condensed interim consolidated statements of income and other comprehensive income

(unaudited)

		Three months
Periods ended March 31 (millions except per share amounts)	Note	2012			2011
OPERATING REVENUES
Service		$	2,443		$	2,337
Equipment		176			169
		2,619			2,506
Other operating income	6	12			25
		2,631			2,531
OPERATING EXPENSES
Goods and services purchased		1,116			1,098
Employee benefits expense	7	506			447
Depreciation		343			332
Amortization of intangible assets		127			112
		2,092			1,989
OPERATING INCOME		539			542
Financing costs	8	75			104
INCOME BEFORE INCOME TAXES		464			438
Income taxes	9	116			110
NET INCOME		348			328
OTHER COMPREHENSIVE INCOME	10
Items that may subsequently be reclassified to income
Change in unrealized fair value of derivatives designated as cash flow hedges		(1		)	8
Foreign currency translation adjustment arising from translating financial statements of foreign operations		(2		)	(4		)
		(3		)	4
Item never subsequently reclassified to income
Employee defined benefit plans actuarial gains		156			44
		153			48
COMPREHENSIVE INCOME		$	501		$	376
NET INCOME ATTRIBUTABLE TO:
Common Shares and Non-Voting Shares		$	348		$	327
Non-controlling interests		—			1
		$	348		$	328
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Common Shares and Non-Voting Shares		$	501		$	375
Non-controlling interests		—			1
		$	501		$	376
NET INCOME PER COMMON SHARE AND NON-VOTING SHARE	11
Basic		$	1.07		$	1.01
Diluted		$	1.06		$	1.00
DIVIDENDS DECLARED PER COMMON SHARE AND NON-VOTING SHARE	12	$	1.190		$	0.525
TOTAL WEIGHTED AVERAGE COMMON SHARES AND NON-VOTING SHARES OUTSTANDING
Basic		325			324
Diluted		327			326

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

condensed interim consolidated statements of financial position

(unaudited)

As at (millions)	Note	March 31, 2012		December 31, 2011
ASSETS
Current assets
Cash and temporary investments, net		$	68	$	46
Accounts receivable	24(a)	1,406		1,428
Income and other taxes receivable		10		66
Inventories	24(a)	270		353
Prepaid expenses		228		144
Derivative assets	4(h)	12		14
		1,994		2,051
Non-current assets
Property, plant and equipment, net	15	7,985		7,964
Intangible assets, net	16	6,135		6,153
Goodwill, net	16	3,661		3,661
Real estate joint venture	17	14		—
Other long-term assets		127		81
Investments		21		21
		17,943		17,880
		$	19,937	$	19,931

LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Short-term borrowings	18	$	407	$	404
Accounts payable and accrued liabilities	24(a)	1,403		1,419
Income and other taxes payable		329		25
Dividends payable	12	387		188
Advance billings and customer deposits	24(a)	663		655
Provisions	19	72		88
Current maturities of long-term debt	20	1,024		1,066
		4,285		3,845
Non-current liabilities
Provisions	19	122		122
Long-term debt	20	5,509		5,508
Other long-term liabilities	24(a)	1,040		1,343
Deferred income taxes		1,352		1,600
		8,023		8,573
Liabilities		12,308		12,418
Owners’ equity
Common Share and Non-Voting Share equity	21	7,629		7,513
		$	19,937	$	19,931
Commitments and Contingent Liabilities	22

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

condensed interim consolidated statements of changes in owners’ equity

(unaudited)

		Common Share and Non-Voting Share equity
		Equity contributed
		Share capital (Note 21)														Accumulated
		Common Shares			Non-Voting Shares											other						Non-
(millions except number of shares)	Note	Number of shares	Share capital		Number of shares	Share capital		Total		Contributed surplus			Retained earnings			comprehensive income			Total			controlling interests			Total

Balance as at January 1, 2011		174,915,546	$	2,219	147,448,586	$	3,237	$	5,456	$	176		$	2,126		$	1		$	7,759		$	22		$	7,781
Net income		—	—		—	—		—		—			327			—			327			1			328
Other comprehensive income		—	—		—	—		—		—			44			4			48			—			48
Dividends	12	—	—		—	—		—		—			(170		)	—			(170		)	(4		)	(174		)
Dividend Reinvestment and Share Purchase Plan
Dividends reinvested in shares		—	—		1,243,679	54		54		—			—			—			54			—			54
Optional cash payments		—	—		5,990	—		—		—			—			—			—			—			—
Share option award expense	13	—	—		—	—		—		4			—			—			4			—			4
Shares issued pursuant to cash exercise of share options	13(b)	—	—		485,354	20		20		(2		)	—			—			18			—			18
Shares issued pursuant to use of share option award net-equity settlement feature	13(b)	—	—		104,512	1		1		(1		)	—			—			—			—			—
Acquisition of subsidiary		—	—		—	—		—		—			—			—			—			60			60
Balance as at March 31, 2011		174,915,546	$	2,219	149,288,121	$	3,312	$	5,531	$	177		$	2,327		$	5		$	8,040		$	79		$	8,119
Balance as at January 1, 2012		174,915,546	$	2,219	149,933,165	$	3,337	$	5,556	$	166		$	1,780		$	11		$	7,513		$	—		$	7,513
Net income		—	—		—	—		—		—			348			—			348			—			348
Other comprehensive income		—	—		—	—		—		—			156			(3		)	153			—			153
Dividends	12	—	—		—	—		—		—			(387		)	—			(387		)	—			(387		)
Share option award expense	13	—	—		—	—		—		2			—			—			2			—			2
Shares issued pursuant to cash exercise of share options	13(b)	—	—		4,650	—		—		—			—			—			—			—			—
Shares issued pursuant to use of share option award net-equity settlement feature	13(b)	—	—		506,279	11		11		(11		)	—			—			—			—			—
Balance as at March 31, 2012		174,915,546	$	2,219	150,444,094	$	3,348	$	5,567	$	157		$	1,897		$	8		$	7,629		$	—		$	7,629

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

condensed interim consolidated statements of cash flows

(unaudited)

		Three months
Periods ended March 31 (millions)	Note	2012			2011
OPERATING ACTIVITIES
Net income		$	348		$	328
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		470			444
Deferred income taxes		(302		)	44
Share-based compensation	13	7			(5		)
Net employee defined benefit plans expense	14(a)	(1		)	(9		)
Employer contributions to employee defined benefit plans		(116		)	(235		)
Gain on 51% Transactel (Barbados) Inc. interest re-measured at acquisition-date fair value and subsequent adjustment to contingent consideration	6	—			(16		)
Other		(1		)	(12		)
Net change in non-cash operating working capital	24(b)	358			(85		)
Cash provided by operating activities		763			454
INVESTING ACTIVITIES
Capital expenditures	5, 15, 16	(441		)	(409		)
Acquisitions and related investments	16(c)	(32		)	(60		)
Real estate joint venture	17(a)	(15		)	—
Other		(21		)	4
Net change in non-cash investing working capital		(5		)	(51		)
Cash used by investing activities		(514		)	(516		)
FINANCING ACTIVITIES
Non-Voting Shares issued		—			17
Dividends paid to holders of Common Shares and Non-Voting Shares	24(b)	(188		)	(115		)
Issuance and repayment of short-term borrowing	18	3			22
Long-term debt issued	20, 24(b)	1,350			630
Redemptions and repayment of long-term debt	20, 24(b)	(1,392		)	(482		)
Dividends paid by a subsidiary to non-controlling interest		—			(4		)
Cash provided (used) by financing activities		(227		)	68
CASH POSITION
Increase in cash and temporary investments, net		22			6
Cash and temporary investments, net, beginning of period		46			17
Cash and temporary investments, net, end of period		$	68		$	23
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
Interest (paid)	24(b)	$	(62	)	$	(61	)
Interest received		$	7		$	—
Income taxes (inclusive of Investment Tax Credits) (paid), net	9	$	(48	)	$	(66	)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

notes to condensed interim consolidated financial statements

(unaudited)

MARCH 31, 2012

TELUS Corporation was incorporated under the Company Act (British Columbia) on October 26, 1998, under the name BCT.TELUS Communications Inc. (BCT). On January 31, 1999, pursuant to a court-approved plan of arrangement under the Canada Business Corporations Act among BCT, BC TELECOM Inc. and the former Alberta-based TELUS Corporation (TC), BCT acquired all of the shares of BC TELECOM Inc. and TC in exchange for Common Shares and Non-Voting Shares of BCT, and BC TELECOM Inc. was dissolved. On May 3, 2000, BCT changed its name to TELUS Corporation and in February 2005, TELUS Corporation transitioned under the Business Corporations Act (British Columbia), successor to the Company Act (British Columbia). TELUS Corporation maintains its registered office at 3777 Kingsway, Burnaby, British Columbia, V5H 3Z7.

TELUS Corporation is one of Canada’s largest telecommunications companies, providing a wide range of telecommunications services and products including wireless, data, Internet protocol, voice and television.

The terms “TELUS” or “Company” are used to mean TELUS Corporation and, where the context of the narrative permits, or requires, its subsidiaries.

Notes to condensed interim consolidated financial statements		Page	Description
General application
1.	Condensed interim consolidated financial statements	7	Summary explanation of basis of presentation of condensed interim consolidated financial statements
2.	Accounting policy developments	7	Summary review of generally accepted accounting principle developments that do, will or may affect the Company
3.	Capital structure financial policies	8	Summary review of the Company’s objectives, policies and processes for managing its capital structure
4.	Financial instruments	10	Summary schedules and review of financial instruments, including the management of associated risks and fair values
Consolidated results of operations focused
5.	Segmented information	15	Summary disclosure of segmented information regularly reported to the Company’s chief operating decision-maker
6.	Other operating income	16	Summary schedule of items comprising other operating income
7.	Employee benefits expense	16	Summary schedule of employee benefits expense
8.	Financing costs	17	Summary schedule of items comprising financing costs
9.	Income taxes	17	Summary schedule of income tax expense and reconciliations of statutory rate income tax expense to income tax expense
10.	Other comprehensive income	18	Details of other comprehensive income and accumulated amounts
11.	Per share amounts	18	Summary schedule and review of numerators and denominators used in calculating per share amounts and related disclosures
12.	Dividends per share	19	Summary schedule of dividends declared
13.	Share-based compensation	19	Summary schedules and review of compensation arising from share option awards, restricted stock units and employee share purchase plan
14.	Employee future benefits	22	Summary schedules of employee future benefits
Consolidated financial position focused
15.	Property, plant and equipment	23	Summary schedule of items comprising property, plant and equipment
16.	Intangible assets and goodwill	24	Summary schedule of items comprising intangible assets, including goodwill and review of reported fiscal year acquisitions from which goodwill arose
17.	Real estate joint venture	25	Summary review of real estate joint venture and related disclosures
18.	Short-term borrowings	25	Review of short-term borrowings and related disclosures
19.	Provisions	27	Summary schedules and review of items comprising provisions, including restructuring activities

notes to condensed interim consolidated financial statements

(unaudited)

Notes to condensed interim consolidated financial statements		Page	Description
Consolidated financial position focused (continued)
20.	Long-term debt	29	Summary schedule of long-term debt and related disclosures
21.	Common Share and Non-Voting Share capital	30	Review of authorized share capital
22.	Commitments and contingent liabilities	30	Summary review of contingent liabilities, claims and lawsuits
Other
23.	Related party transactions	32	Summary schedules, including review of transactions with key management personnel
24.	Additional financial information	33	Summary schedules of items comprising certain primary financial statement line items

1 condensed interim consolidated financial statements

The notes presented in these condensed interim consolidated financial statements include only significant events and transactions and are not fully inclusive of all matters normally disclosed in TELUS Corporation’s annual audited financial statements; thus, these interim consolidated financial statements are referred to as condensed. Further, these condensed interim consolidated financial statements should be read in conjunction with the TELUS Corporation audited consolidated financial statements for the year ended December 31, 2011.

