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TELUS CORPORATION

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TELUS : Consolidated Financial Statements (Form 6-K)

07/30/2021 | 08:29am EDT

TELUS CORPORATION

CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

JUNE 30, 2021

condensed interim consolidated statements of income and other comprehensive income

(unaudited)

Three months

Six months

Periods ended June 30 (millions except per share amounts)

Note

2021

2020

2021

2020

OPERATING REVENUES

Service

$

3,559

$

3,250

$

7,061

$

6,495

Equipment

550

406

1,070

824

Operating revenues (arising from contracts with customers)

6

4,109

3,656

8,131

7,319

Other income

7

2

72

4

103

Operating revenues and other income

4,111

3,728

8,135

7,422

OPERATING EXPENSES

Goods and services purchased

1,609

1,458

3,157

2,870

Employee benefits expense

8

1,051

911

2,066

1,784

Depreciation

17

527

505

1,051

1,028

Amortization of intangible assets

18

266

220

531

422

3,453

3,094

6,805

6,104

OPERATING INCOME

658

634

1,330

1,318

Financing costs

9

203

202

410

394

INCOME BEFORE INCOME TAXES

455

432

920

924

Income taxes

10

111

117

243

256

NET INCOME

344

315

677

668

OTHER COMPREHENSIVE INCOME (LOSS)

11

Items that may subsequently be reclassified to income

Change in unrealized fair value of derivatives designated as cash flow hedges

28

(97)

110

125

Foreign currency translation adjustment arising from translating financial statements of foreign operations

(42)

(10)

(111)

42

(14)

(107)

(1)

167

Items never subsequently reclassified to income

Change in measurement of investment financial assets

(3)

-

(4)

-

Employee defined benefit plan re-measurements

103

(669)

778

(353)

100

(669)

774

(353)

86

(776)

773

(186)

COMPREHENSIVE INCOME

$

430

$

(461)

$

1,450

$

482

NET INCOME ATTRIBUTABLE TO:

Common Shares

$

335

$

290

$

666

$

640

Non-controlling interests

9

25

11

28

$

344

$

315

$

677

$

668

COMPREHENSIVE INCOME ATTRIBUTABLE TO:

Common Shares

$

441

$

(477)

$

1,476

$

451

Non-controlling interests

(11)

16

(26)

31

$

430

$

(461)

$

1,450

$

482

NET INCOME PER COMMON SHARE

12

Basic

$

0.25

$

0.23

$

0.50

$

0.51

Diluted

$

0.25

$

0.23

$

0.50

$

0.51

TOTAL WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

Basic

1,355

1,278

1,327

1,263

Diluted

1,359

1,280

1,331

1,264

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

2|June 30, 2021

condensed interim consolidated statements of financial position

(unaudited)

June 30,

December 31,

As at (millions)

Note

2021

2020

ASSETS

Current assets

Cash and temporary investments, net

$

2,183

$

848

Accounts receivable

6(b)

2,332

2,355

Income and other taxes receivable

202

148

Inventories

1(b)

363

407

Contract assets

6(c)

412

439

Prepaid expenses

20

611

484

Current derivative assets

4(d)

2

2

6,105

4,683

Non-current assets

Property, plant and equipment, net

17

15,314

15,014

Intangible assets, net

18

15,241

15,026

Goodwill, net

18

7,201

7,224

Contract assets

6(c)

247

268

Other long-term assets

20

1,907

1,106

39,910

38,638

$

46,015

$

43,321

LIABILITIES AND OWNERS' EQUITY

Current liabilities

Short-term borrowings

22

$

100

$

100

Accounts payable and accrued liabilities

23

3,110

2,968

Income and other taxes payable

104

135

Dividends payable

13

428

403

Advance billings and customer deposits

24

769

772

Provisions

25

71

73

Current maturities of long-term debt

26

1,913

1,432

Current derivative liabilities

4(d)

23

32

6,518

5,915

Non-current liabilities

Provisions

25

960

961

Long-term debt

26

18,019

18,856

Other long-term liabilities

27

846

1,265

Deferred income taxes

4,022

3,756

23,847

24,838

Liabilities

30,365

30,753

Owners' equity

Common equity

28

14,756

12,040

Non-controlling interests

894

528

15,650

12,568

$

46,015

$

43,321

Contingent liabilities

29

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

June 30, 2021|3

condensed interim consolidated statements of changes in owners' equity

(unaudited)

Common equity

Equity contributed

Accumulated

Common Shares (Note 28)

other

Non-

Number of

Share

Contributed

Retained

comprehensive

controlling

(millions)

Note

shares

capital

surplus

earnings

income

Total

interests

Total

Balance as at January 1, 2020

1,209

$

5,660

$

398

$

4,371

$

119

$

10,548

$

111

$

10,659

Net income

-

-

-

640

-

640

28

668

Other comprehensive income (loss)

11

-

-

-

(353)

164

(189)

3

(186)

Dividends

13

-

-

-

(743)

-

(743)

-

(743)

Dividends reinvested and optional cash payments

13(b),
14(c)

11

262

-

-

-

262

-

262

Equity accounted share-based compensation

-

-

58

-

-

58

-

58

Common Shares issued

58

1,453

-

-

-

1,453

-

1,453

Change in ownership interests of subsidiary

-

-

17

-

-

17

192

209

Balance as at June 30, 2020

1,278

$

7,375

$

473

$

3,915

$

283

$

12,046

$

334

$

12,380

Balance as at January 1, 2021 1

1,291

$

7,677

$

534

$

3,712

$

117

$

12,040

$

528

$

12,568

Net income

-

-

-

666

-

666

11

677

Other comprehensive income (loss)

11

-

-

-

778

32

810

(37)

773

Dividends

13

-

-

-

(832)

-

(832)

-

(832)

Dividends reinvested and optional cash payments

13(b),
14(c)

13

305

-

-

-

305

-

305

Equity accounted share-based compensation

14(b)

-

-

68

-

-

68

-

68

Common Shares issued

28(a)

51

1,267

-

-

-

1,267

-

1,267

Change in ownership interests of subsidiary

28(c)

-

-

432

-

-

432

392

824

Balance as at June 30, 2021

1,355

$

9,249

$

1,034

$

4,324

$

149

$

14,756

$

894

$

15,650

1 The opening balance of retained earnings has been adjusted as set out in Note 18(c).

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

4|June 30, 2021

condensed interim consolidated statements of cash flows

(unaudited)

Three months

Six months

Periods ended June 30 (millions)

Note

2021

2020

2021

2020

OPERATING ACTIVITIES

Net income

$

344

$

315

$

677

$

668

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

793

725

1,582

1,450

Deferred income taxes

10

(24)

36

(21)

(25)

Share-based compensation expense, net

14(a)

52

41

87

64

Net employee defined benefit plans expense

15(a)

30

25

56

52

Employer contributions to employee defined benefit plans

(12)

(12)

(28)

(27)

Non-current contract assets

6

51

21

116

Non-current unbilled customer finance receivables

20

(44)

(53)

(67)

(94)

Loss from equity accounted investments

7, 21

2

5

6

13

Other

(20)

(75)

(37)

(42)

Net change in non-cash operating working capital

31(a)

123

404

(87)

464

Cash provided by operating activities

1,250

1,462

2,189

2,639

INVESTING ACTIVITIES

Cash payments for capital assets, excluding spectrum licences

31(a)

(771)

(694)

(1,521)

(1,474)

Cash payments for spectrum licences

18(a)

(21)

-

(272)

-

Cash payments for acquisitions, net

18(b)

(13)

(107)

(150)

(1,211)

Advances to, and investment in, real estate joint ventures and associates

21

(2)

(8)

(17)

(88)

Real estate joint venture receipts

21

1

1

2

3

Proceeds on disposition

1

-

1

-

Investment in portfolio investments and other

(55)

(15)

(56)

(12)

Cash used by investing activities

(860)

(823)

(2,013)

(2,782)

FINANCING ACTIVITIES

31(b)

Common Shares issued

28(a)

-

-

1,300

1,495

Dividends paid to holders of Common Shares

13(a)

(251)

(240)

(502)

(462)

Long-term debt issued

26

1,250

1,000

2,225

2,377

Redemptions and repayment of long-term debt

26

(1,096)

(1,479)

(2,632)

(2,967)

Shares of subsidiary issued and sold to non-controlling interests, net

28(c)

-

-

827

209

Other

(13)

(7)

(59)

(73)

Cash provided (used) by financing activities

(110)

(726)

1,159

579

CASH POSITION

Increase (decrease) in cash and temporary investments, net

280

(87)

1,335

436

Cash and temporary investments, net, beginning of period

1,903

1,058

848

535

Cash and temporary investments, net, end of period

$

2,183

$

971

$

2,183

$

971

SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS

Interest paid

$

(173)

$

(199)

$

(372)

$

(376)

Interest received

$

1

$

3

$

3

$

6

Income taxes paid, net

In respect of comprehensive income

$

(133)

$

(11)

$

(315)

$

(104)

In respect of business acquisitions

-

(2)

(38)

(33)

$

(133)

$

(13)

$

(353)

$

(137)

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

June 30, 2021|5

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

JUNE 30, 2021

TELUS Corporation is one of Canada's largest telecommunications companies, providing a wide range of technology solutions, including mobile and fixed voice and data telecommunications services and products, healthcare software and technology solutions and digitally-led customer experiences. Data services include: internet protocol; television; hosting, managed information technology and cloud-based services; software, data management and data analytics-driven smart-food chain technologies; and home and business security.

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.

6|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

The terms 'TELUS', 'we', 'us', 'our' or 'ourselves' refer to TELUS Corporation and, where the context of the narrative permits or requires, its subsidiaries. Our principal subsidiaries are: TELUS Communications Inc., in which, as at June 30, 2021, we have a 100% equity interest; and TELUS International (Cda) Inc., in which, as at June 30, 2021, we have a 55.2% equity interest, and which completed its initial public offering in February 2021, as discussed further in Note 28(c).

Notes to condensed interim consolidated financial statements

Page

General application

1.

Condensed interim consolidated financial statements

8

2.

Accounting policy developments

8

3.

Capital structure financial policies

9

4.

Financial instruments

13

Consolidated results of operations focused

5.

Segment information

20

6.

Revenue from contracts with customers

22

7.

Other income

23

8.

Employee benefits expense

24

9.

Financing costs

24

10.

Income taxes

25

11.

Other comprehensive income

26

12.

Per share amounts

27

13.

Dividends per share

27

14.

Share-based compensation

28

15.

Employee future benefits

32

16.

Restructuring and other costs

33

Consolidated financial position focused

17.

Property, plant and equipment

34

18.

Intangible assets and goodwill

35

19.

