - Telecom Decisions 2007-64, 2007-84, 2007-92 and
        2007-97
    

    The CRTC granted forbearance on August 3 (Decision 2007-64) for incumbent
residential local services in Victoria, most of Greater Vancouver, Calgary,
Edmonton and Rimouski. Forbearance was also granted on September 10 (Decision
2007-84) for nine additional exchanges in Eastern Quebec. The areas forborne
from regulation cover more than one million residential subscribers and TELUS
expects to receive decisions on a number of other applications in the near
future.
    TELUS also applied for deregulation of business local services in phone
exchanges covering 78 per cent of business lines in B.C. and Alberta, and
52 per cent in Eastern Quebec. In Telecom Decision 2007-92 on September 27,
the CRTC granted forbearance for eligible business local services in 35
exchanges, including Victoria, most of Greater Vancouver, Calgary, Edmonton,
Fort McMurray and Rimouski, which cover about two-thirds of TELUS' total
business lines. Decision 2007-92 deregulated services such as single and
multi- line business access, features and bundles, integrated services digital
network primary rate interface (ISDN-PRI) and direct-in-dial (DID). TELUS' IP-
One Evolution(R) service, Centrex service and enhanced exchange wide dialling
(EEWD) lines were not included in this decision and are expected to be
addressed in proceedings under Telecom Public Notice 2007-14, in early 2008.
There can be no assurance that forbearance will be granted for any or all of
the exchanges or services included in the Company's outstanding or future
forbearance applications.
    On October 5, 2007, in Decision 2007-97, the CRTC eliminated winback
rules for telecommunication companies' incumbent ADSL Internet services as
well as for large cable carriers' higher-speed access services.
    With these forbearance and winback decisions, pricing and marketing of
retail local services can be set by the marketplace, rather than by
regulators. TELUS expects to bundle services and features in new ways to
better meet customer needs. However, competitive intensity is expected to
increase as the entire industry is expected to be more innovative.

    
        Essential services - Application to review and vary Ethernet and
        ADSL orders (Telecom Decision 2007-77)
    

    In this decision in August, the CRTC rescinded its previous orders with
respect to implementation of new services and new rates that were ordered in
Ethernet and high-speed Internet (ADSL) decisions in January 2007. The
commission also approved deferral account compensation for revenues forgone as
a result of its previous determination to retroactively reduce TELUS ADSL
central office activation fees. In the essential services proceeding currently
under way (Public Notice 2006-14), TELUS continues to argue that ADSL and
Ethernet are not essential services and should not be unbundled.

    
        Quality-of-service rebate program - CRTC decisions on TELUS'
        exclusion applications

    TELUS' remaining exclusion application for retail quality-of-service
programs, concerning the series of severe storms in the Lower Mainland of B.C.
from November 2006 to January 2007, was decided favourably in August 2007 in
Decision 2007-72. TELUS will not be required to issue rebates.

        Wireless number portability (WNP)
    

    Phase one of WNP (sometimes referred to as local number portability, or
LNP) was implemented successfully on March 14, 2007 in the majority of
populated centres in Canada by Canadian wireless carriers, including TELUS.
Implementation of WNP in remaining areas was achieved in September 2007.
Experience from two full quarters of WNP, indicates that it is a net
contributor to increased subscriber loading for TELUS, with inbound porting
exceeding outbound porting, but WNP has also contributed initially to
increased wireless customer retention costs as a percentage of revenues in the
second quarter of 2007 and a slight increase in subscriber churn in the second
and third quarters of 2007. Subscriber churn and retention costs may be
permanently higher in the future.
    WNP could also lead to an increase in migration of network access lines
to wireless services, as well as present opportunities for TELUS to market
more effectively in the business/enterprise market in Central Canada where
TELUS has a lower market share than its competitors. There can be no assurance
that this will be the case.

    
        Foreign-ownership restrictions
    

    TELUS and its subsidiaries are subject to the foreign ownership
restrictions imposed by the Telecommunications Act, the Radiocommunication Act
and the Broadcasting Act. In July 2007, the Minister of Industry and the
Minister of Finance announced the creation of a Competition Review Panel to
review Canadian competition and investment legislation: the Competition Act
and the Investment Canada Act. As the Panel will report to the Minister of
Industry by June 30, 2008, it is expected that any subsequent legislation
changes would not be effective until late-2008 or 2009. TELUS has supported
the relaxation of foreign ownership restrictions in the past, but believes
that any such relaxation must be on an equal basis for broadcasting and
telecommunications companies.

    10.2 Human resources

    
        Collective bargaining at TELUS Québec

    Two collective agreements between TELUS Québec and the Syndicat des agents
de maîtrise de TELUS covering approximately 520 professional and supervisory
team members in Quebec expired on March 31, 2007. The parties continue to
negotiate to achieve a new collective agreement.

