6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

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

For the month of November 2017
Commission File Number 001-15144

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 office)

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 ¨                           Form 40-F x

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

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

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. 333-213497), the registration statement on Form F-3 (File No. 333-186874) and the registration statement on Form S-8 (File No. 333-181463), 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, Corporate Affairs, and Chief Legal and Governance Officer

Date: November 9, 2017

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, 2017

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	2017			2016			2017			2016
OPERATING REVENUES
Service		$	3,174		$	3,045		$	9,292		$	8,921
Equipment		181			180			507			516
Revenues arising from contracts with customers		3,355			3,225			9,799			9,437
Other operating income	6	11			13			38			57
		3,366			3,238			9,837			9,494
OPERATING EXPENSES
Goods and services purchased		1,531			1,426			4,277			4,057
Employee benefits expense	7	639			681			1,909			1,977
Depreciation	17	410			388			1,203			1,158
Amortization of intangible assets	18	137			127			402			356
		2,717			2,622			7,791			7,548
OPERATING INCOME		649			616			2,046			1,946
Financing costs	8	149			129			429			386
INCOME BEFORE INCOME TAXES		500			487			1,617			1,560
Income taxes	9	130			132			420			411
NET INCOME		370			355			1,197			1,149
OTHER COMPREHENSIVE INCOME	10
Items that may subsequently be reclassified to income
Change in unrealized fair value of derivatives designated as cash flow hedges		12			(4		)	22			(13		)
Foreign currency translation adjustment arising from translating financial statements of foreign operations		(5		)	2			(2		)	4
Change in unrealized fair value of available-for-sale financial assets		(2		)	2			(2		)	(1		)
		5			—			18			(10		)
Item never subsequently reclassified to income
Employee defined benefit plan re-measurements		(22		)	150			64			167
		(17		)	150			82			157
COMPREHENSIVE INCOME		$	353		$	505		$	1,279		$	1,306
NET INCOME ATTRIBUTABLE TO:
Common Shares		$	367		$	348		$	1,179		$	1,142
Non-controlling interests		3			7			18			7
		$	370		$	355		$	1,197		$	1,149
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Common Shares		$	351		$	501		$	1,260		$	1,298
Non-controlling interests		2			4			19			8
		$	353		$	505		$	1,279		$	1,306
NET INCOME PER COMMON SHARE	11
Basic		$	0.62		$	0.59		$	1.99		$	1.93
Diluted		$	0.62		$	0.59		$	1.99		$	1.93
TOTAL WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		594			592			592			593
Diluted		594			592			593			593

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

September 30, 2017

2

condensed interim consolidated statements of financial position (unaudited)

As at (millions)	Note	September 30, 2017		December 31, 2016
ASSETS
Current assets
Cash and temporary investments, net		$	488	$	432
Accounts receivable	16	1,539		1,471
Income and other taxes receivable		54		9
Inventories	1(b)	356		318
Prepaid expenses		359		233
Current derivative assets	4(d)	5		11
		2,801		2,474
Non-current assets
Property, plant and equipment, net	17	11,184		10,464
Intangible assets, net	18	10,651		10,364
Goodwill, net	18	4,215		3,787
Other long-term assets	20	715		640
		26,765		25,255
		$	29,566	$	27,729
LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Short-term borrowings	22	$	100	$	100
Accounts payable and accrued liabilities	23	2,447		2,330
Income and other taxes payable		43		37
Dividends payable	12	292		284
Advance billings and customer deposits	24	769		737
Provisions	25	66		124
Current maturities of long-term debt	26	1,357		1,327
Current derivative liabilities	4(d)	30		12
		5,104		4,951
Non-current liabilities
Provisions	25	473		395
Long-term debt	26	12,261		11,604
Other long-term liabilities	27	827		736
Deferred income taxes		2,404		2,107
		15,965		14,842
Liabilities		21,069		19,793
Owners’ equity
Common equity	28	8,458		7,917
Non-controlling interests		39		19
		8,497		7,936
		$	29,566	$	27,729
Contingent Liabilities	29

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 28)											other						Non-
(millions)	Note	Number of shares		Share capital			Contributed surplus			Retained earnings			comprehensiveincome			Total			controlling interests		Total
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
Reversal of opening liability		—		14			—			46			—			60			—		60
Recognition of closing liability		—		(9		)	—			(39		)	—			(48		)	—		(48		)
Change in ownership interests of subsidiary		—		—			236			—			—			236			4		240
Balance as at September 30, 2016		591		$	5,028		$	369		$	2,836		$	48		$	8,281		$	12	$	8,293
Balance as at January 1, 2017		590		$	5,029		$	372		$	2,474		$	42		$	7,917		$	19	$	7,936
Net income		—		—			—			1,179			—			1,179			18		1,197
Other comprehensive income	10	—		—			—			64			17			81			1		82
Dividends	12	—		—			—			(868		)	—			(868		)	—		(868		)
Dividends reinvested and optional cash payments	12(b), 13(c)	1		48			—			—			—			48			—		48
Share option award net-equity settlement feature	13(d)	1		1			(1		)	—			—			—			—		—
Issue of shares in business combination	18(b)	2		100			—			—			—			100			—		100
Change in ownership interests of subsidiary	31(b)	—		—			(2		)	—			—			(2		)	1		(1		)
Other		—		3			—			—			—			3			—		3
Balance as at September 30, 2017		594		$	5,181		$	369		$	2,849		$	59		$	8,458		$	39	$	8,497

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	2017			2016			2017			2016
OPERATING ACTIVITIES
Net income		$	370		$	355		$	1,197		$	1,149
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		547			515			1,605			1,514
Deferred income taxes	9	57			47			243			48
Share-based compensation expense, net	13(a)	22			27			61			65
Net employee defined benefit plans expense	14(a)	20			23			61			67
Employer contributions to employee defined benefit plans		(17		)	(14		)	(52		)	(53		)
Other		10			8			15			(5		)
Net change in non-cash operating working capital	31(a)	124			71			(162		)	(298		)
Cash provided by operating activities		1,133			1,032			2,968			2,487
INVESTING ACTIVITIES
Cash payments for capital assets, excluding spectrum licences	31(a)	(794		)	(711		)	(2,344		)	(1,971		)
Cash payments for spectrum licences		—			—			—			(145		)
Cash payments for acquisitions, net	18(b)	(82		)	(14		)	(560		)	(16		)
Real estate joint ventures advances	21(c)	(6)			(5		)	(19		)	(28		)
Real estate joint venture receipts	21(c)	14			50			18			91
Proceeds on disposition		6			3			12			3
Other		(4		)	(3		)	(16		)	(9		)
Cash used by investing activities		(866		)	(680		)	(2,909		)	(2,075		)
FINANCING ACTIVITIES	31(b)
Dividends paid to holders of Common Shares	12(a)	(269		)	(274		)	(813		)	(798		)
Purchase of Common Shares for cancellation		—			(19		)	—			(140		)
Issuance and repayment of short-term borrowings		—			(3		)	—			—
Long-term debt issued	26	1,267			1,336			5,328			4,623
Redemptions and repayment of long-term debt	26	(1,149		)	(1,403		)	(4,509		)	(4,186		)
Issue of shares by subsidiary to non-controlling interests		—			(1		)	—			291
Other		1			(6)			(9		)	(15		)
Cash used by financing activities		(150		)	(370		)	(3		)	(225		)
CASH POSITION
Increase (decrease) in cash and temporary investments, net		117			(18		)	56			187
Cash and temporary investments, net, beginning of period		371			428			432			223
Cash and temporary investments, net, end of period		$	488		$	410		$	488		$	410
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS
Interest paid		$	(146	)	$	(132	)	$	(413	)	$	(387	)
Interest received		$	1		$	—		$	2		$	1
Income taxes paid, net		$	(20	)	$	(148	)	$	(199	)	$	(571	)

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

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notes to condensed interim consolidated financial statements (unaudited)

SEPTEMBER 30, 2017

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	9
4.	Financial instruments	11
Consolidated results of operations focused
5.	Segment information	16
6.	Other operating income	18
7.	Employee benefits expense	18
8.	Financing costs	18
9.	Income taxes	19
10.	Other comprehensive income	20
11.	Per share amounts	20
12.	Dividends per share	21
13.	Share-based compensation	21
14.	Employee future benefits	25
15.	Restructuring and other costs	26
Consolidated financial position focused
16.	Accounts receivable	26
17.	Property, plant and equipment	27
18.	Intangible assets and goodwill	28
19.	Leases	32
20.	Other long-term assets	32
21.	Real estate joint ventures	32
22.	Short-term borrowings	35
23.	Accounts payable and accrued liabilities	35
24.	Advance billings and customer deposits	36
25.	Provisions	36
26.	Long-term debt	37
27.	Other long-term liabilities	39
28.	Common Share capital	39
29.	Contingent liabilities	40
Other
30.	Related party transactions	42
31.	Additional statement of cash flow information	43

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, 2016.

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, 2016, 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 three-month and nine-month periods ended September 30, 2017, were authorized by our Board of Directors for issue on November 9, 2017.

6

notes to condensed interim consolidated financial statements (unaudited)

(b)Inventories

Our inventories consist primarily of wireless handsets, parts and accessories (totalling $297 million (December 31, 2016 — totalling $266 million)) and communications equipment held for resale. Costs of goods sold for the three-month and nine-month periods ended September 30, 2017, totalled $508 million (2016 — $471 million) and $1,360 million (2016 — $1,277 million), respectively.

2accounting policy developments

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

Amendments to standards arising from Annual Improvements to IFRSs 2014-2016 Cycle are required to be applied for years beginning on or after January 1, 2017 (for IFRS 12, Disclosure of Interests in Other Entities), and January 1, 2018 (for the balance of the amendments); such application has 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 the classification and measurement of financial instruments, a single forward-looking “expected loss” impairment model and a reformed approach to hedge accounting. Based upon our current facts and circumstances, we do not expect our financial performance or disclosure to be materially affected by the application of the standard and expect to apply the standard retrospectively to prior reporting periods.

·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 will apply the standard retrospectively to prior reporting periods, subject to permitted and elected practical expedients.

The effects of the new standard and the materiality of those effects will vary by industry and entity. Like many other telecommunications companies, we will 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 the capitalization of the costs of contract fulfilment (as defined by the new standard).

Revenue — timing of recognition; classification

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

We are retrospectively applying the new standard, such application being subject to associated decisions in respect of transitional provisions and permitted practical expedients. The contract asset that will initially be recorded upon transition to the new standard represents revenues that will have not been reflected, at any time, in our periodic results of operations, but, if not for transitioning to the new standard, would have been; the effect of this “pulling forward” of revenues is expected to be somewhat muted by the composite ongoing inception, maturation and expiration of millions of multi-year contracts with our customers. Our current estimate of the January 1, 2017,

7

notes to condensed interim consolidated financial statements (unaudited)

contract asset initially to be recorded upon transition to the new standard, excluding the effects of required netting of contract assets and contract liabilities (advance billing and customer deposits), is in the order of magnitude of $1.2 billion; the transitional contract asset, net of income tax effects, will be recognized as an adjustment to opening retained earnings.

Costs of contract acquisition; costs of contract fulfilment — timing of recognition

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 the timing of recognition will be. The new standard will result in our wireless and wireline 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 (immediately expensing such costs).

Our current estimate of the combined January 1, 2017, unamortized costs of contract acquisition and unamortized costs of contract fulfilment initially to be recorded as assets upon transition to the new standard is in the order of magnitude of $0.3 billion; the transitional amounts, net of income tax effects, will be recognized as an adjustment to opening retained earnings.

Implementation

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 in-scope for purposes of transitioning to the new standard. The incremental compilation of historical data is underway and we expect that we will have completed the historical data compilation by the end of 2017.

After a multi-year expenditure of time and effort, we have now developed the necessary accounting policies, estimates, judgments and processes necessary to transition to the new standard. Upon completion of the implementation of these developed items, including implementation of the critical incremental requirements of our information technology systems, we have commenced the incremental compilation of historical data, as well as the accounting for that data, all of which is necessary to transition to, and to make reasonable quantitative estimates (which will also be subject to associated incremental internal controls over financial reporting) of the effects of, the new standard.

At this time it is not possible to make any further reasonable quantitative estimates of the effects of the new standard prior to completing our December 31, 2017, annual consolidated financial statements.

The forgoing discussion of the implications of the new standard should be read in conjunction with the Illustrative example in Note 2(b) — Accounting policy developments in our audited consolidated financial statements for the year ended December 31, 2016.

We are using the following practical expedients provided for in, and transitioning to, the new standard:

·No restatement for contracts which were completed as at January 1, 2017, or earlier.

·No restatement for contracts which were modified prior to January 1, 2017. The aggregate effect of all such modifications will be reflected when identifying satisfied and unsatisfied performance obligations and the transaction prices to be allocated thereto and when determining the transaction prices.

For purposes of applying the new standard on an ongoing basis, we are using the following practical expedients provided for in the new standard:

·No adjustment of the contracted amount of consideration for the effects of financing components when at the inception of the contract we expect that the effect of the financing component is not significant at the individual contract level.

·No deferral of contract acquisition costs when the amortization period for such costs would be one year or less.

·When estimating minimum transaction prices allocated to remaining unfulfilled, or partially unfulfilled, performance obligations, exclusion of amounts arising from contracts originally expected to have a duration of one year or less as well as amounts arising from contracts in which we may recognize and bill revenue in an amount that corresponds directly with our completed performance obligations.

8

notes to condensed interim consolidated financial statements (unaudited)

·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 those for most leases that would be currently accounted for as operating leases. Both leases with durations of 12 months or less and leases for low-value assets may be 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 non-executory lease expenses being presented as amortization of lease assets and financing costs arising from lease liabilities rather than as 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 increases in cash flows from operating activities offset equally by decreases in cash flows from financing activities. This is due to the payment of the “principal” component of leases that 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, however, we expect that we will apply the standard retrospectively to prior reporting periods, subject to permitted and elected practical expedients; we will apply the new standard effective January 1, 2019. Our current estimate of the time and effort necessary to develop and implement the accounting policies, estimates 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 2018. We expect that our Consolidated statement of financial position will be materially affected, as will those financial metrics related to both debt and results of operations; however, at this time it is not possible to make reasonable quantitative estimates of the effects of the new standard.

(c)Public Company Accounting Oversight Board (United States) standard not yet effective and not yet applied

The Public Company Accounting Oversight Board has adopted an auditing standard in June 2017, which the United States Securities and Exchange Commission approved in October 2017, that requires auditors to include significantly more information in their audit reports on financial statements including clarification of existing language, disclosure of their tenure and information about critical audit matters (matters communicated to a company’s audit committee that relate to material accounts or disclosures and which involved especially challenging, subjective and/or complex auditor judgment). The new audit report requirement applies to our fiscal 2017 year, except for the critical audit matters which is to first be required to be reported relative to our fiscal 2019 year.

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 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.

9

notes to condensed interim consolidated financial statements (unaudited)

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, business acquisition-related provisions, immediately vesting transformative compensation expense, long-term debt prepayment premium and income tax-related adjustments.

During 2017, our financial objectives, which are reviewed annually and which were unchanged from 2016 included 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	2017			2016
Components of debt and coverage ratios
Net debt 1		$	13,394		$	12,217
EBITDA — excluding restructuring and other costs 2		$	4,847		$	4,668
Net interest cost 3		$	568		$	548
Debt ratio
Net debt to EBITDA — excluding restructuring and other costs	2.00 – 2.50 4	2.76			2.62
Coverage ratios
Earnings coverage 5		4.0			4.6
EBITDA — excluding restructuring and other costs interest coverage 6		8.5			8.5
Other measures 7
Dividend payout ratio	65%–75%	91		%	76		%
Dividend payout ratio of adjusted net earnings		79		%	77		%

(1)Net debt is calculated as follows:

As at September 30	Note	2017			2016
Long-term debt	26	$	13,618		$	12,454
Debt issuance costs netted against long-term debt		72			67
Derivative (assets) liabilities, net		76			24
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)		16			(18		)
Cash and temporary investments, net		(488		)	(410		)
Short-term borrowings	22	100			100
Net debt		$	13,394		$	12,217

(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, 2017	$	3,651		$	79		$	3,730
Year ended December 31, 2016	4,229			479			4,708
Deduct
Nine-month period ended September 30, 2016	(3,460		)	(131		)	(3,591		)
EBITDA — excluding restructuring and other costs	$	4,420		$	427		$	4,847

(3)Net interest cost is defined as financing costs, excluding employee defined benefit plans net interest, 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).

* 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.

10

notes to condensed interim consolidated financial statements (unaudited)

(4)Our long-term objective range for this ratio is 2.00 — 2.50 times. The ratio as at September 30, 2017, is outside the long-term objective range. In the medium term, we may permit, and have permitted, this ratio to go outside the objective range (for long-term investment opportunities), but 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. We are 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 26(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)Our target guideline for the dividend payout ratio is 65%–75% of sustainable earnings on a prospective basis; however we currently expect that we will be within our target guideline when considered on a prospective basis within the medium term.

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

12-month periods ended September 30	2017			2016
Net income attributable to Common Shares	$	1,260		$	1,403
Gain on exchange of wireless spectrum licences, after income taxes	—			(13		)
Gain and net equity income related to real estate redevelopment project, after income taxes	(7		)	(11		)
Business acquisition-related provisions, after income taxes	2			13
Immediately vesting transformative compensation expense, after income taxes	224			—
Income tax-related adjustments	(18		)	(11		)
Adjusted net earnings attributable to Common Shares	$	1,461		$	1,381

Net debt to EBITDA — excluding restructuring and other costs was 2.76 times as at September 30, 2017, up from 2.62 times one year earlier. The increase in net debt exceeded the growth in EBITDA — excluding restructuring and other costs. The earnings coverage ratio for the twelve-month period ended September 30, 2017, was 4.0 times, down from 4.6 times one year earlier. Higher borrowing costs reduced the ratio by 0.2 and lower income before borrowing costs and income taxes reduced the ratio by 0.4. The EBITDA — excluding restructuring and other costs interest coverage ratio for the twelve-month period ended September 30, 2017, was 8.5 times, unchanged from one year earlier. Growth in EBITDA — excluding restructuring and other costs increased the ratio by 0.3, while an increase in net interest costs reduced the ratio by 0.3.

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, 2017		December 31, 2016
Cash and temporary investments, net	$	488	$	432
Accounts receivable	1,539		1,471
Derivative assets	16		17
	$	2,043	$	1,920

Cash and temporary investments

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

Accounts receivable

Credit risk associated with accounts receivable is inherently managed by the size and diversity of our large 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 had not been made as at the dates of the Consolidated statements of financial position. As at September 30, 2017, the weighted average age of customer accounts receivable was 25 days (December 31, 2016 — 26 days) and the weighted average age of past-due customer accounts receivable was 61 days (December 31, 2016 — 61 days). Any late payment charges are levied at an industry-based market or negotiated rate on outstanding non-current customer account balances.

11

notes to condensed interim consolidated financial statements (unaudited)

As at (millions)	Note	September 30, 2017			December 31, 2016
Customer accounts receivable, net of allowance for doubtful accounts
Less than 30 days past billing date		$	872		$	897
30-60 days past billing date		159			176
61-90 days past billing date		39			35
More than 90 days past billing date		43			55
		$	1,113		$	1,163
Customer accounts receivable	16	$	1,160		$	1,217
Allowance for doubtful accounts		(47		)	(54		)
		$	1,113		$	1,163

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 above 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)	2017			2016			2017			2016
Balance, beginning of period	$	50		$	52		$	54		$	52
Additions (doubtful accounts expense)	11			15			40			44
Net use	(14		)	(14		)	(47		)	(43		)
Balance, end of period	$	47		$	53		$	47		$	53

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 an agreement to sell trade receivables to an arm’s-length securitization trust (Note 22);

·maintaining bilateral bank facilities (Note 22) and syndicated credit facilities (Note 26(d),(e));

·maintaining a commercial paper program (Note 26(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 26(f). As at September 30, 2017, we could offer $1.2 billion of debt or equity securities pursuant to a shelf prospectus that is in effect until April 2018 (December 31, 2016 — $2.2 billion). 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:

12

notes to condensed interim consolidated financial statements (unaudited)

	Non-derivative								Derivative
	Non-interest				Construction		Composite long-term debt
As at September 30, 2017	bearing financial		Short-term		credit facilities commitment 2		Long-term debt 1		Currency swap agreement amounts to be exchanged 3					Currency swap agreement amounts to be exchanged
(millions)	liabilities		borrowings 1		(Note 21)		(Note 26)		(Receive)			Pay		(Receive)			Pay		Total
2017	$	1,801	$	—	$	74	$	1,096	$	(972	)	$	977	$	(145	)	$	152	$	2,983
2018	418		102		—		912		(169		)	170		(394		)	407		1,446
2019	16		—		—		1,535		(44		)	46		—			—		1,553
2020	10		—		—		1,484		(44		)	46		—			—		1,496
2021	81		—		—		1,780		(44		)	46		—			—		1,863
Thereafter	15		—		—		13,009		(1,627		)	1,725		—			—		13,122
Total	$	2,341	$	102	$	74	$	19,816	$	(2,900	)	$	3,010	$	(539	)	$	559	$	22,463
							Total (Note 26(f))					$	19,926

(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, 2017.

(2)The drawdowns on the construction credit facilities are expected to occur as construction progresses through 2019.

(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, 2017. 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, 2016	bearing financial		Short-term		credit facilities commitment 2		Long-term debt 1		Currency swap agreement amounts to be exchanged 3							Currency swap agreement amounts to be exchanged
(millions)	liabilities		borrowings 1		(Note 21)		(Note 26)		(Receive)			Pay		Other		(Receive)			Pay		Total
2017	$	1,949	$	1	$	93	$	1,832	$	(634	)	$	634	$	3	$	(475	)	$	469	$	3,872
2018	227		102		—		750		(23		)	23		—		—			—		1,079
2019	16		—		—		1,498		(23		)	23		—		—			—		1,514
2020	9		—		—		1,447		(23		)	23		—		—			—		1,456
2021	9		—		—		1,711		(23		)	23		—		—			—		1,720
Thereafter	5		—		—		11,584		(930		)	921		—		—			—		11,580
Total	$	2,215	$	103	$	93	$	18,822	$	(1,656	)	$	1,647	$	3	$	(475	)	$	469	$	21,221
							Total					$	18,813

(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, 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 December 31, 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.

(c)Market risks

Net income and other comprehensive income for the nine-month periods ended September 30, 2017 and 2016, 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.

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.

13

notes to condensed interim consolidated financial statements (unaudited)

Nine-month periods ended September 30	Net income						Other comprehensive income						Comprehensive income
(increase (decrease) in millions)	2017			2016			2017			2016			2017			2016
Reasonably possible changes in market risks 1
10% change in Cdn.$: U.S.$ exchange rate
Canadian dollar appreciates	$	—		$	(2	)	$	(10	)	$	(5	)	$	(10	)	$	(7	)
Canadian dollar depreciates	$	—		$	2		$	10		$	9		$	10		$	11
25% 2 change in Common Share price 3
Price increases	$	(12	)	$	(14	)	$	16		$	17		$	4		$	3
Price decreases	$	14		$	10		$	(16	)	$	(17	)	$	(2	)	$	(7	)

(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 nine-month data period and calculated on a monthly basis, the volatility of our Common Share price as at September 30, 2017, was 5.2% (2016 – 14.1%).

(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.

(d)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 provisions) 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 of similar maturities subject to similar risks (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.

					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, 2017		Dec. 31, 2016		Sept. 30, 2017		Dec. 31, 2016		Sept. 30, 2017		Dec. 31, 2016		Sept. 30, 2017		Dec. 31, 2016
Assets
Foreign exchange derivatives	$	4	$	10	$	—	$	—	$	4	$	10	$	—	$	—
Share-based compensation derivatives	12		7		—		—		12		7		—		—
Available-for-sale portfolio investments	57		62		—		—		57		62		—		—
	$	73	$	79	$	—	$	—	$	73	$	79	$	—	$	—
Liabilities
Foreign exchange derivatives	$	101	$	30	$	—	$	—	$	101	$	30	$	—	$	—
Share-based compensation derivatives	—		3		—		—		—		3		—		—
	$	101	$	33	$	—	$	—	$	101	$	33	$	—	$	—

14

notes to condensed interim consolidated financial statements (unaudited)

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, 2017				December 31, 2016
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	HFH 2	2018	$	79	$	1	$	263	$	7
Currency risks arising from U.S. dollar-denominated purchases	HFT 3	2017	$	—	—		$	8	—
Currency risks arising from U.S. dollar revenues	HFT 3	2018	$	10	—		$	4	—
Changes in share-based compensation costs (Note 13(b))	HFH 2	2017	$	9	1		$	6	1
Currency risks arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c))	HFH 2	2018	$	514	3		$	191	3
					$	5			$	11
Other Long-Term Assets 1
Derivatives used to manage
Changes in share-based compensation costs (Note 13(b))	HFH 2	2019	$	136	$	11	$	69	$	6
Current Liabilities 1
Derivatives used to manage
Currency risks arising from U.S. dollar-denominated purchases	HFH 2	2018	$	404	$	21	$	69	2
Currency risks arising from U.S. dollar revenues	HFT 3	2018	$	67	1		$	124	5
Changes in share-based compensation costs (Note 13(b))	HFH 2	2017	$	67	—		$	65	3
Currency risks arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c))	HFH 2	2017	$	587	8		$	422	2
					$	30			$	12
Other Long-Term Liabilities 1
Derivatives used to manage
Currency risks arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c))	HFH 2	2027	$	1,910	$	71	$	1,036	$	21

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

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

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

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, 2017				December 31, 2016
As at (millions)	Carrying value		Fair value		Carrying value		Fair value
Long-term debt (Note 26)	$	13,618	$	14,092	$	12,931	$	13,533

(e)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 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.