Leases

37

20.

Other long-term assets

37

21.

Real estate joint ventures and investment in associate

38

22.

Short-term borrowings

41

23.

Accounts payable and accrued liabilities

42

24.

Advance billings and customer deposits

42

25.

Provisions

43

26.

Long-term debt

45

27.

Other long-term liabilities

49

28.

Owners' equity

50

29.

Contingent liabilities

52

Other

30.

Related party transactions

53

31.

Additional statement of cash flow information

55

June 30, 2021|7

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

1 condensed 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, 2020.

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, 2020, other than as set out in Note 5. 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.

These consolidated financial statements for the three-month and six-month periods ended June 30, 2021, were authorized by our Board of Directors for issue on July 30, 2021.

(b) Inventories

Our inventories primarily consist of mobile handsets, parts and accessories totalling $283 million at June 30, 2021 (December 31, 2020 - $328 million), and communications equipment held for resale. Inventories are valued at the lower of cost and net realizable value, with cost being determined on an average cost basis. Costs of goods sold for the three-month and six-month periods ended June 30, 2021, totalled $527 million (2020- $384 million) and $1,031 million (2020 - $786 million), respectively.

2 accounting policy developments

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

In August 2020, the International Accounting Standards Board issued Interest Rate Benchmark Reform-Phase 2, which amends IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases. The amendments are effective for periods beginning on or after January 1, 2021, although earlier application is permitted. Interest rate benchmarks such as interbank offer rates (IBORs) play an important role in global financial markets as they index a wide variety of financial products, including derivative financial instruments. Market developments have impacted the reliability of some existing benchmarks and, in this context, the Financial Stability Board has published a report setting out recommendations to reform such benchmarks. The Interest Rate Benchmark Reform-Phase 2 amendments focus on the effects of the interest rate benchmark reform on a company's financial statements that arise when an interest rate benchmark used to calculate interest is replaced with an alternative benchmark rate; most significantly, there will be no requirement to derecognize or adjust the amount of financial instruments for changes required by the reform, but will instead update the effective interest rate to reflect the change to the alternative benchmark rate. The effects of these amendments on our financial performance and disclosure will be dependent upon the facts and circumstances of future changes in the derivative financial instruments we use, if any, and any future changes in interest rate benchmarks, if any, referenced by such derivative financial instruments we use.

8|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

(b) Standards, interpretations and amendments to standards and interpretations in the reporting period not yet effective and not yet applied

In February 2021, the International Accounting Standards Board issued narrow-scope amendments to IAS 1, Presentation of Financial Statements, IFRS Practice Statement 2, Making Materiality Judgementsand IAS 8, Accounting Polices, Changes in Accounting Estimates and Errors. The amendments are effective for annual periods beginning on or after January 1, 2023, although earlier application is permitted. The amendments will require the disclosure of material accounting policy information rather than disclosing significant accounting policies and clarifies how to distinguish changes in accounting policies from changes in accounting estimates. We are currently assessing the impacts of the amended standards, but do not expect that our financial disclosure will be materially affected by the application of the amendments.
In May 2021, the International Accounting Standards Board issued targeted amendments to IAS 12, Income Taxes. The amendments are effective for annual periods beginning on or after January 1, 2023, although earlier application is permitted. With a view to reducing diversity in reporting, the amendments will clarify that companies are required to recognize deferred taxes on transactions where both assets and liabilities are recognized, such as with leases and asset retirement (decommissioning) obligations. We are currently assessing the impacts of the amended standard.

3 capital structure financial policies

General

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 business. 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.

During 2021, our financial objectives, which are reviewed annually, were unchanged from 2020. We believe that our financial objectives are supportive of our long-term strategy.

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 ratio; coverage ratios; and dividend payout ratios.

* 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 and other income 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.

June 30, 2021|9

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

Debt and coverage 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 and EBITDA - excluding restructuring and other costs are measures that do not have any standardized meanings prescribed by IFRS-IASB and are therefore unlikely to be comparable to similar measures presented by other issuers. The calculation of these measures is set out in the following table. Net debt is one component of a ratio used to determine compliance with debt covenants.

As at, or for the 12-month periods ended, June 30 ($ in millions)

Objective

2021

2020

Components of debt and coverage ratios

Net debt 1

$

18,169

$

17,664

EBITDA - excluding restructuring and other costs 2

$

5,846

$

5,769

Net interest cost 3(Note 9)

$

786

$

797

Debt ratio

Net debt to EBITDA - excluding restructuring and other costs

2.20

-

2.70

4

3.11

3.06

Coverage ratios

Earnings coverage 5

3.2

3.6

EBITDA - excluding restructuring and other costs interest coverage 6

7.4

7.2

1 Net debt and total capitalization are calculated as follows:

As at June 30

Note

2021

2020

Long-term debt

26

$

19,932

$

18,518

Debt issuance costs netted against long-term debt

100

96

Derivative (assets) liabilities, net

62

(392)

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

158

313

Cash and temporary investments, net

(2,183)

(971)

Short-term borrowings

22

100

100

Net debt

18,169

17,664

Common equity

14,756

12,046

Less: accumulated other comprehensive income included in common equity above

(149)

(283)

Total capitalization

$

32,776

$

29,427

2 EBITDA - excluding restructuring and other costs is calculated as follows:

EBITDA -

Restructuring

excluding

EBITDA

and other costs

restructuring

(Note 5)

(Note 16)

and other costs

Add

Six-month period ended June 30, 2021

$

2,912

$

79

$

2,991

Year ended December 31, 2020

5,494

259

5,753

Deduct

Six-month period ended June 30, 2020

(2,768)

(130)

(2,898)

EBITDA - excluding restructuring and other costs

$

5,638

$

208

$

5,846

10|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

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) (see Note 9).
4 Our long-term objective range for this ratio is 2.20- 2.70times. The ratio as at June 30, 2021, is outside the long-term objective range. We may permit, and have permitted, this ratio to go outside the objective range (for long-term investment opportunities), but we will endeavour to return this ratio to within the objective range in the medium term (following the recent 2021, and upcoming, 2023 and 2024 spectrum auctions), as we believe that this range is supportive of our long-term strategy. We are 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 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 by Canadian Securities Administrators National Instrument 41-101 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, all such amounts excluding amounts attributable to non-controlling interests.
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.

Net debt to EBITDA - excluding restructuring and other costs was 3.11 times as at June 30, 2021, up from 3.06 times one year earlier. The effect of the increase in net debt, primarily due to business acquisitions and the acquisition of spectrum licences, exceeded the effect of growth in EBITDA - excluding restructuring and other costs. EBITDA growth was reduced by COVID-19 pandemic impacts.

The earnings coverage ratio for the twelve-month period ended June 30, 2021, was 3.2 times, down from 3.6 times one year earlier. Lower borrowing costs increased the ratio by 0.1 and a decrease in income before borrowing costs and income taxes decreased the ratio by 0.5. The EBITDA - excluding restructuring and other costs interest coverage ratio for the twelve-month period ended June 30,2021, was 7.4 times, up from 7.2 times one year earlier. Growth in EBITDA - excluding restructuring and other costs increased the ratio by 0.1 and a decrease in net interest costs increased the ratio by 0.1. EBITDA growth was reduced by COVID-19 pandemic impacts.

TELUS Corporation Common Share dividend payout ratio

So as to be consistent with the way we manage our business, our TELUS Corporation Common Share dividend payout ratio is presented as a historical measure calculated as the sum of the most recent four quarters' dividends declared for TELUS Corporation Common Shares, as recorded in the financial statements net of dividend reinvestment plan effects (see Note 13), divided by the sum of free cash flow* amounts for the most recent four quarters for interim reporting periods (divided by annual free cash flow if the reported amount is in respect of a fiscal year).

* Free cash flow 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 free cash flow as EBITDA (operating revenues and other income less goods and services purchased and employee benefits expense) excluding 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. We have issued guidance on, and report, free cash flow because it is a key measure that management, and investors, use to evaluate the performance of our business.

June 30, 2021|11

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

For the 12-month periods ended June 30

Objective

2021

2020

Determined using management measures

TELUS Corporation Common Share dividend payout ratio - net of dividend reinvestment plan effects

60%-75% 1

111

%

61

%

Determined using most comparable IFRS-IASB measures

Ratio of TELUS Corporation Common Share dividends declared to cash provided by operating activities - less capital expenditures (excluding spectrum licences)

137

%

84

%

1 Our objective range for the TELUS Corporation Common Share dividend payout ratio is 60%-75% of free cash flow on a prospective basis.

For the 12-month periods ended June 30 (millions)

2021

2020

TELUS Corporation Common Share dividends declared

$

1,609

$

1,433

Amount of TELUS Corporation Common Share dividends declared reinvested in TELUS Corporation Common Shares

(600)

(516)

TELUS Corporation Common Share dividends declared - net of dividend reinvestment plan effects

$

1,009

$

917

Our calculation of free cash flow, and the reconciliation to cash provided by operating activities, is as follows:

For the 12-month periods ended June 30 (millions)

Note

2021

2020

EBITDA

5

$

5,638

$

5,570

Deduct non-cash gains from the sale of property, plant and equipment

(2)

(13)

Restructuring and other costs, net of disbursements

(5)

22

Effects of contract asset, acquisition and fulfilment and TELUS Easy Payment device financing

(86)

43

Effects of lease principal

31(b)

(447)

(346)

Leases accounted for as finance leases prior to adoption of IFRS 16

32

136

Items from the Consolidated statements of cash flows:

Share-based compensation, net

14

50

23

Net employee defined benefit plans expense

15

106

91

Employer contributions to employee defined benefit plans

(52)

(40)

Interest paid

(736)

(764)

Interest received

10

8

Capital expenditures (excluding spectrum licences)

5

(2,952)

(2,911)

Free cash flow before income taxes

1,556

1,819

Income taxes paid, net of refunds

(646)

(308)

Free cash flow

910

1,511

Add (deduct):

Capital expenditures (excluding spectrum licences)

5

2,952

2,911

Adjustments to reconcile to cash provided by operating activities

262

194

Cash provided by operating activities

$

4,124

$

4,616

12|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

4 financial 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 set out in the following table.

June 30,

December 31,

As at (millions)

2021

2020

Cash and temporary investments, net

$

2,183

$

848

Accounts receivable

2,760

2,716

Contract assets

659

707

Derivative assets

72

42

$

5,674

$

4,313

Cash and temporary investments, net

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 evaluates 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. Accounts are considered to be past due (in default) when customers have failed to make the contractually required payments when due, which is generally within 30 days of the billing date. Any late payment charges are levied at an industry-based market or negotiated rate on outstanding non-current customer account balances.

