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TELUS Reports Fourth Quarter 2013 Results and Announces 2014 Financial Targets

Revenue and EBITDA growth driven by strong wireless and wireline data growth

VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 02/13/14 -- For the fourth quarter of 2013, TELUS Corporation (TSX: T)(NYSE: TU) reported consolidated operating revenue growth of 3.4 per cent from a year earlier to $2.95 billion while earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 3.6 per cent to $951 million. EBITDA excluding restructuring and other like costs increased by 5.0 per cent to $984 million. Basic earnings per share (EPS) rose by 17.5 per cent to $0.47 or 22.5 per cent to $0.49 on an adjusted basis.

The increase in consolidated revenue was generated by 4.1 per cent growth in wireless network revenue and 3.4 per cent growth in wireline revenue. Wireless revenue benefited from a 14 per cent increase in data revenue reflecting subscriber growth and increased data usage from continued smartphone adoption. Wireline revenue growth was driven by a 10.5 per cent increase in data revenue, generated in part by ongoing robust TELUS TV and high-speed Internet subscriber growth, as well as increasing revenue per customer.

TELUS attracted 119,000 net new customer connections in the quarter, including 113,000 postpaid wireless customers, 38,000 TV subscribers and 21,000 high-speed Internet customers, partially offset by the loss of prepaid wireless customers and a continued decline in legacy wireline connections. The growth in TELUS' wireless customer base to 7.8 million was supported by a 15 basis point year-over-year improvement in monthly postpaid subscriber churn to 0.97 per cent. The TELUS TV subscriber base of 815,000 is up 20 per cent and high-speed Internet connections are up five per cent to 1.4 million.

Free cash flow of $136 million in the fourth quarter was down $127 million, largely reflecting higher cash income taxes, as well as increased capital investments to expand the capacity, speeds and coverage of TELUS' advanced broadband networks, partly offset by growth in EBITDA.

In 2013, TELUS returned more than $1.85 billion to shareholders including $852 million in dividends paid, and $1.0 billion in share purchases under our 2013 normal course issuer bid (NCIB) program. As part of TELUS' 2014 NCIB program the Company has purchased 590,400 TELUS common shares for $22 million in January 2014.

At the end of 2013, TELUS' defined benefit pension plans in aggregate were in a fully funded position as a result of strong plan asset returns and rising interest rates.

FINANCIAL HIGHLIGHTS


----------------------------------------------------------------------------
C$ and in millions, except per share           Three months ended
 amounts                                              December 31  Per cent
(unaudited)                                       2013       2012    change
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Operating revenues                               2,948      2,851       3.4
Operating expenses before depreciation and
 amortization(1)                                 1,997      1,933       3.3
EBITDA(1)(2)                                       951        918       3.6
EBITDA excluding restructuring and other
 like costs(1)(2)(3)                               984        937       5.0
Net income(1)                                      290        263      10.3
Adjusted net income(1)(4)                          301        267      12.7
Basic earnings per share (EPS)(1)                 0.47       0.40      17.5
Adjusted EPS(1)(4)                                0.49       0.40      22.5
Capital expenditures                               577        521      10.7
Free cash flow(5)                                  136        263     (48.3)
Total customer connections(6)                    13.30      13.11       1.4
(1) Figures for 2012 have been adjusted for retrospective application of the
    amended accounting standard IAS 19 Employee benefits (2011).
(2) EBITDA does not have any standardized meaning prescribed by IFRS-IASB.
    We have issued guidance on and report EBITDA because it is a key measure
    used to evaluate performance at a consolidated level and the
    contribution of our two segments. For definition and explanation, see
    Section 7.1 in the accompanying 2013 fourth quarter Management's review
    of operations.
(3) For the fourth quarter of 2013 and 2012 restructuring and other like
    costs were $33 million and $19 million, respectively.
(4) Adjusted net income and Adjusted EPS do not have any standardized
    meaning prescribed by IFRS-IASB. These terms are defined in this news
    release as excluding (after income taxes): 1) Restructuring and other
    like costs; 2) Income tax-related adjustments. For further analysis of
    the aforementioned items see Section 1.3 in the accompanying 2013 fourth
    quarter Management's review of operations.
(5) Free cash flow does not have any standardized meaning prescribed by
    IFRS-IASB. For definition and explanation, see Section 7.1 in the
    accompanying 2013 fourth quarter Management's review of operations.
(6) Sum of active wireless subscribers (excluding 222,000 Public Mobile
    subscribers), network access lines, total Internet subscribers and TELUS
    TV subscribers (IPTV and satellite TV). Effective with the second
    quarter of 2013 and on a prospective basis, machine-to-machine (M2M)
    subscriptions have been excluded from all subscriber-based measures.
    Cumulative subscribers include an April 1, 2013 opening balance
    adjustment to remove approximately 76,000 M2M subscriptions. Effective
    with the fourth quarter of 2013, and on a prospective basis, we have
    adjusted postpaid wireless subscribers to remove Mike subscriptions, as
    we have ceased marketing the Mike product and started to turn down the
    iDEN network. Cumulative subscriber connections include an October 1,
    2013 adjustment to remove from the postpaid wireless subscriber base
    approximately 94,000 Mike subscribers representing those who, in our
    judgment, are unlikely to migrate to our new services.

"In 2013, the TELUS team once again successfully executed against our longstanding strategy of focused investment and innovation in advanced broadband technology and services coupled with an unwavering commitment to deliver exceptional client experiences," said Darren Entwistle, TELUS President and CEO. "During the year, we earned 584,000 new wireless postpaid, TV, and high-speed Internet net additions, putting us in the rare position globally of profitably growing both our wireless and wireline segments. Most importantly, thanks to our customers' first culture, clients are staying with us longer, as evidenced by our industry-low postpaid wireless monthly churn of 0.97 per cent, the lowest result in seven years, and strong loyalty in TV and Internet services. This in turn has contributed to strong financial performance, including a marked improvement in consolidated margin of 50 basis points due to continued profitable growth across our business and our ongoing focus on operational efficiency, and adjusted EPS growth of 22.5 per cent."

Mr. Entwistle added, "Building on our robust operational momentum in both wireless and wireline, our 2014 financial targets reflect strong and profitable growth and cash flow generation, and will support continued investment in broadband wireline and wireless expansion as well as shareholder-friendly initiatives including our dividend growth and share purchase programs. Indeed, TELUS' balance sheet gives us the unique ability to invest in our business for the long term whilst simultaneously returning significant amounts of cash to shareholders through our multi-year share purchase and dividend growth programs."

John Gossling, TELUS Executive Vice-President and CFO said, "Reflecting growth in data services in both wireless and wireline, our 2014 targets announced today reflect mid-single digit consolidated revenue and EBITDA growth. Earnings per share is targeted to increase by up to 21 per cent due to EBITDA growth and a reduction in shares outstanding from our share purchase programs."

Mr. Gossling added, "With no debt maturities in 2014, combined with our strong credit ratings, over $2 billion of available liquidity, and a net debt to EBITDA ratio of 1.8 times, our balance sheet remains in a very strong position enabling us to return capital to shareholders while at the same time investing in our business for the future, including our participation in the 700 megahertz spectrum auction that began January 14, 2014."

This news release contains statements about financial and operating performance of TELUS (the Company) and future events, including with respect to future dividend increases and normal course issuer bids through 2016 and the 2014 annual targets that are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and predictions 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 performance 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 the 2014 annual guidance, semi-annual dividend increases through 2016, ability to sustain and complete multi-year share purchase programs through 2016), qualifications and risk factors referred to in the attached fourth quarter Management's review of operations and Management's discussion and analysis in the other 2013 quarterly reports, in the 2012 annual report, and in other TELUS public disclosure documents and filings with securities commissions in Canada (on SEDAR at sedar.com) and in the United States (on EDGAR at sec.gov). 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


--  Wireless network revenues increased by $56 million or 4.1 per cent to
    $1.43 billion in the fourth quarter of 2013, compared to the same period
    a year ago. This growth was driven by continued subscriber growth and
    higher blended ARPU as a result of ongoing smartphone adoption and data
    usage.
--  Data revenue increased by $78 million or 14 per cent to $648 million,
    representing 45 per cent of wireless network revenue in the quarter.
    Data ARPU (excluding Public Mobile) increased by $2.88 or 11 per cent to
    $28.17. These increases were due to continued strong adoption and usage
    of smartphones and data applications, as well as higher roaming volumes.
--  Blended ARPU (excluding Public Mobile) increased by 1.5 per cent to
    $61.86 as data ARPU growth more than offset the decline in voice ARPU.
    This is TELUS' thirteenth consecutive quarter of year-over-year growth
    in blended ARPU.
--  Monthly postpaid subscriber churn declined 15 basis points to 0.97 per
    cent - the lowest postpaid churn result in seven years. Blended monthly
    churn (excluding Public Mobile) was down 10 basis points to 1.41 per
    cent. TELUS' industry-low churn reflects the Company's successful
    customers first service approach, investments in customer retention and
    lower churn on smartphones.
--  Postpaid net additions of 113,000 were partially offset by a loss of
    22,000 lower-ARPU prepaid subscribers (excluding Public Mobile) for
    total net additions of 91,000, compared to 112,000 a year ago. The total
    wireless subscriber base (excluding Public Mobile) was up 1.8 per cent
    from a year ago to 7.8 million, while the proportion of high-value
    postpaid subscribers was 86 per cent of the base. Smartphone subscribers
    now represent 77 per cent of TELUS' postpaid base, up from 66 per cent a
    year ago.
--  Reported wireless EBITDA increased by $26 million or 4.4 per cent to
    $592 million over last year due to network revenue growth and lower
    acquisition spending. The wireless EBITDA margin, based on total network
    revenue, increased by 10 basis points to 40.9 per cent. EBITDA excluding
    restructuring and other like costs increased by $34 million or six per
    cent to $604 million or 41.7 per cent on total network revenue.
--  Wireless simple cash flow (EBITDA less capital expenditures) increased
    by $4 million to $379 million in the quarter due to higher EBITDA
    partially offset by increased broadband network investments.

TELUS wireline


--  External wireline revenues increased by $45 million or 3.4 per cent to
    $1.36 billion in the fourth quarter of 2013, when compared with the same
    period a year ago. This growth was generated by increased data revenue,
    partially offset by declines in legacy voice revenues.
--  Data service and equipment revenues increased by $81 million or 10.5 per
    cent, due primarily to strong growth in TELUS TV and high-speed Internet
    subscribers, combined with TV and high-speed Internet ARPU growth and
    revenue increases from enhanced data services, TELUS International and
    TELUS Health services.
--  Total TV net additions of 38,000 were lower by 3,000 from the same
    quarter last year, while the total TV subscriber base of 815,000
    increased by 137,000 or 20 per cent from a year ago.
--  High-speed Internet net additions of 21,000 were 2,000 lower than the
    same quarter a year ago, while the TELUS' high-speed subscriber base of
    1.4 million is up 69,000 or 5.2 per cent from a year ago.
--  Total network access lines declined by 4.5 per cent from a year ago to
    3.25 million. Residential lines were down 7.0 per cent over last year,
    reflecting ongoing wireless and Internet substitution and competition.
    Business lines were down 1.7 per cent over last year, reflecting ongoing
    price-based competition in the small and medium business market and
    customer adoption of IP services.
--  Reported wireline EBITDA of $359 million increased by $7 million or 2.1
    per cent year over year, reflecting improving Optik TV and high-speed
    Internet margins helped by subscriber and ARPU growth, as well as
    ongoing operating efficiency initiatives. EBITDA excluding restructuring
    and other like costs increased by $13 million or 3.5 per cent to $380
    million.
--  Wireline simple cash flow (EBITDA less capital expenditures) decreased
    year-over-year by $27 million due to higher capital expenditures to
    support ongoing investments in broadband infrastructure, including
    connecting more homes and businesses directly to fibre optic cable,
    large enterprise service growth, investments in network and systems
    resiliency and reliability, as well as increased restructuring and other
    like costs.

TELUS sets 2014 financial targets

TELUS today announced 2014 financial targets that reflect continued execution of the Company's long-standing and successful national growth strategy focused on wireless and data.

TELUS' 2014 targets build on the strong results achieved in both wireless and wireline in 2013, including revenue and EBITDA growth in both operating segments of the business. TELUS plans to generate future growth through postpaid wireless net additions combined with ongoing smartphone adoption and upgrades, continued Optik TV and high-speed Internet subscriber growth, while assuming modest ARPU growth across these services.

These targets demonstrate the benefits of the Company's ongoing major strategic network and service-related investments combined with customer-focused operational execution, which has resulted in revenue and profitability growth as well as strong free cash flow generation enabling TELUS to return significant amounts of capital to shareholders.


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                             2014 Targets(1)       2013 Results     Growth
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Consolidated
  Revenues               $11.9 to $12.1 billion    $11.4 billion   4 to 6%
  EBITDA(2)             $4.150 to $4.350 billion   $4.02 billion   3 to 8%

  Basic earnings per         $2.25 to $2.45            $2.02      11 to 21%
   share
  Capital                 Approx. $2.2 billion     $2.11 billion      -
   expenditures(3)

Wireless
  Network Revenue         $5.9 to $6.0 billion     $5.6 billion    5 to 7%
   (external)
  EBITDA                $2.725 to $2.825 billion  $2.604 billion   4 to 8%

Wireline
  Revenue (external)    $5.450 to $5.550 billion   $5.3 billion    3 to 5%

  EBITDA                $1.425 to $1.525 billion  $1.414 billion   1 to 8%
1) Targets and growth rates in 2014 exclude Public Mobile.
2) Earnings before interest, taxes, depreciation and amortization (EBITDA)
   after restructuring costs. Total restructuring costs are estimated at
   approximately $75 million in 2014 ($98 million in 2013).
3) Capital expenditure targets and results exclude expenditures for spectrum
   licences.

For 2014, TELUS is targeting consolidated year-over-year revenue growth of between 4 and 6 per cent, while EBITDA is targeted to be higher by 3 to 8 per cent. Revenue and EBITDA should benefit from continued strong execution in wireless and wireline both driven by data services. Basic earnings per share (EPS) is targeted to be higher by 11 to 21 per cent, due to EBITDA growth combined with a reduction in shares outstanding reflecting our share purchase programs.

For wireless, network revenue is targeted to increase between 5 and 7 per cent in 2014 on the basis of modest growth in subscribers as well as modest ARPU growth due to increasing data usage and benefit of TELUS SharePlus data sharing plans. Subscriber loading should benefit from a Canadian wireless industry penetration gain of approximately one to two percentage points driven by postpaid growth. TELUS should continue to benefit from its 4G long-term evolution (LTE) network investments resulting in continued growth in data and roaming revenues and helping to offset lower voice revenue. Wireless EBITDA is targeted to be higher by between 4 and 8 per cent.

In wireline, revenue is targeted to increase between 3 and 5 per cent in 2014, as we assume continued data revenue growth from Optik TV and high-speed Internet, as well as from business services, partially offset by continued decreases in legacy voice revenues. Uniquely, the wireline EBITDA range is targeted to increase by 1 and 8 per cent. The Company assumes EBITDA improvements from Optik TV, high speed Internet, and business services, including TELUS Health, as well as ongoing efficiency initiatives, partially offset by the ongoing industry trend of revenue losses from higher-margin legacy voice services.

Consolidated capital expenditures in 2014 are targeted to increase modestly to approximately $2.2 billion, excluding the purchase of spectrum licences. The Company plans to continue investing in wireless capacity and network growth. TELUS intends to continue broadband infrastructure expansion and upgrades, including bringing fibre optic cable deeper into the network, to support Optik TV and high-speed Internet subscriber growth and faster Internet broadband speeds. Capital intensity as a percentage of consolidated revenue is targeted to be approximately 18 per cent.

The preceding disclosure respecting TELUS' 2014 financial targets contains forward-looking information and is fully qualified by the 'Caution regarding forward-looking statements' at the beginning of the accompanying Management's review of operations for the fourth quarter of 2013 and are based on management's expectations and assumptions as set out in section 1.5 entitled 'Financial and operating targets for 2014' of such Management's review of operations.

Dividend Declaration

The TELUS Board of Directors has declared a quarterly dividend of 36 cents ($0.36) Canadian per share on the issued and outstanding Common Shares of the Company payable on April 1, 2014 to holders of record at the close of business on March 11, 2014.

This first quarter dividend represents a four cent or 12.5 per cent increase from the $0.32 quarterly dividend paid on April 1, 2013.

About TELUS

TELUS (TSX: T) (NYSE: TU) is Canada's fastest-growing national telecommunications company, with $11.4 billion of annual revenue and 13.3 million customer connections, including 7.8 million wireless subscribers, 3.3 million wireline network access lines, 1.4 million Internet subscribers and 815,000 TELUS TV customers. Led since 2000 by President and CEO, Darren Entwistle, TELUS provides a wide range of communications products and services, including wireless, data, Internet protocol (IP), voice, television, entertainment and video.

In support of our philosophy to give where we live, TELUS, our team members and retirees have contributed more than $350 million to charitable and not-for-profit organizations and volunteered 5.4 million hours of service to local communities since 2000. TELUS was honoured to be named the most outstanding philanthropic corporation globally for 2010 by the Association of Fundraising Professionals, becoming the first Canadian company to receive this prestigious international recognition.

For more information about TELUS, please visit telus.com.

Access to Quarterly results information

Interested investors, the media and others may review this quarterly earnings and 2014 targets news release, management's review of operations, quarterly results and 2014 targets slides, audio and transcript of investor webcast call, supplementary financial information and our full 2012 annual report at telus.com/investors.

TELUS' fourth quarter and 2014 targets conference call is scheduled for February 13, 2014 at 11 a.m. ET and will feature a presentation followed by a question and answer period with investment analysts. Interested parties can access the webcast at telus.com/investors. A telephone playback will be available on February 13 until March 21 at 1-855-201-2300. Please use reference number 1148326# and access code 35175. An archive of the webcast will also be available at telus.com/investors and a transcript will be posted on the website within a few business days.

TELUS CORPORATION

Management's review of operations

2013 Q4

Caution regarding forward-looking statements

This document contains forward-looking statements about expected future events and financial and operating performance of TELUS Corporation. The terms TELUS, the Company, we, us or our refer to TELUS Corporation and where the context of the narrative permits or requires, its subsidiaries. Forward-looking statements include, but are not limited to, statements relating to annual targets, guidance and updates, our multi-year dividend growth program, our multi-year share purchase programs, and trends. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, strategy, target and other similar expressions or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, seek, should, strive and will. By their nature, forward-looking statements are subject to inherent risks and uncertainties, and require us to make assumptions. 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 future performance, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed. Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements, and reserve the right to change, at any time at our sole discretion, our current practice of updating annual targets and guidance. Annual targets for 2014 and related assumptions are described in Sections 1.4 and 1.5.

