A Case study for Telus For academic and school purpose only From the IVEY case

1. TELUS : Dividend Policy
CASE STUDY SHEENSON,
CLEMON ,
MOSES,
WALLY,
SAMUEL

2. CASE BRIEF
* Robert Gardner is a vice-president and treasurer of TELUS Corporation.
* Robert MCFarlane is chief financial officer who wanted to know the Gardners current thinking
about TELUS dividend policy.
* McFarlane planned to make a dividend policy recommendation at upcoming meeting of TELUS
Board.
Canadian Telecommunication Industry
* Canadian telecommunication industry recorded 29.9 billion revenue in 2000.
* The industry was also dominated by incumbent local exchange carriers (ILECs).
* The ILECs consisted primarily of very large companies such as TELUS, Bell Canada, Aliant telecom
etc.
* The large IELCs accounted for TELUS Dividend policy Firm has four choices regards to its
earnings:
(Discussed Later)

3. TELUS
FOCUS / STRATEGY
● Build National Capabilities
● Provide Integrated Solutions
● Partnering, Acquisitions and Mergers
● Focus on IP, Voice Over Internet Protocol (VOIP) and Wireless Growth
● Invest in Internal Capabilities
BOARD MEETING
● Future prospects
● Leverage policy
● State of the telecom industry
● Expectations of the investor

4. OVERVIEW
TELUS CORP
● Merger of two Carriers (Page 4)
○ Alberta Based TELUS
○ BC Telecom
● In October 2000, Acquired Clearnet Communication (Page 4)
○ Enterprise Value - $6.6 BIllion
○ Acquisition was financed by loan $6.25 Billion
○ Debt Rating downgraded as a result
● Raised $9.2Billion Dollars in offerings of Unsecured Notes(Page 4)
○ Largest Debt ever issued by a Canadian Consortium
● Debt Maturity moved from 2.5years to 7.5 years (Page 4)

5. OVERVIEW
KEY CHOICES ABOUT EARNINGS (Page 5)
● Reinvest for Organic Growth
● Reduce Debt / Increase Cash
● Repurchase Shares
● Pay/cut dividends
● Dividend Acquisition
TELUS BC TELECOM
$0.92 $1.40

6. OVERVIEW
● TELUS had 298.4 Million common voting and Non -voting Shares
● TELUS shares were held by mutual funds (47.4 million shares)
○ Growth Oriented - 50%
○ Income Oriented - 36%
○ Balanced Funds - 7 %
○ Index funds - 7%

7. Four Alternatives
● Issuing New Shares
● Repurchase Shares
● Debt Raising
● Pay Current Dividends

8. Cutting Dividend
Telus Current 25% 50% 75% 100%
Annual div. 1.40 ?? ?? ?? ??
Cost assuming
298.4M shares
417.8 ?? ?? ?? ??
Savings Vs Current
Dividend Payout
?? ?? ?? ??
Dividend Yield ?? ?? ?? ??

9. Telus Stock Price (2001)

10. RECOMMENDATION
● Currently Paying in Millions - $417.80
● 50 % Dividend Cut on this
● Will save in Millions - $208.92
● We also retain in Millions - $208.92
● Earnings retained will go towards future growth
● We supposed this is a fair split towards growth and
retained earnings
● Investors should be satisfied with this development