Form 6-K TELUS CORP For: Nov 04

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of November 2016
Commission File Number 000-24876

TELUS CORPORATION

(Translation of registrant’s name into English)

23rd Floor, 510 West Georgia Street
Vancouver, British Columbia V6B 0M3
Canada

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-      .

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

2

Exhibit Index

3

Exhibit 99.1

November 4, 2016

TELUS reports strong results for third quarter 2016

Consolidated operating revenue up 2.6 per cent and EBITDA up 5.8 per cent

Strong customer loading in all key segments with 115,000 net new postpaid wireless, Internet and TELUS TV customer additions

Industry-leading wireless monthly postpaid churn of 0.94 per cent, ARPU growth of 3.8 per cent and best-in-class lifetime revenue per client of $5,650

Quarterly dividend increased to $0.48 per share — twelfth dividend increase since multi-year 10 per cent per annum dividend growth program commenced in May 2011

Vancouver, B.C. — TELUS Corporation’s consolidated operating revenue grew 2.6 per cent to $3.2 billion in the third quarter of 2016 from a year earlier, reflecting higher data revenue and subscriber growth in both wireless and wireline operations. Earnings before interest, income taxes, depreciation and amortization (EBITDA)1 increased by 5.8 per cent to $1.1 billion. When excluding net gains and equity income related to real estate joint venture developments in the third quarter of 2016, as well as restructuring and other costs from both reporting periods, adjusted EBITDA was up 5.5 per cent to $1.2 billion. This growth reflects higher wireless and wireline revenue, as well as ongoing execution of operational efficiency and effectiveness initiatives.

“TELUS’ third quarter results reflect the company’s strong and disciplined performance across both our wireless and wireline operations,” said Darren Entwistle, President and CEO. “Our team once again delivered industry-leading results in wireless customer loyalty, ARPU growth and lifetime-revenue, as well as strong consolidated and segmented revenue and EBITDA growth. Importantly, these results are underpinned by a highly dedicated TELUS team that is committed to consistently providing exceptional customer experiences.”

“This strong performance underscores TELUS’ unique ability to return capital to investors through growing dividends, while simultaneously funding significant strategic growth investments. TELUS announced its twelfth dividend increase in the past six years as part of our multi-year, 10 per cent per annum dividend growth program launched in May 2011. Our consistent long-term track record of providing industry-leading shareholder-friendly initiatives is reflected in TELUS now having returned $13.6 billion to shareholders, including $8.4 billion in dividends and $5.2 billion in share purchases, representing $23 per share between 2004 and October 2016. This track record, combined with our strong operational results, further buttresses our next three-year capital return program targeted for 2017 through 2019,” Mr. Entwistle added.

Doug French, Executive Vice-President and CFO said, “TELUS’ third quarter results reflect the quality of TELUS’ asset base as we delivered healthy margin expansion in both wireless and wireline, along with strong subscriber growth. These results also reflect the benefits of our ongoing efficiency and effectiveness programs, highlighting our commitment to making smart investments that drive ongoing improvements in customer experience, and accelerate future cash flow generation. Anchored by our strong balance sheet, we remain focused on our generational investments in broadband technologies to drive continued growth, future-proof our network and deliver on our shareholder return initiatives.”

In wireless, higher data revenue was driven by a larger proportion of higher-rate two-year plans in the revenue mix, increased adoption of larger data buckets, continued subscriber growth, a more favourable postpaid subscriber mix, and increased data usage from the continued adoption of higher-end smartphones and other data-centric wireless devices, as well as greater use of data-intensive applications. Wireline data revenue growth was generated by growth in business process outsourcing revenues, an increase in Internet,

TV and enhanced data service revenues from continued high-speed Internet and TV subscriber growth and higher revenue per customer.

In the quarter, TELUS attracted 115,000 net wireless postpaid, high-speed Internet and TV customers, up 23,000 sequentially over the second quarter of 2016. Net additions in the quarter included 87,000 wireless postpaid customers, 14,000 high-speed Internet subscribers, and 14,000 TELUS TV customers. These gains were partially offset by the ongoing loss of traditional telephone network access lines and a decline in wireless prepaid customers. TELUS’ total wireless subscriber base of over 8.5 million is up 1.0 per cent from a year ago, reflecting a 2.4 per cent increase in the postpaid subscriber base to 7.5 million. TELUS’ high-speed Internet connections have increased 5.6 per cent to 1.6 million, while TELUS TV subscribers are higher by 6.4 per cent to over 1 million.

TELUS’ continued focus on executing on its top corporate priority of putting customers first was demonstrated by delivering an industry-leading wireless monthly postpaid churn rate of 0.94 per cent. This is the twelfth quarter in the past 13 quarters that TELUS’ postpaid churn rate has been below the 1 per cent level. Blended churn of 1.18 per cent in the third quarter of 2016 is among TELUS’ lowest quarterly churn rates since becoming a national carrier 16 years ago.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(1)             EBITDA is a non-GAAP measure and does not have any standardized meaning prescribed by IFRS-IASB. TELUS issues guidance on and reports EBITDA because it is a key measure used to evaluate performance at a consolidated and segmented level. For further definition and explanation of this measure, see Section 11.1 in the accompanying 2016 third quarter Management’s discussion and analysis.

(2)             For the third quarter of 2016 and 2015, restructuring and other costs were $60 million and $51 million respectively.

(3)             Adjusted EBITDA for the third quarter of 2016 excludes:1) net gains and equity income of $10 million related to real estate joint venture developments; and 2) restructuring and other costs of $60 million.

(4)             Adjusted net income and Adjusted basic EPS are non-GAAP measures and do not have any standardized meaning prescribed by IFRS-IASB. These terms are defined in this news release as excluding from net income attributable to common shares and basic EPS (after income taxes), 1) net gains and equity income from real estate joint venture developments in the third quarter of 2016; 2) restructuring and other costs in the third quarter of 2016 and 2015; and 3) favourable income tax-related adjustments in the third quarter of 2016 and 2015. For further analysis of Adjusted net income and Adjusted basic EPS see Section 1.3 in the accompanying 2016 third quarter Management’s discussion and analysis.

(5)             Free cash flow is a non-GAAP measure and does not have any standardized meaning prescribed by IFRS-IASB. For definition and explanation of this measure, see Section 11.1 in the accompanying 2016 third quarter Management’s discussion and analysis.

(6)             The sum of active wireless subscribers, residential network access lines (NALs), high-speed Internet access subscribers and TELUS TV subscribers (Optik TV™ and TELUS Satellite TV® subscribers) measured at the end of the respective periods based on information in billing and other systems. Our January 1, 2015 opening reported subscriber balance has been retrospectively adjusted to exclude 1,613,000 business NALs due to its diminishing relevance as a key performance indicator. Subsequent to a review of our subscriber base, TELUS’ Q1 2016 beginning of period postpaid wireless subscriber base was reduced by 45,000 and its Q1 2016 beginning of period high-speed Internet subscriber base was increased by 21,000.

Net income of $355 million and basic earnings per share (EPS) of $0.59 were lower by 2.7 and 3.3 per cent, respectively, over the same period a year ago as higher EBITDA was offset primarily by higher depreciation and amortization expenses and increases in financing costs and income tax expense.

Free cash flow5 of $98 million in the third quarter was lower by $212 million from a year ago, primarily due to higher income taxes paid and capital expenditures, partially offset by adjusted EBITDA growth.

In the third quarter of 2016, TELUS returned $293 million to shareholders including $274 million in dividends paid and $19 million in share purchases under its 2016 normal course issuer bid (NCIB) program. Through the end of October, TELUS has returned $1.2 billion to shareholders this year, including $1.07 billion in dividends paid and the purchase of approximately 3.35 million shares for $130 million.

Subsequent to September 30, 2016, TELUS made commitments to pay lump-sum amounts totaling approximately $300 million (inclusive of amounts proposed in an unratified tentative agreement), in respect of immediately-vesting, transformative compensation expense to the majority of its existing unionized and non-unionized Canadian-sited workforces; a portion of the net-of-tax amount for certain lump-sum recipients will be paid in Common Shares purchased in the market. If the tentative agreement is ratified, there will be a one-time payment to these unionized members in the fourth quarter of 2016. This payment represents increases that would have been otherwise awarded July 1, 2016, 2017 and 2018 (a period of 30 months) and compensation in consideration of collective agreement concessions that underpin future productivity improvements. A similar approach with respect to salary increases has been adopted for management employees. For most of TELUS’ current Canadian-sited management employees, there will be a one-time payment in the fourth quarter of 2016 in lieu of general salary increases for 2017 and 2018. The next salary increases will be awarded in 2019.

Dividend Declaration — increased to 48 cents per quarter, up four cents from a year ago

The TELUS Board of Directors has declared a quarterly dividend of 48 cents ($0.48) Canadian per share on the issued and outstanding Common Shares of the Company payable on January 3, 2017 to holders of record at the close of business on December 9, 2016.

This fourth quarter dividend represents a four cent increase from the $0.44 quarterly dividend paid on January 4, 2016.