Factors that could cause actual performance to differ materially include, but are not limited to:


--  Competition including: continued intense rivalry across all services
    among established telecommunications companies, advanced wireless
    services (AWS) entrants, cable-TV providers, other communications
    companies and emerging over-the-top (OTT) services; active price and
    brand competition; our ability to continue to retain customers through
    an enhanced customer service experience; network access line (NAL)
    losses; subscriber additions and retention volumes and associated costs
    for wireless, TV and high-speed Internet services; pressures on wireless
    average revenue per subscriber unit per month (ARPU) from promotional
    activity from competitors and market conditions, flat-rate pricing
    trends for voice and data, inclusive long distance plans for voice, and
    increasing availability of Wi-Fi networks for data; ability to obtain
    and offer content across multiple devices on wireless and TV platforms
    at a reasonable cost; and competition for wireless spectrum.
--  Regulatory approvals and developments including: the federal
    government's stated intention to further increase wireless competition,
    reduce roaming costs on wireless networks in Canada and require further
    unbundling of TV channels; the Competition Bureau's recommendation to
    the Canadian Radio-television and Telecommunications Commission (CRTC)
    that it should implement remedies to provide more favourable roaming
    access terms to entrant service providers; future spectrum auctions
    (including limitations on incumbent wireless providers, advantages
    provided to foreign participants and the amount and cost of spectrum
    acquired); restrictions on the purchase, sale and transfer of spectrum
    licences; the outcome of the CRTC review of mandated wholesale services,
    including consideration of mandated competitor access to fibre-to-the-
    premise facilities; vertical integration by competitors into broadcast
    content ownership and timely and effective enforcement of regulatory
    safeguards; ongoing monitoring and compliance with restrictions on non-
    Canadian ownership of TELUS Common Shares; increased foreign control of
    certain AWS entrants; interpretation and application of tower sharing
    and roaming rules; conflicts between non-harmonized provincial consumer
    protection legislation and the new CRTC mandatory national Wireless Code
    of Conduct (the Wireless Code, or the Code), which came into effect on
    December 2, 2013; uncertainty around the outcome of the legal challenge
    to the retroactivity of the Wireless Code to contracts entered into
    between June 2012 and December 2, 2013; and a possible increase in or
    acceleration of costs of wireless customer acquisition and retention
    resulting from maximum two-year contracts required under the Code.
--  Technological substitution including: reduced utilization and increased
    commoditization of traditional wireline voice local and long distance
    services; increasing numbers of households that have only wireless
    and/or Internet-based telephone services; continuation of wireless voice
    ARPU declines such as through substitution to messaging and OTT
    applications, such as Skype; substitution to Wi-Fi services from
    wireless services; and OTT IP services that may cannibalize TV and
    entertainment services.
--  Technology including: subscriber demand for data that challenges
    wireless network and spectrum capacity, and service levels; reliance on
    systems and information technology; technology options, evolution paths
    and roll-out plans for wireline and wireless networks (including
    broadband initiatives, such as fibre to the home, and wireless small
    cell deployment); reliance on wireless network access agreements; choice
    of suppliers and suppliers' ability to maintain and service their
    product lines; wireless handset supplier concentration and market power;
    the performance of long-term evolution (LTE) wireless technology; our
    spectrum deficiency in certain geographical areas and the need to obtain
    additional spectrum licences through auctions or from third parties;
    dependence of our rural LTE roll-out strategy, in a cost-efficient
    manner, on acquiring spectrum in the 700 MHz band; deployment and
    operation of new wireless networks and success of new products, new
    services and supporting systems; network reliability and change
    management (including migration risks to new, more efficient Internet
    data centres (IDCs) and realizing the expected benefits); timing of
    decommissioning of certain legacy wireline networks and services to
    reduce operating costs; timing of decommissioning of CDMA and iDEN
    wireless networks to redeploy spectrum and reduce operating costs, and
    the associated subscriber migration and retention risks; availability of
    resources and ability to build out adequate broadband capacity; and
    success of upgrades and evolution of TELUS TV® technology, which
    depend on third-party suppliers.
--  Economic growth and fluctuations including: the strength and persistence
    of economic growth in Canada that may be influenced by economic
    developments outside of Canada; future interest rates; pension
    investment returns, funding and discount rates; and Canada: U.S. dollar
    exchange rates.
--  Capital expenditure levels, including potential outlays for spectrum
    licences in spectrum auctions or from third parties, due to our wireless
    deployment strategy for LTE and future technologies, wireline broadband
    initiatives, subscriber demand for data, new IDC initiatives, and the
    Industry Canada wireless spectrum auction for the 700 MHz band, which
    may conclude in February 2014, and the 2,500-2,690 MHz bands, currently
    expected in April 2015.
--  Financing and debt requirements including ability to carry out re-
    financing activities.
--  Ability to sustain dividend growth program of circa 10% per annum
    through 2016 and ability to sustain and complete multi-year share
    purchase programs through 2016. These programs may be affected by
    factors such as regulatory and government decisions, competitive
    environment, reasonable economic performance in Canada, our earnings and
    free cash flow, and levels of capital expenditures and spectrum licence
    purchases. Quarterly dividend decisions are subject to our Board of
    Director's (Board) assessment and determination based on the Company's
    financial situation and outlook. Share purchase programs may be affected
    by the change in our intention to purchase shares, and the assessment
    and determination of our Board from time to time. Consequently, there
    can be no assurance that these programs will be maintained through 2016.
--  Human resource matters including recruitment, retention and appropriate
    training in a highly competitive industry.
--  Ability to successfully implement cost reduction initiatives and realize
    planned savings, net of restructuring and other like costs, without
    losing customer service focus or negatively impacting business
    operations. Initiatives include: our earnings enhancement program to
    drive improvements in earnings before interest, income taxes,
    depreciation and amortization (EBITDA) of $250 million by the end of
    2015; business integrations; business process outsourcing; internal
    offshoring and reorganizations; procurement initiatives; and
    consolidation of real estate.
--  Process risks including: reliance on legacy systems and ability to
    implement and support new products and services and business operations;
    our ability to implement effective change management for system
    replacements and upgrades, process redesigns and business integrations;
    implementation of large enterprise deals that may be adversely impacted
    by available resources and degree of co-operation from other service
    providers; our ability to successfully manage operations in foreign
    jurisdictions; information security breaches, including data loss or
    theft; and real estate joint venture development risks.
--  Tax matters including: tax law that may be subject to differing
    interpretation and the tax authority's interpretation that may be
    different from ours; changes in tax laws including tax rates;
    elimination of income tax deferrals through the use of different tax
    year-ends for operating partnerships and corporate partners; and
    international tax complexity and compliance.
--  Business continuity events including: our ability to maintain customer
    service and operate our networks in the event of human-caused threats
    such as electronic attacks and human errors; equipment failures; supply
    chain disruptions; natural disaster threats, epidemics and pandemics;
    and effectiveness of business continuity and disaster recovery plans and
    responses.
--  Litigation and legal matters including ability to successfully defend
    class actions pending against us.
--  Acquisitions or divestitures including ability to successfully integrate
    acquisitions or complete divestitures in a timely manner, and realizing
    expected strategic benefits.
--  Health, safety and environmental developments and other risk factors
    discussed herein and listed from time to time in our reports and public
    disclosure documents including our annual report, annual information
    form, and other filings with securities commissions or similar
    regulatory authorities in Canada (on SEDAR at sedar.com) and in our
    filings with the U.S. Securities and Exchange Commission (SEC),
    including Form 40-F (on EDGAR at sec.gov). Section 10: Risks and risk
    management in our annual 2012 TELUS MD&A, as well as updates in Section
    10 of our 2013 Q3 MD&A are incorporated by reference in this cautionary
    statement.

Management's review of operations

February 13, 2014.

Contents


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Section                   Description
----------------------------------------------------------------------------
1. Introduction           1.1 Preparation of Management's review of
                          operations
                          1.2 The environment in which we operate
                          1.3 Consolidated highlights
                          1.4 Performance scorecard (key performance
                          measures)
                          1.5. Financial and operating targets for 2014
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2. Discussion of          2.1 General
operations                2.2 Summary of quarterly results and trends
                          2.3 Consolidated operations
                          2.4 Wireless segment
                          2.5 Wireline segment
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3. Changes in financial
position
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4. Liquidity and capital  4.1 Overview
resources                 4.2 Cash provided by operating activities
                          4.3 Cash used by investing activities
                          4.4 Cash provided (used) by financing activities
                          4.5 Liquidity and capital resource measures
                          4.6 Credit facilities
                          4.7 Sale of trade receivables
                          4.8 Credit ratings
                          4.9 Financial instruments, commitments and
                          contingent liabilities
                          4.10 Outstanding share information
                          4.11 Transactions with related parties
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5. Accounting policy
developments
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6. Risks and risk
management
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7. Definitions and        7.1 Non-GAAP financial measures
reconciliations           7.2 Wireless operating indicators
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1.  Introduction

Our discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of Management's review of operations.

1.1 Preparation of Management's review of operations

The following sections are a discussion of the consolidated financial position and financial performance of TELUS for the three-month period and year ended December 31, 2013, and should be read together with the accompanying summary financial information. The generally accepted accounting principles (GAAP) we use are International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Our use of the term IFRS in this Management's review of operations is a reference to these standards. In our discussion, we also use certain non-GAAP financial measures, such as EBITDA, to evaluate our performance, monitor compliance with debt covenants and manage our capital structure. These measures are defined, qualified and reconciled with their nearest GAAP measures in Section 7.1. All amounts are in Canadian dollars, unless otherwise specified.

Our disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management on a timely basis, so that appropriate decisions can be made regarding public disclosure. This document was reviewed by the TELUS' Audit Committee and approved by the TELUS' Board of Directors for issuance on February 13, 2014.

1.2 The environment in which we operate

Economy

We estimate that economic growth in Canada was 1.7% in 2013, and will be 2.4% in 2014 and 2.6% in 2015, based on a composite of estimates from Canadian banks and other sources. The Bank of Canada's January 2014 Monetary Policy Report estimated economic growth for Canada at 1.8% in 2013 and 2.5% in both 2014 and 2015. In addition, Statistics Canada's Labour Force Survey reported the December 2013 national unemployment rate at 7.2% (7.1% reported in December 2012).

Regulation

The CRTC's ongoing proceedings include: reviews of wireline wholesale services, wireless wholesale roaming rates, and paper bill charges; and achievement of basic service objective to all Canadians, especially those in high-cost serving areas. In addition, the federal government announced that it would be amending both the Telecommunications Act and the Radiocommunication Act to give the CRTC and Industry Canada the option to impose monetary penalties on companies that violate established rules, such as the Wireless Code and those related to the deployment of spectrum, services to rural areas and tower sharing.

Subsequent to December 31, 2013, Industry Canada's 700 MHz spectrum auction commenced. As at the date of this Management's review of operations, the spectrum auction had not concluded. Should we be a successful auction participant, we would expect to fund any 700 MHz spectrum licences awarded through a combination of issuance of TELUS Corporation commercial paper and cash on hand.

1.3 Consolidated highlights

Acquisition of Public Mobile Holdings Inc.

On November 29, 2013, we acquired 100% of Public Mobile Holdings Inc. (Public Mobile) for $229 million net of cash acquired. Public Mobile is a Canadian wireless communications operator focused on the Toronto and Montreal markets. The transaction was approved by Industry Canada in October 2013 and by the Competition Bureau in November 2013. The investment was made with a view to growing our wireless segment operations, including acquiring additional spectrum licences.

The contribution of Public Mobile to our financial results in the three-month period ended December 31, 2013 was to increase wireless revenues by $9 million, decrease wireless EBITDA by $10 million (including $8 million of restructuring and other like costs), and reduce Net income by $7 million or approximately one cent per share. All of the 222,000 Public Mobile subscribers at December 31, 2013, were prepaid subscribers.

Share purchase program

On December 12, 2013, the Toronto Stock Exchange (TSX) approved our normal course issuer bid (NCIB) to purchase and cancel up to 16 million of our Common Shares for up to $500 million in 2014. Such purchases will be made through the facilities of the TSX, the New York Stock Exchange (NYSE) and alternative trading platforms or otherwise as may be permitted by applicable securities laws and regulations during the period of January 2, 2014 to December 31, 2014. This represents approximately 2.6% of TELUS Common Shares outstanding at the date of the NCIB notice to the TSX, and Common Shares will be purchased only when and if we consider it advisable. Security holders may obtain copies of the notice filed with the TSX by contacting TELUS Investor Relations (IR@telus.com). Our Board of Directors believes such purchases are in the best interest of the Company and that such purchases constitute an attractive investment opportunity and desirable use of funds that should enhance the value of the remaining shares.

As part of the share purchase program, we have also entered into an automatic share purchase plan (ASPP) with a broker for the purpose of permitting us to purchase shares under our NCIB during internal blackout periods when we would not be permitted to trade in our shares, including regularly scheduled quarterly blackout periods. Such purchases will be at the sole discretion of the broker based on parameters established by TELUS prior to any blackout period, in accordance with the TSX rules, applicable securities laws and the terms of the agreement between the broker and TELUS. In January 2014, we purchased 590,400 Common Shares for cancellation under the ASPP for $22 million at an average price of $37.14 per share.

We currently intend to renew our NCIB in 2015 and 2016 in order to permit purchases of up to $500 million in each calendar year. Future NCIBs will be dependent on factors, such as our earnings and free cash flow, subject to our Board of Directors' assessment and determination, and subject to obtaining regulatory approvals, including approval from the TSX. Also see Caution regarding forward-looking statements - ability to sustain and complete multi-year share purchase programs through 2016.

Consolidated highlights


----------------------------------------------------------------------------
                        Fourth quarters ended                  Years ended
                                  December 31                  December 31
                  ----------------------------------------------------------
($ millions,
 unless noted
 otherwise)           2013     2012    Change      2013     2012    Change
----------------------------------------------------------------------------
Consolidated
 statements of
 income
----------------------------------------------------------------------------
Operating revenues   2,948    2,851       3.4%   11,404   10,921       4.4%
Operating income
 (1)                   490      440      11.4%    2,215    1,994      11.1%
Income before
 income taxes (1)      380      344      10.5%    1,768    1,620       9.1%
Net income (1)         290      263      10.3%    1,294    1,204       7.5%

Net income per
 equity share
 (1)(2)(3)
 Basic (basic EPS)
  ($)                 0.47     0.40      17.5%     2.02     1.85       9.2%
 Diluted ($)          0.46     0.40      15.0%     2.01     1.84       9.2%
Dividends declared
 per equity share
 (2) ($)              0.36     0.32      12.5%     1.36     1.22      11.5%

Basic weighted-
 average equity
 shares (2)
 outstanding
 (millions)            623      652      (4.4)%     640      651      (1.7)%
----------------------------------------------------------------------------
Consolidated
 statements of
 cash flows
----------------------------------------------------------------------------
Cash provided by
 operating
 activities            726      703       3.3%    3,246    3,219       0.8%

Cash (used) by
 investing
 activities           (787)    (514)    (53.1)%  (2,389)  (2,058)    (16.1)%
Capital
 expenditures
 (excluding
 spectrum
 licences) (4)        (577)    (521)    (10.7)%  (2,110)  (1,981)     (6.5)%

Cash provided
 (used) by
 financing
 activities            365     (127)      n/m      (628)  (1,100)     42.9%
----------------------------------------------------------------------------
Other highlights
----------------------------------------------------------------------------
Subscriber
 connections
 (thousands) (5)                                 13,296   13,113       1.4%
EBITDA (1)(6)          951      918       3.6%    4,018    3,859       4.1%
Restructuring and
 other like costs
 included in
 EBITDA (6)             33       19      73.7%       98       48     104.2%
EBITDA -excluding
 restructuring and
 other like costs
 (6)                   984      937       5.0%    4,116    3,907       5.3%
EBITDA margin
 excluding
 restructuring and
 other like costs
 (%) (7)              33.4     32.9  0.5 pts.      36.1     35.8  0.3 pts.
Free cash flow (6)     136      263     (48.3)%   1,051    1,331     (21.0)%
Net debt to EBITDA - excluding restructuring
 and other like costs (times) (1)(6)                1.8      1.7       0.1
----------------------------------------------------------------------------
Notations used in Management's review of operations: n/a - Not applicable;
n/m - Not meaningful; n/r - Not reported; pts. - Percentage points.
(1) Figures for 2012 have been adjusted for retrospective application of
    accounting standard IAS 19 Employee benefits (2011). See Section 5.
(2) Adjusted for the two-for-one stock split effective April 16, 2013 (see
    Section 4.10 Outstanding share information).
(3) Equity shares: Common Shares since February 4, 2013; Common Shares and
    Non-Voting Shares prior to February 4, 2013. See Section 4.10.
(4) Capital expenditures (excluding spectrum licences) include assets
    purchased, but not yet paid for, and consequently differ from Cash
    payments for capital assets, excluding spectrum licences, on the
    Consolidated statements of cash flows.
(5) The sum of active wireless subscribers (excluding 222,000 Public Mobile
    subscribers), NALs, Internet access subscribers and TELUS TV subscribers
    (Optik TV™ subscribers and TELUS Satellite TV® subscribers),
    measured at the end of the respective periods based on information in
    billing and other systems. Effective with the second quarter of 2013 and
    on a prospective basis, wireless machine-to-machine (M2M) subscriptions
    have been excluded. Cumulative subscriber connections include an April
    1, 2013 adjustment to remove approximately 76,000 M2M subscriptions.
    Effective with the fourth quarter of 2013, and on a prospective basis,
    we have adjusted postpaid wireless subscribers to remove Mike
    subscriptions, as we have ceased marketing the Mike product and started
    to turn down the iDEN network. Cumulative subscriber connections include
    an October 1, 2013 adjustment to remove from the postpaid wireless
    subscriber base approximately 94,000 Mike subscribers, representing
    those who, in our judgment, are unlikely to migrate to our new services.
(6) See Section 7.1 Non-GAAP financial measures.
(7) EBITDA - excluding restructuring and other like costs, as a percentage
    of Operating revenues.

Operating highlights


--  Consolidated Operating revenues increased year over year by $97 million
    or 3.4% in the fourth quarter of 2013 and $483 million or 4.4% in the
    full year of 2013. Wireless data network revenue increased year over
    year by $78 million or 14% in the quarter and $343 million or 16% for
    the full year, as a result of subscriber growth and increased data
    usage. Wireline data revenues increased year over year by $81 million or
    11% in the fourth quarter and $312 million or 11% for the full year due
    to growth in TV, Internet, business process outsourcing services and
    TELUS Health services, partly offset for the full year by a decrease in
    data equipment revenue due to lower business spending, including by
    governments, and a negotiated equipment sale in the third quarter of
    2012. These increases in wireless and wireline data revenues were partly
    offset by ongoing declines in both wireless and wireline voice revenues.

    Excluding Public Mobile, wireless monthly blended ARPU was $61.86 in the
    fourth quarter of 2013, up $0.91 or 1.5% from the fourth quarter of
    2012. For the full year of 2013, monthly blended ARPU was $61.38, up
    $0.99 or 1.6% from 2012, driven by a change in subscriber mix and growth
    in data usage and roaming. Postpaid subscribers represent more than 86%
    of the total subscriber base at December 31, 2013.


--  Our subscriber connection net additions were 119,000 in the fourth
    quarter of 2013 and 353,000 for the full year of 2013, excluding
    wireless prepaid subscribers acquired with Public Mobile in November
    2013. During the 12-month period ended December 31, 2013, our subscriber
    connections increased by 183,000 inclusive of adjustments for wireless
    M2M subscriptions on April 1, 2013 and Mike subscriptions on October 1,
    2013. This was composed of a 1.8% increase in wireless subscribers
    (excluding 222,000 subscribers acquired with Public Mobile), 20% growth
    in TV subscribers and 5.2% growth in high-speed Internet subscribers,
    partly offset by a 4.5% decline in total NALs.

    Our postpaid wireless subscriber net additions were 113,000 in the
    fourth quarter of 2013 and 378,000 in the full year of 2013, as compared
    to postpaid subscriber net additions of 123,000 in the fourth quarter of
    2012 and 414,000 for the full year of 2012. The decreases are a result
    of slower industry growth and intense competitive activity, partly
    offset by a change in the subscriber mix. Our churn rate remained low
    due to our customers first initiatives and retention efforts, which will
    continue to be our focus in 2014. Our monthly postpaid subscriber churn
    rates were 0.97% in the fourth quarter of 2013 and 1.03% in the full
    year of 2013, as compared to 1.12% in the fourth quarter of 2012 and
    1.09% in the full year of 2012.


--  EBITDA increased year over year by $33 million or 3.6% in the fourth
    quarter and $159 million or 4.1% for the full year, despite higher
    restructuring and other like costs. EBITDA excluding restructuring and
    other like costs increased year over year by $47 million or 5.0% in the
    fourth quarter and $209 million or 5.3% for the full year. These
    increases reflected wireless network revenue growth and flow through to
    EBITDA, as well as improving Optik TV service margins, net of
    approximately $7 million of costs and revenue impacts from severe
    flooding in Alberta in June 2013. Flooding costs were substantially all
    in the wireline segment.

    EBITDA in the full year of 2012 also included a $7 million pre-tax gain
    net of equity losses for the TELUS Garden residential real estate
    partnership. We do not anticipate retaining an ownership interest in the
    TELUS Garden residential condominium after completion of construction.


--  Operating income increased year over year by $50 million or 11% in the
    fourth quarter and $221 million or 11% for the full year. This resulted
    from increases in EBITDA, as well as lower total depreciation and
    amortization expenses, which decreased due to our continuing program of
    asset life studies and adjustments, net of growth in capital assets.


--  Income before income taxes increased year over year by $36 million or
    11% in the fourth quarter of 2013 and $148 million or 9.1% in the full
    year of 2013. Higher Operating income was partly offset by higher
    Financing costs resulting from our re-financing activities in 2013,
    including a $23 million prepayment premium expense before income taxes
    for the early redemption of Series CF Notes in May 2013.


