Fitch Assigns Rates TELUS' Debt Issuance 'BBB+'; Outlook Stable

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned a 'BBB+' rating to TELUS Corporation's (TELUS) CAD$1 billion 5.05% senior unsecured note offering due in 2019. Proceeds from the offering will be used to early redeem, on Dec. 1, 2009, US$583.5 million principal amount of the company's outstanding US$1.945 billion 8% notes due June 1, 2011, to terminate the cross-currency interest rate swaps for the notes that are redeemed and for general corporate purposes. The Rating Outlook is Stable.

TELUS' ratings reflect the stability of the company's diversified operations, supported by the strong cash flow at its TELUS Mobility segment as well as its leading market position as a local operator in western Canada and eastern Quebec. The wireless segment is key to the company's stability as its stronger growth prospects provide an important offset to the pressure TELUS is experiencing in its local and long-distance operations. The latter operations are experiencing competitive pressures from wireless substitution as well as cable operators expanding voice-over-Internet protocol (VoIP) offerings.

Through the first nine months of 2009, TELUS' EBITDA and revenues have been below Fitch's expectations due to a weaker than expected Canadian economy and more robust wireless competition than anticipated. Leverage, based on the last 12 months EBITDA, was approximately 1.8 times (x) at Sept. 30, 2009. Fitch had expected the company's leverage to approach 2.0x for 2009, which would be at the high end of the range for the rating category. Cost controls, moderately higher free cash flow than expected and a lack of common stock repurchases have combined to keep debt and leverage below Fitch's expectations.

TELUS' financial flexibility is good owing to its free cash flow (FCF) and undrawn revolver capacity. FCF for the LTM ending Sept. 30, 2009 was approximately CAD$208 million and balance sheet cash and temporary investments amounted to CAD$34 million as of Sept. 30, 2009. TELUS maintains a CAD$2 billion revolving credit facility maturing in 2012, which extends beyond the date of TELUS' next significant maturity in 2011, of US$1.9 billion. The revolver backstops TELUS commercial paper program in the amount of CAD$534 million at Sept. 30, 2009. In addition, there were outstanding undrawn letters of credit of CAD$221 million outstanding against the revolver. Consequently, the CAD$2 billion revolving facility had CAD$1.245 billion in net availability.

In June 2009, TELUS amended another revolving credit facility, extending its maturity to Dec. 31, 2010 from March 1, 2010 and reducing its size to CAD$300 million from CAD$700 million. The financial ratio covenants in the CAD$300 million facility are substantially the same as the five-year, CAD$2 billion revolver, which includes net debt to operating cash flow of less than 4.0x and operating cash flow to interest expense greater than 2.0x.

Additional information is available at 'www.fitchratings.com'.

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