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 2019, the 2016 annual targets and guidance 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. The forward-looking statements contained in this news release describe our expectations at the date of this news release and, accordingly, are subject to change after such date. 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 those expressed in the forward-looking statements. Accordingly, this news release is subject to the disclaimer and qualified by the assumptions (including assumptions for the 2016 annual targets and guidance, semi-annual dividend increases through 2019 and our ability to sustain and complete our multi-year share purchase program through 2019), qualifications and risk factors referred to in the accompanying third quarter Management’s discussion and analysis and in the 2015 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.

Third Quarter 2016 Operating Highlights

TELUS wireless

·                 Wireless network revenues increased by $79 million or 4.9 per cent year-over-year to $1.7 billion. This growth was driven by an increase in data revenue due to a larger proportion of higher-rate two-year plans in the revenue mix, increased adoption of larger data buckets, subscriber growth, a more favourable postpaid subscriber mix, and increased data usage from the continued adoption of higher-end smartphones and other data-centric wireless devices. This growth was partially offset by the ongoing decline in voice revenue from increased adoption of unlimited nationwide voice plans and continued but moderating substitution to data services.

·                 Blended ARPU was higher by 3.8 per cent to $66.67. This represents TELUS’ twenty-fourth consecutive quarter of year-over-year growth. The growth was driven by data network revenue growth as described above.

·                 Monthly postpaid subscriber churn of 0.94 per cent improved by three basis points year-over-year. The decline reflects our customers first focus and retention programs, partly offset by competitive intensity and the effects of the economic slowdown, particularly in Alberta. Blended monthly churn improved by 10 basis points to 1.18 per cent reflecting improvements in both postpaid and prepaid churn rates.

·                 Postpaid net additions of 87,000 were higher year-over-year by 18,000 due to higher gross additions, reflecting the success of targeted promotions and marketing efforts, and lower churn. Total wireless net additions of 80,000 were higher by 11,000 over a year ago as higher postpaid net additions were slightly offset by higher prepaid losses of 7,000.

·                 Adjusted wireless EBITDA (EBITDA excluding the net gains and equity income from real estate joint venture developments, as well as restructuring and other costs) increased by $44 million or 6.1 per cent over last year to $773 million. The growth reflects higher network revenue as well as ongoing operational efficiency and effectiveness initiatives, partly offset by higher acquisition and retention spending reflecting higher per-unit subsidies due to customer preference for higher-value smartphones and competitive intensity.

·                 Wireless EBITDA less capital expenditures decreased year-over-year by $42 million to $464 million as higher EBITDA was offset by higher capital expenditures. Capital expenditures increased over the same period a year ago due to ongoing investments in TELUS’ fibre-optic network to support its small-cell technology strategy to improve coverage and prepare for a more efficient and timely evolution to 5G, as well as increased investment on the deployment of 700 MHz and 2500 MHz spectrum licences.

TELUS wireline

·                  External wireline revenues increased by $32 million or 2.3 per cent to $1.4 billion. This growth was generated primarily by higher data service and equipment revenue.

·                  Data service and equipment revenues increased by $75 million or 7.9 per cent, due to growth in business process outsourcing services, higher Internet and enhanced data revenues from continued high-speed Internet subscriber growth and higher revenue per customer, and higher TELUS TV revenues from continued subscriber growth and higher revenue per customer.

·                  High-speed Internet net additions of 14,000 were down 10,000 from the same quarter a year ago, reflecting heightened competitive intensity and the impact of the economic slowdown, leading to lower gross additions and a higher customer churn rate. This was partly offset by the ongoing expansion of TELUS’ high-speed broadband footprint, including fibre-to-the-premises, and the pull-through effect of bundling with Optik TV.

·                  Total TV net additions of 14,000 were lower by 12,000 over the same quarter a year ago, as a result of lower gross additions, a higher customer churn rate and a decline in satellite subscribers due to the effects of heightened competitive intensity including OTT services, slower subscriber growth for paid TV services, the economic slowdown, and a high rate of market penetration for TV services. These factors were partly offset by the ongoing expansion of our addressable high-speed broadband footprint and increasing broadband speeds.

·                  Residential network access lines (NALs) declined by 25,000 in the quarter, consistent with the decline in the same quarter a year ago. Residential NAL losses continue to reflect the ongoing trend towards wireless and Internet substitution, partly mitigated by the success of TELUS’ bundled service offerings.

·                  Adjusted wireline EBITDA (EBITDA excluding the net gains and equity income from real estate joint venture developments as well as restructuring and other costs) increased by $18 million or 4.2 per cent over last year to $408 million. Adjusted EBITDA would have been up 5.8 per cent had certain business acquisition-related provisions been excluded. The improvement reflects execution on operating efficiency and effectiveness

                        initiatives, as well as improving margins in data services, including Internet, business process outsourcing services, TELUS TV, and TELUS Health services.

·                  Wireline EBITDA less capital expenditures decreased by $59 million to $(120) million as higher EBITDA was more than offset by higher capital expenditures that support TELUS’ long-term growth. Capital expenditures increased over the same period a year ago due to continued strategic investments in broadband network infrastructure, including connecting more homes and businesses directly to TELUS’ fibre-optic network and investments in system and network resiliency and reliability.

Corporate Highlights

TELUS makes significant contributions and investments in the communities where team members live, work and serve and to the Canadian economy on behalf of customers, shareholders and team members by:

·                 Paying, collecting and remitting a total of approximately $1.8 billion in taxes during the first nine months of 2016 to federal, provincial and municipal governments in Canada consisting of corporate income taxes, sales taxes, property taxes, employer portion of payroll taxes and various regulatory fees. Since 2000, the Company has remitted more than $20 billion in these taxes.

·                 Disbursing spectrum renewal fees of $53 million to Innovation, Science and Economic Development Canada (formerly Industry Canada) during the first nine months of 2016. Since 2002, TELUS’ total tax and spectrum remittances to federal, provincial and municipal governments in Canada have totaled more than $25 billion.

·                 Investing $2.2 billion in capital expenditures primarily in communities across Canada in the first nine months of 2016 and more than $30 billion since 2000.

·                 Spending $5.6 billion in total operating expenses in the first nine months of 2016, including goods and service purchased of $3.9 billion. Since 2000, TELUS has spent $97 billion and $64 billion respectively in these areas.

·                 Generating a total team member payroll of $2.1 billion in the first nine months of 2016, including payroll taxes of $118 million. Since 2000, total team member payroll totals $39 billion.

·                 Paying $1.07 billion in dividends in 2016 through the end of October to individual shareholders, mutual fund owners, pensioners and institutional investors, and purchasing approximately 3.35 million shares for $130 million on behalf of shareholders under TELUS’ multi-year share purchase program.

·                 Returning $13.6 billion to shareholders through TELUS’ dividend and share purchase programs from 2004 to the end of October 2016, including $8.4 billion in dividends and $5.2 billion in share buybacks, representing $23 per share.

About TELUS

TELUS (TSX: T, NYSE: TU) is Canada’s fastest-growing national telecommunications company, with $12.7 billion of annual revenue and 12.6 million subscriber connections, including 8.5 million wireless subscribers, 1.6 million high-speed Internet subscribers, 1.4 million residential network access lines and more than 1.0 million TELUS TV customers. TELUS provides a wide range of communications products and services, including wireless, data, Internet protocol (IP), voice, television, entertainment and video, and is Canada’s largest healthcare IT provider.

In support of our philosophy to give where we live, TELUS, our team members and retirees have contributed $440 million to charitable and not-for-profit organizations and volunteered more than 6.8 million hours of service to local communities since 2000. Created in 2005 by President and CEO Darren Entwistle, TELUS’ 12 Canadian community boards and 5 International boards have led the Company’s support of grassroots charities and have contributed more than $54 million in support of over 4,900 local charitable projects, enriching the lives of more than 2 million children and youth, annually. 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 news release, management’s discussion and analysis, quarterly results slides, audio and transcript of the investor webcast call, supplementary financial information, and our full 2015 annual report at telus.com/investors.

TELUS’ third quarter 2016 conference call is scheduled for Friday, November 4, 2016 at 10:00am ET (7:00am PT) 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 November 4 until December 15, 2016 at 1-855-201-2300. Please use reference number 1206674# and access code 77377#. 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 discussion and analysis

2016 Q3

Caution regarding forward-looking statements

This document contains forward-looking statements about expected events and the financial and operating performance of TELUS Corporation. The terms TELUS, the Company, we, us and our refer to TELUS Corporation and where the context of the narrative permits or requires, its subsidiaries. Forward-looking statements include statements relating to annual targets, outlook, updates, our multi-year dividend growth program, our multi-year share purchase program 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, predict, could, expect, intend, may, plan, seek, should, strive and will. By their nature, forward-looking statements do not refer to historical facts, are subject to inherent risks and require us to make assumptions. Our assumptions are presented in Section 9 General trends, outlook and assumptions in our Management’s discussion and analysis (MD&A) for 2015 and updated in Section 9 Update to assumptions in this MD&A. There is significant risk that forward-looking statements will not prove to be accurate. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements.

