TELUS Reports Third Quarter Results

Focus on operational efficiency and launch of next generation wireless network and devices

VANCOUVER, Nov. 6 /CNW/ - TELUS Corporation reported third quarter 2009 net income of $280 million and earnings per share (EPS) of $0.88, a decrease of two and one per cent, respectively. Net income and EPS this quarter included favourable income tax-related adjustments related to prior years' tax matters of approximately $14 million net of tax or four cents per share, respectively. Excluding income tax-related adjustments, net income and EPS were down seven and six per cent respectively, and when further excluding restructuring costs were down two per cent and flat, respectively.

Operating revenue was $2.4 billion, a decrease of $39 million from last year. Total customer connections of 11.9 million were 326,000 higher than a year ago due to wireless, TELUS TV and high speed Internet growth. The revenue decrease reflects continued declines in voice revenues. Data and wireless revenues grew modestly affected by a weak economic environment and intense competition. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) decreased by five per cent primarily due to lower revenues, higher defined benefit pension plan expenses and higher restructuring costs from ongoing operating efficiency initiatives. When excluding defined benefit pension plan expenses and restructuring costs, underlying EBITDA decreased by $1 million. The underlying EBITDA benefited from strong cost containment as operations expenses excluding defined pension expenses decreased by three per cent.

Free cash flow of $266 million increased by $748 million over the same period a year ago, primarily due to the prior year payment for advanced wireless services (AWS) spectrum licences. Capital expenditures of $558 million for the quarter reflect TELUS' significant ongoing wireline and wireless broadband build-out initiatives. This has facilitated our increased TELUS TV subscriber loading and the early launch of a next generation High-Speed Packet Access (HSPA) wireless network and associated offering of new devices to customers.

    
    FINANCIAL HIGHLIGHTS

    -------------------------------------------------------------------------
    C$ and in millions, except per share amounts    3 months ended
                                                     September 30
    (unaudited)                                     2009      2008  % Change
    -------------------------------------------------------------------------
    Operating revenues                             2,411     2,450      (1.6)
    Operations expense                             1,456     1,465      (0.6)
    Restructuring costs                               32        10       n.m.
    EBITDA(1)                                        923       975      (5.3)
    Income before income taxes                       386       411      (6.1)
    Net income(2)                                    280       286      (2.1)
    Earnings per share (EPS), basic(2)              0.88      0.89      (1.1)
    Cash provided by operating activities            814       985     (17.4)
    General capital expenditures                     558       473      18.0
    Total capital expenditures(3)                    558     1,355     (58.8)
    Free cash flow(3)(4)                             266      (482)      n.m.
    Total customer connections (millions)          11.86     11.54       2.8

    (1) Earnings before interest, taxes, depreciation and amortization
        (EBITDA) is defined as Operating revenues less Operations expense
        less Restructuring costs. See Section 11.1 of Management's discussion
        and analysis.
    (2) Net income and EPS for the three month period in 2009 included
        favourable income tax-related adjustments related to prior year tax
        matters of approximately $14 million net of tax or four cents per
        share respectively, compared to $nil for the same period in 2008.
    (3) The three month period in 2008 included $882 million payment for
        wireless spectrum licences.
    (4) See Section 11.2 of Management's discussion and analysis.
    

"TELUS is leading the change in Canada's wireless competitive landscape by delivering exceptional client experiences through a series of major initiatives coming to fruition simultaneously," said Darren Entwistle, TELUS president and CEO. "This week, TELUS began offering Canadian consumers the largest coverage and the fastest technology through our newly launched HSPA+ wireless network."

"We have also introduced a fantastic array of brand new HSPA smartphones including the iconic Apple iPhone 3GS. Importantly, the new Blackberry Bold 9700 and the Android HTC Hero also join our compelling selection of innovative devices for Canadians. These devices are complemented by our new Clear Choice(TM) wireless rate plans, which simplify the rate plan options for our clients," Mr. Entwistle noted. "In addition, we have expanded our phone distribution to more than 100 premium Black's Photo locations across Canada. We very much look forward to capitalizing on these positive developments in the marketplace."

Robert McFarlane, TELUS executive vice-president and CFO said that "while we continue to appropriately focus on investing in cost reduction initiatives given the economic and competitive environment, we are at an exciting inflection point in respect of our major growth investments as we transition into the commercialization phase of our wireless and wireline broadband expansion initiatives. As a result, we expect capital expenditures to peak in the second half of 2009, while subscriber growth in wireless, Internet and TV should accelerate."

The Company has updated its 2009 full year guidance to reflect the impacts of ongoing weak economic growth in Canada particularly on its wireline business, the early launch of the new next generation wireless network, and the associated impact on acquisition and retention costs from the November launch of new smartphone devices including the Apple iPhone. The company now expects 2009 revenue to be between $9.6 billion and $9.7 billion. The wireless revenue guidance range has been increased by $25 million, while the wireline revenue guidance range has been lowered and tightened. The 2009 Consolidated EBITDA guidance range has been lowered by $125 million to $3.475 billion to $3.575 billion reflecting a $75 million decrease in the wireless guidance range and a $50 million decrease in the wireline guidance range. Total estimated annual restructuring has been increased $10 million to approximately $160 million. 2009 basic EPS is now expected to be in a range of $3.10 to $3.30. Consolidated capex has increased slightly to approximately $2.1 billion with a preliminary assessment of expected 2010 capital expenditures as low as $1.7 billion. Annual revised guidance and related assumptions for 2009, and the preliminary assessment of expected 2010 capital expenditure levels are described in Section 9 of the Management's discussion and analysis.

    
    -------------------------------------------------------------------------
    This news release contains statements about expected future events and
    financial and operating results of TELUS that are forward-looking. By
    their nature, forward-looking statements require the Company to make
    assumptions and are subject to inherent risks and uncertainties. There is
    significant risk that the forward-looking statements will not prove to be
    accurate. Readers are cautioned not to place undue reliance on forward-
    looking statements as a number of factors could cause actual future
    results and events to differ materially from that expressed in the
    forward-looking statements. Accordingly this news release is subject to
    the disclaimer and qualified by the assumptions (including assumptions
    for 2009 guidance and preliminary assessment of expected 2010 capital
    expenditures), qualifications and risk factors (including those
    associated with the deployment and operation of the new national high-
    speed packet access network and associated introduction of new products,
    services and systems) referred to in the Management's discussion and
    analysis in the 2008 annual report, and in the 2009 first, second and
    third quarter reports. Except as required by law, TELUS disclaims any
    intention or obligation to update or revise forward-looking statements,
    and reserves the right to change, at any time at its sole discretion, its
    current practice of updating annual targets and guidance.
    -------------------------------------------------------------------------

    OPERATING HIGHLIGHTS

    TELUS wireless

    -   External revenues increased by $4 million or 0.3% to $1.2 billion in
        the third quarter of 2009, compared with the same period in 2008, as
        equipment sales and other revenue growth of 16%, which included one
        month of revenue from newly acquired Black's Photo Corporation,
        offset lower network revenue growth.
    -   Wireless data revenue increased $48 million or 27% due to the
        continued adoption of full function smartphones and mobile Internet
        keys, and increased use of data services such as text messaging and
        social networking.
    -   ARPU (average revenue per subscriber unit per month) declined by 7.3%
        to $59.45 compared to the same quarter a year ago, but continued to
        reflect the usual sequential seasonal improvement. The fast-growing
        data component of $12.05 represented 20% of ARPU. Voice revenue
        continued to trend down due to declining minutes of use and plan
        optimization by consumers and businesses, lower business-oriented
        Mike service revenue, decreased inbound roaming revenues, and an
        increased proportion of Koodo Mobile customers.
    -   Net subscriber additions of 125,000 decreased 29% from the same
        period a year ago, when excluding the deactivation of subscribers
        from the turndown of the analogue network one year ago, but improved
        13% sequentially. The year-over-year decrease was primarily due to
        current churn of Koodo subscribers being at normal levels, whereas a
        year ago there was minimal churn given its then recent service
        launch, and reduced prepaid customers. Postpaid net additions were
        131,000, while prepaid net losses were 6,000.
    -   Blended monthly subscriber churn increased slightly to 1.55% from
        1.52% a year ago, when excluding the deactivation of analogue
        subscribers in September 2008 from last year's churn rate.
    -   EBITDA of $517 million decreased by 1.7% due to increased retention
        costs and higher network operating expenses, partially offset by
        lower costs of acquisition.
    -   Cost of acquisition per gross addition decreased 11% year-over-year
        to $320 reflecting lower advertising and promotion expenses and
        commissions, partially offset by higher subsidies on smartphones.
    -   Simple cash flow (EBITDA less capital expenditures) decreased by
        $69 million to $324 million in the quarter due to lower EBITDA growth
        and higher general capital spending to support the major next
        generation HSPA network build-out being completed this year. However,
        when factoring in the payment for AWS spectrum last year, simple cash
        flow increased by $813 million.

    TELUS wireline

    -   External revenues decreased by $43 million or 3.4% to $1.2 billion in
        the third quarter of 2009, when compared with the same period in
        2008, due to declines in voice local and long distance revenues.
    -   Data revenues increased by $8 million or 1.6% primarily due to higher
        managed workplace and Internet, TELUS TV subscriber growth, and
        enhanced data and hosting revenues.
    -   TELUS high-speed Internet net additions of 9,000 were down from
        13,000 in the same period a year ago, due to a maturing market and
        promotional activity from cable-TV competitors.
    -   TELUS TV net additions were 22,000, an increase of 83% over the same
        period last year, due to enhanced broadband coverage, expanded
        marketing efforts and the introduction of TELUS Satellite TV service
        that supplements the coverage IP-based services.
    -   Network access lines (NALs) declined by 44,000 in the quarter to
        4.1 million, which is down 4.3% from a year ago. Residential NAL
        losses of 41,000 improved year-over-year due to more effective
        winbacks and from the benefit of bundling services, including TELUS
        TV. A decrease in business NALs in Western Canada due to economic and
        competitive factors more than offset increased business lines in
        Ontario and Quebec.
    -   EBITDA of $406 million decreased by 9.6% due primarily to higher
        restructuring costs and pension expenses. EBITDA excluding
        restructuring costs and pension expenses increased by $4 million
        benefitting from decreased full-time equivalent employees and strong
        cost containment as wireline operations expenses excluding these
        expenses declined 5.4%.
    -   Simple cash flow (EBITDA less capital expenditures) decreased
        $68 million to $41 million in the quarter due to lower EBITDA and
        increased capital expenditures, which primarily relates to continued
        broadband network enhancements and TELUS TV subscriber growth.

    CORPORATE AND BUSINESS DEVELOPMENTS

    TELUS launches Canada's largest 3G+ network
    

TELUS launched Canada's largest 3G+ network on November 5. The new next generation wireless network is the latest enhancement to TELUS' multi-network mobile strategy, offering customers the technology for increased wireless data download speeds of up to 21 megabits per second, access to a world class selection of compelling mobile devices and international roaming service to more than 200 countries. This initiative should also ensure a smoother transition to fourth generation (4G) wireless technology known as long term evolution (LTE).

With TELUS' new High Speed Packet Access plus (HSPA+) network, customers can experience dramatically decreased download times for web pages, emails, songs and movies.

TELUS brings iPhone 3GS to Canada

On November 5, TELUS launched the iPhone 3GS and iPhone 3G with a range of 3G data plans for iPhone customers. The iPhones will run on TELUS' newly launched HSPA+ network, offering access to Canada's largest 3G+ coverage.

iPhone 3GS is the fastest, most powerful iPhone yet, packed with incredible new features including improved speed and performance - up to twice as fast as iPhone 3G - with longer battery life, a high-quality 3 megapixel autofocus camera, easy to use video recording and hands free voice control. iPhone 3GS includes iPhone OS 3.1, the world's most advanced mobile operating system with features such as Cut, Copy and Paste, MMS, Spotlight Search, landscape keyboard and more.

Exciting new smartphones on TELUS' 3G+ network

TELUS clients can now access the world's leading smartphones on TELUS' new 3G+ network, including the very popular Nokia E71, and the BlackBerry Bold 9700. Exclusive to TELUS in Canada, the HTC Hero is a revolutionary Android touchscreen smartphone that brings personalization to the next level, and the LG New Chocolate, exclusive to TELUS in North America, a stunning handset designed for the future of technology. Also available, the Sierra 306 Internet key, designed to be compatible with the fastest available 3G+ network technology, which has manufacturer-rated peak data download speeds of up to 21 mbps. TELUS also launched the following 3G phones this quarter: LG Versa 9600, LG Keybo 2, Motorola Rival A455, Samsung Intensity U450 and LG Masterpiece.

TELUS introduces Clear Choice(TM) Rate Plans for Canadians

TELUS launched on November 5 new clear and simple rate plans with no System Access Fees (SAF) or carrier 911 fees. The new pricing applies across both new business and consumer wireless rate plans. For consumers, we introduced a new suite of Clear Choice plans with no SAF or carrier 911 fees and also simplified the number of rate plan options, making it easier for clients to choose the plan that is right for them. Rate plans were generally increased by $5 with customers receiving enhanced value with the inclusion of a voicemail service.

These new plans are consistent with TELUS' brand promise, the future is friendly. Existing TELUS clients can continue to renew on their existing rate plans or have the option to switch to the new rate plans. Reduced pricing complexity better positions TELUS to win and retain customers in the competitive wireless market, and the reduced number of rate plans supports operational efficiency.

TELUS acquires Black's Photo and launches camera phone sales

TELUS acquired Black's Photo Corporation for $26 million in September. Black's is a national imaging and digital retailer in Canada, with 113 stores, primarily in mall locations. Eighty-one or 72 per cent of Black's stores are located in Ontario. Starting on November 5, TELUS expanded its wireless distribution capability through Black's, complementing the existing network of dealers and Company-owned stores. It is expected that the proportion of wireless devices with embedded high quality photo and video capability will continue to expand in the future, providing a natural link between TELUS and Black's product lines.

CRTC net neutrality decisions

The Canadian Radio-television and Telecommunications Commission (CRTC) decisions released on October 21 establish guidelines for what constitutes reasonable network management and uphold the principle of usage-based billing for wholesale ADSL access service. TELUS considers these to be fair decisions that recognize the significant investments made by Internet Service Providers (ISPs) like TELUS in Internet infrastructure while empowering consumers by way of new requirements for disclosing ISP network management practices.

In its decision on Internet traffic management practices (popularly known as throttling, traffic shaping, and/or net neutrality), the CRTC has permitted Bell, Rogers, Shaw and other ISPs to continue traffic shaping peer-to-peer file sharing traffic for now; however, the CRTC will evaluate each carrier's measures in future proceedings against the framework that it has established. The issue of whether throttling is permitted has therefore not been definitively resolved yet but the commission recognized that, in some circumstances, it may be the only viable response to traffic congestion.

The CRTC decisions do not have any immediate impact on TELUS because we have not traffic shaped, however we are pleased to see the CRTC preserve ISPs flexibility to adopt usage-based pricing at wholesale and retail. The CRTC's recognition that congestion is a real problem and needs to be managed is positive. The decision strikes a good balance between the realities ISPs are facing and fairness to customers. The chairman of the CRTC has correctly proclaimed that "Canada is the first country to develop and implement a comprehensive approach to Internet traffic management practices."

CRTC finds new wireless entrant not currently eligible to operate

In April, TELUS asked the CRTC to determine if new wireless entrant Globalive was compliant with federal laws in respect of foreign ownership that all communication companies in Canada operate under. After public hearings in September, on October 29, the CRTC ruled that Globalive was not compliant with the Telecommunications Act in respect of ownership and control and is not currently eligible to operate as a Canadian telecommunications carrier.

Globalive purchased wireless spectrum in a government auction 15 months ago. TELUS advocated to Industry Canada that they should pre-qualify bidders before the auction, but this was not done. After the auction, Globalive revealed an equity ownership and debt structure with more than 80 per cent of its capital owned by an Egyptian enterprise. The structure represented a far higher participation by foreign investors than had ever been approved by Canadian regulators in telecommunications or broadcasting. Also of concern to the CRTC was the single foreign enterprise's control of Globalive through trademark and technical services agreements.

TELUS has never opposed foreign ownership restrictions being lifted in Canada, but has simply asked that all communications companies in Canada operate under the same rules without an artificial and unfair advantage being handed to any one player by the government or the regulator.

This CRTC decision does not prevent Globalive or any other new wireless company from competing in Canada or accessing Canadian capital, as several have successfully done. It does require that Globalive must abide by Canada's laws and correct its governance and capital structure. TELUS is of the view that this correction should be made within a reasonable time.

TELUS will again recommend to government that bidders in future auctions should be pre-qualified.

    
    TELUS/Rotman IT security study reveals increasing number and cost of
    security breaches
    

In September, TELUS and the Rotman School of Management released the results of their annual study of the IT security environment in Canada. According to the study, which surveyed more than 600 IT security professionals across the country, IT security breaches cost the average Canadian organization $834,000 in 2009 - a 97 per cent increase from $423,000 last year. Similarly, the average number of reported IT security breaches also increased 276 per cent to 11 per organization in 2009 - compared to three in 2008.

TELUS is a global leader in security products and services, operating one of the world's leading threat and vulnerability analysis labs. TELUS' application, data, and infrastructure security solutions help ensure businesses can focus on the future. For more information about TELUS Security Solutions, please visit telus.com.

    
    AWARDS AND RECOGNITION

    TELUS Annual Report ranked No. 3 in world
    

For the seventh consecutive year, the Annual Report on Annual Reports recognized TELUS for having produced one the 10 best annual reports in the world. The 2008 TELUS report placed No. 3 in the world, unchanged from the previous year. Enterprise.com is the only organization in the world that compares, rates and ranks annual reports globally. An independent panel evaluates 300 annual reports short-listed from an even wider selection of publicly listed corporations. The comprehensive survey looks at 10 key evaluation criteria: packaging, highlights, strategy, business, financials, investors, governance, accounting, responsibility and communication.

TELUS named to Dow Jones Sustainability World Index

For the ninth consecutive year, the Dow Jones Sustainability World Index (DJSI World) has ranked TELUS among the world's leading companies for corporate social responsibility (CSR). TELUS is the only North American telecommunications company and one of just 11 Canadian businesses across all sectors included in the global index of the world's top economic, environmental, and social leaders. Companies included in the DJSI ranking actively lead their industries in setting best practices in strategy, innovation, governance and relations with shareholders, employees and other stakeholders. The annual review is based on a thorough assessment of companies' performance on more than 50 general and industry-specific CSR criteria.

TELUS named Top 100 Employers in Canada list

In October, TELUS was named one of Canada's best employers by Mediacorp Canada in its 10th annual Canada's Top 100 Employers competition. Mediacorp Canada is Canada's largest publisher of employment-related periodicals and online directories. The organizations named to Canada's Top 100 Employers list for 2010 were evaluated using eight criteria: physical workplace; work atmosphere and social; health, financial and family benefits; vacation and time off; employee communications; performance management; training and skills development; and community involvement.

TELUS named best in directory assistance provider

TELUS has been recognized as top directory assistance provider in Canada for the fifth straight year. The Paisley Group 2009 survey also ranked TELUS number one in Customer Care in the United States Directory Assistance index and number two overall on the ranking for U.S. Directory Assistance services. According to The Paisley Group, no other provider in the industry handles a directory assistance call with greater accuracy or customer care than TELUS.

Three TELUS team members named to Global Telecom Business Top 40 Under 40

Global Telecom Business in August named three TELUS team members to its Top 40 Under 40 list of people most likely to lead the global telecom industry over the next decade. David Sharma, TELUS senior vice-president of Partner Solutions; Dalia Hussein, TELUS director of Data Architecture in Business Transformation and Technology Operations; and Shane Logan, TELUS director of Service Strategy and Development in Technology Strategy, were nominated by readers of Global Telecom Business and then selected for the final list by the publication's staff and chief editor from the hundreds of industry leaders nominated. Global Telecom Business has a global subscriber base and is written for executives in the telecom carrier market. This was the publication's inaugural Top 40 Under 40 feature.

    
    COMMUNITY INVESTMENT AND SUPPORT

    TELUS and Edmonton Oilers score with new hockey partnership
    

In September, TELUS announced it has entered into a multi-year, multi-million dollar sponsorship of the Edmonton Oilers NHL team. The TELUS partnership with the Edmonton Oilers includes a number of exciting events throughout the 2009/2010 season designed to bring fans of all ages attending games and watching at home on TV closer to the action. To celebrate this new partnership, TELUS also donated $25,000 to the Edmonton Oilers Community Foundation to support their work with Boys and Girls Clubs of Edmonton.