These condensed interim consolidated financial statements are expressed in Canadian dollars and follow the same accounting policies and methods of their application as set out in the TELUS Corporation consolidated financial statements for the year ended December 31, 2011. The generally accepted accounting principles used by TELUS Corporation are International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS-IASB) and Canadian generally accepted accounting principles; these condensed interim consolidated financial statements comply with International Accounting Standard 34, Interim Financial Reporting. These condensed interim consolidated financial statements reflect all adjustments (which are of a normal recurring nature) that are, in the opinion of the Company, necessary for a fair statement of the results for the interim periods presented.

The condensed interim consolidated financial statements of TELUS Corporation for the three-month period ended March 31, 2012, were authorized by TELUS Corporation’s Board of Directors for issue on May 9, 2012.

2 accounting policy developments

(a) Real estate joint venture

The Company accounts for its 50% interest in the real estate joint venture, discussed further in Note 17, using the equity basis of accounting whereby the investment is initially recorded at cost and subsequently adjusted to recognize the Company’s share of earnings or losses of the real estate joint venture and earnings distributed.

(b) Initial application of standards, interpretations and amendments to standards and interpretations in the reporting period

In December 2010, the IASB issued amendments to IAS 12, Income Taxes, which, in the Company’s current instance, had no effects.

(c) Standards, interpretations and amendments to standards not yet effective and not yet applied

Unless otherwise indicated, the following standards are required to be applied for periods beginning on or after January 1, 2013. Unless otherwise indicated, based upon current facts and circumstances, the Company does not expect to be materially affected by the application of the following standards and is currently determining which date(s) it plans for initial compliance.

· IFRS 7, Financial Instruments: Disclosures (amended 2011).

· IFRS 9, Financial Instruments, is required to be applied for periods beginning on or after January 1, 2015.

· Other than for the disclosure requirements therein, the following standards and amended standards must be initially applied concurrently:

· IFRS 10, Consolidated Financial Statements

notes to condensed interim consolidated financial statements

(unaudited)

· IFRS 11, Joint Arrangements

· IFRS 12, Disclosure of Interests in Other Entities

· IAS 27, Separate Financial Statements (amended 2011)

· IAS 28, Investments in Associates (amended 2011).

· IFRS 13, Fair Value Measurement.

· IAS 32, Financial Instruments (amended 2011), is required to be applied for periods beginning on or after January 1, 2014.

· IAS 19, Employee Benefits (amended 2011): Relative to the Company’s current accounting policies and presentation and disclosure practices, the key difference in the amended standard is that the expected long-term rate of return on plan assets will no longer be used for defined benefit plan measurement purposes (and thus will no longer be a significant estimate). In the determination of net income in the Company’s instance, the effect is that the defined benefit plan expense concepts of “interest cost” and “return on plan assets” will be replaced with the concept of “net interest”. Net interest for each plan is the product of the plan’s surplus (deficit) multiplied by the discount rate. Unchanged is that the amended standard does not prescribe where in the results of operations the net interest amount is to be presented, but the Company expects that it will present such amount as a component of financing costs upon application of the amended standard.

As the Company’s current view, consistent with long-term historical experience, is that the expected long-term rate of return on plan assets would exceed the discount rate (a result of targeting a significant percentage of the defined benefit plan assets to be invested in equity securities), the relative effect of the amended standard is expected to be a decrease in net income and associated per share amounts. The variance, if any, between the actual rate of return on defined benefit plan assets and the discount rate, as well as related effects from the limit on defined benefit assets, if any, would be included in other comprehensive income as a re-measurement. The amended standard is not expected to affect the Company’s statement of financial position or the statement of cash flows.

The amended standard affects the Company’s Condensed Interim Consolidated Statements of Income and Other Comprehensive Income as follows:

	2012							2011
Three-month periods ended March 31 (millions except per share amounts)	As currently reported		Amended IAS 19 effects			Pro forma		As currently reported		Amended IAS 19 effects			Pro forma
OPERATING EXPENSES
Employee benefits expense	$	506	$	28		$	534	$	447	$	29		$	476
FINANCING COSTS	$	75	11			$	86	$	104	2			$	106
INCOME TAXES	$	116	(10		)	$	106	$	110	(7		)	$	103
NET INCOME			(29		)					(24		)
OTHER COMPREHENSIVE INCOME
Item never subsequently reclassified to income
Defined benefit plans re-measurements	$	156	29			$	185	$	44	24			$	68
COMPREHENSIVE INCOME			$	—						$	—
NET INCOME PER COMMON SHARE AND NON-VOTING SHARE
Basic	$	1.07	$	(0.09	)	$	0.98	$	1.01	$	(0.08	)	$	0.93
Diluted	$	1.06	$	(0.08	)	$	0.98	$	1.00	$	(0.07	)	$	0.93

The Company currently plans to initially apply the amended standard for periods beginning on or after January 1, 2013.

3 capital structure financial policies

The Company’s objectives when managing capital are: (i) to maintain a flexible capital structure that optimizes the cost and availability of capital at acceptable risk; and (ii) to manage capital in a manner that considers the interests of equity and debt holders.

In the management and definition of capital, the Company includes Common Share and Non-Voting Share equity (excluding accumulated other comprehensive income), long-term debt (including any associated hedging assets or liabilities, net of amounts recognized in accumulated other comprehensive income), cash and temporary investments and securitized trade receivables.

The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust its capital structure, the Company may adjust the amount of dividends paid to holders of Common Shares and Non-Voting Shares, purchase

notes to condensed interim consolidated financial statements

(unaudited)

shares for cancellation pursuant to permitted normal course issuer bids, 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.

The Company monitors capital utilizing a number of measures, including: net debt to earnings before interest, taxes, depreciation and amortization — excluding restructuring costs (EBITDA — excluding restructuring costs); and dividend payout ratios.

Net debt to EBITDA — excluding restructuring costs is calculated as net debt at the end of the period divided by twelve-month trailing EBITDA — excluding restructuring costs. This measure, historically, is substantially the same as the leverage ratio covenant in the Company’s credit facilities. Net debt and EBITDA — excluding restructuring costs are measures that do not have any standardized meanings prescribed by IFRS-IASB and are therefore unlikely to be comparable to similar measures presented by other issuers; the calculation of these measures are as set out in the following schedule. Net debt is one component of a ratio used to determine compliance with debt covenants.

The reported dividend payout ratio is calculated as the quarterly dividend declared per Common Share and Non-Voting Share, as recorded in the financial statements, multiplied by four and divided by the sum of basic earnings per share for the most recent four quarters for interim reporting periods (divided by annual basic earnings per share if reported amount is in respect of a fiscal year); the reported dividend payout ratio of adjusted net earnings differs in that it excludes: income tax-related adjustments; the loss on redemption of long-term debt; and the ongoing impacts of share options with the net-cash settlement feature.

During 2012, the Company’s strategy, which was unchanged from 2011, included maintaining the financial policy set out in the table below. The Company believes that its financial policies and guidelines, which are reviewed annually, are currently at the optimal level and, by maintaining credit ratings in the range of BBB+ to A-, or the equivalent, provide reasonable access to capital.

As at, or twelve-month periods ended, March 31 ($ in millions)	Policy	2012			2011
Components of debt and coverage ratios
Net debt(1)		$	6,898		$	7,034
EBITDA — excluding restructuring costs(2)		$	3,845		$	3,771
Net interest cost(3)		$	348		$	511

Debt ratio
Net debt to EBITDA — excluding restructuring costs	1.5 – 2.0	1.8			1.9

Coverage ratios
Earnings coverage(4)		5.4			3.8
EBITDA — excluding restructuring costs interest coverage(5)		11.0			7.4

Other measures
Dividend payout ratio of adjusted net earnings(6)		63		%	62		%
Dividend payout ratio		61		%	61		%

(1) Net debt is calculated as follows:

	2012			2011
Long-term debt (Note 20)	$	6,533		$	6,187
Debt issuance costs netted against long-term debt	26			27
Derivative liabilities, net	—			413
Accumulated other comprehensive income amounts arising from financial instruments used to manage interest rate and currency risks associated with U.S. dollar denominated debt (excluding tax effects)	—			8
Cash and temporary investments, net	(68		)	(23		)
Short-term borrowings	407			422
Net debt	$	6,898		$	7,034

(2) EBITDA — excluding restructuring costs is calculated as follows:

	2012
	Period-to-date: add (deduct)							Twelve-month
	Comparative quarter			Prior fiscal year		Current quarter		period currently ended
EBITDA (Note 5)	$	(986	)	$	3,778	$	1,009	$	3,801
Restructuring costs (Note19(b))	(4		)	35		13		44
EBITDA — excluding restructuring costs	$	(990	)	$	3,813	$	1,022	$	3,845

(3) Net interest cost is defined as financing costs before gains on redemption and repayment of debt, calculated on a twelve-month trailing basis (losses recorded on the redemption of long-term debt, if any, are included in net interest cost).

(4) Earnings coverage is defined as net income attributable to Common Shares and Non-Voting Shares before gross interest expense and income tax expense, divided by gross interest expense.

(5) EBITDA — excluding restructuring costs interest coverage is defined as EBITDA — excluding restructuring costs divided by net interest cost. This measure is substantially the same as the coverage ratio covenant in the Company’s credit facilities.

notes to condensed interim consolidated financial statements

(unaudited)

(6) Adjusted net earnings attributable to Common Shares and Non-Voting Shares is calculated as follows:

	2012			2011
Net income attributable to Common Shares and Non-Voting Shares	$	1,240		$	1,103
Income tax-related adjustments	(31		)	(29		)
Loss on redemption of long-term debt, net of income taxes	—			37
Equity loss related to the residential condominium tower component of the TELUS Garden real estate joint venture	1			—
Gain on 51% Transactel (Barbados) Inc. interest re-measured at acquisition-date fair value and subsequent adjustment to contingent consideration, net of income taxes	—			(12		)
Impacts of share options with the net-cash settlement feature, net of income taxes	(8		)	(11		)
Adjusted net earnings attributable to Common Shares and Non-Voting Shares	$	1,202		$	1,088

The net debt to EBITDA — excluding restructuring costs ratio was 1.8 times at March 31, 2012, down 0.1 times from one year earlier due to the reduction in net debt and increase in EBITDA — excluding restructuring costs. The earnings coverage ratio at March 31, 2012, was 5.4 times, up from 3.8 times a year earlier; lower gross interest expenses increased the ratio by 1.5, while increased income before gross interest expense and income taxes increased the ratio by 0.1. The EBITDA — excluding restructuring costs interest coverage ratio at March 31, 2012, was 11.0 times, up from 7.4 times a year earlier; lower net interest expenses increased the ratio by 3.5, while higher EBITDA — excluding restructuring costs increased the ratio by 0.1.