15

notes to condensed interim consolidated financial statements (unaudited)

	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
Periods ended September 30 (millions)	2017			2016			Location	2017			2016
THREE-MONTHS
Derivatives used to manage
Currency risks arising from U.S. dollar-denominated purchases	$	(12	)	$	5		Goods and services purchased	$	(5	)	$	(4	)
Changes in share-based compensation costs (Note 13(b))	1			9			Employee benefits expense	2			5
Currency risks arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c))	(70		)	(8		)	Financing costs	(94		)	10
	$	(81	)	$	6			$	(97	)	$	11
NINE-MONTHS
Derivatives used to manage
Currency risks arising from U.S. dollar-denominated purchases	$	(24	)	$	(19	)	Goods and services purchased	$	—		$	(6	)
Changes in share-based compensation costs (Note 13(b))	10			24			Employee benefits expense	7			11
Currency risks arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c))	(108		)	(60		)	Financing costs	(159		)	(42		)
	$	(122	)	$	(55	)		$	(152	)	$	(37	)

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 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	2017		2016			2017		2016
Derivatives used to manage currency risks	Financing costs	$	1	$	(1	)	$	5	$	(1	)

5segment information

General

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 operations for which can be clearly distinguished and for which the operating results are regularly reviewed by a chief operating decision-maker to make resource allocation decisions and to assess performance.

A significant judgment we make is in respect of distinguishing between our wireless and wireline operations and cash flows (and this extends to allocations of both direct and indirect expenses and of capital expenditures). The clarity of such distinction has been increasingly affected by the convergence and integration of our wireless and wireline telecommunications infrastructure and technology. The continued build-out of our technology-agnostic fibre-optic infrastructure, in combination with converged edge technology, has significantly affected this judgment, as has the commercialization of fixed-wireless telecommunications solutions for customers and the consolidation of our non-customer facing operations. As a result, it has become increasingly impractical and difficult to objectively and clearly distinguish between our wireless and wireline operations and cash flows.

As we do not currently aggregate operating segments, our reportable segments as at September 30, 2017, are also wireless and wireline. The wireless segment includes network revenues and equipment sales arising from mobile technologies. The wireline segment includes data revenues (which include Internet protocol; television; hosting, managed information technology and cloud-based services; business process outsourcing; and certain healthcare solutions), voice and other telecommunications services revenues (excluding wireless arising from mobile technologies), and equipment sales. Segmentation has been based on similarities in technology (mobile versus fixed), the technical expertise required to deliver the service 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 segment information regularly reported to our Chief Executive Officer (our chief operating decision-maker), and the reconciliations thereof to our revenues and income before income taxes, are as set out in the following table.

16

notes to condensed interim consolidated financial statements (unaudited)

Three-month periods ended	Wireless				Wireline				Eliminations						Consolidated
September 30 (millions)	2017		2016		2017		2016		2017			2016			2017		2016
Operating revenues
External revenues
Service	$	1,800	$	1,685	$	1,374	$	1,360	$	—		$	—		$	3,174	$	3,045
Equipment	129		129		52		51		—			—			181		180
Revenues arising from contracts with customers	1,929		1,814		1,426		1,411		—			—			3,355		3,225
Other operating income	5		4		6		9		—			—			11		13
	1,934		1,818		1,432		1,420		—			—			3,366		3,238
Inter-service revenues	11		15		51		48		(62		)	(63		)	—		—
	$	1,945	$	1,833	$	1,483	$	1,468	$	(62	)	$	(63	)	$	3,366	$	3,238
EBITDA 1	$	788	$	759	$	408	$	372	$	—		$	—		$	1,196	$	1,131
CAPEX 2	$	237	$	295	$	584	$	492	$	—		$	—		$	821	$	787
									Operating revenues — external (above)						$	3,366	$	3,238
									Goods and services purchased						1,531		1,426
									Employee benefits expense						639		681
									EBITDA (above)						1,196		1,131
									Depreciation						410		388
									Amortization						137		127
									Operating income						649		616
									Financing costs						149		129
									Income before income taxes						$	500	$	487

(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 31(a) for a reconciliation of capital expenditures to cash payments for capital assets reported in the Consolidated statements of cash flows.

Nine-month periods ended	Wireless				Wireline				Eliminations						Consolidated
September 30 (millions)	2017		2016		2017		2016		2017			2016			2017		2016
Operating revenues
External revenues
Service	$	5,211	$	4,880	$	4,081	$	4,041	$	—		$	—		$	9,292	$	8,921
Equipment	347		362		160		154		—			—			507		516
Revenues arising from contracts with customers	5,558		5,242		4,241		4,195		—			—			9,799		9,437
Other operating income	5		32		33		25		—			—			38		57
	5,563		5,274		4,274		4,220		—			—			9,837		9,494
Inter-service revenues	33		43		155		143		(188		)	(186		)	—		—
	$	5,596	$	5,317	$	4,429	$	4,363	$	(188	)	$	(186	)	$	9,837	$	9,494
EBITDA 1	$	2,391	$	2,308	$	1,260	$	1,152	$	—		$	—		$	3,651	$	3,460
CAPEX 2	$	745	$	733	$	1,610	$	1,441	$	—		$	—		$	2,355	$	2,174
									Operating revenues — external (above)						$	9,837	$	9,494
									Goods and services purchased						4,277		4,057
									Employee benefits expense						1,909		1,977
									EBITDA (above)						3,651		3,460
									Depreciation						1,203		1,158
									Amortization						402		356
									Operating income						2,046		1,946
									Financing costs						429		386
									Income before income taxes						$	1,617	$	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 31(a) for a reconciliation of capital expenditures to cash payments for capital assets reported in the 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 significant revenues that we attribute to countries other than Canada (our

17

notes to condensed interim consolidated financial statements (unaudited)

country of domicile), nor do we have significant amounts of property, plant, equipment, intangible assets and/or goodwill located outside of Canada.

6other operating income

		Three months					Nine months
Periods ended September 30 (millions)	Note	2017		2016			2017		2016
Government assistance, including deferral account amortization		$	7	$	10		$	21	$	28
Investment income		—		10			5		19
Interest income	21(c)	—		—			—		1
Gain (loss) on disposal of assets and other		4		(7		)	12		9
		$	11	$	13		$	38	$	57

7employee benefits expense

		Three months						Nine months
Periods ended September 30 (millions)	Note	2017			2016			2017			2016
Employee benefits expense — gross
Wages and salaries		$	644		$	649		$	1,923		$	1,907
Share-based compensation	13	31			32			92			87
Pensions — defined benefit	14(a)	20			23			61			67
Pensions — defined contribution	14(b)	23			24			67			68
Restructuring costs	15(a)	1			37			12			92
Other		40			35			117			113
		759			800			2,272			2,334
Capitalized internal labour costs
Property, plant and equipment		(80		)	(79		)	(244		)	(236		)
Intangible assets subject to amortization		(40		)	(40		)	(119		)	(121		)
		(120		)	(119		)	(363		)	(357		)
		$	639		$	681		$	1,909		$	1,977

8financing costs

		Three months						Nine months
Periods ended September 30 (millions)	Note	2017			2016			2017			2016
Interest expense
Interest on long-term debt — gross		$	141		$	133		$	419		$	400
Capitalized long-term debt interest 1		—			(12		)	—			(40		)
Interest on long-term debt — net		141			121			419			360
Interest on short-term borrowings and other		1			1			3			3
Interest accretion on provisions	25	2			3			8			9
		144			125			430			372
Employee defined benefit plans net interest	14(a)	1			1			4			3
Foreign exchange		5			3			(3		)	12
		150			129			431			387
Interest income		(1		)	—			(2		)	(1		)
		$	149		$	129		$	429		$	386

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

18

notes to condensed interim consolidated financial statements (unaudited)

9income taxes

	Three months						Nine months
Periods ended September 30 (millions)	2017			2016			2017			2016
Current income tax expense
For the current reporting period	$	75		$	108		$	258		$	388
Adjustments recognized in the current period for income taxes of prior periods	(2		)	(23		)	(81		)	(25		)
	73			85			177			363
Deferred income tax expense (recovery)
Arising from the origination and reversal of temporary differences	57			27			165			25
Revaluation of deferred income tax liability to reflect future statutory income tax rates	—			—			—			1
Adjustments recognized in the current period for income taxes of prior periods	—			20			78			22
	57			47			243			48
	$	130		$	132		$	420		$	411

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

Three-month periods ended September 30 ($ in millions)	2017					2016
Income taxes computed at applicable statutory rates	$	133		26.6	%	$	129		26.6	%
Adjustments recognized in the current period for income taxes of prior periods	(2		)	(0.4	)	(3		)	(0.6	)
Other	(1		)	(0.2	)	6			1.1
Income tax expense per Consolidated statements of income and other comprehensive income	$	130		26.0	%	$	132		27.1	%

Nine-month periods ended September 30 ($ in millions)	2017					2016
Income taxes computed at applicable statutory rates	$	431		26.7	%	$	414		26.5	%
Adjustments recognized in the current period for income taxes of prior periods	(3		)	(0.2	)	(3		)	(0.2	)
Revaluation of deferred income tax liability to reflect future income tax rates	—			—		1			0.1
Other	(8		)	(0.5	)	(1		)	(0.1	)
Income tax expense per Consolidated statements of income and other comprehensive income	$	420		26.0	%	$	411		26.3	%

19

notes to condensed interim consolidated financial statements (unaudited)

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(e))									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, 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
Accumulated balance as at July 1, 2017							$	(10	)	$	51		$	16		$	57
Other comprehensive income (loss)
Amount arising	$	(81	)	$	97		16			(5		)	(3		)	8			$	(30	)	$	(22	)
Income taxes	$	(14	)	$	18		4			—			(1		)	3			(8		)	(5		)
Net							12			(5		)	(2		)	5			$	(22	)	$	(17	)
Accumulated balance as at September 30, 2017							$	2		$	46		$	14		$	62
NINE-MONTH PERIODS ENDED SEPTEMBER 30
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
Accumulated balance as at January 1, 2017							$	(20	)	$	48		$	16		$	44
Other comprehensive income (loss)
Amount arising	$	(122	)	$	152		30			(2		)	(3		)	25			$	88		$	113
Income taxes	$	(18	)	$	26		8			—			(1		)	7			24			31
Net							22			(2		)	(2		)	18			$	64		$	82
Accumulated balance as at September 30, 2017							$	2		$	46		$	14		$	62
Attributable to:
Common Shares																$	59
Non-controlling interests																3
																$	62

As at September 30, 2017, 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)	2017	2016	2017	2016
Basic total weighted average number of Common Shares outstanding	594	592	592	593
Effect of dilutive securities
Share option awards	—	—	1	—
Diluted total weighted average number of Common Shares outstanding	594	592	593	593

For the three-month and nine-month periods ended September 30, 2017 and 2016, no outstanding TELUS Corporation share option awards were excluded in the computation of diluted net income per Common Share.

20

notes to condensed interim consolidated financial statements (unaudited)

12dividends per share

(a)Dividends declared

Nine-month periods ended September 30 (millions except	2017						2016
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. 10, 2017	$	0.4800	Apr 3, 2017	$	283	Mar. 11, 2016	$	0.44	Apr. 1, 2016	$	261
Quarter 2 dividend	Jun. 9, 2017	0.4925		Jul. 4, 2017	293		Jun. 10, 2016	0.46		Jul. 4, 2016	274
Quarter 3 dividend	Sep. 8, 2017	0.4925		Oct. 2, 2017	292		Sep. 9, 2016	0.46		Oct. 3, 2016	272
		$	1.4650		$	868		$	1.36		$	807

On November 8, 2017, the Board of Directors declared a quarterly dividend of $0.5050 per share on our issued and outstanding Common Shares payable on January 2, 2018, to holders of record at the close of business on December 11, 2017. The final amount of the dividend payment depends upon the number of Common Shares issued and outstanding at the close of business on December 11, 2017.

(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.

In respect of Common Share dividends declared during the three-month and nine-month periods ended September 30, 2017, $15 million (2016 — $14 million) and $46 million (2016 — $44 million), respectively, were to be reinvested in Common Shares the trustee acquired from Treasury (2016 — acquired in the stock market), with no discount applicable.

Under the share purchase feature of the Plan, eligible shareholders can make optional cash payments and purchase our Common Shares at the market price without brokerage commissions or service charges; such purchases are subject to a minimum investment of $100 per transaction and a maximum investment of $20,000 per calendar year.

13share-based compensation

(a)Details of share-based compensation expense

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

Three-month periods ended September 30 (millions)		2017							2016
	Note	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	(b)	$	20	$	2		$	22	$	25	$	2		$	27
Employee share purchase plan	(c)	9		(9		)	—		9		(9		)	—
		$	29	$	(7	)	$	22	$	34	$	(7	)	$	27

Nine-month periods ended September 30 (millions)		2017							2016
	Note	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	(b)	$	57	$	4		$	61	$	63	$	2		$	65
Employee share purchase plan	(c)	27		(27		)	—		28		(28		)	—
		$	84	$	(23	)	$	61	$	91	$	(26	)	$	65

For the three-month and nine-month periods ended September 30, 2017, the associated operating cash outflows in respect of restricted stock units were net of cash inflows arising from the cash-settled equity swap agreements of

21

notes to condensed interim consolidated financial statements (unaudited)

$2 million (2016 – $2 million) and $6 million (2016 – $6 million), respectively. For the three-month and nine-month periods ended September 30, 2017, the income tax benefit arising from share-based compensation was $9 million (2016 – $9 million) and $23 million (2016 – $24 million), respectively.

(b)Restricted stock units

General

We use restricted stock units as a form of retention and incentive compensation. Each restricted stock unit is nominally equal in value to one equity share and is nominally entitled to the dividends that would arise thereon if it were an issued and outstanding equity 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 equity 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.

TELUS Corporation restricted stock units

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%) that depends 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 outstanding TELUS Corporation non-vested restricted stock units.

Number of non-vested restricted stock units as at	September 30, 2017	December 31, 2016
Restricted stock units without market performance conditions
Restricted stock units with only service conditions	4,957,948	3,260,745
Notional subset affected by total customer connections performance condition	217,463	130,234
	5,175,411	3,390,979
Restricted stock units with market performance conditions
Notional subset affected by relative total shareholder return performance condition	652,388	390,703
	5,827,799	3,781,682

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

	Three months						Nine months
	Number of restricted stock units 1				Weighted average grant-date		Number of restricted stock units 1				Weighted average grant-date
Periods ended September 30, 2017	Non-vested		Vested		fair value		Non-vested		Vested		fair value
Outstanding, beginning of period
Non-vested	5,131,303		—		$	42.45	3,390,979		—		$	41.71
Vested	—		9,159		$	41.06	—		29,108		$	38.09
Issued
Initial award	17,475		—		$	45.19	1,790,088		—		$	43.50
In lieu of dividends	56,539		102		$	44.50	149,998		303		$	43.63
Vested	(7,533	)	7,533		$	42.27	(29,819	)	29,819		$	42.10
Settled in cash	—		(7,533	)	$	42.34	—		(49,969	)	$	41.47
Forfeited and cancelled	(22,373	)	—		$	42.32	(125,835	)	—		$	42.04
Outstanding, end of period
Non-vested	5,175,411		—		$	42.38	5,175,411		—		$	42.38
Vested	—		9,261		$	32.93	—		9,261		$	32.93

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

22

notes to condensed interim consolidated financial statements (unaudited)

With respect to certain issuances of TELUS Corporation restricted stock units, we have entered into cash-settled equity forward agreements that fix our cost; that information, as well as a schedule of non-vested TELUS Corporation restricted stock units outstanding as at September 30, 2017, 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
2017	1,677,719	$	45.30	37,734	1,715,453
2018	1,792,286	$	40.91	42,144	1,834,430
2019	1,385,734	$	45.46	239,794	1,625,528
	4,855,739			319,672	5,175,411

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

TELUS International (Cda) Inc. restricted stock units

We also award restricted stock units that largely have the same features as the TELUS Corporation restricted stock units, but have a variable payout (0% – 150%) that depends upon the achievement of TELUS International (Cda) Inc. financial performance and non-market quality-of-service performance conditions.

The following table presents a summary of the activity related to TELUS International (Cda) Inc. restricted stock units.

	2017
	U.S.$ denominated						Canadian $ denominated
	Number of restricted stock units				Grant-date		Number of restricted stock units		Grant-date
Nine-month period ended September 30	Non-vested		Vested		fair value		Non-vested	Vested	fair value
Outstanding, beginning of period
Non-vested	163,785		—		U.S.$	21.90	—	—	$	—
Vested	—		—		U.S.$	—	—	32,299	$	21.36
Issued - initial award	77,093		—		U.S.$	24.10	—	—	$	—
Vested	(503	)	503		U.S.$	24.10	—	—	$	—
Exercised	—		(503	)	U.S.$	24.10	—	—	$	—
Forfeited and cancelled	(63	)	—		U.S.$	24.10	—	—	$	—
Outstanding, end of period
Non-vested	240,312		—		U.S.$	22.60	—	—	$	—
Vested	—		—		U.S.$	—	—	32,299	$	21.36

(c)Employee share purchase plan

We have an employee share purchase plan under which eligible employees up to a certain job classification can purchase our Common Shares through regular payroll deductions by contributing between 1% and 20% of their pay; for more highly compensated job classifications, employees may contribute between 1% and 55% of their pay. For every dollar contributed by an employee, up to a maximum of 6% of eligible employee pay, we are required to make a contribution at a percentage between 20% and 40%. For the three-month and nine-month periods ended September 30, 2017 and 2016, we contributed 40% for employees up to a certain job classification; for more highly compensated job classifications, we contributed 35%. We record our contributions as a component of Employee benefits expense and our contribution vests on the earlier of a plan participant’s last day in our employ or the last business day of the calendar year of our contribution, unless the plan participant’s employment is terminated with cause, in which case the plan participant will forfeit any in-year contribution from us.

In respect of Common Shares held within employee share purchase plan, Common Share dividends declared during the three-month and nine-month periods ended September 30, 2017, of $9 million (2016 – $6 million) and $23 million (2016 – $20 million), respectively, were to be reinvested in Common Shares the trustee acquired from Treasury (2016 – acquired in the stock market), with no discount applicable.

(d)Share option awards

General

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

23

notes to condensed interim consolidated financial statements (unaudited)

The weighted average fair value of share option awards granted is calculated by using the Black-Scholes model (a closed-form option pricing model). The risk-free interest rate used in determining the fair value of the share option awards is based on a Government of Canada yield curve that is current at the time of grant. The expected lives of the share option awards are based on our historical share option award exercise data. Similarly, expected volatility considers the historical volatility in the price of our Common Shares for TELUS Corporation share options and historical volatility in the price of a peer group’s shares in respect of TELUS International (Cda) Inc. share options. The dividend yield is the annualized dividend current at the time of grant divided by the share option award exercise price. Dividends are not paid on unexercised share option awards and are not subject to vesting.

TELUS Corporation share options

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

	Three months				Nine months
Periods ended September 30, 2017	Number of share options		Weighted average share option price		Number of share options		Weighted average share option price
Outstanding, beginning of period	890,989		$	26.79	1,417,693		$	24.49
Exercised 1	(50,552	)	$	25.72	(553,150	)	$	21.19
Forfeited	—		$	—	(3,718	)	$	27.48
Expired	—		$	—	(20,388	)	$	16.31
Outstanding, end of period	840,437		$	26.85	840,437		$	26.85

(1)The total intrinsic value of share option awards exercised for the three-month and nine-month periods ended September 30, 2017, was $1 million (reflecting a weighted average price at the dates of exercise of $44.81 per share) and $13 million (reflecting a weighted average price at the dates of exercise of $44.13 per share), respectively. The difference between the number of share options exercised and the number of Common Shares issued (as reflected in the 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 outstanding TELUS Corporation share options, all of which are vested, as at September 30, 2017.

Options outstanding and exercisable

					Total
Range of option prices
Low	$	23.08	$	28.56	$	23.08
High	$	25.64	$	31.69	$	31.69
Year of expiry and number of options
2018	335,666		—		335,666
2019	—		504,771		504,771
	335,666		504,771		840,437
Weighted average remaining contractual life (years)	0.4		1.6		1.2
Weighted average price	$	23.31	$	29.21	$	26.85
Aggregate intrinsic value 1 (millions)	$	7	$	8	$	15

(1)The aggregate intrinsic value is calculated based on the September 30, 2017, price of $44.88 per Common Share.

TELUS International (Cda) Inc. share options

Employees may receive equity share options (equity-settled) to purchase TELUS International (Cda) Inc. common shares at a price equal to, or a multiple of, the fair market value at the time of grant and/or phantom share options (cash-settled) that provide them with exposure to TELUS International (Cda) Inc. common share price appreciation. Share option awards granted under the plan may be exercised over specific periods not to exceed ten years from the time of grant. All equity share option awards and most phantom share option awards have a variable payout (0% – 100%) that depends upon the achievement of TELUS International (Cda) Inc. financial performance and non-market quality-of-service performance conditions.

The following table presents a summary of the activity related to the TELUS International (Cda) Inc. share option plan.

	2017
	U.S.$ denominated			Canadian $ denominated
Three-month and nine-month periods ended September 30	Number of share options	Weighted average share option price 1		Number of share options	Share option price 2
Outstanding, beginning and end of period	573,354	U.S.$	30.86	53,832	$	21.36

(1)The range of share option prices is U.S.$21.90 – U.S.$40.26 per TELUS International (Cda) Inc. equity share and the weighted average remaining contractual life is 9.3 years.

(2)The weighted average remaining contractual life is 8.8 years.

24

notes to condensed interim consolidated financial statements (unaudited)

14employee future benefits

(a)Defined benefit pension plans — details

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

	2017											2016
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	$	18	$	—		$	—		$	18		$	21	$	—		$	—		$	21
Net interest; return on plan assets
Interest expense arising from defined benefit obligations accrued	—		83			—			83			—		85			—			85
Return, including interest income, on plan assets 1	—		(83		)	49			(34		)	—		(85		)	(204		)	(289		)
Interest effect on asset ceiling limit	—		1			—			1			—		1			—			1
	—		1			49			50			—		1			(204		)	(203		)
Administrative fees	2		—			—			2			2		—			—			2
Changes in the effect of limiting net defined benefit assets to the asset ceiling	—		—			(19		)	(19		)	—		—			—			—
	$	20	$	1		$	30		$	51		$	23	$	1		$	(204	)	$	(180	)

(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 defined benefit obligations accrued.

	2017											2016
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	$	56	$	—		$	—		$	56		$	62	$	—		$	—		$	62
Net interest; return on plan assets
Interest expense arising from defined benefit obligations accrued	—		249			—			249			—		255			—			255
Return, including interest income, on plan assets 1	—		(248		)	(120		)	(368		)	—		(254		)	(228		)	(482		)
Interest effect on asset ceiling limit	—		3			—			3			—		2			—			2
	—		4			(120		)	(116		)	—		3			(228		)	(225		)
Administrative fees	5		—			—			5			5		—			—			5
Changes in the effect of limiting net defined benefit assets to the asset ceiling	—		—			32			32			—		—			—			—
	$	61	$	4		$	(88	)	$	(23	)	$	67	$	3		$	(228	)	$	(158	)

(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 defined benefit obligations accrued.

(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)	2017		2016		2017		2016
Union pension plan and public service pension plan contributions	$	6	$	7	$	18	$	20
Other defined contribution pension plans	17		17		49		48
	$	23	$	24	$	67	$	68

25

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 Consolidated statements of income and other comprehensive income as set out in the following table:

	Restructuring (b)				Other (c)				Total
Periods ended September 30 (millions)	2017		2016		2017		2016		2017		2016
THREE-MONTHS
Goods and services purchased	$	15	$	23	$	16	$	—	$	31	$	23
Employee benefits expense	1		37		4		—		5		37
	$	16	$	60	$	20	$	—	$	36	$	60
NINE-MONTHS
Goods and services purchased	$	36	$	39	$	22	$	—	$	58	$	39
Employee benefits expense	12		92		9		—		21		92
	$	48	$	131	$	31	$	—	$	79	$	131

(b)Restructuring provisions

Employee related provisions and other provisions, as presented in Note 25, include amounts in respect of restructuring activities. In 2017, 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.

