Fitch Ratings Affirms TELUS At 'BBB'.

Business Editors

CHICAGO--(BUSINESS WIRE)--May 14, 2004

Fitch Ratings has affirmed TELUS Corporation's (TELUS) 'BBB' senior unsecured debt rating following the announcement of an unsolicited cash offer to purchase all of the issued and outstanding securities of Microcell Telecommunications Inc. for approximately C$1.1 billion. This rating action affects approximately C$6.9 billion of debt including TELUS' C$800 million four-year bank facility and the C$800 million 364-day revolver (both are pari-passu with the public debt), the C$1.6 billion senior unsecured notes and the US$3.3 billion senior unsecured notes as well as TELUS Communications, Inc.'s C$1 billion debentures and C$20 million of medium term notes. The Rating Outlook is Stable.

The Stable Outlook reflects Fitch's view that while the proposed acquisition would be slightly leveraging with expected Proforma Debt-to-EBITDA of approximately 2.8 times (x) at the end of 2004, TELUS' strong FCF generation, the added wireless market stability and likely incremental growth resulting from the acquisition as well as the material tax and operational synergies mitigates this risk.

TELUS has significant liquidity to finance this acquisition through untapped bank facilities of $2.1 billion (TELUS has an agreement for an additional $500 million facility), approximately $300 million of availability on its accounts receivable securitization program and cash. Fitch expects TELUS to deliver its balance sheet rapidly, effectively delaying its credit profile improvement by only one year, given the strong operational trends within the mobility segment driving FCF generation. The affirmation assumes that the cash requirements of the acquisition do not change materially from how Fitch perceives the acquisition at this time. Material changes to the transaction would require further review.

The acquisition, while subject to approval by Microcell shareholders and the Competition Bureau, would make TELUS the largest wireless operator in Canada at approximately 5.1 million subscribers along with a 38% revenue share of the market. The acquisition also enhances TELUS' position in the Ontario and Quebec markets where currently the company is third in market share. TELUS' risk profile would be reduced with a higher proportion of revenue attributed to the deregulated wireless segment with strong fundamentals supporting profitable growth.

TELUS main challenge with the acquisition, if approved, would be to focus on retaining only the profitable Microcell subscribers through improved churn and ARPU characteristics as the company migrates subscribers to the CDMA and Mike networks over the next couple of years. During this time, Fitch expects TELUS to realize capital expenditure savings with the GSM network as well as back office synergies, network expense savings and significant tax synergies resulting from the acquired tax loss carry forwards.