TELUS Celebration of Giving in Vancouver, Ottawa and Rimouski

In September, TELUS celebrated B.C. Lower Mainland charities at the second annual TELUS Vancouver Celebration of Giving. Ottawa charities and non-profit organizations from the Gaspésie and Lower Saint-Lawrence regions were also honoured at first ever TELUS Celebration of Giving events held locally earlier in August. These events put a spotlight on the amazing people and their organizations who work tirelessly to make a difference in the lives of those in our communities who need help. TELUS and its team members are donating more than $4 million to over 600 Lower Mainland charities, $1.3 million to more than 110 Ottawa area charities and nearly $300,000 to more than 25 local organizations in the Gaspésie and Lower Saint-Lawrence regions this year. These totals include funds from the TELUS Employee Charitable Giving program, the local TELUS Community Boards, the TELUS Community Ambassadors and TELUS' corporate donations. The TELUS Employee Charitable Giving program matches team member contributions to eligible charities dollar for dollar.

TELUS Taiwan Festival

In August and September, TELUS invited Canadians to enjoy a diverse and rich cultural experience at TELUS TAIWANfest in Toronto and Vancouver, respectively. The events, sponsored by TELUS, are a spectacular annual arts and culture festival focused on contemporary artistic expressions and presenting programs that reflect today's Taiwan. With more than 140,000 attendees, these multi-disciplinary, three-day festivals are the largest Mandarin/English speaking cultural events in Canada. This year, the festival focused on a marriage-derived theme "A New Journey" to celebrate its 4th year in Toronto and 20th year in Vancouver.

    
    DIVIDEND DEVELOPMENTS

    TELUS to change dividend reinvestment program to treasury issuance and
    offer 3% discount
    

TELUS plans to change to its dividend reinvestment program to issue shares from treasury at a three per cent discount from the average market price. Non-voting shares acquired with optional cash payments under the program would be issued from treasury at 100% of the average market price. In recent years, non-voting shares purchased under the company's dividend reinvestment plan have been purchased on the open market without discount. These changes would come into effect on December 1, 2009 and would apply to the dividend payable on Jan 4, 2010 to common and non voting shareholders of record on December 11, 2009. Under the updated program, common and non voting shareholders who reside in Canada and the United States would be able to elect to have dividends paid on their shares reinvested in TELUS non-voting shares. TELUS expects to file a registration statement on Form F-3 with the United States Securities and Exchange Commission later today to give effect to these changes. Full details of the plan are available at telus.com/drisp.

Dividend Declaration

The Board of Directors has declared a quarterly dividend of forty-seven and one half cents ($0.475) Canadian per share on the issued and outstanding Common shares and forty-seven and one half cents ($0.475) Canadian per share on the issued and outstanding Non-Voting shares of the Company payable on January 4, 2010 to holders of record at the close of business on December 11, 2009.

Access to Quarterly results information

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

Quarterly conference call and webcast presentation

TELUS quarterly conference call is scheduled for November 6, 2009 at 11:00 am ET and will feature a presentation about our third quarter results. It will be followed by a question and answer period with analysts. Interested parties can access the call live on a listen-only basis at: telus.com/investors. A transcript will be posted on the website within several business days. Also, a recording will be available on November 6 until November 16, 2009 at: telus.com/investors or by telephone (1-403-205-4531 or 1-877-245-4531, reservation no. 968017 followed by the number sign).

About TELUS

TELUS (TSX: T, T.A; NYSE: TU) is a leading national telecommunications company in Canada, with $9.6 billion of annual revenue and 11.9 million customer connections including 6.4 million wireless subscribers, 4.1 million wireline network access lines, 1.2 million Internet subscribers and more than 100,000 TELUS TV customers. Led since 2000 by President and CEO, Darren Entwistle, TELUS provides a wide range of communications products and services including data, Internet protocol (IP), voice, entertainment and video. In support of our philosophy to give where we live, TELUS, our team members and retirees have contributed $137 million to charitable and not-for-profit organizations and volunteered more than 2.6 million hours of service to local communities since 2000. Nine TELUS Community Boards across Canada lead our local philanthropic initiatives. For more information about TELUS, please visit telus.com.

    

    TELUS Corporation

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

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

    OPERATING REVENUES           $ 2,411     $ 2,450     $ 7,163     $ 7,199
    -------------------------------------------------------------------------
    OPERATING EXPENSES
      Operations                   1,456       1,465       4,348       4,336
      Restructuring costs             32          10         113          21
      Depreciation                   330         344         994       1,033
      Amortization of intangible
       assets                        100          92         287         245
    -------------------------------------------------------------------------
                                   1,918       1,911       5,742       5,635
    -------------------------------------------------------------------------
    OPERATING INCOME                 493         539       1,421       1,564
      Other expense, net               6           6          22          25
      Financing costs                101         122         302         345
    -------------------------------------------------------------------------
    INCOME BEFORE INCOME TAXES       386         411       1,097       1,194
      Income taxes                   106         125         251         348
    -------------------------------------------------------------------------
    NET INCOME                       280         286         846         846
    OTHER COMPREHENSIVE INCOME
      Change in unrealized fair
       value of derivatives
       designated as cash flow
       hedges                          9           4          36          (6)
      Foreign currency translation
       adjustment arising from
       translating financial
       statements of
       self-sustaining foreign
       operations                     (4)          3         (12)         (1)
      Change in unrealized fair
       value of available-for-sale
       financial assets                -          (6)          1          (2)
    -------------------------------------------------------------------------
                                       5           1          25          (9)
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME         $   285     $   287     $   871     $   837
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET INCOME ATTRIBUTABLE TO:
      Common Shares and
       Non-Voting Shares         $   279     $   285     $   843     $   843
      Non-controlling interests        1           1           3           3
    -------------------------------------------------------------------------
                                 $   280     $   286     $   846     $   846
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    TOTAL COMPREHENSIVE INCOME
     ATTRIBUTABLE TO:
      Common Shares and
       Non-Voting Shares         $   284     $   286     $   868     $   834
      Non-controlling interests        1           1           3           3
    -------------------------------------------------------------------------
                                 $   285     $   287     $   871     $   837
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET INCOME PER COMMON SHARE
     AND NON-VOTING SHARE
      - Basic                    $  0.88     $  0.89     $  2.65     $  2.62
      - Diluted                  $  0.87     $  0.89     $  2.65     $  2.61

    DIVIDENDS DECLARED PER COMMON
     SHARE AND NON-VOTING SHARE  $ 0.475     $  0.45     $ 1.425     $  1.35

    TOTAL WEIGHTED AVERAGE COMMON
     SHARES AND NON-VOTING SHARES
     OUTSTANDING
      - Basic                         318        319         318         321
      - Diluted                       318        320         318         323



    TELUS Corporation

    interim consolidated statements of financial position        (unaudited)

                                                 September 30,   December 31,
    As at (millions)                                     2009           2008
    -------------------------------------------------------------------------
                                                                (as adjusted)

    ASSETS
    Current Assets
      Cash and temporary investments, net        $         34   $          4
      Accounts receivable                                 781            966
      Income and other taxes receivable                   112             25
      Inventories                                         192            333
      Prepaid expenses and other                          200            176
      Derivative assets                                     -             10
    -------------------------------------------------------------------------
                                                        1,319          1,514
    -------------------------------------------------------------------------
    Capital Assets, Net
      Property, plant, equipment and other              7,664          7,317
      Intangible assets subject to amortization         1,282          1,317
      Intangible assets with indefinite lives           3,856          3,849
    -------------------------------------------------------------------------
                                                       12,802         12,483
    -------------------------------------------------------------------------
    Other Assets
      Other long-term assets                            1,556          1,418
      Investments                                          43             42
      Goodwill                                          3,572          3,564
    -------------------------------------------------------------------------
                                                        5,171          5,024
    -------------------------------------------------------------------------
                                                 $     19,292   $     19,021
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Accounts payable and accrued liabilities   $      1,417   $      1,465
      Income and other taxes payable                       14            163
      Restructuring accounts payable and
       accrued liabilities                                 84             51
      Dividends payable                                   151            151
      Advance billings and customer deposits              646            689
      Current maturities of long-term debt                 82              4
      Current portion of derivative liabilities            82             75
      Current portion of future income taxes              586            459
    -------------------------------------------------------------------------
                                                        3,062          3,057
    -------------------------------------------------------------------------
    Long-Term Debt                                      5,809          6,348
    -------------------------------------------------------------------------
    Other Long-Term Liabilities                         1,560          1,295
    -------------------------------------------------------------------------
    Future Income Taxes                                 1,328          1,213
    -------------------------------------------------------------------------
    Shareholders' Equity (as adjusted)
      Common Share and Non-Voting Share equity          7,513          7,085
      Non-controlling interests                            20             23
    -------------------------------------------------------------------------
                                                        7,533          7,108
    -------------------------------------------------------------------------
                                                 $     19,292   $     19,021
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    interim consolidated statements of cash flows                (unaudited)

                                      Three months             Nine months
    Periods ended September 30
     (millions)                     2009        2008        2009        2008
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income (as adjusted)     $   280     $   286     $   846     $   846
    Adjustments to reconcile net
     income to cash provided by
     operating activities:
      Depreciation and
       amortization                  430        436        1,281       1,278
      Future income taxes            110        113          231         290
      Share-based compensation        (3)         9           17          25
      Net employee defined
       benefit plans expense           3        (25)          12         (75)
      Employer contributions to
       employee defined benefit
       plans                         (31)       (27)        (135)        (78)
      Restructuring costs, net
       of cash payments                3         (9)          33         (14)
      Amortization of deferred
       gains on sale-leaseback
       of buildings, amortization
       of deferred charges and
       other, net                    (14)        (2)           9          (8)
      Net change in non-cash
       working capital                36        204          (14)       (192)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                      814        985        2,280       2,072
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Capital expenditures            (558)      (473)      (1,589)     (1,228)
    Payment for advanced wireless
     services spectrum licences        -        (882)          -        (882)
    Acquisitions                     (26)         (5)        (26)       (696)
    Proceeds from the sale of
     property and other assets         -          10           -          13
    Change in non-current
     materials and supplies,
     purchase of investments
     and other                        (1)         (3)          -           3
    -------------------------------------------------------------------------
    Cash used by investing
     activities                     (585)     (1,353)     (1,615)     (2,790)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Common Shares and Non-Voting
     Shares issued                     -           -           1           -
    Dividends to shareholders       (149)          -        (451)       (289)
    Purchase of Common Shares
     and Non-Voting Shares for
     cancellation                      -         (75)          -        (274)
    Long-term debt issued            936       2,971       7,109       9,545
    Redemptions and repayment of
     long-term debt               (1,006)     (2,538)     (7,288)     (8,243)
    Dividends paid by a
     subsidiary to
     non-controlling interests        (2)          -          (6)         (5)
    -------------------------------------------------------------------------
    Cash provided (used) by
     financing activities           (221)        358        (635)        734
    -------------------------------------------------------------------------
    CASH POSITION
    Increase (decrease) in cash
     and temporary investments,
     net                               8         (10)         30          16
    Cash and temporary
     investments, net, beginning
     of period                        26          46           4          20
    -------------------------------------------------------------------------
    Cash and temporary
     investments, net, end of
     period                      $    34     $    36     $    34     $    36
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    SUPPLEMENTAL DISCLOSURE OF
     CASH FLOWS
    Interest (paid)              $   (38)    $   (43)    $  (271)    $  (264)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest received            $    19     $     -     $    54     $     2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income taxes (inclusive of
     Investment Tax Credits)
     (paid) received, net        $   (48)    $    (1)    $  (270)    $    (8)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    TELUS Corporation

    segmented information                                         (unaudited)

    Three-month periods ended
     September 30                       Wireline                Wireless
    (millions)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    Operating revenues
      External revenue           $ 1,205     $ 1,248     $ 1,206     $ 1,202
      Intersegment revenue            34          33           7           7
    -------------------------------------------------------------------------
                                   1,239       1,281       1,213       1,209
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense             804         823         693         682
      Restructuring costs             29           9           3           1
    -------------------------------------------------------------------------
                                     833         832         696         683
    -------------------------------------------------------------------------
    EBITDA(1)                    $   406     $   449     $   517     $   526
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures         $   365     $   340     $   193     $   133
    Advanced wireless services
     spectrum licences                 -           -           -         882
    -------------------------------------------------------------------------
    CAPEX(2)                     $   365     $   340     $   193     $ 1,015
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX            $    41     $   109     $   324     $  (489)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Three-month periods ended
     September 30                     Eliminations            Consolidated
    (millions)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    Operating revenues
      External revenue           $     -     $     -     $ 2,411     $ 2,450
      Intersegment revenue           (41)        (40)          -           -
    -------------------------------------------------------------------------
                                     (41)        (40)      2,411       2,450
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense             (41)        (40)      1,456       1,465
      Restructuring costs              -           -          32          10
    -------------------------------------------------------------------------
                                     (41)        (40)      1,488       1,475
    -------------------------------------------------------------------------
    EBITDA(1)                    $     -     $     -     $   923     $   975
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures         $     -     $     -     $   558     $   473
    Advanced wireless services
     spectrum licences                 -           -           -         882
    -------------------------------------------------------------------------
    CAPEX(2)                     $     -     $     -     $   558     $ 1,355
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX            $     -     $     -     $   365     $  (380)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                EBITDA (from above)      $   923     $   975
                                Depreciation                 330         344
                                Amortization                 100          92
                                ---------------------------------------------
                                Operating income             493         539
                                Other expense, net             6           6
                                Financing costs              101         122
                                ---------------------------------------------
                                Income before income
                                 taxes                       386         411
                                Income taxes                 106         125
                                ---------------------------------------------
                                Net income (as adjusted) $   280     $   286
                                ---------------------------------------------
                                ---------------------------------------------



    Nine-month periods ended
     September 30                       Wireline                Wireless
    (millions)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    Operating revenues
      External revenue           $ 3,681     $ 3,755     $ 3,482     $ 3,444
      Intersegment revenue            98          96          21          21
    -------------------------------------------------------------------------
                                   3,779       3,851       3,503       3,465
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense           2,471       2,503       1,996       1,950
      Restructuring costs            104          19           9           2
    -------------------------------------------------------------------------
                                   2,575       2,522       2,005       1,952
    -------------------------------------------------------------------------
    EBITDA(1)                    $ 1,204     $ 1,329     $ 1,498     $ 1,513
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures         $ 1,011     $   916     $   578     $   312
    Advanced wireless services
     spectrum licences                 -           -           -         882
    -------------------------------------------------------------------------
    CAPEX(2)                     $ 1,011     $   916     $   578     $ 1,194
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX            $   193     $   413     $   920     $   319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Nine-month periods ended
     September 30                     Eliminations            Consolidated
    (millions)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    Operating revenues
      External revenue           $     -     $     -     $ 7,163     $ 7,199
      Intersegment revenue          (119)       (117)          -           -
    -------------------------------------------------------------------------
                                    (119)       (117)      7,163       7,199
    -------------------------------------------------------------------------
    Operating expenses
      Operations expense            (119)       (117)      4,348       4,336
      Restructuring costs              -           -         113          21
    -------------------------------------------------------------------------
                                    (119)       (117)      4,461       4,357
    -------------------------------------------------------------------------
    EBITDA(1)                    $     -     $     -     $ 2,702     $ 2,842
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures         $     -     $     -     $ 1,589     $ 1,228
    Advanced wireless services
     spectrum licences                 -           -           -         882
    -------------------------------------------------------------------------
    CAPEX(2)                     $     -     $     -     $ 1,589     $ 2,110
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less CAPEX            $     -     $     -     $ 1,113     $   732
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                EBITDA (from above)      $ 2,702     $ 2,842
                                Depreciation                 994       1,033
                                Amortization                 287         245
                                ---------------------------------------------
                                Operating income           1,421       1,564
                                Other expense, net            22          25
                                Financing costs              302         345
                                ---------------------------------------------
                                Income before income
                                 taxes                     1,097       1,194
                                Income taxes                 251         348
                                ---------------------------------------------
                                Net income (as adjusted) $   846     $   846
                                ---------------------------------------------
                                ---------------------------------------------

    (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") is the sum of capital
        expenditures and advanced wireless services spectrum licences.




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

                              TELUS CORPORATION

                    Management's discussion and analysis

                                   2009 Q3

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

    Caution regarding forward-looking statements

    -------------------------------------------------------------------------
    This document contains forward-looking statements about expected future
    events and financial and operating results of TELUS Corporation (TELUS or
    the Company, and where the context of the narrative permits, or requires,
    its subsidiaries). By their nature, forward-looking statements require
    the Company to make assumptions, and forward-looking statements are
    subject to inherent risks and uncertainties. There is significant risk
    that assumptions, predictions and other forward-looking statements will
    not prove to be accurate. Readers are cautioned not to place undue
    reliance on forward-looking statements as a number of factors could cause
    actual future results, conditions, actions or events to differ materially
    from the targets, expectations, estimates or intentions expressed. Except
    as required by law, the Company disclaims any intention or obligation to
    update or revise any forward-looking statements, and reserves the right
    to change, at any time at its sole discretion, its current practice of
    updating annual targets and guidance. Annual targets, revised guidance
    and related assumptions for 2009, and a preliminary assessment of
    expected 2010 capital expenditure levels, are described in Section 9:
    Annual guidance for 2009.

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

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


    Management's discussion and analysis (MD&A)
    November 6, 2009
    

The following is a discussion of the consolidated financial position and results of operations of TELUS Corporation for the three-month and nine-month periods ended September 30, 2009 and 2008, and should be read together with TELUS' interim Consolidated financial statements. This discussion contains forward-looking information that is qualified by reference to, and should be read together with, the Caution regarding forward-looking statements above.

TELUS' Consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP), which differ in certain respects from U.S. GAAP. See Note 21 to the interim Consolidated financial statements for a summary of the principal differences between Canadian and U.S. GAAP as they relate to TELUS. The interim Consolidated financial statements and Management's discussion and analysis were reviewed by TELUS' Audit Committee and approved by TELUS' Board of Directors. All amounts are in Canadian dollars unless otherwise specified.

TELUS' Consolidated financial statements include the accounts of the Company and all of the Company's subsidiaries, of which the principal one is TELUS Communications Inc. (TCI). Currently, through the TELUS Communications Company partnership and the TELE-MOBILE COMPANY partnership, TCI includes substantially all of the Company's wireline segment's operations and all of the wireless segment's operations.

TELUS has issued guidance on and reports on certain non-GAAP measures used by management to evaluate performance of segments and the Company. Non-GAAP measures are also used to determine compliance with debt covenants and manage the capital structure. Because non-GAAP measures do not have a standardized meaning, securities regulations require that non-GAAP measures be clearly defined and qualified, and reconciled with their nearest GAAP measure. For the reader's reference, the definition, calculation and reconciliation of consolidated non-GAAP measures are provided in Section 11: Reconciliation of non-GAAP measures and definition of key operating indicators. The terms EBITDA and Free cash flow, as used in this document, refer to management's definitions.

    
    Management's discussion and analysis contents

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

1. Introduction

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

1.1 Materiality for disclosures

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

1.2 Canadian economic environment

Canada's economy entered into recession in the fourth quarter of 2008. In its October 2009 Monetary Policy Report, the Bank of Canada projected that Canada's economy will contract by 2.4 per cent in 2009, and then grow by 3.0 per cent in 2010 and 3.3 per cent in 2011. The Bank of Canada stated that a recovery in economic activity is under way in Canada supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices and stronger business and consumer confidence; however, heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures. See TELUS' risks discussion in Section 10.5 Economic growth and fluctuations.

Economic effects on TELUS in the third quarter

Wireless results for the third quarter of 2009 reflect usual historical seasonal effects when compared to the preceding second quarter, namely sequential growth in gross and net subscriber additions and a sequential increase in average revenue per subscriber unit (ARPU). However, uncertainty regarding the strength and persistence of the economic recovery, and high competitive intensity continue to affect wireless, as reflected in year-over-year decreases in gross and net additions of subscribers, and a year-over-year decrease in ARPU, while the subscriber churn rate stabilized.

Year-over-year wireless gross subscriber additions decreased by 6% in the third quarter of 2009, while net subscriber additions decreased by 16%. When normalizing for the impact of turning down the analogue network in September 2008, the year-over-year decrease in net subscriber additions in the third quarter of 2009 was 29%, attributed to a decline in overall gross additions combined with an increase in deactivations. This trend in increased deactivations was due to a larger subscriber base, lower prior year churn in Koodo subscribers due to its initial launch in March 2008, and increased year-over-year churn rate among business customers.