4 financial instruments

(a) Credit risk

Excluding credit risk, if any, arising from currency swaps settled on a gross basis (see (c)), the best representation of the Company’s maximum exposure (excluding tax effects) to credit risk, which is a worst-case scenario and does not reflect results expected by the Company, is as set out in the following table:

As at (millions)	March 31, 2012		December 31, 2011
Cash and temporary investments, net	$	68	$	46
Accounts receivable	1,406		1,428
Derivative assets	15		17
	$	1,489	$	1,491

Cash and temporary investments

Credit risk associated with cash and temporary investments is managed by ensuring that these financial assets are placed with: governments; major financial institutions that have been accorded strong investment grade ratings by a primary rating agency; and/or other creditworthy counterparties. An ongoing review is performed to evaluate changes in the status of counterparties.

Accounts receivable

Credit risk associated with accounts receivable is inherently managed by the Company’s large and diverse customer base, which covers substantially all consumer and business sectors in Canada. The Company follows a program of credit evaluations of customers and limits the amount of credit extended when deemed necessary.

The following table presents an analysis of the age of customer accounts receivable not allowed for as at the dates of the Consolidated Statements of Financial Position. As at March 31, 2012, the weighted average life of customer accounts receivable was 28 days (December 31, 2011 — 29 days) and the weighted average life of past-due customer accounts receivable was 63 days (December 31, 2011 — 61 days). No interest is charged on customer accounts that are current. Thereafter, interest is charged at a market rate on outstanding balances.

As at (millions)	March 31, 2012			December 31, 2011
Customer accounts receivable net of allowance for doubtful accounts
Less than 30 days past billing date	$	793		$	796
30-60 days past billing date	183			224
61-90 days past billing date	44			65
Greater than 90 days past billing date	67			57
	$	1,087		$	1,142
Customer accounts receivable (Note 24(a))	$	1,122		$	1,178
Allowance for doubtful accounts	(35		)	(36		)
	$	1,087		$	1,142

notes to condensed interim consolidated financial statements

(unaudited)

	Non-derivative								Derivative
	Non-interest bearing financial		Short-term		Long-term debt		Construction credit facilities commitment		Currency swap agreements amounts to be exchanged
As at March 31, 2012 (millions)	liabilities		borrowings(1)		(Note 20)		(Note 17(c))(2)		(Receive)			Pay		Total
2012
Second quarter	$	741	$	9	$	1,117	$	207	$	(115	)	$	115	$	2,074
Balance of year	482		3		171		—		(113		)	113		656
2013	57		7		605		—		—			—		669
2014	1		405		980		—		—			—		1,386
2015	—		—		873		—		—			—		873
2016	—		—		807		—		—			—		807
Thereafter	—		—		4,070		—		—			—		4,070
Total	$	1,281	$	424	$	8,623	$	207	$	(228	)	$	228	$	10,535

(1)	Interest payment cash outflows in respect of short-term borrowings, commercial paper and amounts drawn under the Company’s credit facilities (if any) have been calculated based upon the rates in effect as at March 31, 2012.
(2)	Although the construction credit facilities could be available upon full documentation in the second quarter, the draws are expected to occur as construction progresses through 2015.

	Non-derivative						Derivative
	Non-interest bearing financial		Short-term		Long-term debt		Currency swap agreements amounts to be exchanged
As at December 31, 2011 (millions)	liabilities		borrowings(1)		(Note 20)		(Receive)			Pay		Total
2012
First quarter	$	804	$	6	$	1,111	$	(77	)	$	75	$	1,919
Balance of year	513		5		276		(91		)	89		792
2013	18		7		605		—			—		630
2014	—		405		980		—			—		1,385
2015	—		—		873		—			—		873
2016	—		—		807		—			—		807
Thereafter	—		—		4,070		—			—		4,070
Total	$	1,335	$	423	$	8,722	$	(168	)	$	164	$	10,476

(1)	Interest payment cash outflows in respect of short-term borrowings, commercial paper and amounts drawn under the Company’s credit facilities (if any) have been calculated based upon the rates in effect as at December 31, 2011.

(c) Currency risk

The Company’s functional currency is the Canadian dollar, but certain routine revenues and operating costs are denominated in U.S. dollars and some inventory purchases and capital asset acquisitions are sourced internationally. The U.S. dollar is the only foreign currency to which the Company has a significant exposure.

The Company’s foreign exchange risk management includes the use of foreign currency forward contracts and currency options to fix the exchange rates on short-term U.S. dollar denominated transactions and commitments. Hedge accounting is applied to these short-term foreign currency forward contracts and currency options only on a limited basis.

Net income and other comprehensive income for the three-month periods ended March 31, 2012 and 2011, could have varied if Canadian dollar: U.S. dollar exchange rates varied from the actual transaction date rates. The following Canadian dollar: U.S. dollar exchange rate sensitivity analysis is based upon a hypothetical change having occurred throughout the reporting period (other than no change is reflected as at the statement of financial position date — see (e)) and having been applied to all relevant Consolidated Statement of Income and Other Comprehensive Income transactions. The income tax expenses, which are reflected net in the sensitivity analysis, reflect the applicable weighted average statutory income tax rates for the reporting periods.

	Net income and comprehensive income						Capital expenditures
Three-month periods ended March 31 ($ increase (decrease) in millions)	2012			2011			2012			2011
10% change in Cdn.$: U.S.$ exchange rate(1)
Canadian dollar appreciates	$	8		$	10		$	(5	)	$	(5	)
Canadian dollar depreciates	$	(8	)	$	(10	)	$	5		$	5

(1) These sensitivities are hypothetical and should be used with caution. Changes in net income and comprehensive income generally cannot be extrapolated because the relationship of the change in assumption to the change in net income and comprehensive income may not be linear. In this table, the effect of a variation in the Canadian dollar: U.S. dollar exchange rate on the amount of net income and comprehensive income is calculated without changing any other analysis inputs; in reality, changes in the Canadian dollar: U.S. dollar exchange rate may result in changes in another factor (for example, increased strength of the Canadian dollar may result in more favourable market interest rates), which might magnify or counteract the sensitivities.

The sensitivity analysis assumes that changes in exchange rates would be realized by the Company; in reality, the competitive marketplace in which the Company operates would impact this assumption. The sensitivity analysis is prepared based on the simple average of the Canadian dollar: U.S. dollar exchange rate for the period.

notes to condensed interim consolidated financial statements

(unaudited)

In respect of U.S. dollar denominated inventory purchases, the current period’s purchases have been included in the sensitivity analysis by assuming that all items are sold in the period purchased. Similarly, this sensitivity analysis is based on the assumption that all U.S. dollar denominated accounts receivable and accounts payable arising in the period are collected and paid, respectively, in the period.

In respect of U.S. dollar denominated capital expenditures, the current period’s expenditures have been included in the sensitivity analysis by assuming one-half period’s straight-line depreciation and amortization in the year of acquisition and an estimated useful life of ten years; no consideration has been made for U.S. dollar denominated capital expenditures made in prior periods.

(d) Market risk

Net income and other comprehensive income for the three-month periods ended March 31, 2012 and 2011, could have varied if the Canadian dollar: U.S. dollar exchange rates, market interest rates and the Company’s Common Share and Non-Voting Share prices varied by reasonably possible amounts from their actual statement of financial position date values.

The sensitivity analysis of the Company’s exposure to currency risk at the reporting date has been determined based upon a hypothetical change taking place at the statement of financial position date (as contrasted with applying the hypothetical change to all relevant transactions during the reported periods — see (d)). The U.S. dollar denominated balances and derivative financial instrument notional amounts as at the statement of financial position dates have been used in the calculations.

The sensitivity analysis of the Company’s exposure to interest rate risk at the reporting date has been determined based upon a hypothetical change taking place at the beginning of the relevant fiscal year and being held constant through to the statement of financial position date. The relevant statement of financial position date principal and notional amounts have been used in the calculations.

The sensitivity analysis of the Company’s exposure to other price risk arising from share-based compensation at the reporting date has been determined based upon a hypothetical change taking place at the relevant statement of financial position date. The relevant statement of financial position date notional number of shares, including those in the cash-settled equity swap agreements, has been used in the calculations.

The income tax expenses, which are reflected net in the sensitivity analysis, reflect the applicable weighted average statutory income tax rates for the reporting periods.

Three-month periods ended March 31	Net income						Other comprehensive income						Comprehensive income
($ increase (decrease) in millions)	2012			2011			2012			2011			2012			2011
Reasonably possible changes in market risks(1)
10% change in Cdn.$: U.S.$ exchange rate
Canadian dollar appreciates	$	(8	)	$	(11	)	$	(9	)	$	(10	)	$	(17	)	$	(21	)
Canadian dollar depreciates	$	7		$	9		$	9		$	10		$	16		$	19

25 basis point change in market interest rate
Rate increases	$	(1	)	$	—		$	—		$	—		$	(1	)	$	—
Rate decreases	$	1		$	—		$	—		$	—		$	1		$	—

25%(2) change in Common Share and Non-Voting Share prices(3)
Price increases	$	(3	)	$	(2	)	$	4		$	8		$	1		$	6
Price decreases	$	3		$	2		$	(4	)	$	(8	)	$	(1	)	$	(6	)

(1) These sensitivities are hypothetical and should be used with caution. Changes in net income and/or other comprehensive income generally cannot be extrapolated because the relationship of the change in assumption to the change in net income and/or other comprehensive income may not be linear. In this table, the effect of a variation in a particular assumption on the amount of net income and/or other comprehensive income is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in more favourable foreign exchange rates (increased strength of the Canadian dollar)), which might magnify or counteract the sensitivities.

The sensitivity analysis assumes that changes in exchange rates and market interest rates would be realized by the Company; in reality, the competitive marketplace in which the Company operates would impact this assumption.

No consideration has been made for a difference in the notional number of shares associated with share-based compensation awards made during the reporting period that may have arisen due to a difference in the Non-Voting Share price.

(2) To facilitate ongoing comparison of sensitivities, a constant variance of approximate magnitude has been used. Reflecting a 4.25-year data period and calculated on a monthly basis, which is consistent with the current assumptions and methodology set out in Note 13(b), the volatility of the Company’s Non-Voting Share price as at March 31, 2012, was 22.6% (2011 — 24.7%); reflecting the three-month data period ended March 31, 2012, the volatility was 16.4% (2011 — 22.8%).

(3) The hypothetical effects of changes in the prices of the Company’s Common Shares and Non-Voting Shares are restricted to those which would arise from the Company’s share-based compensation items that are accounted for as liability instruments and the associated cash-settled equity swap agreements.

The Company is exposed to other price risks in respect of its financial instruments, as discussed further in (f).