As at (millions)

June 30, 2021

December 31, 2020

Note

Gross

Allowance

Net 1

Gross

Allowance

Net 1

Customer accounts receivable, net of
allowance for doubtful accounts

Less than 30 days past billing date

$

830

$

(14)

$

816

$

815

$

(19)

$

796

30-60 days past billing date

227

(13)

214

339

(17)

322

61-90 days past billing date

64

(16)

48

90

(19)

71

More than 90 days past billing date

105

(36)

69

98

(43)

55

Unbilled customer finance receivables

1,126

(50)

1,076

1,026

(42)

984

$

2,352

$

(129)

$

2,223

$

2,368

$

(140)

$

2,228

Current

$

1,899

$

(104)

$

1,795

$

1,986

$

(119)

$

1,867

Non-current

20

453

(25)

428

382

(21)

361

$

2,352

$

(129)

$

2,223

$

2,368

$

(140)

$

2,228

1 Net amounts represent customer accounts receivable for which an allowance had not been made as at the dates of the Consolidated statements of financial position (see Note 6(b)).

June 30, 2021|13

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

We maintain allowances for lifetime expected credit losses related to doubtful accounts. Current economic conditions (including forward-looking macroeconomic data), historical information (including credit agency reports, if available), reasons for the accounts being past due and the 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

Six months

Periods ended June 30 (millions)

2021

2020

2021

2020

Balance, beginning of period

$

134

$

56

$

140

$

55

Additions (doubtful accounts expense)

11

46

25

58

Accounts written off 1less than recoveries

(18)

(6)

(39)

(18)

Other

2

8

3

9

Balance, end of period

$

129

$

104

$

129

$

104

1 For the three-month and six-month periods ended June 30, 2021, accounts written off, but that were still subject to enforcement activity, totalled $31(2020 - $25) and $54(2020 - $59), respectively.

Contract assets

Credit risk associated with contract assets 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.

As at (millions)

June 30, 2021

December 31, 2020

Gross

Allowance

Net (Note 6(c))

Gross

Allowance

Net

Contract assets, net of impairment allowance

To be billed and thus reclassified to accounts receivable during:

The 12-month period ending one year hence

$

562

$

(25)

$

537

$

611

$

(29)

$

582

The 12-month period ending two years hence

240

(11)

229

265

(12)

253

Thereafter

19

(1)

18

16

(1)

15

$

821

$

(37)

$

784

$

892

$

(42)

$

850

We maintain allowances for lifetime expected credit losses related to contract assets. Current economic conditions, historical information (including credit agency reports, if available), and the line of business from which the contract asset arose are all considered when determining impairment allowances. The same factors are considered when determining whether to write off amounts charged to the impairment allowance for contract assets against contract assets.

Derivative assets (and derivative liabilities)

Counterparties to our foreign exchange derivatives are major financial institutions that have been accorded investment grade ratings by a primary credit rating agency. The total 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 the risk of 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.

14|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

(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 and bilateral bank facilities (Note 22), a commercial paper program (Note 26(c)) and syndicated credit facilities (Note 26(d),(e));

· 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(h). As at June 30, 2021, TELUS Corporation could offer $2.75 billion of debt or equity securities pursuant to a shelf prospectus that is in effect until June 2023 (December 31, 2020 - $2.0 billion of debt or equity securities pursuant to a shelf prospectus that was in effect until June 2022). 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 set out in the following tables.

Non-derivative

Derivative

Composite long-term debt

Long-term

Currency swap agreement

Currency swap agreement

Non-interest

debt,

amounts to be exchanged 2

amounts to be exchanged

bearing

excluding

financial

Short-term

leases 1

Leases

As at June 30, 2021 (millions)

liabilities

borrowings 1

(Note 26)

(Note 26)

(Receive)

Pay

Other

(Receive)

Pay

Total

2021 (remainder of year)

$

2,666

$

100

$

560

$

267

$

(270)

$

275

$

-

$

(284)

$

295

$

3,609

2022

186

-

2,233

384

(145)

149

4

(230)

231

2,812

2023

15

-

1,166

241

(145)

149

-

-

-

1,426

2024

13

-

1,723

200

(146)

149

-

-

-

1,939

2025

2

-

2,231

155

(511)

549

-

-

-

2,426

2026-2030

4

-

8,135

427

(1,787)

1,898

-

-

-

8,677

Thereafter

-

-

11,512

402

(2,812)

2,949

-

-

-

12,051

Total

$

2,886

$

100

$

27,560

$

2,076

$

(5,816)

$

6,118

$

4

$

(514)

$

526

$

32,940

Total (Note 26(h))

$

29,938

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 June 30, 2021.
2 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 swap receive column, have been determined based upon the currency exchange rates in effect as at June 30, 2021. The hedged U.S. dollar-denominated long-term debt contractual amounts at maturity, in effect, are reflected in the long-term debt currency swap pay column as gross cash flows are exchanged pursuant to the currency swap agreements.

June 30, 2021|15

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

Non-derivative

Derivative

Composite long-term debt

Long-term

Currency swap agreement

Currency swap agreement

Non-interest

debt,

amounts to be exchanged 2

amounts to be exchanged

bearing

excluding

As at December 31,

financial

Short-term

leases 1

Leases

2020 (millions)

liabilities

borrowings 1

(Note 26)

(Note 26)

(Receive)

Pay

Other

(Receive)

Pay

Total

2021

$

2,669

$

101

$

1,658

$

538

$

(882)

$

892

$

-

$

(454)

$

475

$

4,997

2022

74

-

2,204

371

(149)

151

-

-

-

2,651

2023

8

-

1,149

230

(149)

151

6

-

-

1,395

2024

8

-

1,706

191

(150)

151

-

-

-

1,906

2025

9

-

2,868

145

(525)

575

-

-

-

3,072

2026-2030

12

-

7,953

417

(1,836)

1,898

-

-

-

8,444

Thereafter

-

-

9,877

379

(2,889)

2,949

-

-

-

10,316

Total

$

2,780

$

101

$

27,415

$

2,271

$

(6,580)

$

6,767

$

6

$

(454)

$

475

$

32,781

Total

$

29,873

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, 2020.
2 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 swap receive column, have been determined based upon the currency exchange rates in effect as at December 31, 2020. The hedged U.S. dollar-denominated long-term debt contractual amounts at maturity, in effect, are reflected in the long-term debt currency swap 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 six-month periods ended June 30, 2021 and 2020, could have varied if the Canadian dollar: U.S. dollar exchange rate, the U.S. dollar: European euro exchange rate and market interest rates 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 and European euro-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 interest rate risk at the reporting date has been determined based upon a hypothetical change taking place at the beginning of the relevant fiscal year and being held constant through to the statement of financial position date. The principal and notional amounts as at the relevant statement of financial position date have been used in the calculations.

16|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

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

Six-month periods ended June 30

Net income

Other comprehensive income

Comprehensive income

(increase (decrease) in millions)

2021

2020

2021

2020

2021

2020

Reasonably possible changes in market risks 1

10% change in C$: US$ exchange rate

Canadian dollar appreciates

$

1

$

4

$

(25)

$

(66)

$

(24)

$

(62)

Canadian dollar depreciates

$

(1)

$

(4)

$

25

$

66

$

24

$

62

10% change in US$: € exchange rate

U.S. dollar appreciates

$

-

$

-

$

(50)

$

(55)

$

(50)

$

(55)

U.S. dollar depreciates

$

-

$

-

$

50

$

55

$

50

$

55

25 basis point change in interest rates

Interest rates increase

Canadian interest rate

$

-

$

-

$

90

$

118

$

90

$

118

U.S. interest rate

$

-

$

-

$

(93)

$

(129)

$

(93)

$

(129)

Combined

$

-

$

-

$

(3)

$

(11)

$

(3)

$

(11)

Interest rates decrease

Canadian interest rate

$

-

$

-

$

(94)

$

(124)

$

(94)

$

(124)

U.S. interest rate

$

-

$

-

$

98

$

137

$

98

$

137

Combined

$

-

$

-

$

4

$

13

$

4

$

13

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 and market interest rates; in reality, the competitive marketplace in which we operate would have an effect on this assumption.

(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 fair values of our investment financial assets 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, excluding leases, 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 risk are estimated based on 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 statements of financial position dates).

June 30, 2021|17

Table of Contents

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 set out in the following table.

As at (millions)

June 30, 2021

December 31, 2020

Maximum

Fair value 1

Maximum

Fair value 1

maturity

Notional

and carrying

Price or

maturity

Notional

and carrying

Price or

Designation

date

amount

value

rate

date

amount

value

rate

Current Assets 2

Derivatives used to manage

Currency risk arising from U.S. dollar revenues

HFT 4

2021

$

17

$

-

US$1.00: C$1.24

2021

$

87

$

2

US$1.00: C$1.27

Currency risk arising from U.S. dollar-denominated purchases

HFH 3

2022

$

92

1

US$1.00: C$1.22

-

$

-

-

-

Currency risk arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c))

HFH 3

-

$

-

-

-

2021

$

95

-

US$1.00: C$1.27

Currency risk arising from European euro functional currency operations purchased with U.S. dollar-denominated long-term debt 7(Note 26(e))

HFH 5

2025

$

32

1

€1.00: US$1.09

2025

$

34

-

€1.00: US$1.09

$

2

$

2

Other Long-Term Assets 2

Derivatives used to manage

Currency risk arising from U.S. dollar-denominated long-term debt 6(Note 26(b)-(c))

HFH 3

2048

$

2,154

$

70

US$1.00: C$1.27

2048

$

2,176

$

40

US$1.00: C$1.27

Current Liabilities 2

Derivatives used to manage

Currency risk arising from U.S. dollar revenues

HFT 4

2022

$

101

$

1

US$1.00: C$1.24

-

$

-

$

-

-

Currency risk arising from U.S. dollar-denominated purchases

HFH 3

2022

$

315

13

US$1.00: C$1.29

2021

$

388

21

US$1.00: C$1.34

Currency risk arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c))

HFH 3

2021

$

202

5

US$1.00: C$1.27

2021

$

647

11

US$1.00: C$1.29

Interest rate risk associated with non-fixed rate credit facility amounts drawn (Note 26(e))

HFH 3

2022

$

121

4

2.64%

2022

$

8

-

2.64%

$

23

$

32

Other Long-Term Liabilities 2

Derivatives used to manage

Currency risk arising from U.S. dollar-denominated long-term debt 6(Note 26(b)-(c))

HFH 3

2049

$

3,223

$

84

US$1.00: C$1.33

2049

$

3,260

$

82

US$1.00: C$1.33

Currency risk arising from European euro functional currency operations purchased with U.S. dollar-denominated long-term debt 7(Note 26(e))

HFH 5

2025

$

509

44

€1.00: US$1.09

2025

$

557

67

€1.00: US$1.09

Interest rate risk associated with non-fixed rate credit facility amounts drawn (Note 26(e))

HFH 3

-

$

-

-

-

2022

$

120

6

2.64%

$

128

$

155

1 Fair value measured at reporting date using significant other observable inputs (Level 2).
2 Derivative financial assets and liabilities are not set off.
3 Designated as held for hedging (HFH) upon initial recognition (cash flow hedging item); hedge accounting is applied. Unless otherwise noted, hedge ratio is 1:1and is established by assessing the degree of matching between the notional amounts of hedging items and the notional amounts of the associated hedged items.
4 Designated as held for trading (HFT) and classified as fair value through net income upon initial recognition; hedge accounting is not applied.
5 Designated as a hedge of a net investment in a foreign operation and hedge accounting is applied. Hedge ratio is 1:1and is established by assessing the degree of matching between the notional amounts of hedging items and the notional amounts of the associated hedged items.
6 We designate only the spot element as the hedging item. As at June 30, 2021, the foreign currency basis spread included in the fair value of the derivative instruments, which is used for purposes of assessing hedge ineffectiveness, was $43(December 31, 2020 - $101).
7 We designate only the spot element as the hedging item. As at June 30, 2021, the foreign currency basis spread included in the fair value of the derivative instruments, which is used for purposes of assessing hedge ineffectiveness, was $1(December 31, 2020 - $1).