The 6% year-over-year decrease in wireless subscriber gross additions in the third quarter compares to year-over-year changes of (4.7%), 0.3% and 4.8%, respectively, for the second quarter of 2009, first quarter of 2009, and fourth quarter of 2008, while growth for the full year of 2008 was 15%. The worsening growth trend for gross subscriber additions is believed to be primarily due to competitive pressures (including exclusive availability of the iPhone from one competitor), as well as uncertainty about the economic recovery, leading to deferral of buying decisions by customers, lower and more cautious business spending, and lower employment levels.

The decline in wireless ARPU is being impacted by year-over-year decreases in voice revenues largely due to an increased use of lower per-minute rate plans (including increased use of in-bucket minutes), lower service revenue from the Company's Mike(R) service, and decreased roaming revenues. Voice revenue declines can be attributed to the continued highly competitive market being experienced in Canada.

The wireline segment has been impacted in the third quarter of 2009 by slower year-over-year data revenue growth and faster erosion in voice revenues, similar to the second quarter. Strong price competition in both data and voice services, as well as more cautious spending by consumers and businesses, are contributing factors. In 2009, the Company has observed a larger number of disconnections and fewer installations of business network access lines (NALs), in B.C. and Alberta, attributed partly to economic uncertainty and partly to competition. Over the past 12 months, business NALs have decreased by 1%, while residential NAL losses have moderated in B.C. and Alberta.

Considering uncertainty in the strength and persistence of Canada's economic recovery and weaker than expected results experienced by the Company in the first nine months of 2009, the expected impacts from the acquisition of Black's Photo Corporation in September, and early launch of the new HSPA wireless network and service (including the Apple iPhone) in November 2009, the Company has revised its full year guidance, previously updated in May and August 2009. For current full-year guidance, see Section 9: Annual guidance for 2009.

TELUS' capital structure financial policies, which are discussed under Capabilities - Section 4.3 Liquidity and capital resources, were designed with credit cycles in mind. The Company believes that these financial policies and guidelines, and maintaining credit ratings in the range of BBB+ to A-, or the equivalent, provide reasonable access to capital markets. The economic weakness and stock market decline in 2008 have increased TELUS' net defined benefit pension plans expense and funding, which is reflected in the Company's public guidance for 2009. See Section 9.

    
    1.3 Consolidated highlights

    -------------------------------------------------------------------------
                                Quarters ended           Nine-month periods
    ($ millions, unless          September 30              ended Sept. 30
     noted otherwise)       2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Consolidated statements
     of income
    -------------------------------------------------------------------------
    Operating revenues     2,411    2,450   (1.6)%    7,163    7,199   (0.5)%
    Operating income         493      539   (8.5)%    1,421    1,564   (9.1)%
    Income before
     income taxes            386      411   (6.1)%    1,097    1,194   (8.1)%
    Net income(1)            280      286   (2.1)%      846      846      - %

    Earnings per share
     (EPS)(2) basic ($)     0.88     0.89   (1.1)%     2.65     2.62    1.1 %
    EPS(2) diluted ($)      0.87     0.89   (2.2)%     2.65     2.61    1.5 %
    Cash dividends
     declared per
     share(2) ($)          0.475     0.45    5.6 %    1.425     1.35    5.6 %

    Average shares(2)
     outstanding - basic
     (millions)              318      319   (0.3)%      318      321   (0.9)%
    -------------------------------------------------------------------------
    Consolidated statements
     of cash flows
    -------------------------------------------------------------------------
    Cash provided by
     operating activities    814      985  (17.4)%    2,280    2,072   10.0 %

    Cash used by
     investing activities    585    1,353  (56.8)%    1,615    2,790  (42.1)%
      Capital expenditures
        General              558      473   18.0 %    1,589    1,228   29.4 %
        Payment for AWS
         spectrum licences     -      882    n.m.         -      882    n.m.
        Total                558    1,355  (58.8)%    1,589    2,110  (24.7)%
      Acquisitions            26        5    n.m.        26      696    n.m.

    Cash (used) provided by
     financing activities   (221)     358    n.m.      (635)     734    n.m.
    -------------------------------------------------------------------------
    Subscribers and other
     measures
    -------------------------------------------------------------------------
    Subscriber connections(3)
     (thousands)                                     11,863   11,537    2.8 %
    EBITDA(4)                923      975   (5.3)%    2,702    2,842   (4.9)%
    Free cash flow(4)        266     (482)   n.m.       535      300   78.3 %
    -------------------------------------------------------------------------
    Debt and payout ratios(5)
    -------------------------------------------------------------------------
    Net debt to EBITDA -
     excluding restructuring
     costs (times)                                      1.9      1.9       -
    Dividend payout
     ratio(6) (%)                                        60       54   6 pts
    -------------------------------------------------------------------------

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

    (1) Net income for the third quarter and nine-month period ended
        September 30, 2008 has been adjusted. See Section 5.2 Quarterly
        results summary table - Note 2.
    (2) Includes Common Shares and Non-Voting Shares.
    (3) The sum of wireless subscribers, network access lines, Internet
        access subscribers and TELUS TV(R) subscribers (IP TV and satellite
        TV), measured at the end of the respective periods, based on
        information in billing and other systems. In the second quarter of
        2009, the opening balance for 2009 subscriber connections was reduced
        by five thousand to reflect prior period reporting adjustments to
        high-speed Internet subscribers.
    (4) EBITDA and free cash flow are non-GAAP measures. See Section 11.1
        Earnings before interest, taxes, depreciation and amortization
        (EBITDA) and Section 11.2 Free cash flow.
    (5) See Section 7.4 Liquidity and capital resource measures and Section
        11.4 Definitions of liquidity and capital resource measures.
    (6) Based on four-quarter trailing earnings per share excluding
        favourable tax-related adjustments of 40 cents per share for the
        period ended September 30, 2009 and 49 cents per share for the period
        ended September 30, 2008, and minor impacts from a net-cash
        settlement feature.
    -------------------------------------------------------------------------

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

    -   Subscriber connections increased by 326,000 in the 12-month period
        ended September 30, 2009. This includes 7.2% growth in wireless
        subscribers, 117% growth in TELUS TV subscribers and minimal growth
        in total Internet subscribers, partly offset by a 4.3% decrease in
        total network access lines.

    -   Wireless ARPU was $59.45 in the current quarter, or $0.84 higher than
        the second quarter of 2009, but reflected a decrease of 7% when
        compared to the third quarter of 2008. Wireless subscriber net
        additions were 125,000 in the third quarter of 2009, reflecting an
        increase of 14,000 from the second quarter of 2009 and a decrease of
        24,000 or 16% from the third quarter of 2008.

    -   Consolidated operating revenues decreased by $39 million and
        $36 million, respectively, in the third quarter and first nine months
        of 2009 when compared to the same periods in 2008. Strong price
        competition and uncertainty regarding the economic recovery in
        Canada, described in Section 1.2, have contributed to lower data
        revenue growth and accelerated voice revenue declines.

    -   Operating income decreased by $46 million and $143 million,
        respectively, in the third quarter and nine-month period, primarily
        due to lower EBITDA, which included increased defined benefit pension
        plan (DBPP) expenses (up by $29 million and $88 million,
        respectively) and higher restructuring costs (up by $22 million and
        $92 million, respectively).

        EBITDA decreased by $52 million and $140 million, respectively, in
        the third quarter and first nine months. Excluding DBPP and
        restructuring impacts, EBITDA decreased by $1 million in the third
        quarter and increased by $40 million in the first nine months. The
        underlying flat performance for the third quarter reflects a decline
        in higher margin wireline voice local and long distance revenues
        offset by cost containment efforts. The underlying improvement in the
        nine month period included 9% lower expenditures on salaries, other
        benefits and employee-related expenditures. It also included lower
        advertising and promotion expenditures and lower costs to acquire new
        wireless subscribers, net of higher costs for delivery of TELUS TV
        services and to support implementation of services for new wireline
        enterprise customers, as well as higher wireless subscriber retention
        costs and bad debt expenses.

    -   Income before income taxes decreased by $25 million and $97 million,
        respectively, in the third quarter and nine-month period. Lower
        Operating income was partly offset by increased interest income of
        $19 million and $43 million, respectively, primarily from the
        settlement of prior years' tax matters.

    -   Net income decreased by $6 million in the third quarter of 2009 and
        was unchanged in the first nine months of 2009 when compared to the
        same periods in 2008. Net income in the third quarter and first nine
        months of 2009, as well as the first nine months of 2008, include
        income tax-related adjustments arising from legislated income tax
        changes, settlements and tax reassessments for prior years, and any
        related interest on reassessments (see Section 5.2). Net income
        before income tax-related adjustments was $266 million and
        $751 million, respectively, in the third quarter and first nine
        months of 2009, or decreases of $20 million and $78 million,
        respectively, compared to the same periods in 2008.

    -   Basic earnings per share decreased one cent in the third quarter of
        2009 when compared to the same period in 2008, as lower income for
        the quarter was partly offset by fewer shares outstanding. Basic
        earnings per share for the first nine months of 2009 increased by
        three cents compared to the same period in 2008, due to fewer average
        shares outstanding. Earnings per share in the third quarter and first
        nine months of 2009 include favourable income tax-related adjustments
        of approximately four cents and 30 cents, respectively, while
        earnings per share for the first nine months of 2008 includes five
        cents of such favourable adjustments.

    -   Average shares outstanding are lower in 2009 due to market
        repurchases of shares in 2008 under the normal course issuer bid
        (NCIB) program.

    -------------------------------------------------------------------------
                                                     Quarters     Nine-month
    Net income analysis                                 ended  periods ended
    ($ millions)                                 September 30       Sept. 30
    -------------------------------------------------------------------------
    Net income in 2008                                    286            846
    Deduct net favourable income tax-related
     adjustments in 2008 (see Section 5.2)                  -            (17)
                                                  ------------   ------------
                                                          286            829
    Tax-effected changes
    --------------------
    Higher defined benefit pension plan expenses(1)       (20)           (61)
    Higher restructuring charges(1)                       (15)           (64)
    Other changes in EBITDA(1)(2)                          (1)            27
    Changes in depreciation and amortization(1)(2)          5             (2)
    Other                                                  11             22
                                                  ------------   ------------
                                                          266            751

    Net favourable income tax-related adjustments
     in 2009 (see Section 5.2)                             14             95
                                                  ------------   ------------
    Net income in 2009                                    280            846
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

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

    -   At September 30, 2009, TELUS had unutilized credit facilities of
        $1.6 billion, as well as additional unutilized availability under its
        accounts receivable securitization program, consistent with its
        objective of generally maintaining more than $1 billion of unutilized
        liquidity.

    -   Net debt to EBITDA (excluding restructuring costs) at September 30,
        2009 was 1.9 times, within the Company's long-term target policy
        range of 1.5 to 2.0 times.

    -   The dividend payout ratio, based on the annualized third quarter
        dividend and earnings for the twelve-month period ended September 30,
        2009 (excluding favourable income tax-related adjustments and minimal
        impact from a net-cash settlement feature), was 60%, while the ratio
        based on actual earnings for the same period was 53%. The Company's
        prospective guideline is 45% to 55% of sustainable net earnings.

    -   Cash provided by operating activities decreased by $171 million in
        the third quarter of 2009, and increased by $208 million in the first
        nine months of 2009, when compared to the same periods in 2008.
        Changes were primarily due to comparative changes in proceeds from
        securitized receivables and commencement of significant income tax
        payments in 2009.

    -   Cash used by investing activities decreased by $768 million and
        $1,175 million, respectively, in the third quarter and first nine
        months of 2009, when compared to the same periods in 2008. The
        decreases resulted mainly from payment of $882 million for AWS
        spectrum licences in the third quarter of 2008, partly offset by
        increased capital investments for wireless and wireline broadband
        infrastructure to enhance the Company's competitive position and
        support long-term growth. In addition, the Company acquired Black's
        Photo Corporation for $28 million cash ($26 million net of acquired
        cash) in the third quarter of 2009. The decrease for the nine month
        period also resulted from the January 2008 acquisition of Emergis for
        approximately $696 million net of acquired cash.

    -   Cash used by financing activities was $221 million and $635 million,
        respectively, in the third quarter and first nine months of 2009, to
        make dividend payments and reduce debt. The Company reduced amounts
        drawn on the 2012 credit facility and reduced outstanding commercial
        paper with proceeds from the May debt issue and cash-on-hand. In
        comparison, during the third quarter and first nine months of 2008,
        net cash provided by financing activities was $358 million and
        $734 million, respectively, used for corporate purposes including the
        third quarter AWS spectrum auction and the January acquisition of
        Emergis.

    -   Free cash flow increased by $748 million and $235 million,
        respectively, in the third quarter and first nine months of 2009 when
        compared to the same periods in 2008. The increase resulted mainly
        from lower total capital expenditures due to the payment for AWS
        spectrum last year (see cash used by investing activities above) and
        higher interest received from income tax-related settlements, partly
        offset by higher income tax payments and lower EBITDA adjusted for
        defined benefit plan contributions, share-based compensation payments
        and restructuring payments.
    

2. Core business and strategy

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

TELUS' core business and strategy were described in its 2008 Management's discussion and analysis. Activities in the third quarter of 2009 that support the Company's six strategic imperatives include the following:

Building national capabilities across data, IP, voice and wireless

A key focus for TELUS in 2009 is its investment in broadband networks and services to enhance its competitive position and support future growth opportunities. TELUS expects to launch its new advanced wireless network in November 2009, based on the latest version of high-speed packet access (HSPA) technology, with national coverage including network-sharing agreements with Bell Canada. The investment in HSPA technology supports the launch of new HSPA devices such as the Apple iPhone, and is expected to ensure an optimal future transition to long-term evolution (LTE) technology, the emerging world-wide standard for fourth generation or 4G wireless networks. The Company's wireline broadband investments are expanding the coverage and bandwidth of high-speed Internet and digital TELUS TV service in incumbent regions, as well as supporting new business and government contracts.

The Company expanded coverage of IP-based TELUS TV to several communities in Alberta during the third quarter and expects more communities to be added in B.C. and Alberta during the fourth quarter. In Eastern Quebec, the Company expanded its distribution of IP-based TELUS TV to include two independent retail stores of Ameublement Tanguay in Rimouski, allowing customers to evaluate and compare the service prior to buying.

In September, the Company expanded and complemented its national distribution capabilities for wireless products through the acquisition of Black's Photo Corporation (see the strategic imperative Partnering, below). TELUS expects to add wireless product capabilities to the stores in November 2009.

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

The Company announced that it would begin to offer the Apple iPhone 3G and 3GS in November 2009, made possible by the launch of the new HSPA network. In Canada, the iPhone was previously exclusive to one competitor.

TELUS continues to incur upfront costs in 2009 to implement services for several large enterprise and public sector customers, for which revenues are expected to be increasingly realized in 2010. This includes a seven-to-ten year contract worth up to $900 million with the Government of Quebec, to deliver and manage the province's next generation data network, as well as a $200 million multi-year contract to provide and manage telecommunications services for the Department of National Defence.

Partnering, acquiring and divesting to accelerate the implementation of

TELUS' strategy and focus TELUS' resources on core business

On September 3, 2009, TELUS acquired Black's Photo Corporation for $28 million cash ($26 million net of acquired cash) from the private equity fund ReichmannHauer Capital Partners. Black's is a national imaging and digital retailer in Canada, with 113 stores that are primarily in mall locations. Eighty-one (72%) of Black's stores are in Ontario. The Company expects to expand its wireless distribution through Black's, complementing the existing network of dealers and Company-owned stores. It is expected that the proportion of wireless devices with embedded high quality photo and video capability will continue to expand in the future, providing a natural link between TELUS and Black's product lines.

In the third quarter of 2009, Black's contributed approximately $6 million to revenue and a net loss of $1 million. This acquisition is consistent with the strategic objectives of Building national capabilities across data and wireless and Focusing relentlessly on the growth markets of data, IP and wireless.

Investing in internal capabilities to build a high-performance culture

and efficient operations

The Company increased its focus on its ongoing operating efficiency program beginning in the third quarter of 2008, accelerating into 2009. Restructuring costs were $113 million during the first nine months of 2009, as compared to $21 million in the same period in 2008, and are expected to be approximately $160 million for the full year of 2009 ($59 million in 2008). See Section 5.3 Consolidated results from operations - Restructuring costs.

The Company continues to implement an array of initiatives that are expected to improve efficiency and reduce costs, including:

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

TELUS' full-time equivalent (FTE) employees increased by approximately 450 during the third quarter of 2009, as 700 FTE employees (more than 1,000 team members) from Black's Photo joined TELUS in September. Since December 2008, TELUS' FTE employees decreased by approximately 1,050, or 1,750 before the acquisition of Black's. Over this period, operational efficiency initiatives and attrition decreased staff by approximately 1,600, while staffing of business process outsourcing services for customers decreased by approximately 150.

3. Key performance drivers

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

Management sets corporate priorities each year to advance TELUS' strategy and focus on the near-term opportunities and challenges to create value for shareholders.

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

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

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

4. Capabilities

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

4.1 Principal markets addressed and competition

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

4.2 Operational resources

Operational resources are described in Section 4.2 of TELUS' 2008 Management's discussion and analysis. The following is an update to the annual disclosure.

Systems and processes

The provinces of British Columbia and Ontario announced that they planned to harmonize their provincial sales tax regimes with the federal goods and services tax regime, effective July 1, 2010. Harmonized sales tax (HST) standardizes and integrates the collection of formerly separate provincial sales taxes and the federal goods and services tax (GST). TELUS has established a project team and expects to dedicate significant resources to transition numerous systems and processes to accommodate the change. See Section 10.3 Process risks. The HST regime is expected to reduce future costs to TELUS as a result of more consistent and streamlined sales tax rules, and the ability to claim additional sales tax credits on business inputs.

4.3 Liquidity and capital resources

Capital structure financial policies

The Company's objectives when managing capital are: (i) to maintain a flexible capital structure that optimizes the cost of capital at acceptable risk; and (ii) to manage capital in a manner that balances the interests of equity and debt holders.

In the management and definition of capital, the Company includes shareholders' equity (excluding accumulated other comprehensive income), long-term debt (including any associated hedging assets or liabilities, net of amounts recognized in accumulated other comprehensive income), cash and temporary investments and securitized accounts receivable.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares from treasury, purchase shares for cancellation pursuant to normal course issuer bids, issue new debt, issue new debt to replace existing debt with different characteristics and/or increase or decrease the amount of sales of trade accounts receivable to an arm's-length securitization trust.

The Company monitors capital utilizing a number of measures, including: net debt to EBITDA - excluding restructuring costs; and dividend payout ratio of sustainable net earnings. For further discussion, see Section 7.4 Liquidity and capital resource measures.

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

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

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

    The dividend declared for the third quarter of 2009 (paid October 1,
    2009) was 47.5 cents per share as compared to 45 cents per share in the
    same period in 2008, or an increase of 5.6%. A dividend of 47.5 cents
    per share was declared for the fourth quarter, payable January 4, 2010 to
    shareholders of record on December 11, 2009, unchanged from the dividend
    declared in the fourth quarter of 2008.
    -------------------------------------------------------------------------
    Use proceeds from securitized receivables, bank facilities, commercial
    paper and dividend re-investment, as needed, to supplement free cash flow
    and meet other cash requirements

    In May 2009, TELUS extended the termination date for its accounts
    receivable securitization program to 2012. Proceeds from securitized
    accounts receivable were $400 million at September 30 and June 30, 2009,
    up from $300 million on March 31, 2009 and December 31, 2008.

    The Company used increased proceeds from securitized receivables and
    proceeds received from the $700 million May 2009 Note issue to reduce
    amounts drawn against its 2012 credit facility to $nil from $300 million
    at March 31, 2009, and to reduce issued commercial paper to $534 million
    at September 30, 2009 from $1,188 million at March 31, 2009. Since
    December 31, 2008, amounts drawn against the 2012 credit facility were
    reduced by $980 million, while issued commercial paper increased by
    $102 million.

    The Company has announced that effective with the dividend to be paid
    January 4, 2010, shares will be issued from treasury at a discount of 3%
    in respect of the dividend re-investment program. These shares were
    previously purchased in the market with no discount.
    -------------------------------------------------------------------------
    Maintain compliance with financial objectives, policies and guidelines

    Maintain a minimum $1 billion in unutilized liquidity - The Company had
    unutilized credit facilities of $1.6 billion at September 30, 2009, as
    well as additional availability under its accounts receivable
    securitization program.