Factors that could cause actual performance to differ materially from the forward-looking statements made herein and in other TELUS filings include, but are not limited to, the following:

·                  Competition including: continued intense rivalry across all services among wireless and wireline telecommunications companies, cable-TV providers, other communications companies and over-the-top (OTT) services, which, among other things, places pressures on average revenue per subscriber unit per month (ARPU) and churn for all services; mergers and acquisitions of industry competitors; our ability to continue to retain customers through an enhanced customer service experience; pressures on wireless ARPU and churn from market conditions and government actions, customer usage patterns, flat-rate pricing trends for voice and data, inclusive long distance plans for voice and increasing availability of Wi-Fi networks for data; pressures on high-speed Internet and TV ARPU and churn resulting from market conditions, government actions and customer usage patterns; residential and business network access line (NAL) losses; subscriber additions and retention volumes, and associated costs for wireless, TV and high-speed Internet services; our ability to obtain and offer content on a timely basis across multiple devices on wireless and TV platforms at a reasonable cost; and competition from global players for international roaming services.

·                  Technological substitution including: reduced utilization and increased commoditization of traditional wireline voice local and long distance services from impacts of OTT applications and wireless substitution, an overall slower market growth for high-speed Internet access (HSIA) services and an overall market contraction for TV services; the increasing number of households that have only wireless and/or Internet-based telephone services; continuation of wireless voice ARPU declines as a result of, among other factors, substitution to messaging and OTT applications; substitution to increasingly available Wi-Fi services from wireless services; and disruptive technologies such as OTT Internet protocol (IP) services that may displace our services including TV and entertainment services, and impact revenue.

·      Technology including: subscriber demand for data that may challenge wireless networks and spectrum capacity levels in the future; our reliance on legacy systems and information technology; technology options, evolution paths and roll-out plans for wireless and wireline networks (including broadband initiatives, such as fibre to the premises (FTTP), wireless small-cell deployment, 5G wireless and availability of resources and ability to build out adequate broadband capacity); our reliance on wireless network access agreements; choice of suppliers and those suppliers’ ability to maintain and service their product lines; supplier concentration and market power for network equipment, TELUS TV® and wireless handsets; the performance of wireless technology; our expected long-term need to acquire additional spectrum capacity through future spectrum auctions and from third parties to address increasing demand for data; deployment and operation of new wireless networks and success of new products, new services and supporting systems, including the Internet of Things (IoT) services for Internet-connected devices; deployment and operation of new wireline broadband networks at a reasonable cost and availability, and success of new products and services to be rolled out on such networks; network reliability and change management; timing of decommissioning of certain legacy wireline networks, systems and services to reduce operating costs; and success of upgrades and evolution of TELUS TV technology, which depend on third-party suppliers.

·                  Ability to successfully implement cost reduction initiatives and realize planned savings, net of restructuring and other costs, without losing customer service focus or negatively affecting business operations. Initiatives include: our operating efficiency and effectiveness program to drive improvements in earnings before interest, income taxes, depreciation and amortization (EBITDA); business integrations; business process outsourcing; offshoring and reorganizations, including any FTE employee reduction programs; procurement initiatives; and real estate rationalization. Additional revenue and cost efficiency and effectiveness initiatives will continue to be assessed and implemented, as required.

·                  Economic growth and fluctuations including: the state of the economy in Canada, which may be influenced by economic and other developments outside of Canada; future interest rates; inflation; unemployment levels; effects of low oil prices; effects of low business spending (such as reducing investments and cost structure); pension investment returns, funding and discount rates; and Canadian/U.S. dollar exchange rates.

·                  Capital expenditure levels and potential outlays for spectrum licences in spectrum auctions or from third parties, due to: our broadband initiatives, including connecting more homes and businesses directly to fibre; our ongoing deployment of newer wireless technologies such as 5G; utilizing newly acquired spectrum; investments in network resiliency and reliability; subscriber demand for data; evolving systems and business processes; implementing efficiency initiatives; supporting large complex deals; and future wireless spectrum auctions held by Innovation, Science and Economic Development Canada (ISED). Our capital expenditure levels could be impacted if we do not achieve our targeted operational and financial results.

2

·                  Regulatory decisions and developments including: potential of government intervention to further increase wireless competition; the Canadian Radio-television and Telecommunications Commission (CRTC) review of the Wireless Code; the CRTC wireless wholesale services review, in which it was determined that the CRTC will regulate wholesale GSM-based domestic roaming rates and the setting of such rates; future spectrum auctions (including limitations on established wireless providers, spectrum set-aside that favours certain carriers and other advantages provided to new and foreign participants, and the amount and cost of spectrum acquired); restrictions on the purchase, sale and transfer of spectrum licences; the undetermined long-term impact of the CRTC’s wireline wholesale services review; the potential impacts from the CRTC’s decision to require pro-rated refunds when customers terminate their services; the CRTC’s examination of differential pricing practices related to Internet data plans; possible changes to the scope and nature of basic service obligations, including possible regulation on the quality, availability and affordability of residential Internet service and increased subsidy requirements for these services; the impact from the review of Canada’s cultural policies by the Minister of Canadian Heritage; vertical integration in the broadcasting industry resulting in competitors owning broadcast content services and timely and effective enforcement of related regulatory safeguards; and ongoing monitoring and compliance with restrictions on non-Canadian ownership of TELUS Common Shares.

·                  Ability to sustain our dividend growth program through 2019 and ability to sustain and complete our multi-year share purchase program through 2019. These programs may be affected by factors such as the competitive environment, economic performance in Canada, our earnings and free cash flow, our levels of capital expenditures and spectrum licence purchases, and regulatory decisions and developments. Quarterly dividend decisions are subject to assessment and determination by our Board of Directors (Board) based on the Company’s financial position and outlook. The share purchase program may be affected by a change in our intention to purchase shares, and the assessment and determination of our Board from time to time, based on the Company’s financial position and outlook, and the market price of TELUS shares. Consequently, there can be no assurance that these programs will be maintained through 2019.

·                  Financing and debt requirements including our ability to carry out financing activities and our ability to maintain investment grade credit ratings in the range of BBB+ or the equivalent.

·                  Process risks including: our 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 complex large enterprise deals that may be adversely impacted by available resources, system limitations and degree of co-operation from other service providers; our ability to successfully manage operations in foreign jurisdictions; information security and privacy breaches, including data loss or theft of data; intentional threats to our infrastructure and business operations; and real estate joint venture re-development risks.

·                  Litigation and legal matters including: our ability to defend successfully against investigations, regulatory proceedings, claims and lawsuits, including intellectual property infringement claims and class actions pending against us, as well as possible proceedings, intellectual property infringement claims and class actions based on consumer claims, data, privacy or security breaches and secondary market liability; and the complexity of legal compliance in domestic and foreign jurisdictions.

·                  Human resource matters including: recruitment, retention and appropriate training in a highly competitive industry; the results of the ratification vote currently under way (result expected prior to November 20, 2016) for the renewal agreement between TELUS and the Telecommunications Workers Union, United Steel Workers Local Union 1944 (TWU); expected negotiations for the expiry of two smaller agreements with the Syndicat des agents de maîtrise de TELUS (SAMT) expiring in March 2017 and with the Syndicat québécois des employés de TELUS (SQET) expiring in December 2017; and the level of employee engagement.

·                  Taxation matters including: complex tax laws that may be subject to interpretation by the tax authorities that may differ from our interpretations; 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 error or human-caused threats, such as cyber attacks and equipment failures that could cause various degrees of network outages; supply chain disruptions; natural disaster threats; epidemics; pandemics; and the completeness and effectiveness of business continuity and disaster recovery plans and responses.

·                  Partnerships, acquisitions or divestitures including: our ability to conclude the transaction with BCE to acquire a portion of MTS’ wireless customers and dealers, including obtaining the necessary regulatory approvals, and to successfully migrate the customers and dealers, and more generally, our ability to successfully integrate acquisitions, complete divestitures or establish partnerships in a timely manner, and realize 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 Securities and Exchange Commission (SEC) in the United States, including Form 40-F (on EDGAR at sec.gov). Section 10 Risks and risk management in our 2015 annual MD&A, our 2016 Q1 MD&A, our 2016 Q2 MD&A and this MD&A are incorporated by reference in this cautionary statement.

3

Management’s discussion and analysis

November 4, 2016

Contents

4

1.              Introduction

Our discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of this Management’s discussion and analysis (MD&A).

1.1 Preparation of the MD&A

The following sections are a discussion of the consolidated financial position and financial performance of TELUS for the three-month and nine-month periods ended September 30, 2016, and should be read together with TELUS’ September 30, 2016, unaudited condensed interim consolidated financial statements (subsequently referred to as the interim consolidated financial statements). The generally accepted accounting principles (GAAP) we use are the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Our interim consolidated financial statements comply with IFRS-IASB and Canadian GAAP and have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Our use of the term IFRS in this MD&A is a reference to these standards. In our discussion, we also use certain non-GAAP financial measures, such as earnings before interest, income taxes, depreciation and amortization (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 11.1. 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 MD&A and the interim consolidated financial statements were reviewed by TELUS’ Audit Committee and authorized by the Board of Directors for issuance on November 4, 2016.