--  Income taxes increased year over year by $9 million or 11% in the fourth
    quarter of 2013 and $58 million or 14% in the full year of 2013,
    primarily reflecting higher pre-tax income. Income taxes in the full
    year of 2013 include a second quarter $22 million adjustment to revalue
    deferred income tax liabilities as a result of the increase in the B.C.
    provincial corporate income tax rate from 10% to 11% retroactive to
    April 1, 2013.


--  Net income increased year over year by $27 million or 10% in the fourth
    quarter of 2013 and $90 million or 7.5% in the full year of 2013.
    Excluding restructuring and other like costs, the 2012 net gain related
    to the TELUS Garden residential real estate partnership, the May 2013
    long-term debt prepayment premium and income tax-related adjustments,
    Net income increased approximately 13% year over year or $34 million in
    the fourth quarter of 2013 and $164 million in the full year of 2013.


Analysis of Net income
----------------------------------------------------------------------------
                                      Fourth quarters           Years ended
                                    ended December 31           December 31
                                --------------------------------------------
($ millions)                          2013       2012        2013      2012
----------------------------------------------------------------------------
Net income                             290        263       1,294     1,204
Add back (deduct):
  Restructuring and other like
   costs, after income taxes            23         14          72        36
  Gain net of equity losses
   related to TELUS Garden
   residential real estate
   partnership, after income
   taxes                                 -          -           -        (6)
  Long-term debt prepayment
   premium, after income taxes           -          -          17         -
  Unfavourable (favourable)
   income tax-related
   adjustments (see Section 2.2)       (12)       (10)          3       (12)
----------------------------------------------------------------------------
Net income excluding the above
 items                                 301        267       1,386     1,222
----------------------------------------------------------------------------


--  Basic EPS increased year over year by seven cents or 17.5% in the fourth
    quarter of 2013 and 17 cents or 9.2% for the full year of 2013. The
    reduction in shares from our 2013 NCIB program contributed approximately
    two cents to EPS for the quarter and four cents for the full year.
    Excluding restructuring and other like costs, the 2012 net gain related
    to the TELUS Garden residential real estate partnership, the May 2013
    long-term debt prepayment premium and income tax-related adjustments,
    our basic EPS increased year over year by approximately nine cents or
    23% in the fourth quarter of 2013 and 29 cents or 16% in the full year
    of 2013.

Analysis of basic EPS
----------------------------------------------------------------------------
                                      Fourth quarters           Years ended
                                    ended December 31           December 31
                                --------------------------------------------
($)                                   2013       2012        2013      2012
----------------------------------------------------------------------------
Basic EPS                             0.47       0.40        2.02      1.85
Add back (deduct):
  Restructuring and other like
   costs after income taxes, per
   share                              0.04       0.02        0.11      0.05
  Gain net of equity losses
   related to TELUS Garden
   residential real estate
   partnership after income
   taxes, per share                      -          -           -     (0.01)
  Long-term debt prepayment
   premium after income taxes,
   per share                             -          -        0.03         -
  (Favourable) income tax-
   related adjustments, per
   share (see Section 2.2)           (0.02)     (0.02)          -     (0.02)
----------------------------------------------------------------------------
Basic EPS excluding the above
 items                                0.49       0.40        2.16      1.87
----------------------------------------------------------------------------


--  Dividends declared per equity share totalled $1.36 in 2013, up 11.5%
    from 2012. On February 12, 2014, the Board of Directors declared a
    quarterly dividend of 36 cents per share on the issued and outstanding
    Common Shares of the Company, payable on April 1, 2014, to shareholders
    of record at the close of business on March 11, 2014. The 36 cents per
    share dividend declared for the first quarter of 2014 reflects an
    increase of four cents or 12.5% from the first quarter dividend in 2013,
    consistent with our multi-year dividend growth program.

Liquidity and capital resource highlights


--  Net debt to EBITDA - excluding restructuring and other like costs was
    1.8 times at December 31, 2013, up from 1.7 times at December 31, 2012,
    as the increase in net debt was only partly offset by growth in EBITDA
    excluding restructuring and other like costs. The ratio remains within
    our long-term policy guideline of 1.5 to 2.0 times.
--  Cash provided by operating activities increased year over year by $23
    million in the fourth quarter of 2013 and $27 million in the full year
    of 2013, as a result of working capital changes and growth in EBITDA,
    which were largely offset by higher interest and income tax payments.
--  Cash used by investing activities increased year over year by $273
    million in the fourth quarter of 2013 and $331 million in the full year
    of 2013, mainly due to the acquisition of Public Mobile for $229 million
    net of cash acquired, increased capital expenditures and, for the full
    year, the purchase of spectrum licences from a third party in July 2013.
    Capital expenditures (excluding spectrum licences) increased year over
    year by $56 million in the quarter and $129 million during the year,
    mainly due to our continued focus on investment in wireline and wireless
    broadband infrastructure, network and system resiliency and reliability
    to support our ongoing customers first initiatives, large enterprise
    deals and to ready the network and systems for future retirement of
    legacy assets.
--  Cash provided by financing activities was $365 million in the fourth
    quarter of 2013, which reflects the issuance of $800 million of long-
    term debt under our renewed shelf prospectus, net of dividend payments
    and the repayment of outstanding commercial paper. Cash used by
    financing activities for the full year of 2013 was $628 million, which
    reflects purchases of Common Shares under our 2013 NCIB, as well as
    increased dividend payments, partly offset by debt re-financing
    activities (see Section 4.4).

    During 2013, we returned over $1.8 billion to shareholders including
    $852 million in dividends paid and $1.0 billion in share purchases.

--  Free cash flow was $136 million in the fourth quarter of 2013 and $1,051
    million in the full year of 2013, reflecting year over year decreases of
    $127 million for the quarter and $280 million for the full year. The
    decreases resulted mainly from higher income tax payments and higher
    capital expenditures (excluding spectrum licences), net of growth in
    EBITDA.

1.4 Performance scorecard (key performance measures)

In 2013, we achieved three of four original consolidated targets and achieved three of four original segment targets, which were announced on February 15, 2013. Our capital expenditures in 2013 exceeded the target as a result of our continued focus on investment in wireline and wireless broadband infrastructure, network and system resiliency and reliability to support our ongoing customers first initiatives, large enterprise deals and readying the network and systems for future retirement of legacy assets. Wireless revenues were below the low end of our target range due to lower equipment sales from lower gross activations, device mix, and to a lesser extent lower net additions, as well as a lower ARPU from the initial adoption of two-year contracts from customers optimizing their rate plan in the latter part of 2013. The latter effect is expected to reverse somewhat in 2014, as more of the subscriber base activates or renews on the two-year plans. These impacts were offset in wireless EBITDA by lower subscriber acquisition costs. The Public Mobile contribution to Consolidated financial results was an increase in wireless revenues of $9 million, a decrease in EBITDA of $10 million, and a reduction of approximately one cent in basic EPS, for the three-month period ended December 31, 2013.

We met our long-term financial objectives, policies and guidelines, including generally maintaining a minimum of $1.0 billion of unutilized liquidity and a Net debt to EBITDA - excluding restructuring and other like costs ratio in the range of 1.5 to 2.0 times. We also completed six targeted semi-annual dividend increases from 2011 to 2013. We announced an intention to target ongoing semi-annual dividend increases, with the annual increase of circa 10% through to the end of 2016, subject to our Board's assessment and determination of our financial situation and outlook on a quarterly basis and our long-term dividend payout ratio guideline of 65 to 75% of prospective sustainable net earnings. There can be no assurance that we will maintain this dividend growth program. See Caution regarding forward-looking statements - Ability to sustain dividend growth program of circa 10% per annum through 2016.

The following scorecard compares TELUS' performance to our original 2013 targets and also presents our 2014 targets. Our 2014 targets, plans and assumptions are fully qualified by the Caution regarding forward-looking statements at the beginning of Management's review of operations.


Scorecard
----------------------------------------------------------------------------
                                  2013 performance
----------------------------------------------------------------------------
                                                                     2014
                                      Original targets             targets
                     Actual results   and growth and                 and
                       and growth   revised guidance(5) Achieved  growth(6)
----------------------------------------------------------------------------
Consolidated
  Revenues                                                        $11.9 to
                                      $11.4 to $11.6                $12.1
                     $11.4 billion        billion                  billion
                          4.4%            4 to 6%         Yes      4 to 6%
----------------------------------------------------------------------------
  EBITDA(1)(2)                                                    $4.150 to
                                      $3.95 to $4.15               $4.350
                     $4.02 billion        billion                  billion
                          4.1%            2 to 8%         Yes      3 to 8%
----------------------------------------------------------------------------
  Basic EPS(1)(3)                                                 $2.25 to
                         $2.02        $1.90 to $2.10                $2.45
                          9.2%           3 to 14%         Yes     11 to 21%
----------------------------------------------------------------------------
  Capital                              Approx. $1.95
   expenditures (4)  $2.11 billion        billion          No   Approx. $2.2
                          6.5%                                     billion
----------------------------------------------------------------------------
                                     Revised November 8
                                      to approx. $2.0
                                          billion          No
Wireless segment
----------------------------------------------------------------------------
                                   $6.2 to $6.3 billion
  Total revenue       $6.1 billion        6 to 8%
   (external)             4.9%                             No
                                    Revised November 8
                                      to $6.1 to $6.2
                                          billion         Yes         -
----------------------------------------------------------------------------
  Network revenue                                               $5.9 to $6.0
   (external)         $5.6 billion                                 billion
                          5.1%               -             -       5 to 7%
----------------------------------------------------------------------------
  EBITDA(1)(2)                                                    $2.725 to
                                     $2.575 to $2.675              $2.825
                     $2.604 billion       billion                  billion
                          5.9%            5 to 9%         Yes      4 to 8%
----------------------------------------------------------------------------
Wireline segment
  Revenue (external)                                              $5.45 to
                                                                    $5.55
                      $5.3 billion $5.2 to $5.3 billion            billion
                          3.9%            2 to 4%         Yes      3 to 5%
----------------------------------------------------------------------------
  EBITDA(1)(2)                                                    $1.425 to
                                     $1.375 to $1.475              $1.525
                     $1.414 billion       billion                  billion
                          0.9%           (2) to 5%        Yes      1 to 8%
----------------------------------------------------------------------------

Met target Yes; Missed target No.
(1) After application of the amended standard IAS 19 (2011).
(2) See description in Section 7.1 Non-GAAP financial measures.
(3) Adjusted for the two-for-one stock split effective April 16, 2013.
(4) The capital expenditure targets and results exclude expenditures for
    spectrum licences.
(5) Targets in 2013 and revised guidance for 2013 (November 8, 2013)
    excluded the effects of Public Mobile.
(6) Targets and growth rates in 2014 exclude Public Mobile.

We made the following key assumptions when we announced the 2013 targets in February 2013.

Assumptions for 2013 targets and result

Quantitative assumptions:


--  Wireless industry penetration of the Canadian market: Actual result is
    an estimated 1.8 percentage point increase; the assumption was a two to
    three percentage point increase resulting from intense competition and
    adoption and upgrade of smartphones, tablets and data applications.
    Industry growth was slower than in 2012, based on publicly reported
    information and our estimates for 2013.
--  Pension plans: Total defined benefit pension plan expense was $161
    million consisting of $108 million recorded in Employee benefits expense
    and $53 million recorded in Financing costs. The 2013 estimated expense
    was $160 million, including approximately $110 million recorded in
    Employee benefits expense and approximately $50 million recorded in
    Financing costs. Actual defined benefit pension plan funding was $198
    million compared to the original estimate of approximately $195 million.
--  Restructuring and other like costs: Actual result is $98 million. The
    assumption was revised on August 8, 2013, to approximately $100 million
    from approximately $75 million due to ongoing and incremental
    operational efficiency initiatives.
--  Depreciation and amortization expenses: Actual result is $1.8 billion.
    The assumption was revised on August 8 to approximately $1.85 billion
    from approximately $1.9 billion. The actual result was lower than our
    assumptions due to adjustments resulting from our continuing program of
    asset life studies.
--  Financing costs: The actual result is $447 million. The assumption was
    revised on August 8 to approximately $440 million from approximately
    $400 million due to our higher net debt outstanding and prepayment
    premium for early redemption of Notes in May 2013.
--  Blended statutory income tax rate: The actual result is 26.1%. The
    assumption was revised on August 8 to a range of 25.5 to 26.5% as a
    result of the increase in the B.C. provincial corporate income tax rate.
    Our original assumption was a range of 25 to 26%.
--  Cash income tax payments: The actual result is $438 million. The
    assumption was $390 million to $440 million.

Qualitative assumptions:


--  Ongoing intense wireless and wireline competition in both consumer and
    business markets.
--  Flat to higher wireless acquisition and retention expenses - confirmed,
    with these expenses in total increasing by 0.2%.
--  Flat to slightly higher wireless blended ARPU - confirmed by the 1.6%
    increase.
--  Wireline data revenue growth to be partially offset by the ongoing
    decline in legacy voice revenue - confirmed by data revenue growth of
    11% offset by voice and other revenue decline of 5.2%, for net external
    wireline revenue growth of 3.9%.
--  Planned capital expenditure level (excluding spectrum licences) impacted
    by ongoing investments to support wireless and wireline customer growth
    and technology enhancements.

1.5 Financial and operating targets for 2014

We expect future growth through postpaid wireless net additions, combined with ongoing smartphone adoption and upgrades, as well as continued Optik TV and high-speed Internet subscriber growth, with modest ARPU growth across these services.

For 2014, our targets exclude the impacts of Public Mobile. We have targeted consolidated revenues in the range of $11.9 to $12.1 billion, or growth of approximately 4 to 6%. Consolidated EBITDA is targeted in the range of $4.150 to $4.350 billion, or growth of approximately 3 to 8%. Revenue and EBITDA growth is expected to result from increases in wireless and wireline data services. Basic EPS is expected to be in the range of $2.25 to $2.45, or an increase of approximately 11% to 21% due to EBITDA growth, combined with a reduction in shares outstanding as a result of our NCIB programs. Separate from our targets, the integration of Public Mobile in 2014 is expected to have an impact to consolidated and wireless EBITDA and EPS. Consolidated and wireless EBITDA is expected to be negatively impacted by approximately $40 million, while EPS is expected to be negatively impacted by approximately six cents.

Wireless network revenue is targeted to be in the range of $5.9 to $6.0 billion in 2014, or an increase of approximately 5 to 7% due to modest growth in subscribers and modest growth in blended ARPU from increasing data usage. We estimate that the Canadian wireless market will grow in 2014, with a penetration gain of approximately one to two percentage points, similar to 2013. We expect growth in data and roaming revenues will offset lower voice revenue. Wireless EBITDA is targeted to $2.725 to 2.825 billion, or an increase of approximately 4 to 8%.

Wireline revenue is targeted to be in the range of $5.45 to $5.55 billion in 2014, or an increase of approximately 3 to 5%, reflecting continued data revenue growth from Optik TV and high-speed Internet services, as well as from business services, partially offset by continued decreases in legacy voice revenues. Wireline EBITDA is targeted to be in the range of $1.425 to $1.525 billion in 2014, or an increase of approximately 1 to 8%. We anticipate margin improvements from Optik TV services, large enterprise business services and efficiency initiatives, partially offset by the ongoing industry trend of revenue losses from higher-margin legacy voice services.

Consolidated capital expenditures in 2014 are targeted to be approximately $2.2 billion, excluding the purchase of spectrum licences. We plan to continue investing in wireless for 4G LTE expansion and upgrades. We intend to continue broadband infrastructure expansion and upgrades, including bringing fibre optic cable deeper into the network, to support Optik TV and high-speed Internet subscriber growth and faster Internet broadband speeds, as well as invest in network and system resiliency and reliability to support our ongoing customers first initiatives and ready the network and systems for future retirement of legacy assets.

Our long-term financial objectives, policies and guidelines are described in Section 1.4. Achievement of our 2014 targets is subject to risks and uncertainties, including, but not limited to competition, regulatory matters, financing and debt requirements, taxation matters, economic conditions, litigation and other factors noted in our Caution regarding forward-looking statements. The 2014 targets are based on many assumptions including:

Assumptions for 2014 targets


--  We estimate that economic growth in Canada will be 2.4% in 2014.
--  No material adverse regulatory rulings or government actions.
--  Wireless and wireline intense competition continues from 2013 in both
    consumer and business markets.
--  Approximately one to two percentage point increase in wireless industry
    penetration of the Canadian market, similar to 2013.
--  Ongoing subscriber adoption and upgrades of data-intensive smartphones
    at a rate consistent with 2013 levels (70 to 80% of postpaid gross
    additions), as customers want more mobile connectivity to the Internet.
--  Wireless revenue growth from higher postpaid subscriber loadings
    consistent with increased industry market penetration, as well as modest
    increase in blended ARPU resulting from increased data usage, including
    from increased use of shared data plans, and subscriber mix.
--  Flat to higher wireless acquisition and retention expenses, dependent on
    gross loadings and market pressures.
--  Growth in wireline data revenues from an increase in Optik TV and high-
    speed Internet subscribers, consistent with 2013, and a modest increase
    in average revenue per customer, as well as from growth in business
    services.
--  Pension plans: Defined benefit pension plan expense of approximately $85
    million recorded in Employee benefits expense and approximately $2
    million recorded in employee defined benefit plans net interest in
    Financing costs; a 4.75% discount rate for employee defined benefit
    pension accounting purposes; and defined benefit pension plan funding of
    approximately $105 million.
--  Restructuring and other like costs of approximately $75 million for
    continuing operational efficiency initiatives, with other margin
    enhancement initiatives to mitigate pressures from technological
    substitution and subscriber growth.
--  Income taxes: Blended statutory income tax rate of 26.0 to 26.5% and
    cash income tax payments between $540 million and $600 million. Cash tax
    payments are increasing due to higher instalment payments based on 2013
    income, the effect of Canadian federal government's enacted policy
    change that eliminates the ability to defer income taxes through the use
    of different tax year-ends for operating partnerships and corporate
    partners, as well as lower recoveries.
--  Continued investments in broadband infrastructure and for 4G LTE
    expansion and upgrades, and network and systems resiliency and
    reliability.
--  Moderate weakening of the Canadian dollar to U.S. dollar exchange rate
    versus the average exchange rate in 2013.

2. Discussion of operations

Our discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of the Management's review of operations.

2.1 General

Our operating and reportable segments are wireless and wireline. Segmented information is regularly reported to our Chief Executive Officer (the chief operating decision maker).

2.2 Summary of quarterly results and trends



----------------------------------------------------------------------------
($ millions, except per       2013  2013  2013  2013  2012  2012  2012  2012
 share amounts)                 Q4    Q3    Q2    Q1    Q4    Q3    Q2    Q1
----------------------------------------------------------------------------
Operating revenues           2,948 2,874 2,826 2,756 2,851 2,774 2,665 2,631
----------------------------------------------------------------------------
Operating expenses
Goods and services purchased 1,349 1,237 1,222 1,154 1,330 1,222 1,152 1,116
Employee benefits expense
 (1)                           648   602   606   568   603   562   543   534
Depreciation and
 amortization                  461   445   446   451   478   461   456   470
----------------------------------------------------------------------------
Total operating expenses     2,458 2,284 2,274 2,173 2,411 2,245 2,151 2,120
----------------------------------------------------------------------------
Operating income(1)            490   590   552   583   440   529   514   511
Financing costs (1)            110   109   132    96    96    96    96    86
----------------------------------------------------------------------------
Income before income
 taxes(1)                      380   481   420   487   344   433   418   425
Income taxes (1)                90   125   134   125    81   110   119   106
----------------------------------------------------------------------------
Net incomeand Net income
 attributable to equity
 shares(1)                     290   356   286   362   263   323   299   319
----------------------------------------------------------------------------
Net income per equity
 share(1)(2)
- Basic                       0.47  0.56  0.44  0.56  0.40  0.49  0.46  0.49
- Diluted                     0.46  0.56  0.44  0.55  0.40  0.49  0.46  0.49
Dividends declared per
 equity share(2)(3)           0.36  0.34  0.34  0.32  0.32 0.305     - 0.595
----------------------------------------------------------------------------
Cash provided by operating
 activities                    726 1,084   707   729   703   965   788   763
----------------------------------------------------------------------------
Additional information
EBITDA (1)(4)                  951 1,035   998 1,034   918   990   970   981
Restructuring and other like
 costs (4) included in
 EBITDA                         33    15    39    11    19     3    13    13
EBITDA - excluding
 restructuring and other
 like costs (4)                984 1,050 1,037 1,045   937   993   983   994
Free cash flow (4)             136   365   192   358   263   426   284   358
----------------------------------------------------------------------------

(1) Periods in 2012 have been adjusted for retrospective application of
    accounting standard IAS 19 Employee benefits (2011).
(2) Adjusted for the two-for-one stock split effective April 16, 2013.
(3) Dividends declared in 2012 Q1 include the first quarter dividend (29
    cents per share paid April 2, 2012) and the second quarter dividend
    (30.5 cents per share paid July 3, 2012).
(4) See Section 7.1 Non-GAAP financial measures.