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

    Dividend payout ratio of 45 to 55% of sustainable net earnings on a
    prospective basis - The historical ratio was 60% when calculated based on
    the annualized third quarter dividend and 12-month trailing earnings,
    excluding favourable tax-related adjustments and minimal impacts from a
    net-cash settlement feature. The ratio was 53% based on actual earnings
    for the 12-month period ended September 30, 2009.
    -------------------------------------------------------------------------
    Maintain position of fully hedging foreign exchange exposure for
    indebtedness

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

    In May 2009, the Company successfully closed an offering of 4.95% Notes
    due May 2014, for aggregate gross proceeds of $700 million. The net
    proceeds of the offering were used for corporate purposes, including
    repayment of amounts outstanding under the 2012 credit facility and
    outstanding commercial paper. In June, the Company extended the term of
    its 365-day revolving credit facility to December 31, 2010, with the
    available amount becoming $300 million. In September 2009, the Company
    renewed its shelf prospectus pursuant to which it can offer up to
    $4 billion of debt and equity.
    -------------------------------------------------------------------------
    Preserve access to the capital markets at a reasonable cost by
    maintaining investment grade credit ratings and targeting improved credit
    ratings in the range of BBB+ to A-, or the equivalent, in the future

    At November 6, 2009, investment grade credit ratings from the four rating
    agencies that cover TELUS were in the desired range. TELUS' May 2009 debt
    issue was assigned credit ratings of: A(low) by DBRS Ltd., BBB+ by
    Standard and Poor's, Baa1 by Moody's Investors Service, and BBB+ by Fitch
    Ratings, all with a stable trend or outlook and consistent with the
    agencies' existing ratings of TELUS debt securities.
    -------------------------------------------------------------------------

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

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

                  Long-term debt maturities(1), principal
                 -----------------------------------------
                            All except                      Interest and like
    ($ millions)          capital leases   Capital leases   carrying costs(2)
    -------------------------------------------------------------------------
    2009 fourth quarter            -                   -                 197
    2010                          80                   2                 461
    2011                       2,950                   -                 333
    2012                         834                   -                 197
    2013                         300                   -                 182
    Thereafter                 2,649                   -                 767
    -------------------------------------------------------------------------
    Total                      6,813                   2               2,137
    -------------------------------------------------------------------------
    (1) Where applicable, principal-related maturities reflect foreign
        currency exchange rates at September 30, 2009.
    (2) Interest and like carrying costs for commercial paper have been
        calculated based upon rates in effect as at September 30, 2009.
    -------------------------------------------------------------------------
    

4.4 Internal control over financial reporting

Changes in internal control over financial reporting

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

5. Results from operations

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

5.1 General

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

5.2 Quarterly results summary

    
    -------------------------------------------------------------------------
    ($ in millions, except per               2009     2009     2009     2008
     share amounts)                            Q3       Q2       Q1       Q4
    -------------------------------------------------------------------------
    Operating revenues                      2,411    2,377    2,375    2,454
    -------------------------------------------------------------------------
      Operations expenses                   1,456    1,451    1,441    1,479
      Restructuring costs                      32       53       28       38
    -------------------------------------------------------------------------
    EBITDA(1)                                 923      873      906      937
      Depreciation                            330      330      334      351
      Amortization of intangible assets       100       94       93       84
    -------------------------------------------------------------------------
    Operating income                          493      449      479      502
      Other expense                             6       11        5       11
      Financing costs                         101      106       95      118
    -------------------------------------------------------------------------
    Income before income taxes                386      332      379      373
      Income taxes (recovery)                 106       88       57       88
    -------------------------------------------------------------------------
    Net income(2)                             280      244      322      285
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income attributable to Common
     Shares and Non-Voting Shares(2)          279      243      321      285
    Income per Common Share and
     Non-Voting Share - basic                0.88     0.77     1.01     0.90
                      - diluted              0.87     0.77     1.01     0.89
    Dividends declared per Common
     Share and Non-Voting Share             0.475    0.475    0.475    0.475
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ in millions, except per               2008     2008     2008     2007
     share amounts)                            Q3       Q2       Q1       Q4
    -------------------------------------------------------------------------
    Operating revenues                      2,450    2,399    2,350    2,330
    -------------------------------------------------------------------------
      Operations expenses                   1,465    1,477    1,394    1,371
      Restructuring costs                      10        4        7        6
    -------------------------------------------------------------------------
    EBITDA(1)                                 975      918      949      953
      Depreciation                            344      343      346      386
      Amortization of intangible assets        92       77       76       68
    -------------------------------------------------------------------------
    Operating income                          539      498      527      499
      Other expense                             6        2       17        6
      Financing costs                         122      114      109      109
    -------------------------------------------------------------------------
    Income before income taxes                411      382      401      384
      Income taxes (recovery)                 125      114      109      (19)
    -------------------------------------------------------------------------
    Net income(2)                             286      268      292      403
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income attributable to Common
     Shares and Non-Voting Shares(2)          285      267      291      400
    Income per Common Share and
     Non-Voting Share - basic                0.89     0.83     0.90     1.23
                      - diluted              0.89     0.83     0.90     1.22
    Dividends declared per Common
     Share and Non-Voting Share              0.45     0.45     0.45     0.45
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) EBITDA is a non-GAAP measure. See Section 11.1 Earnings before
        interest, taxes, depreciation and amortization (EBITDA).
    (2) Net income has been adjusted for the periods prior to 2009 Q1, and no
        longer includes a deduction for non-controlling interests. As
        described further in Section 8.2.4 of Accounting policy developments,
        the change results from the January 1, 2009 adoption of the new
        recommendations for business combinations (Canadian Institute of
        Chartered Accountants (CICA) Handbook Section 1582), consolidations
        (CICA Handbook Section 1601) and non-controlling interests (CICA
        Handbook Section 1602). Net income attributable to Common Shares and
        Non-Voting Shares is equivalent to Net income previously reported in
        the 2008 and 2007 periods shown above.
    -------------------------------------------------------------------------
    

Trends

The recent economic downturn has heightened consumer and business customers' focus on value and increased expectations for better pricing or packaging of services. The consolidated revenue trend reflects lower year-over-year growth in wireless network revenues. Wireless ARPU for the third quarter of 2009 decreased 7% year-over-year, as strong growth in data ARPU was more than offset by declining voice ARPU. The voice ARPU decline includes pricing competition, greater spending restraint and price optimization on the part of customers, increased use of in-bucket or included-minute service plans, continued decline in Mike service ARPU, lower roaming revenues and to a lesser extent, the growing base of Koodo postpaid basic subscribers.

The expected entry of a number of new wireless competitors in late 2009 or in 2010 may disrupt usual seasonal patterns for wireless subscriber additions in the future. Historically, there has been significant fourth quarter seasonality with respect to higher wireless subscriber additions, related acquisition costs and equipment sales, resulting in lower fourth quarter wireless EBITDA. The third quarter has become more significant in terms of subscriber additions in recent years as a result of back-to-school offers, while subscriber additions have typically been lowest in the first quarter. In addition, wireless ARPU has generally risen sequentially in the second and third quarters, and declined sequentially in the fourth and first quarters. The Company experienced a significant decline in wireless ARPU in the fourth quarter of 2008, but ARPU has been stable over time since then.

Consolidated revenues also continue to reflect growth in wireline data revenue, which includes new revenues from the acquisition of Emergis beginning in mid-January 2008; however, data revenue growth has moderated in 2009 from strong price competition and was more than offset by declining wireline voice local and long distance revenues. The decline in wireline voice revenues is due to substitution to wireless and Internet services, as well as competition from VoIP service providers, resellers and facilities-based competitors. The number of residential network access line (NAL) losses has moderated in the four most recent quarters because of more effective winback efforts and synergies from bundling services, while TELUS' main cable-TV competitor's digital telephone geographic coverage expansion slowed. The Company has observed a larger number of disconnections and fewer installations of business NALs attributed partly to economic conditions and partly to competition.

Consolidated Operations expenses include expenses from Emergis beginning in January 2008. The sequential decrease in operations expenses in the first quarter of 2009, and year-over-year quarterly decreases in the second and third quarters of 2009, resulted mainly from lower employee compensation, including performance bonus expenses. Restructuring costs have increased beginning in the second half of 2008, as management refocused its efforts on accelerating efficiency initiatives, primarily in the wireline segment.

The sequential decline in depreciation in the first quarter of 2009 was due to certain assets becoming fully depreciated in 2008. Depreciation expenses were relatively high in the fourth quarter of 2007 as a result of reductions to estimated useful service lives of certain asset classes. As a result of the expected launch of the new HSPA wireless network in November 2009, depreciation in the fourth quarter of 2009 is expected to increase slightly from the third quarter of 2009. See Caution regarding forward-looking statements.

Amortization of intangible assets in the fourth quarter of 2008 is net of investment tax credits of $6 million. The investment tax credits were applied following a determination of eligibility by a government tax authority and relate to assets capitalized in prior years that are now fully amortized. The sequential increase in amortization of intangible assets in the third quarter of 2008 was due to implementation of the converged billing platform for B.C. residential customers in July 2008, while the sequential increase in amortization in the first quarter of 2008 was due mainly to the January 2008 acquisition of Emergis. Amortization is expected to increase for the full year of 2009, when compared to 2008, as a result of the increase in software assets. See Caution regarding forward-looking statements.

Financing costs shown in the preceding table are net of varying amounts of interest income, including interest from the settlement of prior years' income tax-related matters, particularly in the first, second and third quarters of 2009. Interest expenses for the second and third quarters of 2009 have decreased slightly, when compared to the same periods in 2008, as lower effective interest rates offset higher average debt balances. Interest expenses in the third and fourth quarters of 2008 had increased from preceding quarters due to a higher debt balance that helped fund the third quarter 2008 payment for advanced wireless services (AWS) spectrum licences.

The trends in Net income and earnings per share (EPS) reflect the items noted above, as well as adjustments arising from legislated income tax changes, settlements and tax reassessments for prior years, including any related interest on reassessments. EPS has also been positively impacted by decreased shares outstanding from share repurchases prior to 2009.

    
    -------------------------------------------------------------------------
    Income tax-related adjustments           2009     2009     2009     2008
    ($ in millions, except EPS amounts)        Q3       Q2       Q1       Q4
    -------------------------------------------------------------------------
    Approximate Net income impact              14       19       62       32
    Approximate EPS impact                   0.04     0.06     0.20     0.10
    Approximate basic EPS excluding
     tax-related impacts                     0.84     0.71     0.81     0.80
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Income tax-related adjustments           2008     2008     2008     2007
    ($ in millions, except EPS amounts)        Q3       Q2       Q1       Q4
    -------------------------------------------------------------------------
    Approximate Net income impact               -        -       17      143
    Approximate EPS impact                      -        -     0.05     0.44
    Approximate basic EPS excluding
     tax-related impacts                     0.89     0.83     0.85     0.79
    -------------------------------------------------------------------------

    5.3 Consolidated results from operations

    -------------------------------------------------------------------------
    ($ in millions, except      Quarters ended           Nine-month periods
     EBITDA margin)              September 30              ended Sept. 30
                            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Operating revenues     2,411    2,450   (1.6)%    7,163    7,199   (0.5)%
      Operations
       expenses            1,456    1,465   (0.6)%    4,348    4,336    0.3 %
      Restructuring costs     32       10    n.m.       113       21    n.m.
    -------------------------------------------------------------------------
    EBITDA(1)                923      975   (5.3)%    2,702    2,842   (4.9)%
      Depreciation           330      344   (4.1)%      994    1,033   (3.8)%
      Amortization of
       intangible assets     100       92    8.7 %      287      245   17.1 %
    -------------------------------------------------------------------------
    Operating income         493      539   (8.5)%    1,421    1,564   (9.1)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA margin (%)(2)    38.3     39.8 (1.5)pts     37.7     39.5 (1.8)pts
    -------------------------------------------------------------------------

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

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

Operating revenues

Consolidated Operating revenues decreased by $39 million and $36 million, respectively, in the third quarter and first nine months of 2009, when compared to the same periods in 2008. Wireless segment network revenues decreased by $7 million in the third quarter and increased by $42 million in the first nine months, as strong data revenue growth was impacted by ongoing declines in voice revenues. Wireless equipment and other revenues increased by $11 million in the third quarter from an increasing smartphone mix and higher retention volumes, as well as inclusion of approximately one month results from Black's. Wireless equipment and other revenues decreased by $4 million in the first nine months due to lower acquisition volumes. In the wireline segment, data and other revenues increased by $10 million in the third quarter and $63 million in the first nine months, but this growth was surpassed by erosion in voice local and long distance revenues caused by local competition and technological substitution.

Operations expenses

Operations expenses decreased by $9 million in the third quarter, and increased by $12 million in the first nine months of 2009, when compared to the same periods in 2008.

    
    -------------------------------------------------------------------------
                                Quarters ended           Nine-month periods
    Operations expenses          September 30              ended Sept. 30
    ($ millions)            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Salaries, benefits
     except DBPP,(1) and
     employee-related
     expenses                576      646  (10.8)%    1,770    1,942   (8.9)%
    DBPP expense (recovery)    4      (25)   n.m.        13      (75)   n.m.
    Other operations
     expenses                876      844    3.8 %    2,565    2,469    3.9 %
    -------------------------------------------------------------------------
                           1,456    1,465   (0.6)%    4,348    4,336    0.3 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    In respect of changes in the third quarter and first nine months of 2009,
as compared to the same periods in 2008:

    -   Salaries, benefits (except DBPP benefits) and employee-related
        expenses decreased by $70 million and $172 million, respectively.
        These decreases resulted mainly from lower performance bonus expenses
        arising from lower than originally planned operating performance, as
        well as a decrease in full-time equivalent (FTE) employees in 2009,
        while management base salaries were frozen at 2008 levels.

    -   TELUS' defined benefit pension plans expense increased by $29 million
        and $88 million, respectively. The increase was mainly due to the
        decline in value of defined benefit pension plans assets in 2008.

    -   Other operations expenses increased by $32 million and $96 million,
        respectively, in the third quarter and first nine months of 2009 when
        compared to the same periods in 2008. The increases included higher
        wireless subscriber retention costs, higher wireless network costs
        from increasing smartphone use, and a higher wireless bad debt
        expense for the nine-month period, as well as increased wireline
        TELUS TV programming and customer acquisition costs, and costs to
        implement services for new wireline enterprise customers. These
        increases were partly offset by lower wireless roaming and marketing
        costs and lower wireline advertising and promotions costs.
    

Restructuring costs

Restructuring costs were $32 million and $113 million, respectively, in the third quarter and first nine months of 2009, or increases of $22 million and $92 million, respectively, when compared to the same periods in 2008. Restructuring costs in 2009 were primarily severance costs in respect of efficiency initiatives described in Section 2: Investing in internal capabilities. Restructuring costs are currently expected to be approximately $160 million for the full year of 2009. See Section 9: Annual guidance for 2009.

EBITDA

Consolidated EBITDA decreased by approximately five per cent, or $52 million and $140 million, respectively in the third quarter and first nine months of 2009, when compared to the same periods in 2008. EBITDA decreased primarily due to significantly higher defined benefit pension plan expenses and restructuring costs. EBITDA, excluding the impacts of higher pension and restructuring costs, decreased by $1 million in the third quarter and increased by $40 million in the nine-month period. The underlying flat performance for the third quarter reflects a decline in higher margin wireline voice local and long distance revenues offset by cost containment efforts. The underlying improvement in the nine-month period was primarily from lower performance bonus expenses and increasing traction from efficiency initiatives. Excluding higher pension and restructuring costs, wireline EBITDA increased by $4 million and $42 million, respectively, while wireless EBITDA decreased by $5 million and $2 million, respectively.

Depreciation; Amortization of intangible assets

Combined depreciation and amortization expenses decreased by $6 million in the third quarter of 2009, and increased by $3 million in the first nine months of 2009, when compared to the same periods in 2008.

    
    -   Depreciation decreased by $14 million and $39 million, respectively.
        This reflects accelerated depreciation during 2008 from a reduction
        in estimated useful service lives for certain digital switching
        assets, as well as certain digital cell sites becoming fully
        depreciated. This was slightly offset by growth in capital assets
        over the past 12 months.

    -   Amortization increased by $8 million and $42 million, respectively.
        The increases include $3 million and $18 million, respectively,
        arising from the July 2008 implementation of the converged wireline
        billing and client care platform in B.C. The balance is mainly due to
        increases in other administrative and network application software.
    

Operating income

Operating income decreased by $46 million and $143 million, respectively, in the third quarter and first nine months of 2009 when compared to the same periods in 2008, primarily due to the five per cent decrease in EBITDA.

Other income statement items

    
    -------------------------------------------------------------------------
                                Quarters ended           Nine-month periods
    Other expense, net           September 30              ended Sept. 30
    ($ millions)            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
                               6        6      - %       22       25  (12.0)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Other expense, net includes accounts receivable securitization expense, income (losses) or impairments in equity or portfolio investments, gains and losses on disposal of real estate, and charitable donations.

Accounts receivable securitization expenses were $3 million and $7 million, respectively, in the third quarter and first nine months of 2009 as compared to $2 million and $9 million, respectively, in the same periods of 2008. Average proceeds from securitized accounts receivable were higher in 2009 than in 2008, offset by lower average rates. See Section 7.6 Accounts receivable sale for additional information. Charitable donation expenses and other net gains and losses were relatively unchanged.

    
    -------------------------------------------------------------------------
                                Quarters ended           Nine-month periods
    Financing costs              September 30              ended Sept. 30
    ($ millions)            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Interest on long-
     term debt, short-
     term obligations
     and other               121      124   (2.4)%      352      353   (0.3)%
    Foreign exchange
     (gains) losses            -       (1)   n.m.        (3)      (1)   n.m.
    Capitalized interest
     during construction       -        -      - %        -       (3)   n.m.
    Interest income          (20)      (1)   n.m.       (47)      (4)   n.m.
    -------------------------------------------------------------------------
                             101      122  (17.2)%      302      345  (12.5)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Interest expenses on long-term and short-term debt and other decreased by $3 million and $1 million, respectively, in the third quarter and first nine months of 2009 when compared to the same periods in 2008. Higher average debt balances in 2009, resulting primarily from payment for AWS spectrum licences in the third quarter of 2008, were offset by a lower effective interest rate. Interest income arising from the settlement of prior years' tax matters was $20 million in the third quarter of 2009 ($46 million of $47 million total interest income for the first nine months of 2009). Interest income in the prior year periods was primarily interest on temporary investments and cash balances.

    
    -------------------------------------------------------------------------
    Income taxes                Quarters ended           Nine-month periods
    ($ millions, except          September 30              ended Sept. 30
     tax rates)             2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Basic blended federal
     and provincial tax
     at statutory income
     tax rates               117      128   (8.6)%      332      370  (10.3)%
    Tax rate differential
     on, and consequential
     adjustments from,
     reassessments of
     prior years' tax
     issues                    -        -      -        (48)      (1)     -
    Revaluation of future
     income tax liability
     to reflect future
     statutory income
     tax rates               (10)      (6)     -        (36)     (32)     -
    Share option award
     compensation              -        1      -          3        4      -
    Other                     (1)       2      -          -        7      -
    -------------------------------------------------------------------------
                             106      125  (15.2)%      251      348  (27.9)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Blended federal and
     provincial statutory
     tax rates (%)          30.3     31.2 (0.9)pts     30.3     31.0 (0.7)pts
    Effective tax
     rates (%)              27.5     30.4 (2.9)pts     22.9     29.2 (6.3)pts
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

Comprehensive income

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

5.4 Wireline segment results

    
    -------------------------------------------------------------------------
    Operating revenues -        Quarters ended           Nine-month periods
     wireline segment            September 30              ended Sept. 30
    ($ millions)            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Voice local              466      494   (5.7)%    1,406    1,493   (5.8)%
    Voice long distance      148      173  (14.5)%      477      527   (9.5)%
    Data                     524      516    1.6 %    1,592    1,544    3.1 %
    Other                     67       65    3.1 %      206      191    7.9 %
    -------------------------------------------------------------------------
    External operating
     revenue               1,205    1,248   (3.4)%    3,681    3,755   (2.0)%
    Intersegment revenue      34       33    3.0 %       98       96    2.1 %
    -------------------------------------------------------------------------
    Total operating
     revenues              1,239    1,281   (3.3)%    3,779    3,851   (1.9)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Wireline revenues decreased $42 million and $72 million, respectively, in
the third quarter and first nine months of 2009 when compared to the same
periods in 2008.