    10.3 Process risks

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

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

    10.4 Litigation and legal matters

    
        Certified class action
    

    A class action was brought August 9, 2004 under the Class Actions Act
(Saskatchewan), against a number of past and present wireless service
providers including the Company. The claim alleges that each of the carriers
is in breach of contract and has violated competition, trade practices and
consumer protection legislation across Canada in connection with the
collection of system access fees, and seeks to recover direct and punitive
damages in an unspecified amount. The class was certified on September 17,
2007 by the Saskatchewan Court of Queen's Bench. The Company has applied for
leave to appeal the certification decision. The Company believes that it has
good defences to the action.
    Similar proceedings have been filed by, or on behalf of, plaintiffs'
counsel in other provincial jurisdictions, but are not expected to proceed
until the Saskatchewan action has been decided. Should the ultimate resolution
of this action differ from management's assessments and assumptions, a
material adjustment to the Company's financial position and the results of its
operations could result; management's assessments and assumptions include that
a reliable estimate of the exposure cannot be made at this preliminary stage
of the lawsuit.

    
    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. EBITDA (as adjusted) excludes a non-cash charge for introducing a net-
cash settlement feature for share option awards granted prior to January 1,
2005. EBITDA (as adjusted) is regularly reported to the chief operating
decision-maker and corresponds to the definition used in setting TELUS' 2007
EBITDA targets and revised guidance (see Section 9).

    
    -------------------------------------------------------------------------
                                          Quarters ended   Nine-month periods
                                           September 30    ended September 30
    ($ millions)                          2007      2006      2007      2006
    -------------------------------------------------------------------------
    Net income                           409.9     319.6     857.8     886.3
      Other expense (income)               8.0       4.0      30.3      17.9
      Financing costs                     86.2     116.6     331.0     371.1
      Income taxes                        78.6     126.5     251.6     261.3
      Non-controlling interest             1.7       2.4       4.5       7.1
    -------------------------------------------------------------------------
    Operating income                     584.4     569.1   1,475.2   1,543.7
      Depreciation                       332.5     325.8     968.5   1,000.2
      Amortization of intangible
       assets                             70.1      57.5     192.2     168.3
    -------------------------------------------------------------------------
    EBITDA                               987.0     952.4   2,635.9   2,712.2
    Add back: Non-cash (recovery)
     charge in 2007 for introducing
     a net-cash settlement feature
     for options granted prior
     to 2005                              (7.2)        -     168.1         -
    -------------------------------------------------------------------------
    EBITDA (as adjusted)                 979.8     952.4   2,804.0   2,712.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
                                          Quarters ended   Nine-month periods
                                           September 30    ended September 30
    ($ millions)                          2007      2006      2007      2006
    -------------------------------------------------------------------------
    EBITDA                               987.0     952.4   2,635.9   2,712.2
    Capital expenditures                (434.1)   (423.9) (1,297.8) (1,203.2)
    -------------------------------------------------------------------------
    EBITDA less capital expenditures     552.9     528.5   1,338.1   1,509.0
    Add back: Non-cash charge in
     2007 for introducing a net-
     cash settlement feature for
     options granted prior to 2005        (7.2)        -     168.1         -
    -------------------------------------------------------------------------
    EBITDA (as adjusted) less
     capital expenditures                545.7     528.5   1,506.2   1,509.0
    -------------------------------------------------------------------------
    

    11.2 Free cash flow

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

    
    -------------------------------------------------------------------------
                                          Quarters ended   Nine-month periods
                                           September 30    ended September 30
    ($ millions)                          2007      2006      2007      2006
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                          831.8     570.4   2,354.3   2,056.5
    Cash (used) by investing
     activities                         (430.0)   (451.0) (1,300.1) (1,253.2)
    -------------------------------------------------------------------------
                                         401.8     119.4   1,054.2     803.3

    Net employee defined benefit
     plans expense                        24.0       1.5      69.0       4.4
    Employer contributions to
     employee defined benefit plans       18.9      28.8      67.5     104.3
    Amortization of deferred gains
     on sale-leaseback of buildings,
     amortization of deferred
     charges and other, net               (5.9)     (3.9)     (1.1)    (12.5)
    Reduction (increase) in
     securitized accounts receivable     (50.0)    185.0     (50.0)    150.0
    Non-cash working capital changes
     (except changes in taxes,
     interest, and securitized
     accounts receivable) and other      118.2     161.9       3.5     246.9
    Acquisition                              -      25.0         -      44.5
    Proceeds from the sale of
     property and other assets            (4.1)     (6.9)     (5.4)    (14.9)
    Other investing activities               -       9.0       7.7      20.4
    -------------------------------------------------------------------------
    Free cash flow                       502.9     519.8   1,145.4   1,346.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
                                          Quarters ended   Nine-month periods
                                           September 30    ended September 30
    ($ millions)                          2007      2006      2007      2006
    -------------------------------------------------------------------------
    EBITDA                               987.0     952.4   2,635.9   2,712.2