18|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

Non-derivative

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

As at (millions)

June 30, 2021

December 31, 2020

Carrying

Carrying

value

Fair value

value

Fair value

Long-term debt, excluding leases (Note 26)

$

18,238

$

19,701

$

18,451

$

20,313

(e) Recognition of derivative gains and losses

The following table sets out the gains and losses, excluding income tax effects, arising from derivative instruments that are classified as cash flow hedging items and their location within the Consolidated statements of income and other comprehensive income.

Credit risk associated with such derivative instruments, as discussed further in (a), would be the primary source of hedge ineffectiveness. There was no ineffective portion of the derivative instruments classified as cash flow hedging items for the periods presented.

Amount of gain (loss)

recognized in other

Gain (loss) reclassified from other comprehensive

comprehensive income

income to income (effective portion)(Note 11)

(effective portion) (Note 11)

Amount

Periods ended June 30 (millions)

Note

2021

2020

Location

2021

2020

THREE-MONTH

Derivatives used to manage currency risk

Arising from U.S. dollar-denominated purchases

$

(4)

$

(13)

Goods and services purchased

$

(10)

$

5

Arising from U.S. dollar-denominated long-term debt 1

26(b)-(c)

(26)

(216)

Financing costs

(63)

(129)

Arising from net investment in a foreign operation 2

(4)

(21)

Financing costs

-

(3)

(34)

(250)

(73)

(127)

Derivatives used to manage other market risk

Arising from changes in share-based compensation costs and other

14(b)

(1)

-

Employee benefits expense

(2)

1

$

(35)

$

(250)

$

(75)

$

(126)

SIX-MONTH

Derivatives used to manage currency risk

Arising from U.S. dollar-denominated purchases

$

(8)

$

18

Goods and services purchased

$

(18)

$

7

Arising from U.S. dollar-denominated long-term debt 1

26(b)-(c)

(3)

424

Financing costs

(111)

223

Arising from net investment in a foreign operation 2

22

(22)

Financing costs

-

-

11

420

(129)

230

Derivatives used to manage other market risk

Arising from changes in share-based compensation costs and other

14(b)

-

(10)

Employee benefits expense

(2)

(1)

$

11

$

410

$

(131)

$

229

1 Amounts recognized in other comprehensive income are net of the change in the foreign currency basis spread (which is used for purposes of assessing hedge ineffectiveness) included in the fair value of the derivative instruments; such amounts for the three-month and six-month periods ended June 30, 2021, were $14(2020 - $(4)) and $(58)(2020 - $54), respectively.
2 Amounts recognized in other comprehensive income are net of the change in the foreign currency basis spread (which is used for purposes of assessing hedge ineffectiveness) included in the fair value of the derivative instruments; such amounts for the three-month and six-month periods ended June 30, 2021, were $NIL(2020 - $2) and $NIL(2020 - $2), respectively.

June 30, 2021|19

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

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, as well as their location within the Consolidated statements of income and other comprehensive income.

Gain (loss) recognized in

income on derivatives

Three-month periods ended June 30 (millions)

Location

2021

2020

2021

2020

Derivatives used to manage currency risk

Financing costs

$

(1)

$

3

$

-

$

4

5 segment 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 of 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.

Effective January 1, 2020, we embarked upon modifying our internal and external reporting processes, systems and internal controls to accommodate the technology convergence-driven cessation of the historical distinction between our wireless and wireline operations at the level of regularly reported discrete performance measures that are provided to our chief operating decision-maker. Prior to the World Health Organization characterizing COVID-19 as a pandemic, we had anticipated transitioning to a new segment reporting structure during 2020; commencing with the three-month period ended March 31, 2021, we have now transitioned to our new segment reporting structure and have recast comparative amounts on a comparable basis.

The TELUS technology solutions segment includes: network revenues and equipment sales arising from mobile technologies; data revenues (which include internet protocol; television; hosting, managed information technology and cloud-based services; software, data management and data analytics-driven smart-food chain technologies; and home and business security); certain healthcare software and technology solutions; voice and other telecommunications services revenues; and equipment sales.

The digitally-led customer experiences - TELUS International segment, whose primary functional currency is the U.S. dollar, is comprised of digital customer experience and digital-enablement transformation, including artificial intelligence and content management solutions, provided by our TELUS International (Cda) Inc. subsidiary.

Intersegment sales are recorded at the exchange value, which is the amount agreed to by the parties.

20|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

The segment information regularly reported to our Chief Executive Officer (our chief operating decision-maker), and the reconciliations thereof to our products and services view of revenues, other revenues and income before income taxes, are set out in the following table.

Digitally-led customer

TELUS technology solutions

experiences - TELUS

Mobile

Fixed

Segment total

International 1

Eliminations

Total

Three-month periods ended June 30 (millions)

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

Operating revenues

External revenues

Service

$

1,544

$

1,485

$

1,465

$

1,328

$

3,009

$

2,813

$

550

$

437

$

-

$

-

$

3,559

$

3,250

Equipment

487

347

63

59

550

406

-

-

-

-

550

406

Revenues arising from contracts with customers

2,031

1,832

1,528

1,387

3,559

3,219

550

437

-

-

4,109

3,656

Other income

(2)

(1)

4

2

2

1

-

71

-

-

2

72

2,029

1,831

1,532

1,389

3,561

3,220

550

508

-

-

4,111

3,728

Intersegment revenues

-

-

5

4

5

4

108

104

(113)

(108)

-

-

$

2,029

$

1,831

$

1,537

$

1,393

$

3,566

$

3,224

$

658

$

612

$

(113)

$

(108)

$

4,111

$

3,728

EBITDA 2

$

1,323

$

1,197

$

128

$

162

$

-

$

-

$

1,451

$

1,359

CAPEX excluding spectrum licences 3

$

882

$

727

$

31

$

29

$

-

$

-

$

913

$

756

Operating revenues - external and other income (above)

$

4,111

$

3,728

Goods and services purchased

1,609

1,458

Employee benefits expense

1,051

911

EBITDA (above)

1,451

1,359

Depreciation

527

505

Amortization

266

220

Operating income

658

634

Financing costs

203

202

Income before income taxes

$

455

$

432

Digitally-led customer

TELUS technology solutions

experiences - TELUS

Mobile

Fixed

Segment total

International 1

Eliminations

Total

Six-month periods ended June 30 (millions)

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

Operating revenues

External revenues

Service

$

3,070

$

3,008

$

2,906

$

2,680

$

5,976

$

5,688

$

1,085

$

807

$

-

$

-

$

7,061

$

6,495

Equipment

939

709

131

115

1,070

824

-

-

-

-

1,070

824

Revenues arising from contracts with customers

4,009

3,717

3,037

2,795

7,046

6,512

1,085

807

-

-

8,131

7,319

Other income

(3)

(2)

7

2

4

-

-

103

-

-

4

103

4,006

3,715

3,044

2,797

7,050

6,512

1,085

910

-

-

8,135

7,422

Intersegment revenues

-

-

10

5

10

5

212

201

(222)

(206)

-

-

$

4,006

$

3,715

$

3,054

$

2,802

$

7,060

$

6,517

$

1,297

$

1,111

$

(222)

$

(206)

$

8,135

$

7,422

EBITDA2

$

2,659

$

2,498

$

253

$

270

$

-

$

-

$

2,912

$

2,768

CAPEX excluding spectrum licences 3

$

1,544

$

1,373

$

54

$

48

$

-

$

-

$

1,598

$

1,421

June 30, 2021|21

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

Operating revenues - external and other income (above)

$

8,135

$

7,422

Goods and services purchased

3,157

2,870

Employee benefits expense

2,066

1,784

EBITDA (above)

2,912

2,768

Depreciation

1,051

1,028

Amortization

531

422

Operating income

1,330

1,318

Financing costs

410

394

Income before income taxes

$

920

$

924

1 The digitally-led customer experiences - TELUS International segment is comprised of our consolidated TELUS International (Cda) Inc. subsidiary and a line of business retrospectively reorganized into, and accounted for using predecessor accounting prospectively applied by, TELUS International (Cda) Inc. (see Note 28(b)). All of our other international activities are included in the TELUS technology solutions segment.
2 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 and other income 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.
3 Total capital expenditures (CAPEX); see Note 31(a)for a reconciliation of capital expenditures, excluding spectrum licences, to cash payments for capital assets, excluding spectrum licences, reported in the Consolidated statements of cash flows.

6 revenue from contracts with customers

(a) Revenues

In the determination of the minimum transaction prices in contracts with customers, amounts are allocated to fulfilling, or completion of fulfilling, future contracted performance obligations. These unfulfilled, or partially unfulfilled, future contracted performance obligations are largely in respect of services to be provided over the duration of the contract. The following table sets out our aggregate estimated minimum transaction prices allocated to remaining unfulfilled, or partially unfulfilled, future contracted performance obligations and the timing of when we might expect to recognize the associated revenues; actual amounts could differ from these estimates due to a variety of factors, including the unpredictable nature of: customer behaviour; industry regulation; the economic environments in which we operate; and competitor behaviour.