    -   Voice local revenue decreased by $28 million and $87 million,
        respectively, in the third quarter and first nine months of 2009,
        when compared to the same periods in 2008. Decreases were mainly due
        to lower revenues from basic access and optional enhanced services
        caused by competition for residential subscribers, the consequent
        decline in local residential access lines and matching of competitive
        offers, as well as decreases in business lines from economic impacts.

    -------------------------------------------------------------------------
    Network access lines (NALs)                          As at September 30
    (000s)                                             2009     2008   Change
    -------------------------------------------------------------------------
    Residential                                       2,279    2,444   (6.8)%
    Business                                          1,821    1,838   (0.9)%
    -------------------------------------------------------------------------
    Total                                             4,100    4,282   (4.3)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net (losses) additions      Quarters ended           Nine-month periods
     in NALs                     September 30              ended Sept. 30
    (000s)                  2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Residential              (41)     (53)  22.6 %     (123)    (152)  19.1 %
    Business                  (3)      10    n.m.       (23)      30    n.m.
    -------------------------------------------------------------------------
    Total                    (44)     (43)  (2.3)%     (146)    (122) (19.7)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

    
    -   Voice long distance revenues decreased by $25 million and
        $50 million, respectively, in the third quarter and first nine months
        of 2009, when compared to the same periods in 2008. The decreases
        were due mainly to lower average per-minute rates resulting from
        ongoing industry-wide price competition, a lower base of residential
        subscribers, and lower billed retail minute volumes.

    -   Wireline data revenues increased by $8 million and $48 million,
        respectively, in the third quarter and first nine months of 2009,
        when compared to the same periods in 2008. The increases were
        primarily due to (i) higher managed workplace revenues from growth in
        outsourcing services for business customers; (ii) subscriber growth
        in digital entertainment services; and (iii) increased Internet,
        enhanced data and hosting services, partly offset by lower average
        pricing from competitive pressures. These increases were partly
        offset by lower broadcast and videoconferencing revenues and lower
        data equipment sales, including the effect of a larger equipment sale
        in the first quarter of 2008.

    -------------------------------------------------------------------------
    Wireline Internet and
     TELUS TV subscribers                                As at September 30
    (000s)                                             2009     2008   Change
    -------------------------------------------------------------------------
    High-speed Internet subscribers(1)                1,117    1,077    3.7 %
    Dial-up Internet subscribers                         96      134  (28.4)%
    -------------------------------------------------------------------------
    Total Internet subscribers(1)                     1,213    1,211    0.2 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    TELUS TV subscribers(2)                             137       63  117.5 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Net additions (losses)
     of wireline Internet
     and TELUS TV               Quarters ended           Nine-month periods
     subscribers                 September 30              ended Sept. 30
    (000s)                  2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    High-speed Internet
     subscriber net
     additions                 9       13  (30.8)%       26       57  (54.4)%
    Dial-up Internet
     subscriber net losses    (9)      (8) (12.5)%      (28)     (21) (33.3)%
    -------------------------------------------------------------------------
    Total Internet
     subscriber net
     additions (losses)        -        5 (100.0)%       (2)      36    n.m.
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    TELUS TV subscriber
     net additions(2)         22       12   83.3 %       59       28  110.7 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Opening balances for high-speed Internet subscribers and total
        Internet subscribers for the second quarter of 2009, were reduced by
        five thousand to reflect prior period reporting adjustments.
    (2) Includes TELUS Satellite TV(TM) subscribers beginning in 2009.
    -------------------------------------------------------------------------
    

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

    
    -   Other revenue increased by $2 million and $15 million, respectively,
        in the third quarter and first nine months of 2009, when compared to
        the same periods in 2008, primarily due to higher voice equipment
        sales.

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

    -------------------------------------------------------------------------
    Operating expenses -        Quarters ended           Nine-month periods
     wireline segment            September 30              ended Sept. 30
    ($ millions)            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Salaries, benefits
     except DBPP(1)
     expense (recovery),
     and employee-
     related costs           435      493  (11.8)%    1,342    1,478   (9.2)%
    DBPP expense (recovery)    4      (23)   n.m.        14      (68)   n.m.
    Other operations
     expenses                365      353    3.4 %    1,115    1,093    2.0 %
    -------------------------------------------------------------------------
    Operations expenses      804      823   (2.3)%    2,471    2,503   (1.3)%
    Restructuring costs       29        9    n.m.       104       19    n.m.
    -------------------------------------------------------------------------
    Total operating
     expenses                833      832    0.1 %    2,575    2,522    2.1 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Total operating expenses increased by $1 million and $53 million,
respectively, in the third quarter and first nine months of 2009 when compared
to the same periods in 2008.

    -   Salaries, benefits and employee-related costs decreased by
        $58 million and $136 million, respectively. The decreases resulted
        from a significant reduction in performance bonus expenses from lower
        than originally planned operating performance for 2009, fewer FTE
        staff and efficiency initiatives including those targeting
        discretionary employee-related expenses such as travel.

    -   The defined benefits pension plans expense increased by $27 million
        and $82 million, respectively, mainly due to the decline in value of
        these plans' assets in 2008.

    -   Other operations expenses increased by $12 million and $22 million,
        respectively, due to TELUS TV programming and customer acquisition
        costs related to increased subscriber loading, and access facility
        costs associated with implementing new contracts, partly offset by
        lower advertising and promotional expenses.

    -   Restructuring costs increased by $20 million and $85 million,
        respectively. The increases reflect an array of initiatives under the
        Company's operating efficiency program.

    -------------------------------------------------------------------------
    Wireline segment -          Quarters ended           Nine-month periods
     EBITDA                      September 30              ended Sept. 30
                            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    EBITDA ($ millions)      406      449   (9.6)%    1,204    1,329   (9.4)%
    EBITDA margin (%)       32.8     35.1 (2.3)pts     31.9     34.5 (2.6)pts
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Wireline segment EBITDA decreased by $43 million and $125 million, respectively, in the third quarter and first nine months of 2009 when compared to the same periods in 2008, due primarily to higher restructuring costs and defined benefit pension plan expenses. Excluding the increases in restructuring costs and pension expenses, wireline EBITDA increased by $4 million and $42 million, respectively, due to lower performance bonus expenses, fewer FTE employees, as well as cost containment efforts that drove down discretionary employee-related costs and advertising and promotions costs, partly offset by increased costs to provision TV services and implement services for new enterprise customers. EBITDA margin pressure is caused by declining voice revenues having higher margins than the growing data services.

5.5 Wireless segment results

    
    -------------------------------------------------------------------------
    Operating revenues -        Quarters ended           Nine-month periods
     wireless segment            September 30              ended Sept. 30
    ($ millions)            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Network revenue        1,126    1,133   (0.6)%    3,289    3,247    1.3 %
    Equipment and other
     revenue                  80       69   15.9 %      193      197   (2.0)%
    -------------------------------------------------------------------------
    External operating
     revenue               1,206    1,202    0.3 %    3,482    3,444    1.1 %
    Intersegment revenue       7        7      - %       21       21      - %
    -------------------------------------------------------------------------
    Total operating
     revenues              1,213    1,209    0.3 %    3,503    3,465    1.1 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Wireless segment revenues increased by $4 million and $38 million,
respectively, in the third quarter and first nine months of 2009 when compared
to the same periods in 2008. The increases were due to the following:

    -   Network revenue decreased by $7 million in the third quarter of 2009
        and increased by $42 million in the first nine months of 2009, when
        compared to the same periods in 2008. Data revenue growth of
        $48 million or 27% in the third quarter was more than offset by lower
        voice revenues of $55 million or 6%. Wireless data revenues in the
        third quarter of 2009 represent 20% of network revenue as compared to
        16% in the same period in 2008. Data revenue growth of $167 million
        or 34% in the first nine months was partially offset by lower voice
        revenues of $125 million or 5%. This growth in data revenues
        continues to reflect strength in text messaging and smartphone
        service revenues driven by increased usage and features, and
        increased penetration of smartphones, higher-speed EVDO-capable
        handsets, and mobile Internet keys, partially offset by lower inbound
        data roaming rates.

        Blended ARPU of $59.45 decreased by $4.69 or 7% in the third quarter
        of 2009 when compared to the same period in 2008, but was up from
        $58.61 in the second quarter of 2009. Blended ARPU of $58.82 for the
        first nine months of 2009 decreased $4.12 or 6.5% when compared to
        the same period in 2008. Third quarter data ARPU of $12.05 increased
        by $1.86 or 18% when compared to the same period in 2008, while voice
        ARPU of $47.40 decreased $6.55 or 12%. Data ARPU for the first nine
        months of 2009 was $11.63, an increase of $2.26 or 24%, while voice
        ARPU of $47.19 decreased $6.38 or 12%. Declining voice ARPU is a
        continuing trend and included a combination of factors: declining
        minutes of use by both consumers and businesses, increased use of
        included-minute rate plans as subscribers shift usage patterns and
        move to optimize price plans, lower Mike service ARPU, decreased
        inbound roaming rates and increased penetration of the lower ARPU
        Koodo brand, partly offset by higher service feature revenues.

        Postpaid subscriber gross additions represented approximately 69% of
        total gross additions for the third quarter of 2009 and 64% of total
        gross additions for the first nine months of 2009. This compares to
        67% and 64%, respectively, in the same periods in 2008. This reflects
        an improvement in mix of gross and net subscribers for the third
        quarter of 2009.

        Net additions for the third quarter and first nine months of 2009
        were down 29% and 35%, respectively, when the prior year comparatives
        are normalized for deactivation of 28,000 subscribers on
        September 15, 2008 from the turndown of TELUS' analogue network. Net
        additions were impacted by higher overall churn and market
        competition as compared to normalized net additions in 2008. Postpaid
        subscriber net additions represented 105% and 95%, respectively, of
        total net additions for the third quarter and first nine months of
        2009, as compared to 90% and 88%, respectively, in the same periods
        of 2008.

        The blended churn rate increase year-over-year reflects higher
        involuntary churn, lower prior year churn in the Koodo brand due to
        its initial launch in March 2008, and continued competitive marketing
        intensity within both the postpaid and prepaid market segments. The
        blended churn rate for the third quarter of 2009 increased slightly
        to 1.55% when compared to 1.52% in the third quarter of 2008
        (excluding the effect of deactivating analogue subscribers in
        September 2008), but was unchanged from the second quarter of 2009.
        The blended churn rate for the first nine months of 2009 was 1.57%,
        up from 1.49% in the same period in 2008 (excluding deactivation of
        analogue subscribers in September 2008).

    -------------------------------------------------------------------------
    Wireless operating indicators
    -------------------------------------------------------------------------
                                                         As at September 30
                                                       2009     2008   Change
    -------------------------------------------------------------------------
    Subscribers (000s)
    Postpaid                                          5,192    4,803    8.1 %
    Prepaid                                           1,221    1,178    3.7 %
    -------------------------------------------------------------------------
    Total                                             6,413    5,981    7.2 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Proportion of subscriber base that is
     postpaid (%)                                        81       80    1 pt
    Digital POPs(1) covered (millions)(2)              32.7     32.4    0.9 %


                                Quarters ended           Nine-month periods
                                 September 30              ended Sept. 30
                            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Subscriber gross
     additions (000s)
    Postpaid                 291      300   (3.0)%      753      783   (3.8)%
    Prepaid                  129      147  (12.2)%      415      431   (3.7)%
    -------------------------------------------------------------------------
    Total                    420      447   (6.0)%    1,168    1,214   (3.8)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Subscriber net
     additions (000s)
    Postpaid                 131      133   (1.5)%      270      362  (25.4)%
    Prepaid                   (6)      16    n.m.        14       51  (72.5)%
    -------------------------------------------------------------------------
    Total(3)                 125      149  (16.1)%      284      413  (31.2)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total subscriber
     net additions -
     adjusted(3)             125      176  (29.0)%      284      440  (35.4)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ARPU(4) ($)            59.45    64.14   (7.3)%    58.82    62.94   (6.5)%
    Churn, per
     month(4) (%)           1.55     1.68 (0.13)pts    1.57     1.55 0.02 pts
    Adjusted churn,
     per month (%)(3)       1.55     1.52  0.03 pts    1.57     1.49 0.08 pts
    Average monthly
     minutes of use per
     subscriber (MOU)        397      416   (4.6)%      394      410   (3.9)%
    COA (5) per gross
     subscriber
     addition(4)(6) ($)      320      358  (10.6)%      322      344   (6.4)%
    Retention spend to
     network
     revenue(4)(6) (%)      10.3      8.7  1.6 pts     10.5      8.7  1.8 pts
    EBITDA excluding COA
     ($ millions)            652      686   (5.0)%    1,874    1,931   (3.0)%
    EBITDA to network
     revenue (%)            45.9     46.4 (0.5)pts     45.5     46.6 (1.1)pts
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    pt(s) - percentage point(s)

    (1) POPs is an abbreviation for population. A POP refers to one person
        living in a population area that is wholly or substantially included
        in the coverage area.
    (2) Including roaming/resale agreements, principally with Bell Canada.
    (3) Net Additions and blended churn for the third quarter of 2008 include
        the impact of TELUS' analogue network turndown on September 15, 2008.
        Adjusted subscriber net additions and churn exclude the impact of
        approximately 28,000 subscriber deactivations resulting from turning
        down the analogue network.
    (4) See Section 11.3 Definitions of key wireless operating indicators.
        These are industry measures useful in assessing operating performance
        of a wireless company, but are not defined under accounting
        principles generally accepted in Canada and the U.S.
    (5) Cost of acquisition.
    (6) In the first quarter of 2009, the Company refined the measurement of
        the costs of acquisition and retention in its operational systems to
        align with changes in the business. Prior year comparative figures
        have been restated on a consistent basis.
    -------------------------------------------------------------------------

    -   Equipment sales, rental and service revenue increased by $11 million
        or 16% in the third quarter of 2009 and decreased by $4 million or 2%
        in the first nine months of 2009, when compared to the same periods
        in 2008. The increase for the quarter was due to higher per-unit
        revenues from an increasing smartphone mix and higher retention
        volumes, partly offset by lower acquisition volumes, contributing to
        lower activation and accessory revenues. This category also includes
        results from Black's for the month of September.

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

    -------------------------------------------------------------------------
    Operating expenses -        Quarters ended           Nine-month periods
     wireless segment            September 30              ended Sept. 30
    ($ millions)            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Equipment sales
     expenses                209      193    8.3 %      582      522   11.5 %
    Network operating
     expenses                161      155    3.9 %      465      445    4.5 %
    Marketing expenses       106      122  (13.1)%      292      346  (15.6)%
    General and
     administration (G&A)
     expenses
      Salaries, benefits(1)
       and employee-
       related costs         142      151   (6.0)%      427      457   (6.6)%
      Other G&A expenses      75       61   23.0 %      230      180   27.8 %
    -------------------------------------------------------------------------
    Operations expense       693      682    1.6 %    1,996    1,950    2.4 %
    Restructuring costs        3        1    n.m.         9        2    n.m.
    -------------------------------------------------------------------------
    Total operating
     expenses                696      683    1.9 %    2,005    1,952    2.7 %
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) Includes defined benefit pension plans recoveries of $nil and
        $1 million, respectively, for the third quarter and first nine months
        of 2009, as compared to recoveries of $2 million and $7 million,
        respectively, for the third quarter and first nine months of 2008.
    -------------------------------------------------------------------------

    Wireless segment total operating expenses increased by $13 million and $53
million, respectively, in the third quarter and first nine months of 2009 when
compared to the same periods in 2008. The increases were primarily due to the
growth in data services, inclusion of results from Black's for the month of
September, and higher bad debt expenses for the nine-month period.

    -   Equipment sales expenses increased by $16 million and $60 million,
        respectively, in the third quarter and first nine months of 2009 as
        compared with the same periods in 2008. The increases were due in
        part to higher retention volumes and higher per-unit costs to support
        migration of clients to smartphones, as well as higher inventory
        valuation adjustments, partly offset by lower acquisition volumes.
        Equipment expenses include results from Black's for the month of
        September.

    -   Network operating expenses increased by $6 million and $20 million,
        respectively, in the third quarter and first nine months of 2009 as
        compared with the same periods in 2008. The increases in network
        operating expenses supported growth in data revenues (27% for the
        third quarter and 34% for the first nine months), relating to
        increased usage, continued penetration of smartphones and mobile
        Internet keys that drove increases in revenue share costs to third
        parties and licensing costs to service providers, partly offset by
        lower roaming costs from reduced rates.

    -   Marketing expenses decreased by $16 million and $54 million,
        respectively, in the third quarter and first nine months of 2009, as
        compared with the same periods in 2008, resulting from lower
        advertising and promotions and lower commissions due to a change in
        product mix and loading through lower variable cost channels. COA per
        gross subscriber addition decreased by $38 and $22, respectively, in
        the third quarter and first nine months of 2009 when compared to the
        same periods in 2008. The decrease in COA reflects lower commissions
        and lower per-unit subsidy costs, reflecting changes in promotional
        pricing and higher Koodo product mix, partly offset by lower
        activation revenues.

        Retention costs as a percentage of network revenue increased to 10.3%
        and 10.5% in the third quarter and first nine months of 2009 as
        compared to 8.7% in the same periods in 2008. The increase in
        retention costs was primarily related to continued focus on migration
        of clients to smartphones.

    -   In G&A expenses, salaries, benefits and employee-related costs
        decreased by $9 million and $30 million, respectively, in the third
        quarter and first nine months of 2009, as compared to the same
        periods in 2008, which reflects lower performance bonus accruals and
        traction from competitive efficiency programs. Other G&A expenses
        increased by $14 million and $50 million, respectively, including
        higher external labour costs to support the increased subscriber
        base, higher rent reflecting expansion of Koodo distribution channels
        and the inclusion of expenses from Black's for the month of
        September. Bad debt expense was unchanged in the quarter, but
        increased by $17 million for the nine-month period.

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

    -------------------------------------------------------------------------
    Wireless segment -          Quarters ended           Nine-month periods
     EBITDA                      September 30              ended Sept. 30
                            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    EBITDA ($ millions)      517      526   (1.7)%    1,498    1,513   (1.0)%
    EBITDA margin (%)       42.6     43.5 (0.9)pts     42.8     43.7 (0.9)pts
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Wireless segment EBITDA decreased by $9 million and $15 million, respectively, in the third quarter and first nine months of 2009 when compared to the same periods in 2008. Wireless EBITDA, before higher pension and restructuring expenses, decreased by $5 million and $2 million, respectively, resulting from declining voice ARPU, increased retention and network costs supporting data growth, and higher G&A costs to support the larger subscriber base, partly offset by lower COA expenses. EBITDA margins were affected by increased network costs associated with smartphone adoption, increased restructuring costs, and for the nine-month period, increased bad debt expenses.

6. Changes in financial position

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

    
    -------------------------------------------------------------------------
    Financial
     position
     as at:       Sept. 30,  Dec. 31,        Change          Explanation
    ($ millions)      2009      2008                        of the change
    -------------------------------------------------------------------------
    Current Assets
    Cash and            34         4       30     n.m.  See Section 7:
     temporary                                          Liquidity and capital
     investments,                                       resources
     net

    Accounts           781       966     (185)  (19)%   Reduced by $100
     receivable                                         million due to an
                                                        increase in proceeds
                                                        from securitized
                                                        accounts receivable,
                                                        as well as lower
                                                        receivables from
                                                        wireless dealers, and
                                                        a decrease in
                                                        wireless customer
                                                        accounts receivable
                                                        from a decrease in
                                                        postpaid ARPU.
                                                        Accounts receivable
                                                        turnover was 45 days
                                                        at September 30,
                                                        2009, up from 43 days
                                                        at June 30, 2009 and
                                                        down from 48 days at
                                                        December 31, 2008.

    Income and         112        25       87     n.m.  Reflects an increase
     other taxes                                        in accrued income and
     receivable                                         other taxes
                                                        receivable, and
                                                        instalments paid, net
                                                        of refunds received.

    Inventories        192       333     (141)   (42)%  Mainly a decrease in
                                                        wireless handset
                                                        volumes, parts and
                                                        accessories, as well
                                                        as lower average
                                                        handset costs.

    Prepaid expenses   200       176       24     14 %  Primarily pre-payment
     and other(1)                                       of property taxes,
                                                        maintenance contracts
                                                        and wireless licence
                                                        fees, all net of
                                                        amortization.