(c)Other

During the three-month and nine-month periods ended September 30, 2017, incremental external costs were incurred in connection with business acquisition activity. In connection with our acquisition of Manitoba Telecom Services Inc. postpaid wireless subscribers, as discussed further in Note 18(b), non-recurring atypical business integration expenditures which would be considered neither restructuring expenditures nor part of the fair value of the net assets acquired have been included in other costs.

16accounts receivable

As at (millions)	Note	September 30, 2017			December 31, 2016
Customer accounts receivable	4(a)	$	1,160		$	1,217
Accrued receivables — customer		139			131
Allowance for doubtful accounts	4(a)	(47		)	(54		)
		1,252			1,294
Accrued receivables — other		287			177
		$	1,539		$	1,471

26

notes to condensed interim consolidated financial statements (unaudited)

17property, plant and equipment

(millions)	Note	Network assets			Buildings and leasehold improvements			Other			Land			Assets under construction			Total
At cost
As at January 1, 2017		$	28,284		$	2,954		$	1,021		$	55		$	592		$	32,906
Additions		716			27			33			—			1,128			1,904
Additions arising from business acquisitions	18(b)	25			7			9			—			—			41
Dispositions, retirements and other		(1,460		)	(27		)	(24		)	(7		)	—			(1,518		)
Assets under construction put into service		830			99			51			—			(980		)	—
As at September 30, 2017		$	28,395		$	3,060		$	1,090		$	48		$	740		$	33,333
Accumulated depreciation
As at January 1, 2017		$	19,950		$	1,836		$	656		$	—		$	—		$	22,442
Depreciation		1,039			79			85			—			—			1,203
Dispositions, retirements and other		(1,434		)	(28		)	(34		)	—			—			(1,496		)
As at September 30, 2017		$	19,555		$	1,887		$	707		$	—		$	—		$	22,149
Net book value
As at December 31, 2016		$	8,334		$	1,118		$	365		$	55		$	592		$	10,464
As at September 30, 2017		$	8,840		$	1,173		$	383		$	48		$	740		$	11,184

As at September 30, 2017, our contractual commitments for the acquisition of property, plant and equipment totalled $198 million over a period ending December 31, 2020 (December 31, 2016 – $436 million over a period ending December 31, 2020).

27

notes to condensed interim consolidated financial statements (unaudited)

18intangible assets and goodwill

(a)Intangible assets and goodwill, net

	Intangible assets subject to amortization															Intangible assets with indefinite lives
(millions)	Customer contracts, related customer relationships, subscriber base 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, 2017	$	485		$	4,295		$	93		$	212		$	5,085		$	8,693	$	13,778		$	4,151		$	17,929
Additions	—			63			3			388			454			—		454			—			454
Additions arising from business acquisitions (b)	134			101			—			—			235			—		235			438			673
Dispositions, retirements and other	(47		)	(142		)	(2		)	—			(191		)	—		(191		)	—			(191		)
Assets under construction put into service	—			293			—			(293		)	—			—		—			—			—
Net foreign exchange differences	—			—			—			—			—			—		—			(10		)	(10		)
As at September 30, 2017	$	572		$	4,610		$	94		$	307		$	5,583		$	8,693	$	14,276		$	4,579		$	18,855
Accumulated amortization
As at January 1, 2017	$	323		$	3,032		$	59		$	—		$	3,414		$	—	$	3,414		$	364		$	3,778
Amortization	35			364			3			—			402			—		402			—			402
Dispositions, retirements and other	(48		)	(141		)	(2		)	—			(191		)	—		(191		)	—			(191		)
As at September 30, 2017	$	310		$	3,255		$	60		$	—		$	3,625		$	—	$	3,625		$	364		$	3,989
Net book value
As at December 31, 2016	$	162		$	1,263		$	34		$	212		$	1,671		$	8,693	$	10,364		$	3,787		$	14,151
As at September 30, 2017	$	262		$	1,355		$	34		$	307		$	1,958		$	8,693	$	10,651		$	4,215		$	14,866

(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, 2017, our contractual commitments for the acquisition of intangible assets, excluding that arising from the agreement referenced in (c) following, totalled $58 million over a period ending December 31, 2020 (December 31, 2016 – $82 million over a period ending December 31, 2020).

(b)Business acquisitions

Manitoba Telecom Services Inc. postpaid wireless

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.; as of September 30, 2016, all court and shareholder approvals had been obtained and as of February 15, 2017, all regulatory approvals had been obtained; and the transaction closed on March 17, 2017. In June 2016, we had 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 intended to acquire a portion of Manitoba Telecom Services Inc.’s postpaid wireless subscribers, certain network assets and dealer locations in Manitoba, upon the successful completion of BCE Inc.’s acquisition of Manitoba Telecom Services Inc.

On April 1, 2017, we acquired approximately one-quarter of Manitoba Telecom Services Inc.’s postpaid wireless customer contracts, certain network assets and rights to 15 retail locations in Manitoba. The primary reason for this acquisition is to increase the number of our postpaid wireless subscribers in

28

notes to condensed interim consolidated financial statements (unaudited)

Manitoba and to enhance our distribution of wireless products and customer services across all of Manitoba.

The primary factor that contributed to the recognition of goodwill was the earnings capacity of the acquired business in excess of the net tangible and intangible assets acquired (such excess arising from the benefits of acquiring established businesses in multiple locations). The amount assigned to goodwill is not expected to be deductible for income tax purposes.

Kroll Computer Systems Inc.

On May 15, 2017, we acquired 100% of Kroll Computer Systems Inc., the primary reason for which is to enhance our geographic reach and quality of our product offering as a national pharmacy management services provider.

The primary factor that contributed to the recognition of goodwill was the earnings capacity of the acquired business in excess of the net tangible and intangible assets acquired (such excess arising from the acquired workforce and the benefits of acquiring an established business). The amount assigned to goodwill is expected to be deductible for income tax purposes.

Voxpro Limited

On August 31, 2017, we acquired 55% of Voxpro Limited, a business process outsourcing and contact centre services company with facilities in Ireland, the United States and Romania, for cash consideration of $58 million. The investment was made with a view to expanding further into supporting customers providing Internet-related services and products, bolstering sales capabilities in our chosen markets, and acquiring multi-site redundancy in support of other facilities.

In respect of the 55% acquired business, we concurrently provided a written put option to the remaining selling shareholders under which they could put the remaining 45% of the shares commencing in 2021. The acquisition-date fair value of the puttable shares held by the non-controlling shareholders has been recorded as a provision during the three-month period ended September 30, 2017 (see Note 25). Also concurrent with our acquisition of the initial 55% interest, the non-controlling shareholders provided us with a purchased call option, which mirrors the written put option.

The primary factor that contributed to the recognition of goodwill was the earnings capacity of the acquired business in excess of the net tangible and intangible assets acquired (such excess arising from the acquired workforce and the benefits of acquiring an established business). The amount assigned to goodwill is not expected to be deductible for income tax purposes.

Individually immaterial transactions

During the three-month and nine-month periods ended September 30, 2017, we acquired 100% ownership of businesses complementary to our existing lines of business. The primary factor that gave rise to the recognition of goodwill was the earnings capacity of the acquired businesses in excess of net tangible and intangible assets acquired (such excess arising from: the low level of tangible assets relative to the earnings capacities of the businesses). A portion of the amount assigned to goodwill may be deductible for income tax purposes.

29

notes to condensed interim consolidated financial statements (unaudited)

Acquisition-date fair values

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

	Preliminary purchase price allocated
As at acquisition-date fair values ($ in millions)	Manitoba Telecom Services Inc. postpaid wireless1			Kroll Computer Systems Inc. 2		Voxpro Limited 3		Individually immaterial acquisitions		Total
Assets
Current assets
Cash	$	—		$	1	$	3	$	—	$	4
Accounts receivable 4	9			3		21		—		33
Other	7			—		4		1		12
	16			4		28		1		49
Non-current assets
Property, plant and equipment
Network assets	23			—		—		2		25
Buildings and leasehold improvements	—			—		7		—		7
Other	—			1		8		—		9
Intangible assets subject to amortization 5
Customer contracts, customer relationships (including those related to customer contracts), subscriber base and leasehold interests	54			26		39		15		134
Software	—			101		—		—		101
	77			128		54		17		276
Total identifiable assets acquired	93			132		82		18		325
Liabilities
Current liabilities
Accounts payable and accrued liabilities	1			1		18		—		20
Advance billings and customer deposits	2			4		—		1		7
Provisions	6			—		—		—		6
	9			5		18		1		33
Non-current liabilities
Provisions	6			3		—		—		9
Other long-term liabilities	—			—		1		—		1
Deferred income taxes	18			—		5		—		23
	24			3		6		—		33
Total liabilities assumed	33			8		24		1		66
Net identifiable assets acquired	60			124		58		17		259
Goodwill	206			126		94		12		438
Net assets acquired	$	266		$	250	$	152	$	29	$	697
Acquisition effected by way of:
Cash consideration	$	306		$	150	$	58	$	27	$	541
Accrued receivable 6	(40		)	—		—		—		(40		)
Accounts payable and accrued liabilities	—			—		—		2		2
Provisions	—			—		71		—		71
Issuance of TELUS Corporation Common Shares	—			100		—		—		100
Pre-existing relationship effectively settled upon acquisition	—			—		23		—		23
	$	266		$	250	$	152	$	29	$	697

(1)The purchase price allocation, specifically in respect of subscriber base, customer contracts, customer relationships (including those related to customer contracts) and leasehold interests valuation and provision measurement, had not been finalized as of the date of issuance of these condensed interim consolidated financial statements. As is customary in a business acquisition transaction, until the time of acquisition of control, we did not have full access to the relevant portions of Manitoba Telecom Services Inc.’s books and records. Upon having sufficient time to review the relevant portions of Manitoba Telecom Services Inc.’s books and records, as well as obtaining new and additional information about the related facts and circumstances as of the acquisition date, we will adjust the provisional amounts for identifiable assets acquired and liabilities assumed and thus finalize our purchase price allocation.

Our total price of the transactions with BCE Inc. will vary depending upon the actual number of qualifying wireless subscribers acquired; such determination will happen by March 31, 2018.

(2)The purchase price allocation, primarily in respect of software valuation, had not been finalized as of the date of issuance of these condensed interim consolidated financial statements. As is customary in a business acquisition transaction, until the time of acquisition of control, we did not have full access to Kroll Computer Systems Inc.’s books and records. Upon having sufficient time to review Kroll Computer Systems Inc.’s books and records, we expect to finalize our purchase price allocation.

30

notes to condensed interim consolidated financial statements (unaudited)

(3)The purchase price allocation, primarily in respect of customer relationships, had not been finalized as of the date of issuance of these condensed interim consolidated financial statements. As is customary in a business acquisition transaction, until the time of acquisition of control, we did not have full access to Voxpro Limited’s books and records. Upon having sufficient time to review Voxpro Limited’s books and records, we expect to finalize our purchase price allocation.

Prior to acquisition, we had advanced Voxpro Limited $23; this pre-existing relationship was effectively settled at the date of the business combination with no gain or loss recognized.

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

(5)Customer contracts and customer relationships (including those related to customer contracts) are expected to be amortized over periods of 8 to 10 years; software is expected to be amortized over a period of 10 years.

(6)The total transaction price is a function of the number of qualifying postpaid wireless subscribers acquired. If less than the targeted number of qualifying postpaid wireless subscribers is acquired, the total transaction price will be reduced on a pro-rated basis; a receivable has been accrued for the estimate of such reduction, net of associated adjustments.

Pro forma disclosures

The following pro forma supplemental information represents certain results of operations as if the business acquisitions noted above had been completed at the beginning of the fiscal 2017 year.

	Three months				Nine months
Periods ended September 30, 2017 (millions except per share amounts)	As reported 1		Pro forma 2		As reported 1		Pro forma 2
Operating revenues	$	3,366	$	3,392	$	9,837	$	9,958
Net income	$	370	$	369	$	1,197	$	1,192
Net income per Common Share
Basic	$	0.62	$	0.62	$	1.99	$	1.98
Diluted	$	0.62	$	0.62	$	1.99	$	1.98

(1)Operating revenues and net income for the three-month period ended September 30, 2017, include: $19 and $9, respectively, in respect of Manitoba Telecom Services Inc. postpaid wireless; $7 and $1, respectively, in respect of Kroll Computers Systems Inc.; and $12 and $(1), respectively, in respect of Voxpro Limited. Operating revenues and net income for the nine-month periods ended September 30, 2017, include: $37 and $13, respectively, in respect of Manitoba Telecom Services Inc. postpaid wireless; $10 and $1, respectively, in respect of Kroll Computers Systems Inc.; and $12 and $(1), respectively, in respect of Voxpro Limited.

(2)Pro forma amounts for the three-month and nine-month periods ended September 30, 2017, reflect the acquired businesses. In respect of Manitoba Telecom Services Inc. postpaid wireless, pro forma adjustments for revenues and goods and services purchased are not available as the seller’s information systems were not configured to capture the information thusly; as a proxy, the revenues and goods and services purchased amounts for the three-month period ended June 30, 2017, have been used for pro forma purposes. The results of the acquired businesses have been included in our Consolidated Statements of Income and Other Comprehensive Income effective the dates of acquisition.

The pro forma supplemental information is based on estimates and assumptions which are believed to be reasonable. The pro forma supplemental information is not necessarily indicative of our consolidated financial results in future periods or the results that actually would have been realized had the business acquisitions been completed at the beginning of the periods presented. The pro forma supplemental information includes incremental property, plant and equipment depreciation, intangible asset amortization, financing and other charges as a result of the acquisitions, net of the related tax effects.

(c)   Business acquisition — subsequent to reporting period

On October 30, 2017, through our TELUS International (Cda) Inc. subsidiary, we entered into an agreement to acquire 65% of Xavient Information Systems, a group of information technology consulting and software services companies with facilities in the United States and in India for consideration of approximately $144 million (U.S.$115 million) in cash and approximately $19 million (U.S.$15 million) in TELUS International (Cda) Inc. common shares, subject to customary closing conditions, including regulatory approvals, and we expect to close later in 2017. The investment is being made with a view to enhancing our ability to provide complex and higher value information technology services, improve our related sales and solutioning capabilities and acquire multi-site redundancy in support of other facilities.

In respect of the 65% acquired business, on closing, we will concurrently provide a written put option to the remaining selling shareholders; the written put option for the remaining 35% of the economic interest would become exercisable no later than December 31, 2020. The written put option sets out that the share pricing methodology will be dependent upon earnings. The acquisition-date fair value of the puttable shares held by the non-controlling shareholders will be recorded as a provision in the fiscal period that the transaction closes; we currently estimate that such fair value would be in the range of $150 million (U.S.$120 million). Also concurrent with closing, the non-controlling shareholders are to provide us with a purchased call option, which will substantially mirror the written put option.

The primary factor that will contribute to the recognition of goodwill is the earnings capacity of the business in excess of its net tangible and intangible assets acquired (such excess arising from the acquired workforce and the benefits of acquiring established businesses in multiple locations). The amount assigned to goodwill is not expected to be deductible for income tax purposes.

31

notes to condensed interim consolidated financial statements (unaudited)

19leases

We occupy leased premises in various locations and have land, buildings and equipment under operating leases. For the three-month and nine-month periods ended September 30, 2017, real estate and vehicle operating lease expenses, which are net of the amortization of deferred gains on the sale-leaseback of buildings and the occupancy costs associated with leased real estate, were $50 million (2016 — $45 million) and $143 million (2016 — $130 million), respectively; occupancy costs associated with leased real estate totalled $31 million (2016 — $32 million) and $95 million (2016 — $100 million), respectively.

See Note 2(b) for details of significant changes to IFRS-IASB which are not yet effective and have not yet been applied, but which will significantly affect the timing of the recognition of operating lease expenses and their recognition in the Consolidated statement of financial position, as well as their classification in the Consolidated statement of income and other comprehensive income and the Consolidated statement of cash flows.

20other long-term assets

As at (millions)	Note	September 30, 2017		December 31, 2016
Pension assets		$	426	$	358
Investments		57		62
Prepaid maintenance		60		62
Real estate joint ventures	21(c)	17		30
Real estate joint venture advances	21(c)	40		21
Other		115		107
		$	715	$	640

21real 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 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 2019, is to be built to the LEED Platinum standard.

32

notes to condensed interim consolidated financial statements (unaudited)

(b)   Real estate joint ventures — summarized financial information

As at (millions)	September 30, 2017		December 31, 2016
ASSETS
Current assets
Cash and temporary investments, net	$	14	$	15
Escrowed deposits for tenant inducements and liens	1		5
Sales contract deposits held by arm’s-length trustee	—		2
Other	4		6
Property under development — residential condominiums (subject to sales contracts)	6		13
	25		41
Non-current assets
Property under development — Investment property	185		121
Investment property	257		261
	442		382
	$	467	$	423
LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	12	$	18
Sales contract deposits
Payable	—		3
Held by arm’s-length trustee	—		2
Current portion of 3.7% mortgage and senior secured 3.4% bonds	5		4
Construction holdback liabilities	8		7
	25		34
Non-current liabilities
Construction credit facilities	120		63
3.7% mortgage due September 2024	27		—
Senior secured 3.4% bonds due July 2025	210		213
	357		276
Liabilities	382		310
Owners’ equity
TELUS 1	34		48
Other partners	51		65
	85		113
	$	467	$	423

(1)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 in excess of that recorded by the real estate joint venture.

	Three months				Nine months
Periods ended September 30 (millions)	2017		2016		2017		2016
Revenue
From investment property	$	8	$	6	$	25	$	26
From sale of residential condominiums	$	—	$	106	$	13	$	220
Depreciation and amortization	$	2	$	2	$	6	$	6
Interest expense 1	$	2	$	2	$	6	$	8
Net income and comprehensive income 2	$	1	$	30	$	7	$	66

(1)During the three-month and nine-month periods ended September 30, 2017, the real estate joint ventures capitalized $1 (2016 — $1) and $3 (2016 — $2), 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 and comprehensive income.

33

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 in the following table.

	2017								2016
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 attributable to us 3	$	—	$	1		$	1		$	—		$	15		$	15
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	6		—			6			5			—			5
Amounts repaid	—		—			—			(23		)	—			(23		)
Financing costs paid to us	—		—			—			—			—			—
Repayment of funds advanced	—								(18		)	—			(18		)
Funds repaid to us and earnings distributed	—		(14		)	(14		)	—			(9		)	(9		)
Net increase (decrease)	6		(13		)	(7		)	(36		)	9			(27		)
Real estate joint ventures carrying amounts
Balance, beginning of period	34		30			64			52			34			86
Valuation provision	—		—			—			—			(8		)	(8		)
Balance, end of period	$	40	$	17		$	57		$	16		$	35		$	51

	2017								2016
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 attributable to us 3	$	—	$	4		$	4		$	—		$	29		$	29
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	—		1			1			—			7			7
Construction credit facilities financing costs charged by us and other (Note 6)	—		—			—			1			—			1
Cash flows in the current reporting period
Construction credit facilities
Amounts advanced	19		—			19			28			—			28
Amounts repaid	—		—			—			(63		)	—			(63		)
Financing costs paid to us	—		—			—			(1		)	—			(1		)
Repayment of funds advanced	—		—			—			(18		)	—			(18		)
Funds repaid to us and earnings distributed	—		(18		)	(18		)	—			(9		)	(9		)
Net increase (decrease)	19		(13		)	6			(53		)	27			(26		)
Real estate joint ventures carrying amounts
Balance, beginning of period	21		30			51			69			25			94
Valuation provision	—		—			—			—			(17		)	(17		)
Balance, end of period	$	40	$	17		$	57		$	16		$	35		$	51

(1)Loans and receivables are included in our 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 and comprehensive income; provision for income taxes is made in determining the comprehensive income attributable to us.

During the three-month and nine-month periods ended September 30, 2017, the TELUS Garden real estate joint venture recognized $3 million (2016 — $3 million) and $9 million (2016 — $8 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.

34

notes to condensed interim consolidated financial statements (unaudited)

(d)   Commitments and contingent liabilities

Construction commitments

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, 2017, the real estate joint venture’s construction-related contractual commitments were approximately $96 million through to 2019 (December 31, 2016 — $121 million through to 2018).

Construction credit facilities

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, 2017		December 31, 2016
Construction credit facilities commitment — TELUS Corporation
Undrawn	4(b)	$	74	$	93
Advances		40		21
		114		114
Construction credit facilities commitment — other		228		228
		$	342	$	342

22           short-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, 2016 — $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, 2016 — 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, 2017, we had sold to the trust (but continued to recognize) trade receivables of $117 million (December 31, 2016 — $116 million). Short-term borrowings of $100 million (December 31, 2016 — $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) are comprised of amounts drawn on our bilateral bank facilities.

23           accounts payable and accrued liabilities

As at (millions)	September 30, 2017		December 31, 2016
Accrued liabilities	$	1,131	$	1,013
Payroll and other employee related liabilities	367		460
Restricted stock units liability	78		55
	1,576		1,528
Trade accounts payable	657		578
Interest payable	135		144
Other	79		80
	$	2,447	$	2,330

35

notes to condensed interim consolidated financial statements (unaudited)

24advance billings and customer deposits

As at (millions)	September 30, 2017		December 31, 2016
Advance billings	$	739	$	697
Deferred customer activation and connection fees	15		17
Customer deposits	11		15
Regulatory deferral accounts	4		8
	$	769	$	737

25provisions

(millions)	Asset retirement obligation			Employee related			Written put options		Other			Total
As at July 1, 2017	$	342		$	36		$	—	$	97		$	475
Additions	—			5			71		6			82
Reversal	—			(2		)	—		(1		)	(3		)
Use	—			(10		)	—		(7		)	(17		)
Interest effect	2			—			—		—			2
As at September 30, 2017	$	344		$	29		$	71	$	95		$	539
As at January 1, 2017	$	339		$	77		$	—	$	103		$	519
Additions	—			27			71		22			120
Reversal	—			(5		)	—		(1		)	(6		)
Use	(3		)	(70		)	—		(29		)	(102		)
Interest effect	8			—			—		—			8
As at September 30, 2017	$	344		$	29		$	71	$	95		$	539
Current	$	8		$	28		$	—	$	30		$	66
Non-current	336			1			71		65			473
As at September 30, 2017	$	344		$	29		$	71	$	95		$	539

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(b)). The timing of the cash outflows in respect of the balance accrued as at the financial statement date is substantially short-term in nature.

Written put options

In connection with a business acquisition, we have established provisions for written put options in respect of non-controlling interests. No cash outflows for the written put options are expected prior to their initial exercisability in 2021.

Other

The provisions for other include: legal claims; non-employee related restructuring activities (as discussed further in Note 15); and 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 29, 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, contract termination costs and onerous contracts acquired. In respect of contract termination costs and onerous contracts acquired, cash outflows are expected to occur through mid-2018.

36

notes to condensed interim consolidated financial statements (unaudited)

26long-term debt

(a)Details of long-term debt

As at (millions)	Note	September 30, 2017		December 31, 2016
TELUS Corporation notes	(b)	$	11,553	$	11,367
TELUS Corporation commercial paper	(c)	1,092		613
TELUS Communications Inc. debentures		620		619
TELUS International (Cda) Inc. credit facility	(e)	353		332
Long-term debt		$	13,618	$	12,931
Current		$	1,357	$	1,327
Non-current		12,261		11,604
Long-term debt		$	13,618	$	12,931

(b)TELUS Corporation notes

The notes are 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 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			Effective interest rate 2		Originally issued	Outstanding at financial statement date	Basis points	Cessation date
4.95% Notes, Series CD	March 2007	March 2017	$	999.53		4.96	%	$700 million	$NIL	24 3	N/A
5.05% Notes, Series CG 4	December 2009	December 2019	$	994.19		5.13	%	$1.0 billion	$1.0 billion	45.5 3	N/A
5.05% Notes, Series CH 4	July 2010	July 2020	$	997.44		5.08	%	$1.0 billion	$1.0 billion	47 3	N/A
3.35% Notes, Series CJ 4	December 2012	March 2023	$	998.83		3.36	%	$500 million	$500 million	40 5	Dec. 15, 2022
3.35% Notes, Series CK 4	April 2013	April 2024	$	994.35		3.41	%	$1.1 billion	$1.1 billion	36 5	Jan. 2, 2024
4.40% Notes, Series CL 4	April 2013	April 2043	$	997.68		4.41	%	$600 million	$600 million	47 5	Oct. 1, 2042
3.60% Notes, Series CM 4	November 2013	January 2021	$	997.15		3.65	%	$400 million	$400 million	35 3	N/A
5.15% Notes, Series CN 4	November 2013	November 2043	$	995.00		5.18	%	$400 million	$400 million	50 5	May 26, 2043
3.20% Notes, Series CO 4	April 2014	April 2021	$	997.39		3.24	%	$500 million	$500 million	30 5	Mar. 5, 2021
4.85% Notes, Series CP 4	Multiple 6	April 2044	$	987.91 6		4.93	%6	$500 million 6	$900 million 6	46 5	Oct. 5, 2043
3.75% Notes, Series CQ 4	September 2014	January 2025	$	997.75		3.78	%	$800 million	$800 million	38.5 5	Oct. 17, 2024
4.75% Notes, Series CR 4	September 2014	January 2045	$	992.91		4.80	%	$400 million	$400 million	51.5 5	July 17, 2044
1.50% Notes, Series CS 4	March 2015	March 2018	$	999.62		1.51	%	$250 million	$250 million	N/A 7	N/A
2.35% Notes, Series CT 4	March 2015	March 2022	$	997.31		2.39	%	$1.0 billion	$1.0 billion	35.5 5	Feb. 28, 2022
4.40% Notes, Series CU 4	March 2015	January 2046	$	999.72		4.40	%	$500 million	$500 million	60.5 5	July 29, 2045
3.75% Notes, Series CV 4	December 2015	March 2026	$	992.14		3.84	%	$600 million	$600 million	53.5 5	Dec. 10, 2025
2.80% U.S. Dollar Notes 4, 8	September 2016	February 2027	U.S.$		991.89	2.89	%	U.S.$600 million	U.S.$600 million	20 9	Nov. 16, 2026
3.70% U.S. Dollar Notes 4, 10	March 2017	September 2027	U.S.$		998.95	3.71	%	U.S.$500 million	U.S.$500 million	20 9	June 15, 2027
4.70% Notes, Series CW 4	March 2017	March 2048	$	990.65		4.76	%	$325 million	$325 million	58.5 5	Sept. 6, 2047

(1)Interest is payable semi-annually.