Trends

The consolidated revenue trend continues to reflect: (i) year-over-year growth in wireless network revenue generated from a growing subscriber base and a higher data usage; (ii) wireless equipment revenue that has declined year over year in the last two quarters, but has generally increased year over year from increasing sales of higher value smartphones; and (iii) year-over-year growth in wireline data revenues driven by TV, Internet, business process outsourcing services and TELUS Health, which continues to exceed the decline in legacy wireline voice and other revenues.

Increasing wireless network revenue reflects growing data revenue (14% year-over-year growth in the fourth quarter and 16% in the full year of 2013, respectively), partly offset by declines in voice revenue (down 2.7% and 2.1% year-over-year in the fourth quarter and full year of 2013, respectively). Data revenue growth reflects increased data consumption driven by the proliferation of smartphones, tablets and other wireless devices, partly offset by increased use of data sharing plans. Data growth also reflects increased roaming revenues. Consequently, monthly blended ARPU has increased year over year for 13 consecutive quarters. Some moderation in the data ARPU growth trend results from competitive pressures driving bigger included-data buckets in rate plans, including data sharing, and an increasing number of unlimited messaging rate plans, as well as off-loading of data traffic to increasingly available Wi-Fi hotspots. In July 2013, we introduced new two-year wireless rate plans, which may impact future revenue trends and costs of acquisition and retention, including subscribers optimizing unlimited talk and text and shared data plans, and potentially increase the frequency that subscribers update their devices and services. As contracts signed before July 2013 expire and subscribers can only renew on the maximum two-year contracts, blended ARPU is expected to increase over time. However, the outcome is highly dependent on competitor and consumer behaviour, device selection and other factors.

Historically, there has been third and fourth quarter seasonality with respect to higher wireless subscriber additions, related acquisition costs and equipment sales, and higher retention costs due to contract renewals. These impacts can also be more pronounced around iconic device launches. Wireless EBITDA typically decreases in the fourth quarter due to increased competitive intensity and seasonal loading. Subscriber additions have usually been lowest in the first quarter. Historically, monthly wireless ARPU has risen sequentially in the second and third quarters due to increased vacation season usage and roaming, and declined sequentially in the fourth and first quarters.

The trend of increasing wireline data revenue reflects the continuing expansion of our TELUS TV subscriber base (up 20% in the 12-month period ended December 31, 2013) and increasing revenues per customer, as well as growth in enhanced data, Internet and business process outsourcing services. Growth in Internet revenues includes expansion of our high-speed Internet subscriber base (up 5.2% in the 12-month period ended December 31, 2013) as a result of bundling offers with Optik TV, as well as increasing revenue per customer. A general trend of declining wireline voice revenues and NALs is due to substitution to wireless and IP-based services and applications, as well as competition from VoIP service providers (including cable-TV competitors), resellers and facilities-based competitors. The general trend for business NALs is a decline due to increased competition in the small and medium business (SMB) market, as well as conversion of voice lines to IP and wireless services.

The trend in the Goods and services purchased expense reflects increasing content and support costs for the growing TELUS Optik TV subscriber base, as well as third and fourth quarter wireless expense seasonality described above.

The trend in Employee benefits expenses includes increased employee-related restructuring costs in 2013, compensation increases, individually immaterial business acquisitions and targeted hiring to support wireless growth.

The sequential decrease in depreciation and amortization in the first and second quarters of 2013 resulted from minor adjustments from our continuing program of asset life studies.

The Financing costs in 2013 reflect our second and fourth quarter re-financing activities. Notably, Financing costs in the second quarter of 2013 include a $23 million long-term debt prepayment premium. In addition, Financing costs for the eight periods shown include varying amounts of foreign exchange gains or losses and varying amounts of interest income, such as interest income from the settlement of prior years' income tax-related matters of $10 million in the first quarter of 2012.

The trends in Net income and basic 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 after-tax interest on reassessments.


Income tax-related adjustments
----------------------------------------------------------------------------
                            2013  2013  2013   2013  2012  2012  2012   2012
                              Q4    Q3    Q2     Q1    Q4    Q3    Q2     Q1
----------------------------------------------------------------------------
Net income impact ($
 millions)                    12     2   (22)     5    10     3   (11)    10
Basic EPS impact ($)        0.02     - (0.03)  0.01  0.02     - (0.02)  0.02
----------------------------------------------------------------------------

The trend in Cash provided by operating activities reflects growth in EBITDA, net of higher interest and income tax payments. The trend in free cash flow also reflects these factors, net of increasing capital expenditures (excluding spectrum licences) associated with our continued focus on investment in wireline and wireless broadband infrastructure, customer reliability, large enterprise deals and to ready the network and systems for future retirement of legacy assets.

2.3 Consolidated operations

Discussion of TELUS' consolidated financial performance follows. Segmented discussion is provided in Section 2.4 Wireless segment,Section 2.5 Wireline segment and Section 4.3 Cash used by investing activities - capital expenditures.


Operating revenues
----------------------------------------------------------------------------
                            Fourth quarters ended              Years ended
                                      December 31              December 31
                          --------------------------------------------------
($ millions)                  2013    2012 Change      2013    2012 Change
----------------------------------------------------------------------------
Service                      2,699   2,598    3.9%   10,601  10,079    5.2%
Equipment                      229     236   (3.0)%     735     773   (4.9)%
----------------------------------------------------------------------------
Service and equipment
 revenues                    2,928   2,834    3.3%   11,336  10,852    4.5%
Other operating income          20      17   17.6%       68      69   (1.4)%
----------------------------------------------------------------------------
                             2,948   2,851    3.4%   11,404  10,921    4.4%
----------------------------------------------------------------------------

Consolidated Operating revenues increased year over year by $97 million in the fourth quarter of 2013 and $483 million in the full year of 2013.


--  Service revenue increased year over year by $101 million in the fourth
    quarter of 2013 and $522 million in the full year of 2013, driven by
    wireless, TV and Internet subscriber growth and increasing data
    revenues, which were partly offset by declining wireless and wireline
    voice service revenues and declining wireline NALs.
--  Equipment revenue decreased year over year by $7 million in the fourth
    quarter of 2013 and $38 million in the full year of 2013. Wireless
    equipment sales declined slightly year over year in the quarter due to
    lower gross subscriber additions, more subscribers supplying their own
    devices, and lower retention volumes, partly offset by a higher mix of
    smartphones. For the full year, wireless equipment sales were up
    slightly due to higher retention volumes and the higher mix of
    smartphones. Wireline equipment sales were flat in the quarter but
    declined in the full year of 2013 due to lower business spending,
    including by governments, as well as a significant negotiated equipment
    sale in the third quarter of 2012.
--  Other operating income increased by $3 million year over year in the
    fourth quarter of 2013, mainly due to gains on investments. For the full
    year, it decreased year over year by $1 million, as gains on investments
    in 2013 were offset by lower government assistance and the prior year $7
    million pre-tax gain, net of equity losses, related to the TELUS Garden
    residential real estate partnership.

Operating expenses
----------------------------------------------------------------------------
                            Fourth quarters ended              Years ended
                                      December 31              December 31
                          --------------------------------------------------
($ millions)                  2013    2012 Change      2013    2012 Change
----------------------------------------------------------------------------
Goods and services
 purchased (1)               1,349   1,330    1.4%    4,962   4,820    2.9%
Employee benefits expense
 (1)                           648     603    7.5%    2,424   2,242    8.1%
Depreciation                   347     373   (7.0)%   1,380   1,422   (3.0)%
Amortization of intangible
 assets                        114     105    8.6%      423     443   (4.5)%
----------------------------------------------------------------------------
                             2,458   2,411    1.9%    9,189   8,927    2.9%
----------------------------------------------------------------------------

(1) Includes restructuring and other like costs.

Operating expenses increased year over year by $47 million in the fourth quarter of 2013 and $262 million in the full year of 2013.


--  Goods and services purchased increased year over year by $19 million in
    the fourth quarter of 2013 and $142 million in the full year of 2013.
    The increases reflect higher programming costs for TV services and
    higher network and support costs for the growing wireless subscriber
    base, partly offset by lower wireless marketing expenses. For the
    quarter, this was net of lower cost of goods sold associated with lower
    wireless equipment sales. For the full year, this was net of lower cost
    of goods sold associated with lower wireline equipment sales.
--  Employee benefits expense increased year over year by $45 million in the
    fourth quarter of 2013 and $182 million in the full year of 2013, mainly
    due to higher compensation and benefit costs, increased restructuring
    costs for employee-related initiatives, and operations from individually
    immaterial acquisitions.
--  Depreciation expense decreased year over year by $26 million in the
    fourth quarter of 2013 and $42 million in the full year of 2013. The
    decreases were mainly due to adjustments in 2013 and 2012, resulting
    from our continuing program of asset life studies, partly offset by
    growth in capital assets (such as broadband- and TV-related assets, the
    wireless LTE network and IDCs).
--  Amortization of intangible assets increased year over year by $9 million
    in the fourth quarter of 2013 and decreased year over year by $20
    million in the full year of 2013. The increase for the quarter primarily
    reflects growth in administrative and network software assets, and
    acquisitions. The decrease for the full year was due to prior-year
    adjustments resulting from our continuing program of asset life studies
    and an increase in fully amortized software assets, net of increases
    from new administrative and network software assets and acquisitions.

In December 2013, we carried out our annual impairment testing for intangible assets and goodwill. It was determined that there were no impairments.


Operating income
----------------------------------------------------------------------------
                              Fourth quarters ended             Years ended
                                        December 31             December 31
                            ------------------------------------------------
($ millions)                    2013    2012 Change     2013    2012 Change
----------------------------------------------------------------------------
Operating income                 490     440   11.4%   2,215   1,994   11.1%
----------------------------------------------------------------------------

Operating income increased year over year by $50 million in the fourth quarter of 2013 and $221 million in the full year of 2013. Higher EBITDA contributed $33 million in the fourth quarter of 2013 ($26 million from wireless; $7 million from wireline) and $159 million in the full year of 2013 ($146 million from wireless; $13 million from wireline). Decreases in total depreciation and amortization expenses contributed $17 million in the quarter and $62 million for the full year.


Financing costs
----------------------------------------------------------------------------
                              Fourth quarters ended             Years ended
                                        December 31             December 31
                            ------------------------------------------------
($ millions)                   2013    2012  Change    2013    2012  Change
----------------------------------------------------------------------------
Interest expenses, excluding
 long-term debt prepayment
 premium                         97      89     9.0%    380     355     7.0%
Long-term debt prepayment
 premium                          -       -       -      23       -     n/m
Employee defined benefit
 plans net interest              14      10    40.0%     54      42    28.6%
Interest (income) and
 foreign exchange (gains)        (1)     (3)   66.7%    (10)    (23)   56.5%
----------------------------------------------------------------------------
                                110      96    14.6%    447     374    19.5%
----------------------------------------------------------------------------

Financing costs increased year over year by $14 million in the fourth quarter of 2013 and $73 million in the full year of 2013. This resulted mainly from our re-financing activities in the second and fourth quarters of 2013, which increased our long-term debt outstanding and reduced near-term re-financing risk by extending our average term-to-maturity of long-term debt to 9.4 years at December 31, 2013, from 5.5 years one year earlier. Our weighted average interest rate on long-term debt (excluding commercial paper) was 5.00% at December 31, 2013, as compared to 5.27% one year earlier. For additional details, see Long-term debtissue and repayments in Section 4.4.


--  Interest expenses increased year over year by $8 million in the fourth
    quarter of 2013 and $25 million in the full year of 2013, mainly due to
    the increase in long-term debt and repayment of low-rate commercial
    paper.
--  Long-term debt prepayment premium is a $23 million expense before income
    taxes resulting from our redemption in May 2013 of $700 million of
    Series CF 4.95% Notes one year ahead of their original maturity.
--  Employee defined benefit plans net interest is calculated for the
    periods in 2013 and 2012 based on the respective net defined benefit
    liabilities at December 31, 2012 and 2011, respectively. The increases
    in 2013 reflect an increase in the net defined benefit liability in
    2012, which were only partly offset by the decrease in the discount
    rate. Employee defined benefit plans net interest in 2014 is expected to
    decrease to a nominal amount. This results from the net employee defined
    benefit pension plan deficit switching to a nominal surplus, due to
    strong returns in 2013 and the application of a higher discount rate at
    December 31, 2013, net of an increase in life expectancy assumptions.
--  Interest income and foreign exchange gains fluctuate from period to
    period. Interest income was $8 million in 2013 (including $4 million
    from the settlement of prior years' income tax-related matters), as
    compared to interest income of $15 million in 2012 (including $14
    million from the settlement of prior years' income tax-related matters).
    The balances of amounts were net foreign exchange gains.

Income taxes
----------------------------------------------------------------------------
                           Fourth quarters ended               Years ended
                                     December 31               December 31
                        ----------------------------------------------------
($ millions, except tax
 rates)                    2013    2012   Change     2013    2012   Change
----------------------------------------------------------------------------
Basic blended income tax
 at weighted average
 statutory income tax
 rates                       99      88     12.5%     461     415     11.1%
Revaluation of deferred
 income tax liability to
 reflect future
 statutory income tax
 rates                        -       -        -       22      12     83.3%
Tax rate differential
 on, and consequential
 adjustments from,
 reassessments of prior
 years' income tax
 issues                     (12)     (8)   (50.0)%    (14)    (13)    (7.7)%
Other                         3       1      n/m        5       2    150.0%
----------------------------------------------------------------------------
                             90      81     11.1%     474     416     13.9%
----------------------------------------------------------------------------
Blended statutory tax
 rates (%)                 26.1    25.8 0.3 pts.     26.1    25.7 0.4 pts.
Effective tax rates (%)    23.7    23.6 0.1 pts.     26.8    25.7 1.1 pts.
----------------------------------------------------------------------------

Basic blended income tax at weighted average statutory income tax rates increased year over year by $11 million in the fourth quarter of 2013 and $46 million in the full year of 2013, due to growth in pre-tax income and the increase in the B.C. provincial statutory income tax rate from 10% to 11% effective April 1, 2013. Revaluation of deferred income tax liabilities for the full year of 2013 resulted from the B.C. provincial corporate income tax rate increase in the second quarter of 2013, while for the full year of 2012, revaluation of deferred income tax liabilities resulted from the elimination of previously enacted reductions in Ontario provincial corporate income tax rates in the second quarter of 2012.


Comprehensive income
----------------------------------------------------------------------------
                              Fourth quarters ended             Years ended
                                        December 31             December 31
                            ------------------------------------------------
($ millions)                   2013    2012  Change    2013    2012  Change
----------------------------------------------------------------------------
Net income                      290     263    10.3%  1,294   1,204     7.5%
Other comprehensive income
 (loss):
 Items that may be
  subsequently reclassified
  to income                      (2)     25     n/m      (9)     29     n/m
 Item never subsequently
  reclassified to income -
  Employee defined benefit
  plans re-measurements         755    (454)    n/m     998    (286)    n/m
----------------------------------------------------------------------------
                              1,043    (166)    n/m   2,283     947   141.1%
----------------------------------------------------------------------------

Comprehensive income increased year over year by $1.2 billion in the fourth quarter of 2013 and $1.3 billion in the full year of 2013, primarily due to employee defined benefit plans re-measurements resulting from strong returns on plan assets and an increase in the discount rate, net of an increase in life expectancy assumptions. Net income increased year over year by $27 million in the fourth quarter of 2013 and $90 million in the full year of 2013 (see Operating highlights in Section 1.3). Items that may be subsequently reclassified to income are composed of changes in unrealized fair value of derivatives designated as cash flow hedges, foreign currency translation adjustments arising from translating financial statements of foreign operations, and changes in the unrealized fair value of available-for-sale investments.

2.4 Wireless segment


Wireless operating indicators (excluding Public Mobile)(1)
----------------------------------------------------------------------------
At December 31                                    2013       2012   Change
----------------------------------------------------------------------------
Subscribers(1)(2) (000s)
Postpaid                                         6,751      6,543      3.2%
Prepaid                                          1,056      1,127     (6.3)%
----------------------------------------------------------------------------
Total                                            7,807      7,670      1.8%
----------------------------------------------------------------------------
Postpaid proportion of subscriber base
 (1)(2) (%)                                       86.5       85.3 1.2 pts.
HSPA+ population coverage (3) (millions)          34.9       34.3      1.7%
LTE population coverage (3) (millions)            28.8       23.9     20.5%
----------------------------------------------------------------------------

                        Fourth quarters ended                  Years ended
                                  December 31                  December 31
                  ----------------------------------------------------------
                     2013    2012      Change     2013    2012      Change
----------------------------------------------------------------------------
Subscriber gross
 additions(1)(2)
 (000s)
Postpaid              291     324       (10.2)%  1,118   1,174        (4.8)%
Prepaid               127     131        (3.1)%    496     472         5.1%
----------------------------------------------------------------------------
Total                 418     455        (8.1)%  1,614   1,646        (1.9)%
----------------------------------------------------------------------------
Subscriber net
 additions(1)(2)
 (000s)
Postpaid              113     123        (8.1)%    378     414        (8.7)%
Prepaid               (22)    (11)     (100.0)%    (71)    (83)       14.5%
----------------------------------------------------------------------------
Total                  91     112       (18.8)%    307     331        (7.3)%
----------------------------------------------------------------------------
ARPU, per month
 (1)(4)($)
Voice               33.69   35.66        (5.5)%  34.39   36.39        (5.5)%
Data                28.17   25.29        11.4%   26.99   24.00        12.5%
----------------------------------------------------------------------------
Blended             61.86   60.95         1.5%   61.38   60.39         1.6%
----------------------------------------------------------------------------
Churn, per
 month(1)(4)(%)
 Blended             1.41    1.51 (0.10) pts.     1.41    1.47 (0.06) pts.
 Postpaid            0.97    1.12 (0.15) pts.     1.03    1.09 (0.06) pts.
COA (5) per gross
 subscriber
 addition (1)(4)
 ($)                  453     453           -%     400     408        (2.0)%
Retention spend to
 network revenue
 (1)(4) (%)          12.9    13.4  (0.5) pts.     11.4    11.4      - pts.
----------------------------------------------------------------------------
(1) Where noted, wireless operating indicators exclude those of Public
    Mobile (acquired on November 29, 2013). Public Mobile had approximately
    222,000 subscribers at December 31, 2013, all of which were prepaid
    subscribers.
(2) Effective with the second quarter of 2013 and on a prospective basis,
    machine-to-machine (M2M) subscriptions have been excluded from all
    subscriber-based measures. Cumulative subscribers include an April 1,
    2013, opening balance adjustment to remove approximately 76,000 M2M
    subscriptions. Effective with the fourth quarter of 2013, and on a
    prospective basis, we have adjusted postpaid wireless subscribers to
    remove Mike subscriptions, as we have ceased marketing the Mike product
    and started to turn down the iDEN network. Cumulative subscriber
    connections include an October 1, 2013 adjustment to remove from the
    postpaid wireless subscriber base approximately 94,000 Mike subscribers,
    representing those who, in our judgment, are unlikely to migrate to our
    new services.
(3) Including network access agreements.
(4) See Section 7.2 Wireless operating indicators. These are industry
    measures useful in assessing operating performance of a wireless
    company, but are not measures defined under IFRS-IASB.
(5) Cost of acquisition.

Operating revenues - wireless segment
----------------------------------------------------------------------------
                       Fourth quarters ended                   Years ended
                                 December 31                   December 31
                ------------------------------------------------------------
($ millions)          2013      2012  Change        2013      2012  Change
----------------------------------------------------------------------------
Network
 revenues:
 Voice                 786       808    (2.7)%     3,172     3,241    (2.1)%
 Data                  648       570    13.7%      2,469     2,126    16.1%
----------------------------------------------------------------------------
 Total network
  revenues           1,434     1,378     4.1%      5,641     5,367     5.1%
Equipment and
 other                 151       155    (2.6)%       489       478     2.3%
----------------------------------------------------------------------------
External
 operating
 revenues            1,585     1,533     3.4%      6,130     5,845     4.9%
Intersegment
 network revenue        11        11       -%         47        41    14.6%
----------------------------------------------------------------------------
Total operating
 revenues (1)        1,596     1,544     3.4%      6,177     5,886     4.9%
----------------------------------------------------------------------------
Data revenue to
 network revenue
 (%)                    45        41  4 pts.          44        40  4 pts.
----------------------------------------------------------------------------
(1) Includes $9 million Public Mobile revenues, composed of $7 million
    network revenues and $2 million of equipment and other revenues.