    Derivative assets    -        10      (10)  (100)%  Fair value
                                                        adjustments to
                                                        foreign exchange
                                                        hedges. See current
                                                        Derivative
                                                        liabilities.
    -------------------------------------------------------------------------
    Current
     Liabilities
    Accounts         1,417     1,465      (48)    (3)%  Includes lower
     payable and                                        accrued employee
     accrued                                            benefits and
     liabilities                                        employee-related
                                                        costs, a decrease in
                                                        trade payables from
                                                        lower expenditures,
                                                        and lower accrued
                                                        liabilities partially
                                                        offset by a seasonal
                                                        increase in interest
                                                        payable and five
                                                        additional accrued
                                                        payroll days.

    Income and other    14       163     (149)   (91)%  Reflects final income
     taxes payable                                      tax payments in 2009
                                                        for the 2008 tax
                                                        year.

    Restructuring       84        51       33     65 %  New obligations under
     accounts                                           current restructuring
     payable and                                        initiatives exceeded
     accrued                                            payments under
     liabilities                                        previous
                                                        restructuring
                                                        initiatives.

    Dividends payable  151       151        -      - %  The dividend declared
                                                        for the third quarter
                                                        was paid October 1,
                                                        2009, and the
                                                        dividend declared for
                                                        the fourth quarter of
                                                        2008 was paid
                                                        January 2, 2009.

    Advance billings   646       689      (43)    (6)%  Primarily a decrease
     and customer                                       in deferred revenue
     deposits                                           from lower wireless
                                                        handset volumes held
                                                        by external channels,
                                                        and lower wireline
                                                        customer deposits.

    Current             82         4       78     n.m.  Reflects the May 2010
     maturities of                                      maturity of
     long-term debt                                     $50 million TELUS
                                                        Communications Inc.
                                                        12% Series 1
                                                        debentures and the
                                                        July 2010 maturity of
                                                        $30 million TELUS
                                                        Communications Inc.
                                                        11.5% Series U First
                                                        Mortgage Bonds, net
                                                        of a small reduction
                                                        in capital leases.

    Derivative          82        75        7      9 %  Fair value
     liabilities                                        adjustments for share
                                                        options and
                                                        operational hedges,
                                                        offset by options
                                                        exercised or
                                                        forfeited.

    Current portion    586       459      127     28 %  Primarily changes in
     of future                                          TELUS Communications
     income taxes                                       Company and TELE-
                                                        MOBILE COMPANY
                                                        partnerships' income
                                                        that will be
                                                        allocated over the
                                                        next 12 months.
    -------------------------------------------------------------------------
    Working         (1,743)   (1,543)    (200)   (13)%  The reduction in
     capital(2)                                         working capital
                                                        contributed to a
                                                        reduction in long-
                                                        term debt.
    -------------------------------------------------------------------------
    Capital         12,802    12,483      319      3 %  See Capital
     Assets, Net                                        expenditures in
                                                        Section 7.2 Cash used
                                                        by investing
                                                        activities and
                                                        Depreciation and
                                                        Amortization in
                                                        Section 5.3
                                                        Consolidated results
                                                        from operations.
    -------------------------------------------------------------------------
    Other Assets
    Other            1,556     1,418      138     10 %  Primarily pension
     long-term                                          plan funding and
     assets(1)                                          continued
                                                        amortization of
                                                        transitional pension
                                                        assets.

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

    Goodwill         3,572     3,564        8      - %  Goodwill added for
                                                        the purchase of
                                                        Black's Photo
                                                        Corporation.
    -------------------------------------------------------------------------
    Long-Term Debt   5,809     6,348     (539)    (8)%  Includes:
                                                        - Net proceeds of
                                                          $697 million from
                                                          the issue of 4.95%
                                                          five-year notes in
                                                          May;
                                                        - A $103 million
                                                          increase in
                                                          commercial paper;
                                                        - A net reduction of
                                                          $980 million in
                                                          amounts drawn
                                                          against the 2012
                                                          credit facility;
                                                        - $80 million
                                                          debentures
                                                          reclassified to
                                                          current
                                                          liabilities; and
                                                        - A $280 million
                                                          decrease in the
                                                          Canadian dollar
                                                          value of the 2011
                                                          U.S. dollar Notes
                                                          from an appreciated
                                                          Canadian dollar,
                                                          which is largely
                                                          offset by a lower
                                                          derivative
                                                          liability (see
                                                          Other Long-Term
                                                          Liabilities).
    -------------------------------------------------------------------------
    Other Long-Term  1,560     1,295      265     20 %  Primarily changes
     Liabilities                                        in U.S. dollar
                                                        exchange rates and a
                                                        fair value adjustment
                                                        of the derivative
                                                        liability associated
                                                        with the 2011 U.S.
                                                        dollar Notes.
    -------------------------------------------------------------------------
    Future Income    1,328     1,213      115      9 %  An increase in future
     Taxes(1)                                           taxes on long-term
                                                        assets and
                                                        liabilities,
                                                        including unrealized
                                                        gains and losses on
                                                        derivatives and
                                                        reassessments for
                                                        prior year tax
                                                        issues, partly offset
                                                        by a revaluation for
                                                        statutory tax rate
                                                        changes.
    -------------------------------------------------------------------------
    Shareholders'
     Equity
    Common Share     7,513     7,085      428      6 %  Mainly Net income of
     and Non-Voting                                     $843 million and
     Share equity(1)                                    Other comprehensive
                                                        income of $25 million
                                                        attributable to
                                                        holders of Common
                                                        Shares and Non-Voting
                                                        Shares, less $451
                                                        million of dividends
                                                        paid or payable in
                                                        cash.

    Non-controlling     20        23       (3)   (13)%  Dividends paid by a
     interests                                          subsidiary to non-
                                                        controlling
                                                        interests, net of
                                                        $3 million Net income
                                                        attributable to non-
                                                        controlling
                                                        interests.
    -------------------------------------------------------------------------
    (1) Commencing in 2009, the new recommendations of the CICA for goodwill
        and intangible assets (Handbook Section 3064) apply to the Company.
        The application of this standard resulted in adjustments to the
        Consolidated statements of financial position. See Developments in
        fiscal 2009 in Section 8.2.4.
    (2) Current assets subtracting Current liabilities - an indicator of the
        ability to finance current operations and meet obligations as they
        fall due.
    -------------------------------------------------------------------------
    

7. Liquidity and capital resources

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

The Company's capital structure financial policies, financing plan and results are described in Section 4.3. In the normal course, the Company has generated annual cash flow from operations exceeding annual capital investment needed to support business growth and re-invest in technology. In 2009, cash provided by operating activities has exceeded cash used by investing activities, and debt was reduced. In 2008, cash provided by operating activities was supplemented with cash provided by financing activities to help fund the January acquisition of Emergis and third quarter payment for AWS spectrum licences.

    
    -------------------------------------------------------------------------
    Summary of Consolidated
     statements of              Quarters ended           Nine-month periods
     cash flows                  September 30              ended Sept. 30
    ($ millions)            2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Cash provided by
     operating activities    814      985  (17.4)%    2,280    2,072   10.0 %
    Cash (used) by
     investing activities   (585)  (1,353)  56.8 %   (1,615)  (2,790)  42.1 %
    Cash (used) provided
     by financing
     activities             (221)     358    n.m.      (635)     734    n.m.
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and temporary
     investments, net          8      (10)     -         30       16      -
    Cash and temporary
     investments, net,
     beginning of period      26       46      -          4       20      -
    -------------------------------------------------------------------------
    Cash and temporary
     investments, net,
     end of period            34       36      -         34       36   (5.6)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.1 Cash provided by operating activities

    Cash provided by operating activities decreased by $171 million in the
third quarter of 2009, and increased by $208 million in the first nine months
of 2009 when compared to the same periods in 2008, primarily due to the
following:

    -   Changes in proceeds from securitized accounts receivable (included in
        Net change in non-cash working capital on the Consolidated statements
        of cash flow) are a source of cash when the proceeds are increased,
        and a use of cash when proceeds are reduced. There were no changes in
        proceeds during the third quarter of 2009, as compared to a
        $100 million increase in proceeds during the third quarter of 2008.
        Over the first nine months of 2009, the Company increased proceeds by
        $100 million, while in the corresponding period in 2008, the Company
        reduced proceeds by a net $250 million. See Section 7.6 Accounts
        receivable sale.

    -   Income tax payments net of recoveries were $48 million and
        $270 million in the third quarter and first nine months of 2009. Net
        payments in 2009 included a $10 million third quarter recovery
        ($64 million recovery for the first nine months) for settlement of
        prior years' tax matters, as well as final instalment payments in
        respect of the 2008 tax year made in the first quarter. In
        comparison, income tax payments in the third quarter and first nine
        months of 2008 were $1 million and $8 million, respectively. The
        Company has commenced to make significant income tax payments in 2009
        (see income tax payment assumptions in Section 9).

    -   EBITDA decreased by $52 million and $140 million, respectively, in
        the third quarter and first nine months, as described in Section 5:
        Results from operations. The decrease in EBITDA included increases in
        employee defined benefit pension plan expenses and restructuring
        costs. Excluding these non-cash items, EBITDA decreased by $1 million
        in the quarter and increased by $40 million in the nine-month period.

    -   Contributions to employee defined benefit plans increased by
        $4 million and $57 million, respectively, in the third quarter and
        first nine months of 2009 when compared to the same periods in 2008.
        See assumptions for defined benefits pension plans in Section 9:
        Annual guidance for 2009.

    -   Payments under restructuring programs increased by $10 million and
        $45 million, respectively, in the third quarter and first nine months
        of 2009 when compared to the same periods in 2008.

    -   Interest received increased by $19 million and $52 million,
        respectively, in the third quarter and first nine months of 2009,
        when compared to the same periods in 2008, primarily for the
        settlement of prior years' tax matters.

    -   Other changes in non-cash working capital, including reduced customer
        and dealer accounts receivable and inventory in the first nine months
        of 2009, and liquidation of $42 million of short-term investments in
        the first half of 2008.
    

7.2 Cash used by investing activities

Cash used by investing activities decreased by $768 million and $1,175 million, respectively, in the third quarter and first nine months of 2009 when compared to the same periods in 2008. The decreases resulted from lower total capital expenditures (see below) and smaller acquisitions. In 2009, the Company purchased Black's Photo Corporation for $28 million cash ($26 million net of acquired cash) in the third quarter, while in 2008 the Company acquired Emergis and FastVibe in the first quarter for a total of $696 million net of acquired cash.

Assets under construction were $1,032 million at September 30, 2009, up $350 million from December 31, 2008. The increase related mainly to the Company's wireline and wireless broadband initiatives, described further below. During the third quarter of 2009, software assets under construction decreased by $71 million due to completion of certain broadband-related software projects.

    
    -------------------------------------------------------------------------
    Capital expenditures        Quarters ended           Nine-month periods
    ($ millions, except          September 30              ended Sept. 30
     capital intensity)     2009     2008   Change     2009     2008   Change
    -------------------------------------------------------------------------
    Wireline segment
     (general)               365      340    7.4 %    1,011      916   10.4 %
    Wireless segment
     (general)               193      133   45.1 %      578      312   85.3 %
    -------------------------------------------------------------------------
    Capital expenditures
     (general)               558      473   18.0 %    1,589    1,228   29.4 %
    Payment for AWS
     spectrum licences
     (wireless segment)        -      882    n.m.         -      882    n.m.
    -------------------------------------------------------------------------
    Total capital
     expenditures            558    1,355  (58.8)%    1,589    2,110  (24.7)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total wireless
     capital expenditures    193    1,015  (81.0)%      578    1,194  (51.6)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA less total
     capital
     expenditures(1)         365     (380)   n.m.     1,113      732   52.0 %
    Capital
     intensity(2) (%)
      Of general capital
       expenditures           23       19    4 pts       22       17    5 pts
      Of total capital
       expenditures           23       55  (32)pts       22       29   (7)pts
    -------------------------------------------------------------------------

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

Total capital expenditures decreased by $797 million and $521 million, respectively, in the third quarter and first nine months of 2009, when compared to the same periods in 2008, largely due to the prior year payment for AWS spectrum licences. General capital expenditures (excluding payment for AWS spectrum licences) increased by $85 million and $361 million, respectively, largely due to the Company's focus on wireline broadband and wireless HSPA initiatives. Driven by the near completion of the wireless HSPA initiative in 2009 and progress on wireline broadband expansion, 2010 capital expenditure levels are currently expected to reflect a return back to average historical levels experienced between 2006 and 2008 and therefore to be reduced to as low as $1.7 billion. See Section 9: Annual guidance for 2009 for the Company's expectation for capital expenditures for the full year.

EBITDA less total capital expenditures improved by $745 million and $381 million, respectively, in the third quarter and first nine months of 2009, relative to the same periods in 2008. The improvement was mainly due to the prior year payment for AWS spectrum licences, partly offset by increased defined benefit pension plan expenses and restructuring costs in 2009. The 22% capital intensity level for the first nine months of 2009 reflects a wireline intensity level of 27% (24% in the first nine months of 2008) and a wireless intensity level of 17% (34% in the first nine months of 2008 including payment for AWS spectrum licences, or 9% excluding spectrum licence payments).

    
    -   Wireline segment

        Wireline capital expenditures increased by $25 million and
        $95 million, respectively, in the third quarter and first nine months
        of 2009, relative to expenditures in the same periods in 2008. The
        increases were mainly due to investments in broadband and TELUS TV
        initiatives primarily in B.C. and Alberta. Partly offsetting this
        were expenditures incurred in 2008 for the billing and client care
        platform implemented for B.C. residential customer accounts in July
        2008. Wireline cash flow (EBITDA less capital expenditures) was $41
        million in the third quarter of 2009 and $193 million in the first
        nine months of 2009, or decreases of $68 million or 62% and
        $220 million or 53%, respectively, when compared to the same periods
        in 2008.

    -   Wireless segment

        General wireless capital expenditures increased by $60 million and
        $266 million, respectively, in the third quarter and first nine
        months of 2009, when compared to the same periods in 2008, due mainly
        to new investments in HSPA technology and service capability for
        planned network launch in November 2009. General expenditures in the
        prior year were relatively low due to deferrals pending the outcome
        of the July 2008 AWS spectrum auction and finalization of the
        Company's wireless technology evolution plans.

        Total wireless capital expenditures decreased by $822 million and
        $616 million, respectively, in the third quarter and first nine
        months of 2009, compared to the same periods in 2008. The decrease
        reflected prior year payment of $882 million for AWS spectrum
        licences, partly offset by HSPA spending in 2009. Consequently,
        wireless cash flow (EBITDA less total capital expenditures) improved
        to $324 million and $920 million, respectively, in the third quarter
        and first nine months of 2009, as compared to $(489) million and
        $319 million, respectively, in the same periods in 2008.

    7.3 Cash provided (used) by financing activities

    Net cash used by financing activities was $221 million and $635 million,
respectively, in the third quarter and first nine months of 2009. This
compares to net cash provided by financing activities of $358 million, and
$734 million, respectively, in the same periods of 2008.

    -   Cash dividends paid to shareholders in the third quarter of 2009
        totalled $149 million, in respect of the second quarter declared
        dividend (47.5 cents per share) that was remitted and paid July 2,
        2009. Cash dividends paid to shareholders in the first nine months of
        2009 totalled $451 million and were in respect of the dividends
        declared in the first and second quarters of 2009, as well as the
        fourth quarter of 2008 (47.5 cents per share, each). In comparison,
        $289 million in dividends paid for the first nine months of 2008 were
        in respect of the 2008 first and second quarter dividends ($0.45
        cents per share, each).

    -   There have been no purchases of TELUS shares under the NCIB program
        in 2009. The maximum number of shares that may be repurchased under
        the current program, before December 22, 2009, is four million Common
        Shares and four million Non-Voting Shares. During the third quarter
        of 2008, the Company repurchased approximately 1.97 million shares
        for $75 million, while over the first nine months of 2008 the Company
        repurchased approximately 6.61 million shares for $274 million.

    -   Long-term debt issues

        In May 2009, the Company successfully closed a public offering of
        4.95%, Series CF Notes maturing May 2014, for aggregate gross
        proceeds of $700 million. Net proceeds of approximately $697 million
        were used for corporate purposes, including repayment of amounts
        outstanding under the 2012 Credit Facility and reducing outstanding
        commercial paper. The Series CF Notes are redeemable at the option of
        the Company, in whole at any time, or in part from time to time, on
        not fewer than 30 and not more than 60 days' prior notice, at a
        redemption price equal to the greater of (i) the present value of the
        Notes discounted at the Government of Canada yield plus 71 basis
        points, or (ii) 100% of the principal amount thereof. In addition,
        accrued and unpaid interest, if any, will be paid to the date fixed
        for redemption.

        The Series CF Notes require that the Company make an offer to
        repurchase the Notes at a price equal to 101% of their principal plus
        accrued and unpaid interest to the date of repurchase upon the
        occurrence of a change in control triggering event, as defined in the
        supplemental trust indenture. Credit rating agencies assigned the
        same investment-grade ratings to these Notes as TELUS' previous
        Notes. See Section 7.7 Credit ratings.

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

    -   Bank facilities and commercial paper

        The Company often shifts among short-term financing sources to take
        advantage of interest cost differentials. In the first quarter of
        2009, net amounts drawn on the 2012 credit facility decreased by
        $680 million to $300 million, while issued commercial paper increased
        by $756 million to $1,188 million. Due primarily to the successful
        issue of new Notes in May 2009, during the second quarter the Company
        reduced net amounts drawn on the 2012 credit facility to $nil and
        reduced commercial paper to $604 million. In the third quarter, the
        Company further reduced commercial paper to $534 million.

        In 2008, during the first quarter, the Company increased utilization
        of the 2012 credit facility from $nil to $321 million and increased
        the amount of issued commercial paper by $213 million to $800 million
        for general corporate purposes, including the January acquisition of
        Emergis. During the second quarter of 2008, the Company reduced the
        amount drawn on the 2012 credit facility by $159 million to a balance
        of $162 million at June 30, while the balance of commercial paper was
        unchanged. During the third quarter, the Company increased utilized
        bank facilities to $430 million and increased outstanding commercial
        paper to $980 million to help fund payment of AWS spectrum licences.

    -   TELUS Communications Inc. long-term debt

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

    7.4 Liquidity and capital resource measures

    -------------------------------------------------------------------------
    Liquidity and capital resource measures
    As at, or 12-month periods ended, September 30    2009     2008   Change
    -------------------------------------------------------------------------
    Components of debt and coverage ratios(1)
     ($ millions)
    -------------------------------------------------------------------------
    Net debt                                         7,177    7,187      (10)
    Total capitalization - book value(2)            14,815   14,291      524
    EBITDA - excluding restructuring costs           3,790    3,822      (32)
    Net interest cost                                  420      454      (34)
    -------------------------------------------------------------------------
    Debt ratios
    -------------------------------------------------------------------------
    Fixed-rate debt as a proportion of total
     indebtedness (%)                                   87       77   10 pts
    Average term to maturity of debt (years)           4.0      4.3     (0.3)
    Net debt to total capitalization (%)(1)(2)        48.4     50.3 (1.9)pts
    Net debt to EBITDA - excluding
     restructuring costs(1)                            1.9      1.9        -
    -------------------------------------------------------------------------
    Coverage ratios (12-month trailing)(1)
    -------------------------------------------------------------------------
    Interest coverage on long-term debt
     (Earnings coverage)                               4.1      4.5     (0.4)
    EBITDA - excluding restructuring costs
     interest coverage                                 9.0      8.4      0.6
    -------------------------------------------------------------------------
    Other measures (12-month trailing)
    -------------------------------------------------------------------------
    Free cash flow ($ millions)(3)                     596      679      (83)

    Dividend payout ratio of sustainable
     net earnings guideline - 45 to 55%(1)
    --------------------------------------
    Dividend payout ratio - actual earnings,
     excluding income tax-related adjustments
     and net-cash settlement feature (%)                60       54    6 pts
    Dividend payout ratio - actual earnings (%)         53       47    6 pts
    -------------------------------------------------------------------------

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

Net debt at September 30, 2009 decreased slightly from one year earlier, as a $150 million increase in proceeds from securitized accounts receivable was offset by other changes in net debt. Total capitalization increased primarily from higher retained earnings, as no NCIB share repurchases have been made since the fourth quarter of 2008. Net debt to EBITDA (excluding restructuring costs) was unchanged as the decrease in net debt was proportionally similar to the decrease in 12-month trailing EBITDA.

