6-K

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

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

TELUS CORPORATION

(Translation of registrant’s name into English)

23rd Floor, 510 West Georgia Street
Vancouver, British Columbia V6B 0M3
Canada
(Address of principal executive offices)

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

Form 20-F o                           Form 40-F x

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

Yes o                            No x

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

Yes o       No x

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

Yes o       No x

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

Incorporation by Reference

This report on Form 6-K and the exhibits hereto are specifically incorporated by reference into the registration statement on Form F-10 (File No. 333-161320) and registration statement on Form F-3 (File No. 333-162944) of TELUS Corporation.

2

Signatures

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

	TELUS CORPORATION
	By:	/s/ Monique Mercier
		Name:	Monique Mercier
		Title:	EVP - Chief Legal Officer and
			Corporate Secretary
Date: November 4, 2016

3

Exhibit Index

Exhibit Number	Description of Document
99.1	Consolidated Financial Statements
99.2	Management’s Discussion and Analysis

4

EX-99.1

Exhibit 99.1

TELUS CORPORATION

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

SEPTEMBER 30, 2016

condensed interim consolidated statements of income and other comprehensive income (unaudited)

		Three months						Nine months
Periods ended September 30 (millions except per share amounts)	Note	2016			2015			2016			2015
OPERATING REVENUES
Service		$	3,045		$	2,934		$	8,921		$	8,647
Equipment		180			207			516			597
Revenues arising from contracts with customers		3,225			3,141			9,437			9,244
Other operating income	6	13			14			57			41
		3,238			3,155			9,494			9,285
OPERATING EXPENSES
Goods and services purchased		1,426			1,394			4,057			4,050
Employee benefits expense	7	681			693			1,977			1,951
Depreciation	16	388			361			1,158			1,069
Amortization of intangible assets	17	127			110			356			322
		2,622			2,558			7,548			7,392
OPERATING INCOME		616			597			1,946			1,893
Financing costs	8	129			106			386			333
INCOME BEFORE INCOME TAXES		487			491			1,560			1,560
Income taxes	9	132			126			411			439
NET INCOME		355			365			1,149			1,121
OTHER COMPREHENSIVE INCOME	10
Items that may subsequently be reclassified to income
Change in unrealized fair value of derivatives designated as cash flow hedges		(4		)	1			(13		)	(1		)
Foreign currency translation adjustment arising from translating financial statements of foreign operations		2			12			4			17
Change in unrealized fair value of available-for-sale financial assets		2			1			(1		)	(2		)
		—			14			(10		)	14
Item never subsequently reclassified to income
Employee defined benefit plan re-measurements		150			(156		)	167			(41		)
		150			(142		)	157			(27		)
COMPREHENSIVE INCOME		$	505		$	223		$	1,306		$	1,094
NET INCOME ATTRIBUTABLE TO:
Common Shares		$	348		$	365		$	1,142		$	1,121
Non-controlling interest		7			—			7			—
		$	355		$	365		$	1,149		$	1,121
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Common Shares		$	501		$	223		$	1,298		$	1,094
Non-controlling interest		4			—			8			—
		$	505		$	223		$	1,306		$	1,094
NET INCOME PER COMMON SHARE	11
Basic		$	0.59		$	0.61		$	1.93		$	1.85
Diluted		$	0.59		$	0.61		$	1.93		$	1.85
TOTAL WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		592			601			593			605
Diluted		592			603			593			606

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

2

condensed interim consolidated statements of financial position (unaudited)

As at (millions)	Note		September 30, 2016		December 31, 2015
ASSETS
Current assets
Cash and temporary investments, net			$	410	$	223
Accounts receivable	25	(a)	1,422		1,428
Income and other taxes receivable			85		1
Inventories	25	(a)	262		360
Prepaid expenses			307		213
Real estate joint venture advances	18	(c)	—		66
Current derivative assets	4	(e)	11		40
			2,497		2,331
Non-current assets
Property, plant and equipment, net	16		10,297		9,736
Intangible assets, net	17		10,292		9,985
Goodwill, net	17		3,776		3,761
Other long-term assets	25	(a)	830		593
			25,195		24,075
			$	27,692	$	26,406
LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Short-term borrowings	19		$	100	$	100
Accounts payable and accrued liabilities	25	(a)	2,181		1,990
Income and other taxes payable			37		108
Dividends payable	12		272		263
Advance billings and customer deposits	25	(a)	747		760
Provisions	20		170		197
Current maturities of long-term debt	21		850		856
Current derivative liabilities	4	(e)	12		2
			4,369		4,276
Non-current liabilities
Provisions	20		432		433
Long-term debt	21		11,604		11,182
Other long-term liabilities	25	(a)	731		688
Deferred income taxes			2,263		2,155
			15,030		14,458
Liabilities			19,399		18,734
Owners’ equity
Common equity	22		8,281		7,672
Non-controlling interest			12		—
			8,293		7,672
			$	27,692	$	26,406
Commitments and Contingent Liabilities	23

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

3

condensed interim consolidated statements of changes in owners’ equity (unaudited)

		Common equity
		Equity contributed											Accumulated
		Common Shares (Note 22)											other						Non-
(millions)	Note	Number of shares		Share  capital			Contributed surplus			Retained earnings			comprehensive income			Total			controlling interest		Total
Balance as at January 1, 2015		609		$	5,175		$	141		$	2,100		$	38		$	7,454
Net income		—		—			—			1,121			—			1,121
Other comprehensive income	10	—		—			—			(41		)	14			(27		)
Dividends	12	—		—			—			(748		)	—			(748		)
Share option award expense	13(a)	—		—			1			—			—			1
Share option award net-equity settlement feature	13(d)	1		5			(5		)	—			—			—
Normal course issuer bid purchase of Common Shares		(10	)	(82		)	—			(319		)	—			(401		)
Liability for automatic share purchase plan commitment pursuant to normal course issuer bids for Common Shares	22(b)
Reversal of opening liability		—		15			—			60			—			75
Recognition of closing liability		—		(11		)	—			(44		)	—			(55		)
Balance as at September 30, 2015		600		$	5,102		$	137		$	2,129		$	52		$	7,420
Balance as at January 1, 2016		594		$	5,050		$	135		$	2,428		$	59		$	7,672		$	—	$	7,672
Net income		—		—			—			1,142			—			1,142			7		1,149
Other comprehensive income	10	—		—			—			167			(11		)	156			1		157
Dividends	12	—		—			—			(807		)	—			(807		)	—		(807		)
Share option award net-equity settlement feature	13(d)	—		2			(2		)	—			—			—			—		—
Normal course issuer bid purchase of Common Shares		(3	)	(29		)	—			(101		)	—			(130		)	—		(130		)
Liability for automatic share purchase plan commitment pursuant to normal course issuer bids for Common Shares	22(b)
Reversal of opening liability		—		14			—			46			—			60			—		60
Recognition of closing liability		—		(9		)	—			(39		)	—			(48		)	—		(48		)
Change in ownership interests of subsidiary	1(b), 25(c)	—		—			236			—			—			236			4		240
Balance as at September 30, 2016		591		$	5,028		$	369		$	2,836		$	48		$	8,281		$	12	$	8,293

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

4

condensed interim consolidated statements of cash flows (unaudited)

		Three months						Nine months
Periods ended September 30 (millions)	Note	2016			2015			2016			2015
OPERATING ACTIVITIES
Net income		$	355		$	365		$	1,149		$	1,121
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		515			471			1,514			1,391
Deferred income taxes	9	47			31			48			77
Share-based compensation expense, net	13(a)	27			38			65			40
Net employee defined benefit plans expense	14(a)	23			27			67			81
Employer contributions to employee defined benefit plans		(14		)	(20		)	(53		)	(68		)
Other		8			22			(5		)	36
Net change in non-cash operating working capital	25(b)	71			91			(298		)	8
Cash provided by operating activities		1,032			1,025			2,487			2,686
INVESTING ACTIVITIES
Cash payments for capital assets, excluding spectrum licences	25(b)	(711		)	(616		)	(1,971		)	(1,903		)
Cash payments for spectrum licences		—			(12		)	(145		)	(2,002		)
Cash payments for acquisitions		(14		)	(5		)	(16		)	(10		)
Real estate joint ventures advances and contributions	18(c)	(5		)	(14		)	(28		)	(38		)
Real estate joint venture receipts	18(c)	50			95			91			97
Other		—			3			(6		)	4
Cash used by investing activities		(680		)	(549		)	(2,075		)	(3,852		)
FINANCING ACTIVITIES	25(c)
Dividends paid to holders of Common Shares	12(a)	(274		)	(253		)	(798		)	(740		)
Purchase of Common Shares for cancellation	22(b)	(19		)	(140		)	(140		)	(402		)
Issuance and repayment of short-term borrowings	19	(3		)	(399		)	—			1
Long-term debt issued	21	1,336			2,985			4,623			6,279
Redemptions and repayment of long-term debt	21	(1,403		)	(2,605		)	(4,186		)	(3,882		)
Issue of shares by subsidiary to non-controlling interest	1(b)	(1		)	—			291			—
Other		(6		)	—			(15		)	(9		)
Cash provided (used) by financing activities		(370		)	(412		)	(225		)	1,247
CASH POSITION
Increase (decrease) in cash and temporary investments, net		(18		)	64			187			81
Cash and temporary investments, net, beginning of period		428			77			223			60
Cash and temporary investments, net, end of period		$	410		$	141		$	410		$	141
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS
Interest paid		$	(132	)	$	(115	)	$	(387	)	$	(329	)
Interest received		$	—		$	—		$	1		$	3
Income taxes paid, net		$	(148	)	$	(71	)	$	(571	)	$	(249	)

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

5

notes to condensed interim consolidated financial statements (unaudited)

SEPTEMBER 30, 2016

TELUS Corporation is one of Canada’s largest telecommunications companies, providing a wide range of telecommunications services and products, including wireless and wireline voice and data. Data services include: Internet protocol; television; hosting, managed information technology and cloud-based services; healthcare solutions; and business process outsourcing.

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 Floor 7, 510 West Georgia Street, Vancouver, British Columbia, V6B 0M3.

The terms “TELUS”, “we”, “us”, “our” or “ourselves” are used to refer to TELUS Corporation and, where the context of the narrative permits or requires, its subsidiaries.

Notes to condensed interim consolidated financial statements		Page
General application
1.	Condensed interim consolidated financial statements	6
2.	Accounting policy developments	7
3.	Capital structure financial policies	8
4.	Financial instruments	10
Consolidated results of operations focused
5.	Segmented information	15
6.	Other operating income	17
7.	Employee benefits expense	17
8.	Financing costs	17
9.	Income taxes	18
10.	Other comprehensive income	18
11.	Per share amounts	19
12.	Dividends per share	20
13.	Share-based compensation	20
14.	Employee future benefits	23
15.	Restructuring and other costs	24
Consolidated financial position focused
16.	Property, plant and equipment	25
17.	Intangible assets and goodwill	26
18.	Real estate joint ventures	27
19.	Short-term borrowings	30
20.	Provisions	30
21.	Long-term debt	31
22.	Common Share capital	34
23.	Commitments and contingent liabilities	34
Other
24.	Related party transactions	37
25.	Additional financial information	38

1condensed interim consolidated financial statements

(a)Basis of presentation

The notes presented in our condensed interim consolidated financial statements include only significant events and transactions and are not fully inclusive of all matters normally disclosed in our annual audited financial statements; thus, our interim consolidated financial statements are referred to as condensed. Our condensed interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2015.

Our 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 our consolidated financial statements for the year ended December 31, 2015, other than as set out in Note 2. The generally accepted accounting principles that we use are International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS-IASB) and Canadian generally accepted accounting principles. Our condensed interim consolidated financial statements comply with International Accounting Standard 34, Interim Financial Reporting and reflect all adjustments (which are of a normal recurring nature) that are, in our opinion, necessary for a fair statement of the results for the interim periods presented.

Our condensed interim consolidated financial statements for the nine-month period ended September 30, 2016, were authorized by our Board of Directors for issue on November 4, 2016.

(b)Consolidation

Our consolidated financial statements include our accounts and the accounts of all of our subsidiaries, the principal one of which is TELUS Communications Inc. in which we have a 100% equity interest. Currently, through a 100% equity interest in each of the TELUS Communications Company partnership and the TELE-MOBILE COMPANY partnership, TELUS Communications Inc. includes substantially all of our wireless and wireline segments’ operations.

6

notes to condensed interim consolidated financial statements (unaudited)

Our financing arrangements and those of our wholly-owned subsidiaries do not impose restrictions on inter-corporate dividends.

On a continuing basis, we review our corporate organization and effect changes as appropriate so as to enhance the value of TELUS Corporation. This process can, and does, affect which of our subsidiaries are considered principal subsidiaries at any particular point in time.

During the three-month period ended June 30, 2016, a change in ownership interests occurred in respect of our TELUS International (Cda) Inc. subsidiary, which encompasses our TELUS International operations, due to it issuing shares to Baring Private Equity Asia for approximately $299 million, exclusive of net transaction costs. We continue to control and consolidate the subsidiary and the shares issued are accounted for as a 35% non-controlling interest. An amount equal to 35% of the net book value of the subsidiary has been credited to non-controlling interest in the unaudited condensed interim consolidated statement of changes in owners’ equity and the net balance of proceeds has been credited to contributed surplus. In connection with the transaction, we have also arranged bank financing in the subsidiary company, as set out in Note 21(e).

2accounting policy developments

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

In January 2016, the International Accounting Standards Board released Amendments to IAS 7, Statement of Cash Flows as a part of their Disclosure Initiative. The amendments are required to be applied for years beginning on or after January 1, 2017, however we have currently applied them, as set out in Note 25(c), and such application had no material effect on our financial performance or disclosure.

Annual Improvements to IFRSs 2012-2014 Cycle are required to be applied for years beginning on or after January 1, 2016, and such application had no effect on our financial performance or disclosure.

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

·IFRS 9, Financial Instruments, is required to be applied for years beginning on or after January 1, 2018. The new standard includes a model for classification and measurement, a single forward-looking “expected loss” impairment model and a reformed approach to hedge accounting. Based upon current facts and circumstances, we do not expect to be materially affected by the application of the standard and we are currently determining which date we will select for initial compliance if earlier than the required compliance date.

·IFRS 15, Revenue from Contracts with Customers, is required to be applied for years beginning on or after January 1, 2018, such date reflecting the one-year deferral approved by the International Accounting Standards Board on July 22, 2015. The International Accounting Standards Board and the Financial Accounting Standards Board of the United States worked on this joint project to clarify the principles for the recognition of revenue. The new standard was released in May 2014 and supersedes existing standards and interpretations including IAS 18, Revenue. In April 2016, the International Accounting Standards Board issued Clarifications to IFRS 15, Revenue from Contracts with Customers, clarifying application of some of the more complex aspects of the standard. We are currently assessing the impacts and transition provisions of the new standard.

The effects of the new standard and the materiality of those effects will vary by industry and entity. Like many other telecommunications companies, we currently expect to be materially affected by its application, primarily in respect of the timing of revenue recognition, the classification of revenue, the capitalization of costs of obtaining a contract with a customer and possibly the capitalization of the costs of contract fulfilment (as defined by the new standard). The timing of revenue recognition and the classification of our revenues as either service revenues or equipment revenues will be affected, since the allocation of consideration in multiple element arrangements (solutions for our customers that may involve deliveries of multiple services and products that occur at different points in time and/or over different periods of time) will no longer be affected by the current limitation cap methodology.

The effects of the timing of revenue recognition and the classification of revenue are expected to be most pronounced in our wireless segment. Although the measurement of the total revenue recognized over the life of a contract will be largely unaffected by the new standard, the prohibition of the use of the limitation cap methodology will accelerate the recognition of total contract revenue, relative to both the associated cash inflows from customers and our current practice (using the limitation cap methodology). The acceleration of the recognition of contract revenue relative to the associated cash inflows will also result in the recognition of an amount reflecting the resulting difference as an asset. Although the underlying transaction economics would not differ, during periods of sustained growth in the number of wireless subscriber connection additions, assuming comparable contract-lifetime per unit

7

notes to condensed interim consolidated financial statements (unaudited)

cash inflows, revenues would appear to be greater than under current practice (using the limitation cap methodology). Wireline segment results arising from transactions that include the initial provision of subsidized hardware or promotional pricing plans will be similarly affected.

Similarly, the measurement of the total costs of contract acquisition and contract fulfilment over the life of a contract will be unaffected by the new standard, but timing of recognition will be. The new standard will result in our wireless and wireline segments’ costs of contract acquisition and contract fulfilment, to the extent that they are material, being capitalized and subsequently recognized as an expense over the life of a contract on a rational, systematic basis consistent with the pattern of the transfer of goods or services to which the asset relates. Although the underlying transaction economics would not differ, during periods of sustained growth in the number of customer connection additions, assuming comparable per unit costs of contract acquisition and contract fulfilment, absolute profitability measures would appear to be greater than under the current practice of immediately expensing such costs.

Our operations and associated systems are complex and our accounting for millions of multi-year contracts with our customers will be affected. Significantly, in order to effect the associated accounting, incremental compilation of historical data will be necessary for the millions of already existing multi-year contracts with our customers that are expected to be in-scope for purposes of transitioning to the new standard. Our current estimate of the time and effort necessary to develop and implement the accounting policies, estimates, judgments and processes (including incremental requirements of our information technology systems) we will need to have in place in order to comply with the new standard extends into mid-2017. As a result, at this time, it is not possible to make reasonable quantitative estimates of the effects of the new standard.

·In January 2016 the International Accounting Standards Board released IFRS 16, Leases, which is required to be applied for years beginning on or after January 1, 2019, and which supersedes IAS 17, Leases; earlier application is allowed, but not before the application of IFRS 15, Revenue from Contracts with Customers. The International Accounting Standards Board and the Financial Accounting Standards Board of the United States worked together to modify the accounting for leases, generally by eliminating lessees’ classification of leases as either operating leases or finance leases and, for IFRS-IASB, introducing a single lessee accounting model.

The most significant effect of the new standard will be the lessee’s recognition of the initial present value of unavoidable future lease payments as lease assets and lease liabilities on the statement of financial position, including for most leases which would be currently accounted for as operating leases. Leases with durations of 12 months or less and leases for low-value assets are both exempted.

The measurement of the total lease expense over the term of a lease will be unaffected by the new standard. However, the new standard will result in the timing of lease expense recognition being accelerated for leases which would be currently accounted for as operating leases; the International Accounting Standards Board expects that this effect may be muted by a lessee having a portfolio of leases with varying maturities and lengths of term. The presentation on the statement of income and other comprehensive income required by the new standard will result in most lease expenses being presented as amortization of lease assets and financing costs arising from lease liabilities rather than as being a part of goods and services purchased, thus reported operating income would be higher under the new standard.

Relative to the results of applying the current standard, although the actual cash flows will be unaffected, the lessee’s statement of cash flows will reflect increased operating activity cash flows equally offset by decreased financing activity cash flows due to the payment of the “principal” component of leases, which would be currently accounted for as operating leases, being presented as a cash flow use within financing activities under the new standard.

We are currently assessing the impacts and transition provisions of the new standard, but we expect that our consolidated statement of financial position will be materially affected, as will be debt-related and results of operations-related financial metrics. At this time it is not possible to make reasonable quantitative estimates of the effects of the new standard.

3capital structure financial policies

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

In the management of capital and in its definition, we include common equity (excluding accumulated other comprehensive income), long-term debt (including long-term credit facilities, commercial paper backstopped by long-term credit facilities and any hedging assets or liabilities associated with long-term debt items, net of amounts recognized

8

notes to condensed interim consolidated financial statements (unaudited)

in accumulated other comprehensive income), cash and temporary investments, and short-term borrowings arising from securitized trade receivables.

We manage our capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of our telecommunications infrastructure. In order to maintain or adjust our capital structure, we may adjust the amount of dividends paid to holders of Common Shares, purchase Common Shares for cancellation pursuant to 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.

We monitor capital utilizing a number of measures, including: net debt to earnings before interest, income taxes, depreciation and amortization (EBITDA*) — excluding restructuring and other costs; and dividend payout ratios.

Net debt to EBITDA — excluding restructuring and other costs is calculated as net debt at the end of the period divided by 12-month trailing EBITDA — excluding restructuring and other costs. This measure, historically, is substantially similar to the leverage ratio covenant in our credit facilities. Net debt, EBITDA — excluding restructuring and other costs and adjusted net earnings 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 companies. The calculation of these measures is as set out in the following table. Net debt is one component of a ratio used to determine compliance with debt covenants.

The dividend payout ratio presented is a historical measure calculated as the sum of the last four quarterly dividends declared per Common Share, as recorded in the financial statements, 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 the reported amount is in respect of a fiscal year). The dividend payout ratio of adjusted net earnings presented, also a historical measure, differs in that it excludes the gain on exchange of wireless spectrum licences, net gains and equity income from real estate joint ventures, long-term debt prepayment premium and income tax-related adjustments.

During 2016, our financial objectives, which are reviewed annually and which were unchanged from 2015 other than for a revision to our debt ratio long-term objective, included maintaining the financial objectives set out in the following table. We believe that our financial objectives are supportive of our long-term strategy.

As at, or for the12-month periods ended, September 30 ($ in millions)	Objective	2016			2015
Components of debt and coverage ratios
Net debt 1		$	12,217		$	11,713
EBITDA — excluding restructuring and other costs 2		$	4,668		$	4,438
Net interest cost 3		$	548		$	454
Debt ratio
Net debt to EBITDA — excluding restructuring and other costs	2.00 – 2.50 4	2.62			2.64
Coverage ratios
Earnings coverage 5		4.6			5.1
EBITDA — excluding restructuring and other costs interest coverage 6		8.5			9.8
Other measures
Dividend payout ratio of adjusted net earnings 7		77		%	69		%
Dividend payout ratio	65%–75% 8	76		%	69		%

(1)Net debt is calculated as follows:

As at September 30	Note	2016			2015
Long-term debt	21	$	12,454		$	11,712
Debt issuance costs netted against long-term debt		67			48
Derivative (assets) liabilities, net		24			(7		)
Accumulated other comprehensive income amounts arising from financial instruments used to manage interest rate and currency risks associated with U.S. dollar-denominated long-term debt (excluding tax effects)		(18		)	—
Cash and temporary investments, net		(410		)	(141		)
Short-term borrowings	19	100			101
Net debt		$	12,217		$	11,713

* EBITDA does not have any standardized meaning prescribed by IFRS-IASB and is therefore unlikely to be comparable to similar measures presented by other issuers; we define EBITDA as operating revenues less goods and services purchased and employee benefits expense. We have issued guidance on, and report, EBITDA because it is a key measure that management uses to evaluate the performance of our business and it is also utilized in measuring compliance with certain debt covenants.

9

notes to condensed interim consolidated financial statements (unaudited)

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

	EBITDA (Note 5)			Restructuring and other costs (Note 15)			EBITDA — excluding restructuring and other costs
Add
Nine-month period ended September 30, 2016	$	3,460		$	131		$	3,591
Year ended December 31, 2015	4,262			226			4,488
Deduct
Nine-month period ended September 30, 2015	(3,284		)	(127		)	(3,411		)
EBITDA — excluding restructuring and other costs	$	4,438		$	230		$	4,668

(3)Net interest cost is defined as financing costs, excluding employee defined benefit plans net interest and recoveries on long-term debt prepayment premium and repayment of debt, calculated on a 12-month trailing basis (expenses recorded for long-term debt prepayment premium, if any, are included in net interest cost).

(4)Our long-term objective range for this ratio is 2.00 — 2.50 times. The ratio as at September 30, 2016, is outside the long-term objective range. In the short term, we may permit this ratio to go outside the objective range (for long-term investment opportunities), but will endeavor to return this ratio to within the objective range in the medium term, as we believe that this range is supportive of our long-term strategy. We are well in compliance with our credit facilities leverage ratio covenant which states that we may not permit our net debt to operating cash flow ratio to exceed 4.00:1.00 (see Note 21(d)); the calculation of the debt ratio is substantially similar to the calculation of the leverage ratio covenant in our credit facilities.

(5)Earnings coverage is defined as net income before borrowing costs and income tax expense, divided by borrowing costs (interest on long-term debt; interest on short-term borrowings and other; long-term debt prepayment premium); and adding back capitalized interest.

(6)EBITDA — excluding restructuring and other costs interest coverage is defined as EBITDA — excluding restructuring and other costs divided by net interest cost. This measure is substantially similar to the coverage ratio covenant in our credit facilities.

(7)Adjusted net earnings attributable to Common Shares is calculated as follows:

12-month periods ended September 30	2016			2015
Net income attributable to Common Shares	$	1,403		$	1,433
Gain from exchange of wireless spectrum licences, after income taxes	(13		)	—
Gain and net equity income related to real estate redevelopment project, after income taxes	(11		)	—
Add back business acquisition-related provisions	10			—
Income tax-related adjustments	(11		)	6
Adjusted net earnings attributable to Common Shares	$	1,378		$	1,439

(8)Our target guideline for the dividend payout ratio is 65%—75% of sustainable earnings on a prospective basis; we estimate that we will be within our target guideline on a prospective basis.

Net debt to EBITDA — excluding restructuring and other costs was 2.62 times as at September 30, 2016, a decrease from one year earlier. The increase in net debt, primarily due to the purchase of spectrum licences, was offset by growth in EBITDA — excluding restructuring and other costs. The earnings coverage ratio for the twelve-month period ended September 30, 2016, was 4.6 times, down from 5.1 times one year earlier. Higher borrowing costs reduced the ratio by 0.4 and lower income before borrowing costs and income taxes reduced the ratio by 0.1. The EBITDA — excluding restructuring and other costs interest coverage ratio for the twelve-month period ended September 30, 2016, was 8.5 times, down from 9.8 times one year earlier. Growth in EBITDA — excluding restructuring and other costs increased the ratio by 0.5, while an increase in net interest costs reduced the ratio by 1.8.

4financial instruments

(a)Credit risk

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

As at (millions)	September 30, 2016		December 31, 2015
Cash and temporary investments, net	$	410	$	223
Accounts receivable	1,422		1,428
Derivative assets	18		40
	$	1,850	$	1,691

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.

10

notes to condensed interim consolidated financial statements (unaudited)

Accounts receivable

Credit risk associated with accounts receivable is inherently managed by our large and diverse customer base, which includes substantially all consumer and business sectors in Canada. We follow a program of credit evaluations of customers and limit the amount of credit extended when deemed necessary.