(2)The effective interest rate is that which the notes would yield to an initial debt holder if held to maturity.

(3)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.

(4)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.

(5)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, Series CU and Series CW 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.

(6)$500 million of 4.85% Notes, Series CP were issued in April 2014 at an issue price of $998.74 and an effective interest rate of 4.86%. 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 and an effective interest rate of 5.02%.

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

37

notes to condensed interim consolidated financial statements (unaudited)

(8)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).

(9)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.

(10)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 3.41% and an issued and outstanding amount of $667 million (reflecting a fixed exchange rate of $1.3348).

(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, 2016 — $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, 2017, we had $1,092 million of commercial paper outstanding, all of which was denominated in U.S. dollars (U.S.$875 million), with an effective weighted average interest rate of 1.63%, maturing through January 2018.

(d)TELUS Corporation credit facility

As at September 30, 2017, 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, 2017		December 31, 2016
Net available	$	1,158	$	1,637
Backstop of commercial paper	1,092		613
Gross available	$	2,250	$	2,250

We had $219 million of letters of credit outstanding as at September 30, 2017 (December 31, 2016 — $210 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, 2017, TELUS International (Cda) Inc. had a 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 U.S.$115 million revolving component and an amortizing U.S.$215 million term loan component. The credit facility is non-recourse to TELUS Corporation. As at September 30, 2017, $358 million ($353 million net of unamortized issue costs) was outstanding, all of which was denominated in U.S. dollars (U.S.$287 million), with a weighted average interest rate of 2.71%.

September 30, 2017

December 31, 2016

As at (millions)

Revolving component

Term loan component

Total

Revolving component

Term loan component

Total

Available

U.S.$

30

U.S.$

N/A

U.S.$

30

U.S.$

72

U.S.$

N/A

U.S.$

72

Outstanding

85

202

287

43

210

253

U.S.$

115

U.S.$

202

U.S.$

317

U.S.$

115

U.S.$

210

U.S.$

325

38

notes to condensed interim consolidated financial statements (unaudited)

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 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 in the credit facility.

The term loan is subject to an amortization schedule which 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, 2017, for each of the next five fiscal years are as follows:

Long-term debt denominated in	Cdn. dollars		U.S. dollars
					Derivative liability
Years ending December 31 (millions)	Debt		Debt		(Receive) 1			Pay		Total		Total
2017 (balance of year)	$	—	$	971	$	(972	)	$	977	$	976	$	976
2018	250		138		(125		)	124		137		387
2019	1,000		13		—			—		13		1,013
2020	1,000		13		—			—		13		1,013
2021	1,075		315		—			—		315		1,390
Thereafter	7,574		1,373		(1,248		)	1,335		1,460		9,034
Future cash outflows in respect of long-term debt principal repayments	10,899		2,823		(2,345		)	2,436		2,914		13,813
Future cash outflows in respect of associated interest and like carrying costs 2	5,627		467		(555		)	574		486		6,113
Undiscounted contractual maturities (Note 4(b))	$	16,526	$	3,290	$	(2,900	)	$	3,010	$	3,400	$	19,926

(1)Where applicable, principal-related cash flows reflect foreign exchange rates at September 30, 2017.

(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, 2017.

27other long-term liabilities

As at (millions)	September 30, 2017		December 31, 2016
Pension and other post-retirement liabilities	$	477	$	480
Restricted stock unit and deferred share unit liabilities	111		62
Derivative liabilities	71		21
Other	149		149
	808		712
Deferred customer activation and connection fees	19		24
	$	827	$	736

28Common Share capital

(a)General

Our authorized share capital is as follows:

As at	September 30, 2017	December 31, 2016
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, 2017, approximately 48 million Common Shares were reserved for issuance, from Treasury, under a share option plan (see Note 13(d)).

39

notes to condensed interim consolidated financial statements (unaudited)

(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. We have 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 November 13, 2017, to November 12, 2018. 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 may enter 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.

29contingent liabilities

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 and 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, 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 enumerated following.

Certified class actions

Certified class actions against us include the following:

System access fee class actions

In 2004 a class action was 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 opt-in 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. In February 2008, the Saskatchewan Court of Queen’s Bench granted an order amending the certification order so as to exclude from the class of plaintiffs any customer bound by an arbitration clause with us. All appeals of this decision have now been exhausted. In addition to the 2004 class action brought in Saskatchewan, fourteen additional class actions were brought against us and other wireless service providers in the period 2004 to date in connection with the collection of system access fees in nine provinces. None of these additional fourteen class actions has ever been certified and all have now been dismissed, discontinued or stayed.

Per minute billing class action

In 2008 a class action was brought in Ontario against us alleging 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. The action sought certification of a national class. In November 2014, an Ontario class only 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

40

notes to condensed interim consolidated financial statements (unaudited)

the certification decision have now been exhausted. At the same time, the Ontario Superior Court of Justice declined to stay the claims of our business customers notwithstanding an arbitration clause in our customer service agreements with those customers. This latter decision was appealed and on May 31, 2017, the Ontario Court of Appeal dismissed our appeal. We have sought leave to appeal this decision to the Supreme Court of Canada.

Unilateral rate amendments class actions

In 2012 a class action was brought against us 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 us in the 2008 class action. We had appealed that judgment, but have now settled both the 2008 and 2012 class actions. This settlement received court approval in June 2016, is being implemented and has been fully accounted for in our financial statements.

Call set-up time class actions

In 2005 a class action was 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. In 2011, the Supreme Court of Canada upheld a stay of all of the causes of action advanced by the plaintiff in this class action, with one exception, based on the arbitration clause that was included in our customer service agreements. The sole exception was the cause of action based on deceptive or unconscionable practices under the British Columbia Business Practices and Consumer Protection Act, which the Supreme Court of Canada declined to stay. In January 2016, the British Columbia Supreme Court certified this class action in relation to the claim under the Business Practices and Consumer Protection Act. The class is limited to residents of British Columbia who contracted wireless services with us in the period from January 21, 1999, to April 2010. We have appealed the certification decision and the appeal hearing is expected to occur in December 2017. A companion class action was brought against us in Alberta at the same time as the British Columbia class action. The Alberta class action duplicates the allegations in the British Columbia action, but has not proceeded to date and is not certified.

Uncertified class actions

Uncertified class actions against us include:

9-1-1 class actions

In 2008 a class action was 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, have been deceitfully passing them off as government charges, and have charged 9-1-1 fees to customers who reside in areas where 9-1-1 service is not available. The plaintiffs advance causes of action in breach of contract, misrepresentation and false advertising and seek certification of a national class. 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 against us as of 2009. No steps have been taken in this proceeding in 2017.

Electromagnetic field radiation class actions

In 2013 a class action was brought in British Columbia against us, other telecommunications carriers, and cellular telephone manufacturers alleging that prolonged usage of cellular telephones causes adverse health effects. The British Columbia class action alleges: strict liability; negligence; failure to warn; breach of warranty; breach of competition, consumer protection and trade practices legislation; negligent misrepresentation, breach of a duty not to market the products in question; and waiver of tort. Certification of a national class is sought, but the action has not proceeded to date and no steps were taken in 2016. In 2015 a class action was brought in Quebec against us, other telecommunications carriers, and various other defendants alleging that electromagnetic field radiation causes adverse health effects, contravenes the Quebec Environmental Quality Act, creates a nuisance, and constitutes an abuse of right pursuant to the Quebec Civil Code. This action has not yet proceeded to an authorization hearing.

Public Mobile class actions

In 2014 class actions were brought 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

41

notes to condensed interim consolidated financial statements (unaudited)

law obligations. In particular, the Quebec action alleges that our actions constitute a breach of the Quebec Consumer Protection Act, the Quebec Civil Code, and the Ontario Consumer Protection Act. It has not yet proceeded to an authorization hearing. The Ontario class action alleges negligence, breach of express and implied warranty, breach of the Competition Act, unjust enrichment, and waiver of tort. No steps have been taken in this proceeding since it was filed and served.

Promotional pricing class action

In 2016 a class action was 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. The Plaintiff has agreed to discontinue this claim against us and the Court authorized the discontinuation of the class action against us on July 13, 2017.

Handset subsidy class action

In 2016 a class action was brought in Quebec against us and other telecommunications carriers alleging that we breached the Quebec Consumer Protection Act and the Civil Code of Quebec by making false or misleading representations relating to the handset subsidy provided to our wireless customers, and by charging our wireless customers inflated rate plan prices and termination fees higher than those permitted under the Act. This action has not yet proceeded to an authorization hearing.

Intellectual property infringement claims

Claims and possible claims received by us include:

4G LTE network patent infringement claim

A patent infringement claim was filed in Ontario in 2016 alleging that communications between devices, including cellular telephones, and base stations on our 4G LTE network infringe three third-party patents. No trial date has yet been set for this matter.

Summary

We believe that we have good defences to the above matters. Should the ultimate resolution of these matters 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 reliable estimates of any such exposure cannot be made considering the continued uncertainty about: the nature of the damages that may be sought by the plaintiffs; the causes of action that are being, or may ultimately be, pursued; and, in the case of the uncertified class actions, the causes of action that may ultimately be certified.

30related 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)	2017		2016		2017		2016
Short-term benefits	$	3	$	3	$	9	$	9
Post-employment pension 1 and other benefits	2		1		3		3
Share-based compensation 2	6		11		18		28
	$	11	$	15	$	30	$	40

(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, 2017, share-based compensation expense is net of $NIL (2016 — $1) and $1 (2016 — $2), respectively, of the effects of derivatives used to manage share-based compensation costs (Note 13(b)).

As disclosed in Note 13, we made initial awards of share-based compensation in 2017 and 2016, including, as set out in the following table, 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 2017 and 2016 initial awards are included in the amounts in the table above.

42

notes to condensed interim consolidated financial statements (unaudited)

Nine-month periods ended September 30	2017					2016
($ 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	686,595	$	30	$	30	575,871	$	23	$	15
Quarter 2	—	—		—		9,888	—		—
Quarter 3	—	—		—		—	—		—
Awarded in period	686,595	$	30	$	30	585,759	$	23	$	15

(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 because the fair values of some awards have been determined using a Monte Carlo simulation (see Note 13(b)).

As at June 30, 2017, no share options remained outstanding which were held by key management personnel (including retirees). During the three-month period ended September 30, 2016, key management personnel (including retirees) exercised 142,912 share options that had an intrinsic value of $3 million at the time of exercise, reflecting a weighted average price at the date of exercise of $43.00. During the nine-month period ended September 30, 2017, key management personnel (including retirees) exercised 17,716 (2016 – 169,522) share options that had an intrinsic value of less than $1 million (2016 – $4 million) at the time of exercise, reflecting a weighted average price at the date of exercise of $44.84 (2016 – $42.47).

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

As at (millions)	September 30, 2017		December 31, 2016
Restricted stock units	$	48	$	25
Deferred share units 1	25		32
	$	73	$	57

(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, 2017, $NIL (2016 – $NIL) and $11 (2016 – $4) , 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, 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, 2017, 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 (2016 – $2 million) and $5 million (2016 – $5 million), respectively.

(c)Transactions with real estate joint ventures

During the three-month and nine-month periods ended September 30, 2017 and 2016, we had transactions with the real estate joint ventures, which are related parties, as set out in Note 21.

31additional statement of cash flow information

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

		Three months						Nine months
Periods ended September 30 (millions)	Note	2017			2016			2017			2016
Net change in non-cash operating working capital
Accounts receivable		$	(100	)	$	(105	)	$	15		$	6
Inventories		(35		)	89			(38		)	98
Prepaid expenses		57			52			(126		)	(94		)
Accounts payable and accrued liabilities		176			96			65			(65		)
Income and other taxes receivable and payable, net		46			(59		)	(39		)	(204		)
Advance billings and customer deposits		(17		)	(2		)	25			(14		)
Provisions		(3		)	—			(64		)	(25		)
		$	124		$	71		$	(162	)	$	(298	)

43

notes to condensed interim consolidated financial statements (unaudited)

		Three months						Nine months
Periods ended September 30 (millions)	Note	2017			2016			2017			2016
Cash payments for capital assets
Capital asset additions
Gross capital expenditures
Property, plant and equipment	17	$	(677	)	$	(642	)	$	(1,904	)	$	(1,741	)
Intangible assets	18	(145		)	(149		)	(454		)	(449		)
		(822		)	(791		)	(2,358		)	(2,190		)
Additions arising from non-monetary transactions		1			4			3			16
Capital expenditures		(821		)	(787		)	(2,355		)	(2,174		)
Change in associated non-cash investing working capital		27			76			11			203
		$	(794	)	$	(711	)	$	(2,344	)	$	(1,971	)

(b)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(e))			Other			End of period
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 Communications Inc. debentures	619		—			—			—			—			619
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
	12,523		2,740			(2,807		)	5			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	—		(1,404		)	1,404			—			—			—
	$	12,523	$	1,336		$	(1,403	)	$	5		$	17		$	12,478
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	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

44

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(e))			Other			End of period
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2017
Dividends paid to holders of Common Shares	$	293	$	—		$	(269	)	$	—		$	268		$	292
Short-term borrowings	$	100	$	—		$	—		$	—		$	—		$	100
Long-term debt
TELUS Corporation notes	$	11,605	$	—		$	—		$	(53	)	$	1		$	11,553
TELUS Corporation commercial paper	1,032		1,185			(1,084		)	(41		)	—			1,092
TELUS Communications Inc. debentures	619		—			—			—			1			620
TELUS International (Cda) Inc. credit facility	288		82			(7		)	(11		)	1			353
Derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt — liability	64		1,084			(1,142		)	94			(24		)	76
	13,608		2,351			(2,233		)	(11		)	(21		)	13,694
To eliminate effect of gross settlement of derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt	—		(1,084		)	1,084			—			—			—
	$	13,608	$	1,267		$	(1,149	)	$	(11	)	$	(21	)	$	13,694
Issue of shares by subsidiary to non-controlling interest
Income taxes charged directly to contributed surplus	$	47	$	—		$	—		$	—		$	(3	)	$	44

				Statement of cash flows						Non-cash changes
(millions)	Beginning of period			Issued or received			Redemptions, repayments or payments			Foreign exchange movement (Note 4(e))			Other			End of period
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	—			—			—			—			47			47
	—			299			(8		)	—			(240		)	51
To eliminate effect of gross settlement of transaction costs and income taxes	—			(8		)	8			—			—			—
	$	—		$	291		$	—		$	—		$	(240	)	$	51

45

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(e))			Other			End of period
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2017
Dividends paid to holders of Common Shares	$	284	$	—		$	(813	)	$	—		$	821		$	292
Short-term borrowings	$	100	$	—		$	—		$	—		$	—		$	100
Long-term debt
TELUS Corporation notes	$	11,367	$	990		$	(700	)	$	(96	)	$	(8	)	$	11,553
TELUS Corporation commercial paper	613		4,256			(3,714		)	(63		)	—			1,092
TELUS Communications Inc. debentures	619		—			—			—			1			620
TELUS International (Cda) Inc. credit facility	332		82			(42		)	(22		)	3			353
Derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt — liability	20		3,714			(3,767		)	159			(50		)	76
	12,951		9,042			(8,223		)	(22		)	(54		)	13,694
To eliminate effect of gross settlement of derivatives used to manage currency risks arising from U.S. dollar denominated long-term debt	—		(3,714		)	3,714			—			—			—
	$	12,951	$	5,328		$	(4,509	)	$	(22	)	$	(54	)	$	13,694
Issue of shares by subsidiary to non-controlling interest
Gross proceeds on share issuance	$	—	$	1		$	—		$	—		$	(1	)	$	—
Transaction costs	4		—			(1		)	—			3			6
Income taxes charged directly to contributed surplus	47		—			—			—			(3		)	44
	$	51	$	1		$	(1	)	$	—		$	(1	)	$	50

46

EX-99.2

Exhibit 99.2

TELUS CORPORATION

Management’s discussion and analysis

2017 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 any statements that do not refer to historical facts. They include, but are not limited to, statements relating to our objectives and our strategies to achieve those objectives, our targets, outlook, updates, our multi-year dividend growth program, and our normal course issuer bid. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, strategy, target and other similar expressions, or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, predict, seek, should, strive and will.

By their nature, forward-looking statements are subject to inherent risks and uncertainties and are based on assumptions, including assumptions about future economic conditions and courses of action. These assumptions may ultimately prove to have been inaccurate and, as a result, our actual results or events may differ materially from our expectations expressed in or implied by the forward-looking statements. An update to our assumptions for 2017 is presented in Section 9 Update to assumptions in this Management’s discussion and analysis (MD&A).

Risks and uncertainties that could cause actual performance or events 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: our ability to continue to retain customers through an enhanced customer service experience, including through the deployment and operation of evolving wireless and wireline networks; the ability of industry competitors to successfully launch their respective platforms and to combine a mix of residential local voice over Internet protocol (VoIP), long distance, high-speed Internet access (HSIA) and, in some cases, wireless services under one bundled and/or discounted monthly rate, along with their existing broadcast or satellite-based TV services; the success of new products, new services and supporting systems, such as Internet of Things (IoT) services for Internet-connected devices; 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), cost of acquisition, cost of retention and churn for all services, as do customer usage patterns, flat-rate pricing trends for voice and data, inclusive rate plans for voice and data and availability of Wi-Fi networks for data; mergers and acquisitions of industry competitors; 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; and our ability to obtain and offer content on a timely basis across multiple devices on wireless and TV platforms at a reasonable cost.

·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, a declining overall market for paid TV services; the increasing number of households that have only wireless and/or Internet-based telephone services; potential wireless ARPU declines as a result of, among other factors, substitution to messaging and OTT applications; substitution to increasingly available Wi-Fi services; and disruptive technologies such as OTT IP services, such as Network as a Service in the business market, that may displace our existing data services.

·Technology including: subscriber demand for data that may challenge wireless networks and spectrum capacity levels in the future; our reliance on information technology and our need to streamline our legacy systems; 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, which have facilitated our deployment of wireless technologies; choice of suppliers and those suppliers’ ability to maintain and service their product lines, which could affect the success of upgrades to and evolution of technology that we offer; 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 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; and uncertainties around our strategy to replace certain legacy wireline networks, systems and services to reduce operating costs.

·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, including wireless small cells to improve coverage and capacity and prepare for a more efficient and timely evolution to 5G wireless services; utilizing 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.

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·Regulatory decisions and developments including: the potential of government intervention to further increase wireless competition; 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 charged to wireless service providers (WSPs); the Governor in Council’s request to the CRTC to reconsider whether Wi-Fi networks could count as a home network for WSPs seeking mandated roaming; future spectrum auctions and spectrum policy determinations (including limitations on established wireless providers, proposed 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; disputes with certain municipalities regarding rights-of-way bylaws; the potential impacts from the CRTC’s decision to require pro-rated refunds when customers terminate their services; the CRTC’s examination of the competitor quality of service regime; the CRTC’s examination of the regulatory framework for message relay service; the CRTC’s proposed phase-out of the local service subsidy regime and corresponding establishment of a broadband funding regime to support the enhancement of high-speed Internet services focusing on underserved areas in Canada; the impact from the review of the Minister of Canadian Heritage’s new Creative Canada policy framework announced on September 28, 2017; the CRTC’s consultation and report on distribution models of the future; vertical integration in the broadcasting industry resulting in competitors owning broadcast content services and timely and effective enforcement of related regulatory safeguards; the review of the Copyright Act scheduled to begin in fall 2017; the federal government’s stated intention to review the Broadcasting Act and Telecommunications Act as announced in the March 22, 2017 federal budget; the North American Free Trade Agreement renegotiation; and restrictions on non-Canadian ownership of TELUS Common Shares and the ongoing monitoring and compliance with such restrictions.

·Human resource matters including: recruitment, retention and appropriate training in a highly competitive industry, and the level of employee engagement.

·Process and business combination 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 (such as our ability to successfully integrate acquisitions, complete divestitures or establish partnerships in a timely manner, and realize expected strategic benefits including following compliance with any regulatory orders), the risk that Manitoba Telecom Services Inc.’s postpaid wireless customers acquired by us from BCE Inc. may not be successfully migrated; the 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.

·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. Examples of these initiatives are: our operating efficiency and effectiveness program to drive improvements in earnings before interest, income taxes, depreciation and amortization (EBITDA), including the future benefits of the immediately vesting transformative compensation initiative; business integrations; business product simplification; business process outsourcing; offshoring and reorganizations, including any full-time equivalent (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.

·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.

·Ability to sustain our dividend growth program through 2019. This program 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, acquisitions, the management of our capital structure, 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. Shares may be purchased under our normal course issuer bid (NCIB) when and if we consider it opportunistic, based on the Company’s financial position and outlook, and the market price of TELUS shares. There can be no assurance that our dividend growth program or any NCIB will be maintained, not changed and/or completed through 2019.

·Taxation matters including: interpretation of complex domestic and foreign tax laws by the tax authorities that may differ from our interpretations; including the timing of income and deductions such as tax depreciation and operating expenses; changes in tax laws, including tax rates; tax expenses being materially different than anticipated including the taxability of income and deductibility of tax attributes; elimination of income tax deferrals through the use of different tax year-ends for operating partnerships and corporate partners; and tax authorities adopting more aggressive auditing practices for example, tax reassessments or adverse court decisions impacting the tax payable by us.

·Litigation and legal matters including: our ability to successfully respond to investigations and regulatory proceedings and defend against 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.

·Health, safety and the environment, including lost employee work time resulting from illness or injury, public concerns related to radio frequency emissions, environmental issues affecting our business including climate change, waste and waste recycling, risks relating to fuel systems on our properties, and changing government and public expectations regarding environmental matters and our responses.

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·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.

·Economic growth and fluctuations including: the state of the economy in Canada, which may be influenced by economic and other developments outside of Canada including potential outcomes of yet unknown policies and actions of foreign governments; 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 dollar: U.S. dollar exchange rates.

These risks are described in additional detail in Section 9 General trends, outlook and assumptions and Section 10 Risks and risk management in our 2016 annual MD&A. Those descriptions are incorporated by reference in this cautionary statement but are not intended to be a complete list of the risks that could affect the Company.

Many of these factors are beyond our control or our current expectations or knowledge. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation. Except as otherwise indicated in this document, the forward-looking statements made herein do not reflect the potential impact of any non-recurring or special items or any mergers, acquisitions, dispositions or other business combinations or transactions that may be announced or that may occur after the date of this document.

Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements in this document describe our expectations and are based on our assumptions as at the date of this document and are subject to change after this date. Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements.

This cautionary statement qualifies all of the forward-looking statements in this document.

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Management’s discussion and analysis

November 9, 2017

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 2017
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 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	9.1 Telecommunications industry regulatory developments and proceedings
10.	Risks and risk management
11.	Definitions and reconciliations	11.1 Non-GAAP and other financial measures 11.2 Operating indicators

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1.Introduction

The forward-looking statements in this section, including estimates regarding economic growth, are qualified 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 our consolidated financial position and financial performance for the three-month and nine-month periods ended September 30, 2017, and should be read together with our September 30, 2017, 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 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 currency amounts are in Canadian dollars, unless otherwise specified.

Additional information relating to the Company, including our annual information form and other filings with securities commissions or similar regulatory authorities in Canada, is available on SEDAR (sedar.com). Our filings with the Securities and Exchange Commission in the United States, including Form 40-F, are available on EDGAR (sec.gov).

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 our Audit Committee and approved by our Board of Directors (Board) for issuance on November 9, 2017.

In this MD&A, unless otherwise indicated, results for the third quarter of 2017 (three-month period ended September 30, 2017) and the nine-month period ended September 30, 2017, are compared with results from the third quarter of 2016 (three-month period ended September 30, 2016) and nine-month period ended September 30, 2016.

1.2 The environment in which we operate

The success of our business and the challenges we face can best be understood with reference to the environment in which we operate, including broader economic factors that affect our customers and us, and our competitive industry. Our estimates regarding our environment also form an important part of the assumptions on which our targets are based.