The proportion of debt on a fixed-rate basis was 87% at September 30, 2009, up from 77% one year earlier due to the May 2009 debt issue, reduced commercial paper and repayment of amounts drawn on the 2012 credit facility, partly offset by increased securitization of accounts receivable. The average term to maturity of debt was four years at September 30, 2009, a decrease of 0.3 from one year earlier mainly due to the lapse of time.

The interest coverage on long-term debt ratio was 4.1 times for the 12-month period ended September 30, 2009, down from 4.5 times one year earlier. Lower income before income taxes and long-term interest expense decreased the ratio by 0.3, and an increase in long-term interest expense decreased the ratio by 0.1. The EBITDA (excluding restructuring costs) interest coverage ratio for the 12-month period ended September 30, 2009 was 9.0 times, up from 8.4 times one year earlier due to a lower net interest cost that includes significant interest income, partly offset by lower EBITDA excluding restructuring costs.

Free cash flow for the 12-month period ended September 30, 2009, decreased by $83 million when compared to free cash flow for the 12-month period ended September 30, 2008. The decrease was largely due to increased general capital spending of $520 million, increased income taxes paid net of recoveries of $386 million, and a $50 million increase in payments under restructuring plans, partly offset by the $882 million payment in 2008 for AWS spectrum licences.

The Company's strategy is to maintain the financial policies and guidelines set out below. The Company believes that these measures are currently at the optimal level, and by maintaining credit ratings in the range of BBB+ to A-, or the equivalent, are expected to provide reasonable access to capital markets.

    
    TELUS' long-term financial guidelines and policies are:

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

        The ratio at September 30, 2009 was 1.9 times.

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

        The target guideline is on a prospective basis, rather than on a
        trailing basis. The ratio calculated for the 12-month trailing period
        ended September 30, 2009, excluding income tax-related adjustments
        and a minimal effect from a net-cash settlement feature from
        earnings, was 60%. The measure calculated based on actual earnings
        for the same period was 53%.
    

7.5 Credit facilities

At September 30, 2009, TELUS had available liquidity of $1.6 billion from unutilized credit facilities, as well as unutilized availability under its accounts receivable securitization program, consistent with the Company's objective of generally maintaining at least $1 billion of available liquidity. On June 19, 2009, the terms of the 364-day credit facility were amended such that the amount available became $300 million and the expiry date was extended to December 31, 2010.

    
    TELUS credit facilities at September 30, 2009
    -------------------------------------------------------------------------
                                                     Out-  Backstop
                                                 standing      for
                                                  undrawn   commer-
                                                  letters     cial
                                                       of    paper  Available
    ($ in millions)          Expiry   Size  Drawn  credit  program  liquidity
    -------------------------------------------------------------------------
    Five-year
     revolving
     facility(1)        May 1, 2012  2,000      -    (221)    (534)    1,245
    364-day
     revolving
     facility(2)  December 31, 2010    300      -       -        -       300
    Other bank
     facilities                   -     63     (2)     (4)       -        57
    -------------------------------------------------------------------------
    Total                         -  2,363     (2)   (225)    (534)    1,602
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

TELUS' revolving credit facilities contain customary covenants, including a requirement that TELUS not permit its consolidated Leverage Ratio (debt to trailing 12-month EBITDA) to exceed 4 to 1 (approximately 1.9 to 1 at September 30, 2009) and not permit its consolidated Coverage Ratio (EBITDA to interest expense on a trailing 12-month basis) to be less than 2 to 1 (approximately 9 to 1 at September 30, 2009) at the end of any financial quarter. There are certain minor differences in the calculation of the Leverage Ratio and Coverage Ratio under the credit agreements as compared with the calculation of Net debt to EBITDA and EBITDA interest coverage. Historically, the calculations have not been materially different. The covenants are not impacted by revaluation of capital assets, intangible assets and goodwill for accounting purposes. Continued access to TELUS' credit facilities is not contingent on the maintenance by TELUS of a specific credit rating.

7.6 Accounts receivable sale

TELUS Communications Inc. (TCI), a wholly owned subsidiary of TELUS, is a party to an agreement with an arm's-length securitization trust associated with a major Schedule I Canadian bank, under which TCI is able to sell an interest in certain of its trade receivables. As a result of selling the interest in certain of the trade receivables on a fully serviced basis, a servicing liability is recognized on the date of sale and is, in turn, amortized to earnings over the expected life of the trade receivables. A new agreement in May 2009 resulted in the term of this revolving-period securitization agreement being extended three years, for an amount up to a maximum of $500 million.

TCI is required to maintain at least a BBB (low) credit rating by DBRS Ltd. or the securitization trust may require the sale program to be wound down. The necessary credit rating was exceeded by three levels at A (low) as of November 6, 2009.

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

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

7.7 Credit ratings

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

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

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

7.8 Financial instruments, commitments and contingent liabilities

Financial instruments (Note 4 of the interim Consolidated financial

statements)

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

Credit risk - Accounts receivable/allowance for doubtful accounts

Credit risk associated with accounts receivable is minimized by the Company's large and diverse customer base, which covers substantially all consumer and business sectors in Canada. The Company follows a program of credit evaluations of customers and limits the amount of credit extended when deemed necessary. The Company maintains allowances for potential credit losses, and any such losses to date have been within management's expectations. The weighted average life of past-due customer accounts receivable is 74 days, increased from 64 days at December 31, 2008.

Liquidity risk

As a component of capital structure financial policies, discussed under Capabilities - Section 4.3 Liquidity and capital resources, the Company manages liquidity risk by maintaining a daily cash pooling process which enables the Company to manage its liquidity surplus and liquidity requirements according to the actual needs of the Company and its subsidiaries, by maintaining bilateral bank facilities and syndicated credit facilities, by maintaining a commercial paper program, by the sales of trade receivables to an arm's length securitization trust, by continuously monitoring forecast and actual cash flows and by managing maturity profiles of financial assets and financial liabilities.

TELUS has significant debt maturities in future years. The Company has access to a shelf prospectus, in effect until October 2011, pursuant to which it can offer up to $4 billion of debt or equity securities. The Company believes that its investment grade credit ratings provide reasonable access to capital markets.

Market risk

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

Commitments and contingent liabilities

Price cap deferral accounts

An aggregate deferral account liability of $145 million was recorded as at September 30, 2009. The price cap deferral account concept was introduced by the CRTC in 2002 in Telecom Decisions 2002-34 and 2002-43. From June 2002 through May 2006, the deferral account concept required the Company to defer income statement recognition of a portion of monies received in respect of residential basic services provided to customers in non-high cost serving areas, rather than lower prices to such customers. The CRTC has issued a number of decisions in respect of the application and disposition of funds in the deferral accounts. The Company may recognize amounts in the deferral account upon undertaking qualifying actions, such as: service improvement programs in qualifying non-high cost serving areas; rate reductions (including those provided to competitors); expansion of broadband services in incumbent local exchange areas to rural and remote communities; and enhancement of access to telecommunications services for individuals with disabilities. The CRTC ultimately decides when the deferral account is settled and decided in Telecom Decision 2008-1 that no additional rural and remote communities can be submitted for broadband expansion initiatives to exhaust remaining funds in deferral account. The deferral account balance that exceeds amounts approved for qualifying initiatives is currently estimated at approximately $50 million.

The deferral account was subject to appeals to the Supreme Court of Canada by the Consumers Association of Canada, the National Anti-Poverty Organization, Bell Canada and the Company. On September 18, 2009, the Supreme Court of Canada dismissed all appeals, in effect confirming CRTC's authority to introduce the deferral account and make decisions regarding the disposition of deferral account funds. The Court has also lifted a stay on the CRTC deferral account decision that restricted the use of deferral account funds for any purpose, other than the improvement of accessibility to communications services for persons with disabilities. The CRTC has directed the Company to file, in January 2010, a re-submission of its initial cost estimates and a four year construction proposal associated with the currently approved 229 communities. The Company anticipates it will commence implementing its IP expansion program to rural and remote communities in mid-2010.

The Company currently expects to rebate approximately $50 million in individually small amounts to residential subscribers in non-high cost serving areas, likely in 2010 after the CRTC makes its final determination on the deferral account balance to be refunded. Because the Company deferred income statement recognition of monies received under the deferral account regime, rebates to customers from the deferral account will not affect Net income. Such rebates will be reflected as a working capital outflow in the Consolidated statements of cash flow when payments are ultimately made.

Guarantees

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

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

In connection with its 2001 disposition of TELUS' directory business, the Company agreed to bear a proportionate share of the new owner's increased directory publication costs if the increased costs were to arise from a change in the applicable CRTC regulatory requirements. The Company's proportionate share would have been 80% through May 2006, declining to 40% in the next five-year period and then to 15% in the final five years. Should the CRTC take any action that would result in the owner being prevented from carrying on the directory business as specified in the agreement, TELUS would indemnify the owner in respect of any losses that the owner incurred.

As at September 30, 2009, the Company has no liability recorded in respect of indemnification obligations.

Claims and lawsuits

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

7.9 Outstanding share information

The table below contains a summary of the outstanding shares for each class of equity at September 30, 2009. The total number of outstanding and issuable shares is also presented, assuming full conversion of outstanding options and shares reserved for future option grants. At November 6, 2009, the number of outstanding and issuable shares was not materially different from September 30, 2009. On November 4, the Board of Directors approved an amendment to TELUS dividend reinvestment program, such that beginning with the dividend declared for the fourth quarter of 2009, TELUS will issue shares from treasury for reinvested dividends at a 3% discount, rather than purchase shares exclusively in the open market.

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

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

8. Critical accounting estimates and accounting policy developments

8.1 Critical accounting estimates

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

8.2 Accounting policy developments (also see Note 2 of the interim

Consolidated financial statements)

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

Transition to International Financial Reporting Standards (IFRS) as

issued by the International Accounting Standards Board (IASB)

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

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

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

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

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

The first two transition methods may, or will, result in the Company either having the option to, or being required to, effectively, change over certain accounting policies to IFRS-IASB prior to 2011 in the event a new standard is issued or early adoption is permitted.

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

    
    -------------------------------------------------------------------------
    Key IFRS dates:

    -   January 1, 2010 (transition date): TELUS will prepare an opening
        statement of financial position according to IFRS-IASB, as at this
        date, to facilitate the changeover to IFRS in 2011. TELUS will report
        its fiscal 2010 results according to Canadian GAAP.

    -   January 1, 2011 (changeover date): the date after which TELUS will
        prepare and report interim and annual 2011 financial statements
        according to IFRS with 2010 comparatives also according to IFRS.
    -------------------------------------------------------------------------
    

Section 8.2.1 First-time adoption of International Financial Reporting

Standards (IFRS 1)

The transition to IFRS requires the Company to apply IFRS 1, which are the requirements for preparing IFRS-compliant financial statements in the first reporting period after the changeover date. IFRS 1 applies only at the time of changeover, and includes a requirement for retrospective application of each IFRS, as if they were always in effect. IFRS 1 also mandates certain exceptions to retroactive application and provides a series of optional exemptions from retroactive application to ease the transition to the full set of IFRSs. The Company expects to disclose its initial decisions regarding mandatory exceptions and optional exemptions in its annual 2009 Management's discussion and analysis.

Section 8.2.2 IFRS accounting policy decisions

The Company has determined a modest number of areas where changes in accounting policies are expected that may impact the Consolidated financial statements. The Company expects to disclose its initial IFRS accounting policy decisions in its annual 2009 Management's discussion and analysis.

Section 8.2.3 IFRS Changeover Plan

The following changeover plan is based on the Company's current assumptions and expectations, which could change in future based on IFRS changes or other factors.

    
    -------------------------------------------------------------------------
                          Milestones
    Key activity          (expected timeframes)         Status and comments
    -------------------------------------------------------------------------
    Financial statement
     preparation
    -------------------------------------------------------------------------
    - Initial impact      The Company used a            Completed in the
      assessment and      diagnostic process, and       first quarter of 2008
      scoping phase       identified a modest number
                          of topics impacting either
                          the Company's financial
                          results and/or the
                          Company's effort necessary
                          to change over to IFRS-IASB.
                          This diagnostic resulted
                          in the development of a
                          detailed plan under which
                          activities are being
                          conducted.
                         ----------------------------------------------------
    - Key elements        Identification, evaluation    Completed.
      phase               and selection of accounting
                          policies necessary for the
                          Company to change over to
                          IFRS-IASB.
                         ----------------------------------------------------
                          Approval of initial IFRS 1    Senior management
                          elections and accounting      approval received.
                          policy choices.
                                                        Submitted for Audit
                                                        Committee review and
                                                        Board approval.
                                                        Approval received
                                                        November 4, 2009.
                         ----------------------------------------------------
                          Describe major differences    Disclosures under
                          in the 2009 annual MD&A.      review.
                         ----------------------------------------------------
                          Develop financial statements  Disclosures under
                          formats and note disclosures. review.
                         ----------------------------------------------------
                          2010
                          ----
                          Disclosure in MD&A of the
                          impacts on the 2010
                          comparative period, when
                          available.
                         ----------------------------------------------------
                          2011 first quarter
                          ------------------
                          Disclosure in MD&A of final
                          quantification of conversion
                          effects on the 2010
                          comparative period.
                         ----------------------------------------------------
    - Embedding phase     Integrate the solutions       The Company expects
                          necessary for the changeover  to adapt its existing
                          into the Company's            accounting systems
                          underlying financial systems  for parallel
                          and processes. (See           reporting under IFRS.
                          Infrastructure below.)
    -------------------------------------------------------------------------
    - Embedding phase     In 2010, the Company expects
                          to maintain two parallel
                          sets of books: one according
                          to contemporary Canadian
                          GAAP and one according to
                          contemporary IFRS-IASB.
    -------------------------------------------------------------------------
    Communication and     Provide ongoing training on   Communications and
     training             expected IFRS impacts,        training activities
                          IFRS 1 elections and          leveraging internal
                          accounting policy choices.    resources occurred
                                                        periodically through
                                                        the year.

                                                        Training and resource
                                                        materials are
                                                        available on an
                                                        internal IFRS website
                                                        dedicated to the
                                                        conversion.
    -------------------------------------------------------------------------
    Infrastructure -      Determine necessary changes   Largely completed.
     Information          to systems and processes.
     technology
                         ----------------------------------------------------
                          Update accounting systems to  Preparations are
                          enable the opening financial  under way. Testing is
                          position under IFRS-IASB,     expected to be
                          and facilitate dual           complete by 2010
                          reporting in 2010.            first quarter.
                         ----------------------------------------------------
                          Implement financial planning  Processes are
                          and forecasting capability    currently being
                          under IFRS-IASB standards     adapted. Dual
                                                        forecasting
                                                        capability is to be
                                                        implemented during
                                                        2010.
    -------------------------------------------------------------------------
    Business policy       Assess impacts on             Contracts are
     assessment           contractual arrangements      currently being
                          and covenants. Implement      reviewed.
                          changes as necessary.
                                                        Preliminary review of
                                                        covenants has begun.
    -------------------------------------------------------------------------
    Control environment
    -------------------------------------------------------------------------
    - Internal control    Approval of initial IFRS 1    Senior management
      over financial      elections and accounting      approval received.
      reporting           policy choices.
                                                        Submitted for Audit
                                                        Committee review and
                                                        Board approval.
                                                        Approval received
                                                        November 4, 2009.
                         ----------------------------------------------------
                          Testing of controls for       Activities are
                          2010 comparatives.            planned for 2010.
                         ----------------------------------------------------
    - Disclosure          Review and sign-off by        Annual 2009
      controls and        senior management of 2009     disclosures are being
      procedures          annual IFRS disclosures.      drafted.
                         ----------------------------------------------------
                          2010
                          ----
                          Review and sign-off by
                          senior management of
                          expected conversion effects
                          on fiscal 2010.
                         ----------------------------------------------------
                          December 2010                 It is a long-standing
                          -------------                 practice of TELUS to
                          Expect to Issue final         release annual
                          guidance for fiscal 2010      targets for the
                          according to Canadian GAAP.   upcoming year in
                                                        December, and provide
                          Provide updated disclosure    a final guidance for
                          of expected conversion        the current year. An
                          effects on fiscal 2010.       investor call
                                                        normally follows the
                          December 2010 to first        news release.
                          ----------------------
                          quarter 2011                  Because of the
                          ------------                  transition, it may be
                          Planned release of 2011       necessary to delay
                          annual targets according to   the announcement of
                          IFRS-IASB standards,          2011 targets until
                          together with supplementary   the first quarter of
                          disclosure for fiscal 2010    2011, or revise
                          according to IFRS-IASB.       targets at that time.
                         ----------------------------------------------------
                          May 2011
                          --------
                          First quarter 2011 results
                          with 2010 comparatives
                          according to IFRS-IASB.
                          MD&A discussion of final
                          changeover impacts.
    -------------------------------------------------------------------------
    

Section 8.2.4 Transitional accounting policy changes adopted

Developments in fiscal 2009

Goodwill and intangible assets

As an activity consistent with Canadian GAAP being converged with IFRS IASB, the previously existing recommendations for goodwill and intangible assets and research and development costs were replaced with new recommendations (CICA Handbook Section 3064).

Commencing with the Company's 2009 fiscal year, the new recommendations of the CICA for goodwill and intangible assets apply to the Company. This change in accounting policy has been made in accordance with the transitional provisions of the new recommendations.

The new recommendations provide extensive guidance on when expenditures qualify for recognition as intangible assets. Prior to the Company's 2009 fiscal year, upfront wireline customer activation and connection fees, along with the corresponding direct costs not in excess of revenues, were deferred and recognized by the Company over the average expected term of the customer relationship; the impact of the new recommendations on the Company is that these direct costs do not qualify for recognition as intangible assets.

The effects of the application of this new standard on the Company's Consolidated statements of income and other comprehensive income for the three-month and nine-month periods ended September 30, 2009, and the effects of the application of this new standard on the Company's Consolidated statements of financial position as at September 30, 2009, and December 31, 2008 are presented in Note 2(b) of the interim consolidated financial statements. Due to the nature of these direct costs and the periods of time over which they have been deferred and recognized, the Company's results of operations for the periods currently presented are not materially affected by these new recommendations.

Business combinations and non-controlling interests

As an activity consistent with Canadian GAAP being converged with IFRS IASB, the previously existing recommendations for business combinations and consolidation of financial statements were replaced with new recommendations for business combinations (CICA Handbook Section 1582), consolidations (CICA Handbook Section 1601) and non-controlling interests (CICA Handbook Section 1602).

Effective January 1, 2009, the Company early adopted the new recommendations and did so in accordance with the transitional provisions; the Company would have otherwise been required to adopt the new recommendations effective January 1, 2011.

Generally, the new recommendations result in measuring business acquisitions at the fair value of the acquired business and a prospectively applied shift from a parent company conceptual view of consolidation theory (which results in the parent company recording book values attributable to non-controlling interests) to an entity conceptual view (which results in the parent company recording fair values attributable to non-controlling interests). Unlike the corresponding new U.S. GAAP, which requires the recognition of the fair value of goodwill attributable to non-controlling interests, both the new Canadian GAAP recommendations and IFRS IASB allow the choice of whether or not to recognize the fair value of goodwill attributable to non controlling interests on an acquisition-by-acquisition basis.

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

    
    -   acquisition costs being expensed;

    -   acquisition-created restructuring costs being expensed;

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

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

    Whether the Company will be materially affected by the new recommendations
in the future will depend upon the specific facts of a business combination
occurring subsequent to January 1, 2009. The Company's consolidated financial
statements were subject to a small number of retrospectively applied non
controlling interest-related presentation and disclosure changes:

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

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

Developments in fiscal 2008

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

Financial instruments - disclosure; presentation

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

Inventories

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

9. Annual guidance for 2009

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

The Company has revised its 2009 annual guidance, last updated in the second quarter 2009 Management's discussion and analysis. The revisions reflect uncertainty in the strength and persistence of Canada's economic recovery and weaker than expected results experienced by the Company in the first nine months of 2009. It also includes expected impacts from the acquisition of Black's, higher expected full-year restructuring costs and the early launch of the new HSPA wireless network and service, including the iPhone, in November 2009.