The following table presents an analysis of the age of customer accounts receivable for which an allowance has not been made as at the dates of the Condensed interim consolidated statements of financial position. As at September 30, 2016, the weighted average age of customer accounts receivable was 26 days (December 31, 2015 — 28 days) and the weighted average age of past-due customer accounts receivable was 66 days (December 31, 2015 — 62 days). Any late payment charges are levied, at an industry-based market or negotiated rate, on outstanding non-current customer account balances.

As at (millions)	Note	September 30,  2016			December 31,  2015
Customer accounts receivable, net of allowance for doubtful accounts
Less than 30 days past billing date		$	857		$	823
30-60 days past billing date		142			208
61-90 days past billing date		23			52
More than 90 days past billing date		69			64
		$	1,091		$	1,147
Customer accounts receivable	25(a)	$	1,144		$	1,199
Allowance for doubtful accounts		(53		)	(52		)
		$	1,091		$	1,147

We maintain allowances for potential credit losses related to doubtful accounts. Current economic conditions, historical information, reasons for the accounts being past due and line of business from which the customer accounts receivable arose are all considered when determining whether to make allowances for past-due accounts. The same factors are considered when determining whether to write off amounts charged to the allowance for doubtful accounts against the customer accounts receivable. The doubtful accounts expense is calculated on a specific-identification basis for customer accounts receivable over a specific balance threshold and on a statistically derived allowance basis for the remainder. No customer accounts receivable are written off directly to the doubtful accounts expense.

The following table presents a summary of the activity related to our allowance for doubtful accounts.

	Three months						Nine months
Periods ended September 30 (millions)	2016			2015			2016			2015
Balance, beginning of period	$	52		$	50		$	52		$	44
Additions (doubtful accounts expense)	15			10			44			39
Net use	(14		)	(10		)	(43		)	(33		)
Balance, end of period	$	53		$	50		$	53		$	50

Derivative assets (and derivative liabilities)

Counterparties to our share-based compensation cash-settled equity forward agreements and foreign exchange derivatives are major financial institutions that have been accorded investment grade ratings by a primary credit rating agency. The dollar amount of credit exposure under contracts with any one financial institution is limited and counterparties’ credit ratings are monitored. We do not give or receive collateral on swap agreements and hedging items due to our credit rating and those of our counterparties. While we are exposed to potential credit losses due to the possible non-performance of our counterparties, we consider this risk remote. Our derivative liabilities do not have credit risk-related contingent features.

(b)Liquidity risk

As a component of our capital structure financial policies, discussed further in Note 3, we manage liquidity risk by:

·maintaining a daily cash pooling process that enables us to manage our available liquidity and our liquidity requirements according to our actual needs;

·maintaining bilateral bank facilities (Note 19) and syndicated credit facilities (Note 21(d)-(e));

·maintaining an agreement to sell trade receivables to an arm’s-length securitization trust (Note 19);

·maintaining a commercial paper program (Note 21(c));

·maintaining an in-effect shelf prospectus;

·continuously monitoring forecast and actual cash flows; and

·managing maturity profiles of financial assets and financial liabilities.

Our debt maturities in future years are as disclosed in Note 21(f). As at September 30, 2016, we could offer $2.2 billion of debt or equity securities pursuant to a shelf prospectus that is in effect until April 2018 (December 31, 2015 — $250 million

11

notes to condensed interim consolidated financial statements (unaudited)

until December 2016). We believe that our investment grade credit ratings contribute to reasonable access to capital markets.

We closely match the contractual maturities of our derivative financial liabilities with those of the risk exposures they are being used to manage.

The expected maturities of our undiscounted financial liabilities do not differ significantly from the contractual maturities, other than as noted below. The contractual maturities of our undiscounted financial liabilities, including interest thereon (where applicable), are as set out in the following tables:

	Non-derivative								Derivative
As at	Non-interest				Construction		Composite long-term debt
September 30,	bearing				credit facilities		Long-term		Currency swap agreement							Currency swap agreement
2016	financial		Short-term		commitment		debt 1		amounts to be exchanged 3							amounts to be exchanged
(millions)	liabilities		borrowings 1		(Note 18) 2		(Note 21)		(Receive)			Pay		Other		(Receive)			Pay		Total
2016	$	1,630	$	100	$	98	$	261	$	(137	)	$	138	$	—	$	(120	)	$	123	$	2,093
2017	412		—		—		1,218		(20		)	21		2		(343		)	344		1,634
2018	11		—		—		750		(22		)	23		—		—			—		762
2019	10		—		—		1,498		(22		)	23		—		—			—		1,509
2020	9		—		—		1,447		(22		)	23		—		—			—		1,457
Thereafter	21		—		—		13,292		(930		)	944		—		—			—		13,327
Total	$	2,093	$	100	$	98	$	18,466	$	(1,153	)	$	1,172	$	2	$	(463	)	$	467	$	20,782
							Total (Note 21(f))					$	18,485

(1)Cash outflows in respect of interest payments on our short-term borrowings, commercial paper and amounts drawn under our credit facilities (if any) have been calculated based upon the interest rates in effect as at September 30, 2016.

(2)The drawdowns on the construction credit facilities are expected to occur as construction progresses through 2018.

(3)The amounts included in undiscounted non-derivative long-term debt in respect of U.S. dollar denominated long-term debt, and the corresponding amounts in the long-term debt currency swaps receive column, have been determined based upon the currency exchange rates in effect as at September 30, 2016. The hedged U.S. dollar denominated long-term debt contractual amounts at maturity, in effect, are reflected in the long-term debt currency swaps pay column as gross cash flows are exchanged pursuant to the currency swap agreements.

	Non-derivative								Derivative
As at	Non-interest				Construction		Composite long-term debt
December 31,	bearing				credit facilities		Long-term		Currency swap agreement							Currency swap agreement
2015	financial		Short-term		commitment		debt 1		amounts to be exchanged 3							amounts to be exchanged
(millions)	liabilities		borrowings 1		(Note 18) 2		(Note 21)		(Receive)			Pay		Other		(Receive)			Pay		Total
2016	$	1,895	$	101	$	131	$	1,353	$	(256	)	$	242	$	4	$	(415	)	$	390	$	3,445
2017	28		—		—		1,174		—			—		9		—			—		1,211
2018	8		—		—		705		—			—		—		—			—		713
2019	6		—		—		1,453		—			—		—		—			—		1,459
2020	6		—		—		1,402		—			—		—		—			—		1,408
Thereafter	6		—		—		12,057		—			—		—		—			—		12,063
Total	$	1,949	$	101	$	131	$	18,144	$	(256	)	$	242	$	13	$	(415	)	$	390	$	20,299
							Total					$	18,130

(1)Cash outflows in respect of interest payments on our short-term borrowings, commercial paper and amounts drawn under our credit facilities (if any) have been calculated based upon the interest rates in effect as at December 31, 2015.

(2)The drawdowns on the construction credit facilities are expected to occur as construction progresses through 2018.

(3)The amounts included in undiscounted non-derivative long-term debt in respect of U.S. dollar denominated long-term debt, and the corresponding amounts in the long-term debt currency swaps receive column, have been determined based upon the currency exchange rates in effect as at December 31, 2015. The hedged U.S. dollar denominated long-term debt contractual amounts at maturity, in effect, are reflected in the long-term debt currency swaps pay column as gross cash flows are exchanged pursuant to the currency swap agreements.

(c)Currency risk

Our 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 we have a significant exposure.

Our 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, commitments and commercial paper.

As discussed further in Note 21(b), we are also exposed to currency risks in that the fair value or future cash flows of our U.S. Dollar Notes could fluctuate because of changes in foreign exchange rates. A currency hedging relationship has been established for the related semi-annual interest payments and principal payment at maturity.

(d)Market risk

Net income and other comprehensive income for the nine-month periods ended September 30, 2016 and 2015, could have varied if the Canadian dollar: U.S. dollar exchange rate and our Common Share price varied by reasonably possible amounts from their actual statement of financial position date amounts.

12

notes to condensed interim consolidated financial statements (unaudited)

The sensitivity analysis of our exposure to currency risk at the reporting date has been determined based upon a hypothetical change taking place at the relevant statement of financial position date. 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 our 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 notional number of Common Shares at the statement of financial position date, which includes those in the cash-settled equity swap agreements, has been used in the calculations.

Income tax expense, which is reflected net in the sensitivity analysis, reflects the applicable statutory income tax rates for the reporting periods.

Nine-month periods ended September 30	Net income						Other comprehensive income						Comprehensive income
(increase (decrease) in millions)	2016			2015			2016			2015			2016			2015
Reasonably possible changes in market risks 1
10% change in Cdn.$: U.S.$ exchange rate
Canadian dollar appreciates	$	(2	)	$	(24	)	$	(5	)	$	(7	)	$	(7	)	$	(31	)
Canadian dollar depreciates	$	2		$	23		$	9		$	7		$	11		$	30
25% 2 change in Common Share price 3
Price increases	$	(14	)	$	(10	)	$	17		$	13		$	3		$	3
Price decreases	$	10		$	10		$	(17	)	$	(13	)	$	(7	)	$	(3	)

(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 factors; in reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.

The sensitivity analysis assumes that we would realize the changes in exchange rates; in reality, the competitive marketplace in which we operate would have an effect on this assumption.

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

(2)To facilitate ongoing comparison of sensitivities, a constant variance of approximate magnitude has been used. Reflecting a twelve-month data period and calculated on a monthly basis, the volatility of our Common Share price as at September 30, 2016, was 14.1% (2015 — 10.8%).

(3)The hypothetical effects of changes in the price of our Common Shares are restricted to those which would arise from our share-based compensation awards that are accounted for as liability instruments and the associated cash-settled equity swap agreements.

(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 values due to the immediate or short-term maturity of these financial instruments. The fair values are determined directly by reference to quoted market prices in active markets.

The carrying values of our investments accounted for using the cost method do not exceed their fair values. The fair values of our investments accounted for as available-for-sale are based on quoted market prices in active markets or other clear and objective evidence of fair value.

The fair value of our long-term debt is based on quoted market prices in active markets.

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

The fair values of the derivative financial instruments we use to manage our 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 on our Common Share price as at the statement of financial position dates).

The financial instruments that we measure at fair value on a recurring basis in periods subsequent to initial recognition and the level within the fair value hierarchy at which they are measured are as set out in the following table.

13

notes to condensed interim consolidated financial statements (unaudited)

					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)	Sept. 30,  2016		Dec. 31,  2015		Sept. 30,  2016		Dec. 31,  2015		Sept. 30,  2016		Dec. 31,  2015		Sept. 30,  2016		Dec. 31,  2015
Assets
Foreign exchange derivatives	$	4	$	40	$	—	$	—	$	4	$	40	$	—	$	—
Share-based compensation derivatives	14		—		—		—		14		—		—		—
Available-for-sale portfolio investments	33		30		1		2		32		28		—		—
	$	51	$	70	$	1	$	2	$	50	$	68	$	—	$	—
Liabilities
Foreign exchange derivatives	$	35	$	—	$	—	$	—	$	35	$	—	$	—	$	—
Share-based compensation derivatives	2		11		—		—		2		11		—		—
	$	37	$	11	$	—	$	—	$	37	$	11	$	—	$	—

Derivative

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

			September 30, 2016				December 31, 2015
As at (millions)	Designation	Maximum  maturity  date	Notional  amount		Fair value  and carrying  value		Notional  amount		Fair value  and carrying  value
Current Assets 1
Derivatives used to manage
Currency risks arising from U.S. dollar denominated purchases	HFT 2	2017	$	8	$	1	$	115	$	15
Currency risks arising from U.S. dollar denominated purchases	HFH 3	2017	$	187	3		$	161	11
Currency risks arising from U.S. dollar revenues	HFT 2	2016	$	—	—		$	62	—
Changes in share-based compensation costs (Note 13(b))	HFH 3	2016	$	71	7		$	—	—
Currency risks arising from U.S. dollar denominated long-term debt (Note 21(b)-(c))	HFH 3	2016	$	33	—		$	243	14
					$	11			$	40
Other Long-Term Assets 1
Derivatives used to manage
Changes in share-based compensation costs (Note 13(b))	HFH 3	2018	$	75	$	7	$	—	$	—
Current Liabilities 1
Derivatives used to manage
Currency risks arising from U.S. dollar denominated purchases	HFT 2	2016	$	—	$	—	$	31	$	—
Currency risks arising from U.S. dollar denominated purchases	HFH 3	2017	$	154	8		$	11	—
Currency risks arising from U.S. dollar revenues	HFT 2	2017	$	118	3		$	8	—
Changes in share-based compensation costs (Note 13(b))	HFH 3	2016	$	3	—		$	71	2
Currency risks arising from U.S. dollar denominated long-term debt (Note 21(b)-(c))	HFH 3	2016	$	104	1		$	—	—
					$	12			$	2
Other Long-Term Liabilities 1
Derivatives used to manage
Changes in share-based compensation costs (Note 13(b))	HFH 3	2017	$	65	$	2	$	68	$	9
Currency risk arising from U.S. dollar denominated long-term debt (Note 21(b)-(c))	HFH 3	2027	$	1,035	23		$	—	—
					$	25			$	9

(1)Derivative financial assets and liabilities are not set off.

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

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

14

notes to condensed interim consolidated financial statements (unaudited)

Non-derivative

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

	September 30, 2016				December 31, 2015
As at (millions)	Carrying value		Fair value		Carrying value		Fair value
Long-term debt (Note 21)	$	12,454	$	13,511	$	12,038	$	12,575

(f)Recognition of derivative gains and losses

The following table sets out the gains and losses, excluding income tax effects, on derivative instruments that are classified as cash flow hedging items and their location within the Condensed interim 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 to income (effective portion) (Note 10)
	(effective portion) (Note 10)							Amount
(millions)	2016			2015			Location	2016			2015
THREE-MONTH PERIODS ENDED SEPTEMBER 30
Derivatives used to manage:
Currency risks arising from U.S. dollar denominated purchases	$	5		$	5		Goods and services purchased	$	(4	)	$	—
Changes in share-based compensation costs (Note 13(b))	9			(6		)	Employee benefits expense	5			(1		)
Currency risks arising from U.S. dollar denominated long-term debt (Note 21(b)-(c))	(8		)	32			Financing costs	10			32
	$	6		$	31			$	11		$	31
NINE-MONTH PERIODS ENDED SEPTEMBER 30
Derivatives used to manage:
Currency risks arising from U.S. dollar denominated purchases	$	(19	)	$	6		Goods and services purchased	$	(6	)	$	—
Changes in share-based compensation costs (Note 13(b))	24			(1		)	Employee benefits expense	11			7
Currency risks arising from U.S. dollar denominated long-term debt (Note 21(b)-(c))	(60		)	32			Financing costs	(42		)	32
	$	(55	)	$	37			$	(37	)	$	39

The following table sets out the gains and losses arising from derivative instruments that are classified as held for trading and that are not designated as being in a hedging relationship, and their location within the Condensed interim consolidated statements of income and other comprehensive income.

		Gain (loss) recognized in income on derivatives
		Three months					Nine months
Periods ended September 30 (millions)	Location	2016			2015		2016			2015
Derivatives used to manage currency risks	Financing costs	$	(1	)	$	10	$	(1	)	$	19

5segmented information

General

The operating segments that are regularly reported to our Chief Executive Officer (our chief operating decision-maker) are wireless and wireline. Operating segments are components of an entity that engage in business activities from which they earn revenues and incur expenses (including revenues and expenses related to transactions with the other component(s)), the operating results of which are regularly reviewed by a chief operating decision-maker to make resource allocation decisions and to assess performance.

As we do not currently aggregate operating segments, our reportable segments are also wireless and wireline. The wireless segment includes network revenues (data and voice) and equipment sales. The wireline segment includes data revenues (which includes Internet protocol; television; hosting, managed information technology and cloud-based services; business process outsourcing; and certain healthcare solutions), voice revenues, and other telecommunications services revenues, 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.

The following segmented information is regularly reported to our chief operating decision-maker.

15

notes to condensed interim consolidated financial statements (unaudited)

Three-month periods ended	Wireless				Wireline				Eliminations						Consolidated
September 30 (millions)	2016		2015		2016		2015		2016			2015			2016		2015
Operating revenues
External revenue	$	1,818	$	1,767	$	1,420	$	1,388	$	—		$	—		$	3,238	$	3,155
Intersegment revenue	15		16		48		44		(63		)	(60		)	—		—
	$	1,833	$	1,783	$	1,468	$	1,432	$	(63	)	$	(60	)	$	3,238	$	3,155
EBITDA 1	$	759	$	715	$	372	$	353	$	—		$	—		$	1,131	$	1,068
CAPEX, excluding spectrum licences 2	$	295	$	209	$	492	$	414	$	—		$	—		$	787	$	623
									Operating revenues (above)						$	3,238	$	3,155
									Goods and services purchased						1,426		1,394
									Employee benefits expense						681		693
									EBITDA (above)						1,131		1,068
									Depreciation						388		361
									Amortization						127		110
									Operating income						616		597
									Financing costs						129		106
									Income before income taxes						$	487	$	491

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

(2)Total capital expenditures (CAPEX); see Note 25(b) for a reconciliation of capital expenditures, excluding spectrum licences to cash payments for capital assets, excluding spectrum licences reported in the Condensed interim consolidated statements of cash flows.

Nine-month periods ended	Wireless				Wireline				Eliminations						Consolidated
September 30 (millions)	2016		2015		2016		2015		2016			2015			2016		2015
Operating revenues
External revenue	$	5,274	$	5,161	$	4,220	$	4,124	$	—		$	—		$	9,494	$	9,285
Intersegment revenue	43		44		143		130		(186		)	(174		)	—		—
	$	5,317	$	5,205	$	4,363	$	4,254	$	(186	)	$	(174	)	$	9,494	$	9,285
EBITDA 1	$	2,308	$	2,178	$	1,152	$	1,106	$	—		$	—		$	3,460	$	3,284
CAPEX, excluding spectrum licences 2	$	733	$	684	$	1,441	$	1,238	$	—		$	—		$	2,174	$	1,922
									Operating revenues (above)						$	9,494	$	9,285
									Goods and services purchased						4,057		4,050
									Employee benefits expense						1,977		1,951
									EBITDA (above)						3,460		3,284
									Depreciation						1,158		1,069
									Amortization						356		322
									Operating income						1,946		1,893
									Financing costs						386		333
									Income before income taxes						$	1,560	$	1,560

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

(2)Total capital expenditures (CAPEX); see Note 25(b) for a reconciliation of capital expenditures, excluding spectrum licences to cash payments for capital assets, excluding spectrum licences reported in the Condensed interim consolidated statements of cash flows.

Geographical information

We attribute revenues from external customers to individual countries on the basis of the location where the goods and/or services are provided. We do not have material revenues that we attribute to countries other than Canada (our country of domicile), nor do we have material amounts of property, plant, equipment, intangible assets and/or goodwill located outside of Canada.

16

notes to condensed interim consolidated financial statements (unaudited)

6other operating income

		Three months						Nine months
Periods ended September 30 (millions)	Note	2016			2015			2016		2015
Government assistance, including deferral account amortization		$	10		$	14		$	28	$	38
Investment income (loss)		10			(2		)	19		(4		)
Interest income	18(c)	—			—			1		2
Gain (loss) on disposal of assets and other		(7		)	2			9		5
		$	13		$	14		$	57	$	41

7employee benefits expense

		Three months						Nine months
Periods ended September 30 (millions)	Note	2016			2015			2016			2015
Employee benefits expense — gross
Wages and salaries		$	649		$	653		$	1,907		$	1,873
Share-based compensation 1	13	32			35			87			99
Pensions — defined benefit	14(a)	23			27			67			81
Pensions — defined contribution	14(b)	24			24			68			69
Restructuring costs 1	15(b)	37			34			92			68
Other		35			38			113			115
		800			811			2,334			2,305
Capitalized internal labour costs
Property, plant and equipment		(79		)	(82		)	(236		)	(241		)
Intangible assets subject to amortization		(40		)	(36		)	(121		)	(113		)
		(119		)	(118		)	(357		)	(354		)
		$	681		$	693		$	1,977		$	1,951

(1)For the three-month and nine-month periods ended September 30, 2016, $2 (2015 — $11) and $4 (2015 — $11), respectively, of share-based compensation was included in restructuring costs.

8financing costs

		Three months						Nine months
Periods ended September 30 (millions)	Note	2016			2015			2016			2015
Interest expense
Interest on long-term debt — gross		$	133		$	128		$	400		$	368
Capitalized long-term debt interest 1		(12		)	(18		)	(40		)	(27		)
Interest on long-term debt — net		121			110			360			341
Interest on short-term borrowings and other		1			2			3			5
Interest accretion on provisions	20	3			3			9			9
		125			115			372			355
Employee defined benefit plans net interest	14(a)	1			7			3			20
Foreign exchange		3			(16		)	12			(21		)
		129			106			387			354
Interest income
Interest on income tax refunds		—			—			—			(20		)
Other		—			—			(1		)	(1		)
		—			—			(1		)	(21		)
		$	129		$	106		$	386		$	333

(1)Long-term debt interest at a composite rate of 3.31% was capitalized to intangible assets with indefinite lives.

17

notes to condensed interim consolidated financial statements (unaudited)

9income taxes

	Three months						Nine months
Periods ended September 30 (millions)	2016			2015			2016			2015
Current income tax expense
For current reporting period	$	108		$	118		$	388		$	462
Adjustments recognized in the current period for income taxes of prior periods	(23		)	(23		)	(25		)	(100		)
	85			95			363			362
Deferred income tax expense (recovery)
Arising from the origination and reversal of temporary differences	27			12			25			(48		)
Revaluation of deferred income tax liability to reflect future statutory income tax rates	—			—			1			48
Adjustments recognized in the current period for income taxes of prior periods	20			19			22			77
	47			31			48			77
	$	132		$	126		$	411		$	439

Our income tax expense and effective income tax rate differs from that calculated by applying the applicable statutory rates for the following reasons:

Three-month periods ended September 30 ($ in millions)	2016					2015
Income taxes computed at applicable statutory rates	$	129		26.6	%	$	130		26.5	%
Revaluation of deferred income tax liability to reflect future income tax rates	—			—		—			—
Adjustments recognized in the current period for income taxes of prior periods	(3		)	(0.6	)	(4		)	(0.8	)
Other	6			1.1		—			—
Income tax expense per Condensed interim consolidated statements of income and other comprehensive income	$	132		27.1	%	$	126		25.7	%

Nine-month periods ended September 30 ($ in millions)	2016					2015
Income taxes computed at applicable statutory rates	$	414		26.5	%	$	412		26.4	%
Revaluation of deferred income tax liability to reflect future income tax rates	1			0.1		48			3.1
Adjustments recognized in the current period for income taxes of prior periods	(3		)	(0.2	)	(23		)	(1.5	)
Other	(1		)	(0.1	)	2			0.1
Income tax expense per Condensed interim consolidated statements of income and other comprehensive income	$	411		26.3	%	$	439		28.1	%

10other comprehensive income

	Items that may subsequently be reclassified to income															Item never reclassified to income
	Change in unrealized fair value of derivatives designated as cash flow hedges in current period (Note 4(f))								Cumulative		Change in unrealized fair
(millions)	Gains (losses) arising		Prior period (gains) losses transferred to net income			Total			foreign currency translation adjustment		value of available-for- sale financial assets		Accumulated other comp. income			Employee defined benefit plan re-measurements			Other comp. income
THREE-MONTH PERIODS ENDED SEPTEMBER 30
Accumulated balance as at July 1, 2015						$	2		$	23	$	13	$	38
Other comprehensive income (loss)
Amount arising	$	31	$	(31	)	—			12		1		13			$	(212	)	$	(199	)
Income taxes	$	2	$	(3	)	(1		)	—		—		(1		)	(56		)	(57		)
Net						1			12		1		14			$	(156	)	$	(142	)
Accumulated balance as at September 30, 2015						$	3		$	35	$	14	$	52
Accumulated balance as at July 1, 2016						$	(9	)	$	45	$	13	$	49
Other comprehensive income (loss)
Amount arising	$	6	$	(11	)	(5		)	2		2		(1		)	$	204		$	203
Income taxes	$	3	$	(4	)	(1		)	—		—		(1		)	54			53
Net						(4		)	2		2		—			$	150		$	150
Accumulated balance as at September 30, 2016						$	(13	)	$	47	$	15	$	49

18

notes to condensed interim consolidated financial statements (unaudited)

	Items that may subsequently be reclassified to income																	Item never reclassified  to income
	Change in unrealized fair value of
	derivatives designated as cash flow											Change in
	hedges in current period (Note 4(f))									Cumulative		unrealized fair
(millions)	Gains (losses) arising			Prior period  (gains) losses transferred to net income			Total			foreign  currency  translation  adjustment		value of available-for- sale financial  assets			Accumulated other  comp. income			Employee defined benefit plan re-measurements			Other  comp. income
NINE-MONTH PERIODS ENDED SEPTEMBER 30
Accumulated balance as at January 1, 2015							$	4		$	18	$	16		$	38
Other comprehensive income (loss)
Amount arising	$	37		$	(39	)	(2		)	17		(2		)	13			$	(65	)	$	(52	)
Income taxes	$	3		$	(4	)	(1		)	—		—			(1		)	(24		)	(25		)
Net							(1		)	17		(2		)	14			$	(41	)	$	(27	)
Accumulated balance as at September 30, 2015							$	3		$	35	$	14		$	52
Accumulated balance as at January 1, 2016							$	—		$	43	$	16		$	59
Other comprehensive income (loss)
Amount arising	$	(55	)	$	37		(18		)	4		(1		)	(15		)	$	228		$	213
Income taxes	$	(14	)	$	9		(5		)	—		—			(5		)	61			56
Net							(13		)	4		(1		)	(10		)	$	167		$	157
Accumulated balance as at September 30, 2016							$	(13	)	$	47	$	15		$	49
Attributable to:
Common Shares															$	48
Non-controlling interest															1
															$	49

As at September 30, 2016, our estimate of the net amount of existing gains (losses) arising from the unrealized fair value of derivatives designated as cash flow hedges that are reported in accumulated other comprehensive income and are expected to be reclassified to net income in the next twelve months, excluding income tax effects, is $NIL.

11per share amounts

Basic net income per Common Share is calculated by dividing net income attributable to Common Shares by the total weighted average number of Common Shares outstanding during the period. Diluted net income per Common 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 was equal to diluted net income for all periods presented.

	Three months		Nine months
Periods ended September 30 (millions)	2016	2015	2016	2015
Basic total weighted average number of Common Shares outstanding	592	601	593	605
Effect of dilutive securities Share option awards	—	2	—	1
Diluted total weighted average number of Common Shares outstanding	592	603	593	606

For the three-month and nine-month periods ended September 30, 2016 and 2015, no outstanding share option awards were excluded in the computation of diluted net income per Common Share.