Economic growth

We have updated our assumptions since our first quarter 2017 MD&A. We now estimate that the annual rate of economic growth in Canada in 2017 will be approximately 3.0% (previously 2.2%), based on a composite of estimates from Canadian banks and other sources. For our incumbent local exchange carrier (ILEC) provinces in Western Canada, we currently estimate that annual rates of economic growth will be approximately 3.2% in 2017 (previously 2.3%) in British Columbia (B.C.) and 3.5% in 2017 (previously 2.4%) in Alberta. The Bank of Canada’s October 2017 Monetary Policy Report estimated that annual economic growth in Canada will be 3.1% in 2017. Which sectors of the economy that experience these growth estimates and the competitive and dynamic environment in which we operate will affect when, and to what extent, we will experience the effects of these economic growth estimates.

In respect of the national unemployment rate, Statistics Canada’s Labour Force Survey reported a rate of 6.2% for September 2017 (6.9% for December 2016 and 7.0% for September 2016). The unemployment rate for B.C. was 4.9% for September 2017 (5.8% for December 2016 and 5.7% for September 2016), and the unemployment rate for Alberta was 7.9% for September 2017 (8.5% in December 2016 and 8.5% for September 2016).

1.3 Consolidated highlights

Voxpro Limited

On August 31, 2017, through our TELUS International (Cda) Inc. subsidiary, we acquired 55% of Voxpro Limited (Voxpro), a business process outsourcing and contact centre services company with facilities in Ireland, the U.S. and Romania, for cash consideration of $58 million. The investment was made with a view to expanding further into supporting customers who provide Internet-related services and products, bolstering sales capabilities in our chosen markets, and acquiring multi-site redundancy in support of other facilities. We concurrently provided a written put option to and have a purchased call option from the remaining selling shareholders under which they could put or we could call, the remaining 45% of the shares commencing in 2021. If either of these options are exercised, total consideration is estimated to be approximately $152 million.

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Xavient Information Systems

On October 30, 2017, through our TELUS International (Cda) Inc. subsidiary, we entered into an agreement to acquire 65% of Xavient Information Systems, a group of information technology consulting and software services companies with facilities in the U.S. and in India for consideration of approximately $144 million (U.S.$115 million) in cash and approximately $19 million (U.S.$15 million) in TELUS International (Cda) Inc. common shares, subject to customary closing conditions, including regulatory approvals. We expect the transaction to close in 2017. We will concurrently provide a written put option to the remaining selling shareholders under which they could put the remaining 35% interest on or before December 31, 2020. The written put option sets out that the share pricing methodology will be dependent upon earnings. If this option is exercised, total consideration would be in the range of $310 million (U.S.$250 million). Concurrent with closing, the non-controlling shareholders are to provide us with a purchased call option, which will substantially mirror the written put option. The investment is being made with a view to enhancing our ability to provide complex and higher value information technology services, improve our related sales and solutioning capabilities and acquire multi-site redundancy in support of other facilities.

Changes to the Board of Directors

Effective November 7, 2017, Marc Parent, the President and Chief Executive Officer of CAE Inc. (CAE), joined our Board. CAE, which is listed on both the New York Stock Exchange and the Toronto Stock Exchange, is a global leader in training for the civil aviation, defence and security, and healthcare markets. CAE’s healthcare business designs and manufactures simulators, audiovisual and simulation centre management solutions, develops courseware, and offers services for training of medical, nursing and allied healthcare students as well as clinicians in educational institutions, hospitals and defence organizations worldwide. A native of Montreal, Marc is a graduate of mechanical engineering from Montreal’s École Polytechnique and of the Harvard Business School’s Advanced Management Program, and was awarded an Honorary Doctorate from École Polytechnique for his contributions to the aerospace industry in Montreal and internationally.

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Consolidated highlights

	Third quarters ended September 30						Nine-month periods ended September 30
($ millions, unless otherwise noted)	2017		2016		Change		2017		2016		Change
Consolidated statements of income
Operating revenues	3,366		3,238		4.0	%	9,837		9,494		3.6	%
Operating income	649		616		5.4	%	2,046		1,946		5.1	%
Income before income taxes	500		487		2.7	%	1,617		1,560		3.7	%
Net income	370		355		4.2	%	1,197		1,149		4.2	%
Net income attributable to Common Shares	367		348		5.5	%	1,179		1,142		3.2	%
Earnings per share (EPS) ($)
Basic EPS	0.62		0.59		5.1	%	1.99		1.93		3.1	%
Adjusted basic EPS1	0.66		0.65		1.5	%	2.08		2.05		1.5	%
Diluted EPS	0.62		0.59		5.1	%	1.99		1.93		3.1	%
Dividends declared per Common Share ($)	0.4925		0.46		7.1	%	1.4650		1.36		7.7	%
Basic weighted-average Common Shares outstanding (millions)	594		592		0.4	%	592		593		(0.1	)%
Consolidated statements of cash flows
Cash provided by operating activities	1,133		1,032		9.8	%	2,968		2,487		19.3	%
Cash used by investing activities	(866	)	(680	)	27.4	%	(2,909	)	(2,075	)	40.2	%
Capital expenditures2	(821	)	(787	)	4.3	%	(2,355	)	(2,174	)	8.3	%
Cash used by financing activities	(150	)	(370	)	(59.5	)%	(3	)	(225	)	(98.7	)%
Other highlights
Subscriber connections3 (thousands)							12,942		12,577		2.9	%
EBITDA (earnings before interest, income taxes, depreciation and amortization)1	1,196		1,131		5.9	%	3,651		3,460		5.5	%
Restructuring and other costs1	36		60		(40.0	)%	79		131		(39.7	)%
Adjusted EBITDA4	1,232		1,181		4.4	%	3,727		3,557		4.8	%
Adjusted EBITDA margin5 (%)	36.6		36.5		0.1	pts.	37.9		37.5		0.4	pts.
Free cash flow1	215		98		119.4	%	692		332		108.4	%
Net debt to EBITDA — excluding restructuring and other costs1 (times)							2.76		2.62		0.14

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 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, measured at the end of the respective periods based on information in billing and other systems. In relation to an acquisition and a divestiture that were both undertaken during the first quarter of 2017, January 1, 2017 residential NALs, high-speed Internet and TELUS TV subscriber balances were increased by a net 1,000, 6,000 and 5,000, respectively, and are not included in subscriber connection net additions metrics in Section 5.5. Effective April 1, 2017, postpaid subscribers, total subscribers and associated operating statistics (gross additions, net additions, average revenue per subscriber unit per month (ARPU) and churn) have been adjusted to include an estimated migration of 85,000 Manitoba Telecom Services Inc. (MTS) subscribers in the opening subscriber balances. Cumulative subscriber connections also include an April 1, 2017 adjustment to remove approximately 19,000 prepaid and 25,000 postpaid subscriptions from the respective subscriber bases, primarily due to our national CDMA network shutdown.

(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 first nine months of 2017 excludes net gains and equity income of $3 million related to real estate joint venture developments. 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 in the second quarter of 2016.

Operating highlights

·Consolidated operating revenues increased by $128 million in the third quarter of 2017 and $343 million in the first nine months of 2017:

Service revenues increased by $129 million in the third quarter of 2017 and $371 million in the first nine months of 2017, mainly due to growth in wireless network revenue and wireline data services revenue, partly offset by the ongoing decline in legacy wireline voice revenue.

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Equipment revenues were relatively flat in the third quarter of 2017. In the first nine months of 2017, equipment revenues decreased by $9 million, reflecting a combination of higher wireless per-unit subsidies including devices on Premium Plus plans and wireless competitive intensity, partly offset by increased wireless postpaid gross additions and higher wireless retention volumes.

Other operating income was relatively flat in the third quarter of 2017 and decreased by $19 million in the first nine months of 2017 largely due to lower net gains in the current period than in the comparable period. This change includes lower net gains and equity income related to real estate joint venture developments, in addition to non-recurring 2016 gains related to the exchange of wireless spectrum licences and from the sale of property, plant and equipment, partly offset by the non-recurrence of 2016 provisions related to written put options in respect of non-controlling interests in TELUS International (Cda) Inc.

For additional details on operating revenues, see Section 5.4 Wireless segment and Section 5.5 Wireline segment.

·During the 12-month period ending on September 30, 2017, our total subscriber connections increased by 365,000, reflecting a 5.4% increase in wireless postpaid subscribers, a 3.9% increase in TELUS TV subscribers and a 5.6% increase in high-speed Internet subscribers, partly offset by an 8.4% decline in wireless prepaid subscribers and a 6.0% decline in wireline residential NALs.

Our postpaid wireless subscriber net additions were 115,000 in the third quarter of 2017 and 258,000 in the first nine months of 2017, up 28,000 and 102,000, respectively, compared to the same periods in 2016 from higher gross additions due to the success of our promotions including our focus on higher-value loading, and cost-effective prepaid migrations. Our monthly postpaid subscriber churn rate was 0.86% in the third quarter of 2017 and 0.86% in the first nine months of 2017, as compared to 0.94% in the third quarter of 2016 and 0.93% in the first nine months of 2016. (See Section 5.4 Wireless segment for additional details.)

Net additions of high-speed Internet subscribers were 19,000 in the third quarter of 2017 and 60,000 in the first nine months of 2017, up 5,000 in the quarter and 16,000 in the nine-month period. The increases resulted from the continued expansion of our high-speed broadband footprint, including fibre to the premises (FTTP) and the success of recently launched innovative product offerings. Net additions of TELUS TV subscribers were 9,000 in the third quarter of 2017 and 21,000 in the first nine months of 2017, down 5,000 in the quarter and 17,000 in the nine-month period. These net addition results reflect lower gross additions and a decline in satellite-TV subscribers due to a declining overall market for paid TV services resulting from the effects of heightened competitive intensity, including from over-the-top (OTT) services and a high rate of market penetration. These pressures were partly offset by the 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. This contributed to overall combined Internet and TV subscriber growth of 132,000 or 4.9% over the last 12 months. (See Section 5.5 Wireline segment for additional details.)

·Operating income increased by $33 million in the third quarter of 2017 and $100 million in the first nine months of 2017. The increases reflect growth in EBITDA partially offset by increased depreciation and amortization expenses resulting from higher expenditures associated with both our capital asset base and intangible asset base, including acquisitions, and the impact of our continuing program of asset life studies.

EBITDA includes restructuring and other costs, and includes net gains and equity income related to real estate joint venture developments recorded in the second quarter of 2017 and the second and third quarters of 2016, as well as a gain from the exchange of wireless spectrum licences recorded in the second quarter of 2016. EBITDA increased by $65 million in the third quarter of 2017 and $191 million in the first nine months of 2017. The increases reflect: (i) growth in wireless network revenues and increased wireline data revenues, partially offset by increased costs associated with higher wireless gross loading and retention volumes; (ii) lower restructuring and other costs, partly offset by costs associated with the migration of subscribers acquired from MTS; and (iii) lower employee benefits expense.

Adjusted EBITDA excludes restructuring and other costs, and excludes net gains and equity income related to real estate joint venture developments recorded in the second quarter of 2017 and the second and third quarters of 2016, in addition to the exclusion of a gain from the exchange of wireless spectrum licences recorded in the second quarter of 2016. Adjusted EBITDA increased by $51 million or 4.4% in the third quarter of 2017 and $170 million or 4.8% in the first nine months of 2017. (See Section 5.4 Wireless segment and Section 5.5 Wireline segment for additional details.)

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·Income before income taxes increased by $13 million in the third quarter of 2017 and $57 million in the first nine months of 2017, reflecting higher Operating income as noted above, partly offset by an increase in Financing costs. The increase in Financing costs resulted from lower capitalized long-term debt interest costs for spectrum licences that are now being deployed and higher average long-term debt outstanding. (See Financing costs in Section 5.3.)

·Income taxes were relatively flat in the third quarter of 2017 and increased by $9 million in the first nine months of 2017 primarily due to higher Income before income taxes.

·Net income attributable to Common Shares increased by $19 million in the third quarter of 2017 and $37 million in the first nine months of 2017. These increases were driven by higher Operating income partly offset by increased Financing costs. Adjusted Net income excludes the effects of restructuring and other costs, net gains and equity income related to real estate joint venture developments recorded in the second quarter of 2017 and second and third quarters of 2016, income tax-related adjustments, and a non-recurring gain from the exchange of wireless spectrum licences recorded in the second quarter of 2016. Adjusted Net income increased by $8 million or 2.1% in the third quarter of 2017 and $20 million or 1.7% in the first nine months of 2017.

Analysis of Net income

	Third quarters ended September 30						Nine-month periods ended September 30
($)	2017		2016		Change		2017		2016		Change
Net income attributable to Common Shares	367		348		19		1,179		1,142		37
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		(2	)	(11	)	9
Restructuring and other costs, after income taxes	26		44		(18	)	58		96		(38	)
Favourable income tax-related adjustments	(2	)	(3	)	1		(3	)	(2	)	(1	)
Adjusted Net income	391		383		8		1,232		1,212		20

·Basic EPS increased by $0.03 or 5.1% in the third quarter of 2017 and $0.06 or 3.1% in the first nine months of 2017. Adjusted basic EPS excludes the effects of restructuring and other costs, net gains and equity income related to real estate joint venture developments recorded in the second quarter of 2017 and second and third quarters of 2016, income tax-related adjustments, and a non-recurring gain from the exchange of wireless spectrum licences recorded in the second quarter of 2016. Adjusted basic EPS increased by $0.01 or 1.5% in the third quarter of 2017 and $0.03 or 1.5% in the first nine months of 2017.

Analysis of basic EPS

	Third quarters ended September 30						Nine-month periods ended September 30
($)	2017		2016		Change		2017		2016		Change
Basic EPS	0.62		0.59		0.03		1.99		1.93		0.06
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	0.05		0.08		(0.03	)	0.10		0.16		(0.06	)
Favourable income tax-related adjustments, per share	(0.01	)	(0.01	)	—		(0.01	)	—		(0.01	)
Adjusted basic EPS	0.66		0.65		0.01		2.08		2.05		0.03

·Dividends declared per Common Share were $0.4925 in the third quarter of 2017 and $1.4650 in the first nine months of 2017, reflecting increases of 7.1% from the third quarter of 2016 and 7.7% from the first nine months of 2016. This is consistent with our announced intention of dividend growth in the range of 7 to 10% per annum through 2019. On November 8, 2017, the Board declared a fourth quarter dividend of $0.5050 per share on the issued and outstanding Common Shares, payable on January 2, 2018, to shareholders of record at the close of business on December 11, 2017. The fourth quarter dividend reflects a quarterly increase of $0.025 per share or 5.2% from the $0.48 per share dividend declared one year earlier and an annualized increase of $0.13 per share or 7.1% in 2017 compared to the $1.84 per share dividend declared in 2016.

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Liquidity and capital resource highlights

·Net debt to EBITDA — excluding restructuring and other costs was 2.76 times at September 30, 2017, up from 2.62 times at September 30, 2016, as the increase in net debt exceeded the growth in EBITDA — excluding restructuring and other costs. (See Section 7.5 Liquidity and capital resource measures.)

·Cash provided by operating activities increased by $101 million in the third quarter of 2017 and $481 million in the first nine months of 2017 due to lower income taxes instalments paid and growth in Adjusted EBITDA.

·Cash used by investing activities increased by $186 million in the third quarter of 2017 and $834 million in the first nine months of 2017 attributed to higher cash payments for acquisitions and higher capital expenditures. Acquisitions increased by $68 million in the third quarter of 2017 and $544 million in the first nine months of 2017, primarily due to the acquisition of Voxpro, in addition to the second quarter acquisitions of approximately one-quarter of MTS postpaid wireless subscribers, certain network assets and rights to 15 retail locations in Manitoba, as well as Kroll Computer Systems Inc. Capital expenditures increased by $34 million in the third quarter of 2017 and $181 million in the first nine months of 2017, mainly due to continued generational capital investments in broadband infrastructure and our network enhancement investments in Manitoba to improve coverage, capacity and speeds to significantly enhance our customer experience and supplement the business acquisition of MTS subscribers, dealers and network. Investments in our broadband infrastructure include our fibre-optic network, which supports our small-cell technology strategy to improve coverage and capacity and prepare for a more efficient and timely evolution to 5G, as well as connect more homes and businesses directly to our fibre-optic network. (See Section 7.3 Cash used by investing activities.)

·Cash used by financing activities decreased by $220 million in the third quarter of 2017 reflecting increased issuances of long-term debt net of redemptions. In the first nine months of 2017, Cash used by financing activities decreased by $222 million as increased issuances of long-term debt net of redemptions, coupled with no share repurchase activity in 2017, was partly offset by the impact of the 2016 non-recurring issuance of shares by a subsidiary to a non-controlling interest. (See Section 7.4 Cash used by financing activities.)

·Free cash flow increased by $117 million in the third quarter of 2017 and $360 million in the first nine months of 2017, resulting from lower income taxes paid and increased EBITDA, partially offset by an increase in capital expenditures. (See calculation in Section 11.1 Non-GAAP and other financial measures.)

2.Core business and strategy

Our core business was described in our 2016 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 $8.7 billion in the first nine months of 2017, up $428 million or 5.2%, while remaining revenues totalled $1.1 billion in the first nine months of 2017, down $85 million or 7.0%. These external wireless revenues and wireline data revenues represented 89% of our consolidated revenues for the first nine months of 2017, as compared to $8.2 billion, or 87%, in the same period in 2016.

Providing integrated solutions that differentiate TELUS from our competitors

In July 2017, TELUS Health announced the launch of MedDialog, a national clinical solution that allows doctors to communicate electronically with other physicians regarding the care of their patients directly from their electronic medical record systems. This technology will enable more efficient clinical practice and better patient care by eliminating the need for phone and fax communications and ensuring all patient communication history remains within the digital chart.

Building national capabilities across data, IP, voice and wireless

In September 2017, we successfully completed Canada’s first test of licensed assisted access (LAA) on indoor and outdoor live networks. The test delivered wireless download speeds of 970 Mbps indoors and 966 Mbps outdoors using 80Mhz of aggregated spectrum in a live, dynamic production network. LAA technology will enhance the TELUS network as it continues to evolve towards next-generation 5G speeds, bringing customers higher throughput and a better overall network experience as we deploy the technology into our network in the coming years.

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

As discussed in Section 1.3, on August 31, 2017, we acquired 55% of Voxpro and approximately 2,700 Voxpro team members joined us through our subsidiary TELUS International (Cda) Inc. The Ireland headquartered company now operates as Voxpro — powered by TELUS International.

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3.Corporate priorities for 2017

Our 2017 corporate priorities were listed in our 2016 annual MD&A and updated in our first quarter 2017 MD&A. They are:

·Delivering on TELUS’ future friendly® brand promise by putting customers first

·Elevating our winning culture for sustained competitive advantage

·Generating profitable top-line revenue growth while enhancing our operational efficiency

·Increasing our competitive advantage through advanced, client-centric technology, networks and systems that lead the world in reliability

·Driving TELUS’ leadership position in our chosen business, public sector and international markets

·Advancing TELUS’ leadership in healthcare information management for better human outcomes.

4.Capabilities

The forward-looking statements in this section, including statements regarding our dividend growth program and our financial objectives in Section 4.3, are qualified 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 2016 annual MD&A.

4.2 Operational resources

For a discussion of our operational resources, please refer to Section 4.2 of our 2016 annual MD&A.

Wireless

Churn is defined in Section 11.2 of this MD&A. Our monthly postpaid churn rate was 0.86% in the third quarter of 2017 and has now been below 1% for 16 of the past 17 quarters despite strong competitive and economic pressures. In the third quarter of 2017, we continued to deliver leading blended customer churn on a national basis. Our monthly blended churn was 1.05% in the third quarter of 2017, which represented our lowest third quarter churn rate since we became a national carrier 17 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.

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. This includes investments in wireless small cells connected to our fibre network to improve coverage and capacity and prepare for a more efficient and timely evolution to 5G wireless services.

As at September 30, 2017, our 4G long-term evolution (LTE) network covered 99% of Canada’s population, up from 97% at September 30, 2016. Furthermore, we have continued to invest in our LTE advanced network roll-out, which covered more than 85% of Canada’s population at September 30, 2017, up from 61% at September 30, 2016. Outside of LTE advanced and LTE coverage areas, the LTE devices we offer also operate on our HSPA+ network, which covered 99% of Canada’s population at September 30, 2017.

Wireline

We have continued to invest in our incumbent local exchange carrier (ILEC) 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 in communities 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 4K TV, and enhanced marketing of data products and bundles. Our fibre network is also an essential component of our wireless network, and will enable 5G deployment in the future.

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As at September 30, 2017, our high-speed broadband coverage reached approximately 3 million households and businesses in B.C., Alberta and Eastern Quebec, including approximately 1.33 million homes and businesses covered by fibre-optic cable, up from approximately 0.95 million homes and businesses in the third quarter of 2016, which provides these premises with immediate access to our gigabit-capable fibre-optic network.

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. In order to maintain or adjust our capital structure, we may change the amount of dividends paid to holders of Common Shares, purchase shares for cancellation pursuant to our normal course issuer bid (NCIB) programs, issue new debt, issue new debt to replace existing debt with different characteristics, issue new shares, 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 net debt to EBITDA — excluding restructuring and other costs ratio and the dividend payout ratio. (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 our 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 or that it will not be changed through 2019. (See Caution regarding forward-looking statements — Ability to sustain our dividend growth program through 2019 and Section 10.7 Financing, debt requirements and returning cash to shareholders in our 2016 annual MD&A.)

·On November 8, 2017, a fourth quarter dividend of $0.5050 per share was declared on our issued and outstanding Common Shares, payable on January 2, 2018, to shareholders of record at the close of business on December 11, 2017. The fourth quarter dividend for 2017 reflects a quarterly increase of $0.025 per share or 5.2% from the $0.48 per share dividend paid on January 3, 2017 and an annualized increase of $0.13 per share or 7.1% in 2017 compared to the $1.84 per share dividend declared in 2016.

·In connection with dividends declared during the three-month and nine-month periods ended September 30, 2017, our dividend reinvestment and share purchase plan trustee purchased approximately 0.5 million dividend reinvestment Common Shares for $24 million, and approximately 1.6 million dividend reinvestment Common Shares for $68 million, respectively, with no discount applicable.

Purchase Common Shares

·During the three-month and nine-month periods ended September 30, 2017, we did not have any transactions pursuant to our NCIB.

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

·Our issued and outstanding commercial paper was $1,092 million at September 30, 2017, all of which was denominated in U.S. dollars (U.S.$875 million), compared to $613 million at December 31, 2016, and $137 million at September 30, 2016.

·Our net draws on the TELUS International (Cda) Inc. credit facility were $358 million ($353 million net of unamortized costs) at September 30, 2017, compared to $340 million ($332 million net of unamortized issue costs) at December 31, 2016, and $361 million ($352 million net of unamortized costs) at September 30, 2016.

·Proceeds from securitized trade receivables were $100 million at September 30, 2017, (September 30 and December 31, 2016 — $100 million).

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Report on financing and capital structure management plans

Maintain compliance with financial objectives

Certain of our current financial objectives will be reviewed in 2017 for possible revision due to changes arising from the adoption of new accounting standards, IFRS 15, Revenue from Contracts with Customers and IFRS 16, Leases. (See Section 8.2 Accounting policy developments in our 2016 annual MD&A.)

·Maintain investment grade credit ratings in the range of BBB+ or the equivalent — On November 9, 2017, 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, 2017, the ratio was 2.76 times, outside of the range, primarily due to the funding of spectrum licences acquired in wireless spectrum auctions held during 2014 and 2015, and the elevated strategic capital investments in our fibre-optic network. We expect this ratio to decline in 2018 and we continue to expect to return to within the objective range in the medium term, consistent with 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 — Our target ratio is on a prospective basis. The dividend payout ratio we present in this MD&A is a historical measure utilizing the last four quarters of dividends declared and earnings per share, and is disclosed for illustrative purposes in evaluating our target guideline. As at September 30, 2017, the historical ratio of 91% and the adjusted historical ratio of 79% exceeded the objective range, however, we currently expect that we will be within our target guideline when considered on a prospective basis within the medium term. (See Section 7.5 Liquidity and capital resource measures.)

·Generally maintain a minimum of $1 billion in unutilized liquidity — As at September 30, 2017, our unutilized liquidity was more 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

This section contains forward-looking statements, including those with respect to average revenue per subscriber unit per month (ARPU) growth, high-speed Internet subscriber growth, and the various trends described in this section as they relate to the future. There can be no assurance that we have accurately identified the trends based on past results or that these trends will continue. See Caution regarding forward-looking statements at the beginning of this MD&A.