(e) Fair values

General

The carrying values of cash and temporary investments, accounts receivable, short-term obligations, short-term borrowings, accounts payable and certain provisions (including restructuring accounts payable) approximate their fair

notes to condensed interim consolidated financial statements

(unaudited)

values due to the immediate or short-term maturity of these financial instruments. The carrying values of the Company’s investments accounted for using the cost method do not exceed their fair values.

The carrying value of short-term investments, if any, equals their fair value as they are classified as held for trading. The fair value is determined directly by reference to quoted market prices in active markets.

The fair values of the Company’s long-term debt are based on quoted market prices in active markets.

The fair values of the Company’s derivative financial instruments used to manage exposure to currency risks are estimated based on quoted market prices in active markets for the same or similar financial instruments or on the current rates offered to the Company for financial instruments of the same maturity as well as the use of discounted future cash flows using current rates for similar financial instruments subject to similar risks and maturities (such fair values being largely based on Canadian dollar: U.S. dollar forward exchange rates as at the statement of financial position dates).

The fair values of the Company’s derivative financial instruments used to manage exposure to increases in compensation costs arising from certain forms of share-based compensation are based upon fair value estimates of the related cash-settled equity forward agreements provided by the counterparty to the transactions (such fair value estimates being largely based upon the Company’s Common Share and Non-Voting Share prices as at the statement of financial position dates).

Derivative

The Company’s financial instruments that are measured at fair value on a recurring basis in periods subsequent to initial recognition and the level within the fair value hierarchy used to measure them are as set out in the following table.

					Fair value measurements at reporting date using
					Quoted prices in active markets for identical items				Significant other observable inputs				Significant unobservable inputs
	Carrying value				(Level 1)				(Level 2)				(Level 3)
As at (millions)	Mar. 31, 2012		Dec. 31, 2011		Mar. 31, 2012		Dec. 31, 2011		Mar. 31, 2012		Dec. 31, 2011		Mar. 31, 2012		Dec. 31, 2011
Assets
Foreign exchange derivatives	$	1	$	4	$	—	$	—	$	1	$	4	$	—	$	—
Share-based compensation derivatives	14		13		—		—		14		13		—		—
	$	15	$	17	$	—	$	—	$	15	$	17	$	—	$	—

The Company’s derivative financial instruments that are measured at fair value on a recurring basis subsequent to initial recognition are as set out in the following table.

	March 31, 2012									December 31, 2011
As at (millions)	Designation	Maximum maturity date	Notional amount		Carrying amount			Fair value		Notional amount		Carrying amount			Fair value
Current Assets
Derivatives used to manage
Currency risks arising from U.S. dollar revenues	HFT(1)	2012	$	28	$	—		$	—	$	26	$	—		$	—
Currency risks arising from U.S. dollar denominated purchases	HFT(1)	2012	$	85	—			—		$	50	1			1
Currency risks arising from U.S. dollar denominated purchases	HFH(2)	2012	$	114	1			1		$	89	3			3
Changes in share-based compensation costs (Note 13(b))	HFT(1)	2012	$	3	—			—		$	—	—			—
Changes in share-based compensation costs (Note 13(c))	HFH(2)	2012	$	20	11			11		$	20	10			10
					$	12		$	12			$	14		$	14

Other Long-Term Assets
Derivatives used to manage
Changes in share-based compensation costs (Note 13(c))	HFH(2)	2013	$	22	$	4		$	3	$	22	3			$	2
Deduct: Net amounts due to derivative counterparties					(1		)					(1		)
					$	3		$	3			$	2		$	2

notes to condensed interim consolidated financial statements

(unaudited)

	March 31, 2012								December 31, 2011
As at (millions)	Designation	Maximum maturity date	Notional amount		Carrying amount		Fair value		Notional amount		Carrying amount		Fair value
Current Liabilities
Derivatives used to manage
Changes in share-based compensation costs (Note 13(b))	HFT(1)	2012	$	—	$	—	$	—	$	4	$	—	$	—

(1) Designated as held for trading (HFT) upon initial recognition; hedge accounting is not applied.

(2) Designated as held for hedging (HFH) upon initial recognition (cash flow hedging item); hedge accounting is applied.

Non-derivative

The Company’s long-term debt, which is measured at amortized cost, and the fair value thereof, are as set out in the following table.

March 31, 2012

December 31, 2011

As at (millions)

Carrying
amount

Fair value

Carrying
amount

Fair value

Long-term debt

6,533

7,349

6,574

7,359

(f) Recognition of derivative gains and losses

The following table sets out the gains and losses, excluding tax effects, on derivative instruments classified as cash flow hedging items and their location within the Consolidated Statements of Income and Other Comprehensive Income; there was no ineffective portion of derivative instruments classified as cash flow hedging items for the periods presented.

	Amount of gain (loss) recognized in other comprehensive income						Gain (loss) reclassified from other comprehensive income into income (effective portion) (Note 10)
	(effective portion) (Note10 )							Amount
Three-month periods ended March 31 (millions)	2012			2011			Location	2012		2011
Derivatives used to manage currency risks
– Associated with U.S. dollar denominated debt	$	—		$	(7	)	Financing costs	$	—	$	(19	)
– Arising from U.S. dollar denominated purchases	(1		)	(2		)	Goods and services purchased	1		(1		)
Derivatives used to manage changes in share-based compensation costs (Note 13(c))	2			3			Employee benefits expense	2		3
	$	1		$	(6	)		$	3	$	(17	)

The following table sets out gains and losses arising from derivative instruments that are classified as held for trading items and that are not designated as being in a hedging relationship, and their location within the Consolidated Statements of Income and Other Comprehensive Income.

		Gain (loss) recognized in income on derivatives
Three-month periods ended March 31 (millions)	Location	2012			2011
Derivatives used to manage currency risks	Financing costs	$	(1	)	$	(3	)
Derivatives used to manage changes in share-based compensation costs (Note 13(b))	Employee benefits expense	—			3
		$	(1	)	$	—

5 segmented information

The Company’s operating segments and reportable segments are Wireless and Wireline. The Wireless segment includes digital personal communications services, equipment sales and wireless Internet services. The Wireline segment includes data (which includes: television; Internet, enhanced data and hosting services; and managed and legacy data services), voice local, voice long distance, and other telecommunications services excluding wireless. Segmentation is based on similarities in technology, the technical expertise required to deliver the services and products, customer characteristics, the distribution channels used and regulatory treatment. Intersegment sales are recorded at the exchange value, which is the amount agreed to by the parties.

notes to condensed interim consolidated financial statements

(unaudited)

The Company does not have material revenues attributed, or capital assets and goodwill located, outside of Canada.

The following segmented information is regularly reported to the Company’s Chief Executive Officer (the Company’s chief operating decision-maker).

Three-month periods ended	Wireless				Wireline				Eliminations						Consolidated
March 31 (millions)	2012		2011		2012		2011		2012			2011			2012		2011
Operating revenues
External revenue	$	1,383	$	1,308	$	1,248	$	1,223	$	—		$	—		$	2,631	$	2,531
Intersegment revenue	10		9		41		40		(51		)	(49		)	—		—
	$	1,393	$	1,317	$	1,289	$	1,263	$	(51	)	$	(49	)	$	2,631	$	2,531
EBITDA(1)	$	622	$	551	$	387	$	435	$	—		$	—		$	1,009	$	986
CAPEX(2)	$	151	$	76	$	290	$	333	$	—		$	—		$	441	$	409
EBITDA less CAPEX	$	471	$	475	$	97	$	102	$	—		$	—		$	568	$	577
									Operating revenues (above)						$	2,631	$	2,531
									Goods and services purchased						1,116		1,098
									Employee benefits expense						506		447
									EBITDA (above)						1,009		986
									Depreciation						343		332
									Amortization						127		112
									Operating income						539		542
									Financing costs						75		104
									Income before income taxes						$	464	$	438

(1) Earnings before interest, taxes, depreciation and amortization (EBITDA) does not have any standardized meaning prescribed by IFRS-IASB and is therefore unlikely to be comparable to similar measures presented by other issuers; EBITDA is defined by the Company as operating revenues less goods and services purchased and employee benefits expense. TELUS has issued guidance on, and reports, EBITDA because it is a key measure that management uses to evaluate performance of its business and is also utilized in measuring compliance with certain debt covenants.

(2) Total capital expenditures (CAPEX).

6 other operating income

	Three months
Periods ended March 31 (millions)	2012			2011
Government assistance, including deferral account amortization	$	12		$	10
Investment income (loss)	(2		)	(1		)
Gain on disposal of assets	2			—
Gain on 51% Transactel (Barbados) Inc. interest re-measured at acquisition-date fair value	—			16
	$	12		$	25

7 employee benefits expense

	Three months
Periods ended March 31 (millions)	2012			2011
Employee benefits expense — gross
Wages and salaries	$	523		$	483
Share-based compensation (Note 13)	16			11
Pensions — defined benefit (Note 14(a))	(1		)	(9		)
Pensions — defined contribution (Note 14(b))	17			17
Restructuring costs (Note 19(b))	13			3
Other	34			33
	602			538

Capitalized internal labour costs
Property, plant and equipment	(67		)	(66		)
Intangible assets subject to amortization	(29		)	(25		)
	(96		)	(91		)
	$	506		$	447

notes to condensed interim consolidated financial statements

(unaudited)

8 financing costs

	Three months
Periods ended March 31 (millions)	2012			2011
Interest expense
Interest on long-term debt	$	86		$	102
Interest on short-term borrowings and other	2			3
Interest accretion on asset retirement obligation (Note 19(a))	1			1
	89			106
Foreign exchange	(4		)	(2		)
	85			104
Interest income — interest on tax refunds	(10		)	—
	$	75		$	104

9 income taxes

(a) Expense composition and rate reconciliation

	Three months
Periods ended March 31 (millions)	2012			2011
Current tax expense (recovery)
For current reporting period	$	429		$	66
Consequential adjustments from reassessment of prior year tax issues	(11		)	—
	418			66

Deferred tax expense (recovery)
Arising from the origination and reversal of temporary differences	(309		)	52
Revaluation of deferred income tax liability to reflect future statutory income tax rates	(1		)	(8		)
Consequential adjustments from reassessment of prior year tax issues	8			—
	(302		)	44
	$	116		$	110

The Company’s income tax expense differs from that calculated by applying statutory rates for the following reasons:

Three-month periods ended March 31 ($ in millions)	2012					2011
Basic blended tax at weighted average statutory income tax rates	$	119		25.7	%	$	119		27.2	%
Revaluation of deferred income tax liability to reflect future statutory income tax rates	(1		)			(8		)
Tax rate differential on, and consequential adjustments from, reassessment of prior year tax issues	(3		)			—
Share option award compensation	1					—
Other	—					(1		)
Income tax expense per Condensed Interim Consolidated Statements of Income and Other Comprehensive Income	$	116		25.0	%	$	110		25.1	%

The Company’s basic blended weighted average statutory income tax rate is the aggregate of the following:

	Three months
Periods ended March 31	2012		2011
Basic federal rate	14.7	%	16.1	%
Weighted average provincial rate	10.3	%	10.4	%
Other tax jurisdictions	0.7	%	0.7	%
	25.7	%	27.2	%

(b) Other

The Company conducts research and development activities, which are eligible to earn Investment Tax Credits. During the three-month period ended March 31, 2012, the Company recorded Investment Tax Credits of $2 million (2011 — $NIL). Of the Investment Tax Credits recorded by the Company during the three-month period ended March 31, 2012, $1 million (2011 — $NIL) was recorded as a reduction of property, plant and equipment and/or intangible assets and the balance was recorded as a reduction of Goods and services purchased.

notes to condensed interim consolidated financial statements

(unaudited)

10 other comprehensive income

	Items reclassified to income
	May subsequently be															Never
	Change in unrealized fair value of derivatives designated as cash flow hedges (Note 4(f))									Cumulative						Cumulative
Three-month periods ended March 31 (millions)	Gains (losses) arising in current period			Prior period (gains) losses transferred to net income in the current period			Total			foreign currency translation adjustment			Accumulated other comprehensive income			employee defined benefit plan actuarial gains (losses)(1)			Other comprehensive income
Accumulated balance as at Jan. 1, 2011							$	1		$	—		$	1		$	(214	)
Other comprehensive income (loss)
Amount arising	$	(6	)	$	17		11			(4		)	7			59			$	66
Income taxes	$	1		$	2		3			—			3			15			18
Net							8			(4		)	4			44			$	48
Accumulated balance as at Mar. 31, 2011							$	9		$	(4	)	$	5		$	(170	)
Accumulated balance as at Jan. 1, 2012							$	7		$	4		$	11		$	(1,065	)
Other comprehensive income (loss)
Amount arising	$	1		$	(3	)	(2		)	(2		)	(4		)	209			$	205
Income taxes	$	—		$	(1	)	(1		)	—			(1		)	53			52
Net							(1		)	(2		)	(3		)	156			$	153
Accumulated balance as at Mar. 31, 2012							$	6		$	2		$	8		$	(909	)

(1) Cumulative employee defined benefit plan actuarial gains (losses) are only those amounts arising on or after January 1, 2010; excluding the tax effects thereon, the cumulative net gain (loss) charged to other comprehensive income at March 31, 2012, was $(1,217) ( December 31, 2011 — $(1,426)).

As at March 31, 2012, the Company’s estimate of the net amount of existing gains (losses) arising from the unrealized fair value of derivatives designated as cash flow hedges which are reported in accumulated other comprehensive income and are expected to be reclassified to net income in the next twelve months, excluding tax effects, is $3 million.

11 per share amounts

Basic net income per Common Share and Non-Voting Share is calculated by dividing net income attributable to Common Shares and Non-Voting Shares by the total weighted average Common Shares and Non-Voting Shares outstanding during the period. Diluted net income per Common Share and Non-Voting Share is calculated to give effect to share option awards and restricted stock units.

The following table presents the reconciliations of the denominators of the basic and diluted per share computations. Net income attributable to Common Shares and Non-Voting Shares equalled diluted income attributable to Common Shares and Non-Voting Shares for all periods presented.

	Three months
Periods ended March 31 (millions)	2012	2011
Basic total weighted average Common Shares and Non-Voting Shares outstanding	325	324
Effect of dilutive securities
Share option awards	2	2
Diluted total weighted average Common Shares and Non-Voting Shares outstanding	327	326

For the three-month period ended March 31, 2012, certain outstanding share option awards, in the amount of 1 million (2011 — 3 million), were not included in the computation of diluted income per Common Share and Non-Voting Share because the share option awards’ exercise prices were greater than the average market price of the Common Shares and Non-Voting Shares during the reported periods.

notes to condensed interim consolidated financial statements

(unaudited)

12 dividends per share

Three-month periods ended

2012

2011(1)

March 31 (millions except per

Declared

Paid to

Declared

Paid to

share amounts)

Effective

Per share

shareholders

Total

Effective

Per share

shareholders

Total

Common Share and Non-Voting Share dividends

Quarter 1 dividend

Mar. 9, 2012

0.580

Apr. 2, 2012

189

Mar. 11, 2011

0.525

Apr. 1, 2011

170

Quarter 2 dividend

Jun. 8, 2012

0.610

Jul. 3, 2012

198

—

1.190

387

0.525

170

(1) In fiscal 2011, the quarter 2 dividend was declared on May 4, 2011.

On February 21, 2012, the Board of Directors declared a quarterly dividend of $0.61 per share on the issued and outstanding Common Shares and Non-Voting Shares of the Company, payable on July 3, 2012, to holders of record at the close of business on June 8, 2012.

13 share-based compensation

(a) Details of share-based compensation expense

Reflected in the Consolidated Statements of Income and Other Comprehensive Income as employee benefits expense and in the Consolidated Statements of Cash Flows are the following share-based compensation amounts:

	2012							2011
Three-month periods ended March 31	Employee benefits		Associated operating cash			Statement of cash flows		Employee benefits			Associated operating cash			Statement of cash flows
(millions)	expense		outflows			adjustment		expense			outflows			adjustment
Share option awards(1)	$	2	$	—		$	2	$	(4	)	$	(6	)	$	(10	)
Restricted stock units(2)	6		(1		)	5		7			(2		)	5
Employee share purchase plan	8		(8		)	—		8			(8		)	—
	$	16	$	(9	)	$	7	$	11		$	(16	)	$	(5	)

(1) The expense (recovery) arising from share options with the net-cash settlement feature, net of cash-settled equity swap agreement effects (see Note 4(f)), was $NIL (2011 — $(8)).

(2) The expense arising from restricted stock units was net of cash-settled equity swap agreement effects (see Note 4(f)).

For the three-month period ended March 31, 2012, the associated operating cash outflows in respect of share option awards include cash outflows arising from the cash-settled equity swap agreements of $NIL (2011 — $6 million). For the three-month period ended March 31, 2012, the income tax benefit arising from share-based compensation was $4 million (2011 — $3 million); as disclosed in Note 9, not all share-based compensation amounts are deductible for income tax purposes.

(b) Share option awards

General

The Company uses share option awards as a form of retention and incentive compensation. The Company has a number of share option plans under which employees may receive options to purchase Common Shares or Non-Voting Shares at a price equal to the fair market value at the time of grant. Share option awards currently granted under the plans may be exercised over specific periods not to exceed seven years from the time of grant; prior to 2003, share option awards were granted with exercise periods not to exceed ten years.

The Company applies the fair value based method of accounting for share-based compensation awards granted to officers and other employees. Share option awards typically have a three-year vesting period (the requisite service period), but may vest over periods of up to five years. The vesting method of share option awards, which is determined on or before the date of grant, may be either cliff or graded; all share option awards granted subsequent to 2004 have been cliff-vesting awards.

notes to condensed interim consolidated financial statements

(unaudited)

The following table presents a summary of the activity related to the Company’s share option plans.

	Three months(1)
Period ended March 31, 2012	Number of share options		Weighted average share option price
Outstanding, beginning of period	9,573,701		$	39.41
Exercised(2)	(1,832,885	)	$	35.05
Forfeited	(87,373	)	$	40.19
Expired	(19,806	)	$	35.56
Outstanding, end of period	7,633,637		$	40.46

(1) For the three-month period ended March 31, 2012, the Company’s traditional first quarter annual-awarding of share options for retention and incentive compensation purposes has been deferred until after May 9, 2012.

(2) The total intrinsic value of share option awards exercised for the three-month period ended March 31, 2012, was $39 million (reflecting a weighted average price at the dates of exercise of $56.42 per share).

The following table reconciles the number of share options exercised and the associated number of Non-Voting Shares issued.

Period ended March 31, 2012		Three months
Shares issued or issuable pursuant to exercise of share options		4,750
Shares issued or issuable pursuant to use of share option award net-equity settlement feature		686,958
Impact of Company choosing to settle share option award exercises using net-equity settlement feature		1,141,177
Share options exercised		1,832,885

The following is a life and exercise price stratification of the Company’s share options outstanding, all of which are for Non-Voting Shares, as at March 31, 2012.

									Options exercisable
Options outstanding									Number of	Weighted average
Range of option prices							Total		shares	price
Low	$	10.75	$	29.70	$	44.66	$	10.75
High	$	16.15	$	44.20	$	64.64	$	64.64

Year of expiry and number of shares
2012	61,350		164,530		—		225,880		225,880	$	35.89
2013	—		405,396		102,336		507,732		507,732	$	44.41
2014	—		1,455		891,217		892,672		887,802	$	56.56
2015	—		1,045,513		30,875		1,076,388		1,076,388	$	43.83
2016	—		999,190		—		999,190		909,250	$	30.57
2017	—		2,452,174		12,380		2,464,554		—	$	—
2018	—		—		1,467,221		1,467,221		—	$	—
	61,350		5,068,258		2,504,029		7,633,637		3,607,052
Weighted average remaining contractual life (years)	0.7		3.9		4.3		4.0
Weighted average price	$	15.90	$	35.88	$	50.33	$	40.46
Aggregate intrinsic value(1) (millions)	$	3	$	106	$	16	$	125

Options exercisable
Number of shares	61,350		2,526,144		1,019,558		3,607,052
Weighted average remaining contractual life (years)	0.7		2.8		1.9		2.5
Weighted average price	$	15.90	$	38.87	$	55.58	$	43.21
Aggregate intrinsic value(1) (millions)	$	3	$	45	$	1	$	49

(1) The aggregate intrinsic value is calculated upon the March 31, 2012, per share price of $56.75 for Non-Voting Shares.

Share option awards accounted for as equity instruments

The weighted average fair value of share option awards granted, and the weighted average assumptions used in the fair value estimation at the time of grant, using the Black-Scholes model (a closed-form option pricing model), are as follows:

	Three months
Periods ended March 31	2012			2011
Share option award fair value (per share option)	$	—		$	6.75
Risk free interest rate	—		%	2.4		%
Expected lives(1) (years)	—			4.25
Expected volatility	—		%	25.8		%
Dividend yield	—		%	4.5		%

(1) The maximum contractual term of the share option awards granted in 2011 was seven years.

notes to condensed interim consolidated financial statements

(unaudited)

The risk free interest rate used in determining the fair value of the share option awards is based on a Government of Canada yield curve that is current at the time of grant. The expected lives of the share option awards are based on historical share option award exercise data of the Company. Similarly, expected volatility considers the historical volatility of the Company’s Non-Voting Shares. The dividend yield is the annualized dividend current at the date of grant divided by the share option award exercise price. Dividends are not paid on unexercised share option awards and are not subject to vesting.

Some share option awards have a net-equity settlement feature. The optionee does not have the choice of exercising the net-equity settlement feature; it is at the Company’s option whether the exercise of a share option award is settled as a share option or settled using the net-equity settlement feature.

Share option awards accounted for as liability instruments

Substantially all of the Company’s outstanding share option awards that were granted prior to January 1, 2005, have a net-cash settlement feature; the optionee has the choice of exercising the net-cash settlement feature. The affected outstanding share option awards largely take on the characteristics of liability instruments rather than equity instruments. For the outstanding share option awards that were amended and were granted subsequent to 2001, the minimum expense recognized for them will be their grant-date fair values.