19

notes to condensed interim consolidated financial statements (unaudited)

12dividends per share

(a)Dividends declared

Nine-month periods ended	2016						2015
September 30 (millions except per share amounts)	Declared			Paid to			Declared			Paid to
Common Share dividends	Effective	Per share		shareholders	Total		Effective	Per share		shareholders	Total
Quarter 1 dividend	Mar. 11, 2016	$	0.44	Apr. 1, 2016	$	261	Mar. 11, 2015	$	0.40	Apr. 1, 2015	$	243
Quarter 2 dividend	Jun. 10, 2016	0.46		Jul. 4, 2016	274		Jun. 10, 2015	0.42		Jul. 2, 2015	253
Quarter 3 dividend	Sep. 9, 2016	0.46		Oct. 3, 2016	272		Sep. 10, 2015	0.42		Oct. 1, 2015	252
		$	1.36		$	807		$	1.24		$	748

On November 3, 2016, the Board of Directors declared a quarterly dividend of $0.48 per share on our issued and outstanding Common Shares payable on January 3, 2017, to holders of record at the close of business on December 9, 2016. The final amount of the dividend payment depends upon the number of Common Shares issued and outstanding at the close of business on December 9, 2016.

(b)Dividend Reinvestment and Share Purchase Plan

We have a Dividend Reinvestment and Share Purchase Plan under which eligible holders of Common Shares may acquire additional Common Shares by reinvesting dividends and by making additional optional cash payments to the trustee. Under this Plan, we have the option of offering Common Shares from Treasury or having the trustee acquire Common Shares in the stock market.

We may, at our discretion, offer Common Shares at a discount of up to 5% from the market price under the Plan. We opted to have the trustee acquire the Common Shares in the stock market with no discount offered. In respect of Common Share dividends declared during the three-month and nine-month periods ended September 30, 2016, $14 million (2015 — $16 million) and $44 million (2015 — $43 million), respectively, was to be reinvested in Common Shares.

13share-based compensation

(a)Details of share-based compensation expense

Reflected in the Condensed interim consolidated statements of income and other comprehensive income as Employee benefits expense and in the Condensed interim consolidated statements of cash flows are the following share-based compensation amounts:

	2016							2015
Three-month periods ended September 30 (millions)	Employee  benefits  expense		Associated  operating  cash  outflows			Statement  of cash  flows  adjustment		Employee  benefits  expense		Associated  operating  cash  outflows			Statement  of cash  flows  adjustment
Restricted stock units 1	$	25	$	2		$	27	$	37	$	1		$	38
Employee share purchase plan	9		(9		)	—		9		(9		)	—
Share option awards	—		—			—		—		—			—
	$	34	$	(7	)	$	27	$	46	$	(8	)	$	38

(1)The expense arising from restricted stock units was net of cash-settled equity swap agreement effects (see Note 4(f)). Within employee benefits expense (see Note 7), restricted stock unit expense of $23 (2015 — $26) is presented as share-based compensation and the balance is included in restructuring costs.

	2016							2015
Nine-month periods ended September 30 (millions)	Employee  benefits  expense		Associated  operating  cash  outflows			Statement  of cash  flows  adjustment		Employee  benefits  expense		Associated  operating  cash  outflows			Statement  of cash  flows  adjustment
Restricted stock units 1	$	63	$	2		$	65	$	81	$	(42	)	$	39
Employee share purchase plan	28		(28		)	—		28		(28		)	—
Share option awards	—		—			—		1		—			1
	$	91	$	(26	)	$	65	$	110	$	(70	)	$	40

(1)The expense arising from restricted stock units was net of cash-settled equity swap agreement effects (see Note 4(f)). Within employee benefits expense (see Note 7), restricted stock unit expense of $59 (2015 — $70) is presented as share-based compensation and the balance is included in restructuring costs.

20

notes to condensed interim consolidated financial statements (unaudited)

For the three-month and nine-month periods ended September 30, 2016, the associated operating cash outflows in respect of restricted stock units are net of cash inflows arising from the cash-settled equity swap agreements of $2 million (2015 — $2 million) and $6 million (2015 — $19 million), respectively. For the three-month and nine-month periods ended September 30, 2016, the income tax benefit arising from share-based compensation was $9 million (2015 — $12 million) and $24 million (2015 — $29 million), respectively.

(b)Restricted stock units

We use restricted stock units as a form of retention and incentive compensation. Each restricted stock unit is nominally equal in value to one Common Share and is nominally entitled to the dividends that would arise thereon if it were an issued and outstanding Common 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 Common Shares at the grant date. The restricted stock units generally become payable when vesting is completed and 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 majority of restricted stock units outstanding have cliff vesting. The associated liability is normally cash-settled.

We also award restricted stock units that largely have the same features as our general restricted stock units, but have a variable payout (0% — 200%) depending upon the achievement of our total customer connections performance condition (with a weighting of 25%) and the total shareholder return on our Common Shares relative to an international peer group of telecommunications companies (with a weighting of 75%). The grant-date fair value of the notional subset of our restricted stock units affected by the total customer connections performance condition equals the fair market value of the corresponding Common Shares at the grant date and thus the notional subset has been included in the presentation of our restricted stock units with only service conditions. The recurring estimate, which reflects a variable payout, of the fair value of the notional subset of our restricted stock units affected by the relative total shareholder return performance element is determined using a Monte Carlo simulation.

The following table presents a summary of our outstanding non-vested restricted stock units.

Number of non-vested restricted stock units as at	September 30,  2016	December 31,  2015
Restricted stock units without market performance conditions
Restricted stock units with only service conditions	5,101,555	3,429,008
Notional subset affected by total customer connections performance condition	198,085	135,404
	5,299,640	3,564,412
Restricted stock units with market performance conditions
Notional subset affected by relative total shareholder return performance condition	594,254	406,243
	5,893,894	3,970,655

The following table presents a summary of the activity related to our restricted stock units without market performance conditions.

	Three months						Nine months
	Number of restricted  stock units 1				Weighted  average		Number of restricted  stock units 1				Weighted  average
					grant-date						grant-date
Periods ended September 30, 2016	Non-vested		Vested		fair value		Non-vested		Vested		fair value
Outstanding, beginning of period
Non-vested	5,267,655		—		$	38.98	3,564,412		—		$	41.42
Vested	—		9,587		$	40.80	—		29,008		$	40.00
Issued
Initial award	23,284		—		$	42.97	1,909,972		—		$	39.70
In lieu of dividends	57,224		92		$	42.09	153,295		290		$	40.99
Vested	(10,876	)	10,876		$	40.23	(85,064	)	85,064		$	41.15
Settled in cash	—		(12,049	)	$	40.37	—		(105,856	)	$	40.85
Forfeited and cancelled	(37,647	)	—		$	28.26	(242,975	)	—		$	34.03
Outstanding, end of period
Non-vested	5,299,640		—		$	40.81	5,299,640		—		$	40.81
Vested	—		8,506		$	41.21	—		8,506		$	41.21

(1)Excluding the notional subset of restricted stock units affected by the relative total shareholder return performance element.

21

notes to condensed interim consolidated financial statements (unaudited)

With respect to certain issuances of restricted stock units, we have entered into cash-settled equity forward agreements that fix our cost; that information, as well as a schedule of our non-vested restricted stock units outstanding as at September 30, 2016, is set out in the following table.

Vesting in years ending December 31	Number of  fixed-cost  restricted  stock units	Our fixed cost  per restricted  stock unit		Number of  variable-cost  restricted stock units	Total number of  non-vested  restricted stock  units 1
2016	1,798,900	$	41.02	116,235	1,915,135
2017	1,610,984	$	45.35	56,361	1,667,345
2018	1,552,377	$	40.77	164,783	1,717,160
	4,962,261			337,379	5,299,640

(1)   Excluding the notional subset of restricted stock units affected by the relative total shareholder return performance element.

(c)Employee share purchase plan

	Three months				Nine months
Periods ended September 30 (millions)	2016		2015		2016		2015
Employee contributions	$	26	$	22	$	80	$	79
Employer contributions	9		9		28		28
	$	35	$	31	$	108	$	107

(d)Share option awards

The following table presents a summary of the activity related to our share option plan.

	Three months				Nine months
Period ended September 30, 2016	Number of  share  options		Weighted  average  share option  price		Number of  share  options		Weighted  average  share option  price
Outstanding, beginning of period	1,809,148		$	23.78	2,375,596		$	22.96
Exercised 1	(294,573	)	$	20.66	(833,510	)	$	20.54
Forfeited	(424	)	$	16.31	(8,826	)	$	23.07
Expired	—		$	—	(19,109	)	$	15.29
Outstanding, end of period	1,514,151		$	24.39	1,514,151		$	24.39

(1)The total intrinsic value of share option awards exercised for the three-month and nine-month periods ended September 30, 2016, was $7 million (reflecting a weighted average price at the dates of exercise of $43.06 per share) and $17 million (reflecting a weighted average price at the dates of exercise of $40.89 per share), respectively. The difference between the number of share options exercised and the number of Common Shares issued (as reflected in the Condensed interim consolidated statements of changes in owners’ equity) is the effect of our choosing to settle share option award exercises using the net-equity settlement feature.

The following is a life and exercise price stratification of our outstanding share options, all of which are vested, as at September 30, 2016.

Options outstanding and exercisable

									Weighted
									average
							Total		price
Range of option prices
Low	$	16.31	$	21.42	$	28.56	$	16.31
High	$	18.92	$	25.64	$	31.69	$	31.69
Year of expiry and number of options
2017	332,302		8,180		—		340,482		$	16.50
2018	—		501,807		—		501,807		$	23.29
2019	—		—		671,862		671,862		$	29.20
	332,302		509,987		671,862		1,514,151
Weighted average remaining contractual life (years)	0.4		1.4		2.6		1.7
Weighted average price	$	16.37	$	23.27	$	29.20	$	24.39
Aggregate intrinsic value 1 (millions)	$	9	$	10	$	10	$	29

(1)The aggregate intrinsic value is calculated based on the September 30, 2016, price of $43.29  per Common Share.

22

notes to condensed interim consolidated financial statements (unaudited)

14employee future benefits

(a)Defined benefit pension plans — expense

Our defined benefit pension plan expense (recovery) was as follows:

	2016											2015
Three-month periods ended September 30 (millions)	Employee benefits expense		Financing costs			Other comp. income						Employee benefits expense		Financing costs			Other comp. income
Recognized in	(Note 7)		(Note 8)			(Note 10)			Total			(Note 7)		(Note 8)			(Note 10)			Total
Current service cost	$	21	$	—		$	—		$	21		$	26	$	—		$	—		$	26
Past service costs	—		—			—			—			—		—			—			—
Net interest; return on plan assets
Interest expense arising from accrued benefit obligations	—		85			—			85			—		87			—			87
Return, including interest income, on plan assets 1	—		(85		)	(204		)	(289		)	—		(80		)	218			138
Interest effect on asset ceiling limit	—		1			—			1			—		—			—			—
	—		1			(204		)	(203		)	—		7			218			225
Administrative fees	2		—			—			2			1		—			—			1
Changes in the effect of limiting net defined benefit assets to the asset ceiling	—		—			—			—			—		—			(6		)	(6		)
	$	23	$	1		$	(204	)	$	(180	)	$	27	$	7		$	212		$	246

(1)The interest income on the plan assets portion of the employee defined benefit plans net interest amount included in Financing costs reflects a rate of return on plan assets equal to the discount rate used in determining the accrued benefit obligations.

	2016											2015
Nine-month periods ended September 30 (millions)	Employee benefits expense		Financing costs			Other comp. income						Employee benefits expense		Financing costs			Other comp. income
Recognized in	(Note 7)		(Note 8)			(Note 10)			Total			(Note 7)		(Note 8)			(Note 10)		Total
Current service cost	$	62	$	—		$	—		$	62		$	76	$	—		$	—	$	76
Past service costs	—		—			—			—			1		—			—		1
Net interest; return on plan assets
Interest expense arising from accrued benefit obligations	—		255			—			255			—		262			—		262
Return, including interest income, on plan assets 1	—		(254		)	(228		)	(482		)	—		(243		)	65		(178		)
Interest effect on asset ceiling limit	—		2			—			2			—		1			—		1
	—		3			(228		)	(225		)	—		20			65		85
Administrative fees	5		—			—			5			4		—			—		4
Changes in the effect of limiting net defined benefit assets to the asset ceiling	—		—			—			—			—		—			—		—
	$	67	$	3		$	(228	)	$	(158	)	$	81	$	20		$	65	$	166

(1)The interest income on the plan assets portion of the employee defined benefit plans net interest amount included in Financing costs reflects a rate of return on plan assets equal to the discount rate used in determining the accrued benefit obligations.

(b)Defined contribution plans — expense

Our total defined contribution pension plan costs recognized were as follows:

	Three months				Nine months
Periods ended September 30 (millions)	2016		2015		2016		2015
Union pension plan and public service pension plan contributions	$	7	$	8	$	20	$	22
Other defined contribution pension plans	17		16		48		47
	$	24	$	24	$	68	$	69

23

notes to condensed interim consolidated financial statements (unaudited)

15restructuring and other costs

(a)Details of restructuring and other costs

With the objective of reducing ongoing costs, we incur associated incremental, non-recurring restructuring costs, as discussed further in (b) following. We may also incur atypical charges when undertaking major or transformational changes to our business or operating models. We also include incremental external costs incurred in connection with business acquisition or disposition activity, as well as litigation costs, in the context of significant losses or settlements, in other costs.

Restructuring and other costs are presented in the Condensed interim consolidated statements of income and other comprehensive income as set out in the following table:

	Three months				Nine months
Periods ended September 30 (millions)	2016		2015		2016		2015
Goods and services purchased	$	23	$	17	$	39	$	59
Employee benefits expense	37		34		92		68
	$	60	$	51	$	131	$	127

Subsequent to September 30, 2016, we made commitments to pay, in the fourth quarter of 2016, lump-sum amounts totaling approximately $300 million (inclusive of amounts proposed in an unratified tentative agreement (see Note 23(b))), in respect of immediately-vesting, transformative compensation expense to the majority of our existing unionized and non-unionized Canadian-sited workforces.

(b)Restructuring provisions

Employee related provisions and other provisions, as presented in Note 20, include amounts in respect of restructuring activities. In 2016, restructuring activities included ongoing and incremental efficiency initiatives including personnel-related costs and rationalization of real estate. These initiatives were intended to improve our long-term operating productivity and competitiveness.

	2016									2015
Three-month periods ended September 30 (millions)	Employee related 1			Other 1			Total 1			Employee related 1			Other 1			Total 1
Restructuring costs
Additions	$	37		$	23		$	60		$	38		$	18		$	56
Reversal	—			—			—			(4		)	(1		)	(5		)
Expense	37			23			60			34			17			51
Use	(36		)	(12		)	(48		)	(17		)	(17		)	(34		)
Expenses greater (less) than disbursements	1			11			12			17			—			17
Restructuring provisions
Balance, beginning of period	80			56			136			40			64			104
Balance, end of period	$	81		$	67		$	148		$	57		$	64		$	121

(1)The transactions and balances in this column, excluding share-based compensation amounts, are included in, and thus are a subset of, the transactions and balances in the column with the same caption in Note 20.

	2016									2015
Nine-month periods ended September 30 (millions)	Employee related 1			Other 1			Total 1			Employee related 1			Other 1			Total 1
Restructuring costs
Additions	$	92		$	43		$	135		$	72		$	60		$	132
Reversal	—			(4		)	(4		)	(4		)	(1		)	(5		)
Expense	92			39			131			68			59			127
Use	(127		)	(29		)	(156		)	(52		)	(23		)	(75		)
Expenses greater (less) than disbursements	(35		)	10			(25		)	16			36			52
Restructuring provisions
Balance, beginning of period	116			57			173			41			28			69
Balance, end of period	$	81		$	67		$	148		$	57		$	64		$	121

(1)The transactions and balances in this column, excluding share-based compensation amounts, are included in, and thus are a subset of, the transactions and balances in the column with the same caption in Note 20.

24

notes to condensed interim consolidated financial statements (unaudited)

16property, plant and equipment

(millions)	Network assets			Buildings and leasehold improvements			Other			Land		Assets under construction			Total
At cost
As at January 1, 2016	$	27,191		$	2,847		$	1,120		$	55	$	413		$	31,626
Additions	557			29			24			—		1,131			1,741
Additions arising from business acquisitions	—			—			1			—		—			1
Dispositions, retirements and other	(422		)	(48		)	(205		)	—		—			(675		)
Assets under construction put into service	688			85			57			—		(830		)	—
As at September 30, 2016	$	28,014		$	2,913		$	997		$	55	$	714		$	32,693
Accumulated depreciation
As at January 1, 2016	$	19,351		$	1,810		$	729		$	—	$	—		$	21,890
Depreciation	1,005			74			79			—		—			1,158
Dispositions, retirements and other	(435		)	(48		)	(169		)	—		—			(652		)
As at September 30, 2016	$	19,921		$	1,836		$	639		$	—	$	—		$	22,396
Net book value
As at December 31, 2015	$	7,840		$	1,037		$	391		$	55	$	413		$	9,736
As at September 30, 2016	$	8,093		$	1,077		$	358		$	55	$	714		$	10,297

As at September 30, 2016, our contractual commitments for the acquisition of property, plant and equipment were $507 million over a period ending December 31, 2018 (December 31, 2015 — $326 million over a period ending December 31, 2017).

25

notes to condensed interim consolidated financial statements (unaudited)

17intangible assets and goodwill

	Intangible assets subject to amortization																Intangible assets with indefinite lives
	Subscriber base		Customer contracts, related customer relationships and leasehold interests		Software			Access to rights-of-way and other			Assets under construction			Total			Spectrum licences		Total intangible assets			Goodwill 1		Total intangible assets and goodwill
At cost
As at January 1, 2016	$	245	$	228	$	3,801		$	90		$	216		$	4,580		$	8,480	$	13,060		$	4,125	$	17,185
Additions	—		—		31			3			415			449			164		613			—		613
Additions arising from business acquisitions	—		4		3			—			—			7			—		7			13		20
Dispositions, retirements and other (including capitalized interest)	—		—		(107		)	(3		)	—			(110		)	37		(73		)	—		(73		)
Assets under construction put into service	—		—		321			2			(323		)	—			—		—			—		—
Net foreign exchange differences	—		—		—			—			—			—			—		—			2		2
As at September 30, 2016	$	245	$	232	$	4,049		$	92		$	308		$	4,926		$	8,681	$	13,607		$	4,140	$	17,747
Accumulated amortization
As at January 1, 2016	$	112	$	168	$	2,739		$	56		$	—		$	3,075		$	—	$	3,075		$	364	$	3,439
Amortization	10		22		321			3			—			356			—		356			—		356
Dispositions, retirements and other	—		—		(115		)	(1		)	—			(116		)	—		(116		)	—		(116		)
As at September 30, 2016	$	122	$	190	$	2,945		$	58		$	—		$	3,315		$	—	$	3,315		$	364	$	3,679
Net book value
As at December 31, 2015	$	133	$	60	$	1,062		$	34		$	216		$	1,505		$	8,480	$	9,985		$	3,761	$	13,746
As at September 30, 2016	$	123	$	42	$	1,104		$	34		$	308		$	1,611		$	8,681	$	10,292		$	3,776	$	14,068

(1)Accumulated amortization of goodwill is amortization recorded prior to 2002; there are no accumulated impairment losses in the accumulated amortization of goodwill.

As at September 30, 2016, our contractual commitments for the acquisition of intangible assets, excluding that arising from BCE Inc.’s announced agreement to acquire Manitoba Telecom Services Inc. discussed in the following paragraph, were $89 million over a period ending December 31, 2020 (December 31, 2015 — $55 million over a period ending December 31, 2018).

On May 2, 2016, BCE Inc. announced that it had entered into a definitive agreement to acquire all issued and outstanding shares of Manitoba Telecom Services Inc., subject to customary closing conditions, including court, shareholder and regulatory approvals, and is expected to close in late 2016 or early 2017; as of September 30, 2016, court and shareholder approvals had been obtained. In June 2016, we submitted a notification and advanced ruling request to the Competition Bureau regarding our previously announced agreement in principle with BCE Inc. pursuant to which we intend to acquire approximately one-third of Manitoba Telecom Services Inc.’s postpaid wireless subscribers and be assigned one-third of its dealer locations in Manitoba, upon the successful completion of BCE Inc.’s acquisition of Manitoba Telecom Services Inc. Our total price of the transaction with BCE Inc. will vary depending upon the actual number of qualifying postpaid wireless subscribers acquired.

During the three-month period ended September 30, 2016, we acquired 100% ownership of a business complementary to our existing lines of business. The primary factor that gave rise to the recognition of goodwill was the

26

notes to condensed interim consolidated financial statements (unaudited)

earnings capacity of the acquired businesses in excess of the net tangible assets and net intangible assets acquired (such excess arising from: the low levels of tangible assets relative to the earnings capacity of the businesses; expected synergies; the benefits of acquiring established businesses with certain capabilities in the industry; and the geographic presence of the acquired businesses). A portion of the amounts assigned to goodwill may be deductible for income tax purposes. The acquisition-date fair values assigned to assets acquired and liabilities assumed in the individually immaterial acquisitions are also individually immaterial. Any differences between the results of operations currently presented and the pro forma operating revenues, net income and basic and diluted net income per Common Share amounts reflecting the results of operations as if the business acquisitions had been completed at the beginning of the fiscal year are immaterial (as are the post-acquisition operating revenues and net income of the acquired businesses for the three-month period and nine-month periods ended September 30, 2015).

18real estate joint ventures

(a)General

In 2011, we 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. TELUS is a tenant in TELUS Garden, which is now our new global headquarters. The new-build office tower has received its 2009 Leadership in Energy and Environmental Design (LEED) Platinum certification and the neighbouring new-build residential condominium tower, was built to the LEED Gold standard.

In 2013, we partnered, as equals, with two arm’s-length parties (one of which is also our TELUS Garden partner) in a residential, retail and commercial real estate redevelopment project, TELUS Sky, in Calgary, Alberta. The new-build tower, scheduled for completion in 2018, is to be built to the LEED Platinum standard.

27

notes to condensed interim consolidated financial statements (unaudited)

(b)Real estate joint ventures — summarized financial information

As at (millions)	September 30, 2016		December 31, 2015
ASSETS
Current assets
Cash and temporary investments, net	$	14	$	20
Escrowed deposits for tenant inducements and liens	14		20
Sales contract deposits held by arm’s-length trustee	2		6
Other	8		21
Property under development — residential condominiums (subject to sales contracts)	43		156
	81		223
Non-current assets
Property under development — Investment property	111		96
Investment property	253		238
	364		334
	$	445	$	557
LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	20	$	46
Sales contract deposits
Payable	10		55
Held by arm’s-length trustee	2		6
Current portion of senior secured 3.4% bonds due July 2025	4		4
Construction credit facilities	—		96
Construction holdback liabilities	7		10
Other financial liability 1	—		18
	43		235
Non-current liabilities
Construction credit facilities	48		9
Other	—		4
Senior secured 3.4% bonds due July 2025	214		217
	262		230
Liabilities	305		465
Owners’ equity
TELUS 2	56		36
Other partners	84		56
	140		92
	$	445	$	557

(1)Other financial liability was due to us; such amount was non-interest bearing, was secured by an $18 mortgage on the TELUS Garden residential condominium tower, was payable in cash and was due subsequent to repayment of the residential condominium tower construction credit facility.

(2)The equity amounts recorded by the real estate joint ventures differ from those recorded by us by the amount of the deferred gains on our real estate contributed and the valuation provision we have recorded.

	Three months					Nine months
Periods ended September 30 (millions)	2016		2015			2016		2015
Revenue
From investment property	$	6	$	6		$	26	$	10
From sale of condominiums	$	106	$	—		$	220	$	—
Depreciation and amortization	$	2	$	3		$	6	$	5
Interest expense 1	$	2	$	3		$	8	$	5
Net income (loss) and comprehensive income (loss) 2	$	30	$	(2	)	$	66	$	(4	)

(1)During the three-month and nine-month periods ended September 30, 2016, the real estate joint ventures capitalized $1 (2015 — $2) and $2 (2015 — $4), respectively, of financing costs.

(2)As the real estate joint ventures are partnerships, no provision for income taxes of the partners is made in determining the real estate joint ventures’ net income (loss) and comprehensive income (loss).

28

notes to condensed interim consolidated financial statements (unaudited)

(c)Our real estate joint ventures activity

Our real estate joint ventures investment activity is as set out following table.

	2016									2015
Three-month periods ended September 30 (millions)	Loans and receivables 1			Equity 2			Total			Loans and receivables 1			Equity 2			Total
Related to real estate joint ventures’ statements of income and other comprehensive income
Comprehensive income (loss) attributable to us 3	$	—		$	15		$	15		$	—		$	(1	)	$	(1	)
Related to real estate joint ventures’ statements of financial position
Items not affecting currently reported cash flows
Recognition of gain initially deferred on our real estate initially contributed	—			3			3			—			—			—
Cash flows in the current reporting period
Construction credit facilities
Amounts advanced	5			—			5			12			—			12
Amounts repaid	(23		)	—			(23		)	(95		)	—			(95		)
Repayment of funds advanced	(18		)	—			(18		)	—			—			—
Funds we contributed	—			—			—			—			2			2
Funds repaid to us and earnings distributed	—			(9		)	(9		)	—			—			—
Net increase (decrease)	(36		)	9			(27		)	(83		)	1			(82		)
Real estate joint ventures carrying amounts
Balance, beginning of period	52			34			86			140			24			164
Valuation provision	—			(8		)	(8		)	—			—			—
Balance, end of period	$	16		$	35		$	51		$	57		$	25		$	82

	2016									2015
Nine-month periods ended September 30 (millions)	Loans and receivables 1			Equity 2			Total			Loans and receivables 1			Equity 2			Total
Related to real estate joint ventures’ statements of income and other comprehensive income
Comprehensive income (loss) attributable to us 3	$	—		$	29		$	29		$	—		$	(2	)	$	(2	)
Related to real estate joint ventures’ statements of financial position
Items not affecting currently reported cash flows
Recognition of gain initially deferred on our real estate initially contributed	—			7			7			—			—			—
Construction credit facilities financing costs charged by us and other (Note 6)	1			—			1			2			—			2
Cash flows in the current reporting period
Construction credit facilities
Amounts advanced	28			—			28			32			—			32
Amounts repaid	(63		)	—			(63		)	(95		)	—			(95		)
Financing costs paid to us	(1		)	—			(1		)	(2		)	—			(2		)
Repayment of funds advanced	(18		)	—			(18		)	—			—			—
Funds we contributed	—			—			—			—			6			6
Funds repaid to us and earnings distributed	—			(9		)	(9		)	—			—			—
Net increase (decrease)	(53		)	27			(26		)	(63		)	4			(59		)
Real estate joint ventures carrying amounts
Balance, beginning of period	69			25			94			120			21			141
Valuation provision	—			(17		)	(17		)	—			—			—
Balance, end of period	$	16		$	35		$	51		$	57		$	25		$	82

(1)Loans and receivables are included in our Condensed interim consolidated statements of financial position as Real estate joint venture advances and are comprised of advances under construction credit facilities (see (d)) and, prior to its repayment during the three-month period ended September 30, 2016, an $18 mortgage on the TELUS Garden residential condominium tower.