5.1 General

A significant judgment we make is in respect of distinguishing between our wireless and wireline operations and cash flows (and this extends to allocations of both direct and indirect expenses and of capital expenditures). The clarity of such distinction has been increasingly affected by the convergence and integration of our wireless and wireline telecommunications infrastructure and technology. The continued build-out of our technology-agnostic fibre-optic infrastructure, in combination with converged edge technology, has significantly affected this judgment, as has the commercialization of fixed-wireless telecommunications solutions for customers and the consolidation of our non-customer facing operations. As a result, it has become increasingly impractical and difficult to objectively and clearly distinguish between our wireless and wireline operations and cash flows. As we do not currently aggregate operating segments, our reportable segments as at September 30, 2017, are also wireless and wireline. Segmented information in Note 5 of the interim consolidated financial statements is regularly reported to our Chief Executive Officer (CEO) (our chief operating decision-maker).

5.2 Summary of consolidated quarterly results and trends

Summary of quarterly results

($ millions, except per share amounts)	2017 Q3	2017 Q2	2017 Q1	2016 Q4		2016 Q3	2016 Q2	2016 Q1	2015 Q4
Operating revenues	3,366	3,273	3,198	3,305		3,238	3,148	3,108	3,217
Operating expenses
Goods and services purchased1	1,531	1,433	1,313	1,574		1,426	1,331	1,300	1,482
Employee benefits expense1	639	646	624	962		681	628	668	757
Depreciation and amortization	547	526	532	533		515	499	500	518
Total operating expenses	2,717	2,605	2,469	3,069		2,622	2,458	2,468	2,757
Operating income	649	668	729	236		616	690	640	460
Financing costs	149	142	138	134		129	134	123	114
Income before income taxes	500	526	591	102		487	556	517	346
Income taxes	130	140	150	15		132	140	139	85
Net income	370	386	441	87		355	416	378	261
Net income attributable to Common Shares	367	379	433	81		348	416	378	261
Net income per Common Share:
Basic earnings per share (basic EPS)	0.62	0.64	0.73	0.14		0.59	0.70	0.64	0.44
Adjusted basic EPS2	0.66	0.68	0.74	0.53		0.65	0.70	0.70	0.54
Diluted EPS	0.62	0.64	0.73	0.14		0.59	0.70	0.64	0.44
Dividends declared per Common Share	0.4925	0.4925	0.48	0.48		0.46	0.46	0.44	0.44
Additional information:
EBITDA2	1,196	1,194	1,261	769		1,131	1,189	1,140	978
Restructuring and other costs2	36	39	4	348		60	23	48	99
Gains on the exchange of wireless spectrum licences	—	—	—	—		—	15	—	—
Net gains and equity income from real estate joint venture developments	—	3	—	7		10	9	—	—
Adjusted EBITDA2	1,232	1,230	1,265	1,110		1,181	1,188	1,188	1,077
Cash provided by operating activities	1,133	1,126	709	732		1,032	892	563	870
Free cash flow2	215	260	217	(191	)	98	126	108	197

(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 trend of year-over-year increases in consolidated revenue reflects: (i) wireless network revenue generated from growth in both our ARPU and subscriber base; and (ii) wireline data service revenue, driven by Internet and enhanced

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data, TELUS Health, TELUS TV services and business process outsourcing revenues. Increased Internet and TV service revenues are being generated by subscriber growth and higher Internet revenue per customer. Consolidated revenue growth was partially offset by the continued decline in wireline voice revenues and the general decline in wireless equipment revenues. For additional information on wireless and wireline revenue and subscriber trends, see Section 5.4 Wireless segment and Section 5.5 Wireline segment.

The trend of year-over-year increases in Goods and services purchased expense reflects higher equipment expenses associated with increased postpaid gross additions and retention volumes, as well as increasing per-unit device costs including higher-value smartphones in the sales mix; increasing wireless customer service, administrative, roaming, and external labour expenses to support growth in our subscriber base; and increased wireline TV costs of sales associated with a growing subscriber base. These were partly offset by lower wireline equipment costs.

The general trend of year-over-year decreases in net Employee benefits expense reflects moderating wages and salaries resulting from a decrease in the number of full-time equivalent (FTE) domestic employees and the impact of benefits from certain contract concessions associated with our immediately vesting transformative compensation (recorded in the fourth quarter of 2016 and described in our 2016 annual MD&A) that are yielding efficiency improvements and continue to support our customer service focus. This was partly offset by increases in the number of employees to support business process outsourcing revenue growth and from business acquisitions.

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

The trend of year-over-year increases in Financing costs reflects an increase in long-term debt outstanding, mainly associated with our generational investments in fibre to homes and businesses and our wireless network, and the significant investments in wireless spectrum licences acquired during auctions in 2014 and 2015. Financing costs are net of capitalized interest which was related to spectrum licences acquired during the wireless spectrum licence auctions. Capitalization of interest ceased in the first quarter of 2017, as cell sites are now capable of utilizing those spectrum frequencies. Financing costs also include the Employee defined benefit plans net interest expense. Additionally, for the eight periods shown, Financing costs include varying amounts of foreign exchange gains or losses and varying amounts of interest income.

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 periods for income taxes of prior periods, including any related after-tax interest on reassessments. Historically, the trend in basic EPS has also been impacted by share purchases under our normal course issuer bid programs. However, there have been no repurchases in the first nine months of 2017.

The general trend of year-over-year increases in Cash provided by operating activities reflects generally higher consolidated Adjusted EBITDA. It also reflects increased interest payments arising from increases in debt outstanding, offset by lower fixed-term interest rates. Both income tax payments and restructuring and other costs have generally increased in 2016, but cash income tax payments have decreased in fiscal 2017, consistent with our assumption described in Section 9.3 of our 2016 annual MD&A and updated in Section 9 Update to assumptions. The trend in free cash flow reflects the factors affecting Cash provided by operating activities, as well as increases in capital expenditures. For further discussion on trends, see Section 5.4 Wireless segment and Section 5.5 Wireline segment.

5.3 Consolidated operations

The following is a discussion of our consolidated financial performance. Segment information in Note 5 of the interim consolidated financial statements is regularly reported to our CEO. We discuss the performance of our segments in Section 5.4 Wireless segment, Section 5.5 Wireline segment and Section 7.3 Cash used by investing activities.

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Operating revenues

	Third quarters ended September 30				Nine-month periods ended September 30
($ millions)	2017	2016	Change		2017	2016	Change
Service	3,174	3,045	4.2	%	9,292	8,921	4.2	%
Equipment	181	180	0.6	%	507	516	(1.7	)%
Revenues arising from contracts with customers	3,355	3,225	4.0	%	9,799	9,437	3.8	%
Other operating income	11	13	(15.4	)%	38	57	(33.3	)%
	3,366	3,238	4.0	%	9,837	9,494	3.6	%

Consolidated operating revenues increased by $128 million in the third quarter of 2017 and $343 million in the first nine months of 2017.

·Service revenues increased by $129 million in the third quarter of 2017 and $371 million in the first nine months of 2017, primarily reflecting growth in wireless network revenue and wireline data services, partly offset by the continuing decline in wireline voice revenues. Wireless network revenue reflects growth in blended ARPU and a growing wireless subscriber base and, to a lesser extent, revenues related to postpaid subscribers we acquired from Manitoba Telecom Services Inc. (MTS). Wireline data service revenue reflects increases in Internet and enhanced data service, TELUS Health, and TELUS TV revenues. Higher TELUS Health revenues were driven by organic growth through additional professional services and support revenue, and through acquisitions. Professional services revenue increased in large part due to being selected as the technology solution provider for PrescribeIT, a national e-prescribing service, and support revenue growth has arisen from additional physicians using our electronic medical records offering. Internet and TV revenues increased due to subscriber growth, as well as higher Internet revenue per customer.

·Equipment revenues were relatively flat in the third quarter of 2017. For the nine-month period, equipment revenues decreased by $9 million, primarily reflecting a decrease in wireless equipment revenue from a combination of higher per-unit subsidies including devices on Premium Plus plans and wireless competitive intensity, partly offset by increased postpaid gross additions and higher wireless retention volumes.

·Other operating income was relatively flat in the third quarter of 2017 and decreased by $19 million in the first nine months of 2017, primarily due to lower net gains in the current period than in the comparable period. These changes include lower net gains and equity income related to real estate joint venture developments, in addition to non-recurring 2016 gains related to the exchange of wireless spectrum licences and from the sale of property, plant and equipment, partly offset by the non-recurrence of 2016 provisions related to written put options issued in a 2012 business combination for the non-controlling interests.

Operating expenses

	Third quarters ended September 30				Nine-month periods ended September 30
($ millions)	2017	2016	Change		2017	2016	Change
Goods and services purchased	1,531	1,426	7.4	%	4,277	4,057	5.4	%
Employee benefits expense	639	681	(6.2	)%	1,909	1,977	(3.4	)%
Depreciation	410	388	5.7	%	1,203	1,158	3.9	%
Amortization of intangible assets	137	127	7.9	%	402	356	12.9	%
	2,717	2,622	3.6	%	7,791	7,548	3.2	%

Consolidated operating expenses increased by $95 million in the third quarter of 2017 and $243 million in the first nine months of 2017.

·Goods and services purchased increased by $105 million in the third quarter of 2017 and $220 million in the first nine months of 2017, reflecting increased costs associated with higher wireless gross loading and retention volumes (retention volumes increased by 6.5% in the third quarter of 2017 and 1.9% in the first nine months of 2017), higher handset costs, increased roaming costs, increased advertising and promotion expense, increased external labour to support a growing subscriber base, higher non-labour restructuring costs including those associated with the migration of subscribers from MTS, customer support costs related to acquired MTS subscribers and higher TV content costs.

·Employee benefits expense decreased by $42 million in the third quarter of 2017 and $68 million in the first nine months of 2017 due to the non-recurrence of labour-related restructuring expenses from 2016, and the benefits from certain contract concessions associated with our immediately vesting transformative compensation that are yielding efficiency improvements and continue to support our customer service focus.

·Depreciation increased by $22 million in the third quarter of 2017 and $45 million in the first nine months of 2017 due to increased expenditures associated with capital assets, including those arising from business acquisitions, as well as the impact of our continuing program of asset life studies.

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·Amortization of intangible assets increased by $10 million in the third quarter of 2017 and $46 million in the first nine months of 2017, reflecting increased expenditures associated with the intangible asset base, including those arising from business acquisitions.

Operating income

	Third quarters ended September 30						Nine-month periods ended September 30
($ millions)	2017		2016		Change		2017		2016		Change
Wireless EBITDA (See Section 5.4)	788		759		3.9	%	2,391		2,308		3.6	%
Wireline EBITDA (See Section 5.5)	408		372		9.8	%	1,260		1,152		9.3	%
EBITDA	1,196		1,131		5.9	%	3,651		3,460		5.5	%
Depreciation and amortization (discussed above)	(547	)	(515	)	6.2	%	(1,605	)	(1,514	)	6.0	%
	649		616		5.4	%	2,046		1,946		5.1	%

Operating income increased by $33 million in the third quarter of 2017 and $100 million in the first nine months of 2017. EBITDA increased by $65 million in the third quarter of 2017 and $191 million in the first nine months of 2017 and was negatively affected by in-quarter costs and revenue impacts of $4 million related to the wildfires in Western Canada. Adjusted EBITDA (see Section 11.1) increased by $51 million in the third quarter of 2017 and $170 million in the first nine months of 2017. These increases reflect wireless network revenue growth driven by higher ARPU and a larger customer base, in addition to growth in data service margins.

Financing costs

	Third quarters ended September 30						Nine-month periods ended September 30
($ millions)	2017		2016		Change		2017		2016		Change
Gross interest expense	144		137		5.1	%	430		412		4.4	%
Capitalized long-term debt interest	—		(12	)	n/m		—		(40	)	n/m
Interest expense	144		125		15.2	%	430		372		15.6	%
Employee defined benefit plans net interest	1		1		—	%	4		3		33.3	%
Interest (income)	(1	)	—		n/m		(2	)	(1	)	100.0	%
Foreign exchange losses (gains)	5		3		66.7	%	(3	)	12		(125.0	)%
	149		129		15.5	%	429		386		11.1	%

Financing costs increased by $20 million in the third quarter of 2017 and $43 million in the first nine months of 2017, mainly due to the following factors:

·Gross interest expense, prior to capitalization of long-term debt interest, increased by $7 million in the third quarter of 2017 and $18 million in the first nine months of 2017, primarily due to the increase in average long-term debt balances outstanding, 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 4.16% at September 30, 2017, as compared to 4.23% 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 deploy in our existing network. Capitalization of long-term debt interest occurs until substantially all of the activities necessary to prepare the spectrum for its intended use are complete, effectively when cell sites are ready to be put into service. The capitalization of interest ceased in the first quarter of 2017.

·Employee defined benefit plans net interest was flat in the third quarter of 2017 and was relatively flat in the first nine months of 2017. There was a small increase in the defined benefit plan deficit at December 31, 2016, compared to December 31, 2015, and minimal change in the discount rate.

·Foreign exchange losses (gains) have fluctuated as a result of the strengthening of the Canadian dollar relative to the U.S. dollar in 2017, combined with the impact of our hedging activities and the impacts from our international business process outsourcing operations.

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Income taxes

	Third quarters ended September 30						Nine-month periods ended September 30
($ millions, except tax rates)	2017		2016		Change		2017		2016		Change
Income tax computed at applicable statutory rates	133		129		3.1	%	431		414		4.1	%
Adjustments recognized in the current period for income taxes of prior periods	(2	)	(3	)	(33.3	)%	(3	)	(3	)	—	%
Revaluation of deferred income tax liability to reflect future statutory income tax rates	—		—		—	%	—		1		(100.0	)%
Other	(1	)	6		(116.7	)%	(8	)	(1	)	n/m
Income taxes	130		132		(1.5	)%	420		411		2.2	%
Income taxes computed at applicable statutory rates (%)	26.6		26.6		—	pts.	26.7		26.5		0.2	pts.
Effective tax rate (%)	26.0		27.1		(1.1	)pt.	26.0		26.3		(0.3	)pts.

Total income tax expense was relatively flat in the third quarter of 2017 and increased by $9 million in the first nine months of 2017. The increase for the nine-month period was primarily due to higher Income before income taxes.

Comprehensive income

	Third quarters ended September 30					Nine-month periods ended September 30
($ millions)	2017		2016	Change		2017	2016		Change
Net income	370		355	4.2	%	1,197	1,149		4.2	%
Other comprehensive income (loss) (net of income taxes):
Items that may be subsequently reclassified to income	5		—	n/m		18	(10	)	n/m
Item never subsequently reclassified to income — Employee defined benefit plans re-measurements	(22	)	150	(114.7	)%	64	167		(61.7	)%
Comprehensive income	353		505	(30.1	)%	1,279	1,306		(2.1	)%

Comprehensive income decreased by $152 million in the third quarter of 2017 and $27 million in the nine-month period, primarily due to decreases in employee defined benefit plan re-measurement amounts, partly offset by increases in Net income. 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 trends and seasonality

The historical trend in wireless network revenue reflects growth in both ARPU and our subscriber base, driven by larger proportions of higher-rate plans in the revenue mix and higher data consumption. This growth, coupled with higher-value smartphones in the sales mix, was partially offset by the general decline in wireless equipment revenues. This general decline in wireless equipment revenues reflects higher per-unit subsidies including devices on Premium Plus plans, driven by competitive intensity. The general trend of year-over-year increases in subscriber net additions resulted from the success of our promotions, including marketing efforts focused on higher-value postpaid and smartphone loading, coupled with the effects of market growth arising from a growing population, changing population demographics and an increasing number of customers with multiple activated devices. Although there has historically been significant third and fourth quarter seasonal effects that result in increased loading, competitive intensity in both the consumer and business markets as well as other factors may impact subscriber addition results and trends for future periods.

The wireless ARPU growth trend increased in 2017 due to an emphasis on marketing and increased mix of higher-rate plans, including the Premium Plus plans launched in June 2016 and a higher mix of data share plans. This was partly offset by competitive pressures driving larger allotments of data provided in rate plans, including data sharing and international data roaming features and plans, consumer behavioural response to increased frequency of customer data usage notifications, and offloading of data traffic to Wi-Fi hotspots. ARPU is expected to continue to increase modestly, as a result of the continued growth in data consumption and the ongoing shift in our subscriber base towards higher-value postpaid customers. 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 assurance that ARPU growth will continue to materialize.

The trend of year-over-year improvements in our average monthly postpaid subscriber churn reflects our efforts of putting customers first and retention programs. We may experience pressure on our postpaid subscriber churn if the

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level of competitive intensity increases, in part due to increased promotional activity, an increase in customers on expired contracts, as well as customers bringing their own devices and therefore not entering into new contracts. Accordingly, our wireless segment historical operating results and trends may not be reflective of results and trends for future periods.

Historically, the third and fourth quarter seasonal effects described above have reflected 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 promotional events such as back to school, Black Friday and the Christmas holiday season. 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, and are usually followed by sequential increases in wireless EBITDA from the fourth quarter through to the second quarter. The fourth quarter of 2016 included the immediately vesting transformative compensation expense. 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 has moderated, as unlimited nationwide voice plans have become more prevalent and chargeable voice and long distance usage spikes have become less pronounced. In addition, customers are opting for higher-capacity data plans with higher base prices and benefiting from flexible data top-up features, resulting in less variability in chargeable data usage but higher monthly recurring revenue. These historical seasonal ARPU patterns are tempering similar to the associated loading patterns. Marketing and promotions aimed at attracting and retaining customers have become more prevalent throughout the year. The trends in revenue and revenue-based operating metrics will be impacted by our adoption of IFRS 15, Revenue from Contracts with Customers, as discussed further in Section 8.2 Accounting policy developments of our 2016 annual MD&A.

Wireless operating indicators

As at September 30	2017	2016	Change
Subscribers (000s):
Postpaid	7,868	7,463	5.4	%
Prepaid	956	1,044	(8.4	)%
Total	8,824	8,507	3.7	%
Postpaid proportion of subscriber base (%)	89.2	87.7	1.5	pts.
HSPA+ population coverage1 (millions)	36.7	35.7	2.8	%
LTE population coverage1 (millions)	36.6	35.1	4.3	%

	Third quarters ended September 30					Nine-month periods ended September 30
	2017	2016		Change		2017		2016		Change
Subscriber gross additions (000s):
Postpaid	306	283		8.1	%	793		742		6.9	%
Prepaid	93	96		(3.1	)%	243		259		(6.2	)%
Total	399	379		5.3	%	1,036		1,001		3.5	%
Subscriber net additions (000s):
Postpaid	115	87		32.2	%	258		156		65.4	%
Prepaid	9	(7	)	n/m		(60	)	(61	)	1.6	%
Total	124	80		55.0	%	198		95		n/m
Blended ARPU, per month2 ($)	68.67	66.67		3.0	%	67.04		64.72		3.6	%
Churn, per month2 (%)
Blended	1.05	1.18		(0.13	)pts.	1.07		1.20		(0.13	)pts.
Postpaid	0.86	0.94		(0.08	)pts.	0.86		0.93		(0.07	)pts.

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

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

(3)Effective April 1, 2017, postpaid subscribers, total subscribers and associated operating statistics (gross additions, net additions, ARPU and churn) have been adjusted to include an estimated migration of 85,000 MTS subscribers in the opening subscriber balances. Cumulative subscriber connections also include an April 1, 2017 adjustment to remove approximately 19,000 prepaid and 25,000 postpaid subscriptions from the respective subscriber bases, primarily due to our national CDMA network shutdown.

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Operating revenues — Wireless segment

	Third quarters ended September 30				Nine-month periods ended September 30
($ millions, except ratios)	2017	2016	Change		2017	2016	Change
Network revenue	1,794	1,679	6.8	%	5,192	4,860	6.8	%
Equipment and other service revenues	135	135	—	%	366	382	(4.2	)%
Revenues arising from contracts with customers	1,929	1,814	6.3	%	5,558	5,242	6.0	%
Other operating income	5	4	25.0	%	5	32	(84.4	)%
External operating revenues	1,934	1,818	6.4	%	5,563	5,274	5.5	%
Inter-service revenues	11	15	(26.7	)%	33	43	(23.3	)%
Wireless operating revenues	1,945	1,833	6.1	%	5,596	5,317	5.2	%

Network revenue from external customers increased by $115 million in the third quarter of 2017 and $332 million in the first nine months of 2017. Network revenue increased, reflecting: (i) growth in the subscriber base, including subscribers we acquired from MTS; (ii) a larger proportion of higher-rate plans in the revenue mix, including the Premium Plus plans launched in June 2016; (iii) a larger proportion of customers selecting plans with larger data buckets or periodically topping up their data buckets; (iv) a higher postpaid subscriber mix; (v) a higher smartphone mix; and (vi) higher roaming revenues.

·Monthly blended ARPU was $68.67 in the third quarter of 2017 and $67.04 in the first nine months of 2017, reflecting increases of $2.00 for the quarter and $2.32 for the nine-month period. The increases were primarily driven by the effects of higher network revenue (as described above).

·Gross subscriber additions were 399,000 in the third quarter of 2017 and 1,036,000 in the first nine months of 2017, reflecting increases of 20,000 for the quarter and 35,000 for the nine-month period. Postpaid gross additions increased by 23,000 for the quarter and 51,000 for the first nine months due to the success of promotions, including our marketing efforts focused on higher-value postpaid and smartphone loading. Prepaid gross activations decreased by 3,000 for the quarter and 16,000 for the first nine months mainly from competitive intensity, and our marketing efforts focused on higher-value postpaid loading.

·Our average monthly postpaid subscriber churn rate was 0.86% in the third quarter of 2017 and 0.86% in the first nine months of 2017, as compared to 0.94% and 0.93%, respectively, in the comparable periods of 2016. The continuing low postpaid subscriber churn rates during 2017 reflect our focus on executing customers first initiatives and retention programs. Our blended monthly subscriber churn rate was 1.05% in the third quarter of 2017 and 1.07% in the first nine months of 2017, as compared to 1.18% and 1.20%, respectively, in the comparable periods of 2016. The improvement in our blended subscriber churn rates in 2017 reflects the changes in the postpaid churn rate as described above and improvements in prepaid churn rates, as well as an increase in the mix of postpaid subscribers versus prepaid subscribers in our subscriber base.

·Net subscriber additions reflect postpaid net additions of 115,000 in the third quarter of 2017 and 258,000 in the first nine months of 2017, compared to 87,000 and 156,000, respectively, in the comparable periods of 2016, attributed to the factors affecting gross subscriber additions as described above, as well as our marketing efforts focused on cost-effective prepaid to postpaid migrations. Prepaid subscribers increased by 9,000 in the third quarter of 2017 due to improvements in prepaid churn rates, as compared to a decrease of 7,000 in 2016. Prepaid subscribers decreased by 60,000 in the first nine months of 2017, as compared to a decrease of 61,000 in the comparable period in 2016, reflecting our focus on higher-value postpaid loading, increased competition for prepaid services and conversions to postpaid services as described above. Net subscriber additions were 124,000 in the third quarter of 2017 and 198,000 in the first nine months of 2017, reflecting year-over-year improvements of 44,000 for the quarter and 103,000 for the first nine months of 2017 due to lower blended monthly churn and higher postpaid gross additions.

Equipment and other service revenues were flat in the third quarter of 2017 as higher volumes were offset by higher per-unit subsidies. In the first nine months of 2017, equipment and other service revenues decreased by $16 million, mainly from a combination of higher per-unit subsidies combined with competitive intensity, partly offset by increased postpaid gross additions and higher retention volumes.

Other operating income was relatively flat in the third quarter of 2017. In the first nine months of 2017, other operating income decreased by $27 million, mainly due to non-recurring 2016 gains from the exchange of wireless spectrum licences, lower gains from sales of property, plant and equipment, and lower net gains and equity income related to real estate joint venture developments, partly offset by gains on the sale of investments.

Inter-service revenues represent network services that are eliminated upon consolidation along with the associated wireline expenses.

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Operating expenses — Wireless segment

	Third quarters ended September 30				Nine-month periods ended September 30
($ millions)	2017	2016	Change		2017	2016	Change
Goods and services purchased:
Equipment sales expenses	465	437	6.4	%	1,237	1,171	5.6	%
Network operating expenses	215	200	7.5	%	612	573	6.8	%
Marketing expenses	113	101	11.9	%	301	289	4.2	%
Other1	208	170	22.4	%	583	486	20.0	%
Employee benefits expense1	156	166	(6.0	)%	472	490	(3.7	)%
Wireless operating expenses	1,157	1,074	7.7	%	3,205	3,009	6.5	%

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

Wireless operating expenses increased by $83 million in the third quarter of 2017 and $196 million in the first nine months of 2017.

Equipment sales expenses increased by $28 million in the third quarter of 2017 and $66 million in the first nine months of 2017, reflecting an increase in postpaid gross additions and retention volumes (retention volumes increased by 6.5% in the third quarter of 2017 and 1.9% in the first nine months of 2017), an increase in higher-value smartphones in the sales mix, including premium devices on Premium Plus plans, and increasing handset costs.

Network operating expenses increased by $15 million in the third quarter of 2017 and $39 million in the first nine months of 2017, mainly due to increased roaming expenses.

Marketing expenses increased by $12 million in the third quarter and in the first nine months of 2017, primarily due to higher advertising and promotions expenses, as well as higher commission expense driven by higher gross additions and higher retention volumes.