Wireless segment revenues increased year over year by $52 million or 3.4% in the fourth quarter of 2013 and $291 million or 4.9% in the full year of 2013, driven by growth in data network revenue, offset by a moderate decline in voice network revenue. Included in the total are Public Mobile's network, equipment and other revenues of $9 million for the post-acquisition period from November 29 to December 31, 2013.

Network revenues from external customers increased year over year by $56 million in the fourth quarter of 2013 and $274 million in the full year of 2013.


--  Voice network revenue, which includes $7 million from Public Mobile,
    decreased year over year by $22 million in the fourth quarter of 2013
    and $69 million in the full year of 2013. Voice ARPU, excluding Public
    Mobile, was $33.69 in the fourth quarter of 2013 and $34.39 in the full
    year of 2013, reflecting year-over-year decreases of $1.97 or 5.5% in
    the quarter and $2.00 or 5.5% for the year. The decline in voice ARPU is
    due to the increased use of included-minute plans for both local and
    long distance calling, an increasing volume of mobile Internet
    connection devices and tablet subscriptions where there are no voice
    revenues, lower voice roaming prices, and an increased penetration of
    the lower ARPU Koodo brand, partly offset by increased roaming volumes
    and rate increases for minutes outside of plan limits.
--  Data network revenue, which includes a nominal amount from Public
    Mobile, increased year over year by $78 million in the fourth quarter of
    2013 and $343 million in the full year of 2013. The increases reflect
    subscriber growth and increased usage from high smartphone adoption
    rates, the expansion of coverage of our LTE network and continued growth
    in data roaming revenues due to increased roaming volumes. Data ARPU,
    excluding Public Mobile, was $28.17 in the fourth quarter of 2013 and
    $26.99 in the full year of 2013, reflecting year-over-year increases of
    $2.88 or 11% in the quarter and $2.99 or 12% for the year.
--  Excluding Public Mobile, monthly blended ARPU was $61.86 in the fourth
    quarter of 2013 and $61.38 in the full year of 2013, reflecting a year-
    over-year increase of $0.91 or 1.5% in the quarter and $0.99 or 1.6% for
    the year. The increases were driven by a change in subscriber mix and
    growth in data usage and roaming, partly offset by a decline in voice
    ARPU and an increased penetration of the lower ARPU Koodo brand.
--  Excluding Public Mobile, gross subscriber additions, were 418,000 in the
    fourth quarter reflecting a year-over-year decrease of 37,000, while
    gross additions were 1,614,000 in the full year of 2013, reflecting a
    year-over-year decrease of 32,000. Postpaid gross additions were 291,000
    in the fourth quarter of 2013 and 1,118,000 in the full year of 2013,
    reflecting year-over-year decreases of 33,000 in the quarter and 56,000
    for the year, due to slower market growth and continued competitive
    intensity. Prepaid gross additions were 127,000 in the fourth quarter of
    2013 and 496,000 in the full year of 2013, reflecting a year-over-year
    decrease of 4,000 in the quarter and a year-over-year increase of 24,000
    for the year. The decrease for the quarter reflects slower market growth
    and continued competitive intensity from lower entry rate of postpaid
    plans. The increase for the year reflects loading activity on Koodo
    brand prepaid services that were introduced in August 2012.
--  Excluding Public Mobile, net subscriber additions were 91,000 in the
    fourth quarter and 307,000 in the full year of 2013, reflecting year-
    over-year decreases of 21,000 in the quarter and 24,000 for the year.
    Postpaid net additions were 113,000 in the fourth quarter of 2013 and
    378,000 in the full year of 2013, reflecting year over year decreases of
    10,000 in the quarter and 36,000 in the year. The decreases in postpaid
    net additions were due to factors described in gross subscriber
    additions, partly offset by lower subscriber churn and change in
    subscriber mix. Net reductions in prepaid subscribers were 22,000 in the
    fourth quarter of 2013 and 71,000 in the full year of 2013, as compared
    to reductions of 11,000 and 83,000 for the respective periods in 2012.
    Combined prepaid losses reflect conversions to postpaid services, as
    well as continued competitive intensity from lower entry cost of
    postpaid plans. The improvement for the year was primarily due to new
    subscribers attracted to Koodo brand prepaid services.
--  Excluding Public Mobile, blended monthly wireless subscriber churn rates
    were 1.41% in both the fourth quarter of 2013 and the full year of 2013,
    as compared to 1.51% in the fourth quarter of 2012 and 1.47% in the full
    year of 2012. The improvement in blended churn resulted from our
    continuing customers first initiatives and Clear and Simple approach,
    which differentiate TELUS in an intensely competitive market, as well as
    from a greater percentage of postpaid clients in our subscriber base.
    Despite promotions from other incumbents and AWS entrants, our postpaid
    churn remained low at 0.97% in the fourth quarter of 2013 (1.12% in the
    fourth quarter of 2012), while our postpaid churn for the full year of
    2013 was 1.03% (1.09% in 2012).

Equipment and other revenues, which include $2 million from Public Mobile, decreased year over year by $4 million in the fourth quarter of 2013 and increased year over year by $11 million in the full year of 2013. Lower equipment revenues in the quarter resulted mainly from the decrease in subscriber acquisition and retention volumes, partly offset by a greater proportion of smartphones in the sales mix. The increase for the full year resulted from higher retention volumes, as well as a greater proportion of smartphones in the sales mix, partly offset by lower gross loadings and the elimination of activation and renewal fees beginning in the fourth quarter of 2012.


--  The smartphone adoption rate remained strong at 77% of postpaid gross
    additions in the fourth quarter of 2013 (76% in the fourth quarter of
    2012). Smartphone subscribers represented 77% of the postpaid subscriber
    base at December 31, 2013, as compared to 66% one year earlier.
    Smartphone subscribers generate significantly higher ARPU and have lower
    churn than those with messaging and voice-only devices, but have higher
    costs of acquisition and retention resulting from the large device
    subsidies for multiple-year contract sales or renewals. A higher
    smartphone mix is expected to continue to positively impact future data
    revenue growth, ARPU and churn rates, which increase expected lifetime
    revenue per customer.

Intersegment revenue in the wireless segment represents network services provided to the wireline segment. Such revenues are eliminated upon consolidation along with the associated expense in the wireline segment.


Operating expenses - wireless segment
----------------------------------------------------------------------------
                          Fourth quarters ended                Years ended
                                    December 31                December 31
                      ------------------------------------------------------
($ millions)               2013     2012 Change       2013     2012 Change
----------------------------------------------------------------------------
Goods and services
 purchased:
 Equipment sales
  expenses                  378      389   (2.8)%    1,279    1,257    1.8%
 Network operating
  expenses                  181      168    7.7%       707      674    4.9%
 Marketing expenses         126      134   (6.0)%      423      431   (1.9)%
 Other (1) (2)              140      126   11.1%       507      461   10.0%
Employee benefits
 expense (1)                179      161   11.2%       657      605    8.6%
----------------------------------------------------------------------------
Total operating
 expenses (2)             1,004      978    2.7%     3,573    3,428    4.2%
----------------------------------------------------------------------------
(1) Includes restructuring and other like costs.
(2) Includes Public Mobile-related expenses totalling $19 million. Of this
    amount, $8 million is restructuring and other like costs.

Wireless segment expenses increased year over year by $26 million in the fourth quarter of 2013 and $145 million in the full year of 2013. This includes Public Mobile operating expenses and related restructuring and other like costs totalling $19 million for the post-acquisition period from November 29 to December 31, 2013.

Equipment sales expenses, which include $3 million related to Public Mobile, decreased year over year by $11 million in the fourth quarter of 2013 and increased year over year by $22 million for the full year of 2013. The decrease for the quarter reflects lower subscriber acquisition and retention volumes, slightly offset by higher smartphone loadings. The increase for the full year was due to higher retention volumes, as well as an increase in the proportion of smartphones sold to new and existing customers.


--  Retention costs as a percentage of network revenue were 12.9% in the
    fourth quarter of 2013 and 11.4% in the full year of 2013, as compared
    to 13.4% in the fourth quarter of 2012 and 11.4% in the full year of
    2012. The year-over year decrease in the quarter was primarily due to
    decreased retention volumes, while for the full year retention volumes
    increased and network revenue growth kept pace with the rate of
    retention spend helped by increased data from retained subscribers.
--  COA per gross subscriber addition was $453 in the fourth quarter of 2013
    and $400 for the full year of 2013, unchanged year over year for the
    quarter, while reflecting a year over year decrease of $8 for the full
    year. The decrease for the year was mainly due to promotional discipline
    and lower per-unit subsidy costs, partly offset by higher commissions
    due to a higher smartphone mix.

Network operating expenses, which include $4 million related to Public Mobile, increased year over year by $13 million in the fourth quarter of 2013 and $33 million in the full year of 2013. Growth in data roaming volumes and increases in operating costs associated with LTE network expansion and, for the full year, a one-time roaming-related settlement recovery in the second quarter of 2012, were partly offset by reduced roaming revenue-share rates and lower licensing costs.

Marketing expenses, which include a nominal amount related to Public Mobile, decreased year over year by $8 million in both the fourth quarter and full year of 2013. Overall, we reduced spending, due to lower commissions from reduced gross subscriber additions.

Other goods and services purchased increased year over year by $14 million in the fourth quarter of 2013 and $46 million in the full year of 2013, resulting from higher restructuring and other like costs associated with real estate consolidation and business acquisition activity, including $8 million related to Public Mobile, as well as higher external labour costs and higher administrative costs to support the growing subscriber base.

Employee benefits expense, which includes $3 million related to Public Mobile, increased year over year by $18 million in the fourth quarter of 2013 and $52 million in the full year of 2013, resulting from higher compensation and benefit costs, an increase in the number of full-time equivalent employees to provide customer service and technical support for a growing subscriber base and greater smartphone adoption.


EBITDA - wireless segment
----------------------------------------------------------------------------
                          Fourth quarters ended                 Years ended
                                    December 31                 December 31
                    --------------------------------------------------------
($ millions, except
 margins)                2013     2012   Change      2013     2012   Change
----------------------------------------------------------------------------
EBITDA (1)                592      566      4.4%    2,604    2,458      5.9%
Restructuring and
 other like costs
 included in
 EBITDA(2)                 12        4      n/m        30       13    130.8%
----------------------------------------------------------------------------
EBITDA excluding
 restructuring and
 other like costs         604      570      6.0%    2,634    2,471      6.6%
----------------------------------------------------------------------------
EBITDA margin (%)        37.0     36.7 0.3 pts.      42.1     41.8 0.3 pts.
EBITDA to total
 network revenue (3)
 (%)                     40.9     40.8 0.1 pts.      45.8     45.4 0.4 pts.
EBITDA excluding
 restructuring and
 other like costs,
 to total network
 revenue (%)             41.7     41.1 0.6 pts.      46.3     45.7 0.6 pts.
----------------------------------------------------------------------------
(1) Includes negative $10 million EBITDA impact of Public Mobile in the
    fourth quarter and full year of 2013.
(2) Includes $8 million related to Public Mobile.
(3) Total network revenue includes intersegment network revenue.

Wireless EBITDA increased year over year by $26 million or 4.4% in the fourth quarter of 2013 and $146 million or 5.9% in the full year of 2013. Wireless EBITDA excluding Public Mobile was $602 million for the fourth quarter of 2013 and $2,614 million for the full year 2013, or an increase of 6.4% for the quarter and 6.3% for the full year. Wireless EBITDA excluding restructuring and other like costs increased year over year by $34 million or 6.0% in the fourth quarter of 2013 and $163 million or 6.6% in the full year of 2013. The increases reflect network revenue growth and increased flow-through of network revenue to EBITDA, despite higher data roaming costs and higher labour costs to support a larger subscriber base.

2.5 Wireline segment


Wireline operating indicators
----------------------------------------------------------------------------
At December 31 (000s)                                 2013     2012   Change
----------------------------------------------------------------------------
High-speed Internet subscribers                      1,395    1,326    5.2 %
TELUS TV subscribers                                   815      678   20.2 %
Network access lines (NALs):
  Residential                                        1,643    1,767   (7.0)%
  Business                                           1,611    1,639   (1.7)%
----------------------------------------------------------------------------
  Total NALs                                         3,254    3,406   (4.5)%
----------------------------------------------------------------------------

                          Fourth quarters ended                Years ended
                                    December 31                December 31
----------------------------------------------------------------------------
(000s)                    2013     2012  Change      2013     2012  Change
----------------------------------------------------------------------------
High-speed Internet
 subscriber net
 additions                  21       23    (8.7)%      69       84   (17.9)%
TELUS TV subscriber
 net additions              38       41    (7.3)%     137      169   (18.9)%
Net NAL losses:
 Residential               (25)     (35)  (28.6)%    (124)    (148) (16.2)%
 Business                   (5)      (7)  (28.6)%     (28)     (39) (28.2)%
----------------------------------------------------------------------------
 Total NALs                (30)     (42)  (28.6)%    (152)    (187) (18.7)%
----------------------------------------------------------------------------
Operating revenues - wireline segment
----------------------------------------------------------------------------
                          Fourth quarters ended                Years ended
                                    December 31                December 31
                      ------------------------------------------------------
($ millions)               2013     2012 Change       2013     2012 Change
----------------------------------------------------------------------------
Service and equipment
 revenues:
 Data service and
  equipment                 851      770   10.5%     3,208    2,896   10.8%
 Voice local service        323      352   (8.2)%    1,335    1,416   (5.7)%
 Voice long distance
  service                    96      103   (6.8)%      400      425   (5.9)%
 Other service and
  equipment                  75       76   (1.3)%      267      272   (1.8)%
----------------------------------------------------------------------------
 Total service and
  equipment revenues      1,345    1,301    3.4%     5,210    5,009    4.0%
Other operating income       18       17    5.9%        64       67   (4.5)%
----------------------------------------------------------------------------
External operating
 revenues                 1,363    1,318    3.4%     5,274    5,076    3.9%
Intersegment revenue         43       43      -%       169      170   (0.6)%
----------------------------------------------------------------------------
Total operating
 revenues                 1,406    1,361    3.3%     5,443    5,246    3.8%
----------------------------------------------------------------------------

Total wireline segment revenues increased year over year by $45 million or 3.3% in the fourth quarter of 2013 and $197 million or 3.8% in the full year of 2013, driven by continued growth in data revenue, partly offset by ongoing declines in legacy voice revenues.

Service and equipment revenues increased year over year by $44 million in the fourth quarter of 2013 and $201 million in the full year of 2013.


--  Data service and equipment revenues increased year over year by $81
    million in the fourth quarter of 2013 and $312 million in the full year
    of 2013 primarily due to: (i) growth in TELUS TV revenues resulting from
    20% subscriber growth over the prior 12 months and higher revenue per
    customer; (ii) increased Internet and enhanced data service revenues due
    to a 5.2% increase in high-speed Internet subscribers over the prior 12
    months, higher revenue per customer and business service growth; (iii)
    growth in international business process outsourcing services provided
    to business customers; (iv) growth in TELUS Health revenues; and (v) an
    increase in data equipment sales in the quarter. These increases were
    partly offset by declines in videoconferencing revenues, combined with a
    decrease in data equipment sales for the full year largely due to lower
    business spending, including by governments, as well as a negotiated
    equipment sale in the third quarter of 2012.
--  Net additions of high-speed Internet subscribers and TELUS TV
    subscribers for the fourth quarter and full year of 2013 declined
    slightly from the same periods in 2012, as market growth slows.
    Continued focus on expanding our addressable Optik TV and high-speed
    Internet footprint, combined with bundling these services together, have
    resulted in a combined subscriber growth of more than 10% for the full
    year.
--  Voice local service revenue decreased year over year by $29 million in
    the fourth quarter of 2013 and $81 million in the full year of 2013. The
    ongoing decline in legacy revenues resulted from the 4.5% decline in
    NALs over the prior 12 months. As well, the fourth quarter of 2013 no
    longer benefits from certain rate increases implemented more than a year
    ago.
--  Residential NAL losses in the fourth quarter and full year of 2013
    reflect the ongoing trend of substitution to wireless and Internet-based
    services, including losses to competitors. The year-over-year reduction
    in NAL losses of 10,000 for the quarter and 24,000 for the year reflects
    our continuing customers first initiatives aimed at improving customer
    experience and increasing their likelihood to recommend TELUS, as well
    as prior year losses in the first quarter of 2012 from heavily
    discounted promotions by Shaw Communications in B.C. and Alberta.
--  Business NAL losses continue to reflect technological substitution and
    increased competition in the small and medium business sector, but have
    moderated, reflecting our efforts to improve the customer experience and
    growth in the resource industry. Business NAL losses in the fourth
    quarter and full year of 2013 improved by 2,000 and 11,000,
    respectively, when compared to the same periods in 2012.
--  Voice long distance service revenue decreased year over year by $7
    million in the fourth quarter of 2013 and $25 million in the full year
    of 2013, due to ongoing technological substitution to wireless and
    Internet-based services, competition and losses of local subscribers,
    partly offset by certain rate increases in the first quarter of 2013.
--  Other service and equipment revenues decreased year over year by $1
    million in the fourth quarter of 2013 and $5 million in the full year of
    2013, mainly due to lower sales of voice equipment.

Other operating income increased by $1 million year over year in the fourth quarter of 2013, mainly due to gains on investments. For the full year, it decreased year over year by $3 million, as gains on investments in 2013 were offset by lower government assistance and the prior year $7 million pre-tax gain, net of equity losses, related to the TELUS Garden residential real estate partnership.

Intersegment revenue represents services provided to the wireless segment. Such revenue is eliminated upon consolidation together with the associated expenses in both segments.


Operating expenses - wireline segment
----------------------------------------------------------------------------
                           Fourth quarters ended                Years ended
                                     December 31                December 31
                      ------------------------------------------------------
($ millions)               2013     2012  Change      2013     2012  Change
----------------------------------------------------------------------------
Goods and services
 purchased (1)              578      567     1.9%    2,262    2,208     2.4%
Employee benefits
 expense (1)                469      442     6.1%    1,767    1,637     7.9%
----------------------------------------------------------------------------
Total operating
 expenses                 1,047    1,009     3.8%    4,029    3,845     4.8%
----------------------------------------------------------------------------

(1) Includes restructuring and other like costs.

Total wireline operating expenses increased year over year by $38 million in the fourth quarter of 2013 and $184 million in the full year of 2013.

Goods and services purchased increased year over year by $11 million in the fourth quarter of 2013 and $54 million in the full year of 2013, mainly due to increased programming costs for TELUS TV services. For the full year, these increases were partly offset by a lower equipment cost of sales due to lower business spending, including by governments, and a negotiated sale in the third quarter of 2012.

Employee benefits expense increased year over year by $27 million in the fourth quarter of 2013 and $130 million in the full year of 2013 due to higher compensation and benefit costs, increased restructuring costs for employee-related initiatives and the expansion of business process outsourcing services for business customers, partly offset by higher capitalization of labour and a decrease in domestic full-time equivalent staff over the prior 12 months resulting from our efficiency initiatives. Restructuring and other like costs included in Employee benefits expense were $16 million in the fourth quarter of 2013 and $62 million in the full year of 2013, as compared to $12 million in the fourth quarter of 2012 and $29 million in the full year of 2012, increases of $4 million and $33 million, respectively.