June 30,

December 31,

As at (millions)

2021

2020

Estimated minimum transaction price allocated to remaining unfulfilled, or partially unfulfilled, performance obligations to be recognized as revenue in a future period 1, 2

During the 12-month period ending one year hence

$

2,119

$

2,279

During the 12-month period ending two years hence

973

883

Thereafter

56

35

$

3,148

$

3,197

1 Excludes constrained variable consideration amounts, amounts arising from contracts originally expected to have a duration of one year or less and, as a permitted practical expedient, amounts arising from contracts that are not affected by revenue recognition timing differences arising from transaction price allocation orfrom contracts under which we may recognize and bill revenue in an amount that corresponds directly with our completed performance obligations.
2 IFRS-IASB requires the explanation of when we expect to recognize as revenue the amounts disclosed as the estimated minimum transaction price allocated to remaining unfulfilled, or partially unfulfilled, performance obligations. The estimated amounts disclosed are based upon contractual terms and maturities. Actual minimum transaction price revenues recognized, and the timing thereof, will differ from these estimates primarily due to the frequency with which the actual durations of contracts with customers do not match their contractual maturities.

22|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

(b) Accounts receivable

June 30,

December 31,

As at (millions)

Note

2021

2020

Customer accounts receivable

$

1,899

$

1,986

Accrued receivables - customer

269

241

Allowance for doubtful accounts

4(a)

(104)

(119)

2,064

2,108

Accrued receivables - other

268

247

Accounts receivable - current

$

2,332

$

2,355

(c) Contract assets

Three months

Six months

Periods ended June 30 (millions)

Note

2021

2020

2021

2020

Balance, beginning of period

$

803

$

1,069

$

850

$

1,238

Net additions arising from operations

311

176

583

347

Amounts billed in the period and thus reclassified to accounts receivable 1

(331)

(343)

(655)

(688)

Change in impairment allowance, net

4(a)

2

(2)

5

3

Other

(1)

1

1

1

Balance, end of period

$

784

$

901

$

784

$

901

To be billed and thus reclassified to accounts receivable during:

The 12-month period ending one year hence

$

537

$

689

The 12-month period ending two years hence

229

197

Thereafter

18

15

Balance, end of period

$

784

$

901

Reconciliation of contract assets presented in the Consolidated statements of financial position - current

Gross contract assets

$

537

$

689

Reclassification to contract liabilities of contracts with contract assets less than contract liabilities

24

(12)

(9)

Reclassification from contract liabilities of contracts with contract liabilities less than contract assets

24

(113)

(142)

$

412

$

538

1 For the three-month and six-month periods ended June 30, 2021, amounts billed for our mobile products and services and reclassified to accounts receivable totalled $183(2020 - $268) and $376(2020 - $557), respectively.

7 other income

Three months

Six months

Periods ended June 30 (millions)

Note

2021

2020

2021

2020

Government assistance

$

2

$

3

$

5

$

6

Other sublet revenue

19

1

-

2

1

Investment income (loss), gain (loss) on disposal of assets and other

(2)

(3)

(5)

(9)

Interest income

21(b)

1

1

2

2

Changes in business combination-related provisions

-

71

-

103

$

2

$

72

$

4

$

103

June 30, 2021|23

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

8 employee benefits expense

Three months

Six months

Periods ended June 30 (millions)

Note

2021

2020

2021

2020

Employee benefits expense - gross

Wages and salaries 1

$

1,026

$

901

$

2,017

$

1,781

Share-based compensation 2

14

63

46

123

78

Pensions - defined benefit

15(a)

30

25

56

52

Pensions - defined contribution

15(b)

28

25

50

46

Restructuring costs 2

16(a)

16

10

34

20

Employee health and other benefits

45

43

95

89

1,208

1,050

2,375

2,066

Capitalized internal labour costs, net

Contract acquisition costs

20

Capitalized

(20)

(16)

(42)

(33)

Amortized

16

13

31

26

Contract fulfilment costs

20

Capitalized

(1)

(1)

(1)

(2)

Amortized

1

1

2

2

Property, plant and equipment

(96)

(83)

(186)

(170)

Intangible assets subject to amortization

(57)

(53)

(113)

(105)

(157)

(139)

(309)

(282)

$

1,051

$

911

$

2,066

$

1,784

1 For the three-month and six-month periods ended June 30, 2021 and 2020, wages and salaries are net of Canada Emergency Wage Subsidy program amounts.
2 For the three-month and six-month periods ended June 30, 2021, $NILand $6, respectively, of share-based compensation in the Digitally-led customer experiences segment was included in restructuring costs.

9 financing costs

Three months

Six months

Periods ended June 30 (millions)

Note

2021

2020

2021

2020

Interest expense

Interest on long-term debt, excluding lease liabilities - gross

$

172

$

169

$

343

$

339

Interest on long-term debt, excluding lease liabilities - capitalized

-

(9)

-

(17)

Interest on long-term debt, excluding lease liabilities

172

160

343

322

Interest on lease liabilities

19

17

17

34

35

Interest on short-term borrowings and other

4

2

7

4

Interest accretion on provisions

25

6

4

11

9

Long-term debt prepayment premium

-

18

-

18

199

201

395

388

Employee defined benefit plans net interest

15

7

4

13

8

Foreign exchange

(1)

(1)

5

1

205

204

413

397

Interest income

(2)

(2)

(3)

(3)

$

203

$

202

$

410

$

394

Net interest cost

3

$

397

$

403

Interest on long-term debt, excluding lease liabilities - capitalized

-

(17)

Employee defined benefit plans net interest

13

8

$

410

$

394

24|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

10 income taxes

Three months

Six months

Periods ended June 30 (millions)

2021

2020

2021

2020

Current income tax expense

For the current reporting period

$

150

$

83

$

279

$

285

Adjustments recognized in the current period for income taxes of prior periods

(15)

(2)

(15)

(4)

135

81

264

281

Deferred income tax expense

Arising from the origination and reversal of temporary differences

(25)

32

(22)

(28)

Revaluation of deferred income tax liability to reflect future income tax rates

-

(2)

-

(5)

Adjustments recognized in the current period for income taxes of prior periods

1

6

1

8

(24)

36

(21)

(25)

$

111

$

117

$

243

$

256

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

Three-month periods ended June 30 ($ in millions)

2021

2020

Income taxes computed at applicable statutory rates

$

117

25.7

%

$

113

26.2

%

Revaluation of deferred income tax liability to reflect future income tax rates

-

-

(2)

(0.5)

Adjustments recognized in the current period for income taxes of prior periods

(14)

(3.0)

4

0.9

Non-deductible amounts

6

1.3

6

1.4

Other

2

0.4

(4)

(0.9)

Income tax expense per Consolidated statements of income and other comprehensive income

$

111

24.4

%

$

117

27.1

%

Six-month periods ended June 30 ($ in millions)

2021

2020

Income taxes computed at applicable statutory rates

$

236

25.7

%

$

243

26.3

%

Revaluation of deferred income tax liability to reflect future income tax rates

-

-

(5)

(0.5)

Adjustments recognized in the current period for income taxes of prior periods

(14)

(1.5)

4

0.4

Non-deductible amounts

12

1.3

10

1.1

Other

9

0.9

4

0.4

Income tax expense per Consolidated statements of income and other comprehensive income

$

243

26.4

%

$

256

27.7

%

June 30, 2021|25

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

11 other comprehensive income

Item never

Item never

reclassified to

reclassified to

Items that may subsequently be reclassified to income

income

income

Change in unrealized fair value of derivatives designated as cash flow hedges in current period (Note 4(e))

Derivatives used to manage currency risk

Derivatives used to manage other market risks

Cumulative

Change in

Prior period

Prior period

foreign

measurement

Employee

Gains

(gains) losses

Gains

(gains) losses

currency

of investment

Accumulated

defined benefit

(losses)

transferred to

(losses)

transferred to

translation

financial

other

plan

Other

Periods ended June 30 (millions)

arising

net income

Total

arising

net income

Total

Total

adjustment

assets

comp. income

re-measurements

comp. income

THREE-MONTH

Accumulated balance as at April 1, 2020

$

294

$

(7)

$

287

$

94

$

12

$

393

Other comprehensive income (loss)

Amount arising

$

(250)

$

127

(123)

$

-

$

(1)

(1)

(124)

(10)

-

(134)

$

(901)

$

(1,035)

Income taxes

$

(43)

$

16

(27)

$

1

$

(1)

-

(27)

-

-

(27)

(232)

(259)

Net

(96)

(1)

(97)

(10)

-

(107)

$

(669)

$

(776)

Accumulated balance as at June 30, 2020

$

198

$

(8)

$

190

$

84

$

12

$

286

Accumulated balance as at April 1, 2021

$

41

$

(5)

$

36

$

86

$

25

$

147

Other comprehensive income (loss)

Amount arising

$

(34)

$

73

39

$

(1)

$

2

1

40

(42)

(4)

(6)

$

139

$

133

Income taxes

$

(2)

$

14

12

$

-

$

-

-

12

-

(1)

11

36

47

Net

27

1

28

(42)

(3)

(17)

$

103

$

86

Accumulated balance as at June 30, 2021

$

68

$

(4)

$

64

$

44

$

22

$

130

SIX-MONTH

Accumulated balance as at January 1, 2020

$

66

$

(1)

$

65

$

42

$

12

$

119

Other comprehensive income (loss)

Amount arising

$

420

$

(230)

190

$

(10)

$

1

(9)

181

42

-

223

$

(475)

$

(252)

Income taxes

$

100

$

(42)

58

$

(2)

$

-

(2)

56

-

-

56

(122)

(66)

Net

132

(7)

125

42

-

167

$

(353)

$

(186)

Accumulated balance as at June 30, 2020

$

198

$

(8)

$

190

$

84

$

12

$

286

Accumulated balance as at January 1, 2021

$

(40)

$

(6)

$

(46)

$

155

$

26

$

135

Other comprehensive income (loss)

Amount arising

$

11

$

129

140

$

-

$

2

2

142

(111)

(5)

26

$

1,050

$

1,076

Income taxes

$

8

$

24

32

$

-

$

-

-

32

-

(1)

31

272

303

Net

108

2

110

(111)

(4)

(5)

$

778

$

773

Accumulated balance as at June 30, 2021

$

68

$

(4)

$

64

$

44

$

22

$

130

Attributable to:

Common Shares

$

149

Non-controlling interests

(19)

$

130

26|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

12 per 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 share unit awards.

The following table presents 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

Six months

Periods ended June 30 (millions)

2021

2020

2021

2020

Basic total weighted average number of Common Shares outstanding

1,355

1,278

1,327

1,263

Effect of dilutive securities - Restricted share units

4

2

4

1

Diluted total weighted average number of Common Shares outstanding

1,359

1,280

1,331

1,264

For the three-month and six-month periods ended June 30, 2021 and 2020, no outstanding equity-settled restricted share unit awards were excluded in the computation of diluted income per Common Share. For the three-month and six-month periods ended June 30, 2021 and 2020, less than 1 million outstanding TELUS Corporation share option awards were excluded in the calculation of diluted net income per Common Share.