(2)We account for our interests in the real estate joint ventures using the equity method of accounting.

(3)As the real estate joint ventures are partnerships, no provision for income taxes of the partners is made in determining the real estate joint ventures’ net income (loss) and comprehensive income (loss); provision for income taxes is made in determining the comprehensive income (loss) attributable to us.

During the three-month and nine-month periods ended September 30, 2016, the TELUS Garden real estate joint venture recognized $3 million (2015 — $2 million) and $8 million (2015 — $3 million), respectively, of revenue from our TELUS Garden office tenancy; of this amount, one-half is due to our economic interest in the real estate joint venture and one-half is due to our partner’s economic interest in the real estate joint venture.

29

notes to condensed interim consolidated financial statements (unaudited)

(d)Commitments and contingent liabilities

Construction commitments

The TELUS Garden real estate joint venture is expected to spend a total of approximately $470 million on the construction of an office tower and a residential condominium tower. As at September 30, 2016, the real estate joint venture’s construction-related contractual commitments were approximately $9 million through 2017 (December 31, 2015 — $38 million through to 2016).

The TELUS Sky real estate joint venture is expected to spend a total of approximately $400 million on the construction of a mixed-use tower. As at September 30, 2016, the real estate joint venture’s construction-related contractual commitments were approximately $136 million through to 2018 (December 31, 2015 — $124 million through to 2018).

Construction credit facilities

The TELUS Garden real estate joint venture had a credit agreement with two Canadian financial institutions (as 50% lender) and TELUS Corporation (as 50% lender) to provide $136 million of construction financing for the residential project as at December 31, 2015; as at September 30, 2016, all outstanding amounts had been repaid. The TELUS Sky real estate joint venture has a credit agreement with three Canadian financial institutions (as 66-2/3% lender) and TELUS Corporation (as 33-1/3% lender) to provide $342 million of construction financing for the project.

The construction credit facilities contain customary real estate construction financing representations, warranties and covenants and are secured by demand debentures constituting first fixed and floating charge mortgages over the underlying real estate assets. The construction credit facilities are available by way of bankers’ acceptance or prime loan and bear interest at rates in line with similar construction financing facilities.

As at (millions)	Note	September 30, 2016		December 31, 2015
Construction credit facilities commitment — TELUS Corporation
Undrawn	4(b)	$	98	$	131
Advances		16		51
		114		182
Construction credit facilities commitment — other		228		296
		$	342	$	478

19short-term borrowings

On July 26, 2002, one of our subsidiaries, TELUS Communications Inc., entered into an agreement with an arm’s-length securitization trust associated with a major Schedule I bank under which it is able to sell an interest in certain trade receivables up to a maximum of $500 million (December 31, 2015 — $500 million). This revolving-period securitization agreement term ends December 31, 2018, and it requires minimum cash proceeds of $100 million from monthly sales of interests in certain trade receivables. TELUS Communications Inc. is required to maintain at least a BB (December 31, 2015 — BB) 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 we sell our trade receivables, we retain reserve accounts, which are retained interests in the securitized trade receivables, and servicing rights. As at September 30, 2016, we had sold to the trust (but continued to recognize) trade receivables of $116 million (December 31, 2015 — $124 million). Short-term borrowings of $100 million (December 31, 2015 — $100 million) are comprised of amounts advanced to us by 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 our bilateral bank facilities.

20provisions

(millions)	Asset retirement obligation			Employee related			Other			Total
As at July 1, 2016	$	381		$	72		$	135		$	588
Additions 1	—			37			27			64
Use	(3		)	(37		)	(13		)	(53		)
Interest effect	3			—			—			3
As at September 30, 2016	$	381		$	72		$	149		$	602

30

notes to condensed interim consolidated financial statements (unaudited)

(millions)	Asset retirement obligation			Employee related			Other			Total
As at January 1, 2016	$	377		$	109		$	144		$	630
Additions 1	—			90			51			141
Use	(4		)	(127		)	(43		)	(174		)
Reversal	—			—			(4		)	(4		)
Interest effect	8			—			1			9
As at September 30, 2016	$	381		$	72		$	149		$	602
Current	$	14		$	71		$	85		$	170
Non-current	367			1			64			432
As at September 30, 2016	$	381		$	72		$	149		$	602

(1)For the three-month and nine-month periods ended September 30, 2016, employee related additions are net of share-based compensation of $2 and $4, respectively.

Asset retirement obligation

We establish provisions for 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. We expect that the cash outflows in respect of the balance accrued as at the financial statement date will occur proximate to the dates these assets are retired.

Employee related

The employee related provisions are largely in respect of restructuring activities (as discussed further in Note 15). 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: legal claims; non-employee related restructuring activities (as discussed further in Note 15); and written put options, contract termination costs and onerous contracts related to business acquisitions. Other than as set out following, we expect that the cash outflows in respect of the balance accrued as at the financial statement date will occur over an indeterminate multi-year period.

As discussed further in Note 23, we are involved in a number of legal claims and we are aware of certain other possible legal claims. In respect of legal claims, we establish provisions, when warranted, after taking into account legal assessments, information presently available, and the expected availability of recourse. The timing of cash outflows associated with legal claims cannot be reasonably determined.

In connection with business acquisitions, we have established provisions for contingent consideration, written put options in respect of non-controlling interests, contract termination costs and onerous contracts acquired. No cash outflows for the written put options occurred prior to their initial exercisability in December 2015. In respect of contract termination costs and onerous contracts acquired, cash outflows are expected to occur through mid-2018.

21long-term debt

(a)Details of long-term debt

As at (millions)	Note	September 30, 2016		December 31, 2015
TELUS Corporation notes	(b)	$	11,346	$	11,164
TELUS Corporation commercial paper	(c)	137		256
TELUS Communications Inc. debentures		619		618
TELUS International (Cda) Inc. credit facility	(e)	352		—
Long-term debt		$	12,454	$	12,038
Current		$	850	$	856
Non-current		11,604		11,182
Long-term debt		$	12,454	$	12,038

(b)TELUS Corporation notes

The notes are our senior, unsecured and unsubordinated obligations and rank equally in right of payment with all of our existing and future unsecured, unsubordinated obligations, are senior in right of payment to all of our existing and future subordinated indebtedness, and are effectively subordinated to all existing and future obligations of, or guaranteed by, our subsidiaries. The indentures governing the notes contain certain covenants which, among other things, place

31

notes to condensed interim consolidated financial statements (unaudited)

limitations on our ability and the ability of certain of our subsidiaries to: grant security in respect of indebtedness; enter into sale-leaseback transactions; and incur new indebtedness.

						Principal face amount		Redemption present value spread
Series 1	Issued	Maturity	Issue price			Originally issued	Outstanding at financial statement date	Basis points	Cessation date
4.95% Notes, Series CD	March 2007	March 2017	$	999.53		$700 million	$700 million	24 2	N/A
5.05% Notes, Series CG 3	December 2009	December 2019	$	994.19		$1.0 billion	$1.0 billion	45.5 2	N/A
5.05% Notes, Series CH 3	July 2010	July 2020	$	997.44		$1.0 billion	$1.0 billion	47 2	N/A
3.65% Notes, Series CI 3	May 2011	May 2016	$	996.29		$600 million	$NIL	29.5 2	N/A
3.35% Notes, Series CJ 3	December 2012	March 2023	$	998.83		$500 million	$500 million	40 4	Dec. 15, 2022
3.35% Notes, Series CK 3	April 2013	April 2024	$	994.35		$1.1 billion	$1.1 billion	36 4	Jan. 2, 2024
4.40% Notes, Series CL 3	April 2013	April 2043	$	997.68		$600 million	$600 million	47 4	Oct. 1, 2042
3.60% Notes, Series CM 3	November 2013	January 2021	$	997.15		$400 million	$400 million	35 2	N/A
5.15% Notes, Series CN 3	November 2013	November 2043	$	995.00		$400 million	$400 million	50 4	May 26, 2043
3.20% Notes, Series CO 3	April 2014	April 2021	$	997.39		$500 million	$500 million	30 4	Mar. 5, 2021
4.85% Notes, Series CP 3	Multiple 5	April 2044	$	987.91 5		$500 million 5	$900 million 5	46 4	Oct. 5, 2043
3.75% Notes, Series CQ 3	September 2014	January 2025	$	997.75		$800 million	$800 million	38.5 4	Oct. 17, 2024
4.75% Notes, Series CR 3	September 2014	January 2045	$	992.91		$400 million	$400 million	51.5 4	July 17, 2044
1.50% Notes, Series CS 3	March 2015	March 2018	$	999.62		$250 million	$250 million	N/A 6	N/A
2.35% Notes, Series CT 3	March 2015	March 2022	$	997.31		$1.0 billion	$1.0 billion	35.5 4	Feb. 28, 2022
4.40% Notes, Series CU 3	March 2015	January 2046	$	999.72		$500 million	$500 million	60.5 4	July 29, 2045
3.75% Notes, Series CV 3	December 2015	March 2026	$	992.14		$600 million	$600 million	53.5 4	Dec. 10, 2025
2.80% U.S. Dollar Notes 3, 7	September 2016	February 2027	U.S.$		991.89	U.S.$600 million	U.S.$600 million	20 8	Nov. 16, 2026

(1)Interest is payable semi-annually.

(2)The notes are redeemable at our option, in whole at any time, or in part from time to time, on not fewer than 30 and not more than 60 days’ prior notice. The redemption price is equal to the greater of (i) the present value of the notes discounted at the Government of Canada yield plus the redemption present value spread, or (ii) 100% of the principal amount thereof. In addition, accrued and unpaid interest, if any, will be paid to the date fixed for redemption.

(3)This series of notes requires us to make an offer to repurchase the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest to the date of repurchase upon the occurrence of a change in control triggering event, as defined in the supplemental trust indenture.

(4)At any time prior to the respective maturity dates set out in the table, the notes are redeemable at our option, in whole at any time, or in part from time to time, on not fewer than 30 and not more than 60 days’ prior notice. The redemption price is equal to the greater of (i) the present value of the notes discounted at the Government of Canada yield plus the redemption present value spread calculated over the period to maturity, other than in the case of the Series CT and Series CU notes where it is calculated over the period to the redemption present value spread cessation date, or (ii) 100% of the principal amount thereof. In addition, accrued and unpaid interest, if any, will be paid to the date fixed for redemption. On or after the respective redemption present value spread cessation dates set out in the table, the notes are redeemable at our option, in whole but not in part, on not fewer than 30 and not more than 60 days’ prior notice, at redemption prices equal to 100% of the principal amount thereof.

(5)$500 million of 4.85% Notes, Series CP were issued in April 2014 at an issue price of $998.74. This series of notes was reopened in December 2015 and a further $400 million of notes were issued at an issue price of $974.38.

(6)The notes are not redeemable at our option, other than in the event of certain changes in tax laws.

(7)We have entered into a foreign exchange derivative (a cross currency interest rate exchange agreement) which effectively converted the principal payments and interest obligations to Canadian dollar obligations with a fixed interest rate of 2.95% and an issued and outstanding amount of $792 million (reflecting a fixed exchange rate of $1.3205).

(8)At any time prior to the maturity date set out in the table, the notes are redeemable at our option, in whole at any time, or in part from time to time, on not fewer than 30 and not more than 60 days’ prior notice. The redemption price is equal to the greater of (i) the present value of the notes discounted at the U.S. Adjusted Treasury Rate plus the redemption present value spread calculated over the period to the redemption present value spread cessation date, or (ii) 100% of the principal amount thereof. In addition, accrued and unpaid interest, if any, will be paid to the date fixed for redemption. On or after the redemption present value spread cessation date set out in the table, the notes are redeemable at our option, in whole but not in part, on not fewer than 30 and not more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount thereof.

(c)TELUS Corporation commercial paper

TELUS Corporation has an unsecured commercial paper program, which is backstopped by our $2.25 billion syndicated credit facility (see (d)) and is to be used for general corporate purposes, including capital expenditures and investments. This program enables us to issue commercial paper, subject to conditions related to debt ratings, up to a maximum aggregate amount at any one time of $1.4 billion (December 31, 2015 — $1.4 billion). Foreign currency forward contracts are used to manage currency risk arising from issuing commercial paper denominated in U.S. dollars. 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 we expect that they will continue to be supported, by the revolving credit facility, which has no repayment requirements within the next year. As at September 30, 2016, we had $137 million of commercial paper outstanding, all of which was denominated in U.S. dollars (U.S.$104 million), with an effective weighted average interest rate of 1.00%, maturing through October 2016.

32

notes to condensed interim consolidated financial statements (unaudited)

(d)TELUS Corporation credit facility

As at September 30, 2016, TELUS Corporation had an unsecured, revolving $2.25 billion bank credit facility, expiring on May 31, 2021, with a syndicate of financial institutions, which is to be used for general corporate purposes, including the backstopping 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. These tests are that our net debt to operating cash flow ratio must not exceed 4.00:1.00 and our operating cash flow to interest expense ratio must not be less than 2.00:1.00, each as defined under the credit facility.

Continued access to TELUS Corporation’s credit facility is not contingent on TELUS Corporation maintaining a specific credit rating.

As at (millions)	September 30, 2016		December 31, 2015
Net available	$	2,113	$	1,994
Backstop of commercial paper	137		256
Gross available	$	2,250	$	2,250

We had $208 million of letters of credit outstanding as at September 30, 2016 (December 31, 2015 — $202 million), issued under various uncommitted facilities; such letter of credit facilities are in addition to the ability to provide letters of credit pursuant to our committed bank credit facility.

(e)TELUS International (Cda) Inc. credit facility

As at September 30, 2016, TELUS International (Cda) Inc. had a U.S.$330 million bank credit facility, secured by its assets, expiring on May 31, 2021, with a syndicate of financial institutions. The credit facility is comprised of a revolving U.S.$115 million component and a U.S.$215 million term loan component. The credit facility is non-recourse to TELUS Corporation. As at September 30, 2016, $361 million ($352 million net of unamortized issue costs) was outstanding, all of which was denominated in U.S. dollars (U.S.$275 million), with a weighted average interest rate of 2.66%.

TELUS International (Cda) Inc.’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. These tests, which must first be performed as at December 31, 2016, are that TELUS International (Cda) Inc.’s net debt to operating cash flow ratio must not exceed 3.75:1.00 through June 30, 2017, and 3.25:1.00 subsequently, and its operating cash flow to debt service (interest and scheduled principal repayment) ratio must not be less than 1.50:1.00, all as defined under the credit facility.

The term loan is subject to an amortization schedule that requires that 5% of the principal advanced be repaid each year of the term of the agreement, with the balance due at maturity.

(f)Long-term debt maturities

Anticipated requirements to meet long-term debt repayments, calculated upon such long-term debts owing as at September 30, 2016, for each of the next five fiscal years are as follows:

			U.S. dollars
Long-term debt denominated in	Cdn. dollars				Derivative liability
Years ending December 31 (millions)	Debt		Debt		(Receive) 1			Pay		Total		Total
2016	$	—	$	140	$	(137	)	$	138	$	141	$	141
2017	700		14		—			—		14		714
2018	250		14		—			—		14		264
2019	1,000		14		—			—		14		1,014
2020	1,000		14		—			—		14		1,014
Thereafter	8,324		1,088		(787		)	792		1,093		9,417
Future cash outflows in respect of long-term debt principal repayments	11,274		1,284		(924		)	930		1,290		12,564
Future cash outflows in respect of associated interest and like carrying costs 2	5,636		272		(229		)	242		285		5,921
Undiscounted contractual maturities (Note 4(b))	$	16,910	$	1,556	$	(1,153	)	$	1,172	$	1,575	$	18,485

(1)Where applicable, principal-related cash flows reflect foreign exchange rates at September 30, 2016.

(2)Future cash outflows in respect of associated interest and like carrying costs for commercial paper and amounts drawn under our credit facilities (if any) have been calculated based upon the rates in effect at September 30, 2016.

33

notes to condensed interim consolidated financial statements (unaudited)

22Common Share capital

(a)General

Our authorized share capital is as follows:

As at	September 30, 2016	December 31, 2015
First Preferred Shares	1 billion	1 billion
Second Preferred Shares	1 billion	1 billion
Common Shares	2 billion	2 billion

Only holders of Common Shares may vote at our general meetings, with each holder of Common Shares entitled to one vote per Common Share held at all such meetings so long as not less than 66-2/3% of the issued and outstanding Common Shares are owned by Canadians. With respect to priority in payment of dividends and in the distribution of assets in the event of our liquidation, dissolution or winding-up, whether voluntary or involuntary, or any other distribution of our assets among our shareholders for the purpose of winding up our affairs, preferences are as follows: First Preferred Shares; Second Preferred Shares; and finally Common Shares.

As at September 30, 2016, approximately 47 million Common Shares were reserved for issuance, from Treasury, under a share option plan (see Note 13(d)).

(b)Purchase of Common Shares for cancellation pursuant to normal course issuer bid

As referred to in Note 3, we may purchase a portion of our Common Shares for cancellation pursuant to normal course issuer bids in order to maintain or adjust our capital structure. During the nine-month period ended September 30, 2016, we purchased for cancellation, through the facilities of the Toronto Stock Exchange, the New York Stock Exchange and/or alternative trading platforms or otherwise as may be permitted by applicable securities laws and regulations, including privately negotiated block purchases, approximately 3 million of our Common Shares, pursuant to a normal course issuer bid which ran until September 14, 2016. On September 28, 2016, we announced that we had received approval for a normal course issuer bid to purchase and cancel up to 8 million Common Shares (up to a maximum of $250 million) from September 30, 2016, to September 29, 2017; in lieu of purchasing and canceling shares, subject to regulatory approval, an Employee Benefit Plan Trust may purchase up to 25% of the approved normal course issuer bid amount for the benefit of non-executive employees pursuant to partial payment of the immediately-vesting, transformative compensation expense (see Note 15(a)). The excess of the purchase price over the average stated value of Common Shares purchased for cancellation is charged to retained earnings. We cease to consider Common Shares outstanding on the date of our purchase of the Common Shares, although the actual cancellation of the Common Shares by the transfer agent and registrar occurs on a timely basis on a date shortly thereafter.

Additionally, we have entered into an automatic share purchase plan with a broker for the purpose of permitting us to purchase our Common Shares under the normal course issuer bid at such times when we would not be permitted to trade in our own shares during internal blackout periods, including during regularly scheduled quarterly blackout periods. Such purchases will be determined by the broker in its sole discretion based on parameters we have established. We record a liability and charge share capital and retained earnings for purchases that may occur during such blackout periods based upon the parameters of the normal course issuer bid as at the statement of financial position date.

23commitments and contingent liabilities

(a)Claims and lawsuits

General

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

It is not currently possible for us to predict the outcome of such claims, possible claims and lawsuits due to various factors, including: the preliminary nature of some claims; uncertain damage theories and demands; an incomplete factual record; uncertainty concerning legal theories, procedures and their resolution by the courts, at both the trial and the appeal levels; and the unpredictable nature of opposing parties and their demands.

34

notes to condensed interim consolidated financial statements (unaudited)

However, subject to the foregoing limitations, management is of the opinion, based upon legal assessments and information presently available, that it is unlikely that any liability, to the extent not provided for through insurance or otherwise, would have a material effect on our financial position and the results of our operations, including cash flows, with the exception of the following items.

Certified class actions

Certified class actions against us include:

·A 2004 class action brought in Saskatchewan against a number of past and present wireless service providers, including us, which alleged breach of contract, misrepresentation, unjust enrichment and violation of competition, trade practices and consumer protection legislation across Canada in connection with the collection of system access fees. In September 2007, a national class was certified by the Saskatchewan Court of Queen’s Bench in relation to the unjust enrichment claim only; all appeals of this certification decision have now been exhausted.

·A 2008 class action brought in Ontario which alleged breach of contract, breach of the Ontario Consumer Protection Act, breach of the Competition Act and unjust enrichment, in connection with our practice of “rounding up” wireless airtime to the nearest minute and charging for the full minute. In November 2014, an Ontario class was certified by the Ontario Superior Court of Justice in relation to the breach of contract, breach of Consumer Protection Act, and unjust enrichment claims; all appeals of this decision have now been exhausted.

·A 2012 class action brought in Quebec alleging that we improperly unilaterally amended customer contracts to increase various wireless rates for optional services, contrary to the Quebec Consumer Protection Act and the Civil Code of Quebec. On June 13, 2013, the Superior Court of Quebec authorized this matter as a class action. This class action follows on a non-material 2008 class action brought in Quebec alleging that we improperly unilaterally amended customer contracts to charge for incoming SMS messages. On April 8, 2014, judgment was granted in part against TELUS in the 2008 class action. We had appealed that judgment, but have now settled both the 2008 and 2012 class actions. This settlement has received court approval, is being implemented and has been fully accounted for in our financial statements.

·A 2005 class action brought against us in British Columbia alleging that we have engaged in deceptive trade practices in charging for incoming calls from the moment the caller connects to the network, and not from the moment the incoming call is connected to the recipient. We have appealed the certification decision.

We believe that we have good defences to the unsettled actions. Should the ultimate resolution of these unsettled actions differ from management’s assessments and assumptions, a material adjustment to our financial position and the results of our operations, including cash flows, could result. Management’s assessments and assumptions include that a reliable estimate of any such exposure cannot be made considering the continued uncertainty about the causes of action and the nature of the damages that may be sought by the plaintiffs.

Uncertified class actions

Uncertified class actions against us include:

·A 2005 class action brought against us in Alberta alleging that we have engaged in deceptive trade practices in charging for incoming calls from the moment the caller connects to the network, and not from the moment the incoming call is connected to the recipient. This is a companion class action to the certified 2005 British Columbia claim referenced above;

·A 2008 class action brought in Saskatchewan against us and other Canadian telecommunications carriers alleging that, among other matters, we failed to provide proper notice of 9-1-1 charges to the public and have been deceitfully passing them off as government charges. A virtually identical class action was filed in Alberta at the same time, but the Alberta Court of Queen’s Bench declared that class action expired as of 2009;

·A 2013 class action brought in British Columbia against us, other telecommunications carriers, and cellular telephone manufacturers alleging that prolonged usage of cellular telephones causes adverse health effects;

·A 2015 class action brought in Quebec against us, other telecommunications carriers, and various other defendants alleging that electromagnetic field radiation causes adverse health effects, creates a nuisance, and constitutes an abuse of right pursuant to Quebec laws;

·Class actions brought in 2014 against us in Quebec and Ontario on behalf of Public Mobile’s customers, alleging that changes to the technology, services and rate plans made by us contravene our statutory and common law obligations;

35

notes to condensed interim consolidated financial statements (unaudited)

·A number of class actions against Canadian telecommunications carriers alleging various causes of action in connection with the collection of system access fees, including:

·Companion class actions to the certified 2004 Saskatchewan class action, filed in eight of the nine other Canadian provinces, the status of which is as follows:

·British Columbia — dismissed;

·Alberta — an application for an order that this claim has expired was dismissed in July 2015 but that decision is under appeal;

·Manitoba — stayed by the Court of Queen’s Bench, with the Court of Appeal upholding the stay on March 14, 2016. The plaintiff has sought leave to appeal this decision to the Supreme Court of Canada;

·Ontario, Quebec, New Brunswick and Newfoundland and Labrador — pursuant to terms of settlement the Plaintiffs have agreed to discontinue these proceedings. A discontinuance has been filed in the Newfoundland and Labrador proceeding and the Quebec Superior Court has approved the filing of a discontinuances in the Quebec proceedings; and

·Nova Scotia — an application by other defendants to stay the class action was initially unsuccessful, but on April 9, 2015, the Nova Scotia Court of Appeal ordered that the claim be permanently and unconditionally stayed against those defendants. The plaintiff has sought leave to appeal this decision to the Supreme Court of Canada;

·A second class action filed in 2009 in Saskatchewan by plaintiff’s counsel acting in the certified 2004 Saskatchewan class action, following the enactment of opt-out class action legislation in that province. This claim makes substantially the same allegations as the certified 2004 Saskatchewan class action, and was stayed by the court in December 2009 upon an application by the defendants to dismiss it for abuse of process, conditional on possible future changes in circumstance. The plaintiff’s separate applications to appeal and lift the stay were denied in 2013. The Plaintiff has now discontinued this class action pursuant to terms of settlement;

·A class action filed in 2011 in British Columbia alleging misrepresentation and unjust enrichment. On June 5, 2014, the B.C. Supreme Court dismissed the plaintiff’s application for certification of this class action. The plaintiff’s appeal of that decision was dismissed by the B.C. Court of Appeal on June 9, 2015. On February 11, 2016, the Supreme Court of Canada dismissed the plaintiff’s application for leave to appeal, bringing this matter to an end; and

·A class action filed in 2013 in Alberta by plaintiff’s counsel acting in the certified 2004 Saskatchewan class action. This class action appears to be a nullity, and the plaintiff filed a replacement class action in 2014. On March 10, 2015, the Alberta Court of Queen’s Bench stayed the 2014 class action on an interim basis. On October 7, 2015, the Alberta Court of Appeal allowed an appeal of this decision and stayed the 2014 class action on a permanent basis. The plaintiff has sought leave to appeal this decision to the Supreme Court of Canada;

·A 2016 class action brought in Quebec against us, other telecommunications carriers, and various other defendants alleging that we violated the Quebec Consumer Protection Act by enticing Quebec consumer customers to contract with us by providing them goods or services at a reduced price, or free as a trial, for a fixed period, and, at the end of the fixed period, charging them the regular price if they did not take steps to either renegotiate or cancel their contract with us; and

·A 2016 class action brought in Quebec against us and other telecommunications carriers alleging that we breached the Quebec Consumer Protection Act and the Quebec Civil Code by making false or misleading representations relating to the handset subsidy provided to our wireless customers, and by charging inflated rate plan prices and termination fees higher than those permitted under the Act to our wireless customers.

