Fitch Assigns 'BBB+' to TELUS' Debt Issuance; Outlook Stable

TELUS' ratings reflect the stability of the company's diversified operations, supported by the growth cash flow at its TELUS Mobility segment as well as its leading market position as a local operator in western Canada and eastern Quebec. The wireless segment is key to the company's stability as its growth provides an important offset to the pressure the company is experiencing in its local and long-distance operations. The latter operations are experiencing competitive pressures from wireless substitution as well as cable operators expanding voice-over-Internet protocol (VoIP) offerings.

Following first quarter 2009 earnings, TELUS revised downward revenue and EBITDA guidance as a result of the weakening Canadian economy and competition. Total wireline and wireless revenue guidance was revised down by approximately $350 million, and wireless and consolidated EBITDA was revised down by $125 million. The midpoint of revised EBITDA guidance of $3.625 billion to $3.775 billion is weaker than Fitch expected for 2009, although Fitch's expectation remains within the guidance range.

TELUS' liquidity position is good owing to its free cash flow (FCF) and undrawn revolver capacity. FCF for the last 12 months ending March 31, 2009 was approximately $202 million and balance sheet cash and temporary investments amounted $65 million as of March 31, 2009. TELUS maintains a $2 billion revolving credit facility maturing in 2012, which extends beyond the date of TELUS' next significant maturity in 2011, $1.9 billion. The revolver backstops TELUS commercial paper program in the amount of $1.188 billion at March 31, 2009. In addition, there were outstanding undrawn letters of credit of $226 million and bankers' acceptances of $300 million outstanding against the revolver. Consequently, the $2 billion revolving facility had $286 million in net availability.

In December 2008, TELUS renewed a $700 million 364-day revolving credit facility, extending its maturity to March 1, 2010. The financial ratio covenants in the 364-day facility are substantially the same as the five year revolver, which includes net debt to operating cash flow of less than 4.0 times (x) and operating cash flow to interest expense greater than 2.0x.

Fitch expects the majority of TELUS' excess cash flow will be used to benefit shareholders through its share repurchase and dividend programs. In December 2008, TELUS renewed the normal course issuer bid (NCIB) program to allow for purchases of up to eight million shares over a 12 month period. In the first quarter of 2009, there were no share repurchases. Due to share repurchases in 2008 and investment activity, TELUS' leverage of 1.9x is approaching the high end of Fitch's expectations for the rating category of 2.0x or lower.

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SOURCE: Fitch Ratings

Fitch Ratings 
John Culver, CFA, +1-312-368-3216 (Chicago) 
Bill Densmore, +1-312-368-3125 (Chicago) 
Cindy Stoller, +1-212-908-0526 (Media Relations) 
cindy.stoller@fitchratings.com