13 dividends per share

(a) TELUS Corporation Common Share dividends declared

Six-month periods ended June 30 (millions except per share amounts)

2021

2020

TELUS Corporation

Declared

Paid to

Declared

Paid to

Common Share dividends

Effective

Per share

shareholders

Total

Effective

Per share

shareholders

Total

Quarter 1 dividend

Mar.11, 2021

$

0.3112

Apr. 1, 2021

$

404

Mar. 11, 2020

$

0.29125

Apr. 1, 2020

$

371

Quarter 2 dividend

Jun. 10, 2021

0.3162

Jul. 2, 2021

428

Jun. 10, 2020

0.29125

Jul. 2, 2020

372

$

0.6274

$

832

$

0.58250

$

743

On July 29, 2021, the Board of Directors declared a quarterly dividend of $0.3162 per share on our issued and outstanding TELUS Corporation Common Shares payable on October 1, 2021, to holders of record at the close of business on September 10, 2021. The final amount of the dividend payment depends upon the number of TELUS Corporation Common Shares issued and outstanding at the close of business on September 10, 2021.

(b) Dividend Reinvestment and Share Purchase Plan

We have a Dividend Reinvestment and Share Purchase Plan under which eligible holders of TELUS Corporation Common Shares may acquire additional TELUS Corporation Common Shares by reinvesting dividends and by making additional optional cash payments to the trustee. Under this plan, we have the option of offering TELUS Corporation Common Shares from Treasury or having the trustee acquire TELUS Corporation Common Shares in the stock market. We may, at our discretion, offer TELUS Corporation Common Shares at a discount of up to 5% from the market price under the plan. Effective with our dividends paid October 1, 2019, we offered TELUS Corporation Common Shares from Treasury at a discount of 2%. In respect of TELUS Corporation Common Shares held by eligible shareholders who have elected to participate in the plan, dividends declared during the three-month and six-month periods ended June 30, 2021, of $146 million (2020 - $131 million) and $289 million (2020 - $253 million), respectively, were to be reinvested in TELUS Corporation Common Shares.

June 30, 2021|27

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

14 share-based compensation

(a) Details of share-based compensation expense

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

Periods ended June 30 (millions)

2021

2020

Associated

Statement

Associated

Statement

Employee

operating

of cash

Employee

operating

of cash

benefits

cash

flows

benefits

cash

flows

Note

expense 1

outflows

adjustment

expense

outflows

adjustment

THREE-MONTH

Restricted share units

(b)

$

48

$

-

$

48

$

38

$

-

$

38

Employee share purchase plan

(c)

11

(11)

-

5

(5)

-

Share option awards

(d)

4

-

4

3

-

3

$

63

$

(11)

$

52

$

46

$

(5)

$

41

TELUS Technology Solutions

$

39

$

(11)

$

28

$

32

$

(5)

$

27

Digitally-led customer experiences

24

-

24

14

-

14

$

63

$

(11)

$

52

$

46

$

(5)

$

41

SIX-MONTH

Restricted share units

(b)

$

98

$

-

$

98

$

60

$

-

$

60

Employee share purchase plan

(c)

20

(20)

-

14

(14)

-

Share option awards

(d)

11

(22)

(11)

4

-

4

$

129

$

(42)

$

87

$

78

$

(14)

$

64

TELUS Technology Solutions

$

74

$

(20)

$

54

$

61

$

(14)

$

47

Digitally-led customer experiences

55

(22)

33

17

-

17

$

129

$

(42)

$

87

$

78

$

(14)

$

64

1 Within employee benefits expense (see Note 8), for the three-month period ended June 30, 2021, restricted share unit expense of $48and share option expense of $4is presented as share-based compensation expense and the balance is included in restructuring costs (see Note 16) of the Digitally-led customer experiences segment; for the six-month period ended June 30, 2021, restricted share unit expense of $93and share option expense of $10is presented as share-based compensation expense and the balance is included in restructuring costs of the Digitally-led customer experiences segment.

For the three-month and six-month periods ended June 30, 2020, the associated operating cash outflows in respect of restricted share units were net of cash inflows arising from cash-settled equity forward agreements of $1 million and $2 million; there were no cash-settled equity forward agreements outstanding during the three-month and six-month periods ended June 30, 2021. For the three-month and six-month periods ended June 30, 2021, the income tax benefits arising from share-based compensation were $17 million (2020 - $11 million) and $34 million (2020 - $19 million), respectively.

28|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

(b) Restricted share units

TELUS Corporation restricted share units

We also award restricted share units that largely have the same features as our general restricted share 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 TELUS Corporation 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 share units affected by the total customer connections performance condition equals the fair market value of the corresponding TELUS Corporation Common Shares at the grant date, and thus the notional subset has been included in the presentation of our restricted share units with only service conditions. The estimate, which reflects a variable payout, of the fair value of the notional subset of our restricted share units affected by the relative total shareholder return performance condition is determined using a Monte Carlo simulation. Grants of restricted share units in 2021 and 2020 are accounted for as equity-settled, as that was their expected manner of settlement when granted.

The following table presents a summary of outstanding TELUS Corporation non-vested restricted share units.

June 30,

December 31,

Number of non-vested restricted share units as at

2021

2020

Restricted share units without market performance conditions

Restricted share units with only service conditions

8,529,275

5,718,328

Notional subset affected by total customer connections performance condition

500,204

298,957

9,029,479

6,017,285

Restricted share units with market performance conditions

Notional subset affected by relative total shareholder return performance condition

1,500,613

896,870

10,530,092

6,914,155

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

Periods ended June 30, 2021

Three months

Six months

Weighted

Weighted

Number of restricted

average

Number of restricted

average

share units 1

grant-date

share units 1

grant-date

Non-vested

Vested

fair value

Non-vested

Vested

fair value

Outstanding, beginning of period

Non-vested

8,943,373

-

$

24.96

6,017,285

-

$

24.55

Vested

-

29,581

$

24.59

-

29,870

$

24.58

Granted

Initial award

73,674

-

$

26.79

2,984,181

-

$

25.83

In lieu of dividends

108,699

363

$

25.38

181,106

728

$

25.41

Vested

(14,055)

14,055

$

25.13

(24,004)

24,004

$

24.87

Settled in cash

-

(14,463)

$

24.88

-

(25,066)

$

24.70

Forfeited

(82,212)

-

$

24.79

(129,089)

-

$

24.77

Outstanding, end of period

Non-vested

9,029,479

-

$

24.98

9,029,479

-

$

24.98

Vested

-

29,536

$

24.60

-

29,536

$

24.60

1 Excluding the notional subset of restricted share units affected by the relative total shareholder return performance condition.

June 30, 2021|29

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

TELUS International (Cda) Inc. restricted share units

We also award restricted share units that largely have the same features as the TELUS Corporation restricted share 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. Grants of restricted share units in 2021 are accounted for as equity-settled, as that was their expected manner of settlement when granted.

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

Periods ended June 30, 2021

Three months

Six months

Number of restricted

Weighted

Number of restricted

Weighted

share units

average

share units

average

grant-date

grant-date

Non-vested

Vested

fair value

Non-vested

Vested

fair value

Outstanding, beginning of period

Non-vested

2,039,588

-

US$

13.55

1,383,642

-

US$

7.94

Granted - initial award

657,525

-

US$

29.17

1,327,817

-

US$

27.06

Vested

(365,150)

365,150

US$

6.18

(365,150)

365,150

US$

6.18

Forfeited

(9,766)

-

US$

8.47

(24,112)

-

US$

7.37

Outstanding, end of period

Non-vested

2,322,197

-

US$

17.39

2,322,197

-

US$

17.39

Vested

-

365,150

US$

6.18

-

365,150

US$

6.18

(c) TELUS Corporation employee share purchase plan

We have an employee share purchase plan under which eligible employees up to a certain job classification can purchase TELUS Corporation Common Shares through regular payroll deductions. In respect of TELUS Corporation Common Shares held within the employee share purchase plan, TELUS Corporation Common Share dividends declared during the three-month and six-month periods ended June 30, 2021, of $11 million (2020 - $9 million) and $21 million (2020 - $18 million), respectively, were to be reinvested in TELUS Corporation Common Shares acquired by the trustee from Treasury, with a discount applicable, as set out in Note 13(b).

(d) Share option awards

TELUS Corporation share options

Employees may be granted options to purchase TELUS Corporation Common Shares at an exercise price equal to the fair market value at the time of grant. Share option awards granted under the plan may be exercised over specific periods not to exceed seven years from the time of grant. Share option awards granted in fiscal 2021 and 2020 were for front-line employees.

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

30|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

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

Periods ended June 30, 2021

Three months

Six months

Number of

Weighted

Number of

Weighted

share

average share

share

average share

options

option price

options

option price 1

Outstanding, beginning of period

3,213,300

$

21.92

3,014,700

$

21.59

Granted

75,600

$

26.29

324,300

$

25.96

Forfeited

(79,700)

$

21.66

(129,800)

$

21.62

Outstanding, end of period

3,209,200

$

22.03

3,209,200

$

22.03

1 The weighted average remaining contractual life is 5.9 years. Nooptions were exercisable as at the balance sheet date.

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

Periods ended June 30, 2021

Three months

Six months

Share option award fair value (per share option)

$

0.95

$

0.93

Risk-free interest rate

0.80

%

0.79

%

Expected lives 1(years)

4.25

4.25

Expected volatility

12.6

%

12.5

%

Dividend yield

4.8

%

4.8

%

1 The maximum contractual term of the share option awards granted in 2021 was seven years.

TELUS International (Cda) Inc. share options

Employees may be granted equity share options (equity-settled) to purchase TELUS International (Cda) Inc. subordinate voting 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. subordinate voting 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.

Periods ended June 30, 2021

Three months

Six months

US$ denominated

Canadian $ denominated

US$ denominated

Canadian $ denominated

Weighted

Weighted

Number

average

Number

Share

Number

average

Number

Share

of share

share option

of share

option

of share

share option

of share

option

options

price

options

price

options

price 1

options

price

Outstanding, beginning of period

4,092,969

US$

9.59

-

$

-

3,922,056

US$

6.94

242,244

$

4.75

Granted

-

US$

-

-

$

-

579,949

US$

25.00

-

$

-

Exercised

-

US$

-

-

$

-

(409,036)

US$

6.06

(242,244)

$

4.75

Outstanding, end of period

4,092,969

US$

9.59

-

$

-

4,092,969

US$

9.59

-

$

-

Exercisable, end of period

2,858,387

US$

6.95

-

$

-

2,858,387

US$

6.95

-

$

-

1 For 3,513,020share options, the range of share option prices is US$4.87- US$8.95per TELUS International (Cda) Inc. equity share and the weighted average remaining contractual life is 6.3years; for the balance of share options, the price is US$25.00and the weighted average remaining contractual life is 9.6years.