We believe that we have good defences to these actions. Should the ultimate resolution of these actions differ from management’s assessments and assumptions, a material adjustment to our financial position and the results of our operations could result. Management’s assessments and assumptions include that reliable estimates of any such exposure cannot be made for the majority of these class actions considering continued uncertainty relating to the causes of action that may ultimately be pursued by the plaintiffs and certified by the courts and the nature of the damages that will be sought by the plaintiffs.

Intellectual property infringement claims

Claims and possible claims received by us include:

·Notice of one potential claim received in 2007 and 2011 alleging that certain wireless products used on our network infringe two third-party patents.

36

notes to condensed interim consolidated financial statements (unaudited)

·A patent infringement claim filed in Ontario in 2014 alleging that TELUS’ IPTV products infringe two third-party patents; and

·A patent infringement claim filed in Ontario in 2016 alleging that communications between devices, including cellular telephones, and base stations on TELUS’ 4G LTE network infringe three third-party patents.

We believe that we have good defences to these actions and possible claims. Should the ultimate resolution of these actions and possible claim differ from management’s assessments and assumptions, a material adjustment to our financial position and the results of our operations, including cash flows, could result. Management’s assessments and assumptions include that a reliable estimate of any such exposure cannot be made considering the continued uncertainty about the causes of action and the nature of the damages that will be sought by the plaintiffs.

(b)Concentration of labour

In 2015, we commenced collective bargaining with the Telecommunications Workers Union, United Steel Workers Local Union 1944, to renew a collective agreement that expired on December 31, 2015; the expired contract covered approximately 40% of our Canadian workforce as at September 30, 2016.

On October 3, 2016, the Telecommunications Workers Union, United Steel Workers Local Union 1944 and ourselves announced that the two parties had reached a tentative agreement of a five-year deal that would be submitted to the Telecommunications Workers Union, United Steel Workers Local Union 1944 members for ratification. The ratification process is to be completed no later than November 20, 2016. The Telecommunications Workers Union, United Steel Workers Local Union 1944 Bargaining Committee has recommended neither acceptance nor rejection of the tentative agreement.

24related party transactions

(a)Transactions with key management personnel

Our key management personnel have authority and responsibility for overseeing, planning, directing and controlling our activities and consist of our Board of Directors and our Executive Leadership Team.

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

	Three months				Nine months
Periods ended September 30 (millions)	2016		2015		2016		2015
Short-term benefits	$	3	$	3	$	9	$	9
Post-employment pension 1 and other benefits	1		1		3		4
Termination benefits	—		8		—		8
Share-based compensation 2	11		20		28		35
	$	15	$	32	$	40	$	56

(1)Our Executive Leadership Team members are either: members of our Pension Plan for Management and Professional Employees of TELUS Corporation and non-registered, non-contributory supplementary defined benefit pension plans; or members of one of our defined contribution pension plans.

(2)For the three-month and nine-month periods ended September 30, 2016, share-based compensation is net of $1 (2015 — $NIL) and $2 (2015 — $3), respectively, of the effects of derivatives used to manage share-based compensation costs (Note 13(b)). For the three-month and nine-month periods ended September 30, 2016, $NIL (2015 — $2) and $4 (2015 — $1), respectively, is included in share-based compensation representing restricted stock unit and deferred share unit expense arising from changes in the fair market value of the corresponding Common Shares, which is not affected by derivatives used to manage share-based compensation costs. For the three-month and nine-month periods ended September 30, 2016, share-based compensation of $2 (2015 — $11) and $4 (2015 — $11), respectively, was included in restructuring costs (Note 15).

As disclosed in Note 13, we made awards of share-based compensation in 2016 and 2015, including, as set out in the table following, to our key management personnel. 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 2016 and 2015 awards are included in the amounts in the table above.

	2016					2015
Nine-month periods ended September 30 ($ in millions)	Number of restricted stock units	Notional value 1		Grant-date fair value 1		Number of restricted stock units	Notional value 1		Grant-date fair value 1
Quarter 1	575,871	$	23	$	15	529,563	$	23	$	27
Quarter 2	9,888	—		—		—	—		—
Quarter 3	—	—		—		—	—		—
Awarded in period	585,759	$	23	$	15	529,563	$	23	$	27

(1)Notional value is determined by multiplying the Common Share price at the time of award by the number of units awarded. The grant-date fair value differs from the notional value due to the effect of some awards having fair values determined using a Monte Carlo simulation.

37

notes to condensed interim consolidated financial statements (unaudited)

During the three-month period ended September 30, 2016, key management personnel (including retirees) exercised 142,912 share options (2015 — 52,560 share options) that had an intrinsic value of $3 million (2015 — $1 million) at the time of exercise, reflecting a weighted average price at the date of exercise of $43.00 (2015 — $43.67). During the nine-month period ended September 30, 2016, key management personnel (including retirees) exercised 169,522 share options (2015 — 68,062 share options) that had an intrinsic value of $4 million (2015 — $2 million) at the time of exercise, reflecting a weighted average price at the date of exercise of $42.47 (2015 — $43.41).

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

As at (millions)	September 30, 2016		December 31, 2015
Restricted stock units	$	42	$	21
Deferred share units 1	32		29
	$	74	$	50

(1)Our Directors’ Deferred Share Unit Plan provides that, in addition to his or her 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, Common Shares or cash. Deferred share units entitle directors to a specified number of, or a cash payment based on the value of, our Common 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 and nine-month periods ended September 30, 2016, $NIL (2015 — $3) and $4 (2015 — $3), respectively, was paid out.

Employment agreements with members of the Executive Leadership Team typically provide for severance payments if an executive’s employment is terminated without cause: generally 18—24 months of base salary, benefits and accrual of pension service in lieu of notice and 50% of base salary in lieu of an annual cash bonus. In the event of a change in control, the Executive Leadership Team members are not entitled to treatment any different than that given to our other employees with respect to non-vested share-based compensation.

(b)Transactions with defined benefit pension plans

During the three-month and nine-month periods ended September 30, 2016, we provided management and administrative services to our defined benefit pension plans; the charges for these services were on a cost recovery basis and amounted to $2 million (2015 — $2 million) and $5 million (2015 — $6 million), respectively.

(c)Transactions with real estate joint ventures

During the three-month and nine-month periods ended September 30, 2016 and 2015, we had transactions with the real estate joint ventures, which are related parties, as set out in Note 18.

25additional financial information

(a)Statements of financial position

As at (millions)	Note	September 30, 2016			December 31, 2015
Accounts receivable
Customer accounts receivable	4(a)	$	1,144		$	1,199
Accrued receivables — customer		140			128
Allowance for doubtful accounts	4(a)	(53		)	(52		)
		1,231			1,275
Accrued receivables — other		191			153
		$	1,422		$	1,428
Inventories 1
Wireless handsets, parts and accessories		$	212		$	319
Other		50			41
		$	262		$	360
Other long-term assets
Pension assets		$	556		$	356
Investments		62			69
Real estate joint ventures	18(c)	35			25
Real estate joint venture advances	18(c)	16			3
Other		161			140
		$	830		$	593

38

notes to condensed interim consolidated financial statements (unaudited)

As at (millions)	Note	September 30, 2016		December 31, 2015
Accounts payable and accrued liabilities
Accrued liabilities		$	1,012	$	843
Payroll and other employee related liabilities		345		410
Restricted stock units liability		90		58
		1,447		1,311
Trade accounts payable		529		476
Interest payable		133		134
Other		72		69
		$	2,181	$	1,990
Advance billings and customer deposits
Advance billings		$	698	$	706
Regulatory deferral accounts		9		16
Deferred customer activation and connection fees		18		19
Customer deposits		22		19
		$	747	$	760
Other long-term liabilities
Pension and other post-retirement liabilities		$	440	$	451
Other		163		150
Restricted stock units and deferred share units liabilities		102		57
		705		658
Deferred customer activation and connection fees		26		30
		$	731	$	688

(1)Costs of goods sold for the three-month and nine-month periods ended September 30, 2016, were $471 (2015 — $461) and $1,277 (2015 — $1,270), respectively.

(b)Statements of cash flows — operating activities and investing activities

		Three months						Nine months
Periods ended September 30 (millions)	Note	2016			2015			2016			2015
Net change in non-cash operating working capital
Accounts receivable		$	(105	)	$	(94	)	$	6		$	53
Inventories		89			(42		)	98			(87		)
Prepaid expenses		52			50			(94		)	(132		)
Accounts payable and accrued liabilities		96			163			(65		)	79
Income and other taxes receivable and payable, net		(59		)	21			(204		)	89
Advance billings and customer deposits		(2		)	14			(14		)	(2		)
Provisions		—			(21		)	(25		)	8
		$	71		$	91		$	(298	)	$	8
Cash payments for capital assets, excluding spectrum licences
Capital asset additions, excluding spectrum licences
Gross capital expenditures
Property, plant and equipment	16	$	(642	)	$	(496	)	$	(1,741	)	$	(1,544	)
Intangible assets	17	(149		)	(127		)	(449		)	(378		)
		(791		)	(623		)	(2,190		)	(1,922		)
Additions arising from non-monetary transactions		4			—			16			—
Capital expenditures		(787		)	(623		)	(2,174		)	(1,922		)
Change in associated non-cash investing working capital		76			7			203			19
		$	(711	)	$	(616	)	$	(1,971	)	$	(1,903	)

39

notes to condensed interim consolidated financial statements (unaudited)

(c)Changes in liabilities arising from financing activities

			Statement of cash flows						Non-cash changes
(millions)	Beginning of period		Issued or received			Redemptions, repayments or payments			Foreign exchange movement (Note 4(f))			Other			End of period
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2015
Dividends paid to holders of Common Shares	$	253	$	—		$	(253	)	$	—		$	252		$	252
Purchase of Common Shares for cancellation	$	32	$	—		$	(140	)	$	—		$	110		$	2
Short-term borrowings	$	500	$	1		$	(400	)	$	—		$	—		$	101
Long-term debt
TELUS Corporation notes	$	10,180	$	—		$	—		$	—		$	2		$	10,182
TELUS Corporation commercial paper	—		2,715			(1,960		)	32			—			787
TELUS Corporation credit facility	400		270			(670		)	—			—			—
Derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt — liability (asset)	—		1,960			(1,935		)	(32		)	—			(7		)
	10,580		4,945			(4,565		)	—			2			10,962
To eliminate effect of gross settlement of derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt	—		(1,960		)	1,960			—			—			—
	$	10,580	$	2,985		$	(2,605	)	$	—		$	2		$	10,962
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2016
Dividends paid to holders of Common Shares	$	274	$	—		$	(274	)	$	—		$	272		$	272
Purchase of Common Shares for cancellation	$	—	$	—		$	(19	)	$	—		$	19		$	—
Short-term borrowings	$	103	$	—		$	(3	)	$	—		$	—		$	100
Long-term debt
TELUS Corporation notes	$	10,569	$	785		$	—		$	(4	)	$	(4	)	$	11,346
TELUS Corporation commercial paper	975		551			(1,404		)	15			—			137
TELUS International (Cda) Inc. credit facility	359		—			(13		)	5			1			352
Derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt — liability (asset)	1		1,404			(1,390		)	(11		)	20			24
	11,904		2,740			(2,807		)	5			17			11,859
To eliminate effect of gross settlement of derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt	—		(1,404		)	1,404			—			—			—
	$	11,904	$	1,336		$	(1,403	)	$	5		$	17		$	11,859
Issue of shares by subsidiary to non-controlling interest
Gross proceeds on share issuance	$	—	$	—		$	—		$	—		$	—		$	—
Transaction costs	5		—			(1		)	—			—			4
Income taxes charged directly to contributed surplus 1	43		—			—			—			4			47
	48		—			(1		)	—			4			51
To eliminate effect of gross settlement of transaction costs and income taxes	—		(1		)	1			—			—			—
	$	48	$	(1	)	$	—		$	—		$	4		$	51

(1)Income taxes charged directly to contributed surplus were comprised of a current income tax charge of $4 and a deferred income tax recovery of $NIL.

40

notes to condensed interim consolidated financial statements (unaudited)

				Statement of cash flows						Non-cash changes
(millions)	Beginning of period			Issued or received			Redemptions, repayments or payments			Foreign exchange movement (Note 4(f))			Other			End of period
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2015
Dividends paid to holders of Common Shares	$	244		$	—		$	(740	)	$	—		$	748		$	252
Purchase of Common Shares for cancellation	$	3		$	—		$	(402	)	$	—		$	401		$	2
Short-term borrowings	$	100		$	401		$	(400	)	$	—		$	—		$	101
Long-term debt
TELUS Corporation notes	$	8,437		$	1,747		$	—		$	—		$	(2	)	$	10,182
TELUS Corporation commercial paper	130			3,752			(3,127		)	32			—			787
TELUS Corporation credit facility	—			780			(780		)	—			—			—
Derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt — liability (asset)	—			1,960			(1,935		)	(32		)	—			(7		)
	8,567			8,239			(5,842		)	—			(2		)	10,962
To eliminate effect of gross settlement of derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt	—			(1,960		)	1,960			—			—			—
	$	8,567		$	6,279		$	(3,882	)	$	—		$	(2	)	$	10,962
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2016
Dividends paid to holders of Common Shares	$	263		$	—		$	(798	)	$	—		$	807		$	272
Purchase of Common Shares for cancellation	$	10		$	—		$	(140	)	$	—		$	130		$	—
Short-term borrowings	$	100		$	3		$	(3	)	$	—		$	—		$	100
Long-term debt
TELUS Corporation notes	$	11,164		$	785		$	(600	)	$	(4	)	$	1		$	11,346
TELUS Corporation commercial paper	256			3,465			(3,550		)	(34		)	—			137
TELUS Communications Inc. debentures	618			—			—			—			1			619
TELUS International (Cda) Inc. credit facility	—			373			(13		)	—			(8		)	352
Derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt — liability (asset)	(14		)	3,550			(3,573		)	38			23			24
	12,024			8,173			(7,736		)	—			17			12,478
To eliminate effect of gross settlement of derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt	—			(3,550		)	3,550			—			—			—
	$	12,024		$	4,623		$	(4,186	)	$	—		$	17		$	12,478
Issue of shares by subsidiary to non-controlling interest
Gross proceeds on share issuance	$	—		$	299		$	—		$	—		$	(299	)	$	—
Transaction costs	—			—			(8		)	—			12			4
Income taxes charged directly to contributed surplus 1	—			—			—			—			47			47
	—			299			(8		)	—			(240		)	51
To eliminate effect of gross settlement of transaction costs and income taxes	—			(8		)	8			—			—			—
	$	—		$	291		$	—		$	—		$	(240	)	$	51

(1)Income taxes charged directly to contributed surplus were comprised of a current income tax charge of $49 and a deferred income tax recovery of $2.

41

EX-99.2

Exhibit 99.2

TELUS CORPORATION

Management’s discussion and analysis

2016 Q3

Caution regarding forward-looking statements

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

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

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

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

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

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

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

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

2

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

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

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

·Process risks including: our reliance on legacy systems and ability to implement and support new products and services and business operations; our ability to implement effective change management for system replacements and upgrades, process redesigns and business integrations; implementation of complex large enterprise deals that may be adversely impacted by available resources, system limitations and degree of co-operation from other service providers; our ability to successfully manage operations in foreign jurisdictions; information security and privacy breaches, including data loss or theft of data; intentional threats to our infrastructure and business operations; and real estate joint venture re-development risks.

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

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

·Taxation matters including: complex tax laws that may be subject to interpretation by the tax authorities that may differ from our interpretations; changes in tax laws, including tax rates; elimination of income tax deferrals through the use of different tax year-ends for operating partnerships and corporate partners; and international tax complexity and compliance.

·Business continuity events including: our ability to maintain customer service and operate our networks in the event of human error or human-caused threats, such as cyber attacks and equipment failures that could cause various degrees of network outages; supply chain disruptions; natural disaster threats; epidemics; pandemics; and the completeness and effectiveness of business continuity and disaster recovery plans and responses.

·Partnerships, acquisitions or divestitures including: our ability to conclude the transaction with BCE to acquire a portion of MTS’ wireless customers and dealers, including obtaining the necessary regulatory approvals, and to successfully migrate the customers and dealers, and more generally, our ability to successfully integrate acquisitions, complete divestitures or establish partnerships in a timely manner, and realize expected strategic benefits.

·Health, safety and environmental developments and other risk factors discussed herein and listed from time to time in our reports and public disclosure documents, including our annual report, annual information form, and other filings with securities commissions or similar regulatory authorities in Canada (on SEDAR at sedar.com) and in our filings with the Securities and Exchange Commission (SEC) in the United States, including Form 40-F (on EDGAR at sec.gov). Section 10 Risks and risk management in our 2015 annual MD&A, our 2016 Q1 MD&A, our 2016 Q2 MD&A and this MD&A are incorporated by reference in this cautionary statement.

3

Management’s discussion and analysis

November 4, 2016

Contents

Section	Description
1. Introduction	1.1 Preparation of the MD&A 1.2 The environment in which we operate 1.3 Consolidated highlights
2. Core business and strategy
3. Corporate priorities for 2016
4. Capabilities	4.1 Principal markets addressed and competition 4.2 Operational resources 4.3 Liquidity and capital resources 4.4 Changes in internal control over financial reporting
5. Discussion of operations	5.1 General 5.2 Summary of consolidated quarterly results and trends 5.3 Consolidated operations 5.4 Wireless segment 5.5 Wireline segment
6. Changes in financial position
7. Liquidity and capital resources	7.1 Overview 7.2 Cash provided by operating activities 7.3 Cash used by investing activities 7.4 Cash provided (used) by financing activities 7.5 Liquidity and capital resource measures 7.6 Credit facilities 7.7 Sale of trade receivables 7.8 Credit ratings 7.9 Financial instruments, commitments and contingent liabilities 7.10 Outstanding share information 7.11 Transactions between related parties
8. Accounting matters	8.1 Critical accounting estimates 8.2 Accounting policy developments
9. Update to assumptions
10. Risks and risk management	10.1 Regulatory matters
11. Definitions and reconciliations	11.1 Non-GAAP and other financial measures 11.2 Operating indicators

4

1.Introduction

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

1.1 Preparation of the MD&A

The following sections are a discussion of the consolidated financial position and financial performance of TELUS for the three-month and nine-month periods ended September 30, 2016, and should be read together with TELUS’ September 30, 2016, unaudited condensed interim consolidated financial statements (subsequently referred to as the interim consolidated financial statements). The generally accepted accounting principles (GAAP) we use are the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Our interim consolidated financial statements comply with IFRS-IASB and Canadian GAAP and have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Our use of the term IFRS in this MD&A is a reference to these standards. In our discussion, we also use certain non-GAAP financial measures, such as earnings before interest, income taxes, depreciation and amortization (EBITDA), to evaluate our performance, monitor compliance with debt covenants and manage our capital structure. These measures are defined, qualified and reconciled with their nearest GAAP measures in Section 11.1. All amounts are in Canadian dollars, unless otherwise specified.

Our disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management on a timely basis, so that appropriate decisions can be made regarding public disclosure. This MD&A and the interim consolidated financial statements were reviewed by TELUS’ Audit Committee and authorized by the Board of Directors for issuance on November 4, 2016.

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

1.2 The environment in which we operate

Economic growth

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

1.3 Consolidated highlights

Collective bargaining and transformative change for 2017 to 2019 compensation

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

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

5

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

Long-term debt issue

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

Normal course issuer bid (NCIB)

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

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

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

6

Consolidated highlights

	Third quarters ended September 30						Nine-month periods ended Sept. 30
($ millions, unless otherwise noted)	2016		2015		Change		2016		2015		Change
Consolidated statements of income
Operating revenues	3,238		3,155		2.6	%	9,494		9,285		2.3	%
Operating income	616		597		3.1	%	1,946		1,893		2.8	%
Income before income taxes	487		491		(0.8	)%	1,560		1,560		—	%
Net income	355		365		(2.7	)%	1,149		1,121		2.6	%
Net income attributable to Common Shares	348		365		(4.7	)%	1,142		1,121		1.9	%
Net income per Common Share ($):
Basic earnings per share (basic EPS)	0.59		0.61		(3.3	)%	1.93		1.85		4.3	%
Adjusted basic EPS1	0.65		0.66		(1.5	)%	2.05		2.03		1.0	%
Diluted	0.59		0.61		(3.3	)%	1.93		1.85		4.3	%
Dividends declared per Common Share ($)	0.46		0.42		9.5	%	1.36		1.24		9.7	%
Basic weighted-average Common Shares outstanding (millions)	592		601		(1.6	)%	593		605		(2.0	)%
Consolidated statements of cash flows
Cash provided by operating activities	1,032		1,025		0.7	%	2,487		2,686		(7.4	)%
Cash used by investing activities	(680	)	(549	)	(23.9	)%	(2,075	)	(3,852	)	46.1	%
Capital expenditures (excluding spectrum licences)2	(787	)	(623	)	(26.3	)%	(2,174	)	(1,922	)	(13.1	)%
Payments for wireless spectrum licences	—		(12	)	100.0	%	(145	)	(2,002	)	92.8	%
Cash provided (used) by financing activities	(370	)	(412	)	10.2	%	(225	)	1,247		n/m
Other highlights
Subscriber connections3 (thousands)							12,577		12,436		1.1	%
EBITDA1	1,131		1,068		5.8	%	3,460		3,284		5.3	%
EBITDA — excluding restructuring and other costs1	1,191		1,119		6.4	%	3,591		3,411		5.3	%
Adjusted EBITDA1,4	1,181		1,119		5.5	%	3,557		3,411		4.3	%
Adjusted EBITDA margin5	36.5		35.5		1.0	pts.	37.5		36.7		0.8	pts.
Free cash flow1	98		310		(68.4	)%	332		881		(62.3	)%
Net debt to EBITDA — excluding restructuring and other costs1 (times)							2.62		2.64		(0.02	)

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

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

(2)Capital expenditures (excluding spectrum licences) include assets purchased, but not yet paid for, and consequently differ from Cash payments for capital assets, excluding spectrum licences, as reported on the condensed interim consolidated statements of cash flows.

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

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

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

Operating highlights

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

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

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

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

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

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

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

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

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

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

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

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

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

Analysis of Net income

	Third quarters ended September 30						Nine-month periods ended Sept. 30
($)	2016		2015		Change		2016		2015	Change
Net income attributable to Common Shares	348		365		(17	)	1,142		1,121	21
Add back (deduct):
Gain on the exchange of wireless spectrum licences, after income taxes	—		—		—		(13	)	—	(13	)
Net gains and equity income from real estate joint venture developments, after income taxes	(6	)	—		(6	)	(11	)	—	(11	)
Restructuring and other costs, after income taxes	44		38		6		96		93	3
Unfavourable (favourable) income tax-related adjustments	(3	)	(5	)	2		(2	)	10	(12	)
Asset retirement from planned closure of Black’s, after income taxes	—		—		—		—		6	(6	)
Adjusted net income	383		398		(15	)	1,212		1,230	(18	)

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

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Analysis of basic EPS

	Third quarters ended September 30						Nine-month periods ended Sept. 30
($)	2016		2015		Change		2016		2015	Change
Basic EPS	0.59		0.61		(0.02	)	1.93		1.85	0.08
Add back (deduct):
Gain on the exchange of wireless spectrum licences, after income taxes, per share	—		—		—		(0.02	)	—	(0.02	)
Net gains and equity income from real estate joint venture developments, after income taxes, per share	(0.01	)	—		(0.01	)	(0.02	)	—	(0.02	)
Restructuring and other costs, after income taxes, per share	0.08		0.06		0.02		0.16		0.15	0.01
Unfavourable (favourable) income tax-related adjustments, per share	(0.01	)	(0.01	)	—		—		0.02	(0.02	)
Asset retirement from planned closure of Black’s, after income taxes, per share	—		—		—		—		0.01	(0.01	)
Adjusted basic EPS	0.65		0.66		(0.01	)	2.05		2.03	0.02

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

Liquidity and capital resource highlights

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

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

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

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

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

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2.Core business and strategy

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

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

Focusing relentlessly on growth markets of data, IP and wireless

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

Providing integrated solutions that differentiate TELUS from our competitors

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

Building national capabilities across data, IP, voice and wireless

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

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

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

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

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

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

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

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

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

3.Corporate priorities for 2016

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

4.Capabilities

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

4.1 Principal markets addressed and competition

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

4.2 Operational resources

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

Wireless segment

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

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

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

Wireline segment

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

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

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4.3 Liquidity and capital resources

Capital structure financial policies

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

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

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

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

Financing and capital structure management plans

Report on financing and capital structure management plans

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

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

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

Purchase Common Shares under our multi-year NCIB

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

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

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

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

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Report on financing and capital structure management plans

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

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

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

Maintain compliance with financial objectives

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

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

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

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

4.4 Changes in internal control over financial reporting

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

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5.Discussion of operations

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

5.1 General

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

5.2 Summary of consolidated quarterly results and trends

Summary of quarterly results

($ millions, except per share amounts)	2016 Q3	2016 Q2	2016 Q1	2015 Q4	2015 Q3	2015 Q2	2015 Q1	2014 Q4
Operating revenues	3,238	3,148	3,108	3,217	3,155	3,102	3,028	3,128
Operating expenses
Goods and services purchased1	1,426	1,331	1,300	1,482	1,394	1,372	1,284	1,476
Employee benefits expense1	681	628	668	757	693	649	609	651
Depreciation and amortization	515	499	500	518	471	464	456	468
Total operating expenses	2,622	2,458	2,468	2,757	2,558	2,485	2,349	2,595
Operating income	616	690	640	460	597	617	679	533
Financing costs	129	134	123	114	106	110	117	115
Income before income taxes	487	556	517	346	491	507	562	418
Income taxes	132	140	139	85	126	166	147	106
Net income	355	416	378	261	365	341	415	312
Net income attributable to Common Shares	348	416	378	261	365	341	415	312
Net income per Common Share:
Basic earnings per share (Basic EPS)	0.59	0.70	0.64	0.44	0.61	0.56	0.68	0.51
Adjusted basic EPS2	0.65	0.70	0.70	0.54	0.66	0.66	0.70	0.53
Diluted	0.59	0.70	0.64	0.44	0.61	0.56	0.68	0.51
Dividends declared per Common Share	0.46	0.46	0.44	0.44	0.42	0.42	0.40	0.40
Additional information:
EBITDA2	1,131	1,189	1,140	978	1,068	1,081	1,135	1,001
Restructuring and other costs2	60	23	48	99	51	59	17	26
EBITDA — excluding restructuring and other costs2	1,191	1,212	1,188	1,077	1,119	1,140	1,152	1,027
Cash provided by operating activities	1,032	892	563	863	1,018	943	718	917
Free cash flow2	98	126	108	197	310	300	271	337

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

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

Trends

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

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

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

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

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

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

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

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

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

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

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

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

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

5.3 Consolidated operations

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

Operating revenues

	Third quarters ended September 30				Nine-month periods ended Sept. 30
($ millions)	2016	2015	Change		2016	2015	Change
Service	3,045	2,934	3.8	%	8,921	8,647	3.2	%
Equipment	180	207	(13.0	)%	516	597	(13.6	)%
Revenues arising from contracts with customers	3,225	3,141	2.7	%	9,437	9,244	2.1	%
Other operating income	13	14	(7.1	)%	57	41	39.0	%
	3,238	3,155	2.6	%	9,494	9,285	2.3	%

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

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

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

Operating expenses

	Third quarters ended September 30				Nine-month periods ended Sept. 30
($ millions)	2016	2015	Change		2016	2015	Change
Goods and services purchased	1,426	1,394	2.3	%	4,057	4,050	0.2	%
Employee benefits expense	681	693	(1.7	)%	1,977	1,951	1.3	%
Depreciation	388	361	7.5	%	1,158	1,069	8.3	%
Amortization of intangible assets	127	110	15.5	%	356	322	10.6	%
	2,622	2,558	2.5	%	7,548	7,392	2.1	%

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

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

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

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

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

Operating income

	Third quarters ended September 30						Nine-month periods ended Sept. 30
($ millions)	2016		2015		Change		2016		2015		Change
Wireless EBITDA (See Section 5.4)	759		715		6.2	%	2,308		2,178		6.0	%
Wireline EBITDA (See Section 5.5)	372		353		5.1	%	1,152		1,106		4.1	%
Depreciation and amortization (discussed above)	(515	)	(471	)	(9.3	)%	(1,514	)	(1,391	)	(8.8	)%
	616		597		3.1	%	1,946		1,893		2.8	%

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

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Financing costs

	Third quarters ended September 30						Nine-month periods ended Sept. 30
($ millions)	2016		2015		Change		2016		2015		Change
Gross interest expenses	137		133		3.0	%	412		382		7.9	%
Capitalized long-term debt interest	(12	)	(18	)	33.3	%	(40	)	(27	)	(48.1	)%
Employee defined benefit plans net interest	1		7		(85.7	)%	3		20		(85.0	)%
Interest (income)	—		—		—	%	(1	)	(21	)	95.2	%
Foreign exchange losses (gains)	3		(16	)	n/m		12		(21	)	n/m
	129		106		21.7	%	386		333		15.9	%

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

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

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

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

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

Income taxes

	Third quarters ended September 30						Nine-month periods ended Sept. 30
($ millions, except tax rates)	2016		2015		Change		2016		2015		Change
Income tax computed at applicable statutory rates	129		130		(0.8	)%	414		412		0.5	%
Revaluation of deferred income tax liability to reflect future statutory income tax rates	—		—		—	%	1		48		(97.9	)%
Adjustments recognized in the current period for income taxes of prior periods	(3	)	(4	)	25.0	%	(3	)	(23	)	87.0	%
Other	6		—		n/m		(1	)	2		n/m
Income taxes	132		126		4.8	%	411		439		(6.4	)%
Income taxes computed at applicable statutory rates (%)	26.6		26.5		0.1	pts.	26.5		26.4		0.1	pts.
Effective tax rate (%)	27.1		25.7		1.4	pts.	26.3		28.1		(1.8	) pts.