    Restructuring costs net of
     cash payments                         3.3      (1.2)    (21.0)      2.2
    Share-based compensation              (3.3)     14.2     126.4      35.3
    Donations and securitization
     fees included in Other expense       (9.2)     (8.5)    (27.6)    (20.6)
    Cash interest paid                   (41.1)    (13.0)   (283.2)   (297.6)
    Cash interest received                 1.4       0.6       8.9      23.9
    Income taxes received (paid),
     less investment tax credits
     received that were previously
     recognized in either EBITDA or
     capital expenditures, and other      (1.1)     (0.8)      3.8      94.2
    Capital expenditures                (434.1)   (423.9) (1,297.8) (1,203.2)
    -------------------------------------------------------------------------
    Free cash flow                       502.9     519.8   1,145.4   1,346.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    11.3 Definition of key operating indicators

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

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

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

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

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

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

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

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

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

    11.4 Definition of liquidity and capital resource measures

    Dividend payout ratio is defined as the most recent quarterly dividend
declared per share multiplied by four and divided by basic earnings per share
for the 12-month trailing period. The target guideline for the annual dividend
payout ratio is on a prospective basis, rather than on a trailing basis, and
is 45 to 55% of sustainable net earnings.

    EBITDA - excluding restructuring costs is used in the calculation of Net
debt to EBITDA and EBITDA interest coverage, consistent with the calculation
of the Leverage Ratio and the Coverage Ratio in credit facility covenants.
Restructuring costs were $22.2 million and $95.4 million, respectively, for
the twelve-month periods ended September 30, 2007 and 2006.

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

    Interest coverage on long-term debt is calculated on a 12-month trailing
basis as Net income before interest expense on long-term debt and income tax
expense divided by interest expense on long-term debt. Interest expense on
long-term debt for the 12-month trailing period ending September 30, 2006
includes losses on redemption of long-term debt. The 12-month periods ended
September 30, 2007 and 2006 also include accruals for estimated costs to
settle a lawsuit.

    Net debt is a non-GAAP measure whose nearest GAAP measure is the sum of
Long-term debt and 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     As at     As at
                                                Sept. 30,  Dec. 31, Sept. 30,
    ($ millions)                                    2007      2006      2006
    -------------------------------------------------------------------------
    Long-term debt including current portion     4,502.6   4,908.2   4,764.5
    Debt issuance costs netted against
     long-term debt                                 31.5      19.9      21.5
    Derivative liability                         1,201.5     838.5     985.8
    Accumulated other comprehensive income
     amounts arising from financial
     instruments used to manage interest
     rate and currency risks associated
     with U.S. Dollar denominated debt            (163.2)        -         -
    -------------------------------------------------------------------------
    Debt                                         5,572.4   5,766.6   5,771.8
    Deduct Cash and temporary investments           (1.0)     11.5      25.4
    Add proceeds from securitized accounts
     receivable                                    550.0     500.0     350.0
    -------------------------------------------------------------------------
    Net debt                                     6,121.4   6,278.1   6,147.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The derivative liability in the table above relates to cross currency
interest rate swaps that effectively convert principal repayments and interest
obligations to Canadian dollar obligations, which at September 30, 2007, is in
respect of the US$1,925.0 million debenture maturing June 1, 2011. At
December 31, 2006 and September 30, 2006, the derivative liability was in
respect of the 2011 debenture and the US$1,166.5 million debenture that
matured June 1, 2007. Management believes that Net debt is a useful measure
because it incorporates the exchange rate impact of cross currency swaps put
into place that fix the value of U.S. Dollar denominated debt, and because it
represents the amount of long-term debt obligations that are not covered by
available cash and temporary investments.

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

    Net debt to total capitalization provides a measure of the proportion of
debt used in the Company's capital structure. The long-term target ratio for
Net debt to total capitalization is 45 to 50%.

    Net interest cost is defined as Financing costs before gains on
redemption and repayment of debt, calculated on a 12-month trailing basis. No
gains on redemption and repayment of debt were recorded in the respective
periods. Losses recorded on the redemption of long-term debt are included in
net interest cost. Net interest costs for the 12-months ending September 30,
2007 and 2006 are equivalent to reported quarterly financing costs over those
periods.

    Total capitalization - book value excludes Accumulated other
comprehensive income (loss) and is calculated as follows.

    
    -------------------------------------------------------------------------
                                                   As at     As at     As at
                                                Sept. 30   Dec. 31  Sept. 30
    ($ millions)                                    2007      2006      2006
    -------------------------------------------------------------------------
    Net debt                                     6,121.4   6,278.1   6,147.2
    Non-controlling interests                       23.8      23.6      22.3
    Shareholders equity                          6,679.6   6,928.1   6,987.9
    Accumulated other comprehensive loss           118.6         -         -
    -------------------------------------------------------------------------
    Total capitalization - book value           12,943.4  13,229.8  13,157.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

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

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