June 30, 2021|31

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

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

Periods ended June 30, 2021

Six months

Share option award fair value (per share option)

US$

5.34

Risk-free interest rate

0.73

%

Expected lives 1(years)

6.5

Expected volatility 2

19.3

%

Dividend yield

NIL

%

1 The maximum contractual term of the share option awards granted in 2021 was ten years.
2 Estimated by taking the average historical price volatility of industry peers observed over a period equivalent to the expected term of the share options.

15 employee future benefits

(a) Defined benefit pension plans - details

Expense

Our defined benefit pension plan expense was as follows:

Three-month periods ended June 30 (millions)

2021

2020

Employee

Other

Employee

Other

benefits

Financing

comp.

benefits

Financing

comp.

expense

costs

income

expense

costs

income

Recognized in

(Note 8)

(Note 9)

(Note 11)

Total

(Note 8)

(Note 9)

(Note 11)

Total

Current service cost

$

26

$

-

$

-

$

26

$

23

$

-

$

-

$

23

Past service cost

3

-

-

3

-

-

-

-

Net interest; return on plan assets

Interest expense arising from defined benefit obligations accrued

-

65

-

65

-

74

-

74

Return, including interest income, on plan assets 1

-

(59)

(386)

(445)

-

(71)

(467)

(538)

Interest effect on asset ceiling limit

-

1

-

1

-

1

-

1

-

7

(386)

(379)

-

4

(467)

(463)

Administrative fees

1

-

-

1

2

-

-

2

Re-measurements arising from:

Financial assumptions

-

-

231

231

-

-

1,396

1,396

Changes in the effect of limiting net defined benefit assets to the asset ceiling

-

-

16

16

-

-

(28)

(28)

$

30

$

7

$

(139)

$

(102)

$

25

$

4

$

901

$

930

32|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

Six-month periods ended June 30 (millions)

2021

2020

Employee

Other

Employee

Other

benefits

Financing

comp.

benefits

Financing

comp.

expense

costs

income

expense

costs

income

Recognized in

(Note 8)

(Note 9)

(Note 11)

Total

(Note 8)

(Note 9)

(Note 11)

Total

Current service cost

$

51

$

-

$

-

$

51

$

46

$

-

$

-

$

46

Past service cost

3

-

-

3

3

-

-

3

Net interest; return on plan assets

Interest expense arising from defined benefit obligations accrued

-

130

-

130

-

148

-

148

Return, including interest income, on plan assets 1

-

(119)

(237)

(356)

-

(142)

(32)

(174)

Interest effect on asset ceiling limit

-

2

-

2

-

2

-

2

-

13

(237)

(224)

-

8

(32)

(24)

Administrative fees

2

-

-

2

3

-

-

3

Re-measurements arising from:

Financial assumptions

-

-

(864)

(864)

-

-

507

507

Changes in the effect of limiting net defined benefit assets to the asset ceiling

-

-

51

51

-

-

-

-

$

56

$

13

$

(1,050)

$

(981)

$

52

$

8

$

475

$

535

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

Six months

Periods ended June 30 (millions)

2021

2020

2021

2020

Union pension plan and public service pension plan contributions

$

6

$

5

$

10

$

10

Other defined contribution pension plans

22

20

40

36

$

28

$

25

$

50

$

46

16 restructuring 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 or post-acquisition business integration. In other costs, we include incremental atypical external costs incurred in connection with business acquisition or disposition activity; significant litigation costs in respect of losses or settlements; adverse retrospective regulatory decisions; and certain incremental atypical costs incurred in connection with the COVID-19 pandemic.

June 30, 2021|33

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

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 June 30 (millions)

2021

2020

2021

2020

2021

2020

THREE-MONTH

Goods and services purchased

$

14

$

43

$

8

$

17

$

22

$

60

Employee benefits expense

16

10

-

-

16

10

$

30

$

53

$

8

$

17

$

38

$

70

SIX-MONTH

Goods and services purchased

$

27

$

89

$

18

$

21

$

45

$

110

Employee benefits expense

34

20

-

-

34

20

$

61

$

109

$

18

$

21

$

79

$

130

(b) Restructuring provisions

Employee-related provisions and other provisions, as presented in Note 25, include amounts in respect of restructuring activities. In 2021, restructuring activities included ongoing and incremental efficiency initiatives, some of which involved 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 six-month periods ended June 30, 2021, incremental external costs were incurred in connection with business acquisition activity. In connection with business acquisitions, non-recurring atypical business integration expenditures that would be considered neither restructuring costs nor part of the fair value of the net assets acquired have been included in other costs.

Also during the three-month and six-month periods ended June 30, 2021, other costs were incurred in connection with the COVID-19 pandemic. Incremental costs were incurred due to proactive steps we elected to take to keep our customers and employees safe, including adjustments to the frequency of real estate cleaning and maintenance, among other items. As well, costs that have been incurred in the normal course but which are unable to contribute normally to the earning of revenues have been deemed atypical.

17 property, plant and equipment

Owned assets

Right-of-use lease assets(Note 19)

Buildings and

Computer

Network

leasehold

hardware

Assets under

Network

Real

(millions)

Note

assets

improvements

and other

Land

construction

Total

assets

estate

Other

Total

Total

AT COST

As at January 1, 2021

$

32,972

$

3,428

$

1,403

$

54

$

640

$

38,497

$

499

$

1,506

$

82

$

2,087

$

40,584

Additions

423

19

34

3

743

1,222

-

100

13

113

1,335

Additions arising from business acquisitions

18(b )

-

1

4

-

-

5

-

1

-

1

6

Dispositions, retirements and other

(307)

(10)

(41)

-

-

(358)

3

(14)

(9)

(20)

(378)

Assets under construction put into service

475

36

48

11

(570)

-

-

-

-

-

-

Net foreign exchange differences

(4)

(5)

(10)

-

(1)

(20)

-

(12)

-

(12)

(32)

As at June 30, 2021

$

33,559

$

3,469

$

1,438

$

68

$

812

$

39,346

$

502

$

1,581

$

86

$

2,169

$

41,515

ACCUMULATED DEPRECIATION

As at January 1, 2021

$

22,120

$

2,109

$

889

$

-

$

-

$

25,118

$

43

$

382

$

27

$

452

$

25,570

Depreciation 1

762

67

81

-

-

910

37

96

8

141

1,051

Dispositions, retirements and other

(308)

(7)

(79)

-

-

(394)

1

(5)

(4)

(8)

(402)

Net foreign exchange differences

(4)

(2)

(6)

-

-

(12)

-

(6)

-

(6)

(18)

As at June 30, 2021

$

22,570

$

2,167

$

885

$

-

$

-

$

25,622

$

81

$

467

$

31

$

579

$

26,201

NET BOOK VALUE

As at December 31, 2020

$

10,852

$

1,319

$

514

$

54

$

640

$

13,379

$

456

$

1,124

$

55

$

1,635

$

15,014

As at June 30, 2021

$

10,989

$

1,302

$

553

$

68

$

812

$

13,724

$

421

$

1,114

$

55

$

1,590

$

15,314

1 For the six- month period ended June 30, 2021, depreciation includes $10in respect of impairment of real estate right-of-use lease assets.

34|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

As at June 30, 2021, our contractual commitments for the acquisition of property, plant and equipment totalled $553 million over a period ending December 31, 2023 (December 31, 2020 - $235 million over a period ending December 31, 2022).

18 intangible assets and goodwill

(a) Intangible assets and goodwill, net

Intangible

assets with

Intangible assets subject to amortization

indefinite lives

Customer contracts,

Access to

Total

related customer

rights-of-way,

Assets

Total

intangible

relationships and

crowdsource assets

under

Spectrum

intangible

assets and

(millions)

Note

subscriber base

Software

and other

construction

Total

licences

assets

Goodwill 1,2

goodwill

AT COST

As at January 1, 2021

$

2,915

$

6,479

$

371

$

216

$

9,981

$

9,910

$

19,891

$

7,588

$

27,479

Additions

-

51

2

323

376

325

701

-

701

Additions arising from business acquisitions

(b)

11

56

7

-

74

-

74

56

130

Dispositions, retirements and other (including capitalized interest)

(32)

(449)

64

-

(417)

-

(417)

-

(417)

Assets under construction put into service

-

288

-

(288)

-

-

-

-

-

Net foreign exchange differences

(66)

(2)

(7)

(1)

(76)

-

(76)

(79)

(155)

As at June 30, 2021

$

2,828

$

6,423

$

437

$

250

$

9,938

$

10,235

$

20,173

$

7,565

$

27,738

ACCUMULATED AMORTIZATION

As at January 1, 2021

$

495

$

4,274

$

96

$

-

$

4,865

$

-

$

4,865

$

364

$

5,229

Amortization

153

364

14

-

531

-

531

-

531

Dispositions, retirements and other

(29)

(453)

28

-

(454)

-

(454)

-

(454)

Net foreign exchange differences

(8)

(1)

(1)

-

(10)

-

(10)

-

(10)

As at June 30, 2021

$

611

$

4,184

$

137

$

-

$

4,932

$

-

$

4,932

$

364

$

5,296

NET BOOK VALUE

As at December 31, 2020

$

2,420

$

2,205

$

275

$

216

$

5,116

$

9,910

$

15,026

$

7,224

$

22,250

As at June 30, 2021

$

2,217

$

2,239

$

300

$

250

$

5,006

$

10,235

$

15,241

$

7,201

$

22,442

1 The amount for goodwill arising from business acquisitions for the year ended December 31, 2020, has been adjusted as set out in (c).
2 Accumulated amortization of goodwill is amortization recorded prior to 2002; there are noaccumulated impairment losses in the accumulated amortization of goodwill.

As at June 30, 2021, our contractual commitments for the acquisition of intangible assets totalled $33 million over a period ending December 31, 2023 (December 31, 2020 - $56 million over a period ending December 31, 2024).

During the quarter ended March 31, 2021, for $249 million, we acquired 3500 MHz spectrum licences from the previous licensee; such transfer of licences has been approved by Innovation, Science and Economic Development Canada.

Also during the quarter ended March 31, 2021, we obtained the use of AWS-4 spectrum licences from the original licensee and have accounted for them as intangible assets with indefinite lives; such subordination of licences has been approved by Innovation, Science and Economic Development Canada. The terms of payment for the obtained spectrum licences are such that the amounts owed to the original licensee are accounted for as a long-term financial liability, as set out in Note 26(f).

