TELUS responds to Moody's Rating Downgrade
VANCOUVER, July 25 /CNW/ - TELUS Corporation (TELUS) responded today to
the decision by Moody's Investors Service to lower its senior unsecured debt
rating from Baa2 to Ba1.
"TELUS Corporation finds this rating downgrade to be unwarranted at this
time, and not consistent with our business fundamentals or our financial
position and outlook," said Robert McFarlane, Executive Vice President and
Chief Financial Officer, TELUS Corporation.
"Three other credit agencies - Standard & Poors (S&P), Dominion Bond
Rating Service (DBRS) and Fitch Ratings who were provided with the same
information, issued decisions this month rating TELUS' debt at two notches
above Moody's, reaffirming our investment grade ratings," added McFarlane.
TELUS has proactively taken measures in the past year to enhance TELUS'
credit position including:
- Selling non-core assets of approximately $1.2 billion,
- Refinancing at reduced rates, high yield debt acquired with Clearnet,
- Significantly reducing the dividend on TELUS' common and non-voting
shares,
- Enhancing the dividend reinvestment plan with treasury shares issued,
- Reducing capital expenditures,
- Realizing significant cash tax savings, and
- Initiating a significant Operational Efficiency Program.
Darren Entwistle, president and Chief Executive Officer of TELUS
commented, "On the back of strong financial results, TELUS proactively reduced
its dividend in October 2001 by 57%. This, in combination with the dividend
reinvestment plan, successfully offset the impact of negative regulatory
decisions of last year. With our positive business outlook, TELUS has no
intention of reducing the dividend further and is committed to the maintenance
of the existing payout."
The impact of the Moody's announcement on TELUS' operations is minimal.
Furthermore, TELUS does not need to issue new debt in the public debt market
and the Company's business plan is fully financed. The announcement does not
affect TELUS' considerable borrowing availability under its current bank
facilities, and will not have a significant effect on interest costs for
TELUS. The estimated increase in expense is $3 to $4 million per annum. The
Company's fixed rate debt is approximately 90% of its total indebtedness and
the average term to maturity is 6.8 years.
"TELUS is committed to being free cash flow positive in 2003, a year
earlier than stated in public guidance at the end of 2001," said McFarlane.
The anticipated improvement in TELUS' free cash flow is expected to result
from strong cash flow growth from TELUS Mobility, planned capital expenditure
reductions and the recently announced second phase of our Operational
Efficiency Program."
"We are extremely disappointed about the process and outcome related to
the Moody's credit rating action," said Robert McFarlane. "It does not seem to
be consistent with historic methodology nor does it reflect the considerable
credit enhancement which has occurred in the past year. Nevertheless, we
remain committed to improving our debt ratings in the future."
Recent concerns about credit quality and downgrades are a worldwide
telecom phenomenon. However, TELUS is differentiated from most other telecom
firms given continued prospects for significant growth and margin expansion.
TELUS' business plan entails an explicit and achievable objective of reducing
its debt leverage, as represented by net debt to EBITDA ratio, to 3.0x by
2003.
TELUS will be releasing its Q2 2002 results on Monday, July 29, 2002 and
will be holding an investor conference call, which will be Web cast from the
TELUS web site at www.telus.com on the same day. The Web cast begins at
11:00 a.m. ET.
About TELUS
TELUS Corporation (TSX: T, T.A; NYSE: TU) is one of Canada's leading
telecommunications companies providing a full range of telecommunications
products and services that connect Canadians to the world. The company is the
leading service provider in Western Canada and provides data, Internet
Protocol, voice and wireless services to Central and Eastern Canada.
Forward-Looking Statements
This document contains statements about expected future events and
financial and operating results that are forward-looking and subject to risks
and uncertainties. TELUS' actual results, performance or achievement could
differ materially from those expressed or implied by such statements. Such
statements are qualified in their entirety by the inherent risks and
uncertainties surrounding future expectations and may not reflect the
potential impact of any future acquisitions, mergers or divestitures. Factors
that could cause actual results to differ materially include but are not
limited to: general business and economic conditions in TELUS' service
territories across Canada; competition in wireline and wireless services,
including voice, data and Internet services and within the Canadian
telecommunications industry generally; levels of capital expenditures;
corporate restructurings; successful implementation of operational efficiency
programs; successful integration of acquisitions; capital and operating
expense savings; the impact of credit rating changes; renewal of credit
facilities; successful completion of a new accounts receivable securitization
program; adverse regulatory action; collective labour agreement negotiations;
technological advances; the effect of health and safety concerns and other
risk factors described and listed from time to time in the TELUS' reports, the
TELUS' comprehensive public disclosure documents, including the Annual
Information Form, and in other filings with securities commissions in Canada
and the U.S.
The Company disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
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For further information: Nick Culo, Media Relations, (780) 493-7236,
nick.culo@telus.com; John Wheeler, Investor Relations, (780) 493-7310,
Ir@telus.com; Shafiq Jamal, Media Relations, (604) 488-1100, |