Other goods and services purchased increased by $38 million in the third quarter of 2017 and $97 million in the first nine months of 2017, primarily due to higher non-labour restructuring costs, including those associated with the migration of subscribers from MTS, customer support costs related to acquired MTS subscribers, an increase in external labour and higher administrative costs supporting the higher customer base.

Employee benefits expense decreased by $10 million in the third quarter of 2017 and $18 million in the first nine months of 2017, primarily due to the non-recurrence of significant labour-related restructuring costs from efficiency initiatives in 2016 and higher capitalized labour costs.

EBITDA — Wireless segment

	Third quarters ended September 30					Nine-month periods ended September 30
($ millions, except margins)	2017	2016		Change		2017		2016		Change
EBITDA	788	759		3.9	%	2,391		2,308		3.6	%
Add back restructuring and other costs included in EBITDA	24	18		33.3	%	52		36		44.4	%
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	)	(100.0	)%	(1	)	(8	)	(87.5	)%
Adjusted EBITDA1	812	773		5.1	%	2,442		2,321		5.2	%
EBITDA margin (%)	40.5	41.4		(0.9	)pts.	42.7		43.4		(0.7	)pts.
Adjusted EBITDA margin2 (%)	41.7	42.3		(0.6	)pts.	43.6		43.8		(0.2	)pts.

(1)See description under EBITDA in Section 11.1.

(2)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 $29 million in the third quarter of 2017 and $83 million in the first nine months of 2017. Wireless Adjusted EBITDA increased by $39 million in the third quarter of 2017 and $121 million in the first nine months of 2017, reflecting network revenue growth driven by higher ARPU and a larger customer base including the subscribers we acquired from MTS, partly offset by increased equipment sales expenses, increased network operating expenses, higher administrative costs and increased external labour.

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5.5 Wireline segment

Wireline trends

The trend of increasing wireline service revenue reflects growth in high-speed Internet and enhanced data services, TELUS Health revenues, TELUS TV revenues and business process outsourcing services, and is partly offset by declining wireline voice revenues and equipment revenues. The increases in Internet and TV service revenues are being generated by subscriber growth and higher Internet revenue per customer from upgrades to faster speeds and larger data usage rate plans. The trend of increasing TELUS Health revenues has been driven by organic growth and through acquisitions. Although growth rates of business process outsourcing services have moderated, revenues have remained stable. The trend of declining wireline voice revenues is due to technological substitution, greater use of inclusive long distance coupled with lower long distance minutes used, and continuing increased competition in the small and medium-sized business market, as well as, impacts of the economic slowdown in previous quarters, particularly in Alberta, which were more prominent in the business markets.

We expect continued high-speed Internet subscriber base growth as the economy grows and as we continue our investments in expanding our fibre-optic network. TELUS TV subscriber base growth has moderated due to a declining overall market for paid TV services resulting from 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 ongoing trend of substitution to wireless and Internet-based services.

Wireline operating indicators

At September 30 (000s)	2017	2016	Change
Subscriber connections:
High-speed Internet subscribers1	1,722	1,631	5.6	%
TELUS TV subscribers1	1,084	1,043	3.9	%
Residential NALs1	1,312	1,396	(6.0	)%
Total wireline subscriber connections1	4,118	4,070	1.2	%

	Third quarters ended September 30						Nine-month periods ended September 30
(000s)	2017		2016		Change		2017		2016		Change
Subscriber connection net additions (losses):
High-speed Internet	19		14		35.7	%	60		44		36.4	%
TELUS TV	9		14		(35.7	)%	21		38		(44.7	)%
Residential NALs	(20	)	(25	)	20.0	%	(62	)	(71	)	12.7	%
Total wireline subscriber connection net additions	8		3		166.7	%	19		11		72.7	%

(1)In relation to an acquisition and a divestiture that were both undertaken during the first quarter of 2017, January 1, 2017 residential NALs, high-speed Internet and TELUS TV subscriber balances were increased by a net 1,000, 6,000 and 5,000, respectively.

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Operating revenues — Wireline segment

	Third quarters ended September 30				Nine-month periods ended September 30
($ millions)	2017	2016	Change		2017	2016	Change
Data services and equipment	1,067	1,025	4.1	%	3,147	3,008	4.6	%
Voice services	305	335	(9.0	)%	936	1,023	(8.5	)%
Other services and equipment	54	51	5.9	%	158	164	(3.7	)%
Revenues arising from contracts with customers	1,426	1,411	1.1	%	4,241	4,195	1.1	%
Other operating income	6	9	(33.3	)%	33	25	32.0	%
External operating revenues	1,432	1,420	0.8	%	4,274	4,220	1.3	%
Inter-service revenues	51	48	6.3	%	155	143	8.4	%
Wireline operating revenues	1,483	1,468	1.0	%	4,429	4,363	1.5	%

·Data services and equipment revenues increased by $42 million in the third quarter of 2017 and $139 million in the first nine months of 2017. The increases were primarily due to: (i) increased Internet and enhanced data service revenues resulting from a 5.6% increase in our high-speed Internet subscribers over the last 12 months, higher revenue per customer from upgrades to faster Internet speeds and larger data usage Internet rate plans, and certain rate increases; (ii) increased TELUS Health revenues driven by organic growth through additional professional services and support revenue, and through acquisitions. Professional services revenue increased in large part due to being selected as the technology solution provider for PrescribeIT, and support revenue growth has arisen from additional physicians using our electronic medical records offering; (iii) increased TELUS TV revenues resulting from a 3.9% subscriber growth over the last 12 months and certain rate increases; and (iv) growth in business process outsourcing revenues, inclusive of foreign exchange impacts on foreign operations. This growth was partly offset by the ongoing decline in legacy data services.

·Voice services revenues decreased by $30 million in the third quarter of 2017 and $87 million in the first nine months of 2017. The decreases reflect the ongoing decline in legacy revenues from technological substitution including wireless and Internet, increased competition, greater use of inclusive long distance plans and lower long distance minutes of use, partially offset by higher wholesale volumes and certain rate increases. We experienced a 6.0% decline in residential NALs in the 12-month period ended September 30, 2017.

·Wireline subscriber connection net additions were 8,000 in the third quarter of 2017 and 19,000 in the first nine months of 2017, reflecting increases of 5,000 and 8,000 compared to the respective periods in 2016.

Net additions of high-speed Internet subscribers were 19,000 in the third quarter of 2017 and 60,000 in the first nine months of 2017, reflecting increases of 5,000 and 16,000, respectively, compared to the net additions in the same periods in 2016. The increases were due to the continued expansion of our high-speed broadband footprint, including fibre to the premises and the success of recently launched innovative product offerings in addition to our efforts of putting customers first. Net additions of TELUS TV subscribers were 9,000 for the third quarter of 2017 and 21,000 for the first nine months of 2017, down 5,000 and 17,000 compared to the net additions in the respective periods in 2016. These net addition results reflect lower gross additions and satellite-TV subscriber losses due to a declining overall market for paid TV services resulting from the effects of heightened competitive intensity, including from OTT services and a high rate of market penetration. These pressures were partly offset by the continued focus on expanding our addressable high-speed Internet and Optik TV footprint, connecting more homes and businesses directly to fibre (as we approach nearly 50% of our targeted coverage footprint), and bundling these services together. This contributed to combined Internet and TV subscriber growth of 132,000 or 4.9% over the last 12 months.

Residential NAL losses were 20,000 in the third quarter of 2017 and 62,000 in the first nine months of 2017, as compared to NAL losses of 25,000 and 71,000, respectively, in the same periods in 2016. This reflects the trend of substitution to wireless and Internet-based services, as well as increased competition, partially mitigated by the success of our bundled service offerings and our customers first initiatives.

·Other services and equipment revenues increased by $3 million in the third quarter of 2017. In the first nine months of 2017, other services and equipment revenues decreased by $6 million, mainly due to declines in voice equipment sales.

Other operating income decreased by $3 million in the third quarter of 2017 due to write-down of investments and non-recurrence of gains and equity income related to real estate joint venture developments, partly offset by the non-recurrence of a 2016 provision related to written put options issued in a 2012 TELUS International (Cda) Inc. business combination. Other operating income increased by $8 million in the first nine months of 2017, largely attributable to the non-recurrence of 2016 provisions related to written put options issued in a 2012 business combination for the non-controlling interests (such written put options were exercised in the fourth quarter of 2016), coupled with higher net gains

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on the sale of investments, partly offset by lower net gains and equity income related to real estate joint venture developments.

Inter-service revenues represent services provided to the wireless segment. Such revenue is eliminated upon consolidation together with the associated expenses in wireless.

Operating expenses — Wireline segment

	Third quarters ended September 30				Nine-month periods ended September 30
($ millions)	2017	2016	Change		2017	2016	Change
Goods and services purchased1	592	581	1.9	%	1,732	1,724	0.5	%
Employee benefits expense1	483	515	(6.2	)%	1,437	1,487	(3.4	)%
Wireline operating expenses	1,075	1,096	(1.9	)%	3,169	3,211	(1.3	)%

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

Total wireline operating expenses decreased by $21 million in the third quarter of 2017 and $42 million in the first nine months of 2017, primarily due to the following factors:

Goods and services purchased increased by $11 million in the third quarter of 2017 and $8 million in the first nine months of 2017, primarily from higher TV content costs mainly driven by higher numbers of TV subscribers, partly offset by lower non-labour restructuring costs.

Employee benefits expense decreased by $32 million in the third quarter of 2017, primarily due to the non-recurrence of significant labour-related restructuring costs from efficiency initiatives in 2016. For the first nine months of 2017, Employee benefits expense decreased by $50 million, primarily due to the non-recurrence of significant labour-related restructuring costs from efficiency initiatives in 2016, benefits from certain contract concessions associated with our immediately vesting transformative compensation, lower compensation and benefits costs resulting from a decrease in the average number of domestic FTE employees and higher capitalized labour costs. These decreases were partly offset by an increase in the number of employees supporting growing business process outsourcing revenue, net of the effects of foreign exchange on foreign operations.

EBITDA — Wireline segment

	Third quarters ended September 30					Nine-month periods ended September 30
($ millions, except margins)	2017	2016		Change		2017		2016		Change
EBITDA	408	372		9.8	%	1,260		1,152		9.3	%
Add back restructuring and other costs included in EBITDA	12	42		(71.4	)%	27		95		(71.6	)%
Deduct net gains and equity income from real estate joint venture developments	—	(6	)	(100.0	)%	(2	)	(11	)	(81.8	)%
Adjusted EBITDA1	420	408		3.0	%	1,285		1,236		3.9	%
EBITDA margin (%)	27.5	25.3		2.2	pts.	28.4		26.4		2.0	pts.
Adjusted EBITDA margin2 (%)	28.3	27.8		0.5	pts.	29.0		28.3		0.7	pts.

(1)See description under EBITDA in Section 11.1.

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

Wireline EBITDA increased by $36 million in the third quarter of 2017 and $108 million in the first nine months of 2017. Wireline Adjusted EBITDA increased by $12 million in the third quarter of 2017 and $49 million in the first nine months of 2017 due to growth in data service margins (including Internet, TELUS Health services, and TELUS TV) and our execution of cost efficiency programs, partly offset by continued declines in legacy voice services.

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6.Changes in financial position

Financial position at:	Sept. 30		Dec. 31		Change
($ millions)	2017		2016		($ millions)		(%)		Change includes:
Current assets
Cash and temporary investments, net	488		432		56		13	%	See Section 7 Liquidity and capital resources
Accounts receivable	1,539		1,471		68		5	%	An increase in roaming revenue accruals, as well as the accrued receivable related to the business acquisition of Manitoba Telecom Services Inc. (MTS) subscribers partially offset by lower customer receivables
Income and other taxes receivable	54		9		45		n/m		An increase due to the timing of tax instalments in excess of current income tax expense as well as payment of taxes owing for 2016
Inventories	356		318		38		12	%	An increase in wireless handset inventory
Prepaid expenses	359		233		126		54	%	An increase due to the annual prepayment of statutory employee benefits, maintenance contracts, property taxes and annual wireless spectrum licence fees, net of amortization
Current derivative assets	5		11		(6	)	(55	)%	A decrease in the fair value of 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	2,447		2,330		117		5	%	An increase in accounts payables associated with higher capital expenditures, partly offset by a decrease in payroll and other employee-related liabilities due to payment of variable pay for 2016 made in the first quarter of 2017
Income and other taxes payable	43		37		6		16	%	An increase due to the timing of current income tax expense in excess of tax instalments
Dividends payable	292		284		8		3	%	n/m
Advance billings and customer deposits	769		737		32		4	%	An increase in advance billings due to the upfront payment for the hardware, maintenance and installation of a managed voice solution, as well as increased subscriber growth during the year
Provisions	66		124		(58	)	(47	)%	Amounts paid out under restructuring initiatives exceeded new restructuring provisions
Current maturities of long-term debt	1,357		1,327		30		2	%	An increase of $479 in outstanding commercial paper, as well as $250 of our 1.50% Notes, Series CS in March 2018 reclassified from long-term debt, offset by the maturation of $700 of our 4.95% Notes, Series CD in March 2017
Current derivative liabilities	30		12		18		n/m		An increase in the fair value of U.S. currency hedging items.
Working capital (Current assets subtracting Current liabilities)	(2,303	)	(2,477	)	174		7	%	Increases of $327 in Current assets and $153 in Current liabilities. Historically, TELUS 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 2016 annual MD&A.

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Financial position at:	Sept. 30	Dec. 31	Change
($ millions)	2017	2016	$	( millions)	(%)		Change includes:
Non-current assets
Property, plant and equipment, net	11,184	10,464	720		7	%	See Capital expenditures in Section 7.3 Cash used by investing activities and Depreciation in Section 5.3
Intangible assets, net	10,651	10,364	287		3	%	See Capital expenditures in Section 7.3 Cash used by investing activities and Amortization of intangible assets in Section 5.3
Goodwill, net	4,215	3,787	428		11	%	Acquisitions including MTS subscribers, a pharmacy management services provider, and a business process outsourcing and contact centre services company
Other long-term assets	715	640	75		12	%	Increases in pension and post-retirement assets due to positive returns earned on plan assets as well as pension cash funding offset by pension expense.
Non-current liabilities
Provisions	473	395	78		20	%	An increase due to a business acquisition provision in respect of non-controlling interests
Long-term debt	12,261	11,604	657		6	%	See Section 7.4 Cash used by financing activities
Other long-term liabilities	827	736	91		12	%	An increase in Other long-term liabilities due to an increase in the accrual for share-based compensation, as well as an increase in the fair value of U.S. currency hedging items
Deferred income taxes	2,404	2,107	297		14	%	Increase in temporary differences between the accounting and tax basis of assets and liabilities, as well as adjustments recognized in the current period for income taxes of prior periods.
Owners’ equity
Common equity	8,458	7,917	541		7	%	Includes Net income of $1,179 and Other comprehensive income of $81, issue of shares in a business combination of $100, dividends reinvested and optional cash payments of $48, and other of $1, net of dividend declarations of $868 (see Section 7.4 Cash used by financing activities)
Non-controlling interests	39	19	20		105	%	Includes Net income of $18, Other comprehensive income of $1 and adjustments arising from the 35% non-controlling interests in TELUS International (Cda) Inc. of $1.

7.Liquidity and capital resources

This section contains forward-looking statements, including those with respect to our dividend payout ratio and net debt to EBITDA — excluding restructuring and other costs ratio. See Caution regarding forward-looking statements at the beginning of this MD&A.

7.1 Overview

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

Cash flows

	Third quarters ended September 30						Nine-month periods ended September 30
($ millions)	2017		2016		Change		2017		2016		Change
Cash provided by operating activities	1,133		1,032		9.8	%	2,968		2,487		19.3	%
Cash used by investing activities	(866	)	(680	)	27.4	%	(2,909	)	(2,075	)	40.2	%
Cash used by financing activities	(150	)	(370	)	(59.5	)%	(3	)	(225	)	(98.7	)%
Increase (decrease) in Cash and temporary investments, net	117		(18	)	n/m		56		187		(70.1	)%
Cash and temporary investments, net, beginning of period	371		428		(13.3	)%	432		223		93.7	%
Cash and temporary investments, net, end of period	488		410		19.0	%	488		410		19.0	%

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7.2 Cash provided by operating activities

Cash provided by operating activities increased by $101 million in the third quarter of 2017 and $481 million in the first nine months of 2017.

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, 2016	1,032		2,487
Year-over-year changes:
Higher EBITDA (See Section 5.4 Wireless segment and Section 5.5 Wireline segment)	65		191
Higher share-based compensation cash outflows, net of expense	(5	)	(4	)
Higher employer contributions to defined benefits plans, net of expense	(6	)	(5	)
Lower restructuring disbursements, net of restructuring expenses	31		24
Higher interest paid, net of interest received	(13	)	(25	)
Lower income taxes paid, net of recoveries received	128		372
Other	(99	)	(72	)
Cash provided by operating activities, three-month and nine-month periods ended September 30, 2017	1,133		2,968

·Income taxes paid, net of refunds received, decreased in 2017, reflecting lower required instalment payments and a larger final income tax payment in the first quarter of 2016 in respect of the 2015 income tax year.

·Other operating working capital changes in the first nine months of 2017 include an increase in inventories and a decrease in provisions, net of an increase in Accounts payable and accrued liabilities. (See Section 6 Changes in financial position and Note 31(a) in the interim consolidated financial statements.)

7.3 Cash used by investing activities

Cash used by investing activities

	Third quarters ended September 30						Nine-month periods ended September 30
($ millions)	2017		2016		Change		2017		2016		Change
Cash payments for capital assets, excluding spectrum licences	(794	)	(711	)	(83	)	(2,344	)	(1,971	)	(373	)
Cash payments for spectrum licences	—		—		—		—		(145	)	145
Cash payments for acquisitions, net	(82	)	(14	)	(68	)	(560	)	(16	)	(544	)
Real estate joint venture advances	(6	)	(5	)	(1	)	(19	)	(28	)	9
Real estate joint venture receipts	14		50		(36	)	18		91		(73	)
Proceeds on dispositions and Other	2		—		2		(4	)	(6	)	2
Cash used by investing activities	(866	)	(680	)	(186	)	(2,909	)	(2,075	)	(834	)

·The increase in Cash payments for capital assets, excluding spectrum licences, for both the third quarter of 2017 and first nine months of 2017 was composed of:

·An increase in capital expenditures of $34 million in the third quarter of 2017 and $181 million in the first nine months of 2017 (see Capital expenditure measures table and discussion below)

·Increased capital expenditure payments with respect to payment timing differences, as associated Accounts payable and accrued liabilities decreased by $49 million in the third quarter of 2017 and $192 million in the first nine months of 2017.

·For the first nine months of 2017, there were no cash payments for acquisition of spectrum licences. Payments for spectrum licences in 2016 were monetary consideration as part of an approved spectrum licence exchange.

·In the third quarter of 2017, we made cash payments for the Voxpro business acquisition described in Section 1.3 as well as individually immaterial acquisitions complementary to our existing lines of business. In the first nine months of 2017, in addition to the Voxpro business acquisition, cash payments for acquisitions included second quarter payments for approximately one-quarter of Manitoba Telecom Services Inc. (MTS) postpaid wireless subscribers, certain network assets and rights to 15 retail locations in Manitoba, as well as Kroll Computer Systems Inc.

·Receipts from real estate joint ventures, net of advances in 2016, resulted mainly from repayment of construction financing from the TELUS Garden real estate joint venture as TELUS Garden opened in September 2015.

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Capital expenditure measures

	Third quarters ended September 30				Nine-month periods ended September 30
($ millions, except capital intensity)	2017	2016	Change		2017	2016	Change
Capital expenditures1
Wireless segment	237	295	(19.7	)%	745	733	1.6	%
Wireline segment	584	492	18.7	%	1,610	1,441	11.7	%
Consolidated	821	787	4.3	%	2,355	2,174	8.3	%
Wireless segment capital intensity (%)	12	16	(4	)pts.	13	14	(1	)pt.
Wireline segment capital intensity (%)	39	34	5	pts.	36	33	3	pts.
Consolidated capital intensity2 (%)	24	24	—	pts.	24	23	1	pt.

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

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

Wireless segment capital expenditures decreased by $58 million in the third quarter of 2017 as we incurred costs in the third quarter of 2016 to update our radio access network in Ontario and Quebec, which was completed in the second quarter of 2017. In the first nine months of 2017, wireless segment capital expenditures increased by $12 million due to continuing investments in our fibre-optic network to support our small-cell technology strategy to improve coverage, capacity and back-haul while preparing for a more efficient and timely evolution to 5G. We also expanded our investment in Manitoba to improve coverage, capacity and speeds to significantly enhance our customer experience and supplement the business acquisition of MTS subscribers, dealers and network. Additionally, we 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. During the third quarter of 2017, retirement of legacy CDMA network assets cost and accumulated depreciation was approximately $1 billion.

Wireline segment capital expenditures increased by $92 million in the third quarter of 2017 and $169 million in the first nine months of 2017. The increases were due to continuing investments in our broadband infrastructure, including connecting more homes and businesses directly to our fibre-optic network. These investments support 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. Additionally, the increases were also attributed to readying TELUS TV product in preparation for deployment.

7.4 Cash used by financing activities

Cash used by financing activities

	Third quarters ended September 30					Nine-month periods ended September 30
($ millions)	2017		2016		Change	2017		2016		Change
Dividends paid to holders of Common Shares	(269	)	(274	)	5	(813	)	(798	)	(15	)
Purchase of Common Shares for cancellation	—		(19	)	19	—		(140	)	140
Issuance and repayment of short-term borrowings	—		(3	)	3	—		—		—
Long-term debt issued net of redemptions and repayment	118		(67	)	185	819		437		382
Issue of shares by subsidiary to non-controlling interests	—		(1	)	1	—		291		(291	)
Other	1		(6	)	7	(9	)	(15	)	6
	(150	)	(370	)	220	(3	)	(225	)	222

Dividends paid to the holders of Common Shares

In connection with dividends declared during the three-month and nine-month periods ended September 30, 2017, the dividend reinvestment and share purchase plan trustee (Trustee) purchased shares from Treasury for the dividend reinvestment and share purchase plan instead of acquiring Common Shares in the stock market. For the third quarter of 2017, cash dividends paid to the holders of Common Shares decreased due to the Trustee purchasing dividend reinvestment Common Shares from Treasury, partly offset by higher dividend rates under our dividend growth program (see Section 4.3). For the first nine months of 2017, the increase in dividends paid to the holders of Common Shares reflect higher dividend rates under our dividend growth program, partly offset by the Trustee purchasing Common Shares from Treasury. During the three-month and nine-month periods ended September 30, 2017, the Trustee purchased approximately 0.5 million dividend reinvestment Common Shares for $24 million, and approximately 1.6 million dividend reinvestment Common Shares for $68 million, respectively, with no discount applicable. In October 2017, we paid dividends of $269 million to the holders of Common Shares and the Trustee purchased dividend reinvestment Common Shares from Treasury for $23 million, totaling $292 million.

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Purchase of Common Shares for cancellation

No Common Shares were purchased for cancellation in the third quarter or first nine months of 2017.

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, 2017, unchanged since September 30, 2016.

Long-term debt issues and repayments

In the third quarter of 2017, long-term debt issues net of repayments increased by $185 million, primarily composed of:

·A net increase in commercial paper, including foreign exchange effects, of $60 million in the third quarter of 2017, to a balance of $1,092 million (U.S.$875 million) at September 30, 2017, from $1,032 million (U.S.$794 million) at June 30, 2017. Our commercial paper program, when utilized, provides low-cost funds and is fully backstopped by the five-year committed credit facility (see Section 7.6 Credit facilities).

·An increase in net draws on the TELUS International (Cda) Inc. credit facility. As at September 30, 2017, net draws were $358 million ($353 million net of unamortized issue costs), all of which were denominated in U.S. dollars (U.S.$287 million). As at June 30, 2017, net draws were $294 million ($288 million net of unamortized issue costs), all of which were denominated in U.S. dollars (U.S.$226 million). The increase in net draws on the TELUS International (Cda) Inc. credit facility was used for an acquisition in the third quarter of 2017.

In the first nine months of 2017, long-term debt issues net of repayments increased by $382 million, primarily composed of:

·A net increase in commercial paper, including foreign exchange effects, of $479 million in the first nine months of 2017 from $613 million (U.S.$456 million) at December 31, 2016.

·An increase in net draws on the TELUS International (Cda) Inc. credit facility. As at December 31, 2016, net draws were $340 million ($332 million net of unamortized issue costs), all of which were denominated in U.S. dollars (U.S.$253 million).

·The March 2017 issues of U.S.$500 million of senior unsecured notes at 3.70% due September 15, 2027, and $325 million of senior unsecured notes at 4.70% due March 6, 2048. For the U.S. issuance, we have fully hedged the principal and interest obligations of the notes against fluctuations in the Canadian dollar: U.S. dollar foreign exchange rate for the entire term of the notes by entering into foreign exchange derivatives (cross currency interest rate exchange agreements). These derivatives effectively converted the principal payments and interest obligations to Canadian dollar obligations with an effective fixed interest rate of 3.41% and an effective issued and outstanding amount of $667 million (reflecting a fixed exchange rate of $1.3348). For additional information on these notes, please refer to Note 26(b) of the interim consolidated financial statements.