EBITDA - wireline segment
----------------------------------------------------------------------------
                          Fourth quarters ended                 Years ended
                                    December 31                 December 31
                    --------------------------------------------------------
($ millions, except
 margins)               2013    2012     Change     2013    2012     Change
----------------------------------------------------------------------------
EBITDA                   359     352        2.1%   1,414   1,401        0.9%
Restructuring and
 other like costs
 included in EBITDA       21      15       40.0%      68      35       94.3%
----------------------------------------------------------------------------
EBITDA excluding
 restructuring and
 other like costs        380     367        3.5%   1,482   1,436        3.2%
----------------------------------------------------------------------------
EBITDA margin (%)       25.6    25.9 (0.3) pts.     26.0    26.7 (0.7) pts.
EBITDA margin
 excluding
 restructuring and
 other like costs
 (%)                    27.0    27.0     - pts.     27.2    27.4 (0.2) pts.
----------------------------------------------------------------------------

Wireline EBITDA increased year over year by $7 million in the fourth quarter of 2013 and $13 million in the full year of 2013, while EBITDA excluding restructuring and other like costs increased year over year by $13 million in the fourth quarter of 2013 and $46 million in the full year of 2013. This resulted from improving high-speed Internet and TELUS TV revenues due to subscriptions coming off of introductory rates, subscriber growth and certain rate increases, as well as savings from our operational efficiency initiatives, net of higher TV programming costs and the one-time impact of severe flooding in Southern Alberta in June 2013 ($7 million). EBITDA margins, excluding restructuring and other like costs, were relatively flat as growth in lower margin data services, such as TELUS TV, offset declines in higher margin legacy voice services.

3. Changes in financial position


----------------------------------------------------------------------------
                        Dec.    Dec.        Changes   Changes during the
Financial position       31,     31,                  year ended December
 at:                                                  31, 2013, include:
($ millions)            2013    2012
----------------------------------------------------------------------------
Current assets
Cash and temporary       336     107     229    n/m   See Section 4
 investments, net                                     Liquidity and capital
                                                      resources.
Accounts receivable    1,461   1,541     (80)    (5)% A decrease in days
                                                      outstanding in
                                                      wireless and wireline
                                                      receivables, and
                                                      refunds of commodity
                                                      taxes
Income and other          32      25       7     28%  An increase in
 taxes receivable                                     investment tax
                                                      credits receivable
Inventories              326     350     (24)    (7)% A decrease in
                                                      wireless handsets and
                                                      accessories on hand,
                                                      partially offset by
                                                      an increase in the
                                                      average handset cost
Prepaid expenses         168     178     (10)    (6)% A decrease in prepaid
                                                      amounts for the
                                                      Kamloops IDC and a
                                                      reclassification of
                                                      share conversion
                                                      costs to Common
                                                      equity, partly offset
                                                      by an increase in
                                                      maintenance contracts
Derivative assets          6       9      (3)   (33)% Fair value
                                                      adjustments related
                                                      to operational hedges
                                                      and hedges of
                                                      restricted share
                                                      units.
----------------------------------------------------------------------------
Current liabilities
Short-term borrowings    400     402      (2)     -%  Amounts in both
                                                      periods include $400
                                                      million received by
                                                      TELUS from an arm's-
                                                      length securitization
                                                      trust in respect of
                                                      securitized trade
                                                      receivables (see
                                                      Section 4.6)
Accounts payable and   1,735   1,511     224     15%  A $75 million accrued
 accrued liabilities                                  liability for our
                                                      2014 NCIB program, as
                                                      well as increases in
                                                      TV content costs,
                                                      interest payable and
                                                      payroll and other
                                                      employee-related
                                                      liabilities
Income and other         102     102       -      -%  Current income tax
 taxes payable                                        expense in 2013,
                                                      offset by instalment
                                                      payments and accruals
                                                      for investment tax
                                                      credits and interest
Dividends payable        222     208      14      7%  An increase in the
                                                      dividend rate was
                                                      partly offset by a
                                                      decrease in shares
                                                      outstanding as a
                                                      result of our 2013
                                                      NCIB program
Advance billings and     729     703      26      4%  An increase from
 customer deposits                                    wireline subscriber
                                                      growth and advance
                                                      billings to wireless
                                                      dealers
Provisions               110      49      61    124%  Recording of Public
                                                      Mobile acquisition-
                                                      related provisions,
                                                      as well as
                                                      restructuring
                                                      accruals exceeding
                                                      restructuring
                                                      payments in 2013
Current maturities of      -     545    (545)  (100)% Repayment of $300
 long-term debt                                       million of TELUS
                                                      Corp. Notes that
                                                      matured in June and
                                                      net repayments of
                                                      $245 million of
                                                      commercial paper
                                                      outstanding at
                                                      December 31, 2012
Current derivative         1       -       1    n/m   -
 liabilities
----------------------------------------------------------------------------
Working                 (970) (1,310)    340     26%  Increased Cash and
 capital(Current                                      temporary investments
 assets subtracting                                   and repayment of
 Current liabilities)                                 current maturities of
                                                      long-term debt
                                                      facilitated by long-
                                                      term debt issues, net
                                                      of increased Accounts
                                                      payable and accrued
                                                      liabilities.
----------------------------------------------------------------------------
Non-current assets
Property, plant and    8,428   8,165     263      3%  See Capital
 equipment, net                                       expenditures in
                                                      Section 4.3 Cash used
                                                      by investing
                                                      activities and
                                                      Depreciation in
                                                      Section 2.3
Intangible assets,     6,531   6,181     350      6%  See Capital
 net                                                  expenditures in
                                                      Section 4.3 Cash used
                                                      by investing
                                                      activities and
                                                      Amortization of
                                                      intangible assets in
                                                      Section 2.3. Included
                                                      in the balances are
                                                      spectrum licences of
                                                      $5,168 million for
                                                      2013, including
                                                      Public Mobile, and
                                                      $4,876 million for
                                                      2012
Goodwill, net          3,737   3,702      35      1%  Acquisitions of
                                                      Public Mobile, an EMR
                                                      provider and several
                                                      smaller entities
Real estate joint         11      11       -      -%  See Transactions
 ventures                                             between related
                                                      parties in Section
                                                      4.11
Other long-term          530     176     354    n/m   A pension asset
 assets                                               reclassification from
                                                      Other long-term
                                                      liabilities as a
                                                      result of plan asset
                                                      returns creating an
                                                      overall nominal
                                                      surplus in the
                                                      aggregate pension
                                                      plans, and a
                                                      receivable from the
                                                      TELUS Garden real
                                                      estate joint venture,
                                                      net of fair value
                                                      adjustments for
                                                      available-for-sale
                                                      financial assets.
----------------------------------------------------------------------------
Non-current
 liabilities
Provisions               219     222      (3)    (1)% A decrease in asset
                                                      retirement
                                                      obligations net of
                                                      additions for the
                                                      Public Mobile
                                                      acquisition
Long-term debt         7,493   5,711   1,782     31%  Public issue of $1.7
                                                      billion of Notes in
                                                      two series, on April
                                                      1, early redemption
                                                      of $700 million of
                                                      Notes in May and
                                                      public issue of $800
                                                      million of Notes in
                                                      two series on
                                                      November 26. See
                                                      Section 4.4 Cash
                                                      provided (used) by
                                                      financing activities
Other long-term          649   1,682  (1,033)   (61)% A decrease in pension
 liabilities                                          and post-retirement
                                                      liabilities resulting
                                                      from returns on plan
                                                      assets, funding and
                                                      an increase in
                                                      discount rate
Deferred income taxes  1,891   1,624     267     16%  Deferred income tax
                                                      expense arising from
                                                      increases in
                                                      temporary differences
                                                      and revaluation of
                                                      the deferred income
                                                      tax liability for the
                                                      B.C. provincial
                                                      income tax rate
                                                      increase.
----------------------------------------------------------------------------
Owners' equity
Common equity          8,015   7,686     329      4%  Net income of $1,294
                                                      million and Other
                                                      comprehensive income
                                                      of $989 million, net
                                                      of dividend
                                                      declarations of $866
                                                      million, 2013 NCIB
                                                      purchases of $1.0
                                                      billion and the $75
                                                      million liability for
                                                      the automatic share
                                                      purchase plan
                                                      commitment pursuant
                                                      to the 2014 NCIB.
----------------------------------------------------------------------------

4. Liquidity and capital resources

Our discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of the Management's review of operations.

4.1 Overview

Cash provided by operating activities was supplemented in the fourth quarter of 2013 by debt issues. For the full year of 2013 and 2012, Cash provided by operating activities significantly exceeded Cash used by investing activities.


Cash flows
----------------------------------------------------------------------------
                             Fourth quarters ended             Years ended
                                       December 31             December 31
                            ------------------------------------------------
($ millions)                   2013    2012 Change     2013    2012 Change
----------------------------------------------------------------------------
Cash provided by operating
 activities                     726     703    3.3%   3,246   3,219    0.8%
Cash (used) by investing
 activities                    (787)   (514) (53.1)% (2,389) (2,058) (16.1)%
Cash provided (used) by
 financing activities           365    (127)   n/m     (628) (1,100)  42.9%
----------------------------------------------------------------------------
Increase in cash and
 temporary investments, net     304      62    n/m      229      61    n/m
Cash and temporary
 investments, net, beginning
 of period                       32      45  (28.9)%    107      46  132.6%
----------------------------------------------------------------------------
Cash and temporary
 investments, net, end of
 period                         336     107    n/m      336     107    n/m
----------------------------------------------------------------------------

4.2 Cash provided by operating activities

Cash provided by operating activities increased by $23 million in the fourth quarter of 2013 and $27 million in the full year of 2013, when compared to the same periods in 2012.


Analysis of changes in cash provided by operating activities
---------------------------------------------------------------------------
($ millions)                                          Fourth           Full
                                                     quarter           year
---------------------------------------------------------------------------
Cash provided by operating activities, three-
 month period and year ended December 31, 2012           703          3,219
Year-over-year changes:
  Higher EBITDA (see Section 2.4 Wireless
   segment and Section 2.5 Wireline segment)              33            159
  Lower restructuring disbursements net of
   restructuring costs                                     8             13
  Higher employee defined benefits plans
   expense                                                 1              5
  Lower (higher) employer contributions to
   defined benefit plans                                   1            (27)
  Higher interest paid, including $23 million
   long-term debt prepayment premium in May
   2013                                                   (5)           (27)
  Lower interest received                                  -             (9)
  Higher income taxes paid, net of recoveries
   received                                             (107)          (288)
  Other operating working capital changes                 92            201
---------------------------------------------------------------------------
Cash provided by operating activities, three-
 month periods and year ended December 31,
 2013                                                    726          3,246
---------------------------------------------------------------------------

--  Income taxes paid net of recoveries received increased year over year
    due to larger instalment payments resulting from a higher tax instalment
    base, lower income tax recoveries in 2013, and for the full year, a
    larger final payment in respect of preceding year income taxes made in
    the first quarter.
--  Other operating working capital changes for the fourth quarter included
    a lower investment in Inventories in the fourth quarter of 2013 as
    compared to the same period in 2012, as well as comparative decreases in
    Prepaid expenses. Other working capital changes for the full year
    included decreases in Inventories, Prepaid expenses and Accounts
    receivable in the year ended December 31, 2013. (See Section 3 Changes
    in financial position).

4.3 Cash used by investing activities

Cash used by investing activities increased by $273 million in the fourth quarter of 2013 and $331 million in the full year of 2013, when compared to the same periods in 2012.


--  In the third quarter of 2013, we purchased spectrum licences from a
    third party for $67 million after receiving approval from Industry
    Canada.
--  In 2013, we made several business acquisitions and related investments,
    including Public Mobile for $229 million net of cash acquired, which
    complement our existing lines of business, and totalled $229 million and
    $261 million in the fourth quarter and full year, respectively. This
    compares to $5 million and $53 million in the fourth quarter and full
    year of 2012, respectively.
--  Our advances and contributions to real estate joint ventures, net of
    receipts, were $8 million in the fourth quarter of 2013 and $23 million
    for the full year of 2013, as compared to $6 million in the fourth
    quarter of 2012 and $26 million in the full year of 2012.
--  In 2013, we received proceeds of $5 million and $12 million in the
    fourth quarter and full year, respectively, from the sale of portfolio
    investments, while for the full year of 2012 we received proceeds of $20
    million from the sale of land and investments, including $14 million
    from foreign assets.
--  Cash payments for capital assets (excluding spectrum licences) increased
    by $58 million year over year in the fourth quarter of 2013 and $85
    million year over year for the full year of 2013, when compared to the
    same periods in 2012. This was composed of:
    --  Year-over-year increases in capital expenditures of $56 million in
        the fourth quarter of 2013 and $129 million in the full year of
        2013, reflecting increases in capital intensity, as discussed
        further below.
    --  Changes in working capital to reflect payment timing differences in
        respect of capital expenditures.
    --  Net effects in asset retirement obligations included in capital
        expenditures.

Capital expenditure measures
----------------------------------------------------------------------------
                          Fourth quarters ended                 Years ended
                                    December 31                 December 31
                      ------------------------------------------------------
($ millions)               2013     2012 Change       2013     2012  Change
----------------------------------------------------------------------------
Capital expenditures
 (excluding spectrum
 licences) (1):
 Wireless segment           213      191   11.5%       712      711     0.1%
 Wireline segment           364      330   10.3%     1,398    1,270    10.1%
----------------------------------------------------------------------------
                            577      521   10.7%     2,110    1,981     6.5%
----------------------------------------------------------------------------
EBITDA less capital
 expenditures
 (excluding spectrum
 licences) (2)              374      397   (5.7)%    1,908    1,878     1.6%
Wireless segment
 capital intensity (%)       13       12  1 pt.         12       12       -
Wireline segment
 capital intensity (%)       26       24 2 pts.         26       24  2 pts.
Consolidated capital
 intensity (2) (%)           20       18 2 pts.         19       18   1 pt.
----------------------------------------------------------------------------

(1) Capital expenditures include assets purchased, but not yet paid for, and
    therefore differ from Cash payments for capital assets, as presented on
    the Consolidated statements of cash flows.
(2) See calculation and description in Section 7.1 Non-GAAP financial
    measures.

--  Wireless capital expenditures increased year over year by $22 million in
    the fourth quarter of 2013 and $1 million in the full year of 2013. The
    increases were due to investments in expanded coverage, enhanced
    capacity, supporting systems and backhaul facilities of our networks,
    partly offset by lower expenditures resulting from the accelerated 4G
    LTE network build-out in 2012 and wireless segment investments in the
    opening of two IDCs (one in 2012 and one in 2013). Wireless capital
    intensity was 12% for the full year of 2013 and 2012.

    The wireless cash flow proxy (EBITDA less capital expenditures) was $379
    million in the fourth quarter of 2013, as compared to $375 million in
    the fourth quarter of 2012, for an increase of $4 million or 1.1%. The
    cash flow proxy was $1,892 million in the full year of 2013 as compared
    to $1,747 million in the full year of 2012, reflecting an increase of
    $145 million or 8.3%. These increases were due to higher EBITDA, partly
    offset by higher capital expenditures.

--  Wireline capital expenditures increased year over year by $34 million in
    the fourth quarter of 2013 and $128 million in the full year of 2013.
    The increases were due to ongoing investments in broadband
    infrastructure, including connecting more homes and businesses directly
    with fibre optic cable, large enterprise service growth, as well as
    investments in network and systems resiliency and reliability, which
    were partly offset by lower wireline segment investments in the opening
    of two IDCs (one in 2012 and one in 2013). Our investments in broadband
    infrastructure support TV and high-speed Internet subscriber growth and
    faster Internet speeds, as well as extend the reach of our TELUS Health
    solutions. In addition, we are investing in additional functionality to
    administrative, client care and service delivery systems. Wireline
    capital intensity was 26% for the full year of 2013, up from 24% in
    2012.

    The wireline cash flow proxy (EBITDA less capital expenditures) was $(5)
    million in the fourth quarter of 2013, down from $22 million in the
    fourth quarter of 2012. The wireline cash flow proxy was $16 million in
    the full year of 2013 as compared to $131 million in the full year of
    2012, reflecting a decrease of $115 million or 88%. The decreases were
    largely due to increased restructuring and other like costs and higher
    capital expenditures.

4.4 Cash provided (used) by financing activities

Net cash provided by financing activities was $365 million in the fourth quarter of 2013, while net cash used by financing activities was $628 million for the full year of 2013. In 2012, net cash used by financing activities was $127 million in the fourth quarter and $1.1 billion for the full year. Financing activities included:

Dividends paid to the holders of equity shares

Dividends paid to the holders of TELUS shares were $213 million in the fourth quarter of 2013 and $852 million in the full year of 2013, or year-over-year increases of $14 million in the quarter and $78 million in the year. The increases primarily reflect higher dividend rates under our dividend growth program, partly offset by lower outstanding shares resulting from shares purchased and cancelled under our 2013 NCIB program.

Purchase of Common Shares for cancellation

We purchased approximately 31.2 million shares under our 2013 NCIB program through September 24, 2013, for the maximum $1 billion authorized for the year. The shares purchased represented approximately 4.8% of the Common Shares outstanding prior to commencement of the NCIB in May 2013.


Normal course issuer bid in 2013
----------------------------------------------------------------------------
                   Common
                   Shares     Average
                purchased    purchase     Purchase     Accounts
                      and   price per        costs      payable Cash outflow
Period          cancelled   share ($) ($ millions) ($ millions) ($ millions)
----------------------------------------------------------------------------
Second
 quarter        8,420,800       33.40          281         (43)          238
Third quarter  22,759,812       31.58          719           43          762
----------------------------------------------------------------------------
Total          31,180,612       32.07        1,000            -        1,000
----------------------------------------------------------------------------

In January 2014, we purchased, by way of the ASPP, 590,400 Common Shares for cancellation under our 2014 NCIB. We recorded a $75 million liability at December 31, 2013, for this ASPP commitment.


Normal course issuer bid in 2014
----------------------------------------------------------------------------
                    Common
                    Shares     Average
                 purchased    purchase     Purchase
                       and   price per        costs
Period           cancelled   share ($) ($ millions)
----------------------------------------------------------------------------
January            590,400       37.14           22
----------------------------------------------------------------------------

Long-term debt issues and repayments

In 2013, we had net issues of $595 million in the fourth quarter of 2013 and net repayments of $1,255 million for the full year, composed of:


--  Our April 1, 2013, public issue of $1.7 billion of senior unsecured
    TELUS Corporation Notes in two series: $1.1 billion of 11-year 3.35%
    Series CK Notes and $600 million of 30-year 4.40% Series CL Notes. The
    net proceeds of these issues were used to: (i) fund the early redemption
    on May 15, 2013, of $700 million of 4.95% Series CF Notes one year ahead
    of their maturity; (ii) fund the June 2013 maturity of $300 million of
    5.00% Series CB Notes; and (iii) repay outstanding commercial paper by
    June 30, 2013. The remaining proceeds were used for general working
    capital purposes.
--  Our November 26, 2013, public issue of $800 million of senior unsecured
    TELUS Corporation Notes in two series: $400 million of seven-year 3.60%
    Series CM Notes and $400 million of 30-year 5.15% Series CN Notes. The
    net proceeds of these issues were used to fund the acquisition of 100%
    of Public Mobile and repay $290 million of commercial paper outstanding
    on November 26, 2013. The remaining proceeds are to be used for other
    general corporate purposes.
--  The Notes issued on April 1 and November 26 may be redeemed in whole at
    any time, or in part from time to time, and contain certain change of
    control provisions.
--  A $245 million net decrease in commercial paper during 2013 to $Nil at
    December 31, 2013. Commercial paper balances during the year were: $174
    million at March 31, 2013, $Nil at June 30, 2013, and $205 million at
    September 30, 2013.
--  These activities reduced financing risk by increasing the average term
    to maturity of our debt to 9.4 years at December 31, 2013, from 5.5
    years at December 31, 2012. Our weighted average interest rate on long-
    term debt was 5.00% at December 31, 2013, as compared to 5.27% one year
    earlier.

In comparison, in 2012, we had a net issue of $76 million of long-term debt in the fourth quarter of 2012 and a net repayment of $321 million for the full year of 2012, composed of:


--  A $424 million decrease in commercial paper in the fourth quarter of
    2012, funded from the issue of Series CJ, ten-year Notes in December.
    Commercial paper decreased by $521 million for the full year of 2012 to
    a balance of $245 million at December 31, 2012.
--  A $500 million public offering of 3.35% Series CJ Notes in December. The
    net proceeds were used to repay outstanding commercial paper.
--  For the full year, repayment in March of $300 million matured 4.5%
    Series CC Notes.

No amounts were drawn against our revolving credit facility in 2013 or 2012. Our commercial paper program provides access to low cost funds and is fully backstopped by this committed credit facility (see Section 4.6 Credit facilities).

4.5 Liquidity and capital resource measures

Net debt was $7,592 million at December 31, 2013, an increase of $1,015 million when compared to one year earlier, resulting from our re-financing activities in the second and fourth quarters of 2013, as discussed above, net of increased cash.

Fixed rate debt as a proportion of total indebtedness was 95% at December 31, 2013, up from 90% one year earlier due to the repayment of commercial paper.