Total income tax expense increased by $6 million in the third quarter of 2016 and decreased by $28 million in the first nine months of 2016. The increase for the quarter was primarily due to an increase in non-deductible expenses in 2016, as well as adjustments recognized in 2015 from the settlements of prior years’ income tax-related matters. The decrease for the nine-month period was primarily due to a $48 million non-cash adjustment in the second quarter of 2015 to revalue deferred income tax liabilities arising from an increase in the Alberta provincial corporate tax rate, and a $23 million recovery recorded in 2015 related to the settlement of prior years’ income tax-related matters (excluding related interest income).

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Comprehensive income

	Third quarters ended September 30					Nine-month periods ended Sept. 30
($ millions)	2016	2015		Change		2016		2015		Change
Net income	355	365		(2.7	)%	1,149		1,121		2.5	%
Other comprehensive income (loss) (net of income taxes):
Items that may be subsequently reclassified to income	—	14		(100.0	)%	(10	)	14		n/m
Item never subsequently reclassified to income — Employee defined benefit plans re-measurements	150	(156	)	n/m		167		(41	)	n/m
Comprehensive income	505	223		126.5	%	1,306		1,094		19.4	%

Comprehensive income increased by $282 million in the third quarter of 2016 and $212 million in the first nine months of 2016, primarily due to increases in employee defined benefit plan re-measurement amounts due to returns on pension plan assets. Items that may be subsequently reclassified to income are composed of changes in the unrealized fair value of derivatives designated as cash flow hedges, foreign currency translation adjustments arising from translating financial statements of foreign operations, and changes in the unrealized fair value of available-for-sale investments.

5.4 Wireless segment

Wireless operating indicators

As at September 30	2016	2015	Change
Subscribers (000s):
Postpaid1	7,463	7,290	2.4	%
Prepaid	1,044	1,131	(7.7	)%
Total	8,507	8,421	1.0	%
Postpaid proportion of subscriber base (%)	87.7	86.6	1.1	pts.
HSPA+ population coverage2 (millions)	35.7	35.7	—	%
LTE population coverage2 (millions)	35.1	34.3	2.3	%

	Third quarters ended September 30					Nine-month periods ended Sept. 30
	2016		2015	Change		2016		2015		Change
Subscriber gross additions (000s):
Postpaid	283		269	5.2	%	742		741		0.1	%
Prepaid	96		121	(20.7	)%	259		331		(21.8	)%
Total	379		390	(2.8	)%	1,001		1,072		(6.6	)%
Subscriber net additions (losses) (000s):
Postpaid	87		69	26.1	%	156		182		(14.3	)%
Prepaid	(7	)	—	n/m		(61	)	(42	)	(45.2	)%
Total	80		69	15.9	%	95		140		(32.1	)%
Blended ARPU, per month3 ($)	66.67		64.22	3.8	%	64.72		63.35		2.2	%
Churn, per month3 (%)
Blended	1.18		1.28	(0.10	) pts.	1.20		1.24		(0.04	) pts.
Postpaid	0.94		0.97	(0.03	) pts.	0.93		0.91		0.02	pts.
Cost of acquisition (COA) per gross subscriber addition3 ($)	435		400	8.8	%	437		399		9.5	%
Retention spend to network revenue3 (%)	14.6		14.3	0.3	pts.	13.7		12.8		0.9	pts.

(1)Subsequent to a review of our subscriber base during the first quarter of 2016, our 2016 opening postpaid subscriber base was reduced by 45,000.

(2)Including network access agreements with other Canadian carriers.

(3)These are industry measures useful in assessing operating performance of a wireless company, but are not measures defined under IFRS. (See Section 11.2 Operating indicators.)

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Operating revenues — Wireless segment

	Third quarters ended September 30				Nine-month periods ended Sept. 30
($ millions, except ratios)	2016	2015	Change		2016	2015	Change
Network revenues	1,679	1,600	4.9	%	4,860	4,703	3.3	%
Equipment and other services	135	165	(18.2	)%	382	456	(16.2	)%
Revenues arising from contracts with customers	1,814	1,765	2.8	%	5,242	5,159	1.6	%
Other operating income	4	2	100.0	%	32	2	n/m
External operating revenues	1,818	1,767	2.9	%	5,274	5,161	2.2	%
Intersegment network revenue	15	16	(6.3	)%	43	44	(2.3	)%
Total operating revenues	1,833	1,783	2.8	%	5,317	5,205	2.2	%

Total wireless operating revenues increased by $50 million in the third quarter of 2016 and $112 million in the first nine months of 2016.

Network revenues from external customers increased by $79 million in the third quarter of 2016 and $157 million in the first nine months of 2016. Data network revenue increased by 10.6% in the third quarter of 2016 and 8.8% in the first nine months of 2016, reflecting: (i) a larger proportion of higher-rate two-year plans in the revenue mix; (ii) increased adoption of larger data buckets; (iii) growth in the subscriber base; (iv) a higher postpaid subscriber mix; and (v) increasing data usage from data-intensive devices. Voice network revenue decreased by 2.4% in the third quarter of 2016 and 3.3% in the first nine months of 2016 due to the increased adoption of unlimited nationwide voice plans and continued but moderating substitution to data services, partly offset by growth in the subscriber base.

·Monthly blended ARPU was $66.67 in the third quarter and $64.72 in the first nine months of 2016, reflecting increases of $2.45 or 3.8% for the quarter and $1.37 or 2.2% for the nine-month period. The increases were primarily driven by effects of higher data network revenue (as described above), partly offset by continued declines in voice revenue.

·Gross subscriber additions decreased by 11,000 in the third quarter of 2016 and 71,000 for the nine-month period of 2016. Postpaid gross additions increased by 14,000 in the third quarter of 2016 and 1,000 for the first nine months of 2016. The increases in postpaid gross additions were due to the success of targeted promotions and our focused marketing efforts on higher-value postpaid loading, partly offset by competitive intensity and the effects of the economic slowdown, particularly in Alberta. Prepaid gross additions decreased by 25,000 in the third quarter of 2016 and 72,000 in the first nine months of 2016, mainly from competitive intensity and our focused marketing efforts on higher-value postpaid loading.

·Our average monthly postpaid subscriber churn rate was 0.94% in the third quarter of 2016 and 0.93% in the first nine months of 2016, as compared to 0.97% and 0.91%, respectively, in the same periods in 2015. The continuing low postpaid subscriber churn rates during the third quarter and nine-month period of 2016 reflect our focus on executing on customers first initiatives, and retention programs, partly offset by competitive intensity and the effects of the economic slowdown, particularly in Alberta, and for the nine-month period, the simultaneous expiration of two-year and three-year customer contracts starting in June 2015. Our blended monthly subscriber churn rate was 1.18% in the third quarter of 2016 and 1.20% in the first nine months of 2016, as compared to 1.28% and 1.24%, respectively, in the same periods in 2015. The improvement in our blended subscriber churn rate during the third quarter and nine-month period of 2016 reflect the changes in the postpaid churn rate as described above, as well as improvements in the prepaid churn rate as well as increase in mix of postpaid subscribers.

·Net subscriber additions increased by 11,000 in the third quarter of 2016 due to an improvement in our blended monthly churn rate. In the first nine months of 2016, net subscriber additions declined 45,000 due to lower gross additions, partly offset by an improvement in blended monthly churn rate. Postpaid net additions increased by 18,000 in the third quarter of 2016 and decreased by 26,000 in the first nine months of 2016, due to the factors affecting gross subscriber additions and postpaid churn described above. Prepaid subscribers decreased by 7,000 in the third quarter of 2016 and 61,000 in the first nine months of 2016, as compared to no change and a decrease of 42,000, respectively, in the same periods in 2015. Prepaid losses reflect conversions to postpaid services (due to our marketing efforts focused on higher-value postpaid loading) and increased competition for prepaid services.

Equipment and other services decreased by $30 million in the third quarter of 2016 and $74 million in the first nine months of 2016, resulting from a combination of higher per-unit subsidies, lower retention volumes, competitive intensity and the discontinuance of Black’s Photography revenue from the closure of stores in August 2015, partly offset by increased postpaid gross additions in the quarter and higher-value smartphones in the sales mix.

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Other operating income increased by $2 million in the third quarter of 2016 and $30 million in the first nine months of 2016, mainly due to net gains and equity income related to real estate joint venture developments, gains from the sale of property, plant and equipment, as well as the gain from the exchange of wireless spectrum licences in the second quarter of 2016.

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

Operating expenses — Wireless segment

	Third quarters ended September 30				Nine-month periods ended Sept. 30
($ millions)	2016	2015	Change		2016	2015	Change
Goods and services purchased:
Equipment sales expenses	437	425	2.8	%	1,171	1,143	2.4	%
Network operating expenses	200	197	1.5	%	573	569	0.7	%
Marketing expenses	101	113	(10.6	)%	289	307	(5.9	)%
Other 1	170	151	12.6	%	486	487	(0.2	)%
Employee benefits expense1	166	182	(8.8	)%	490	521	(6.0	)%
Total operating expenses	1,074	1,068	0.6	%	3,009	3,027	(0.6	)%

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

Total wireless operating expenses increased by $6 million in the third quarter of 2016 and decreased by $18 million in the first nine months of 2016.

Equipment sales expenses increased by $12 million in the third quarter of 2016 and $28 million in the first nine months of 2016, reflecting an increase in higher-value smartphones in the sales mix and increasing handset costs (including the effect of higher supplier costs due to the decline in the Canadian dollar exchange rate vs. the U.S. dollar over the last two years) and increased postpaid gross additions in the quarter, partly offset by lower retention volumes, lower prepaid gross additions, and by lower cost of sales from the closure of Black’s Photography stores in August 2015.

·Retention costs as a percentage of network revenue were 14.6% in the third quarter of 2016 and 13.7% in the first nine months of 2016, compared to 14.3% and 12.8%, respectively, in the same periods in 2015. The increases were driven by higher per-unit subsidy costs reflecting the factors noted in Equipment sales expense above, partly offset by lower retention volumes.

·COA per gross subscriber addition was $435 in the third quarter of 2016 and $437 in the first nine months of 2016, reflecting increases of $35 and $38, respectively, in the same periods in 2015. These increases reflect the factors noted in Equipment sales expense above, partly offset by lower advertising and promotional costs.

Network operating expenses increased by $3 million in the third quarter of 2016 and $4 million in the first nine months of 2016, mainly from higher roaming costs from increased roaming volumes partly offset by lower maintenance costs.

Marketing expenses declined by $12 million in the third quarter of 2016 and $18 million in the first nine months of 2016, primarily due to lower advertising and promotions expenses, as well as lower commission expenses driven by lower gross additions and retention volumes.

Other goods and services purchased increased by $19 million in the third quarter of 2016, primarily due to increases in external labour, higher non-labour restructuring and other costs, as well as higher bad debt provisions to support the growing subscriber base. Other goods and services purchased were relatively flat in the first nine months of 2016, as lower non-labour restructuring and other costs mainly from provisions for the closure of Black’s Photography retail stores during the third quarter of 2015 were offset by higher external labour and other administrative costs and an increase in bad debt provisions.

Employee benefits expense decreased by $16 million in the third quarter of 2016 and $31 million in the first nine months of 2016, reflecting lower salaries and wages driven by a reduction in FTEs from our ongoing operational efficiency and effectiveness initiatives, lower share-based compensation expenses, and lower labour-related restructuring costs, partly offset by inflationary compensation increases.

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EBITDA — Wireless segment

	Third quarters ended September 30					Nine-month periods ended Sept. 30
($ millions, except margins)	2016		2015	Change		2016		2015	Change
EBITDA	759		715	6.2	%	2,308		2,178	6.0	%
Add back restructuring and other costs	18		14	28.6	%	36		56	(35.7	)%
EBITDA — excluding restructuring and other costs	777		729	6.6	%	2,344		2,234	4.9	%
Deduct gain on the exchange of wireless spectrum licences	—		—	n/m		(15	)	—	n/m
Deduct net gains and equity income from real estate joint venture developments	(4	)	—	n/m		(8	)	—	n/m
Adjusted EBITDA	773		729	6.1	%	2,321		2,234	3.9	%
EBITDA margin (%)	41.4		40.1	1.3	pts.	43.4		41.8	1.6	pts.
Adjusted EBITDA margin1 (%)	42.3		40.9	1.4	pts.	43.8		42.9	0.9	pts.

(1)The calculation of the adjusted EBITDA margin excludes the net gains and equity income from real estate joint venture developments, as well as the gain on the exchange of wireless spectrum licences from both EBITDA and Operating revenues, and excludes restructuring and other costs from EBITDA.

Wireless EBITDA increased by $44 million in the third quarter of 2016 and $130 million in the first nine months of 2016, including gains, as detailed in the table above. Wireless adjusted EBITDA increased by $44 million in the third quarter of 2016 and $87 million in the first nine months of 2016, reflecting network revenue growth driven by higher ARPU and a larger customer base, as well as ongoing operational efficiency and effectiveness initiatives, partly offset by higher acquisition and retention spending.

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5.5 Wireline segment

Wireline operating indicators

At September 30 (000s)	2016	2015	Change
Subscriber connections:
High-speed Internet subscribers1	1,631	1,544	5.6	%
TELUS TV subscribers	1,043	980	6.4	%
Residential NALs	1,396	1,491	(6.4	)%
Total wireline subscriber connections1	4,070	4,015	1.4	%

	Third quarters ended September 30						Nine-month periods ended Sept. 30
	2016		2015		Change		2016		2015		Change
Subscriber net additions (losses):
High-speed Internet	14		24		(41.7	)%	44		69		(36.2	)%
TELUS TV	14		26		(46.2	)%	38		64		(40.6	)%
Residential NALs	(25	)	(25	)	—	%	(71	)	(65	)	(9.2	)%
Total wireline subscriber connections net additions (losses)	3		25		(88.0	)%	11		68		(83.8	)%

(1)Effective December 31, 2015, business NALs have been removed from the reported subscriber base due to the measure’s diminishing relevance as a key performance indicator and, as such, our January 1, 2015 opening reported subscriber balance has been retrospectively adjusted to exclude 1,613,000 business NALs. In addition, subsequent to a review of our subscriber base during the first quarter of 2016, our 2016 opening high-speed Internet subscriber base was increased by 21,000.

Operating revenues — Wireline segment

	Third quarters ended September 30				Nine-month periods ended Sept. 30
($ millions)	2016	2015	Change		2016	2015	Change
Data service and equipment	1,025	950	7.9	%	3,008	2,781	8.2	%
Voice service	335	373	(10.2	)%	1,023	1,138	(10.1	)%
Other services and equipment	51	53	(3.8	)%	164	166	(1.2	)%
Revenues arising from contracts with customers	1,411	1,376	2.5	%	4,195	4,085	2.7	%
Other operating income	9	12	(25.0	)%	25	39	(35.9	)%
External operating revenues	1,420	1,388	2.3	%	4,220	4,124	2.3	%
Intersegment revenue	48	44	9.1	%	143	130	10.0	%
Total operating revenues	1,468	1,432	2.5	%	4,363	4,254	2.6	%

Total wireline operating revenues increased by $36 million in the third quarter of 2016 and $109 million in the first nine months of 2016.

·Data service and equipment revenues increased by $75 million in the third quarter of 2016 and $227 million in the first nine months of 2016, primarily due to: (i) growth in business process outsourcing revenues; (ii) increased Internet and enhanced data service revenues resulting from a 5.6% increase in our high-speed Internet subscribers over 12 months, higher revenue per customer from upgrades to faster Internet speeds and larger usage Internet rate plans, subscribers coming off of promotional offers, the phased-in introduction of usage-based billing in 2015 and certain rate increases; and (iii) increased TELUS TV revenues resulting from a 6.4% subscriber growth over 12 months and higher revenue per customer including certain rate increases, as well as promotional offers. This growth was partly offset by a decline in data equipment revenues in the business market related to the economic slowdown, particularly in Alberta.

·Voice service revenues decreased by $38 million in the third quarter of 2016 and $115 million in the first nine months of 2016. The decreases reflect the ongoing decline in legacy revenues from technological substitution, the economic slowdown, increased competition, greater use of inclusive long distance plans and lower long distance minutes of use including lower wholesale volumes, partially offset by certain rate increases. We experienced a 5.9% decline in residential NALs in the 12-month period ended September 30, 2016.

·Wireline subscriber connections net additions were 3,000 in the third quarter of 2016 and 11,000 in the first nine months of 2016, reflecting decreases of 22,000 and 57,000, respectively, over the same periods in 2015.

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Net additions of high-speed Internet subscribers declined by 10,000 in the third quarter of 2016 and 25,000 in the first nine months of 2016. The decreases resulted from the effects of heightened competitive intensity and the impact of the economic slowdown, resulting in lower gross additions and increased churn, partly offset by the continued expansion of our high-speed broadband footprint, including fibre to the premises, as well as the pull-through impact from the continued adoption of Optik TV. Net additions of TELUS TV subscribers were down 12,000 in the third quarter of 2016 and 26,000 in the first nine months of 2016. The decreases reflected lower gross additions, a higher customer churn rate and a decline in satellite subscribers due to the effects of heightened competitive intensity including from OTT services, slower subscriber growth for paid TV services, the economic slowdown, and a high rate of market penetration for TV services. These were partly offset by the ongoing expansion of our addressable high-speed broadband footprint and increasing broadband speeds. Continued focus on expanding our addressable high-speed Internet and Optik TV footprint, connecting more homes and business directly to fibre, and bundling these services together, resulted in combined Internet and TV subscriber growth of 150,000 or 5.9% over the last 12 months.

Residential NAL losses were 25,000 in the third quarter of 2016 and 71,000 in the first nine months of 2016, as compared to NAL losses of 25,000 and 65,000, respectively, for the same periods in 2015. The residential NAL losses continue to reflect the economic slowdown, the ongoing trend of substitution to wireless and Internet-based services, and increased competition, partially mitigated by the success of our bundled service offerings and our customers first initiatives.

·Other services and equipment decreased by $2 million in the third quarter and first nine months of 2016, mainly due to declines in voice equipment sales.

Other operating income decreased by $3 million in the third quarter of 2016 and $14 million in the first nine months of 2016, mainly due to a decrease in amounts recognized from the regulatory price cap deferral account for provisioning broadband Internet services to eligible rural and remote communities, as well as certain business acquisition-related provisions. Partly offsetting this decline was net gains and equity income on real estate joint venture developments.

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

Operating expenses — Wireline segment

	Third quarters ended September 30				Nine-month periods ended Sept. 30
($ millions)	2016	2015	Change		2016	2015	Change
Goods and services purchased1	581	568	2.3	%	1,724	1,718	0.3	%
Employee benefits expense1	515	511	0.8	%	1,487	1,430	4.0	%
Total operating expenses	1,096	1,079	1.6	%	3,211	3,148	2.0	%

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

Total wireline operating expenses increased by $17 million in the third quarter of 2016 and $63 million in the first nine months of 2016.

·Goods and services purchased increased by $13 million in the third quarter of 2016 and $6 million in the first nine months of 2016, due to increased network operating and administrative costs to support our growing subscriber base, and higher advertising and promotional expenses related to bundled offerings and in response to heightened competitive intensity, as well as higher TELUS TV costs of sales, partly offset by lower transit and termination costs and lower equipment costs related to declining equipment revenue.

·Employee benefits expense increased slightly by $4 million in the third quarter of 2016 and $57 million in the first nine months of 2016, primarily due to increases in wages and salaries, mainly due to growth in the number of TELUS International employees to support increased business process outsourcing revenue growth, as well as inflationary compensation increases and higher labour restructuring costs from ongoing operational efficiency and effectiveness initiatives. These were partly offset by lower defined benefit pension plan and share-based compensation expenses, and lower compensation and benefits costs resulting from a decrease in the number of domestic FTE employees.

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EBITDA — Wireline segment

	Third quarters ended September 30					Nine-month periods ended Sept. 30
($ millions, except margins)	2016		2015	Change		2016		2015	Change
EBITDA	372		353	5.1	%	1,152		1,106	4.1	%
Add back restructuring and other costs	42		37	13.5	%	95		71	33.8	%
EBITDA — excluding restructuring and other costs	414		390	6.2	%	1,247		1,177	5.9	%
Deduct net gains and equity income from real estate joint venture developments	(6	)	—	n/m		(11	)	—	n/m
Adjusted EBITDA	408		390	4.2	%	1,236		1,177	5.0	%
EBITDA margin (%)	25.3		24.7	0.6	pts.	26.4		26.0	0.4	pts.
Adjusted EBITDA margin1 (%)	27.8		27.3	0.5	pts.	28.3		27.7	0.6	pts.

(1)The calculation of the Adjusted EBITDA margin excludes the net gains and equity income on real estate joint venture developments from both EBITDA and Operating revenues, and excludes restructuring and other costs from EBITDA.

Wireline EBITDA increased by $19 million in the third quarter of 2016, primarily from growth in the data service margin, as well as net revenue impacts from the real estate joint venture developments, partly offset by continued declines in legacy voice services, higher restructuring and other costs, and the impact of the economic slowdown on the business market, particularly in Alberta. In the first nine months of 2016, wireline EBITDA increased by $46 million due to similar factors as noted for the third quarter, and was negatively impacted by year-to-date costs and revenue impacts of $3 million related to the wildfires in northern Alberta. Wireline adjusted EBITDA increased by 4.2% and 5.0%, respectively, in the third quarter and nine-month period, as compared to operating revenue increases of 2.1% and 2.3%, respectively, excluding the net revenue impacts from the real estate joint venture developments. This reflects our execution on cost efficiency programs, as well as improving margins in data services, including Internet, business process outsourcing services, TELUS TV and TELUS Health services.

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6.Changes in financial position

Financial position at:	Sept. 30		Dec. 31
($ millions)	2016		2015		Change				Change includes:
Current assets
Cash and temporary investments, net	410		223		187		84	%	See Section 7 Liquidity and capital resources
Accounts receivable	1,422		1,428		(6	)	—	%	n/m
Income and other taxes receivable	85		1		84		n/m		An increase due to the timing of tax instalments in excess of current income tax expense
Inventories	262		360		(98	)	(27	)%	A decrease in wireless handset inventory due to a lower volume of handsets on hand at the end of the third quarter
Prepaid expenses	307		213		94		44	%	Prepaid expenses increased due to the annual prepayment of statutory employee benefits, maintenance contracts, property taxes and annual wireless spectrum licence fees, net of amortization
Real estate joint venture advances	—		66		(66	)	(100	)%	Repayment of construction credit facility concurrent with commencement of closing of residential condominium unit sales
Current derivative assets	11		40		(29	)	(73	)%	A decrease in U.S. currency hedging items.
Current liabilities
Short-term borrowings	100		100		—		—	%	See Section 7.7 Sale of trade receivables
Accounts payable and accrued liabilities	2,181		1,990		191		10	%	An increase in payables associated with higher capital expenditures, partly offset by lower payroll and employee-related liabilities
Income and other taxes payable	37		108		(71	)	(66	)%	Decreased primarily due to the final tax payment for the 2015 taxation year made in the first quarter of 2016
Dividends payable	272		263		9		3	%	n/m
Advance billings and customer deposits	747		760		(13	)	(2	)%	A decrease in advance billings arising from a lower number of wireless handsets shipped to external distribution channels, as well as a decrease in the regulatory price cap deferral account resulting from recognition of amounts for provisioning broadband Internet services to eligible rural and remote communities
Provisions	170		197		(27	)	(14	)%	Amounts paid out under restructuring initiatives exceeded new restructuring provisions
Current maturities of long-term debt	850		856		(6	)	(1	)%	A decrease of $119 million in outstanding commercial paper, as well as amounts reclassified from long-term debt relating to upcoming maturity of $700 million of our 4.95% Notes, Series CD in March 2017, offset by the maturation of $600 million of our 3.65% Notes, Series CI in May 2016
Current derivative liabilities	12		2		10		n/m		An increase in U.S. currency hedging items.
Working capital (Current assets subtracting Current liabilities)	(1,872	)	(1,945	)	73		4	%	Current assets increased by $166 million, while Current liabilities increased by $93 million. TELUS historically has had a negative working capital position. See Capital structure management policies in Section 4.3 of this MD&A and the Liquidity risk discussion in Section 7.9 of our 2015 annual MD&A.