·The March 2017 repayment of $700 million of Series CD Notes.

In comparison, long-term debt repayments, net of issues, were $67 million in the third quarter of 2016 and were 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.

Long-term debt issues, net of repayments, were $437 million in the first nine months of 2016 and were composed of:

·A decrease in commercial paper from $256 million (U.S.$185 million) at December 31, 2015.

·The above-mentioned September 2016 public issue of U.S.$600 million of senior unsecured notes.

The average term to maturity of our long-term debt (excluding commercial paper and the revolving component of the TELUS International (Cda) Inc. credit facility) increased to approximately 10.8 years at September 30, 2017, compared to approximately 10.7 years at September 30, 2016. Additionally, our weighted average cost of long-term debt (excluding commercial paper and the revolving component of the TELUS International (Cda) Inc. credit facility) was 4.16% at September 30, 2017, as compared to 4.23% at September 30, 2016.

Issue of shares by subsidiary to non-controlling interest

In June 2016, we announced the completion of the agreement whereby a subsidiary issued shares to Baring Private Equity Asia, which acquired a 35% non-controlling interest in TELUS International (Cda) Inc. There was no comparable activity in the third quarter or first nine months of 2017.

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7.5 Liquidity and capital resource measures

Net debt was $13.4 billion at September 30, 2017, an increase of $1.2 billion when compared to one year earlier, resulting mainly from a net increase in commercial paper outstanding in addition to the issuances of the U.S.$500 million of senior unsecured notes and the $325 million of senior unsecured notes, partially offset by the repayment of Series CD Notes, as described in Section 7.4.

Fixed-rate debt as a proportion of total indebtedness was 89% as at September 30, 2017, down from 95% one year earlier, mainly due to the increase in commercial paper, which emulates floating-rate debt, partly offset by the two unsecured note issuances in the first nine months of 2017 described in Section 7.4.

Net debt to EBITDA — excluding restructuring and other costs ratio was 2.76 times, as measured at September 30, 2017, up from 2.62 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, 2017, 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, and the elevated strategic capital investments in our fibre optic network, partially 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 expect this ratio to decline in 2018 and we continue to expect to return to within the objective range in the medium term, consistent with 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	2017	2016	Change
Components of debt and coverage ratios1 ($ millions)
Net debt	13,394	12,217	1,177
EBITDA — excluding restructuring and other costs	4,847	4,668	179
Net interest cost	568	548	20
Debt ratios
Fixed-rate debt as a proportion of total indebtedness (%)	89	95	(6	)pts.
Average term to maturity of long-term debt (excluding commercial paper) (years)	10.8	10.7	0.1
Weighted average interest rate on long-term debt (excluding commercial paper) (%)	4.16	4.23	(0.07	)pts.
Net debt to EBITDA — excluding restructuring and other costs1 (times)	2.76	2.62	0.14
Coverage ratios1 (times)
Earnings coverage	4.0	4.6	(0.6	)
EBITDA — excluding restructuring and other costs interest coverage	8.5	8.5	—
Other measures1 (%)
Dividend payout ratio	91	76	15	pts.
Dividend payout ratio of adjusted net earnings	79	77	2	pts.

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

Earnings coverage ratio for the 12-month period ended September 30, 2017, was 4.0 times, down from 4.6 times one year earlier. A decrease in income before borrowing costs and income taxes reduced the ratio by 0.4, while an increase in borrowing costs reduced the ratio by 0.2.

EBITDA — excluding restructuring and other costs interest coverage ratio for the 12-month period ended September 30, 2017, was 8.5 times, consistent with one year earlier. An increase in net interest costs reduced the ratio by 0.3, while growth in EBITDA — excluding restructuring and other costs increased the ratio by 0.3.

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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 currently expect that we will be within our target guideline when considered on a prospective dividend payout ratio basis within the medium term. The historical measures for the 12-month period ended September 30, 2017, are presented for illustrative purposes in evaluating our target guideline and both exceeded the objective range. The immediately vesting transformative compensation expense described in our 2016 annual MD&A impacted the dividend payout ratio for the 12-month period ended September 30, 2017 by 14% and was the single largest adjustment in calculating the denominator of adjusted net earnings.

7.6 Credit facilities

At September 30, 2017, we had available liquidity of more than $1.1 billion from the TELUS revolving credit facility, approximately $37 million available liquidity from the TELUS International (Cda) Inc. credit facility and $123 million available from uncommitted letters of credit facilities. In addition, we had $400 million available under our trade receivables securitization program (see Section 7.7 Sale of trade receivables). We are well within our objective of generally maintaining at least $1.0 billion of available liquidity.

TELUS revolving credit facility

We have a $2.25 billion (or U.S. dollar equivalent) revolving credit facility with a syndicate of financial institutions that 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, 2017

($ 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	—	—	(1,092	)	1,158

(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 2.76 to 1.00 as at September 30, 2017, and our consolidated coverage ratio was approximately 8.53 to 1.00 as at September 30, 2017. 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, 2017, including a U.S. dollar-denominated commercial paper program for up to U.S.$1.0 billion within this maximum aggregate amount. Foreign currency forward contracts are used to manage currency risk arising from issuing commercial paper denominated in U.S. dollars. 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 facility

As at September 30, 2017, TELUS International (Cda) Inc. had a bank credit facility, secured by its assets, expiring on May 31, 2021, with a syndicate of financial institutions. The credit facility is composed of a revolving U.S.$115 million component and an amortizing U.S.$215 million term loan component. The credit facility is non-recourse to TELUS Corporation. As at September 30, 2017, $358 million ($353 million net of unamortized issue costs) was outstanding, all of which was denominated in U.S. dollars (U.S.$287 million), with a weighted average interest rate of 2.71%.

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Other letter of credit facilities

At September 30, 2017, we had $219 million of letters of credit outstanding (December 31, 2016 — $210 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 $123 million at September 30, 2017.

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, 2017. (See Note 22 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 9, 2017.

7.8 Credit ratings

There were no changes to our investment grade credit ratings as of November 9, 2017.

7.9 Financial instruments, commitments and contingent liabilities

Financial instruments

Our financial instruments and the nature of certain risks they may be subject to were described in Section 7.9 of our 2016 annual 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 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 an agreement to sell trade receivables to an arm’s-length securitization trust; maintaining bilateral bank facilities and syndicated credit facilities; 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 $1.2 billion of long-term debt or equity securities pursuant to a shelf prospectus that is effective until April 2018.

At September 30, 2017, we had available liquidity of more than $1.1 billion from unutilized credit facilities and $123 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 $488 million in cash and temporary investments at September 30, 2017. 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.

Commitments and contingent liabilities

Purchase obligations

As at September 30, 2017, our contractual commitments related to the acquisition of property, plant and equipment were $198 million through to December 31, 2019, as compared to $436 million over a period ending December 31, 2020, reported in our 2016 annual report. The decrease was primarily due to the completion of the update to our radio access network in the second quarter of 2017, combined with a decrease in commitments related to our fibre expansion.

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

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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.

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 29 of the interim consolidated financial statements.

Indemnification obligations

At September 30, 2017, we had no liability recorded in respect of our indemnification obligations.

7.10 Outstanding share information

Outstanding shares (millions)	September 30, 2017	October 31, 2017
Common Shares	594	595
Common Share options — all exercisable (one for one)	1	1

7.11 Transactions between related parties

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 $11 million and $30 million, in the third quarter and first nine months of 2017, respectively, as compared to $15 million and $40 million in the comparable periods in 2016, respectively. See Note 30(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 third quarter of 2017, we had transactions with real estate joint ventures, which are related parties to us, as set out in Note 21 of our interim consolidated financial statements.

As at September 30, 2017, the proportion of space leased in the TELUS Garden office tower was approximately 99%. Closing was completed for the majority of residential units in the TELUS Garden residential condominium project in the fourth quarter of 2016, and the remaining units were closed subsequent to September 30, 2017.

For the TELUS Sky real estate joint venture, commitments and contingent liabilities include construction-related contractual commitments through to 2019 (approximately $96 million at September 30, 2017) and construction credit facilities ($342 million with three Canadian financial institutions as 66 2/3% lender and TELUS as 33 1/3% lender).

8.Accounting matters

8.1 Critical accounting estimates

Our significant accounting policies are described in Note 1 of the Consolidated financial statements for the year ended December 31, 2016. The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as 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 and are described in Section 8.1 of our 2016 annual MD&A, which is hereby incorporated by reference.

8.2 Accounting policy developments

Our accounting policy developments were discussed in Section 8.2 Accounting policy developments of our 2016 annual MD&A. See Note 2 of the interim consolidated financial statements for additional details.

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9.Update to assumptions

This section contains forward-looking statements, which should be read together with the Caution regarding forward-looking statements at the beginning of this MD&A.

The assumptions for our 2017 outlook, as described in Section 9 General trends, outlook and assumptions of our 2016 annual MD&A, remain the same, except for the following updates as follows:

·Our revised estimate for economic growth in Canada in 2017 will be approximately 3.0% (previously 2.2% as updated in our first quarter 2017 MD&A). For our incumbent local exchange carrier (ILEC) provinces in Western Canada, we currently estimate that annual rates of economic growth in B.C. will be approximately 3.2% in 2017 (previously 2.3% as reported in our 2016 annual MD&A), and that economic growth in Alberta will be approximately 3.5% in 2017 (previously 2.4% as updated in our first quarter 2017 MD&A).

Which sectors of the economy that experience these growth estimates and the competitive and dynamic environment in which we operate will affect when, and to what extent, we will experience the effects of these economic growth estimates.

·Our cash income tax payments assumption has been revised downward to a range of $170 million to $230 million, from an original assumption of a range between $300 million to $360 million, due to a reorganization to simplify our legal structure to realize efficiencies and streamline processes which also impacts the timing of cash income tax payments.

9.1 Telecommunications industry regulatory developments and proceedings

Our telecommunications, broadcasting and radiocommunication services are regulated under federal laws by various authorities, including the Canadian Radio-television and Telecommunications Commission (CRTC), Innovation, Science and Economic Development Canada (ISED) and the Minister of Canadian Heritage.

The following are updates to Section 9.4 Telecommunications industry regulatory developments and proceedings in our 2016 annual MD&A.

Radiocommunication licences and spectrum-related matters

ISED regulates, among other matters, the allocation and use of radio spectrum in Canada. It also licenses radio apparatus, frequency bands and/or radio channels within various frequency bands to service providers and private users. As well, ISED establishes the terms and conditions attaching to such radio authorizations, including restrictions on licence transfers, coverage obligations, research and development obligations, annual reporting, and obligations concerning mandated roaming and antenna site sharing with competitors.

ISED periodically initiates spectrum-related consultation notices.

ISED Consultation on a Technical, Policy and Licensing Framework for Spectrum in the 600 MHz Band

On August 4, 2017, ISED issued Consultation on a Technical, Policy and Licensing Framework for Spectrum in the 600 MHz Band. ISED is proposing a 30 MHz set-aside of the 70 MHz of spectrum that will be auctioned off for non-national incumbent providers (i.e. service providers having less than 10% of the national wireless subscriber market share). TELUS has filed comments on October 2, 2017 and reply comments on October 25, 2017 in which we aggressively advocated for an open auction process. No specific auction timing has been announced. It is too early to determine the potential impact that this consultation and ensuing auction process may have on TELUS.

ISED Consultation on the Spectrum Outlook 2018 to 2022

On October 6, 2017, ISED issued Consultation on the on the Spectrum Outlook 2018 to 2022 to obtain feedback on spectrum activities over the next five years relating to “the release of spectrum for commercial mobile services, licence-exempt applications, satellite services and wireless backhaul services”. ISED is also seeking comments on future technology advancements and associated spectrum demand, as well as on the proposed release of specific spectrum bands, and timing thereof, to meet these future needs. TELUS will be actively participating in this consultation process and filing submissions on the issues under consideration. It is too early to determine the potential impact that this consultation may have on TELUS.

Regulatory and federal government reviews

The CRTC and the federal government have initiated public proceedings to review various matters. They are discussed below.

Telecommunications-related issues

Review of competitor quality of service regime

The CRTC has commenced Telecom Notice of Consultation CRTC 2017-49 to review the regulatory framework for the competitor quality of service regime (CQoS). CQoS applies to certain wholesale services we provide to competitors. It

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establishes standards for certain aspects of service provision and requires TELUS to rebate a portion of rates where we fail to meet those standards. TELUS is also subject to tracking, reporting and auditing requirements. This proceeding will consider whether a regime is needed, what services should be subject to the regime, which service providers will be subject to the regime, the appropriateness of the rate rebates and other similar matters. The proceeding is now complete and a decision is not expected before the first quarter of 2018. It is not expected that the outcome of this proceeding will have a significant impact on TELUS.

Review of regulatory framework for message relay service

On February 2, 2017, the CRTC initiated a proceeding to review the regulatory framework and marketplace environment for text-based message relay services. Local exchange carriers are required to provide these services that enable people with a hearing or speech disability to make and receive telephone calls. The CRTC has initiated this review because these services are in declining use in light of technological developments that have made other text messaging services convenient for customers. TELUS is participating in this review. It is not expected that the outcome of this proceeding will have a significant impact on TELUS.

Phase-out of local service subsidy regime

The CRTC has issued Telecom Notice of Consultation CRTC 2017-92 in which it is seeking comments on its proposed approach to the phase-out of the local service subsidy regime and associated policies. This notice is part of the followup activities resulting from Modern Telecommunications Services — The path forward for Canada’s digital economy, Telecom Regulatory Policy CRTC 2016-496 issued on December 21, 2016. TELUS is characterized by the CRTC as an incumbent local exchange carrier with respect to wireline voice service. As such, TELUS is subject to certain mandatory service obligations that do not necessarily apply to all of TELUS’ competitors. TELUS participated in this proceeding seeking greater pricing flexibility in regulated high cost exchanges if subsidies are removed and to ensure we are compensated for any obligation to serve. The proceeding is now complete and is scheduled to be followed by a further proceeding to review the price cap and the local forbearance regimes applicable to local service. It is too early to determine the potential impacts of the proceedings on TELUS.

Development of the CRTC’s new broadband funding regime

On April 25, 2017, the CRTC issued Development of the Commission’s broadband funding regime, Telecom Notice of Consultation CRTC 2017-112. This consultation follows on the CRTC’s Modern Telecommunications Services decision issued on December 21, 2016, in which the CRTC set a new universal service objective that included fixed and mobile wireless broadband Internet access services, and stated that it would begin to shift the focus of its current regulatory frameworks from wireline voice services to broadband in order to assist in expanding the availability and adoption of broadband Internet access services. The CRTC also set out its preliminary views on the establishment of a new broadband funding mechanism in that decision. The CRTC has subsequently issued a new notice calling for comments on the various issues pertaining to the establishment of its new broadband funding regime, including governance of the new fund, operating and accountability frameworks, as well as eligibility and assessment criteria for proposed projects. TELUS is participating in this proceeding and has filed its intervention and responded to interventions filed by other parties thus far, and is awaiting potential requests for information from the CRTC. It is too early to determine the potential impact that this proceeding may have on TELUS.

Governor in Council’s request to the CRTC to reconsider wireless service providers’ wholesale mobile roaming service tariffs

The Governor in Council has ordered the CRTC to reconsider Wholesale mobile wireless roaming service tariffs - Final terms and conditions, Telecom Decision CRTC 2017-56. More specifically, the CRTC has been asked to reconsider whether Wi-Fi networks could count as a home network for wireless service providers seeking mandated roaming. The CRTC’s reconsideration is to be completed by March 31, 2018. In response to this request, the CRTC has issued Reconsideration of Telecom Decision 2017-56 regarding final terms and conditions for wholesale mobile wireless roaming service, Telecom Notice of Consultation CRTC 2017-259, thereby initiating a proceeding to review this matter. Subsequent to the Governor in Council’s order, a company called TNW Wireless Inc. brought an application requesting the CRTC to order TELUS (and Bell Mobility) to provide wholesale roaming for a primarily Wi-Fi based service offering. It is not yet clear whether the CRTC will consider this matter separately from the review proceeding. It is too early to determine the potential impact that this proceeding may have on TELUS.

Decision on Review of the Wireless Code

On June 15, 2017, the CRTC issued Telecom Regulatory Policy CRTC 2017-200, Review of the Wireless Code. The major changes to the Wireless Code relate to: (i) the removal of unlocking fees and the requirement to sell all devices unlocked as of December 1, 2017; (ii) changes to how the $50 data usage cap and $100 data roaming cap are calculated and how consent to obtain additional usage is obtained; and (iii) amendments to the mandated trial period for customers who obtain a postpaid wireless contract. Changes to the Wireless Code are to be implemented by December 1, 2017. TELUS has commenced its implementation process and is assessing the impacts of these changes. However, it is not expected that these changes will have a significant impact on TELUS.

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Broadcasting-related issues

Review and modernizing of the Broadcasting Act and Telecommunications Act

In the federal government’s budget announcement on March 22, 2017, the federal government recognized the impact of the digital age on Canada’s media and broadcasting industries and indicated its intention to review and modernize the Broadcasting Act and the Telecommunications Act, looking specifically at issues relating to content creation in the digital age, net neutrality and cultural diversity. This announcement dovetails with the review of Canada’s cultural policies as described in Section 9.4 of our 2016 annual MD&A and with the new order for the CRTC to hold hearings and report back to the federal government on distribution models of the future and how Canadians will access programming, described below.

CRTC ordered to report back to the federal government on distribution models of the future

On September 22, 2017, the federal government issued an Order in Council pursuant to section 15 of the Broadcasting Act to request that the CRTC hold hearings and report on distribution models of the future and how Canadians will access programming. The deadline for the CRTC’s report back to the federal government is June 1, 2018. It is expected that the CRTC will launch a consultation process by the end of 2017. TELUS will participate in these hearings. While the CRTC’s report to the federal government will likely form part of the record for the later review of the Broadcasting Act and the Telecommunications Act, it is not expected to have a significant impact on TELUS.

Minister of Canadian Heritage’s Creative Canada Policy Framework

On September 28, 2017, the Minister of Canadian Heritage announced her Creative Canada Policy Framework. This policy framework is focused on: 1) investing in Canadian creators and cultural entrepreneurs; 2) promoting discovery and distribution of Canadian content at home and globally; and 3) strengthening public broadcasting and support local news.  The Minister has indicated in her official speech unveiling this new policy framework that the federal government would not support any new tax on Internet service providers. As a result, this new policy framework is not expected to have a significant impact on TELUS.

Review of the Copyright Act and Copyright Board

The Copyright Act is slated for a review in 2017 and is expected to begin soon. While the Minister of Canadian Heritage has indicated her intention that this review be focused on creators, the Copyright Act falls under the mandate of the Minister of ISED which will also look to balance the interests of consumers in innovation. The policy approach for copyright has traditionally been based on a balancing of interests. The review is not expected to have a significant impact on TELUS.

North American Free Trade Agreement Negotiations

The Office of the United States Trade Representative has released its summary of objectives for the renegotiation of the North American Free Trade Agreement (NAFTA) between Canada, the United States and Mexico. The United States government has identified a number of objectives including trade in services (including telecommunications services), digital trade in goods and services and cross-border data flows, intellectual property (including copyright) and competition policy, amongst other issues, as potential items for negotiation. The Government of Canada has since outlined Canada’s ten priorities for the NAFTA renegotiations, none of which include detailed telecommunications or intellectual property objectives. On the issue of cultural exemptions, the Government of Canada has clearly stated that it is committed to maintaining the current exemption for the cultural industries found in NAFTA. NAFTA negotiations have begun but are expected to continue through to the end of 2017. It remains unclear what issues will be negotiated, the outcome of negotiations, and the potential impact that the NAFTA negotiations may have on TELUS.

10.Risks and risk management

The principal risks and uncertainties that could affect our future business results and associated risk mitigation activities were described in our 2016 annual MD&A and have not materially changed since December 31, 2016. Reference is made as well to the summary of risks and uncertainties in the Caution regarding forward-looking statements at the beginning of this MD&A.

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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, 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 obscure the underlying trends in business performance. These measures should not be considered alternatives to Net income and 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 redevelopment partnerships, gains on the exchange of wireless spectrum licences, 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 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 sustainable earnings per share on a prospective basis. (See Section 7.5 Liquidity and capital resource measures.)

Calculation of Dividend payout ratio

12-month periods ended September 30 ($)	2017	2016
Numerator — sum of the last four quarterly dividends declared per Common Share	1.9450	1.80
Denominator — Net income per Common Share	2.13	2.37
Ratio (%)	91	76

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, immediately vesting transformative compensation expense, long-term debt prepayment premium (when applicable) and income tax-related adjustments.

Calculation of Dividend payout ratio of adjusted net earnings

12-month periods ended September 30 ($)	2017		2016
Numerator — sum of the last four quarterly dividends declared per Common Share	1.9450		1.80
Adjusted net earnings ($ millions):
Net income attributable to Common Shares	1,260		1,403
Deduct net gains and equity income from real estate joint venture developments, after income taxes	(7	)	(11	)
Deduct gain on the exchange of wireless spectrum licences, after income taxes	—		(13	)
Add back business acquisition-related provisions, after income taxes	2		13
Add back transformative compensation expense, after income taxes	224		—
Add back net unfavourable (deduct net favourable) income tax-related adjustments	(18	)	(11	)
	1,461		1,381
Denominator — Adjusted net earnings per Common Share	2.47		2.33
Adjusted ratio (%)	79		77

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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

12-month periods ended September 30 ($ millions, except ratio)	2017	2016
Net income attributable to Common Shares	1,260	1,403
Income taxes (attributable to Common Shares)	431	493
Borrowing costs (attributable to Common Shares)1	557	532
Numerator	2,248	2,428
Denominator — Borrowing costs	557	532
Ratio (times)	4.0	4.6

(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 have issued guidance on and report EBITDA because it is a key measure used to evaluate performance at a consolidated level. 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 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 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)	2017	2016		2017		2016
Net income	370	355		1,197		1,149
Financing costs	149	129		429		386
Income taxes	130	132		420		411
Depreciation	410	388		1,203		1,158
Amortization of intangible assets	137	127		402		356
EBITDA	1,196	1,131		3,651		3,460
Add back restructuring and other costs	36	60		79		131
EBITDA — excluding restructuring and other costs	1,232	1,191		3,730		3,591
Deduct gain on the exchange of wireless spectrum licences	—	—		—		(15	)
Deduct net gains and equity income from real estate joint venture developments	—	(10	)	(3	)	(19	)
Adjusted EBITDA	1,232	1,181		3,727		3,557

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 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 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)	2017		2016		2017		2016
EBITDA	1,196		1,131		3,651		3,460
Deduct non-cash gains from the sale of property, plant and equipment	(2	)	(4	)	(3	)	(15	)
Restructuring costs net of disbursements	(18	)	12		(64	)	(27	)
Deduct net gains and equity income from real estate joint venture developments	—		(10	)	(3	)	(19	)
Deduct gain on the exchange of wireless spectrum licences	—		—		—		(15	)
Items from the interim consolidated statements of cash flows:
Share-based compensation	22		27		61		65
Net employee defined benefit plans expense	20		23		61		67
Employer contributions to employee defined benefit plans	(17	)	(14	)	(52	)	(53	)
Interest paid	(146	)	(132	)	(413	)	(387	)
Interest received	1		1		2		1
Capital expenditures (excluding spectrum licences)	(821	)	(787	)	(2,355	)	(2,174	)
Other	—		—		6		—
Free cash flow before income taxes	235		246		891		903
Income taxes paid, net of refunds	(20	)	(148	)	(199	)	(571	)
Free cash flow	215		98		692		332

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)	2017	2016	2017		2016
Free cash flow	215	98	692		332
Add (deduct):
Capital expenditures (excluding spectrum licences)	821	787	2,355		2,174
Adjustments to reconcile to Cash provided by operating activities	97	147	(79	)	(19	)
Cash provided by operating activities	1,133	1,032	2,968		2,487

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)	2017		2016
Long-term debt including current maturities	13,618		12,454
Debt issuance costs netted against long-term debt	72		67
Derivative liabilities, net	76		24
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)	16		(18	)
Cash and temporary investments	(488	)	(410	)
Short-term borrowings	100		100
Net debt	13,394		12,217

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 2017 and 2016. Expenses recorded for the long-term debt prepayment premium, if any, are included in net interest cost. Net interest cost was $568 million in the 12-month period ended September 30, 2017, and $548 million in the 12-month period ended September 30, 2016.

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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. In addition, 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.

Components of restructuring and other costs

	Third quarters ended September 30		Nine-month periods ended September 30
($ millions)	2017	2016	2017	2016
Goods and services purchased	31	23	58	39
Employee benefits expense	5	37	21	92
Restructuring and other costs included in EBITDA	36	60	79	131

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-IASB.

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 (or churn) 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 wireless subscriber is deactivated when the subscriber has no usage for 90 days following expiry of the prepaid credits.

Wireless subscriber unit (subscriber) is defined as an active mobile recurring 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 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 fixed 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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