In this MD&A, unless otherwise indicated, results for the third quarter and nine-month periods of 2016 are compared with results from the third quarter and nine-month periods of 2015.

1.2 The environment in which we operate

Economic growth

We have updated our assumptions since our 2016 Q2 MD&A. We now estimate that economic growth in Canada will be slightly slower at approximately 1.2% in 2016 (previously 1.3%) and in the range of 1.8 to 2.2% in 2017, based on a composite of estimates from Canadian banks and other sources. For our incumbent local exchange carrier (ILEC) provinces in Western Canada, we now estimate that economic growth in British Columbia will be approximately 2.8% in 2016 (previously 2.9%) and within a slightly wider range of 2.2% to 2.8% in 2017, and that economic contraction in Alberta will now be approximately (2.2)% in 2016 (previously (2.0)%) in part due to the Fort McMurray wildfires and lower oil prices in 2016. We expect growth in Alberta to be within a wider range of 1.4 to 2.3% in 2017. The Bank of Canada’s October 2016 Monetary Policy Report estimated economic growth for Canada will be 1.1% in 2016 and 2% in 2017. In respect of the national unemployment rate, Statistics Canada’s Labour Force Survey reported a rate of 7.0% for September 2016 (7.1% reported for both December 2015 and September 2015).

1.3 Consolidated highlights

Collective bargaining and transformative change for 2017 to 2019 compensation

In 2015, we commenced collective bargaining with the Telecommunications Workers Union, United Steel Workers Local Union 1944 (TWU), to renew a collective agreement that expired on December 31, 2015; the expired contract covered approximately 40% of our Canadian workforce as at September 30, 2016. Throughout the third quarter, negotiations between TELUS and the TWU continued. On October 3, 2016, the TWU and TELUS announced that the two parties had reached a tentative agreement, a five-year deal that would be submitted to the TWU members for ratification. The ratification vote process is to be completed no later than November 20, 2016.

Subsequent to September 30, 2016, we made commitments to pay, lump-sum amounts totaling approximately $300 million (inclusive of amounts proposed in an unratified tentative agreement), in respect of immediately-vesting, transformative compensation expense to the majority of our existing unionized and non-unionized Canadian-sited workforces; a portion of the net-of-tax amount for certain lump-sum recipients will be paid in Common Shares purchased in the market. If the tentative agreement is ratified, there will be a one-time payment to these unionized members in the fourth quarter of 2016. This payment represents increases that would have been otherwise awarded July 1, 2016, 2017 and 2018 (a period of 30 months) and compensation in consideration of collective agreement concessions that underpin future productivity improvements. A similar approach with respect to salary increases has been adopted for management employees. For most of our current Canadian-sited management employees, there will be a one-time payment in the fourth quarter of 2016 in lieu of general salary increases for 2017 and 2018

5

(a period of 24 months). The next salary increases will be awarded in 2019.

Long-term debt issue

In September 2016, we successfully completed a public issue of U.S.$600 million of senior unsecured notes at 2.80%, due February 16, 2027. As of the date of this MD&A, the proceeds were used to repay U.S.$453 million of commercial paper, with the balance to be used for general corporate purposes. We have fully hedged the principal and interest obligations of the notes against fluctuations in the Canadian dollar foreign exchange rate for the entire term of the notes. We have entered into a foreign exchange derivative (a cross currency interest rate exchange agreement) that effectively converted the principal payments and interest obligations to Canadian dollar obligations with an effective fixed interest rate of 2.95% and an effective issued and outstanding amount of $792 million (reflecting a fixed exchange rate of $1.3205). Our average term to maturity of long-term debt (excluding commercial paper and the revolving component of the TELUS International (Cda.) Inc. (TI) credit facility) has increased to approximately 10.7 years at September 30, 2016, from approximately 10.6 years at September 30, 2015. Additionally, our weighted average cost of long-term debt (excluding commercial paper and the revolving component of the TI credit facility) decreased to 4.23% at September 30, 2016, as compared to 4.32% at June 30, 2016 and 4.42% at September 30, 2015.

Normal course issuer bid (NCIB)

Our 2016 NCIB began on September 15, 2015 and concluded on September 14, 2016. Under the 2016 NCIB, we purchased and cancelled 9,691,400 of our Common Shares for approximately $379 million, reflecting an average share purchase price of $39.14.

In September 2016, we received approval from the Toronto Stock Exchange (TSX) for a new 2017 NCIB to purchase and cancel up to 8 million TELUS Common Shares for consideration of up to a maximum of $250 million over a 12-month period, commencing September 30, 2016. In lieu of purchasing and cancelling shares, subject to regulatory approval, an Employee Benefit Plan Trust may purchase up to 25% of the approved normal course issuer bid amount for the benefit of non-executive employees pursuant to partial payment of the immediately-vesting, transformative compensation expense.

Share purchases under the 2017 NCIB represent up to an additional 1.4% of outstanding TELUS Common Shares as of September 16, 2016. See Section 4.3 for additional details. There can be no assurance that we will complete our 2017 NCIB, as the decisions to purchase shares depend on the assessment and determination of our Board from time to time on the basis of the Company’s financial position and outlook, and the market price of TELUS shares. (See Caution regarding forward-looking statements — Ability to sustain and complete multi-year share purchase program through 2019.)

6

Consolidated highlights

Notations used in MD&A: n/m — Not meaningful; pts. — Percentage points.

(1)         Non-GAAP and other financial measures. (See Section 11.1.)

(2)         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, as reported on the condensed interim consolidated statements of cash flows.

(3)         The sum of active wireless subscribers, residential network access lines (NALs), high-speed Internet access subscribers and TELUS TV subscribers (Optik TV™ and TELUS Satellite TV® subscribers), measured at the end of the respective periods based on information in billing and other systems. On January 1, 2015, our opening reported subscriber balance has been retrospectively adjusted to exclude 1,613,000 business NALs due to its diminishing relevance as a key performance indicator. In addition, subsequent to a review of our subscriber base during the first quarter of 2016, our 2016 opening postpaid wireless subscriber base was reduced by 45,000 and our 2016 opening high-speed Internet subscriber base was increased by 21,000.

(4)         Adjusted EBITDA for all periods excludes restructuring and other costs (see Section 11.1 for restructuring and other cost amounts). Adjusted EBITDA for the third quarter of 2016 excludes net gains and equity income of $10 million, related to real estate joint venture developments. Adjusted EBITDA for the first nine months of 2016 excludes: (i) a $15 million gain in the second quarter of 2016, from the exchange of wireless spectrum licences; and (ii) net gains and equity income of $19 million ($9 million in the second quarter and $10 million in the third quarter), related to real estate joint venture developments.

(5)         Adjusted EBITDA margin is adjusted EBITDA divided by Operating revenues, where the calculation of the Operating revenues excludes the net gains and equity income related to real estate joint venture developments, as well as the gain from exchange of wireless spectrum licences.

Operating highlights

·                  Consolidated operating revenues increased by $83 million in the third quarter of 2016 and $209 million in the first nine months of 2016.

Service revenues increased by $111 million in the third quarter of 2016 and $274 million in the first nine months of 2016, mainly due to growth in wireline data revenue and wireless network revenue, partly offset by the ongoing decline in legacy wireline voice revenue from technological substitution and continued competitive pressures. (See Section 5.4 Wireless segment and Section 5.5 Wireline segment.)

7

Equipment revenues decreased by $27 million in the third quarter of 2016 and $81 million in the first nine months of 2016 resulting from a combination of higher wireless per-unit subsidies, lower retention volumes, and lower wireline equipment sales activity in the business market, in part due to the economic slowdown. (See Section 5.4 Wireless segment and Section 5.5 Wireline segment.)

Other operating income decreased slightly in the third quarter of 2016 and increased by $16 million in the first nine months of 2016. The year-to-date increase includes a gain in the second quarter of 2016 on exchange of wireless spectrum licences, and net gains and equity income in 2016 related to real estate joint venture developments, partly offset by certain business acquisition-related provisions and a decrease in amounts recognized from the regulatory price cap deferral account. (See Section 5.4 Wireless segment and Section 5.5 Wireline segment.)

·                  During the 12-month period ended September 30, 2016, our total subscriber connections increased by 141,000. This reflects a 12-month increase in wireless postpaid subscribers of 2.4%, TELUS TV subscribers of 6.4% and high-speed Internet subscribers of 5.6%, partly offset by a 7.7% decline in wireless prepaid subscribers and a 6.4% decline in residential NALs.