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Financial position at:	Sept. 30	Dec. 31
($ millions)	2016	2015	Change				Change includes:
Non-current assets
Property, plant and equipment, net	10,297	9,736	561		6	%	See Capital expenditures in Section 7.3 Cash used by investing activities and Depreciation in Section 5.3
Intangible assets, net	10,292	9,985	307		3	%	See Capital expenditures in Section 7.3 Cash used by investing activities and Amortization of intangible assets in Section 5.3
Goodwill, net	3,776	3,761	15		—	%	An increase from minor acquisitions.
Other long-term assets	830	593	237		40	%	Pension and post-retirement assets increased due to positive returns earned on plan assets.
Non-current liabilities
Provisions	432	433	(1	)	—	%	n/m
Long-term debt	11,604	11,182	422		4	%	See Section 7.4 Cash provided (used) by financing activities
Other long-term liabilities	731	688	43		6	%	Primarily an increase in the accrual for share-based compensation.
Deferred income taxes	2,263	2,155	108		5	%	Primarily relates to returns on pension plan assets, as well as deferred income tax expense.
Owners’ equity
Common equity	8,281	7,672	609		8	%	Includes Net income of $1,142 million, Other comprehensive income of $156 million, impact on contributed surplus arising from subsidiary issuance of shares to non-controlling interest of $236 million, net of dividend declarations of $807 million, and share purchase activity under our normal course issuer bid program of $118 million (see Section 7.4 Cash provided (used) by financing activities)
Non-controlling interest	12	—	12		n/m		Impact arising from the 35% non-controlling interest in TELUS International (Cda) Inc.

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7.Liquidity and capital resources

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

7.1 Overview

Our capital structure financial policies and report on financing and capital structure management plans are described in Section 4.3.

Cash flows

	Third quarters ended September 30						Nine-month periods ended Sept. 30
($ millions)	2016		2015		Change		2016		2015		Change
Cash provided by operating activities	1,032		1,025		0.7	%	2,487		2,686		(7.4	)%
Cash used by investing activities	(680	)	(549	)	(23.9	)%	(2,075	)	(3,852	)	46.1	%
Cash provided (used) by financing activities	(370	)	(412	)	10.2	%	(225	)	1,247		n/m
Increase (decrease) in Cash and temporary investments, net	(18	)	64		n/m		187		81		130.9	%
Cash and temporary investments, net, beginning of period	428		77		n/m		223		60		n/m
Cash and temporary investments, net, end of period	410		141		n/m		410		141		n/m

7.2 Cash provided by operating activities

Cash provided by operating activities increased by $7 million in the third quarter of 2016 and decreased by $199 million in the first nine months of 2016.

Analysis of changes in cash provided by operating activities

($ millions)	Third quarter		Nine-month period
Cash provided by operating activities, three-month and nine-month periods ended September 30, 2015	1,025		2,686
Changes:
Higher EBITDA (See Section 5.4 Wireless segment and Section 5.5 Wireline segment)	63		176
(Higher) lower share-based compensation cash outflows, net of expense	(11	)	25
Lower employer contributions to defined benefits plans, net of expense	2		1
Lower (higher) restructuring disbursements, net of restructuring expenses	6		(68	)
Higher interest paid, net of interest received	(17	)	(60	)
Higher income taxes paid, net of recoveries received	(77	)	(322	)
Other operating working capital changes	41		49
Cash provided by operating activities, three-month and nine-month periods ended September 30, 2016	1,032		2,487

·Restructuring disbursements, net of expenses, for the first nine months of 2016 increased as a result of various operational efficiency and effectiveness initiatives in 2015 and 2016, including the reduction of full-time equivalent (FTE) positions announced in November 2015.

·Income taxes paid, net of refunds received, increased in the third quarter and the first nine months of 2016. The increase in the quarter reflects higher required instalment payments, as well as higher refunds received in the comparative period in 2015. The increase for the nine-month period also includes a larger final income tax payment in the first quarter of 2016 in respect of the 2015 income tax year than was required in the first quarter of 2015 in respect of the 2014 income tax year, mainly due to the use of Public Mobile losses in 2014.

7.3 Cash used by investing activities

Cash used by investing activities increased by $131 million in the third quarter of 2016 and decreased by nearly $1.8 billion in the first nine months of 2016. The changes included the following:

·An increase of $95 million in Cash payments for capital assets (excluding spectrum licences) in the third quarter of 2016 and $68 million in the first nine months of 2016. These increases were composed of:

·An increase of $164 million in capital expenditures in the third quarter of 2016 and $252 million in the first nine months of 2016 (see Capital expenditure measures table and discussion below)

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·Lower capital expenditure payments with respect to payment timing differences, as associated Accounts payable and accrued liabilities increased by $69 million in the third quarter of 2016 and $184 million in the first nine months of 2016.

·Cash payments for spectrum licences were $NIL in the third quarter of 2016 and $145 million in the first nine months of 2016. Comparatively, we paid $12 million in the third quarter of 2015 and $2 billion in the first nine months of 2015 for the AWS-3 and 2500 MHz spectrum licences acquired in Innovation, Science and Economic Development Canada’s (ISED) wireless spectrum auctions.

·Cash payments for acquisitions complementary to our existing lines of business were $14 million in the third quarter and $16 million in the first nine months of 2016.

·Receipts from real estate joint ventures, net of advances and contributions, were in the amount of $45 million in the third quarter of 2016 and $63 million in the first nine months of 2016, mainly from repayment of construction financing from the TELUS Garden real estate joint venture. For the comparable periods in 2015, receipts from the real estate joint ventures, net of advances and contributions, were $81 million and $59 million, respectively, resulting mainly from a $95 million repayment of construction financing from the TELUS Garden real estate joint venture pursuant to its bond issuance for the office tower in July 2015.

Capital expenditure measures

	Third quarters ended September 30				Nine-month periods ended Sept. 30
($ millions, except capital intensity)	2016	2015	Change		2016	2015	Change
Capital expenditures excluding spectrum licences1
Wireless segment	295	209	41.1	%	733	684	7.2	%
Wireline segment	492	414	18.8	%	1,441	1,238	16.4	%
Consolidated	787	623	26.3	%	2,174	1,922	13.1	%
Wireless segment capital intensity (%)	16	12	4	pts.	14	13	1	pt.
Wireline segment capital intensity (%)	34	29	5	pts.	33	29	4	pts.
Consolidated capital intensity2 (%)	24	20	4	pts.	23	21	2	pts.

(1)Capital expenditures include assets purchased, but not yet paid for, and therefore differ from Cash payments for capital assets, as presented on the interim consolidated statements of cash flows.

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

Wireless segment capital expenditures increased in 2016 by $86 million in the third quarter and $49 million year to date. The increases were primarily due to continued investments in our fibre-optic network to support our small-cell technology strategy to improve coverage and prepare for a more efficient and timely evolution to 5G, as well as increased spending on the deployment of 700 MHz and 2500 MHz spectrum licences. We also continued to invest in system and network resiliency and reliability in support of our ongoing customers first initiatives and to ready the network and systems for future retirement of legacy assets.

Wireline segment capital expenditures increased in 2016 by $78 million in the third quarter and $203 million year to date. The increases were primarily due to continuing investments in our broadband infrastructure, including connecting more homes and businesses directly to our fibre-optic network. This investment supports our high-speed Internet and Optik TV subscriber growth, as well as our customers’ demand for faster Internet speeds, and extends the reach and functionality of our business and healthcare solutions. We also continued to make investments in system and network resiliency and reliability.

7.4 Cash provided (used) by financing activities

Net cash used by financing activities was $370 million in the third quarter of 2016, as compared to $412 million net cash used by financing activities in the third quarter of 2015. Net cash used by financing activities was $225 million in the first nine months of 2016, as compared to net cash provided by financing activities of $1.25 billion in the first nine months of 2015. Financing activities included the following:

Dividends paid to the holders of Common Shares

Dividends paid to the holders of Common Shares totalled $274 million in the third quarter of 2016, an increase of $21 million from the third quarter of 2015. Dividends paid for the first nine months of 2016 were $798 million, an increase of $58 million from the first nine months of 2015. The increases reflect higher dividend rates under our dividend growth program (see Section 4.3), partially offset by lower outstanding shares resulting from shares purchased and cancelled under our normal course issuer bid (NCIB) program. Subsequent to September 30, 2016, we paid dividends of $272 million to the holders of Common Shares in October 2016. Dividends paid to our shareholders in 2016 totalled $1,070 million.

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Purchase of Common Shares for cancellation

Under our 2016 NCIB, we purchased 441,700 shares for $19 million in the third quarter of 2016 and purchased approximately 3 million shares for $130 million in the first nine months of 2016. Our 2016 NCIB concluded on September 14, 2016. Our 2017 NCIB commenced September 30, 2016. See Section 4.3 for details of our planned multi-year share purchase program.

Normal course issuer bid purchases in 2016

Period	Common Shares purchased and cancelled (millions)	Average purchase price per share ($)	Purchase costs ($ millions)	Increase (decrease) in Accounts payable ($ millions)		Cash outflow ($ millions)
First quarter	1	37.77	50	(10	)	60
Second quarter	2	38.43	61	—		61
Third quarter	—	42.92	19	—		19
Total	3	38.76	130	(10	)	140

Short-term borrowings

Short-term borrowings are composed primarily of amounts advanced to us from an arm’s-length securitization trust pursuant to the transfer of receivables securitization transactions (see Section 7.7 Sale of trade receivables). Such proceeds were $100 million at September 30, 2016, unchanged since September 30, 2015. In the comparative periods, such proceeds had increased from $100 million at March 31, 2015, to $500 million at June 30, 2015, and subsequently decreased to $100 million at September 30, 2015.

Long-term debt issues and repayments

For the third quarter of 2016, long-term debt repayments, net of issues, were $67 million, primarily composed of:

·A reduction in commercial paper to a balance of $137 million (U.S.$104 million) at September 30, 2016, from $975 million (U.S.$755 million) at June 30, 2016.

·The September 2016 public issue of U.S.$600 million of senior unsecured notes at 2.80%, due February 16, 2027. As of the date of this MD&A, the proceeds were used to repay U.S.$453 million of commercial paper, with the balance to be used for general corporate purposes. We have entered into a foreign exchange derivative (a cross currency interest rate exchange agreement) which effectively converted the principal payments and interest obligations to Canadian dollar obligations with an effective fixed interest rate of 2.95% and an effective issued and outstanding amount of $792 million (reflecting a fixed exchange rate of $1.3205). For additional information on these notes, please refer to Note 21(b) of the interim consolidated financial statements.

For the first nine months of 2016, long-term debt issues net of repayments were $437 million, resulting primarily from the September debt issue, a $119 million (U.S.$81 million) net decrease in commercial paper from $256 million (U.S.$185 million) at December 31, 2015, and $361 million, net, drawn on the TELUS International (Cda) Inc. (TI) credit facility as at September 30, 2016, net of the $600 million repayment of Series CI Notes in May 2016.

In comparison, long-term debt issues, net of repayments, were $380 million in the third quarter of 2015 and $2.4 billion in the first nine months of 2015, and were primarily composed of:

·A March 24, 2015, public issue of $1.75 billion in senior unsecured notes in three series: a $250 million offering at 1.50% due March 27, 2018, a $1.0 billion offering at 2.35% due March 28, 2022, and a $500 million offering at 4.40% due January 29, 2046. The net proceeds were used to fund a portion of the $1.5 billion purchase price of the AWS-3 wireless spectrum licences and the remainder was used for general corporate purposes.

·An increase in commercial paper during the third quarter of 2015 from $NIL at June 30, 2015, to $787 million at September 30, 2015, all of which was denominated in U.S. dollars (U.S.$589 million). For the first nine months of 2015, commercial paper increased by a net $657 million.

·A decrease in amounts drawn on our five-year revolving credit facility during the third quarter of 2015 from $400 million at June 30, 2015, to $NIL at September 30, 2015 ($NIL at December 31, 2014).

Our average term to maturity of long-term debt (excluding commercial paper and the revolving component of the TI credit facility) has increased to approximately 10.7 years at September 30, 2016, compared to approximately 10.6 years at September 30, 2015. Additionally, our weighted average cost of long-term debt (excluding commercial paper and the revolving component of the TI credit facility) was 4.23% at September 30, 2016, as compared to 4.32% at June 30, 2016 and 4.42% at September 30, 2015.

Issue of shares by subsidiary to non-controlling interest

In June 2016, a subsidiary issued shares to Baring Private Equity Asia for it to acquire a 35% non-controlling interest in TI. Cash proceeds net of issue costs currently paid were $291 million as at September 30, 2016.

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7.5 Liquidity and capital resource measures

Net debt was $12.2 billion at September 30, 2016, an increase of $0.5 billion from one year earlier, resulting mainly from the U.S.$600 million Note issue in September 2016.

Fixed-rate debt as a proportion of total indebtedness was 95% at September 30, 2016, up from 92% one year earlier, mainly due to the U.S. dollar Note issue and a decrease in commercial paper, which emulates floating-rate debt, partially offset by the amounts drawn on the TI credit facility.

Net debt to EBITDA — excluding restructuring and other costs ratio was 2.62 times, as measured at September 30, 2016, down slightly from one year earlier. Our long-term objective for this measure is within a range of 2.00 to 2.50 times, which we believe is consistent with maintaining investment grade credit ratings in the range of BBB+, or the equivalent and providing reasonable access to capital. As at September 30, 2016, this ratio remains outside of the long-term objective range due to prior issuance of incremental debt primarily for the acquisition in 2014 and 2015 of spectrum licences for approximately $3.6 billion, which were auctioned in unprecedented amounts and in atypical concentrations during those years, offset by growth in EBITDA — excluding restructuring and other costs. These acquired licences have more than doubled our national spectrum holdings and represent an investment to extend our network capacity to support continuing data consumption growth, as well as growth in our wireless customer base. We will endeavour to return this ratio to within the objective range in the medium term, as we believe that this range is supportive of our long-term strategy. While this ratio exceeds our long-term objective range, we are well in compliance with the leverage ratio covenant in our credit facilities, which states that we may not permit our net debt to operating cash flow ratio to exceed 4.00:1.00 (see Section 7.6 Credit facilities).

Liquidity and capital resource measures

As at, or 12-month periods ended, September 30	2016	2015	Change
Components of debt and coverage ratios1 ($ millions)
Net debt	12,217	11,713	504
EBITDA — excluding restructuring and other costs	4,668	4,438	230
Net interest cost	548	454	94
Debt ratios
Fixed-rate debt as a proportion of total indebtedness (%)	95	92	3	pts.
Average term to maturity of long-term debt (excluding commercial paper) (years)	10.7	10.6	0.1
Net debt to EBITDA — excluding restructuring and other costs1 (times)	2.62	2.64	(0.02	)
Coverage ratios1 (times)
Earnings coverage	4.6	5.1	(0.5	)
EBITDA — excluding restructuring and other costs interest coverage	8.5	9.8	(1.3	)
Other measures1 (%)
Dividend payout ratio of adjusted net earnings	77	69	8	pts.
Dividend payout ratio	76	69	7	pts.

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

Earnings coverage ratio measured for the 12-month period ended September 30, 2016, was 4.6 times, down from 5.1 times one year earlier. Higher borrowing costs reduced the ratio by 0.4, while lower income before borrowing costs and income taxes reduced the ratio by 0.1.

EBITDA — excluding restructuring and other costs interest coverage ratio measured for the 12-month period ended September 30, 2016, was 8.5 times, down from 9.8 times one year earlier as a result of the increase in net interest costs, partially offset by growth in EBITDA — excluding restructuring and other costs.

Dividend payout ratios: Actual dividend payout decisions will continue to be subject to our Board’s assessment and the determination of our financial position and outlook, as well as our long-term dividend payout ratio guideline of 65 to 75% of prospective net earnings per share. The disclosed basic and adjusted dividend payout ratios are historical measures utilizing the last four quarters of dividends declared and earnings per share. We estimate that we are within our target guideline on a prospective dividend payout ratio basis. These historical measures for the 12-month period ended September 30, 2016 are presented for illustrative purposes in evaluating our target guideline and both exceeded the objective range.

7.6 Credit facilities

At September 30, 2016, we had available liquidity of more than $2.1 billion from unutilized credit facilities, including approximately $72 million available liquidity from the TI credit facility, and $133 million available from uncommitted letters of credit facilities, as well as $400 million available under our trade receivables securitization program (see Section 7.7 Sale of trade receivables). This adheres to our objective of generally maintaining at least $1.0 billion of available liquidity.

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TELUS revolving credit facility

We have a $2.25 billion (or U.S. dollar equivalent) revolving credit facility with a syndicate of 15 financial institutions that was renewed in the second quarter of 2016 and expires on May 31, 2021. The revolving credit facility is used for general corporate purposes, including the backstop of commercial paper, as required.

TELUS revolving credit facility at September 30, 2016

($ millions)	Expiry	Size	Drawn	Outstanding undrawn letters of credit	Backstop for commercial paper program	Available liquidity
Five-year revolving facility1	May 31, 2021	2,250	—	—	137	2,113

(1)Canadian dollars or U.S. dollar equivalent.

Our revolving credit facility contains customary covenants, including a requirement that we not permit our consolidated leverage ratio to exceed 4.00 to 1.00 and that we not permit our consolidated coverage ratio to be less than 2.00 to 1.00, at the end of any financial quarter. Our consolidated leverage ratio was approximately 2.62 to 1.00 as at September 30, 2016, and our consolidated coverage ratio was approximately 8.52 to 1.00 as at September 30, 2016. These ratios are expected to remain well above the covenants. There are certain minor differences in the calculation of the leverage ratio and coverage ratio under the revolving credit facility, as compared with the calculation of Net debt to EBITDA — excluding restructuring and other costs and EBITDA — excluding restructuring and other costs interest coverage. Historically, the calculations have not been materially different. The covenants are not impacted by revaluation, if any, of Property, plant and equipment, Intangible assets or Goodwill for accounting purposes. Continued access to our credit facilities is not contingent on maintaining a specific credit rating.

Commercial paper

TELUS Corporation has an unsecured commercial paper program, which is backstopped by our revolving credit facility, enabling us to issue commercial paper up to a maximum aggregate amount of $1.4 billion at September 30, 2016, including a U.S. dollar denominated commercial paper program for up to U.S.$1.0 billion within this maximum aggregate amount. The commercial paper program is to be used for general corporate purposes, including, but not limited to, capital expenditures and investments. Our ability to reasonably access the commercial paper market in Canada and the U.S. is dependent on our credit ratings (see Section 7.8 Credit ratings).

TELUS International (Cda) Inc. credit facilities

As at September 30, 2016, TI had a U.S.$330 million bank credit facility, secured by its assets, expiring on May 31, 2021, with a syndicate of financial institutions. The credit facility comprises a revolving U.S.$115 million component and a U.S.$215 million term loan component. The credit facility is non-recourse to TELUS Corporation. As at September 30, 2016, $361 million ($352 million net of unamortized issue costs) was outstanding, all of which was denominated in U.S. dollars (U.S.$275 million), with a weighted average interest rate of 2.66%.

Other letter of credit facilities

At September 30, 2016, we had $208 million of letters of credit outstanding (December 31, 2015 - $202 million), issued under various uncommitted facilities; such letter of credit facilities are in addition to the ability to provide letters of credit pursuant to our committed bank credit facility. Available liquidity under various uncommitted letters of credit facilities was $133 million at September 30, 2016.

7.7 Sale of trade receivables

TELUS Communications Inc., a wholly owned subsidiary of TELUS, is a party to an agreement with an arm’s-length securitization trust associated with a major Schedule I Canadian bank, under which it is able to sell an interest in certain trade receivables for an amount up to a maximum of $500 million. The agreement is in effect until December 31, 2018, and available liquidity was $400 million as at September 30, 2016. (See Note 19 of the interim consolidated financial statements.) Sales of trade receivables in securitization transactions are recognized as collateralized Short-term borrowings and thus do not result in our de-recognition of the trade receivables sold.

TELUS Communications Inc. is required to maintain at least a BB credit rating by DBRS Ltd. or the securitization trust may require the sale program to be wound down prior to the end of the term. The necessary credit rating was exceeded as of November 4, 2016.

7.8 Credit ratings

There were no changes to our investment grade credit ratings as of November 4, 2016.

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7.9 Financial instruments, commitments and contingent liabilities

Financial instruments

Our financial instruments and the nature of certain risks that they may be subject to were described in Section 7.9 of our 2015 MD&A.

Liquidity risk

As a component of our capital structure financial policies, discussed in Section 4.3 Liquidity and capital resources, we manage liquidity risk and, therefore, our ability to meet current and future working capital requirements by: maintaining a daily cash pooling process that enables us to manage our available liquidity and our liquidity requirements according to our actual needs; maintaining bilateral bank facilities and a syndicated credit facility; maintaining an agreement to sell trade receivables to an arm’s-length securitization trust; maintaining a commercial paper program; maintaining an in-effect shelf prospectus; continuously monitoring forecast and actual cash flows; and managing maturity profiles of financial assets and financial liabilities.

As of the date of this MD&A, we can offer up to $2.2 billion of long-term debt or equity securities pursuant to a shelf prospectus that is effective until April 2018.

At September 30, 2016, we had available liquidity of more than $1.2 billion from unutilized credit facilities and $133 million from uncommitted letters of credit facilities (see Section 7.6 Credit facilities), as well as $400 million available under our trade receivables securitization program (see Section 7.7 Sale of trade receivables). We also had $410 million in cash and temporary investments at September 30, 2016. This adheres to our objective of generally maintaining at least $1 billion of available liquidity. We believe that our investment grade credit ratings contribute to reasonable access to capital markets.

Currency risk

Our 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, commitments and commercial paper. We are also exposed to currency risks in that the fair value or future cash flows of our U.S. dollar notes could fluctuate because of changes in foreign exchange rates. A currency hedging relationship has been established for the related semi-annual interest payments and principal payment at maturity.

Commitments and contingent liabilities

Purchase obligations

As at September 30, 2016, our contractual commitments related to the acquisition of property, plant and equipment were $507 million through to December 31, 2018, as compared to $326 million over a period ending December 31, 2017, reported in our 2015 annual report, primarily driven by the increase in commitments related to broadband expansion.

Indemnification obligations

At September 30, 2016, we had no liability recorded in respect of indemnification obligations.

Claims and lawsuits

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

It is not currently possible for us to predict the outcome of such claims, possible claims and lawsuits due to various factors, including: the preliminary nature of some claims; uncertain damage theories and demands; an incomplete factual record; uncertainty concerning legal theories, procedures and their resolution by the courts, at both the trial and the appeal levels; and the unpredictable nature of opposing parties and their demands. However, when it is determined in respect of a particular claim that payments to claimants are probable, we accrue an estimate of the liability.

However, subject to the foregoing limitations, management is of the opinion, based upon legal assessments and information presently available, that it is unlikely that any liability, to the extent not provided for through insurance or otherwise, would have a material effect on our financial position and the results of our operations, including cash flows, with the exception of the items disclosed in Note 23(a) of the interim consolidated financial statements.

7.10 Outstanding share information

Outstanding shares (millions)	September 30, 2016	October 31, 2016
Common Shares	591	591
Common Share options — all exercisable	2	1

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7.11 Transactions between related parties

Investments in significant controlled entities

As at September 30, 2016, TELUS Corporation controlled 100% of the equity of TELUS Communications Inc., which, in turn, ultimately controlled 100% of the equity of TELUS Communications Company and TELE-MOBILE COMPANY. This is unchanged from December 31, 2015.

Transactions with key management personnel

Our key management personnel have authority and responsibility for overseeing, planning, directing and controlling our activities. They consist of our Board of Directors and our Executive Leadership Team. Total compensation expense amounts for key management personnel were $15 million and $40 million, respectively, in the third quarter and first nine months of 2016, as compared to $32 million and $56 million, respectively, in the comparable periods of 2015. See Note 24(a) of the interim consolidated financial statements for additional detail.

Transactions with defined benefit pension plans

We provided management and administrative services to our defined benefit pension plans. Charges for these services were on a cost recovery basis and were immaterial.

Transactions with real estate joint ventures

In the first nine months of 2016, we had transactions with real estate joint ventures, which are related parties to us, as set out in Note 18 of our interim consolidated financial statements. In regard to the TELUS Garden real estate joint venture, commitments and contingent liabilities include construction-related contractual commitments through to 2017 (approximately $9 million at September 30, 2016). The TELUS Garden real estate joint venture had a credit agreement with two Canadian financial institutions (as 50% lender) and TELUS Corporation (as 50% lender) to provide $136 million of construction financing for the residential project as at December 31, 2015; as at September 30, 2016, all outstanding amounts had been repaid. As at September 30, 2016, the proportion of space leased in the TELUS Garden office tower was approximately 98%. The sale of the TELUS Garden residential condominium units continued in the third quarter of 2016 and the sale of the remaining residential condominium units are expected to be substantially completed by the end of 2016.

For the TELUS Sky™ real estate joint venture, commitments and contingent liabilities include construction-related contractual commitments through to 2018 (approximately $136 million at September 30, 2016) and construction credit facilities ($342 million with three Canadian financial institutions as 66 2/3% lender and TELUS as 33 1/3% lender).

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8.Accounting matters

8.1 Critical accounting estimates

Our significant accounting policies are described in Note 1 of the Consolidated financial statements dated December 31, 2015. Our critical accounting estimates and significant judgments are described in Section 8.1 of our 2015 annual MD&A, which is hereby incorporated by reference. The preparation of financial statements in conformity with IFRS requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our critical accounting estimates and significant judgments are generally discussed with the Audit Committee each quarter.

8.2 Accounting policy developments

Our accounting policy developments were discussed in Section 8.2 Accounting policy developments of our 2015 annual MD&A, and updated in Section 8.2 of our 2016 Q1 MD&A, and are hereby incorporated by reference. See Note 2 of the interim consolidated financial statements for additional details.