    
                      -------------------------------------------------------
                          Annual                             Previous annual
    Revised annual       guidance      Expected change          guidance,
     guidance            for 2009         from 2008           Aug. 7, 2009
    -------------------------------------------------------------------------
    Consolidated
      Revenues          $9.6 to $9.7                          $9.65 to $9.80
                          billion           +/- 0.5 %             billion
    -------------------------------------------------------------------------
      EBITDA(1)           $3.475 to                            $3.6 to $3.7
                        $3.575 billion    (8) to (5)%             billion
    -------------------------------------------------------------------------
      EPS - basic,
       excluding
       income tax-
       related
       adjustments(2)   $2.80 to $3.00   (17) to (11)%       $3.10 to $3.30
    -------------------------------------------------------------------------
      EPS - basic (3)   $3.10 to $3.30   (12) to (6)%        $3.35 to $3.55
    -------------------------------------------------------------------------
      Capital              Approx.                       Unchanged at approx.
       expenditures     $2.1 billion         13 %            $2.05 billion
    -------------------------------------------------------------------------
    Wireline segment
    -------------------------------------------------------------------------
      Revenue             $4.925 to                          $5.0 to $5.1
       (external)      $4.975 billion    (2) to (1)%           billion
    -------------------------------------------------------------------------
      EBITDA              $1.575 to                         $1.625 to $1.675
                       $1.625 billion    (11) to (8)%          billion
    -------------------------------------------------------------------------
    Wireless segment
    -------------------------------------------------------------------------
      Revenue             $4.675 to                         $4.65 to $4.70
       (external)      $4.725 billion      1 to 2 %            billion
    -------------------------------------------------------------------------
      EBITDA              $1.90 to                        $1.975 to $2.025
                       $1.95 billion     (5) to (3)%           billion
    -------------------------------------------------------------------------

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

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

    -------------------------------------------------------------------------
    Assumptions for 2009 original     Actual result to date, and confirmed or
    targets                           revised expectations for 2009 guidance
    -------------------------------------------------------------------------
    Ongoing wireline competition in   Expectation unchanged, as evident by a
    both business and consumer        major cable-TV competitor's continued
    markets, particularly from        digital telephone and Internet
    cable-TV and VoIP companies       subscriber additions and increasing
                                      penetration among business customers.
    -------------------------------------------------------------------------
    Canadian wireless industry        Expectation may be too high given
    market penetration gain of        Canadian economic contraction
    approximately 4.5 percentage      experienced in the first nine months of
    points for the year               2009.
    -------------------------------------------------------------------------
    Downward pressure on wireless     Expectation confirmed by 6.5% year-
    ARPU                              over-year decrease in TELUS' blended
                                      ARPU in the first nine months of 2009,
                                      which is more than originally expected.
                                      See Section 5.5 Wireless segment
                                      results.
    -------------------------------------------------------------------------
    New competitive wireless entry    Expectation unchanged. One or two
    beginning in the fourth quarter   competitors are expected to launch
    of 2009 with most entrants        services in the fourth quarter of 2009.
    starting in 2010
    -------------------------------------------------------------------------
    Restructuring expenses of         Revised to approximately $160 million
    approximately $50 million to      to reflect increased operational
    $75 million                       efficiency activities (previously
                                      revised on August 7, 2009, to
                                      approximately $150 million and on May
                                      7, 2009, to approximately $125 million
                                      for the full year 2009).
    -------------------------------------------------------------------------
    A blended statutory tax rate      Expectation unchanged. The blended
    of approximately 30 to 31%        statutory income tax rate for the first
                                      nine months of 2009 was 30.3%.
    -------------------------------------------------------------------------
    Net payments of income tax        The current estimate for 2009 income
    of approximately $320 to          tax payments net of recoveries is
    $350 million                      approximately $270 million. Income tax
                                      payments in the first nine months of
                                      2009 were $270 million, including final
                                      payments for 2008 and instalments for
                                      2009 less income tax recoveries
                                      received in 2009.
    -------------------------------------------------------------------------
    Forecast average exchange         The current expectation is that the
    rate of U.S. $0.80 per            Canadian dollar exchange rate will
    Canadian dollar                   average U.S. $0.86 in 2009, based on a
                                      composite of forecasts by Canadian
                                      chartered banks, the Bank of Canada,
                                      Conference Board of Canada and internal
                                      forecasts.

                                      The average closing exchange rate for
                                      the nine-month period ended
                                      September 30, 2009 was approximately
                                      U.S. $0.855 per Canadian dollar. The
                                      closing rate at September 30, 2009 was
                                      U.S. $0.934, while the daily closing
                                      rate varied between approximately
                                      U.S. $0.770 and U.S. $0.939 over the
                                      first nine months of 2009. (Source:
                                      the Bank of Canada)

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

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

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

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

    2010 preliminary consolidated capital expenditures
    --------------------------------------------------
    

Driven by the near completion of the next generation wireless network in 2009 and progress on wireline broadband expansion, 2010 capital expenditure levels are currently expected to be as low as $1.7 billion.

10. Risks and risk management

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

10.1 Regulatory

CRTC hearings to assist local broadcasting

In Broadcasting Regulatory Policy CRTC 2009-406 issued on July 6, 2009, the CRTC increased amounts to be paid by broadcasting distribution undertakings (BDUs) into a fund to assist local programming to 1.5% of all BDUs' gross broadcasting revenues. BDUs began making such payments in September 2009. This contribution is over and above the longstanding 5% of gross revenues paid by BDUs to the Canadian Media Fund (formerly the Canadian Television Fund) or required to be spent on their own community programming services. Also on July 6, the CRTC issued Broadcasting Notice of Consultation CRTC 2009-411 which essentially reversed its previous determinations rejecting the payment of subscriber fees by BDUs for the local television signals available for reception free over the air, determining that broadcasters should be compensated for the value of their signals. In response to court action initiated by Bell Canada alleging a breach of natural justice in making this determination, the CRTC amended Notice of Consultation 2009-411 to consider whether (not merely how) broadcasters should be compensated for their signals. On September 17, 2009, the Government of Canada issued an Order-In-Council, directing the CRTC to consider consumer interests with regard to the fee-for-carriage or negotiation for value-for-signal and report back to the government. In response, the CRTC announced it would continue with the hearing initiated by Notice of Consultation 2009-411 to deal with group licensing issues as well as fee-for-carriage and has also initiated a second public hearing in Notice of Consultation 2009-614 to look at the impact of fee-for-carriage on consumers.

The value-for-signal regime proposed by the CRTC is effectively the same as fee-for-carriage and would increase consumer costs without increasing the value of services received. Moreover, the increased costs to consumers could negatively impact future growth in the broadcasting distribution sector, including TELUS TV services. The Company expects to participate in the eventual CRTC hearings. In the interim, TELUS has joined with other BDUs to launch a public campaign opposing fee-for-carriage to counter a public campaign by broadcasters that supports such fees.

Foreign ownership restrictions (CRTC finds new wireless entrant not

currently eligible to operate)

In April 2009, TELUS asked the CRTC to determine if new wireless entrant Globalive was compliant with federal laws in respect of foreign ownership that all communication companies in Canada operate under. After public hearings in September, on October 29, the CRTC ruled that Globalive was not compliant with the Telecommunications Act in respect of ownership and control and is not currently eligible to operate as a Canadian telecommunications carrier. Globalive may appeal the CRTC decision.

TELUS has never opposed foreign ownership restrictions being lifted in Canada, but has simply asked that all communications companies in Canada operate under the same rules without an artificial and unfair advantage being handed to any one player by the government or the regulator. This CRTC decision does not prevent Globalive or any other new wireless company from competing in Canada or accessing Canadian capital, as several have successfully done. It does require that Globalive must abide by Canada's laws and correct its governance and capital structure. TELUS is of the view that this correction should be made within a reasonable time. TELUS will again recommend to government that bidders in future wireless spectrum auctions should be pre-qualified.

10.2 Human resource developments

Collective bargaining in the TELUS Québec region

Collective bargaining has resumed for an agreement with the Syndicat québécois des employés de TELUS (SQET) covering approximately 1,050 trades, clerical and operator services team members. The current agreement with the SQET expires on December 31, 2009. In any set of labour negotiations, there can be no assurance that the negotiated compensation expenses or changes to operating efficiency will be as planned or that reduced productivity and work disruptions will not occur during the course of collective bargaining prior to settlement.

Risk mitigation: A governance model is in place to ensure the financial and operating impact of any proposed terms of settlement are assessed and determined to be aligned with TELUS' strategic direction. As is prudent in any round of collective bargaining, while negotiations proceed, any potential need to continue operations in response to work disruptions will be addressed through contingency planning.

10.3 Process risks

Systems and processes

TELUS expects to make changes to several dozen systems and processes in order to accommodate the July 1, 2010, implementation of harmonized sales tax (HST) by the provinces of B.C. and Ontario. Not all of the harmonization rules have been determined, which combined with a relatively short implementation time frame, may result in interpretation issues and possible future reassessments that could increase costs. The possibility remains that other provinces could also choose to implement an HST regime in the same timeframe. There can be no assurance that the resources required for this new initiative will not negatively impact resources available to the full portfolio of change initiatives underway and planned. There is risk that other projects may be deferred or cancelled, and expected benefits of such projects are deferred or unrealized.

Risk mitigation: TELUS has established an enterprise-wide program to implement the necessary changes to dozens of systems and processes. The Company has some experience with harmonized sales taxes in Newfoundland and Labrador, New Brunswick and Nova Scotia. In general, TELUS strives to ensure that system development priorities are selected in an optimal manner. TELUS' project management approach includes extensive risk identification and contingency planning, scope and change control, and resource and quality management. The quality assurance of the solutions includes extensive functional, performance and revenue assurance testing, as well as capturing and utilizing lessons learned. In addition, TELUS often moves its business continuity planning and emergency management operations centre to a heightened state of readiness in advance of major systems conversions.

10.4 Health, safety and environment

Concerns about influenza A (H1N1)

In June 2009, the World Health Organization (WHO) raised the pandemic alert level to Phase 6 and announced the start of the 2009 influenza A (H1N1) pandemic. Although the highest pandemic alert level has been declared, the alert level pertains to the geographic spread of the virus and not the severity of illness it causes. In Canada, most infections have been mild so far and TELUS operations have not been impacted beyond what is experienced in normal flu seasons. The novel H1N1 virus has not yet mutated into a more deadly form, but there can be no assurance that it will not do so in the future.

Lost time resulting from illness of TELUS team members can negatively impact organizational productivity and employee benefit healthcare costs. TELUS is a key provider of critical communications infrastructure in Canada, and is also dependent on other infrastructure providers (e.g. power). A flu pandemic could negatively impact the Company's ability to provide critical services and there can be no assurance that vaccines being developed for H1N1 will be effective or available early enough and in sufficient quantities.

Risk mitigation: The Company has an extensive enterprise-wide business continuity plan with resources dedicated to business continuity and disaster recovery policies, plans and processes that address a range of scenarios, including pandemics. See Section 10.10 Manmade and natural threats in TELUS' 2008 Management's discussion and analysis. The Company reviewed and updated its policies and plans based on learnings from the original H1N1 outbreak in April of this year. TELUS also sponsors a voluntary flu vaccination program for team members each autumn, and has communicated other recommendations to team members to reduce the risk of spreading viruses. Although TELUS has business continuity planning processes, there can be no assurance that specific events will not materially impact TELUS operations and results.

Responsible driving

Research has shown an increase in distraction levels for drivers using wireless devices while operating vehicles. Canadian provinces of Manitoba, Ontario, Quebec, Nova Scotia, and Newfoundland and Labrador have previously banned the use of handheld mobile phones while driving, but do permit the use of hands-free devices. Prince Edward Island has only banned the use of handheld devices by new drivers. Alberta is expected to table legislation in 2009 that would broadly address driver distraction, including drivers' use of any handheld electronic device. British Columbia has introduced legislation to completely ban text messaging and use of handheld mobile devices by all drivers, as well as a ban on the use of hands-free devices for new drivers under the graduated licensing program. Saskatchewan also plans to introduce legislation that would ban texting and use of handheld cell phones while driving. In addition, the Alliance of Automobile Manufacturers, a trade association of 11 companies, announced its support for banning text messaging using a handheld device or calling using a handheld device while driving a vehicle. There can be no assurance that additional laws against using mobile phones or hands-free devices while driving will not be passed and that, if passed, such laws will not have a negative effect on subscriber growth rates, usage levels or wireless revenues.

Risk mitigation: TELUS promotes responsible driving and recommends that driving safely should be every wireless customer's first responsibility.

10.5 Economic growth and fluctuations

Continuation of economic recessions may adversely impact TELUS

In its third quarter monetary report, the Bank of Canada noted steady improvement in consumer and business confidence. However, uncertainty remains regarding the strength and persistence of the economic recovery in Canada, which may cause residential and business telecommunications customers to delay new service purchases, reduce volumes of use, discontinue use of services or seek lower-priced alternatives. Negative economic growth could adversely impact TELUS' profitability, free cash flow and bad debt expense, and potentially require the Company to record impairments to the carrying value of its assets including, but not limited to, its intangible assets with indefinite lives (spectrum licences) and its goodwill. Impairments to the carrying value of assets would result in a charge to earnings and a reduction in shareholders' equity, but would not affect cash flow.

Risk mitigation: The Company cannot completely mitigate economic risks. Through 2008, TELUS benefited from strong growth in the Canadian wireless sector. Wireless results for the first quarter of 2009 were significantly affected by the economic downturn, but stabilized in the second and third quarter of 2009. However, year-over-year wireless subscriber growth and ARPU continue to be negatively affected. In addition, the cyclical resource economies in B.C. and Alberta are now experiencing contraction or lower growth. TELUS continues to focus on five key vertical markets of the public sector, healthcare, financial services, energy and telecom wholesale. The public sector, healthcare and financial services vertical markets are generally expected to be less exposed to the economic downturn than the manufacturing and export-oriented industries in Ontario and Quebec and the cyclical resource economies in B.C. and Alberta. TELUS continues to pursue cost reduction and efficiency initiatives, has deferred NCIB share repurchases and could reduce capital expenditures in future years.

Pension funding

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

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

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

indicators

11.1 Earnings before interest, taxes, depreciation and amortization

(EBITDA)

TELUS has issued guidance on and reports EBITDA because it is a key measure that management uses to evaluate performance of 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. Management's definition of EBITDA is simply Operating revenues deducting Operations expense and Restructuring costs, which are items on the Consolidated statements of income and comprehensive income. Management believes EBITDA assists investors in comparing a company's operating performance on a consistent basis, before taking into account financing decisions and before depreciation and amortization expenses, 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 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 are 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 management's definition of EBITDA with Net income and Operating income.

    
    -------------------------------------------------------------------------
    EBITDA reconciliation                                         Nine-month
                                            Quarters ended           periods
                                              September 30    ended Sept. 30
                                          -----------------------------------
    ($ millions)                             2009     2008     2009     2008
    -------------------------------------------------------------------------
    Net income                                280      286      846      846
      Other expense (income)                    6        6       22       25
      Financing costs                         101      122      302      345
      Income taxes                            106      125      251      348
    -------------------------------------------------------------------------
    Operating income                          493      539    1,421    1,564
      Depreciation                            330      344      994    1,033
      Amortization of intangible assets       100       92      287      245
    -------------------------------------------------------------------------
    EBITDA (management's definition)          923      975    2,702    2,842
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Management also 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.

    
    -------------------------------------------------------------------------
                                                                  Nine-month
                                            Quarters ended           periods
                                              September 30     ended Sept 30
                                          -----------------------------------
    ($ millions)                             2009     2008     2009     2008
    -------------------------------------------------------------------------
    EBITDA                                    923      975    2,702    2,842
    Capital expenditures                     (558)    (473)  (1,589)  (1,228)
    -------------------------------------------------------------------------
    EBITDA less capital expenditures          365      502    1,113    1,614
    Payment for AWS spectrum licences           -     (882)       -     (882)
    -------------------------------------------------------------------------
    EBITDA less total capital expenditures    365     (380)   1,113      732
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

11.2 Free cash flow

TELUS reports free cash flow because it is a key measure used by management to evaluate the Company's performance. Free cash flow excludes certain working capital changes and other sources and uses of cash, as found in the Consolidated statements of cash flows. Free cash flow is not a calculation based on Canadian or U.S. GAAP and should not be considered an alternative to the Consolidated statements of cash flows. Free cash flow can be used to gauge TELUS' performance over time. Investors are 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. Management believes its definition of free cash flow provides an indication of how much cash generated by operations is available after capital expenditures, but before acquisitions, proceeds from divested assets and changes in certain working capital items (such as trade receivables, which can be significantly distorted by securitization changes that do not reflect operating results, and trade payables).

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

    
    -------------------------------------------------------------------------
    Free cash flow calculation                                    Nine-month
                                            Quarters ended           periods
                                              September 30    ended Sept. 30
                                          -----------------------------------
    ($ millions)                             2009     2008     2009     2008
    -------------------------------------------------------------------------
    EBITDA                                    923      975    2,702    2,842
    Share-based compensation                   (3)       9       17       25
    Net employee defined benefit plans
     expense (recovery)                         3      (25)      12      (75)
    Employer contributions to employee
     defined benefit plans                    (31)     (27)    (135)     (78)
    Restructuring costs net of cash
     payments                                   3       (9)      33      (14)
    Donations and securitization fees
     included in Other expense                 (4)      (5)     (18)     (22)
    Cash interest paid                        (38)     (43)    (271)    (264)
    Cash interest received                     19        -       54        2
    Income taxes refunded (paid);
     and other                                (48)      (2)    (270)      (6)
    Capital expenditures                     (558)    (473)  (1,589)  (1,228)
    Payment for AWS spectrum licences           -     (882)       -     (882)
    -------------------------------------------------------------------------
    Free cash flow (management's
     definition)                              266     (482)     535      300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following reconciles management's definition of free cash flow with
Cash provided by operations less Cash used by investing activities:

    -------------------------------------------------------------------------
    Free cash flow reconciliation                                 Nine-month
                                            Quarters ended           periods
                                              September 30    ended Sept. 30
                                          -----------------------------------
    ($ millions)                             2009     2008     2009     2008
    -------------------------------------------------------------------------
    Cash provided by operating activities     814      985    2,280    2,072
    Cash used by investing activities        (585)  (1,353)  (1,615)  (2,790)
    -------------------------------------------------------------------------
                                              229     (368)     665     (718)
    Adjustments
      Amortization of deferred gains on
       sale-leaseback of buildings,
       amortization of deferred charges
       and other, net                          14        2       (9)       8
      Reduction (increase) in securitized
       accounts receivable                      -     (100)    (100)     250
      Non-cash working capital changes
       except changes from income tax
       payments (receipts), interest
       payments (receipts) and securitized
       accounts receivable, and other          (4)     (14)     (47)      80
      Acquisitions                             26        5       26      696
      Proceeds from the sale of assets          -      (10)       -      (13)
      Other investing activities                1        3        -       (3)
    -------------------------------------------------------------------------
    Free cash flow (management's
     definition)                              266     (482)     535      300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

11.3 Definition of key wireless operating indicators

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

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

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

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

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

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

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

11.4 Definition of liquidity and capital resource measures

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

EBITDA - excluding restructuring costs is used in the calculation of Net debt to EBITDA and EBITDA interest coverage, consistent with the calculation of the Leverage Ratio and the Coverage Ratio in credit facility covenants. Restructuring costs were $151 million and $27 million, respectively, for the 12-month periods ended September 30, 2009 and 2008.

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

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

Net debt is a non-GAAP measure whose nearest GAAP measure is Long-term debt, including Current maturities of long-term debt, as reconciled below. Net debt is one component of a ratio used to determine compliance with debt covenants (refer to the description of Net debt to EBITDA below).

    
    -------------------------------------------------------------------------
                                                          As at September 30
                                                        ---------------------
    ($ millions)                                               2009     2008
    -------------------------------------------------------------------------
    Long-term debt including current portion                  5,891    6,038
    Debt issuance costs netted against long-term debt            28       30
    Derivative liability                                      1,001    1,045
    Accumulated other comprehensive income amounts
     arising from financial instruments used to manage
     interest rate and currency risks associated with
     U.S. dollar denominated debt (excluding tax effects)      (109)    (140)
    Cash and temporary investments                              (34)     (36)
    Proceeds from securitized accounts receivable               400      250
    -------------------------------------------------------------------------
    Net debt                                                  7,177    7,187
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

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

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

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

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

    
    -------------------------------------------------------------------------
                                                          As at September 30
                                                        ---------------------
    ($ millions)                                               2009     2008
    -------------------------------------------------------------------------
    Net debt                                                  7,177    7,187
    Shareholders' equity (2008 - as adjusted)
      Common Share and Non-Voting Share equity                7,513    6,969
      Add back Accumulated other comprehensive loss             105      113
      Non-controlling interests                                  20       22
    -------------------------------------------------------------------------
    Total capitalization - book value                        14,815   14,291
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE TELUS Corporation

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

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