Our postpaid wireless subscriber net additions were 87,000 in the third quarter of 2016 and 156,000 in the first nine months of 2016, representing an increase of 18,000 in the quarter and a decrease of 26,000 in the nine-month period. The increase for the third quarter reflects higher gross additions due to the success of targeted promotions and a lower postpaid churn rate. The decrease for the nine-month period reflects flat gross additions due to the economic slowdown, particularly in Alberta, increased competitive intensity and the effect of higher handset prices (including the effect of higher supplier costs due to the decline in the Canadian dollar exchange rate vs. the U.S. dollar over the last two years) on customer demand, as well as an increase in our postpaid subscriber churn rate. Our monthly postpaid subscriber churn rate was 0.94% in the third quarter of 2016 and 0.93% in the first nine months of 2016, as compared to 0.97% in the third quarter of 2015 and 0.91% in the first nine months of 2015. (See Section 5.4 Wireless segment for additional details.)

Net additions of high-speed Internet subscribers were 14,000 in the third quarter of 2016 and 44,000 in the first nine months of 2016, down 10,000 in the quarter and 25,000 in the nine-month period. The decreases resulted from the effects of heightened competitive intensity and the impact of the economic slowdown, resulting in lower gross additions and increased churn, partly offset by the continued expansion of our high-speed broadband footprint, including fibre to the premises (FTTP), as well as the pull-through impact from the continued adoption of Optik TV. Net additions of TELUS TV subscribers were 14,000 in the third quarter of 2016 and 38,000 in the first nine months of 2016, down 12,000 in the quarter and 26,000 in the nine-month period. The decreases reflect lower gross additions, a higher customer churn rate and a decline in satellite-TV subscribers, as the effects of heightened competitive intensity including OTT services, slower market growth for TV services, the economic slowdown, and a high rate of market penetration for TV services. These pressures were partly offset by the ongoing expansion of our addressable Optik TV footprint and increasing broadband speeds that increase the attractiveness of our bundled offering. (See Section 5.5 Wireline segment for additional details.)

·                  Operating income increased by $19 million in the third quarter of 2016 and $53 million in the first nine months of 2016, reflecting growth in EBITDA, partly offset by increases in total depreciation and amortization expenses resulting from the impact of our continuing program of asset life studies and increased expenditures associated with capital assets.

EBITDA includes restructuring and other costs, as well as net gains and equity income related to real estate joint venture developments recorded in the second and third quarters of 2016, and a gain from the exchange of wireless spectrum licences recorded in the second quarter of 2016. EBITDA increased by $63 million in the third quarter of 2016 and $176 million in the first nine months of 2016, reflecting the growth in wireline data revenues and wireless network revenues; improvements in Internet, business process outsourcing, TELUS TV and TELUS Health margins; growth in other operating income noted above; and the execution of our operational efficiency and effectiveness initiatives. This growth was partly offset by higher wireless acquisition and retention costs, increased restructuring costs, continued declines in legacy wireline voice revenues, certain business acquisition-related provisions, and for the nine-month period, approximately $5 million of costs and revenue impacts, predominately in the wireline segment, related to the severe wildfires in northern Alberta.

Adjusted EBITDA, which excludes restructuring and other costs, and real estate net gains and equity income noted above, increased by $62 million in the third quarter and $146 million in the first nine months of 2016. (See Section 5.4 Wireless segment and Section 5.5 Wireline segment for additional details.)

8

·                  Income before income taxes decreased by $4 million in the third quarter of 2016 and was unchanged in the first nine months of 2016, as increased operating income was offset by higher financing costs. The increase in financing costs resulted from higher average long-term debt outstanding (which arose mainly from the purchase of spectrum licences in 2015), higher foreign exchange losses and a decrease in interest income for the nine-month period which resulted primarily from the recognition of $20 million interest income in the second quarter of 2015 related to the settlement of prior years’ income tax-related items. These were partly offset by a lower weighted average cost of long-term debt and, for the nine-month period, by higher capitalized long-term debt interest costs for spectrum licences not yet able to be deployed.

·                  Income taxes increased by $6 million in the third quarter of 2016 and decreased by $28 million in the first nine months of 2016. The increase for the quarter primarily reflects an increase in non-deductible expenses in 2016, as well as adjustments recognized in 2015 from the settlements of prior years’ income tax-related matters. The decrease for the nine-month period reflects a $48 million non-cash adjustment in the second quarter of 2015 to revalue deferred income tax liabilities as a result of an increase to the Alberta provincial corporate income tax rate, partly offset by a $23 million recovery in 2015 from the settlement of prior years’ income tax-related matters. (See Section 5.3 Consolidated operations.)

·                  Net income attributable to Common Shares decreased by $17 million in the third quarter of 2016 and increased by $21 million in the first nine months of 2016. For the quarter, higher operating income was more than offset by increased financing costs and income taxes, while for the nine-month period, higher operating income and lower income taxes were partly offset by increased financing costs. Excluding net gains and equity income from the real estate joint venture developments in 2016, restructuring and other costs, income tax-related adjustments, and, for the nine-month period, the effects of the gain on the exchange of wireless spectrum licences in 2016 and the asset retirement from the closure of Black’s Photography retail stores in 2015, net income decreased by $15 million or 3.8% in the third quarter of 2016 and $18 million or 1.5% in the first nine months of 2016.

Analysis of Net income

·                  Basic earnings per share (basic EPS) decreased by $0.02 in the third quarter of 2016 and increased by $0.08 in the first nine months of 2016. The reduction in the number of shares outstanding, as a result of our NCIB program, net of share option exercises, contributed positively to basic EPS by approximately $0.01 and $0.04, respectively, in the third quarter and first nine months of 2016. Excluding net gains and equity income from the real estate joint venture developments in 2016, restructuring and other costs, income tax-related adjustments, and, for the nine-month period, the effects of the gain on the exchange of wireless spectrum licences in 2016 and the asset retirement from the closure of Black’s Photography retail stores in 2015, basic EPS decreased by $0.01 in the third quarter of 2016 and increased by $0.02 in the first nine months of 2016.

9

Analysis of basic EPS

·                  Dividends declared per Common Share were $0.46 in the third quarter of 2016 and $1.36 in the first nine months of 2016, reflecting increases of 9.5% from the third quarter of 2015 and 9.7% from the first nine months of 2015. This is consistent with our announced intention of sustained dividend growth of circa 10% per annum through 2016. On November 3, 2016, the Board declared a fourth quarter dividend of $0.48 per share on the issued and outstanding Common Shares, payable on January 3, 2017, to shareholders of record at the close of business on December 9, 2016. The fourth quarter dividend reflects a cumulative increase of $0.04 per share or 9.1% from the $0.44 per share dividend declared one year earlier.

Liquidity and capital resource highlights

·                  Net debt to EBITDA — excluding restructuring and other costs was 2.62 times at September 30, 2016, down from 2.64 at September 30, 2015, as the increase in net debt was offset by growth in EBITDA — excluding restructuring and other costs. (See Section 4.3 Liquidity and capital resources and Section 7.5 Liquidity and capital resource measures.)

·                  Cash provided by operating activities increased by $7 million in the third quarter of 2016 and decreased by $199 million in the first nine months of 2016. The increase for the quarter resulted primarily from higher EBITDA and working capital changes, net of increases in income taxes paid and interest paid. The decrease for the nine-month period resulted from increases in income taxes paid, interest paid and restructuring disbursements, partly offset by EBITDA growth and lower share-based compensation payments. (See Section 7.2 Cash provided by operating activities.)

·                  Cash used by investing activities increased by more than $131 million in the third quarter of 2016 and decreased by nearly $1.8 billion in the first nine months of 2016. The increase for the quarter mainly reflects higher capital expenditures — excluding spectrum licences. The decrease for the nine-month period mainly reflects cash payments for spectrum licences of $2 billion made in 2015. Capital expenditures — excluding spectrum licences increased by $164 million in the third quarter and $252 million in the first nine months, mainly due to the higher generational capital investments in wireless and wireline broadband infrastructure, including connecting more homes and businesses directly to our fibre-optic network and deploying wireless spectrum licences. (See Section 7.3 Cash used by investing activities.)

·                  In the third quarter of 2016, Cash used by financing activities decreased by $42 million, mainly due to lower purchases of shares under the NCIB program, offset by net repayments of long-term debt in the third quarter of 2016, as compared to net issues of debt in the same period in 2015. For the nine-month period, comparative net cash used by financing activities increased by nearly $1.5 billion mainly due to lower net issues of long-term debt in 2016. (See Section 7.4 Cash provided (used) by financing activities.)

·                 Free cash flow decreased by $212 million in the third quarter of 2016 and $549 million in the first nine months of 2016, resulting from increases in income taxes paid, increases in capital expenditures — excluding spectrum licences and increases in interest paid, partly offset by adjusted EBITDA growth. In addition, for the nine-month period, the decrease reflected higher restructuring disbursements, partly offset by lower share-based compensation payments. (See Section 11.1.)

10

2.              Core business and strategy

Our discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of this MD&A.

Our core business was described in our 2015 annual MD&A. The following are business updates grouped under the applicable strategic imperatives.