9.Update to assumptions

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

The assumptions for our 2016 outlook were described in Section 9 General trends, outlook and assumptions of our 2015 annual MD&A. Assumptions were updated in Section 9 Update to assumptions of our 2016 Q1 MD&A and 2016 Q2 MD&A. These documents are hereby incorporated by reference. Such assumptions remain the same, except as updated below.

·We now estimate that economic growth in Canada will be slightly slower at approximately 1.2% in 2016 (previously 1.3%), based on a composite of estimates from Canadian banks and other sources. For our incumbent local exchange carrier (ILEC) provinces in Western Canada, we now estimate that economic growth in British Columbia will be approximately 2.8% in 2016 (previously 2.9%), and that economic contraction in Alberta will now be approximately (2.2)% in 2016 (previously (2.0)%).

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10.Risks and risk management

Our discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of this MD&A. Our principal risks and uncertainties that could affect our future business results and our associated risk mitigation activities were described in our 2015 annual MD&A, and updated in our 2016 Q1 MD&A and 2016 Q2 MD&A, each of which is hereby incorporated by reference. Certain additional updates follow.

10.1 Regulatory matters

Our telecommunications, broadcasting and radiocommunication services are regulated under federal laws by various authorities including the Canadian Radio-television and Telecommunications Commission (CRTC), the Minister of Innovation, Science and Economic Development Canada (ISED) and the Minister of Canadian Heritage. These laws and accompanying regulations relate to, among other matters, rates, terms and conditions for the provision of telecommunications services, licensing of broadcast services, licensing of spectrum and radio apparatus, and restrictions on ownership and control by non-Canadians. The outcome of regulatory proceedings, reviews, appeals, policy announcements, court cases and other developments could have a material impact on our operating procedures and profitability.

Regulatory and federal government reviews

The CRTC has recently initiated public proceedings to review, among other issues, differential pricing practices related to Internet data plans that could affect TELUS’ business results. The CRTC is also conducting further followup related to past proceedings on wireline wholesale services (including the appropriateness of mandating competitor access to our fibre-to-the-premises (FTTP) facilities) and wireless wholesale services that could also impact TELUS. The CRTC’s decision to require pro-rated refunds, the recently concluded basic telecommunications services proceeding and the CRTC’s future review of TELUS’ broadcasting licences are also reviewed below, as is the federal government’s ongoing cultural policy review.

Review of wireless code

On July 28, 2016, the CRTC launched a proceeding to review the Wireless Code which was originally launched in 2013. This proceeding was planned because the CRTC had indicated that it would review the Wireless Code three years after it was put into force. The Commission has asked parties to comment on the effectiveness of the Wireless Code and whether any provisions should be updated. There is a hearing scheduled for this proceeding in February 2017. TELUS has filed its intervention in this proceeding, asking for, among other things, changes to allow for more flexibility in how early cancellation fees are calculated, to allow for more offers to be made to customers, to clarify how data caps are to be managed and to make the default version of the permanent copy of a contract to be electronic. These are amendments that will increase customer choice and are consistent with customer preferences. The decision in this proceeding is not expected to have a material impact on TELUS.

Examination of differential pricing practices related to Internet data plans

On May 18, 2016, the CRTC issued Examination of differential pricing practices related to Internet data plans, Telecom Notice of Consultation CRTC 2016-192 in which it announced its intention to examine differential pricing practices for Internet data plans, following a complaint concerning Videotron’s pricing practices when offering its unlimited music service to its mobile wireless customers. In general terms, differential pricing occurs when the same or a similar product or service is sold to customers at different prices. Differential pricing is a normal feature of competitive markets, including telecommunications markets. Examples of differential pricing practices include zero-rating (when an Internet service provider (ISP) exempts data traffic from a particular application or a set of applications from a monthly data plan, which is often sold to consumers at a fixed monthly price) and sponsored data (where companies sponsor the data usage for specific content allowing an ISP’s customers to access this content with no impact to monthly data plan allowances). The CRTC’s stated objective in this proceeding is to develop an overall approach to differential pricing for Internet data plans, as opposed to adjudicating complaints on a case-by-case basis. A public hearing commenced on October 31, 2016. The decision in this proceeding is not expected to have a material impact on TELUS.

CRTC decision to require pro-rated refunds

On May 5, 2016, the CRTC issued TELUS Communications Company — Prohibition of 30-day cancellation policies — Application regarding liquidated damages, Telecom Decision CRTC 2016-170, in which the CRTC, among other things, mandated that all service providers are to provide pro-rated refunds to customers who cancel telecommunications and broadcasting services. This decision was unexpected in that it is contradicted by guidance that TELUS and third parties had received from CRTC staff following a 2014 CRTC decision regarding prohibition of notice period for cancellation of services and in light of past decisions on the Wireless Code and notice of cancellation policies which had not required pro-rated refunds. The decision has major impacts on billing systems with no transition period provided to implement the required changes. On July 4, 2016, TELUS filed an application with the CRTC seeking guidance and clarification that the decision does not apply with respect to wireless services with a subsidized device, usage-based

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services and local telephone service in non-forborne exchanges. TELUS also requested an extension of time to implement the decision. The CRTC has yet to issue a decision on this matter. Pending resolution of TELUS’ application, the potential impact of this decision is not expected to be material.

Wireless wholesale services review

On May 5, 2015, the CRTC issued its decision at the conclusion of its wireless wholesale services review. The main determination was that the CRTC will regulate the wholesale GSM-based domestic roaming rates that TELUS, Rogers and Bell charge other wireless carriers. Proposed final tariff rates were filed by TELUS, Rogers and Bell on November 23, 2015, based on the CRTC’s Phase II costing approach. The CRTC is in the process of reviewing these tariff filings, with the announcement of the final rates expected in the first half of 2017. While TELUS does not currently expect that the decision will have a negative material impact, the impact will be assessed once the final wholesale roaming rates have been approved.

Basic telecommunications services

On April 9, 2015, the CRTC issued Review of basic telecommunications services, Telecom Notice of Consultation CRTC 2015-134, announcing a two-phase proceeding to determine what telecommunications services (e.g. voice and broadband) are required by all Canadians in order to participate in the digital economy. In the first phase of the review, the CRTC gathered information to better understand which telecommunications services are being offered across Canada and whether any areas are underserved or unserved. In the second phase of the review, the CRTC conducted consultations to collect comments from Canadians regarding the issues identified. Following the second phase, a public hearing was held in April 2016. Among other things, the CRTC reviewed whether broadband Internet service should be a basic telecommunications service and whether there should be changes to the National Contribution Fund from which subsidies are provided for voice service in high-cost serving areas (and video relay service). While supportive of the inclusion of broadband service as a part of basic telecommunications service at a 5 Mbps download and 1 Mbps upload speed, TELUS opposed any new regulatory requirements pertaining to the provision or mandating of new minimum data allowances and quality of service indicators for retail broadband service, and any new subsidies for broadband from the National Contribution Fund. We expect the CRTC to issue a decision as a result of this proceeding by the end of the fourth quarter of 2016. It is too early to determine what impact the outcome of this proceeding will have on TELUS.

Wireline wholesale services review

On July 22, 2015, the CRTC released Review of wholesale wireline services and associated policies, Telecom Regulatory Policy CRTC 2015-326. This decision updates the CRTC’s framework for the provision of regulated wireline wholesale services and will remain in place for a minimum of five years. The decision substantially preserves the status quo established in the CRTC’s 2008 wireline wholesale services framework, with two key exceptions. First, the CRTC has ordered the introduction of a disaggregated wholesale high-speed Internet access service for ISP competitors. This will include access to FTTP facilities. This requirement is being phased in geographically beginning in the largest markets in Ontario and Quebec (i.e., in the serving territories of Bell Aliant, Bell Canada, Cogeco, Rogers and Videotron). The Commission initiated a followup proceeding to determine the technical configurations, appropriate costs and wholesale cost-based rates in those regions. Second, the Commission determined that the provision of access to unbundled local loops to competitors will no longer be mandated and will be phased out over a three-year transition period. Unbundled local loops are the copper lines connecting homes and businesses to the central offices in TELUS’ network. Competitors use these lines to provide voice services or low-speed Internet services to their retail customers.

The FTTP follow-up activities directed in Telecom Policy CRTC 2015-326 remain ongoing. In Follow-up to Telecom Regulatory Policy 2015-326 — Implementation of a disaggregated wholesale high-speed access service, including over fibre-to-the premises access facilities, Telecom Decision CRTC 2016-379, the Commission rendered its decision on the first phase of the follow-up process for the disaggregated FTTP wholesale services for Bell, Rogers, Videotron and Cogeco by ruling on the technical configurations for their respective services. The associated tariff and cost study reviews have now begun, for these companies who will be filing their proposed cost studies and tariffs in the fourth quarter of 2016. For the second phase, which involves FTTP wholesale services for the rest of Canada (including TELUS’ serving territories), a technical configuration proceeding is expected to commence in the fourth quarter of 2016. The associated cost study and tariff review will follow, which is expected to take place during the second quarter of 2017.

TELUS anticipates no material adverse impact in the short term from the CRTC’s decision. Given the phased implementation of the mandated wholesale provision of access to our FTTP networks, it is too early to determine the ultimate impact this decision will have on TELUS in the longer term. The determination that the provision of access to unbundled local loops to competitors will no longer be mandated and will be phased out over a three-year transition period is not expected to have a material impact on TELUS.

Disconnection practices between telecommunications service providers

On August 18, 2016, the CRTC issued Call for comments: Disconnection practices between telecommunications service providers, Telecom Notice of Consultation CRTC 2016-333 in which it sought industry comments with respect to the practices associated with the disconnection of one telecommunication service provider by

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another telecommunications service provider, and specifically whether any regulatory measures should be introduced, including mandatory notification requirements. A decision is expected by the first quarter of 2017 and is not expected to have a material adverse impact on TELUS.

TELUS broadcasting licence renewals

TELUS’ national licence to operate a video-on-demand undertaking was granted an administrative renewal, which extends the licence term to August 31, 2017 (Broadcasting Decision CRTC 2016-7 issued on January 12, 2016). This licence-term extension enables the CRTC to conduct a consultation on the standard conditions of licence of all video-on-demand licences (Broadcasting Notice of Consultation CRTC 2016-195 issued on May 20, 2016). Also, TELUS’ regional licences to operate broadcasting distribution undertakings in Alberta and British Columbia were granted an administrative renewal, which extends the licence term to August 31, 2017. TELUS’ regional broadcasting distribution licence to serve Quebec expires in 2018.

In consultations launched in Broadcasting Notice of Consultation CRTC 2016-147 and Broadcasting Notice of Consultation CRTC 2016-225 issued on April 21, 2016 and June 21, 2016, respectively, the CRTC is considering the renewal of broadcasting licences held by the large television ownership groups and large broadcasting distribution undertakings. TELUS’ broadcasting distribution undertaking licences to serve British Columbia and Alberta are being reviewed as part of these consultations. It is expected that the CRTC will use these licence renewal consultations to further entrench the consumer-friendly policies announced in its Let’s Talk TV decisions issued in March 2015.

Review of Canada’s cultural policies

On April 22, 2016, the Minister of Canadian Heritage announced a broad review of Canada’s cultural policies that is intended to strengthen the “creation, discovery and export of Canadian content in a digital world.” Amendments to the Broadcasting Act, Telecommunications Act and Copyright Act, changes to the mandates of institutions and agencies, such as the CRTC and the CBC, and the potential introduction of new laws and establishment of new agencies are being included for consideration by the Minister.

The first phase of the public consultation was a pre-consultation by way of an online poll, which closed May 20, 2016. A panel of experts has been appointed to act as a “sounding board” to the Minister. A Consultation Paper was released on September 15, 2016 in which the federal government sets out its intention to adapt its approach on how to support culture and move Canada forward as a hub for creativity and innovation. The Minister has announced that she will host round table discussions with stakeholders across the country over the next few months and Canadians are also invited to share their views via social media. It is unknown at this time whether there will be a material impact resulting from this Consultation.

Government of Quebec Bill C-74 — Blocking of certain websites associated with online gambling

Bill 74 was adopted on May 17, 2016, and assented to on May 18, 2016, by the National Assembly of Quebec. The provisions of this legislation, which will allow the Government of Quebec to require ISPs and wireless service providers operating in Quebec to block access to a prescribed list of gambling websites, are not yet in force (anticipated to occur in 2018). On July 8, 2016, the Public Interest Advocacy Centre (PIAC) filed an application with the CRTC seeking a declaration that: Bill 74 is unconstitutional; a declaration that any application by a carrier, to the CRTC, for website blocking pursuant to this legislation will be denied; and an interim injunction enjoining ISPs and wireless service providers operating in Quebec from actually blocking websites or taking steps preparatory to the implementation of Bill 74. It is too early to determine what impact this legislation may have on TELUS. In July 2016, the Canadian Wireless Telecommunications Association filed a constitutional challenge to Bill 74 in Quebec Superior Court. On September 1, 2016, the CRTC issued a letter asking for comments on its preliminary view that the PIAC application should be suspended pending the disposition of the constitutional challenge before the Quebec Superior Court. On September 16, 2016, TELUS filed a letter where it supported the position that the PIAC application before the CRTC should be suspended. The constitutional challenge to Bill C74 is now scheduled to be heard in the Quebec Superior Court in April 2017.

Review of tariffs for aggregated wholesale high-speed access services

The CRTC is conducting a review of cost studies and rates associated with aggregated wholesale high-speed access services, which are services provided by incumbent local exchange carriers (ILECs) and cable companies on their respective DSL and cable facilities to ISPs to resell high-speed Internet services. In March 2016, the CRTC ordered all rates for aggregated wholesale high-speed access services to be interim rates and asked ILECs and cable companies to file cost studies and proposed rates for these services. While this review remains ongoing, on October 6, 2016, the Commission issued Tariff notice applications concerning aggregated wholesale high-speed access services — Revised interim rates, Telecom Order 2016-396, where it reduced many of the interim rates for ILECs and cable companies, including TELUS. The Commission ordered the reduction for TELUS because it found that TELUS had filed insufficient evidence to support its cost studies. This review remains ongoing, and TELUS will have an opportunity to file further evidence to substantiate its costs and proposed rates. It is not expected that the outcome of this review will have a material impact on TELUS.

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Risk mitigation: TELUS participates in various CRTC proceedings and has advocated the following positions in its participation:

·Amendments under the Wireless Code to benefit customer choice and customer preferences.

·That differential pricing of Internet data plans is generally pro-competitive, pro-consumer and a normal feature of competitive markets, including telecommunications markets, while differential pricing by vertically integrated communications companies for their affiliated broadcasting services might raise concerns that can be dealt with by the CRTC pursuant to its powers under the Broadcasting Act.

·The basic telecommunications services review, opposing any new industry-funded subsidies for broadband or other services.

·The follow-up proceedings for the implementation of the new disaggregated wholesale high-speed Internet access service for ISP competitors in Ontario and Quebec (including issues related to service configuration) in order to influence the implementation of the service in our serving territories, when the service is phased-in.

·The disconnection practices proceeding supporting a notification period of thirty days prior to disconnection which TELUS already provides, and to advocate for no further intervention by the CRTC.

·Filing applications for broadcasting distribution licences to serve markets in British Columbia and Alberta and also intervening in the proceeding to consider the licence renewals of the vertically integrated broadcasting service providers.

·Ensuring favourable changes in the broadcasting system.

·Supporting the CRTC’s preliminary view that it should suspend consideration of an application filed by the Public Interest Advocacy Centre seeking a declaration that the Government of Quebec’s Bill C-74 (as described above) is unconstitutional pending the disposition of the constitutional challenge of Bill C-74 before the Quebec Superior Court Blocking of certain websites associated with online gambling.

·Filing further supporting evidence with the CRTC’s Review of tariffs for aggregated wholesale high-speed access services to substantiate TELUS’s cost and proposed rates for its wholesale aggregated high-speed access services.

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11.Definitions and reconciliations

11.1 Non-GAAP and other financial measures

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

Adjusted net income and adjusted basic earnings per share: These measures are used to evaluate performance at a consolidated level and exclude items that may distort the underlying trends in business performance. These measures should not be considered alternatives to net income or basic earnings per share in measuring TELUS’ performance. Items that may, in management’s view, obscure the underlying trends in business performance include significant gains or losses associated with real estate development partnerships, restructuring and other costs, long-term debt prepayment premiums (when applicable), income-tax related adjustments and asset retirements related to restructuring activities. (See Analysis of net income and Analysis of basic EPS in Section 1.3.)

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

Dividend payout ratio: This ratio is a historical measure calculated as the sum of the last four quarterly dividends declared per Common Share, as reported in the financial statements, divided by the sum of basic earnings per share for the most recent four quarters for interim reporting periods. For fiscal years, the denominator is annual basic earnings per share. Our policy guideline for the annual dividend payout ratio is on a prospective basis, rather than on a trailing basis, and is 65 to 75% of net earnings per share on a prospective basis. (See Section 7.5 Liquidity and capital resource measures.)

Calculation of Dividend payout ratio

Twelve-month periods ended September 30 ($)	2016	2015
Numerator — Sum of the last four quarterly dividends declared per Common Share	1.80	1.64
Denominator — Basic earnings per share	2.37	2.36
Ratio (%)	76	69

Dividend payout ratio of adjusted net earnings: This ratio is a historical measure calculated as the sum of the last four quarterly dividends declared per Common Share, as reported in the financial statements, divided by adjusted net earnings per share. Adjusted net earnings per share is basic earnings per share, as used in the Dividend payout ratio, adjusted to exclude the gain on the exchange of wireless spectrum licences, net gains and equity income from real estate joint venture developments, business acquisition-related provisions, transformative compensation adjustments, long-term debt prepayment premium (when applicable) and income tax-related adjustments.

Calculation of Dividend payout ratio of adjusted net earnings

Twelve-month periods ended September 30 ($)	2016		2015
Numerator — Sum of the last four quarterly dividends declared per Common Share	1.80		1.64
Adjusted net earnings ($ millions):
Net income attributable to Common Shares	1,403		1,433
Deduct gain on the exchange of wireless spectrum licences, after income taxes	(13	)	—
Deduct net gains and equity income from real estate joint venture developments, after income taxes	(11	)	—
Add back business acquisition-related provisions, after income taxes	10		—
Add back net unfavourable (deduct net favourable) income tax-related adjustments	(11	)	6
	1,378		1,439
Denominator — Adjusted net earnings per share	2.33		2.37
Adjusted ratio (%)	77		69

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

Calculation of Earnings coverage

Twelve-month periods ended September 30 ($ millions, except ratio)	2016	2015
Net income attributable to Common Shares	1,403	1,433
Income taxes (attributable to Common Shares)	493	545
Borrowing costs (attributable to Common Shares) 1	532	488
Numerator	2,428	2,466
Denominator — Borrowing costs (from above)	532	488
Ratio (times)	4.6	5.1

(1)Interest on Long-term debt plus Interest on short-term borrowings and other plus long-term debt prepayment premium, adding back capitalized interest and deducting borrowing costs attributable to non-controlling interests.

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

We calculate EBITDA — excluding restructuring and other costs, as it is a component of the EBITDA — excluding restructuring and other costs interest coverage ratio and the Net debt to EBITDA — excluding restructuring and other costs ratio.

We may also calculate an adjusted EBITDA to exclude items of an unusual nature that do not reflect our ongoing operations and should not, in our opinion, be considered in a valuation metric or that should not be included in an assessment of our ability to service or incur debt.

EBITDA reconciliation

	Third quarters ended September 30			Nine-month periods ended September 30
($ millions)	2016		2015	2016		2015
Net income	355		365	1,149		1,121
Financing costs	129		106	386		333
Income taxes	132		126	411		439
Depreciation	388		361	1,158		1,069
Amortization of intangible assets	127		110	356		322
EBITDA	1,131		1,068	3,460		3,284
Add back restructuring and other costs	60		51	131		127
EBITDA — excluding restructuring and other costs	1,191		1,119	3,591		3,411
Deduct gain on the exchange of wireless spectrum licences	—		—	(15	)	—
Deduct net gains and equity income from real estate joint venture developments	(10	)	—	(19	)	—
Adjusted EBITDA	1,181		1,119	3,557		3,411

EBITDA — excluding restructuring and other costs interest coverage: This measure is defined as EBITDA —excluding restructuring and other costs, divided by Net interest cost, calculated on a 12-month trailing basis. This measure is similar to the coverage ratio covenant in our credit facilities, as described in Section 7.6 Credit facilities.

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

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Free cash flow calculation

	Third quarters ended September 30				Nine-month periods ended September 30
($ millions)	2016		2015		2016		2015
EBITDA	1,131		1,068		3,460		3,284
Deduct gain on the exchange of wireless spectrum licences	—		—		(15	)	—
Deduct net gains and equity income from real estate joint venture developments	(10	)	—		(19	)	—
Gains from the sale of property, plant and equipment	(4	)	—		(15	)	—
Restructuring costs net of disbursements	12		6		(27	)	41
Items from the interim consolidated statements of cash flows:
Share-based compensation expense, net	27		38		65		40
Net employee defined benefit plans expense	23		27		67		81
Employer contributions to employee defined benefit plans	(14	)	(20	)	(53	)	(68	)
Interest paid	(132	)	(115	)	(387	)	(329	)
Interest received	—		—		1		3
Capital expenditures (excluding spectrum licences)	(787	)	(623	)	(2,174	)	(1,922	)
Free cash flow before income taxes	246		381		903		1,130
Income taxes paid, net of refunds	(148	)	(71	)	(571	)	(249	)
Free cash flow	98		310		332		881

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

Free cash flow reconciliation with Cash provided by operating activities

	Third quarters ended September 30		Nine-month periods ended September 30
($ millions)	2016	2015	2016		2015
Free cash flow	98	310	332		881
Add (deduct):
Capital expenditures (excluding spectrum licences)	787	623	2,174		1,922
Adjustments to reconcile to Cash provided by operating activities	147	92	(19	)	(117	)
Cash provided by operating activities	1,032	1,025	2,487		2,686

Net debt: We believe that net debt is a useful measure because it represents the amount of Short-term borrowings and long-term debt obligations that are not covered by available Cash and temporary investments. The nearest IFRS measure to net debt is Long-term debt, including Current maturities of long-term debt. Net debt is a component of the Net debt to EBITDA — excluding restructuring and other costs ratio.

Calculation of Net debt

At September 30 ($ millions)	2016		2015
Long-term debt including current maturities	12,454		11,712
Debt issuance costs netted against long-term debt	67		48
Derivative liabilities (assets), net	24		(7	)
Accumulated other comprehensive income amounts arising from financial instruments used to manage interest rate and currency risks associated with U.S. dollar denominated long-term debt (excluding tax effects)	(18	)	—
Cash and temporary investments	(410	)	(141	)
Short-term borrowings	100		101
Net debt	12,217		11,713

Net debt to EBITDA — excluding restructuring and other costs: This measure is defined as net debt at the end of the period divided by 12-month trailing EBITDA — excluding restructuring and other costs. Our long-term policy guideline for this ratio is from 2.00 to 2.50 times. (See discussion in Section 7.5 Liquidity and capital resource measures.) This measure is similar to the leverage ratio covenant in our credit facilities, as described in Section 7.6 Credit facilities.

Net interest cost: This measure is the denominator in the calculation of EBITDA — excluding restructuring and other costs interest coverage. Net interest cost is defined as financing costs, excluding capitalized long-term debt interest, employee defined benefit plans net interest and recoveries on redemption and repayment of debt, calculated on a 12-month trailing basis. No recoveries on redemption and repayment of debt were recorded in 2016 and 2015. Expenses recorded for the long-term debt prepayment premium, if any, are included in net interest cost. Net interest cost was $548 million in the 12-month period ended September 30, 2016, and $454 million in the 12-month period ended September 30, 2015.

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Restructuring and other costs: With the objective of reducing ongoing costs, we incur associated incremental, non-recurring restructuring costs. We may also incur atypical charges when undertaking major or transformational changes to our business or operating models. We include incremental external costs incurred in connection with business acquisition or disposition activity, as well as litigation costs, in the context of significant losses and settlements, in other costs.

Subsequent to September 30, 2016, we made commitments to pay, in the fourth quarter of 2016, lump-sum amounts totaling approximately $300 million (inclusive of amounts proposed in an unratified tentative agreement), in respect of immediately-vesting, transformative compensation expense to the majority of our existing unionized and non-unionized Canadian-sited workforces; a portion of the net-of-tax amount for certain lump-sum recipients will be paid in Common Shares purchased in the market. (See Note 23(b) of the interim consolidated financial statements.)

Restructuring and other costs composition

	Third quarters ended September 30		Nine-month periods ended September 30
($ millions)	2016	2015	2016	2015
Goods and services purchased	23	17	39	59
Employee benefits expense	37	34	92	68
Restructuring and other costs included in EBITDA	60	51	131	127

11.2 Operating indicators

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

Average revenue per subscriber unit per month (ARPU) for wireless subscribers is calculated as network revenue divided by the average number of subscriber units on the network during the period and is expressed as a rate per month.

Churn per month is calculated as the number of subscriber units deactivated during a given period divided by the average number of subscriber units on the network during the period and is expressed as a rate per month. A TELUS, Koodo or Public Mobile brand prepaid subscriber is deactivated when the subscriber has no usage for 90 days following expiry of the prepaid credits.

Cost of acquisition (COA) consists of the total of the device subsidy (the device cost to TELUS less the initial charge to the customer), commissions, and advertising and promotion expenses related to the initial subscriber acquisition during a given period. As defined, COA excludes costs to retain existing subscribers (retention spend).

COA per gross subscriber addition is calculated as the cost of acquisition divided by the gross subscriber activations during the period.

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

Retention volume represents the number of subscriber units retained in the period through marketing and promotional efforts that result in client upgrades or contract renewals.

Wireless subscriber unit (subscriber) is defined as an active recurring mobile revenue-generating unit (e.g. mobile phone, tablet or mobile Internet key) with a unique subscriber identifier (SIM or IMEI number). In addition, TELUS has a direct billing or support relationship with the user of each device. Subscriber units exclude machine-to-machine (M2M) devices (a subset of the Internet of Things), such as those used for asset tracking, remote control monitoring and meter readings, vending machines and wireless automated teller machines.

Wireline subscriber connection is defined as an active recurring revenue-generating unit that has access to stand-alone services, including Internet access, TELUS TV and residential network access lines (NALs). In addition, TELUS has a direct billing or support relationship with the user of each service. Reported subscriber units exclude business NALs as the impact of migrating from voice lines to IP services has led to business NAL losses without a similar decline in revenue, thus diminishing its relevance as a key performance indicator.

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