The Company has entered into a cash-settled equity swap agreement that establishes a cap on the Company’s cost associated with substantially all of the affected outstanding share option awards. The following table sets out the number of affected outstanding share option awards (all of which are for Non-Voting Shares granted subsequent to 2001) and the composition of their capped exercise-date fair values.

As at March 31, 2012 ($ in millions except per affected outstanding share option award)
Weighted average exercise price	$	15.89
Weighted average grant-date fair value	4.85
Incremental expense arising from net-cash settlement feature	34.41
Exercise-date fair value capped by cash-settled equity swap agreement	$	55.15
Affected share option awards outstanding	61,350
Aggregate intrinsic value(1)	$	3

(1) The aggregate intrinsic value is calculated upon the March 31, 2012, per share price of $56.75 for Non-Voting Shares. The difference between the aggregate intrinsic value amount in this table and the amount disclosed in Note 24(a) is the effect, if any, of recognizing no less than the expense arising from the grant-date fair values for the affected share option awards outstanding.

(c) Restricted stock units

The Company uses restricted stock units as a form of incentive compensation. Each restricted stock unit is nominally equal in value to one Non-Voting Share together with the dividends that would have arisen thereon had it been an issued and outstanding Non-Voting Share; the notional dividends are recorded as additional issuances of restricted stock units during the life of the restricted stock unit. Due to the notional dividend mechanism, the grant-date fair value of restricted stock units equals the fair market value of the corresponding shares at the grant date. The restricted stock units become payable when vesting is completed. The restricted stock units typically vest over a period of 33 months (the requisite service period). The vesting method of restricted stock units, which is determined on or before the date of grant, may be either cliff or graded. The associated liability is normally cash-settled.

The following table presents a summary of the activity related to the Company’s restricted stock units.

	Three months(1)
	Number of restricted stock units				Weighted average grant-
Period ended March 31, 2012	Non-vested		Vested		date fair value
Outstanding, beginning of period
Non-vested	1,471,836		—		$	40.60
Vested	—		15,951		$	38.39
Issued — In lieu of dividends	14,570		21		$	54.50
Vested	(4,517	)	4,517		$	40.63
Settled in cash	—		(18,372	)	$	38.45
Forfeited and cancelled	(21,220	)	(21	)	$	39.37
Outstanding, end of period
Non-vested	1,460,669		—		$	40.62
Vested	—		2,096		$	42.68

(1) For the three-month period ended March 31, 2012, the Company’s traditional first quarter annual-awarding of restricted stock units for incentive compensation purposes has been deferred until after May 9, 2012.

notes to condensed interim consolidated financial statements

(unaudited)

With respect to certain issuances of restricted stock units, the Company has entered into cash-settled equity forward agreements that fix the cost to the Company; that information, as well as a schedule of the Company’s non-vested restricted stock units outstanding as at March 31, 2012, is set out in the following table.

Vesting in years ending December 31	Number of fixed-cost restricted stock units	Cost fixed to the Company per restricted stock unit		Number of variable-cost restricted stock units	Total number of non-vested restricted stock units
2012	538,000	$	38.13	195,472	733,472
2013	447,000	$	50.96	280,197	727,197
	985,000			475,669	1,460,669

(d) Employee share purchase plan

The Company has an employee share purchase plan under which eligible employees up to a certain job classification can purchase Common Shares through regular payroll deductions by contributing between 1% and 10% of their pay; for more highly compensated job classifications, employees may contribute between 1% and up to 55% of their pay. For every dollar contributed by an employee, up to a maximum of 6% of eligible employee pay, the Company is required to contribute a percentage between 20% and 40% as designated by the Company. For the three-month periods ended March 31, 2012 and 2011, the Company contributed 40% for employees up to a certain job classification; for more highly compensated job classifications, the Company contributed 35%. The Company records its contributions as a component of Employee benefits expense and the Company’s contribution vests on the earlier of a plan participant’s last day in the Company’s employ or the last business day of the calendar year of the Company’s contribution, unless the plan participant’s employment is terminated with cause, in which case the plan participant will forfeit their in-year Company contribution.

	Three months
Periods ended March 31 (millions)	2012		2011
Employee contributions	$	23	$	21
Company contributions	8		8
	$	31	$	29

Under this plan, the Company has the option of offering shares from Treasury or having the trustee acquire shares in the stock market. For the three-month periods ended March 31, 2012 and 2011, all Common Shares issued to employees under the plan were purchased on the market at normal trading prices.

14 employee future benefits

(a) Defined benefit pension plans — details

Expense

The Company’s defined benefit pension plan expense was as follows:

	2012									2011
	Employee			Other						Employee			Other
Three-month periods ended March 31 (millions)	benefits			comprehensive						benefits			comprehensive
Recognized in	expense			income			Total			expense			income			Total
Current service cost	$	23		$	—		$	23		$	20		$	—		$	20
Past service cost	3			—			3			—			—			—
Return on plan assets net of interest
Interest cost on accrued benefit obligation	86			—			86			89			—			89
Return on plan assets(1)	(113		)	(200		)	(313		)	(118		)	(59		)	(177		)
	(27		)	(200		)	(227		)	(29		)	(59		)	(88		)
Actuarial (gain) arising from:
Demographic assumptions	—			(9		)	(9		)	—			—			—
	$	(1	)	$	(209	)	$	(210	)	$	(9	)	$	(59	)	$	(68	)

(1) The return on plan assets included in employee benefits expense reflects management’s expected long-term rate of return.

notes to condensed interim consolidated financial statements

(unaudited)

(b) Defined contribution plans

The Company’s total defined contribution pension plan costs recognized were as follows:

	Three months
Periods ended March 31 (millions)	2012		2011
Union pension plan and public service pension plan contributions	$	7	$	7
Other defined contribution pension plans	10		10
	$	17	$	17

15 property, plant and equipment

(millions)	Network assets			Buildings and leasehold improvements			Assets under finance lease			Other			Land		Assets under construction			Total
At cost
As at December 31, 2011	$	23,766		$	2,473		$	23		$	1,622		$	55	$	372		$	28,311
Additions	130			3			—			11			—		225			369
Dispositions, retirements and other	(38		)	(4		)	(16		)	(19		)	—		—			(77		)
Reclassifications	106			8			—			13			—		(127		)	—
As at March 31, 2012	$	23,964		$	2,480		$	7		$	1,627		$	55	$	470		$	28,603
Accumulated depreciation
As at December 31, 2011	$	17,428		$	1,560		$	20		$	1,339		$	—	$	—		$	20,347
Depreciation	285			32			—			26			—		—			343
Dispositions, retirements and other	(35		)	(2		)	(16		)	(19		)	—		—			(72		)
As at March 31, 2012	$	17,678		$	1,590		$	4		$	1,346		$	—	$	—		$	20,618
Net book value
As at December 31, 2011	$	6,338		$	913		$	3		$	283		$	55	$	372		$	7,964
As at March 31, 2012	$	6,286		$	890		$	3		$	281		$	55	$	470		$	7,985

The gross carrying amount of fully depreciated property, plant and equipment that was still in use as at March 31, 2012, was $3.1 billion (December 31, 2011 — $3.0 billion).

As at March 31, 2012, the Company’s contractual commitments for the acquisition of property, plant and equipment were $264 million over a period through to 2014 (December 31, 2011 — $188 million over a period through to 2013).

notes to condensed interim consolidated financial statements

16 intangible assets and goodwill

(a) Intangible assets and goodwill, net

	Intangible assets subject to amortization																Intangible assets with indefinite lives
(millions)	Subscriber base		Customer contracts, related customer relationships and leasehold interests		Software			Access to rights-of-way and other			Assets under construction			Total			Spectrum licences		Acquired brand		Total		Total intangible assets			Goodwill (1)		Total intangible assets and goodwill
At cost
As at December 31, 2011	$	245	$	197	$	2,701		$	93		$	165		$	3,401		$	4,867	$	7	$	4,874	$	8,275		$	4,025	$	12,300
Additions	—		—		1			1			70			72			—		—		—		72			—		72
Additions arising from business acquisitions and related investments (c)	—		3		29			—			—			32			—		—		—		32			—		32
Dispositions, retirements and other	—		—		(54		)	(2		)	—			(56		)	—		—		—		(56		)	—		(56		)
Reclassifications	—		—		43			—			(43		)	—			—		—		—		—			—		—
As at March 31, 2012	$	245	$	200	$	2,720		$	92		$	192		$	3,449		$	4,867	$	7	$	4,874	$	8,323		$	4,025	$	12,348

Accumulated amortization
As at December 31, 2011	$	64	$	60	$	1,936		$	62		$	—		$	2,122		$	—	$	—	$	—	$	2,122		$	364	$	2,486
Amortization	2		5		119			1			—			127			—		—		—		127			—		127
Dispositions, retirements and other	—		—		(61		)	—			—			(61		)	—		—		—		(61		)	—		(61		)
As at March 31, 2012	$	66	$	65	$	1,994		$	63		$	—		$	2,188		$	—	$	—	$	—	$	2,188		$	364	$	2,552

Net book value
As at December 31, 2011	$	181	$	137	$	765		$	31		$	165		$	1,279		$	4,867	$	7	$	4,874	$	6,153		$	3,661	$	9,814
As at March 31, 2012	$	179	$	135	$	726		$	29		$	192		$	1,261		$	4,867	$	7	$	4,874	$	6,135		$	3,661	$	9,796

(1) Accumulated amortization of goodwill is amortization recorded prior to 2002.

The gross carrying amount of fully amortized intangible assets subject to amortization that were still in use as at March 31, 2012, was $718 million (December 31, 2011 — $662 million).

As at March 31, 2012, the Company’s contractual commitments for the acquisition of intangible assets were $158 million over a period through to 2018 (December 31, 2011 — $142 million over a period through to 2018).

notes to condensed interim consolidated financial statements

(unaudited)

(b) Intangible assets subject to amortization

Estimated aggregate amortization expense for intangible assets subject to amortization, calculated for such assets held as at March 31, 2012, for each of the next five fiscal years is as follows:

Years ending December 31 (millions)
2012 (balance of year)	$	300
2013	276
2014	159
2015	85
2016	50

(c) Business acquisitions and related investments

During the three-month period ended March 31, 2012, the Company made business acquisitions and related investments including 100% ownership of a business complementary to the Company’s existing lines of business. There was no contingent consideration in the transaction.

Acquisition-date fair values

The acquisition-date fair values assigned to assets acquired and liabilities assumed are as set out in the following table:

As at acquisition date (millions)
Assets
Current assets
Accounts receivable(1)	$	2
Non-current assets
Intangible assets
Intangible assets subject to amortization(2)
Customer relationships	3
Software	29
Total non-current assets	32
Total identifiable assets acquired	34
Liabilities
Current liabilities	2
Net identifiable assets acquired	$	32
Acquisition effected by way of:
Cash consideration	$	30
Accrued liabilities	2
	$	32

(1) The fair value of the accounts receivable is equal to the gross contractual amounts receivable and reflects the best estimates at the acquisition dates of the contractual cash flows expected to be collected.