Focusing relentlessly on growth markets of data, IP and wireless

External wireless revenues and wireline data revenues totalled $8.3 billion in the first nine months of 2016, up by $340 million or 4.3%, while wireline voice and other revenues and wireline Other operating income totalled $1.2 billion in the first nine months of 2016, down $131 million or 9.8%. Wireless revenues and wireline data revenues in total represented 87% of TELUS’ consolidated revenues for the first nine months of 2016, as compared to 86% in the same period in 2015.

Providing integrated solutions that differentiate TELUS from our competitors

TELUS introduced its advanced 150 Mbps Internet plan, which uniquely offers symmetrical download and upload speeds of up to 150 Mbps to consumer and business customers on the TELUS PureFibre™ fibre-optic network. The symmetrical upload speed of 150 Mbps is not currently offered by cable-TV competitors. TELUS believes that symmetrical uploads are a requirement of home monitoring, IoT and consumer-based cloud services.

Building national capabilities across data, IP, voice and wireless

During 2016, in accordance with an asset transfer agreement with Bell Mobility Inc. (Bell) and consistent with our network optimization strategy, we exchanged certain wireless telecommunication tower sites. The exchange entailed the assignment of existing lease agreements for each tower site, as well as the transfer of all rights, titles and interests on the construction on the leased premises, including tower structures, antennae and cabling. The exchange benefits both parties as the location of the tower sites are well positioned for utilization within each party’s respective 4G long-term evolution (LTE) network footprints. It is expected that additional transfers of assets will occur in multiple tranches throughout 2016 and subsequent periods.

Partnering, acquiring and divesting to accelerate the implementation of our strategy and focus our resources on core business

In June 2016, we submitted a notification and advance ruling request to the Competition Bureau regarding our previously announced agreement with BCE Inc., pursuant to which we intend to acquire approximately one-third of Manitoba Telecom Services Inc.’s (MTS) postpaid wireless subscribers and be assigned one-third of MTS’ dealer locations in Manitoba, dependent on the successful completion of BCE Inc.’s acquisition of MTS. Our total price of the transaction with BCE Inc. will vary depending upon the actual number of qualifying postpaid wireless subscribers acquired. On June 23, 2016, Manitoba Telecom Services Inc. (MTS) announced that a significant majority of its shareholders had approved the previously announced agreement in which BCE Inc. will acquire all issued and outstanding common shares of MTS. On June 29, 2016, the Manitoba Court of Queen’s Bench approved the transaction. The transaction is still subject to regulatory approvals and other customary closing conditions, and is expected to close in late 2016 or early 2017.

In September 2016, TELUS acquired the Canadian business operations of Nightingale Informatix Corp., including its proprietary electronic medical record (EMR) software and customers. The acquisition is complementary to our existing lines of business and is consistent with our corporate priority of advancing TELUS’ leadership position in healthcare information management.

We partnered with Huawei Canada for trials of 5G wireless technology, which is anticipated to begin deployment by 2020. These trials were successful, having achieved wireless download speeds of 29.3 Gbps. Additionally, we upgraded several 4G LTE wireless sites with LTE-Advanced-Pro technologies and have successfully tested download speeds that are approaching 1Gbps, approximately 10 times faster speeds than those currently available through our LTE advanced networks. We believe that devices that can take advantage of these technologies may be available as early as 2017. Our advancement towards 5G technology builds on our fibre-optic investments, and advances us further towards converged and more efficient networks.

Going to market as one team under a common brand, executing a single strategy

As part of our strategy of building national capabilities, we have formed the TELUS Manitoba Community Board, which will launch in early 2017 and will provide funding to local registered charities that support youth and families and focus on at least one of three key areas: health, education and the environment.

11

Investing in internal capabilities to build a high-performance culture and efficient operation

Through our transformative changes for 2017 to 2019 compensation, we expect to realize savings in 2017, 2018 and over the coming years through avoidance of the compounding effect of two years of salary increases and the resulting impact on bonuses and benefits. See Collective bargaining and transformative change for 2017 to 2019 compensation in Section 1.3.

3.              Corporate priorities for 2016

Our corporate priorities for 2016 were listed in our 2015 annual MD&A.

4.              Capabilities

Our discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of this MD&A.

4.1 Principal markets addressed and competition

For a discussion of our principal markets and an overview of competition, please refer to Section 4.1 of our 2015 annual MD&A and updates in our 2016 Q1 MD&A and 2016 Q2 MD&A.

4.2 Operational resources

For a discussion of our operational resources, please refer to Section 4.2 of our 2015 annual MD&A and updates in our 2016 Q1 MD&A and 2016 Q2 MD&A.

Wireless segment

In the third quarter of 2016, we continued to deliver leading blended customer churn on a national basis. Our monthly postpaid churn rate was 0.94% in the third quarter of 2016, representing the 12th quarter in the past 13 quarters that our postpaid churn rate was below 1%, despite economic pressures that have resulted in customers purchasing fewer handsets. Our monthly blended churn rate of 1.18% in the third quarter of 2016 is among our lowest quarterly churn rates since we became a national carrier 16 years ago. This further exemplifies the success of our differentiated “customers first” culture, our ongoing focus on delivering an outstanding customer experience, combined with attractive new products and services, and our retention programs.

During the first nine months of 2016, we continued our deployment of 700 MHz and 2500 MHz wireless spectrum licences acquired during Innovation, Science and Economic Development Canada’s (ISED) wireless spectrum auctions, which we have begun to operationalize for the benefit of our customers. Since mid-2013, we have invested more than $3.6 billion to acquire wireless spectrum licences in spectrum auctions and other transactions, which has more than doubled our national spectrum holdings, in support of our top corporate priority of putting customers first. Wireless data consumption has been increasing rapidly and we have responded by investing to extend the capacity of our network to support the additional data consumption and growth in our wireless customer base.

As at September 30, 2016, our 4G LTE network covered 97% of Canada’s population, up from 95% at September 30, 2015. Furthermore, we continue to invest in our LTE advanced network roll-out, which covered more than 61% of Canada’s population at September 30, 2016. Outside of LTE advanced and LTE coverage areas, and for voice services, the LTE devices we offer also operate on our HSPA+ network, which covered 99% of Canada’s population at September 30, 2016.

Wireline segment

We continue to invest in urban and rural communities with commitments to deliver broadband network capabilities to as many Canadians as possible. We are expanding our fibre footprint by connecting more homes and businesses directly to fibre. Throughout 2015 and 2016, we have made announcements regarding investments to bring our fibre-optic network to cities across B.C., Alberta and Eastern Quebec. We have also increased broadband Internet speeds, expanded our IP TV video-on-demand library and high-definition content, including the launch of 4K TV, and enhanced marketing of data products and bundles.

As at September 30, 2016, our high-speed broadband coverage reached more than 2.9 million households and businesses in B.C., Alberta and Eastern Quebec, including approximately 0.95 million homes and businesses covered by fibre-optic cable, up from 0.83 million homes and businesses in the second quarter of 2016, which now provides these premises with immediate access to our gigabit-capable fibre-optic network.

12

4.3 Liquidity and capital resources

Capital structure financial policies

Our objective when managing capital is to maintain a flexible capital structure that optimizes the cost and availability of capital at acceptable risk.

In the management of capital and in its definition, we include Common Share equity (excluding Accumulated other comprehensive income), Long-term debt (including long-term credit facilities, commercial paper backstopped by long-term credit facilities and any associated hedging assets or liabilities, net of amounts recognized in Accumulated other comprehensive income), Cash and temporary investments, and securitized trade receivables.

We manage our capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of our telecommunications infrastructure. To maintain or adjust our capital structure, we may adjust the amount of dividends paid to holders of Common Shares, purchase shares for cancellation pursuant to our normal course issuer bids (NCIBs), issue new shares, issue new debt, issue new debt to replace existing debt with different characteristics and/or increase or decrease the amount of trade receivables sold to an arm’s-length securitization trust.

We monitor capital by utilizing a number of measures, including the net debt to EBITDA — excluding restructuring and other costs ratio and the dividend payout ratios. (See definitions in Section 11.1.)

Financing and capital structure management plans

Report on financing and capital structure management plans

Pay dividends to the holders of Common Shares under our multi-year dividend growth program

·                  In May 2016, we announced an intention to target ongoing semi-annual dividend increases, with the annual increase in the range of 7 to 10% from 2017 through to the end of 2019, thereby extending the policy first announced in May 2011. Notwithstanding this target, dividend decisions will continue to be subject to our Board’s assessment and the determination of our financial position and outlook on a quarterly basis. Our long-term dividend payout ratio guideline is 65 to 75% of prospective net earnings per share. There can be no assurance that we will maintain a dividend growth program through 2019. (See Caution regarding forward-looking statements — Ability to sustain our dividend growth program per annum through 2019.)

·                  On November 3, 2016, a fourth quarter dividend of $0.48 per share was declared on our issued and outstanding Common Shares, payable on January 3, 2017, to shareholders of record at the close of business on December 9, 2016. The fourth quarter dividend for 2016 reflects a cumulative increase of $0.04 per share or 9.1% from the $0.44 per share dividend paid in January 2016.