Total capitalization - book value was $15,576 million at December 31, 2013, an increase of $1,353 million from one year earlier. This includes an increase in retained earnings, resulting from employee defined benefit plans re-measurements, partly offset by reduction in equity from share purchases under our NCIB programs. Net debt to total capitalization increased to about 49% at December 31, 2013, from 46% one year earlier.

The Net debt to EBITDA - excluding restructuring and other like costs ratio was 1.8 times at December 31, 2013, up from 1.7 times from one year earlier, as the increase in net debt (see above) was partly offset by growth in EBITDA - excluding restructuring and other like costs. Our long-term policy guideline for this ratio is from 1.5 to 2.0 times. See Section 4.6 Credit facilities. In the short term, we may permit this ratio to go outside of the long-term policy guideline range (for long-term investment opportunities), but will endeavor to return to the policy guideline range, as we believe that the policy guideline range is supportive of maintaining our investment grade credit ratings.


Summary of liquidity and capital resource measures
----------------------------------------------------------------------------
As at, or for the years ended, December
 31                                             2013       2012      Change
----------------------------------------------------------------------------
Components of debt and coverage ratios
 (1)($ millions)
----------------------------------------------------------------------------
Net debt                                       7,592      6,577       1,015
Total capitalization - book value             15,576     14,223       1,353
EBITDA - excluding restructuring and
 other like costs (2)                          4,116      3,907         209
Net interest cost                                370        332          38
----------------------------------------------------------------------------
Debt ratios
----------------------------------------------------------------------------
Fixed-rate debt as a proportion of total
 indebtedness (%)                                 95         90      5 pts.
Average term to maturity of debt (years)         9.4        5.5         3.9
Net debt to total capitalization (1) (%)        48.7       46.2    2.5 pts.
Net debt to EBITDA - excluding
 restructuring and other like costs
 (1)(2)                                          1.8        1.7         0.1
----------------------------------------------------------------------------
Coverage ratios(1)(times)
----------------------------------------------------------------------------
Earnings coverage (2)                            5.5        5.6        (0.1)
EBITDA - excluding restructuring and
 other like costs interest coverage (2)         11.1       11.8        (0.7)
----------------------------------------------------------------------------
Other 12-month trailing measures(1)
----------------------------------------------------------------------------
Dividend payout ratio of adjusted net
 earnings (2)(3) (%)                              70         70      - pts.
Dividend payout ratio (2)(3) (%)                  71         69       2 pts
----------------------------------------------------------------------------
(1) See Section 7.1 Non-GAAP financial measures.
(2) Figures for 2012 have been adjusted for retrospective application of IAS
    19 (2011).
(3) Our dividend payout ratio target guideline is 65% to 75% of sustainable
    earnings on a prospective basis.

The Earnings coverage ratio for 2013 was 5.5 times, down from 5.6 times in 2012 due to higher borrowing costs (including the May 2013 long-term debt prepayment premium).

The EBITDA - excluding restructuring and other like costs interest coverage ratio for 2013 was 11.1 times, down from 11.8 times in 2012. An increase in net interest costs (including the May 2013 long-term debt prepayment premium) reduced the ratio by 1.3, while growth in EBITDA before restructuring and other like costs increased the ratio by 0.6. See Section 4.6 Credit facilities.

Dividend payout ratios: Our target guideline is 65% to 75% of sustainable earnings on a prospective basis. The basic and adjusted dividend payout ratios for 2013 and 2012 were consistent with the target range.

4.6 Credit facilities

At December 31, 2013, we had $336 million of cash, more than $2.0 billion of unutilized credit facilities and $100 million available under our trade receivables securitization program (see Section 4.7). This is consistent with our objective of generally maintaining at least $1 billion of available liquidity.

TELUS credit facilities at December 31, 2013


----------------------------------------------------------------------------
                                          Outstanding Backstop for
                                              undrawn   commercial
($ in                                      letters of        paper Available
 millions)             Expiry  Size Drawn      credit      program liquidity
----------------------------------------------------------------------------
Five-year
 revolving
 facility(1) November 3, 2016 2,000     -           -            -     2,000
----------------------------------------------------------------------------
(1) Canadian dollars or U.S. dollar equivalent.

Revolving credit facility

We have a $2.0 billion (or U.S. dollar equivalent) revolving credit facility with a syndicate of 14 financial institutions that expires on November 3, 2016. The revolving credit facility is used for general corporate purposes including the backstop of commercial paper, as required.

Our revolving credit facility contains customary covenants, including a requirement that we not permit our consolidated Leverage Ratio (debt to trailing 12-month EBITDA) to exceed 4 to 1 (approximately 1.8 to 1 at December 31, 2013) and not permit our consolidated Coverage Ratio (EBITDA to interest expense on a trailing 12-month basis) to be less than 2 to 1 (approximately 11.1 to 1 at December 31, 2013) 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 - excluding restructuring and other like costs and EBITDA - excluding restructuring and other like costs interest coverage. Historically, the calculations have not been materially different. The covenants are not impacted by revaluation of property, plant and equipment, intangible assets or goodwill for accounting purposes. Continued access to our credit facilities is not contingent on maintaining a specific TELUS credit rating.

Other bank credit facilities

At December 31, 2013, we also have other bank credit facilities available to us, including letter of credit facilities expiring in the second and third quarters of 2014. Given our historical experience, it is unlikely that letters of credit will be collateralized into cash.

We have arranged incremental letter of credit facilities to allow us to participate in Industry Canada's 700 MHz auction held in 2014. Under the terms of the auction, as outlined in the Licensing Framework of Mobile Broadband Services (MBS) - 700 MHz Band, communications between bidders that would provide insights into bidding strategies, including reference to preferred blocks, technologies or valuations, are precluded until the deadline for final payment in the auction. Disclosure of the precise amount of our letters of credit could be interpreted as a signal of bidding intentions. The maximum amount of letters of credit that any individual participant could be required to deliver is approximately $405 million.

4.7 Sale of trade receivables

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, for an amount up to a maximum of $500 million. The agreement is in effect until August 1, 2014, and available liquidity was $100 million at December 31, 2013. Sales of trade receivables in securitization transactions are recognized as collateralized short-term borrowings and thus do not result in our de-recognition of the trade receivables sold.

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 as of February 13, 2014.

4.8 Credit ratings

There were no changes to our investment grade credit ratings as of February 13, 2014.

4.9 Financial instruments, commitments and contingent liabilities

Financial instruments

Our financial instruments, and the nature of risks that they may be subject to, were described in Section 7.8 of our annual 2012 MD&A.

Liquidity risk

As a component of our capital structure financial policies, we manage liquidity risk by: maintaining a daily cash pooling process that enables us to manage our liquidity surplus and liquidity requirements according to our actual needs and those of our subsidiaries; maintaining bilateral bank facilities and a syndicated credit facility, where we have more than $2 billion of bank credit facilities available at December 31, 2013 (see Section 4.6); the sales of trade receivables to an arm's-length securitization trust, where we have $100 million availability at December 31, 2013 (see Section 4.7); maintaining a commercial paper program; continuously monitoring forecast and actual cash flows; and managing maturity profiles of financial assets and financial liabilities.

We have significant debt maturities in future years. We have access to a shelf prospectus, renewed in November 2013 for $3.0 billion and in effect until December 2015, pursuant to which we issued $800 million of long-term debt on November 26, 2013. At December 31, 2013, we can offer $2.2 billion of debt or equity securities under this shelf prospectus. We also had $336 million in Cash and temporary investments at December 31, 2013. We believe that our investment grade credit ratings contribute to reasonable access to capital markets.

Commitments and contingent liabilities

Claims and lawsuits

A number of claims and lawsuits (including class actions) seeking damages and other relief are pending against TELUS. As well, we have received or are aware of certain possible claims (including intellectual property infringement claims) against us and, in some cases, numerous other wireless carriers and telecommunications service providers.

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 have a material effect in relation to our financial position and the results of our operations, excepting items disclosed in Section 10.9 Litigation and legal matters of our annual 2012 MD&A.

4.10 Outstanding share information

On February 4, 2013, in accordance with the terms of a court-approved plan of arrangement, we exchanged all of our issued and outstanding Non-Voting Shares into Common Shares on a one-for-one basis. Subsequently, Non-Voting Shares were delisted from the TSX and the NYSE, and Common Shares (TSX stock symbol: T) were listed on the NYSE (stock symbol: TU).

On March 14, 2013, we announced a subdivision of our Common Shares on a two-for-one basis (two-for-one stock split). On April 16, 2013, TELUS shareholders received one additional share for each share owned on the record date of April 15, 2013. All information pertaining to shares outstanding and per-share amounts in this Management's review of operations for periods before April 16, 2013, reflects retrospective treatment of the stock split.

On May 9, 2013, at our annual and special meeting, shareholders approved the elimination of the Non-Voting Shares from our authorized share structure, the elimination of all references to Non-Voting Shares from our Articles, and an increase in the maximum number of Common Shares we are authorized to issue from one billion to two billion.


Outstanding shares (millions)
----------------------------------------------------------------------------
At:                                      December 31, 2013  January 31, 2014
----------------------------------------------------------------------------
Common Shares                                          623               623
Common Share options                                     8                 8
Exercisable Common Share options                         3                 3
----------------------------------------------------------------------------

4.11 Transactions between related parties

Investments in significant controlled entities

At December 31, 2013, TELUS Corporation ultimately controlled 100% of the equity of TELUS Communications Inc., which in turn ultimately controlled 100% of the equity of TELUS Communications Company and TELE-MOBILE COMPANY. This is unchanged from December 31, 2012.

Transactions with key management personnel

Our key management personnel have authority and responsibility for overseeing, planning, directing and controlling our activities, and consist of our Board of Directors and our Executive Leadership Team. Total compensation expense amounts for key management personnel were $13 million and $40 million in the fourth quarter and full year of 2013, respectively, as compared to $12 million and $37 million in the fourth quarter and full year of 2012, respectively.

Transactions with real estate joint ventures

In the first quarter of 2011, we announced that we had partnered, as equals, with an arm's-length party in a residential condominium, retail and commercial real estate redevelopment project, TELUS Garden, in Vancouver, B.C. In July 2013, we announced that we had partnered, as equals, with two arm's-length parties in a residential, retail and commercial real estate redevelopment project, TELUS Sky, in Calgary, Alberta.

Commitments and contingent liabilities for the TELUS Garden real estate joint venture include construction-related contractual commitments through to 2015 (approximately $146 million at December 31, 2013), a 20-year operating lease commitment commencing in 2014 and construction credit facilities ($413 million with two Canadian financial institutions as 50% lender and TELUS as 50% lender). The TELUS Garden residential tower has sales contracts in place for substantially all units, while at December 31, 2013, the proportion of leased space in the TELUS Garden office tower was approximately 93%.

5. Accounting policy developments

IAS 19 Employee benefits(amended 2011): We applied the amended standard effective for fiscal 2013 with the required retrospective application. The effects for the fourth quarter and full year of 2012 are quantified in the table below.


Effects of retrospective application of IAS 19 (2011)
----------------------------------------------------------------------------
                        Fourth quarter ended                     Year ended
                           December 31, 2012              December 31, 2012
              --------------------------------------------------------------
($ millions,
 except per           As   Amended        As         As   Amended        As
 share        originally    IAS 19 currently originally    IAS 19 currently
 amounts)       reported   effects  reported   reported   effects  reported
----------------------------------------------------------------------------
Operating
 expenses
Employee
 benefits
 expense             574        29       603      2,129       113     2,242
----------------------------------------------------------------------------
Operating
 income              469       (29)      440      2,107      (113)    1,994
Financing
 costs                86        10        96        332        42       374
----------------------------------------------------------------------------
Income before
 income taxes        383       (39)      344      1,775      (155)    1,620
Income taxes          92       (11)       81        457       (41)      416
----------------------------------------------------------------------------
Net income and
 Net income
 attributable
 to equity
 shares              291       (28)      263      1,318      (114)    1,204
----------------------------------------------------------------------------
Other
 comprehensive
 incomeItem
 never
 subsequently
 reclassified
 to income -
 Employee
 defined
 benefit plans
 re-
 measurements       (482)       28      (454)      (400)      114      (286)
----------------------------------------------------------------------------
Net income per
 equity
 share(1)
- Basic             0.45     (0.05)     0.40       2.02     (0.17)     1.85
- Diluted           0.44     (0.04)     0.40       2.01     (0.17)     1.84
----------------------------------------------------------------------------
Additional
 information
Wireless
 EBITDA              569        (3)      566      2,467        (9)    2,458
Wireline
 EBITDA              378       (26)      352      1,505      (104)    1,401
----------------------------------------------------------------------------
EBITDA (2)           947       (29)      918      3,972      (113)    3,859
----------------------------------------------------------------------------
(1) Adjusted for the two-for-one stock split effective April 16, 2013.
(2) See Section 7.1 Non-GAAP financial measures.

Revenue from contracts with customers: In November 2011, a revised exposure draft was issued. We are currently assessing the impacts of the draft proposals. If the finalized standard, currently expected to be effective for our 2017 fiscal year, were to largely reflect the draft proposals, its effects and the materiality of those effects would vary by industry and entity. We, like many other telecommunications companies, currently expect to be materially affected by its application, primarily in respect of the timing of revenue recognition and in respect of capitalization of costs of acquisition and contract fulfillment costs. The prohibition of the use of the limitation cap methodology would accelerate the recognition of revenue, relative to both the associated cash inflows from customers and our current practice, primarily in the Wireless sector. Although the underlying transaction economics would not differ, during periods of increases in the number of wireless subscriber connections, assuming comparable contract-lifetime per unit cash inflows, revenue growth would appear greater than under current practice (using the limitation cap methodology).

Similarly, the measurement, over the life of a contract, of total costs of contract acquisition and contract fulfillment costs would be unaffected by the draft proposals. The draft proposals would result in such costs being capitalized and subsequently recognized as an expense over the life of a contract on a rational, systematic basis consistent with the pattern of the transfer of goods or services to which the asset relates. Although the underlying transaction economics would not differ, during periods of increases in the number of subscriber connections, assuming comparable per unit costs of acquisition and contract fulfillment, profitability measures would appear greater than under the current practice of immediate expensing of such costs.

Other issued standards: Other issued standards required to be applied for periods beginning on or after January 1, 2013, have no significant effect on our financial performance.

6. Risks and risk management

Our principal risks and uncertainties that could affect our future business results, as well as our associated risk mitigation activities, were described in our annual 2012 MD&A. Certain updates were provided to these annual risks in our 2013 Q3 MD&A, dated November 8, 2013.

7. Definitions and reconciliations

7.1 Non-GAAP financial measures

We have issued guidance on, and report on, certain non-GAAP measures that are used to evaluate the performance of TELUS and its segments, as well as to determine compliance with debt covenants and to manage the capital structure. As non-GAAP measures generally do not have a standardized meaning, they may not be comparable to similar measures presented by other issuers. Securities regulations require such measures to be clearly defined, qualified and reconciled with their nearest GAAP measure.

Capital intensity is calculated as capital expenditures (excluding spectrum licences) divided by total operating revenues. This measure provides a basis for comparing the level of capital expenditures to those of other companies of varying size within the same industry.

Dividend payout ratio: This basic measure is defined as the quarterly dividend declared per share for the most recently completed quarter, as reported in the Consolidated financial statements, multiplied by four and divided by the sum of basic earnings per share for the most recent four quarters for interim reporting periods (divided by annual basic earnings per share for fiscal years).


Calculation of Dividend payout ratio
----------------------------------------------------------------------------
Years ended December 31 ($)                              2013           2012
----------------------------------------------------------------------------
Numerator - Annualized fourth quarter dividend
 declared per equity share (1)                           1.44           1.28
Denominator - Net income per equity share (1)            2.02           1.85
----------------------------------------------------------------------------
Ratio (%)                                                  71             69
----------------------------------------------------------------------------
(1) Reflects the two-for-one stock split effective April 16, 2013.

Dividend payout ratio of adjusted net earnings: More representative of a sustainable calculation is the historical ratio based on reported earnings per share adjusted to exclude income tax-related adjustments, long-term debt prepayment premiums, the impacts of a net-cash settlement feature from 2007 to 2012, and items adjusted for in EBITDA. Our target guideline, for the annual dividend payout ratio is on a prospective basis, rather than on a trailing basis, and is 65 to 75% of sustainable earnings on a prospective basis.


Calculation of Dividend payout ratio of adjusted net earnings
----------------------------------------------------------------------------
Years ended December 31 ($)                              2013          2012
----------------------------------------------------------------------------
Numerator - Annualized fourth quarter dividend
 declared per equity share (1)                           1.44          1.28
----------------------------------------------------------------------------
Adjusted net earnings ($ millions):
  Net income attributable to equity shares              1,294         1,204
  Add back long-term debt prepayment premium
   after income taxes                                      17             -
  Add back unfavourable (deduct favourable)
   income tax-related adjustments (see Section
   2.2)                                                     3           (12)
  Deduct after-tax gain net equity losses
   related to the TELUS Garden residential
   real estate partnership                                  -            (6)
  Net-cash settlement feature (2007 to 2012)                -            (2)
----------------------------------------------------------------------------
                                                        1,314         1,184
----------------------------------------------------------------------------
Denominator - Adjusted net earnings per share
 (1)                                                     2.05          1.83
----------------------------------------------------------------------------
Adjusted ratio (%)                                         70            70
----------------------------------------------------------------------------
(1) Reflects the two-for-one stock split effective April 16, 2013.

Earnings coverage is defined in the Canadian Securities Administrators' National Instrument 41-101 and related instruments, and is calculated as follows:


Calculation of Earnings coverage
----------------------------------------------------------------------------
Years ended December 31 ($ millions, except
 ratio)                                                  2013           2012
----------------------------------------------------------------------------
Net income attributable to equity shares                1,294          1,204
Income taxes                                              474            416
Borrowing costs (Interest on long-term debt +
 Interest on short-term borrowings and other +
 Long-term debt prepayment premium)                       395            350
----------------------------------------------------------------------------
Numerator                                               2,163          1,970
Denominator - Borrowing costs                             395            350
----------------------------------------------------------------------------
Ratio (times)                                             5.5            5.6
----------------------------------------------------------------------------

EBITDA (earnings before interest, income taxes, depreciation and amortization): We have issued guidance on and report EBITDA because it is a key measure used to evaluate performance at a consolidated level and the contribution of our two segments. EBITDA is commonly reported and widely used by investors and lending institutions as an indicator of a company's operating performance and ability to incur and service debt, and as a valuation metric. EBITDA should not be considered an alternative to Net income in measuring TELUS' performance, nor should it be used as an exclusive measure of cash flow. EBITDA as calculated by TELUS is equivalent to Operating revenues less the total of Goods and services purchased and Employee benefits expense.

We may also calculate an adjusted EBITDA to exclude items of an unusual nature that do not reflect our ongoing operations, that should not be considered in a valuation metric or should not be included in assessment of ability to service or incur debt. In respect of the TELUS Garden residential real estate partnership, which is included in the wireline segment, we do not anticipate retaining an ownership interest in the TELUS Garden residential condominium following completion of construction. In respect of the TELUS Garden residential real estate partnership, in 2012 we recorded a $7 million pre-tax gain net of equity losses in the year; consolidated EBITDA in 2012 excluding this net gain would be $3,852 million. Equity losses for the TELUS Garden residential real estate partnership were $Nil in the fourth quarter and full year of 2013 and $Nil in the fourth quarter of 2012.


Calculation of EBITDA
----------------------------------------------------------------------------
                                       Fourth quarters           Years ended
                                     ended December 31           December 31
                                --------------------------------------------
($ millions)                           2013       2012       2013       2012
----------------------------------------------------------------------------
Net income                              290        263      1,294      1,204
Financing costs                         110         96        447        374
Income taxes                             90         81        474        416
Depreciation                            347        373      1,380      1,422
Amortization of intangible
 assets                                 114        105        423        443
----------------------------------------------------------------------------
EBITDA                                  951        918      4,018      3,859
----------------------------------------------------------------------------

EBITDA - excluding restructuring and other like costs: We report this measure as a supplementary indicator of our operating performance. It is also utilized in the calculation of Net debt to EBITDA - excluding restructuring and other like costs and EBITDA - excluding restructuring and other like costs interest coverage.