(2) The customer relationships and software acquired in conjunction with the acquisition are being amortized over periods of six years and five years, respectively.

17 real estate joint venture

(a) General

In the first quarter of 2011, the Company announced that it partnered, as equals, with an arm’s-length party in a residential condominium, retail and commercial real estate redevelopment project, TELUS Garden, in Vancouver, British Columbia. The project will result in the Company having new national headquarters. The new-build office tower, scheduled for completion in 2014, is to be built to the 2009 Leadership in Energy and Environmental Design (LEED) Platinum standard and the neighboring residential condominium tower (also new-build), scheduled for completion in 2015, is to be built to the LEED Gold standard.

notes to condensed interim consolidated financial statements

(unaudited)

(b) Company transactions with real estate joint venture

	2012
Three-month period ended March 31 (millions)	Loans and receivables		Equity			Total
Real estate joint venture statement of income and other comprehensive income related
Comprehensive income (loss) attributable to the Company	$	—	$	(2	)	$	(2	)
Real estate joint venture statement of financial position related
Company real estate contributed to real estate joint venture	1		1			2
Company funds contributed to real estate joint venture	—		15			15
	1		16			17
Increase in account with real estate joint venture	1		14			15
Balance — beginning of period	—		—			—
Balance — end of period	$	1	$	14		$	15
Account with real estate joint venture
Current(1)	$	1	$	—		$	1
Non-current	—		14			14
	$	1	$	14		$	15

(1) Included in the Company’s Consolidated Statements of Financial Position as Accounts receivable.

(c) Commitments and contingent liabilities

Construction commitment

The real estate joint venture is expected to spend a combined total of approximately $470 million on an office tower and a residential condominium tower. Construction activity has commenced on the office tower and is expected to commence on the residential condominium tower in the second quarter of 2012. As at March 31, 2012, the real estate joint venture’s construction-related contractual commitments were $152 million through to 2014.

Operating lease

In the three-month period ended March 31, 2012, the Company entered into an operating lease for its new national headquarter premises with the real estate joint venture at market rates. Operating lease payments for the 20 year term total $230 million, including occupancy costs of $91 million.

Construction credit facilities

In the three-month period ended March 31, 2012, the real estate joint venture received financing commitments from two Canadian financial institutions in connection with the TELUS Garden project. TELUS Corporation plans to participate as a 50% lender in the construction credit facilities which, once fully documented and all conditions of funding having been satisfied, will provide a combined total of $413 million of liquidity to the real estate joint venture. The facilities contain customary representations, warranties and covenants and will be secured by demand debentures constituting first fixed and floating charge mortgages over the two underlying real estate projects; the facilities will bear interest at bankers’ acceptance rate or prime rate, plus applicable margins.

As at May 9, 2012, no amounts had been advanced under the facilities.

Commitment to contribute resources

In addition to that which it had already contributed by March 31, 2012, the Company has committed to contributing real estate necessary for the office tower and the residential condominium tower to the real estate joint venture; such contributions are expected to occur in the second quarter of 2012.

In respect of the real estate necessary for the residential condominium tower, the Company expects that it will take back a non-interest bearing note as consideration for such contribution and the non-interest bearing note is to be repaid prior to any other distributions, excepting repayment of construction credit facilities, to the venturers arising from the residential condominium tower. The non-interest bearing note is expected to be secured by a mortgage which will be subordinated to the construction financing security.

Other

The Company is to receive 50% of earnings from the sale of residential condominium tower units in excess of the first $18 million of earnings; the Company is to receive 25% of the first $18 million of earnings and the arm’s-length co-venturer is to receive 75%.

notes to condensed interim consolidated financial statements

(unaudited)

The Company is to guarantee the payment of 50% of the real estate joint venture’s construction credit facility carrying costs and costs to complete. The Company is also required to provide an environmental indemnity in favor of the construction lenders. If the Company pays out under such guarantee or indemnity because the arm’s-length co-venturer has not paid its pro rata share of project costs then the Company has recourse options available, including against the arm’s-length co-venturer’s interest in the real estate joint venture.

As at March 31, 2012, the Company had no liability recorded in respect of real estate joint venture obligations and guarantees.

18 short-term borrowings

On July 26, 2002, TELUS subsidiary TELUS Communications Inc. (see Note 23(a)) entered into an agreement with an arm’s-length securitization trust associated with a major Schedule I bank under which TELUS Communications Inc. is able to sell an interest in certain of its trade receivables up to a maximum of $500 million (December 31, 2011 — $500 million). This revolving-period securitization agreement’s current term ends August 1, 2014. TELUS Communications Inc. is required to maintain at least a BBB (low) credit rating by Dominion Bond Rating Service or the securitization trust may require the sale program to be wound down prior to the end of the term.

When the Company sells its trade receivables, it retains reserve accounts, which are retained interests in the securitized trade receivables, and servicing rights. As at March 31, 2012, the Company had transferred, but continued to recognize, trade receivables of $455 million (December 31, 2011 — $456 million). Short-term borrowings of $400 million (December 31, 2011 — $400 million) are comprised of amounts loaned to the Company from the arm’s-length securitization trust pursuant to the sale of trade receivables.

The balance of short-term borrowings (if any) comprised amounts drawn on the Company’s bilateral bank facilities.

19 provisions

(a) General

(millions)	Asset retirement obligation		Employee related (b)			Other (b)			Total
As at December 31, 2011	$	104	$	37		$	69		$	210
Addition	—		13			1			14
Interest effect	1		—			—			1
Use	—		(9		)	(22		)	(31		)
As at March 31, 2012	$	105	$	41		$	48		$	194

Current	$	3	$	36		$	49		$	88
Non-current	101		1			20			122
As at December 31, 2011	$	104	$	37		$	69		$	210

Current	$	3	$	40		$	29		$	72
Non-current	102		1			19			122
As at March 31, 2012	$	105	$	41		$	48		$	194

Asset retirement obligation

The Company recognizes liabilities associated with the retirement of property, plant and equipment when those obligations result from the acquisition, construction, development and/or normal operation of the assets. The Company expects that the cash outflows in respect of the balance accrued as at the financial statement date will occur proximate to the dates these long-term assets are retired.

Employee related

The employee related provisions are largely in respect of restructuring activities (as discussed further in (b) following). The timing of the cash outflows in respect of the balance accrued as at the financial statement date is substantially short-term in nature.

Other

The provision for other includes disputes and non-employee related restructuring activities (as discussed further in (b) following), as well as a written put option related to a business acquisition. As discussed further in Note 22(d), the Company

notes to condensed interim consolidated financial statements

(unaudited)

is involved in a number of legal disputes and is aware of certain possible legal disputes. In respect of legal disputes, the Company has established provisions, when warranted, after taking into account legal assessment, information presently available, and the expected availability of insurance or other recourse. The timing of cash outflows associated with legal claims cannot be reasonably determined. The Company provided a written put option in respect of the remaining 5% non-controlling interest in Transactel (Barbados) Inc. which it does not own; cash outflows are not expected to occur prior to initial exercisability of the written put option on December 22, 2015. The Company expects that the cash outflows in respect of the balance accrued as at the financial statement date will occur over an indeterminate, multi-year period.

(b) Restructuring

Employee related provisions and other provisions, in (a) preceding, include amounts in respect of restructuring activities. In 2012, restructuring activities include ongoing efficiency initiatives such as:

· simplifying or automating processes to achieve operating efficiencies, which includes workforce reductions;

· simplifying organizational structures through consolidation of functions and reducing organizational layers;

· consolidating administrative real estate to create a smaller environmental footprint through mobile working, encouraging less inter-city travel, reduced daily commutes, and lower use of real estate space, which includes vacating premises;

· decommissioning uneconomic services and products; and

· leveraging business process outsourcing and off-shoring to the Company’s own international call centres.

	2012							2011
Three-month periods ended March 31 (millions)	Employee related(1)		Other(1)			Total(1)		Employee related(1)			Other(1)			Total(1)
Restructuring costs
Addition
Workforce
Voluntary	$	12	$	—		$	12	$	1		$	—		$	1
Involuntary	1		—			1		2			—			2
Other	—		—			—		—			1			1
	13		—			13		3			1			4

Use
Workforce
Voluntary	3		—			3		8			—			8
Involuntary and other	6		—			6		17			—			17
Other	—		2			2		—			2			2
	9		2			11		25			2			27

Expenses greater (less) than disbursements	4		(2		)	2		(22		)	(1		)	(23		)
Restructuring accounts payable and accrued liabilities
Balance, beginning of period	36		27			63		95			16			111
Balance, end of period	$	40	$	25		$	65	$	73		$	15		$	88

(1) The transactions and balances in this column are included in, and thus are a subset of, the transactions and balances in the columns with the same caption in (a) preceding.

These initiatives were intended to improve the Company’s long-term operating productivity and competitiveness. The Company expects that substantially all of the cash outflows in respect of the balance accrued as at the financial statement date will occur within twelve months thereof.

The Company’s estimate of restructuring costs for 2012 is approximately $50 million.

notes to condensed interim consolidated financial statements

(unaudited)

20 long-term debt

(a) Details of long-term debt

As at (millions)				March 31,		December 31,
Series	Rate of interest		Maturity	2012		2011
TELUS Corporation Notes
CB	5.00	%(1)	June 2013	$	300	$	300
CC	4.50	%(1)	March 2012	—		300
CD	4.95	%(1)	March 2017	692		692
CE	5.95	%(1)	April 2015	499		498
CF	4.95	%(1)	May 2014	698		698
CG	5.05	%(1)	December 2019	991		991
CH	5.05	%(1)	July 2020	993		993
CI	3.65	%(1)	May 2016	595		595
				4,768		5,067
TELUS Corporation Commercial Paper	1.16	%	Through July 2012	1,024		766
TELUS Communications Inc. Debentures
2	11.90	%(1)	November 2015	124		124
3	10.65	%(1)	June 2021	174		174
5	9.65	%(1)	April 2022	245		245
B	8.80	%(1)	September 2025	198		198
				741		741
Long-Term Debt				$	6,533	$	6,574
Current				$	1,024	$	1,066
Non-current				5,509		5,508
Long-Term Debt				$	6,533	$	6,574

(1) Interest is payable semi-annually.

(b) TELUS Corporation commercial paper

TELUS Corporation has an unsecured commercial paper program, which is backstopped by its $2.0 billion syndicated credit facility, enabling it to issue commercial paper up to a maximum aggregate of $1.2 billion, and is to be used for general corporate purposes, including capital expenditures and investments. Commercial paper debt is due within one year and is classified as a current portion of long-term debt as the amounts are fully supported, and the Company expects that they will continue to be supported, by the revolving credit facility, which has no repayment requirements within the next year.

(c) TELUS Corporation credit facility

TELUS Corporation has an unsecured, revolving $2.0 billion bank credit facility, expiring on November 3, 2016, with a syndicate of financial institutions and is to be used for general corporate purposes including the backstop of commercial paper.