Purchase Common Shares under our multi-year NCIB

·                  On May 5, 2016, we announced our intention to renew our NCIB program in each of the next three years in order to permit purchases for up to $250 million in each calendar year. In September 2016, we received approval from the Toronto Stock Exchange (TSX) for a new 2017 NCIB to purchase and cancel up to 8 million TELUS Common Shares for consideration of up to $250 million over a 12-month period, commencing September 30, 2016. In lieu of purchasing and cancelling shares, subject to regulatory approval, an Employee Benefit Plan Trust may purchase up to 25% of the approved normal course issuer bid amount for the benefit of non-executive employees pursuant to partial payment of the immediately-vesting, transformative compensation expense.

·                  Share purchases under the 2017 NCIB represent up to 1.4% of outstanding TELUS Common Shares as of September 16, 2016. Such purchases may be made through the facilities of the TSX, the New York Stock Exchange (NYSE) and alternative trading platforms as may be permitted by applicable securities laws and regulations. Shares will be purchased only when and if we consider it advisable. There can be no assurance that we will complete our 2017 NCIB or that we will renew and complete our NCIB program in each of the next two years, as the decisions to purchase shares depend on the assessment and determination of our Board from time to time on the basis of the Company’s financial position and outlook, and the market price of TELUS shares. (See Caution regarding forward-looking statements — Ability to sustain and complete multi-year share purchase program through 2019.)

·                  Under the 2016 NCIB, which came into effect on September 15, 2015 and concluded on September 14, 2016, we purchased and cancelled 9,691,400 of our Common Shares for approximately $379 million, reflecting an average share purchase price was $39.14. The purchased and cancelled shares represent 1.6% of the shares outstanding prior to commencement of the 2016 NCIB.

·                  We have also entered into an automatic share purchase plan (ASPP) with a broker for the purpose of permitting us to purchase our Common Shares under our NCIB program at times when we would not be permitted to trade in our shares, including regularly scheduled quarterly blackout periods. Such purchases will be determined by the broker in its sole discretion based on parameters that we established prior to any blackout period, in accordance with TSX rules and applicable securities laws. The ASPP has been approved by the TSX, and may be implemented from time to time in the future.

13

Report on financing and capital structure management plans

Use proceeds from securitized trade receivables (Short-term borrowings), bank facilities, commercial paper and cash retained through dividend reinvestment, as needed, to supplement free cash flow and meet other cash requirements

·                  Our issued and outstanding commercial paper was $137 million at September 30, 2016, all of which was denominated in U.S. dollars (U.S.$104 million), compared to $256 million (U.S.$185 million) at December 31, 2015 and $787 million (U.S.$589 million) at September 30, 2015.

·                  Proceeds from securitized trade receivables were $100 million at September 30, 2016, September 30, 2015 and December 31, 2015.

Maintain compliance with financial objectives

·                  Maintain investment grade credit ratings in the range of BBB+ or the equivalent — On November 4, 2016, investment grade credit ratings from the four rating agencies that cover TELUS were in the desired range. (See Section 7.8 Credit ratings.)

·                  Net debt to EBITDA — excluding restructuring and other costs ratio of 2.00 to 2.50 times — As measured at September 30, 2016, the ratio was 2.62 times, outside of the range primarily due to the funding of spectrum licences acquired in ISED’s wireless spectrum auctions during 2014 and 2015. We will endeavour to return the ratio to within this objective range in the medium term, as we believe that this range is supportive of our long-term strategy. (See Section 7.5 Liquidity and capital resource measures.)

·                  Dividend payout ratio of 65 to 75% of net earnings per share on a prospective basis — The disclosed dividend payout ratio is a historical measure utilizing the last four quarters of dividends declared and earnings per share, and is presented for illustrative purposes in evaluating our target guideline. We estimate that we are within our target guideline on a prospective dividend payout ratio basis. As at September 30, 2016, the historical ratio of 76% exceeded the desired range. (See Section 7.5 Liquidity and capital resource measures.)

·                  Generally maintain a minimum $1 billion in unutilized liquidity — As at September 30, 2016, our unutilized liquidity was greater than $1 billion. (See Section 7.6 Credit facilities.)

4.4 Changes in internal control over financial reporting

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

14

5.              Discussion of operations

Our discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of this MD&A.

5.1 General

Our operating segments and reportable segments are currently wireless and wireline. Segmented information in Note 5 of the interim consolidated financial statements is regularly reported to our Chief Executive Officer (CEO) (the chief operating decision-maker).

5.2 Summary of consolidated quarterly results and trends

Summary of quarterly results

(1)         Goods and services purchased and Employee benefits expense amounts include restructuring and other costs.

(2)         See Section 11.1 Non-GAAP and other financial measures.

Trends

The consolidated revenue trend reflects increases in: (i) wireline data revenues, driven by business process outsourcing, Internet, enhanced data services and TELUS TV services; and (ii) wireless network revenues generated from growth in both our average revenue per subscriber unit per month (ARPU) and subscriber base. This growth was partially offset by: (i) the continued declines in wireline voice revenues due to technological substitution and greater use of inclusive long distance and lower wholesale volumes; and (ii) the decline in wireless equipment revenue, reflecting lower retention volumes, partly offset by higher-value smartphones in the sales mix. Retention volumes declined due to (i) the effects on contract renewals of higher handset prices (including the effect of higher supplier costs due to the decline in the Canadian dollar exchange rate vs. the U.S. dollar over the last two years), as well as an increasing number of clients on month-to-month service; and (ii) and economic pressures resulting in customers purchasing fewer handsets.

The trend of increasing wireline data revenue reflects growth in high-speed Internet and enhanced data services reflecting a larger high-speed Internet subscriber base (up 5.6% in the 12-month period ended September 30, 2016), continued expansion of our broadband footprint, including fibre-optic cable, and increased pricing; growth in business process outsourcing; and the continuing but moderating expansion of our TELUS TV subscriber base (up 6.4% in the 12-month period ended September 30, 2016) and increased pricing. A general trend of declining wireline voice revenues is due to competition from voice over IP (VoIP) service providers (including cable-TV competitors) and resellers, as well as

15

technological substitution to wireless and IP-based services and applications, continuing increased competition in the small and medium-sized business market, and the impact of the economic slowdown.

The high-speed Internet subscriber growth has declined during the first nine months of 2016, primarily from the impact of the economic slowdown and competitive intensity, however, we expect the subscriber growth to gradually improve as the economy recovers and as we continue our investments in expanding our fibre-optic network. The TELUS TV subscriber base growth is moderating due to the effects of slower subscriber growth for paid TV services, the economic slowdown, the high rate of market penetration and increased competition, including from over-the-top (OTT) services. Residential network access line (NAL) losses continue to reflect the economic slowdown and the ongoing trend of substitution to wireless and Internet-based services, as noted above.

The wireless subscriber base growth trend has moderated due to the impacts of the economic slowdown, particularly in Alberta, heightened intensity and the effects of higher handset prices, partly offset by our customers first initiatives and retention programs. The wireless ARPU growth trend has increased slightly in the past three quarters due to higher mix of share plans and increased mix of higher-rate plans including the newly launched premium plus plans, influenced by competitive pressures driving larger allotments of data provided in rate plans, including data sharing and international data roaming features and plans, consumer response to increased frequency of customer data usage notifications and offloading of data traffic to increasingly available Wi-Fi hotspots. ARPU is expected to continue to increase modestly over time, as a result of the continued growth in data usage and the ongoing shift in our subscriber base towards higher-value postpaid customers, as seen in the third quarter of 2016. However, the level of ARPU is highly dependent on competition, the economic environment, consumer behaviour, the regulatory environment, device selection and other factors, and, as a consequence, there cannot be any assurance that ARPU growth will continue to materialize.

Retention spending as a percentage of network revenue has increased from 12.8% in the first nine months of 2015 to 13.7% in the first nine months of 2016, mainly from an increase in the sales mix of higher-subsidy smartphones. In addition, due to the coterminous expiration of two-year and three-year contracts beginning on June 3, 2015, there are a greater number of customers renewing contracts at any given time, which has impacted acquisition and retention trends. We have generally experienced a higher volume of contract renewals than previously experienced prior to 2015. We expect this trend to continue. We also expect to experience continuing pressure on our postpaid subscriber churn if competitive intensity continues, in part due to an increase in customers on expired contracts, as well as customers bringing their own devices and therefore not entering into term contracts. Accordingly, our wireless segment historical operating results and trends prior to the coterminous expiration of two-year and three-year contracts may not be reflective of results and trends for future periods.

Historically, there has been significant third and fourth quarter seasonal effects reflected in higher wireless subscriber additions, an increase in related acquisition costs and equipment sales, and higher retention costs due to contract renewals in those quarters. These impacts can be more pronounced around popular device launches and seasonal events such as back to school, Black Friday and Christmas. The costs associated with higher seasonal loading volumes have typically resulted in sequential decreases in wireless EBITDA from the second quarter through to the fourth quarter, typically followed by sequential increases in wireless EBITDA from the fourth quarter through to the second quarter. Subscriber additions have generally been lowest in the first quarter. Historically, wireless ARPU has experienced seasonal sequential increases in the second and third quarters, reflecting higher levels of usage and roaming in the spring and summer, followed by seasonal sequential declines in the fourth and first quarters. This seasonal effect on ARPU is expected to diminish in the future, as unlimited nationwide voice plans become more prevalent and chargeable voice and data usage and long distance spikes become less pronounced.