Calculation of EBITDA - excluding restructuring and other like costs
----------------------------------------------------------------------------
                                       Fourth quarters           Years ended
                                     ended December 31           December 31
                                --------------------------------------------
($ millions)                           2013       2012       2013       2012
----------------------------------------------------------------------------
EBITDA                                  951        918      4,018      3,859
Restructuring and other like
 costs                                   33         19         98         48
----------------------------------------------------------------------------
EBITDA - excluding restructuring
 and other like costs                   984        937      4,116      3,907
----------------------------------------------------------------------------

EBITDA - excluding restructuring and other like costs interest coverage is defined as EBITDA - excluding restructuring and other like costs, divided by Net interest cost, calculated on a 12-month trailing basis. This measure is similar to the Coverage Ratio covenant in our credit facilities (see Section 4.5).

EBITDA less capital expenditures (excluding spectrum licences): We calculate this measure as a simple proxy for cash flow at a consolidated level and for our two 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.


Calculation of EBITDA less capital expenditures (excluding spectrum
 licences)
----------------------------------------------------------------------------
                                      Fourth quarters                 Years
                                    ended December 31     ended December 31
                                --------------------------------------------
($ millions)                          2013       2012       2013       2012
----------------------------------------------------------------------------
EBITDA                                 951        918      4,018      3,859
Capital expenditures (excluding
 spectrum licences)                   (577)      (521)    (2,110)    (1,981)
----------------------------------------------------------------------------
EBITDA less capital expenditures
 (excluding spectrum licences)         374        397      1,908      1,878
----------------------------------------------------------------------------

Free cash flow: We report free cash flow because it is a key measure that we use to evaluate performance and it should not be considered an alternative to the measures in the Consolidated statements of cash flows. Free cash flow excludes certain working capital changes (such as trade receivables and trade payables), proceeds from divested assets and other sources and uses of cash, as found in the Consolidated statements of cash flows. It provides an indication of how much cash generated by operations is available after capital expenditures (excluding purchases of spectrum licences) that may be used to, among other things, pay dividends, repay debt, purchase shares under an NCIB program or make other investments. Free cash flow may be supplemented from time to time by proceeds from divested assets or financing activities.


Free cash flow calculation
----------------------------------------------------------------------------
                                      Fourth quarters           Years ended
                                    ended December 31           December 31
                                --------------------------------------------
($ millions)                          2013       2012       2013       2012
----------------------------------------------------------------------------
EBITDA                                 951        918      4,018      3,859
Deduct gain net of equity losses
 related to TELUS Garden
 residential real estate
 partnership                             -          -          -         (7)
Deduct interest income received
 that is also recorded in Other
 operating income                        -          -          -         (1)
Restructuring (disbursements)
 net of restructuring costs             17          9          9         (4)
Items from the Consolidated
 statements of cash flows
  Share-based compensation             (22)       (20)        24          9
  Net employee defined benefit
   plans expense                        27         26        108        103
  Employer contributions to
   employee defined benefit
   plans                               (27)       (28)      (200)      (173)
  Interest paid                       (114)      (109)      (364)      (337)
  Interest received                      1          1          4         13
Capital expenditures (excluding
 spectrum licences)                   (577)      (521)    (2,110)    (1,981)
----------------------------------------------------------------------------
Free cash flow before income
 taxes                                 256        276      1,489      1,481
Income taxes paid, net of
 refunds                              (120)       (13)      (438)      (150)
----------------------------------------------------------------------------
Free cash flow                         136        263      1,051      1,331
----------------------------------------------------------------------------

The following reconciles our definition of free cash flow with Cash provided by operating activities.


Free cash flow reconciliation with Cash provided by operating activities
----------------------------------------------------------------------------
                                      Fourth quarters           Years ended
                                    ended December 31           December 31
                                --------------------------------------------
($ millions)                           2013      2012        2013      2012
----------------------------------------------------------------------------
Free cash flow                          136       263       1,051     1,331
Add back capital expenditures
 (excluding spectrum licences)          577       521       2,110     1,981
Adjustments to reconcile to cash
 provided by operating
 activities                              13       (81)         85       (93)
----------------------------------------------------------------------------
Cash provided by operating
 activities                             726       703       3,246     3,219
----------------------------------------------------------------------------

Net debt: We believe that Net debt is a useful measure because it represents the amount of short-term borrowings and long-term debt obligations that are not covered by available Cash and temporary investments, and when applicable in previous years, it incorporated exchange rate impacts of cross-currency swap agreements put into place to fix the value of U.S. dollar debt. The nearest IFRS measure to net debt is Long-term debt, including Current maturities of long-term debt. Net debt is a component of the Net debt to EBITDA - excluding restructuring and other like costs ratio.


Calculation of Net debt
----------------------------------------------------------------------------
At December 31 ($ millions)                             2013           2012
----------------------------------------------------------------------------
Long-term debt including current maturities of
 long-term debt                                        7,493          6,256
Debt issuance costs netted against long-term
 debt                                                     35             26
Cash and temporary investments                          (336)          (107)
Short-term borrowings                                    400            402
----------------------------------------------------------------------------
Net debt                                               7,592          6,577
----------------------------------------------------------------------------

Net debt to EBITDA - excluding restructuring and other like costs is defined as Net debt at the end of the period divided by the 12-month trailing EBITDA - excluding restructuring and other like costs. Our long-term policy guideline for this ratio is from 1.5 to 2.0 times, which is similar to the Leverage Ratio covenant in our credit facilities (see Section 4.5).

Net debt to total capitalization is a measure of the proportion of debt used in the capital structure of TELUS.

Net interest cost: is the denominator in the calculation of EBITDA - excluding restructuring and like costs interest coverage. Net interest cost is defined as Financing costs excluding employee defined benefit plans net interest and recoveries on redemption and repayment of debt, calculated on a 12-month trailing basis. No recoveries on redemption and repayment of debt were recorded in 2013 and 2012. Expenses recorded for the long-term debt prepayment premium, if any, are included in net interest cost. Net interest cost was $370 million in 2013 and $332 million in 2012.

Restructuring and other like costs: With the objective of reducing ongoing costs, we incur associated incremental, non-recurring restructuring costs. We may also incur atypical charges when undertaking major or transformational changes to our business or operating models. In addition to items such as internal and external labour, such atypical charges may include depreciation and amortization of intangible assets expenses, when property, plant, equipment and intangible assets are retired significantly prior to the end of their estimated useful lives so that other continuing formerly associated resources, such as spectrum, may be redeployed elsewhere in our business. We also include incremental external costs incurred in connection with business acquisition activity in other like costs.

Total capitalization - book value is defined and calculated as follows:


Calculation of total capitalization - book value
----------------------------------------------------------------------------
At December 31 ($ millions)                             2013           2012
----------------------------------------------------------------------------
Net debt                                               7,592          6,577
Owners' equity                                         8,015          7,686
Deduct Accumulated other comprehensive income            (31)           (40)
Total capitalization - book value                     15,576         14,223
----------------------------------------------------------------------------

7.2 Wireless operating indicators

The following measures are industry metrics that are useful in assessing the operating performance of a wireless telecommunications entity, but do not have a standardized meaning under IFRS-IASB.

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 revenue 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 deactivated 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 TELUS or Koodo brand prepaid subscriber is deactivated when the subscriber has no usage for 90 days following expiry of the prepaid credits.

Cost of acquisition (COA) consists of the total of the device subsidy (the device cost to TELUS less initial charge to the customer), 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.

Retention spend to network revenue represents direct costs associated with marketing and promotional efforts (including device subsidy and commissions) aimed at the retention of the existing subscriber base, divided by network revenue.

Subscriber unit (wireless) is defined as an active recurring revenue-generating unit (e.g. cellular phone, tablet or mobile Internet key) with a unique subscriber identifier (SIM or IMEI number) that has access to the wireless voice and/or data networks for communication. In addition, TELUS has a direct billing or support relationship with the user of each device. Our definition of subscriber units excludes machine-to-machine (M2M) devices, such as those for asset tracking, remote control monitoring and meter readings, vending machines and wireless ATMs.

consolidated statements of income and other comprehensive income


                                         Three months         Twelve months
                                --------------------------------------------
Periods ended December 31
 (millions except per share
 amounts)                             2013       2012       2013       2012
----------------------------------------------------------------------------
                                            (adjusted)            (adjusted)
OPERATING REVENUES
Service                            $ 2,699    $ 2,598   $ 10,601   $ 10,079
Equipment                              229        236        735        773
----------------------------------------------------------------------------
                                     2,928      2,834     11,336     10,852
Other operating income                  20         17         68         69
----------------------------------------------------------------------------
                                     2,948      2,851     11,404     10,921
----------------------------------------------------------------------------
OPERATING EXPENSES
Goods and services purchased         1,349      1,330      4,962      4,820
Employee benefits expense              648        603      2,424      2,242
Depreciation                           347        373      1,380      1,422
Amortization of intangible
 assets                                114        105        423        443
----------------------------------------------------------------------------
                                     2,458      2,411      9,189      8,927
----------------------------------------------------------------------------
OPERATING INCOME                       490        440      2,215      1,994
Financing costs                        110         96        447        374
----------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES             380        344      1,768      1,620
Income taxes                            90         81        474        416
----------------------------------------------------------------------------
NET INCOME                             290        263      1,294      1,204
----------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME
Items that may subsequently be
 reclassified to income
Change in unrealized fair value
 of derivatives designated as
 cash flow hedges                        1          1          -         (4)
Foreign currency translation
 adjustment arising from
 translating financial
 statements of foreign
 operations                              4          2          4          -
Change in unrealized fair value
 of available-for-sale financial
 assets                                 (7)        22        (13)        33
----------------------------------------------------------------------------
                                        (2)        25         (9)        29
----------------------------------------------------------------------------
Item never subsequently
 reclassified to income
Employee defined benefit plans
 re-measurements                       755       (454)       998       (286)
----------------------------------------------------------------------------
                                       753       (429)       989       (257)
----------------------------------------------------------------------------
COMPREHENSIVE INCOME               $ 1,043     $ (166)   $ 2,283      $ 947
----------------------------------------------------------------------------
NET INCOME PER EQUITY SHARE((i))
Basic                               $ 0.47     $ 0.40     $ 2.02     $ 1.85
Diluted                             $ 0.46     $ 0.40     $ 2.01     $ 1.84
DIVIDENDS DECLARED PER EQUITY
 SHARE(i)                           $ 0.36     $ 0.32     $ 1.36     $ 1.22
TOTAL WEIGHTED AVERAGE EQUITY
 SHARES OUTSTANDING(i)
Basic                                  623        652        640        651
Diluted                                626        656        643        655

(i) Amounts reflect retrospective application of April 16, 2013, stock
    split.

consolidated statements of financial position



As at December 31 (millions)                                2013        2012
----------------------------------------------------------------------------

ASSETS
Current assets
Cash and temporary investments, net                   $      336  $      107
Accounts receivable                                        1,461       1,541
Income and other taxes receivable                             32          25
Inventories                                                  326         350
Prepaid expenses                                             168         178
Current derivative assets                                      6           9
----------------------------------------------------------------------------
                                                           2,329       2,210
----------------------------------------------------------------------------
Non-current assets
Property, plant and equipment, net                         8,428       8,165
Intangible assets, net                                     6,531       6,181
Goodwill, net                                              3,737       3,702
Real estate joint ventures                                    11          11
Other long-term assets                                       530         176
----------------------------------------------------------------------------
                                                          19,237      18,235
----------------------------------------------------------------------------
                                                      $   21,566  $   20,445
----------------------------------------------------------------------------

LIABILITIES AND OWNERS' EQUITY
Current liabilities
Short-term borrowings                                 $      400  $      402
Accounts payable and accrued liabilities                   1,735       1,511
Income and other taxes payable                               102         102
Dividends payable                                            222         208
Advance billings and customer deposits                       729         703
Provisions                                                   110          49
Current maturities of long-term debt                           -         545
Current derivative liabilities                                 1           -
----------------------------------------------------------------------------
                                                           3,299       3,520
----------------------------------------------------------------------------
Non-current liabilities
Provisions                                                   219         222
Long-term debt                                             7,493       5,711
Other long-term liabilities                                  649       1,682
Deferred income taxes                                      1,891       1,624
----------------------------------------------------------------------------
                                                          10,252       9,239
----------------------------------------------------------------------------
Liabilities                                               13,551      12,759
----------------------------------------------------------------------------
Owners' equity
Common equity                                              8,015       7,686
----------------------------------------------------------------------------
                                                      $   21,566  $   20,445
----------------------------------------------------------------------------

consolidated statements of cash flows


                                         Three months         Twelve months
                                --------------------------------------------
Periods ended December 31
 (millions)                           2013       2012       2013       2012
----------------------------------------------------------------------------
                                            (adjusted)            (adjusted)
OPERATING ACTIVITIES
Net income                           $ 290      $ 263    $ 1,294    $ 1,204
Adjustments to reconcile net
 income to cash provided by
 operating activities:
  Depreciation and amortization        461        478      1,803      1,865
  Deferred income taxes                 98        156         21        122
  Share-based compensation
   expense                             (22)       (20)        24          9
  Net employee defined benefit
   plans expense                        27         26        108        103
  Employer contributions to
   employee defined benefit
   plans                               (27)       (28)      (200)      (173)
  Other                                  7         12          9         37
  Net change in non-cash
   operating working capital          (108)      (184)       187         52
----------------------------------------------------------------------------
Cash provided by operating
 activities                            726        703      3,246      3,219
----------------------------------------------------------------------------
INVESTING ACTIVITIES
Cash payments for capital
 assets, excluding spectrum
 licences                             (545)      (487)    (2,035)    (1,950)
Cash payments for spectrum
 licences                                -          -        (67)         -
Cash payments for acquisitions
 and related investments              (229)        (5)      (261)       (53)
Real estate joint ventures
 advances and contributions             (8)        (6)       (24)       (73)
Real estate joint ventures
 receipts                                -          -          1         47
Proceeds on dispositions                 5          -         12         20
Other                                  (10)       (16)       (15)       (49)
----------------------------------------------------------------------------
Cash used by investing
 activities                           (787)      (514)    (2,389)    (2,058)
----------------------------------------------------------------------------
FINANCING ACTIVITIES
Non-Voting Shares issued                 -          1          -          1
Dividends paid to holders of
 equity shares                        (213)      (199)      (852)      (774)
Purchase of Common Shares for
 cancellation                            -          -     (1,000)         -
Issuance and repayment of short-
 term borrowings                        (9)        (1)        (2)        (2)
Long-term debt issued                1,180      2,364      4,630      5,988
Redemptions and repayment of
 long-term debt                       (585)    (2,288)    (3,375)    (6,309)
Other                                   (8)        (4)       (29)        (4)
----------------------------------------------------------------------------
Cash provided (used) by
 financing activities                  365       (127)      (628)    (1,100)
----------------------------------------------------------------------------
CASH POSITION
Increase in cash and temporary
 investments, net                      304         62        229         61
Cash and temporary investments,
 net, beginning of period               32         45        107         46
----------------------------------------------------------------------------
Cash and temporary investments,
 net, end of period                  $ 336      $ 107      $ 336      $ 107
----------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF
 OPERATING CASH FLOWS
Interest paid                       $ (114)    $ (109)    $ (364)    $ (337)
----------------------------------------------------------------------------
Interest received                      $ 1        $ 1        $ 4       $ 13
----------------------------------------------------------------------------
Income taxes paid, net              $ (120)     $ (13)    $ (438)    $ (150)
----------------------------------------------------------------------------

segmented information


Three months ended
 December 31 (millions)                  Wireless                  Wireline

                                 2013        2012         2013         2012
----------------------------------------------------------------------------
                                        (adjusted)                (adjusted)
Operating revenues
External revenue              $ 1,585     $ 1,533      $ 1,363      $ 1,318
Intersegment revenue               11          11           43           43
----------------------------------------------------------------------------
                              $ 1,596     $ 1,544      $ 1,406      $ 1,361
----------------------------------------------------------------------------
EBITDA(1)                       $ 592       $ 566        $ 359        $ 352
----------------------------------------------------------------------------
CAPEX, excluding spectrum
 licences(2)                    $ 213       $ 191        $ 364        $ 330
----------------------------------------------------------------------------
EBITDA less CAPEX,
 excluding spectrum
 licences                       $ 379       $ 375         $ (5)        $ 22
----------------------------------------------------------------------------















Three months ended
 December 31 (millions)              Eliminations             Consolidated

                                 2013        2012         2013        2012
---------------------------------------------------------------------------
                                                                 (adjusted)
Operating revenues
External revenue                  $ -         $ -      $ 2,948     $ 2,851
Intersegment revenue              (54)        (54)           -           -
---------------------------------------------------------------------------
                                $ (54)      $ (54)     $ 2,948     $ 2,851
---------------------------------------------------------------------------
EBITDA(1)                         $ -         $ -        $ 951       $ 918
---------------------------------------------------------------------------
CAPEX, excluding spectrum
 licences(2)                      $ -         $ -        $ 577       $ 521
---------------------------------------------------------------------------
EBITDA less CAPEX,
 excluding spectrum
 licences                         $ -         $ -        $ 374       $ 397
---------------------------------------------------------------------------
                         Operating revenues
                          (above)                      $ 2,948     $ 2,851
                         Goods and services
                          purchased                      1,349       1,330
                         Employee benefits
                          expense                          648         603
                         --------------------------------------------------
                         EBITDA (above)                    951         918
                         Depreciation                      347         373
                         Amortization                      114         105
                         --------------------------------------------------
                         Operating income                  490         440
                         Financing costs                   110          96
                         --------------------------------------------------
                         Income before income
                          taxes                          $ 380       $ 344
                         --------------------------------------------------


Years ended December 31
 (millions)                                Wireless                Wireline

                                    2013       2012         2013       2012
----------------------------------------------------------------------------
                                          (adjusted)              (adjusted)
Operating revenues
External revenue                 $ 6,130    $ 5,845      $ 5,274    $ 5,076
Intersegment revenue                  47         41          169        170
----------------------------------------------------------------------------
                                 $ 6,177    $ 5,886      $ 5,443    $ 5,246
----------------------------------------------------------------------------
EBITDA(1)                        $ 2,604    $ 2,458      $ 1,414    $ 1,401
----------------------------------------------------------------------------
CAPEX, excluding spectrum
 licences(2)                       $ 712      $ 711      $ 1,398    $ 1,270
----------------------------------------------------------------------------
EBITDA less CAPEX, excluding
 spectrum licences               $ 1,892    $ 1,747         $ 16      $ 131
----------------------------------------------------------------------------














Years ended December 31
 (millions)                            Eliminations            Consolidated

                                   2013        2012         2013       2012
----------------------------------------------------------------------------
                                                                  (adjusted)
Operating revenues
External revenue                    $ -         $ -     $ 11,404   $ 10,921
Intersegment revenue               (216)       (211)           -          -
----------------------------------------------------------------------------
                                 $ (216)     $ (211)    $ 11,404   $ 10,921
----------------------------------------------------------------------------
EBITDA(1)                           $ -         $ -      $ 4,018    $ 3,859
----------------------------------------------------------------------------
CAPEX, excluding spectrum
 licences(2)                        $ -         $ -      $ 2,110    $ 1,981
----------------------------------------------------------------------------
EBITDA less CAPEX, excluding
 spectrum licences                  $ -         $ -      $ 1,908    $ 1,878
----------------------------------------------------------------------------
                            Operating revenues
                             (above)                    $ 11,404   $ 10,921
                            Goods and services
                             purchased                     4,962      4,820
                            Employee benefits
                             expense                       2,424      2,242
                            ------------------------------------------------
                            EBITDA (above)                 4,018      3,859
                            Depreciation                   1,380      1,422
                            Amortization                     423        443
                            ------------------------------------------------
                            Operating income               2,215      1,994
                            Financing costs                  447        374
                            ------------------------------------------------
                            Income before income
                             taxes                       $ 1,768    $ 1,620
                            ------------------------------------------------
(1) Earnings before interest, income taxes, depreciation and amortization
    (EBITDA) does not have any standardized meaning prescribed by IFRS-IASB
    and is therefore unlikely to be comparable to similar measures presented
    by other issuers; we define EBITDA as operating revenues less goods and
    services purchased and employee benefits expense. We have issued
    guidance on, and report, EBITDA because it is a key measure that
    management uses to evaluate the performance of our business and is also
    utilized in measuring compliance with certain debt covenants.
(2) Total capital expenditures (CAPEX).

Contacts:
TELUS Corporation
Media relations:
Shawn Hall
(604) 619-7913
shawn.hall@telus.com

TELUS Corporation
Investor relations:
Robert Mitchell
(647) 837-1606
ir@telus.com

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