TELUS Corporation’s credit facility bears interest at prime rate, U.S. Dollar Base Rate, a bankers’ acceptance rate or London interbank offered rate (LIBOR) (all such terms as used or defined in the credit facility), plus applicable margins. The credit facility contains customary representations, warranties and covenants, including two financial quarter-end financial ratio tests. The financial ratio tests are that the Company may not permit its net debt to operating cash flow ratio to exceed 4.0:1 and may not permit its operating cash flow to interest expense ratio to be less than 2.0:1, each as defined under the credit facility.

Continued access to TELUS Corporation’s credit facility is not contingent on the maintenance by TELUS Corporation of a specific credit rating.

As at (millions)	Mar. 31, 2012		Dec. 31, 2011
Net available	$	976	$	1,234
Outstanding, undrawn letters of credit	—		—
Backstop of commercial paper	1,024		766
Gross available	$	2,000	$	2,000

In addition to the ability to provide letters of credit pursuant to its $2.0 billion bank credit facility, the Company has $115 million of letter of credit facilities expiring mid-2013, of which $115 million was utilized at March 31, 2012 (December 31, 2011 — $115 million).

notes to condensed interim consolidated financial statements

(unaudited)

(d) Long-term debt maturities

Anticipated requirements to meet long-term debt repayments, calculated upon such long-term debts owing as at March 31, 2012, for each of the next five fiscal years are as follows:

Years ending December 31 (millions)
2012 (balance of year)	$	1,024
2013	300
2014	700
2015	625
2016	600
Thereafter	3,324
Future cash outflows in respect of long-term debt principal repayments	6,573
Future cash outflows in respect of associated interest and like carrying costs(1)	2,050
Undiscounted contractual maturities (Note 4(c))	$	8,623

(1) Future cash outflows in respect of associated interest and like carrying costs for commercial paper and amounts drawn under the Company’s credit facilities (if any) have been calculated based upon the rates in effect as at March 31, 2012.

21 Common Share and Non-Voting Share capital

As at March 31, 2012, and December 31, 2011, the Company’s authorized share capital consisted of one billion no par value shares of each of the following classes: First Preferred Shares; Second Preferred Shares; Common Shares; and Non-Voting Shares. Only holders of Common Shares may vote at general meetings of the Company with each holder of Common Shares being entitled to one vote per Common Share held at all such meetings. Non-Voting Shares have conversion rights in certain instances, such as if there are changes in Canadian telecommunications, radiocommunication and broadcasting regulations so that there is no restriction on non-Canadians owning or controlling Common Shares of the Company. In that instance, shareholders have the right to convert their Non-Voting Shares into Common Shares on a one-for-one basis, and the Company has the right to require conversion on the same basis.

With respect to priority in payment of dividends and in the distribution of assets in the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up its affairs, preferences are as follows: First Preferred Shares; Second Preferred Shares; and finally Common Shares and Non-Voting Shares participating equally, without preference or distinction.

As at March 31, 2012, approximately 27 million Non-Voting Shares were reserved for issuance, from Treasury, under the share option plans (see Note 13(b)).

On February 21, 2012, the Company announced that holders of its Common Shares and Non-Voting Shares would have the opportunity to decide whether to eliminate the Company’s Non-Voting Share class at the Company’s annual and special meeting to be held May 9, 2012. Under the terms of the proposal, each Non-Voting Share would be converted into a Common Share on a one-for-one basis, effected by way of a court-approved plan of arrangement subject to the approval of two-thirds of the votes cast by the holders of Common Shares and two-thirds of the votes cast by the holders of Non-Voting Shares, each voting separately as a class. On May 8, 2012, the Company announced it was withdrawing the plan of arrangement set out in its 2012 Information Circular and intends to reintroduce a new proposal in due course.

22 commitments and contingent liabilities

(a) Indemnification obligations

In the normal course of operations, the Company may provide indemnification in conjunction with certain transactions. The terms of these indemnification obligations range in duration and often are not explicitly defined. Where appropriate, an indemnification obligation is recorded as a liability. In many cases, there is no maximum limit on these indemnification obligations and the overall maximum amount of such indemnification obligations cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of the transaction, historically the Company has not made significant payments under these indemnifications.

In connection with its 2001 disposition of TELUS’ directory business, the Company agreed to bear a proportionate share of the new owner’s increased directory publication costs if the increased costs were to arise from a change in the applicable CRTC regulatory requirements. The Company’s proportionate share is 15% through, and ending, May 2016. As well, should the CRTC take any action which would result in the owner being prevented from carrying on the directory

notes to condensed interim consolidated financial statements

(unaudited)

23 related party transactions

(a) Investments in significant controlled entities

		March 31, 2012		December 31, 2011
As at	Country of incorporation	Per cent of equity held by immediate parent
Parent entity
TELUS Corporation	Canada

Controlled entities
TELUS Communications Inc.	Canada	100	%	100	%
TELE-MOBILE COMPANY	Canada	100	%	100	%
TELUS Communications Company	Canada	100	%	100	%

(b) Transactions with key management personnel

The Company’s key management personnel have authority and responsibility for overseeing, planning, directing and controlling the activities of the Company and consist of the Company’s Board of Directors and the Company’s Executive Leadership Team.

Total compensation expense for key management personnel, and the composition thereof, is as follows:

	Three months
Periods ended March 31 (millions)	2012		2011
Short-term benefits	$	2	$	2
Post-employment pension(1) and other benefits	4		1
Share-based compensation(2)	3		4
	$	9	$	7

(1) The Company’s Executive Leadership Team members are members of the Company’s Pension Plan for Management and Professional Employees of TELUS Corporation and non-registered, non-contributory supplementary defined benefit pension plans.

(2) For the three-month period ended March 31, 2012, share-based compensation is net of $1 (2011 — $1) of effects of derivatives used to manage share-based compensation costs (Note 13(b)-(c)).

As disclosed in Note 13, the Company made awards of share-based compensation in fiscal 2011. As most of these awards are cliff-vesting or graded-vesting and have multi-year requisite service periods, the expense will be recognized ratably over a period of years and thus only a portion of the fiscal 2011 awards are included in the amounts in the table above.

	Three months
Periods ended March 31 (millions)	2012		2011
Total fair value at date of grant of:
Restricted stock units awarded	$	—	$	15

The liability amounts accrued for share-based compensation awards to key management personnel are as follows:

As at (millions)	March 31, 2012		December 31, 2011
Restricted stock units	$	14	$	12
Deferred share units(1)	24		22
	$	38	$	34

(1) The Company’s Directors’ Deferred Share Unit Plan (formerly the Directors Share Option and Compensation Plan) provides that, in addition to their annual equity grant of deferred share units, a director may elect to receive his or her annual retainer and meeting fees in deferred share units, Non-Voting Shares or cash. Deferred share units entitle the directors to a specified number of, or a cash payment based on the value of, TELUS’ Common Shares and Non-Voting Shares. Deferred share units are paid out when a director ceases to be a director, for any reason, at a time elected by the director in accordance with the Directors’ Deferred Share Unit Plan.

During the three-month period ended March 31, 2012, key management personnel exercised 485,480 share options (2011 — 116,920 share options) which had an intrinsic value of $12 million (2011 — $1 million) at the time of exercise, reflecting a weighted average price at the date of exercise of $57.37 (2011 — $46.52).

The Company’s key management personnel receive telecommunications services from the Company, which are immaterial and domestic in nature.

Employment agreements with members of the Executive Leadership Team typically provide for severance payments if the executive’s employment is terminated without cause: 18 months (24 months for the Chief Executive Officer and the

notes to condensed interim consolidated financial statements

(unaudited)

Chief Financial Officer) of base salary, benefits and accrual of pension service in lieu of notice and 50% of base salary in lieu of annual cash bonus (other than for the Chief Executive Officer, who would receive twice the average of the preceding three years’ annual cash bonus). In the event of a change in control (as defined), the Executive Leadership Team members are not entitled to treatment any different than other Company employees with respect to unvested share-based compensation, other than for the Chief Executive Officer, whose unvested share-based compensation would immediately vest.

(c) Transactions with defined benefit pension plans

During the three-month period ended March 31, 2012, the Company provided management and administrative services to its defined benefit pension plans; the charges for these services were on a cost recovery basis and amounted to $1 million (2011 — $1 million).

During the three-month periods ended March 31, 2012 and 2011, the Company made employer contributions to its defined benefit pension plans as set out in the Consolidated Statements of Cash Flows.

(d) Transactions with real estate joint venture

During the three-month period ended March 31, 2012, the Company had transactions with the real estate joint venture, which is a related party, as set out in Note 17.

24 additional financial information

(a) Statement of financial position

As at (millions)	March 31, 2012			December 31, 2011
Accounts receivable
Customer accounts receivable	$	1,122		$	1,178
Accrued receivables — customer	157			111
Allowance for doubtful accounts	(35		)	(36		)
	1,244			1,253
Accrued receivables — other	161			172
Other	1			3
	$	1,406		$	1,428
Inventories(1)
Wireless handsets, parts and accessories	$	220		$	307
Other	50			46
	$	270		$	353
Accounts payable and accrued liabilities
Accrued liabilities	$	534		$	579
Payroll and other employee related liabilities	254			287
Restricted stock units liability	33			29
Accrual for net-cash settlement feature for share option awards (Note 13(b))	3			3
	824			898
Trade accounts payable	432			406
Interest payable	90			68
Other	57			47
	$	1,403		$	1,419
Advance billings and customer deposits
Advance billings	$	583		$	575
Regulatory deferral accounts	23			24
Deferred customer activation and connection fees	31			32
Customer deposits	26			24
	$	663		$	655
Other long-term liabilities
Pension and other post-retirement liabilities	$	754		$	1,053
Other	111			116
Restricted stock units and deferred share units liabilities	41			35
	906			1,204
Regulatory deferral accounts	74			77
Deferred customer activation and connection fees	57			59
Deferred gain on sale-leaseback of buildings	3			3
	$	1,040		$	1,343

(1) Cost of goods sold for the three-month period ended March 31, 2012 was $349 (2011 — $327).

notes to condensed interim consolidated financial statements

(unaudited)

(b) Supplementary cash flow information

	Three months
Periods ended March 31 (millions)	2012			2011
Net change in non-cash working capital
Accounts receivable	$	18		$	56
Inventories	83			(55		)
Prepaid expenses	(84		)	(94		)
Accounts payable and accrued liabilities	(11		)	47
Income and other taxes receivable and payable, net	360			10
Advance billings and customer deposits	8			(24		)
Provisions	(16		)	(25		)
	$	358		$	(85	)
Dividends paid to holders of Common Shares and Non-Voting Shares
Dividends declared in immediately preceding fiscal year, payable in current fiscal year	$	(188	)	$	(169	)
Re-invested in Non-Voting Shares issued from Treasury	—			54
	(188		)	(115		)
Fiscal year dividends
Declared	(387		)	(170		)
Payable at end of period	387			170
	—			—
	$	(188	)	$	(115	)
Long-term debt issued
TELUS Corporation Commercial Paper	$	1,350		$	630

Redemptions and repayment of long-term debt
TELUS Corporation Commercial Paper	$	(1,092	)	$	(480	)
Other	(300		)	(2		)
	$	(1,392	)	$	(482	)