The trend in Goods and services purchased expense generally reflects increasing wireless equipment expenses associated with higher-value smartphones in the sales mix and increased handset costs (as described above); increasing wireless customer service, administrative, external labour and distribution channel expenses to support moderating growth in our subscriber base; increased wireline TV costs of sales; and higher non-labour restructuring and other costs in 2015 mainly from real estate rationalization. These were partly offset by lower transit and termination costs and wireline equipment costs.

The trend in Employee benefits expense reflects moderating wages and salaries, as growth in the number of TELUS International employees to support increased business process outsourcing revenue growth, inflationary compensation increases and higher labour restructuring costs from efficiency initiatives were offset by lower defined benefit pension plan and share-based compensation expenses, and a decrease in the number of full-time equivalent (FTE) domestic employees. We expect to record significant transformative compensation expenses in the fourth quarter of 2016. See Collective bargaining and transformative change for 2017 to 2019 compensation in Section 1.3 Consolidated highlights.

16

The general trend in Depreciation and amortization reflects increases due to the impact of our continuing program of asset life studies, as well as growth in capital assets supporting the expansion of our broadband footprint and enhanced long-term evolution (LTE) network coverage. The investments in our fibre-optic network also support our small-cell technology strategy to improve coverage and prepare for a more efficient and timely evolution to 5G.

The general trend in Financing costs reflects an increase in long-term debt outstanding, mainly associated with significant investments in wireless spectrum licences acquired during wireless spectrum licence auctions in 2014 and 2015 and our generational investments in fibre to the home. Financing costs also include the Employee defined benefit plans net interest expense that has decreased for 2016, primarily due to the decrease in the defined benefit plan deficit at December 31, 2015, as compared to one year earlier, partly offset by an increase in the discount rate. Moreover, Financing costs are net of capitalized interest related to spectrum licences acquired during the wireless spectrum licence auctions, which we expect to deploy into our existing network in future periods (capitalized long-term debt interest was $40 million in the first nine months of 2016, as compared to $27 million in the first nine months of 2015 and $45 million during fiscal year 2015). Capitalization of long-term debt interest will moderate, as cell sites become ready to utilize the spectrum frequencies. Financing costs for the eight periods shown included varying amounts of foreign exchange gains or losses and varying amounts of interest income, including $20 million of interest income in the second quarter of 2015 resulting from the settlement of prior years’ income tax-related matters.

The trend in Net income reflects the items noted above, as well as non-cash adjustments arising from legislated income tax changes and adjustments recognized in the current period for income tax of prior periods, including any related after-tax interest on reassessments. The trend in basic EPS is impacted by the share purchases under our normal course issuer bid (NCIB) program.

The trend in Cash provided by operating activities reflects generally higher income tax payments and increased interest payments and higher restructuring and other disbursements, partly offset by growth in consolidated EBITDA. The trend in free cash flow reflects the factors affecting Cash provided by operating activities, as well as increases in capital expenditures (excluding spectrum licences).

5.3 Consolidated operations

The following is a discussion of our consolidated financial performance. Segmented information in Note 5 of the interim consolidated financial statements is regularly reported to our CEO (the chief operating decision-maker). We discuss the performance of our segments in Section 5.4 Wireless segment, Section 5.5 Wireline segment and in capital expenditures in Section 7.3 Cash used by investing activities.

Operating revenues

·                  Service revenue increased by $111 million in the third quarter of 2016 and $274 million in the first nine months of 2016. The increases primarily reflect growth in wireline data services and wireless network revenues, partly offset by continuing declines in wireline voice revenues, as well as the impacts of the economic slowdown, particularly in Alberta. Wireless network revenue reflects growth in blended ARPU and the wireless subscriber base. Wireline data service revenue reflects increased wireline business process outsourcing revenue, higher wireline Internet, enhanced data and TELUS TV revenue due to subscriber growth and higher revenue per customer, and continued, but moderating, expansion of our subscriber base.

·                  Equipment revenue decreased by $27 million in the third quarter of 2016 and $81 million in the first nine months of 2016. The decrease reflects a decline in wireless equipment revenue of $25 million for the third quarter and $60 million for the first nine months from a combination of higher per-unit subsidies, lower retention volumes, and discontinuance of Black’s Photography revenue from the closure of stores in August 2015, partly offset by higher-value smartphones in the sales mix. Also reflected is lower wireline equipment revenue of $2 million for the third quarter and $21 million for the nine-month period, primarily from lower sales activity in the business market in part from the economic slowdown and a focus on providing managed services rather than equipment-only sales.

17

·                  Other operating income decreased slightly in the third quarter of 2016 and increased by $16 million in the first nine months of 2016. In the third quarter and nine-month period, gains in 2016 from the sale of property, plant and equipment and net gains and equity income in 2016 related to real estate joint venture developments were offset by certain business acquisition-related provisions and a decrease in amounts recognized from the regulatory price cap deferral account for provisioning broadband Internet services to eligible rural and remote communities. The year-to-date increase also reflects a gain in the second quarter of 2016 from the exchange of wireless spectrum licences.

Operating expenses

·                  Goods and services purchased increased by $32 million in the third quarter of 2016 and $7 million in the first nine months of 2016. The increases were due to higher wireless acquisition and retention spending (including the effect of higher supplier cost of handsets due to the decline in the Canadian dollar exchange rate vs. the U.S. dollar over the last two years) and higher wireline network operating and administrative costs to support our growing subscriber base, and higher advertising and promotional expenses in support of bundled wireline offerings and in response to heightened competitive intensity, as well as higher TV costs of sales, partly offset by lower wireline transit and termination costs, ongoing operational efficiency and effectiveness initiatives, and lower wireline equipment costs related to the decline in equipment revenue.

·                  Employee benefits expense decreased by $12 million in the third quarter of 2016, mainly from lower wages and salaries resulting from a decrease in employee compensation from ongoing operational efficiency and effectiveness initiatives, a lower defined benefit pension plan expense and lower share-based compensation. These decreases were partly offset by an increase in wages and salaries from growth in the number of TELUS International employees to support increased business process outsourcing revenue and inflationary compensation increases.

For the nine-month period, employee benefits expense increased by $26 million, primarily due to higher wages and salaries, resulting from an increase in employee compensation to support increased business process outsourcing revenue, and higher labour-related restructuring costs from ongoing operational efficiency and effectiveness initiatives. These increases were partially offset by lower wages and salaries resulting from the decrease in the number of domestic FTE employees, as noted above, and lower defined benefit pension plan and share-based compensation expenses.

·                  Depreciation increased by $27 million in the third quarter of 2016 and $89 million in the first nine months of 2016, due to the impact of our continuing program of asset life studies and increased expenditures associated with capital assets (such as the broadband network and the wireless LTE network), partly offset by asset retirements of $9 million in 2015 relating to the closure of Black’s Photography retail stores.

·                  Amortization of intangible assets increased by $17 million in the third quarter of 2016 and $34 million in the first nine months of 2016, reflecting increased expenditures associated with the intangible asset base, partially offset by software asset life adjustments arising from our continuing program of asset life studies.

Operating income

Operating income increased by $19 million in the third quarter of 2016 and $53 million in the first nine months of 2016, as growth in EBITDA was partly offset by increased Depreciation and amortization expenses.

18

Financing costs

·                  Gross interest expenses, prior to capitalization of long-term debt interest, increased by $4 million in the third quarter of 2016 and $30 million in the first nine months of 2016, primarily due to the increase in average long-term debt balances outstanding, which arose mainly from the purchase of spectrum licences, partly offset by a reduction in the effective interest rate. Our weighted average interest rate on long-term debt (excluding commercial paper and the revolving component of the TELUS International (Cda.) Inc. credit facility) was 4.23% at September 30, 2016, as compared to 4.42% one year earlier. (See Long-term debt issues and repayments in Section 7.4.)

·                  Capitalized long-term debt interest is in respect of debt incurred for the purchase of spectrum licences during spectrum auctions held by Innovation, Science and Economic Development Canada (ISED), which we expect to deploy in our existing network in future periods. Capitalization of long-term debt interest will continue until substantially all of the activities necessary to prepare the spectrum for its intended use are complete; effectively when cell sites that can utilize the spectrum are ready to be put into service.

·                  Employee defined benefit plans net interest decreased by $6 million in the third quarter of 2016 and $17 million in the first nine months of 2016, mainly from the decrease in the defined benefit plan deficit at December 31, 2015, to $53 million from $598 million one year earlier, partly offset by a higher discount rate.

·                  Interest income in the first nine months of 2015 was derived primarily from $20 million interest income related to the settlement of prior years’ income-tax related matters.

·                  Foreign exchange losses (gains) fluctuate from period to period as a result of increased application of hedge accounting.

Income taxes