During the quarter ended June 30, 2021, for $21 million, we obtained the use of 2500 MHz licences from the original licensee and have accounted for them as intangible assets with indefinite lives; such subordination of licences has been approved by Innovation, Science and Economic Development Canada.

Innovation, Science and Economic Development Canada's 3500 MHz band spectrum auction occurred during the period from June 15, 2021, through July 23, 2021. We were the successful auction participant on 142 spectrum licences for a total purchase price of approximately $1.95 billion. In accordance with the terms of the auction, 20% ($390 million) will be remitted to Innovation, Science and Economic Development Canada on, or before, August 13, 2021, while the remaining balance will be paid on, or before, October 4, 2021. Until such time as Innovation, Science and Economic Development Canada determines that we qualify as a radio communications carrier and comply with Canadian Ownership and Control rules, we may not commercially use the licences.

June 30, 2021|35

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

(b) Business acquisitions

Individually immaterial transactions

During the six-month period ended June 30, 2021, 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 the 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 amounts assigned to goodwill may be deductible for income tax purposes. Any differences between the results of operations currently presented and pro forma operating revenues, net income and basic and diluted net income per Common Share amounts reflecting the results of operations as if the business acquisitions had been completed at the beginning of the year are immaterial (as are the post-acquisition operating revenues and net income of the acquired businesses for the three-month and six-month periods ended June 30, 2021).

Acquisition-date fair values

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

Total of

individually

immaterial

(millions)

transactions 1

Assets

Current assets

Cash

$

2

Accounts receivable 2

2

Other

4

8

Non-current assets

Property, plant and equipment

Owned assets

5

Right-of-use lease assets

1

Intangible assets subject to amortization 3

74

Other

19

99

Total identifiable assets acquired

107

Liabilities

Current liabilities

Accounts payable and accrued liabilities

3

Advance billings and customer deposits

1

4

Non-current liabilities

Long-term debt

1

Deferred income taxes

10

11

Total liabilities assumed

15

Net identifiable assets acquired

92

Goodwill

56

Net assets acquired

$

148

Acquisition effected by way of:

Cash consideration

$

148

36|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

1 The purchase price allocation, primarily in respect of customer contracts, related customer relationships and leasehold interests and deferred income taxes, had not been finalized as of the date of issuance of these 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 books and records of the acquired businesses. Upon having sufficient time to review the books and records of the acquired businesses, we expect to finalize our purchase price allocations.
2 The fair value of accounts receivable is equal to the gross contractual amounts receivable and reflects the best estimates at the acquisition dates of the contractual cash flows expected to be collected.
3 Customer contracts and customer relationships (including those related to customer contracts) are generally expected to be amortized over a period of 8 years; software is expected to be amortized over periods of 5-7years; and other intangible assets are expected to be amortized over periods of 2-4years.

(c) Business acquisitions - prior period

In 2020, we acquired businesses that were complementary to our existing lines of business. As at December 31, 2020, purchase price allocations had not been finalized. During the three-month period ended March 31, 2021, the preliminary acquisition-date values for goodwill, accounts payable, provisions, deferred income tax liabilities and retained earnings were increased (decreased) by $(11 million), $6 million, $37 million, $(20 million), and $(34 million), respectively; as required by IFRS-IASB, comparative amounts have been adjusted so as to reflect those increases (decreases) effective the dates of acquisition.

19 leases

Maturity analyses of lease liabilities are set out in Note 4(b) and Note 26(h); the period interest expense in respect thereof is set out in Note 9. The additions to, the depreciation charges for, and the carrying amounts of, right-of-use lease assets are set out in Note 17. We have not currently elected to exclude low-value and short-term leases from lease accounting.

Three months

Six months

Periods ended June 30 (millions)

Note

2021

2020

2021

2020

Income from subleasing right-of-use lease assets

Co-location sublet revenue included in operating service revenues

$

4

$

5

$

12

$

9

Other sublet revenue included in other income

7

$

1

$

-

$

2

$

1

Lease payments

$

140

$

98

$

280

$

200

20 other long-term assets

June 30,

December 31,

As at (millions)

Note

2021

2020

Pension assets

$

639

$

13

Unbilled customer finance receivables

4(a)

428

361

Derivative assets

4(d)

70

40

Costs incurred to obtain or fulfill a contract with a customer

100

103

Real estate joint venture advances

21(b)

114

114

Investment in real estate joint venture

21(b)

1

1

Investment in associates

21

76

69

Portfolio investments 1

244

236

Prepaid maintenance

43

50

Other

192

119

$

1,907

$

1,106

1 Fair value measured at reporting date using significant other observable inputs (Level 2).

June 30, 2021|37

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

The costs incurred to obtain and fulfill contracts with customers are set out in the following table:

Period ended June 30, 2021 (millions)

Three months

Six months

Costs incurred to

Costs incurred to

Obtain

Obtain

contracts with

Fulfill contracts

contracts with

Fulfill contracts

customers

with customers

Total

customers

with customers

Total

Balance, beginning of period

$

317

$

10

$

327

$

323

$

11

$

334

Additions

64

-

64

125

1

126

Amortization

(67)

(1)

(68)

(134)

(3)

(137)

Balance, end of period

$

314

$

9

$

323

$

314

$

9

$

323

Current 1

$

218

$

5

$

223

Non-current

96

4

100

$

314

$

9

$

323

1 Presented in the Consolidated statements of financial position in prepaid expenses.

21 real estate joint ventures and investment in associate

(a) General

Real estate joint ventures

In 2013, we partnered, as equals, with two arm's-length parties in a residential, retail and commercial real estate redevelopment project, TELUS Sky, in Calgary, Alberta. The new-build tower, completed in 2020, was to be built to the LEED Platinum standard.

Associate

In 2020, we acquired a 28% basic equity interest in Miovision Technologies Incorporated, an associate that is complementary to, and is viewed to grow, our existing Internet of Things business; our judgment is that we obtained significant influence over the associate concurrent with obtaining the newly acquired equity interest.

38|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

(b) Real estate joint ventures

Summarized financial information

June 30,

December 31,

As at (millions)

2021

2020

ASSETS

Current assets

Cash and temporary investments, net

$

9

$

11

Other

25

18

34

29

Non-current assets

Investment property

335

332

Other

10

13

345

345

$

379

$

374

LIABILITIES AND OWNERS' EQUITY

Current liabilities

Accounts payable and accrued liabilities

$

12

$

21

Construction credit facilities

342

342

354

363

Owners' equity

TELUS 1

9

5

Other partners

16

6

25

11

$

379

$

374

1 The equity amounts recorded by the real estate joint venture 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

Six months

Periods ended June 30 (millions)

2021

2020

2021

2020

Revenue

$

3

$

-

$

5

$

-

Depreciation and amortization

$

3

$

-

$

4

$

-

Interest expense 1

$

1

$

-

$

1

$

-

Net income (loss) and comprehensive income (loss) 2

$

(3)

$

(31)

$

(10)

$

(33)

1 During the three-month and six-month periods ended June 30, 2020, the real estate joint venture capitalized $1and $4, respectively, of financing costs.
2 As the real estate joint ventures are partnerships, noprovision for income taxes of the partners is made in determining the real estate joint ventures' net incomeand comprehensive income.

June 30, 2021|39

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

Our real estate joint ventures activity

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

2021

2020

Loans and

Loans and

Three-month periods ended June 30 (millions)

receivables 1

Equity 2

Total

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)

$

-

$

(10)

$

(10)

Related to real estate joint ventures' statements
of financial position

Items not affecting currently reported cash flows

Construction credit facilities financing costs charged by us and other (Note 7)

1

-

1

1

-

1

Cash flows in the current reporting period

Construction credit facilities

Amounts advanced

-

-

-

3

-

3

Financing costs paid to us

(1)

-

(1)

(1)

-

(1)

Funds we advanced or contributed, excluding construction credit facilities

-

2

2

-

5

5

Net increase (decrease)

-

1

1

3

(5)

(2)

Real estate joint ventures carrying amounts

Balance, beginning of period

114

(7)

107

111

(10)

101

Valuation provision

-

(1)

(1)

-

6

6

Balance, end of period

$

114

$

(7)

$

107

$

114

$

(9)

$

105

2021

2020

Loans and

Loans and

Six-month periods ended June 30 (millions)

receivables 1

Equity 2

Total

receivables 1

Equity 2

Total

Related to real estate joint ventures' statements
of income and other comprehensive income

Comprehensive income (loss) attributable to us 3

$

-

$

(2)

$

(2)

$

-

$

(11)

$

(11)

Related to real estate joint ventures' statements
of financial position

Items not affecting currently reported cash flows

Construction credit facilities financing costs charged by us (Note 7)

2

-

2

2

-

2

Cash flows in the current reporting period

Construction credit facilities

Amounts advanced

-

-

-

10

-

10

Financing costs paid to us

(2)

-

(2)

(2)

-

(2)

Funds we advanced or contributed, excluding construction credit facilities

-

8

8

-

5

5

Funds repaid to us and earnings distributed

-

-

-

-

(1)

(1)

Net increase (decrease)

-

6

6

10

(7)

3

Real estate joint ventures carrying amounts

Balance, beginning of period

114

(11)

103

104

(2)

102

Valuation provision

-

(2)

(2)

-

-

-

Balance, end of period

$

114

$

(7)

$

107

$

114

$

(9)

$

105

40|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

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.
2 We account for our interests in the real estate joint ventures using the equity method of accounting. As at June 30, 2021, and December 31, 2020, we had recorded equity losses in excess of our recorded equity investment in respect of one of the real estate joint ventures; such resulting balance has been included in long-term liabilities (Note 27).
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.

We have entered into lease agreements with the TELUS Sky real estate joint venture; for lease accounting purposes, the first lease commenced during the three-month period ended June 30, 2019. During the three-month and six-month periods ended June 30, 2021, the TELUS Sky real estate joint venture recognized $2 million (2020 - $NIL) and $4 million (2020 - $NIL), respectively, of revenue from our office tenancy; of this amount, one-third was due to our economic interest in the real estate joint venture and two-thirds was due to our partners' economic interests in the real estate joint venture.

Construction credit facilities

The TELUS Sky real estate joint venture has a credit agreement, maturing August 31, 2021, with 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 credit agreement is expected to be extended in August 2021 for an amount equal to that currently advanced. 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.

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, 2020 - $500 million). The term of this revolving-period securitization agreement ends December 31, 2021, 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 a credit rating of at least BB (December 31, 2020 - BB) from DBRS Limited or the securitization trust may require the sale program to be wound down prior to the end of the term.

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. When we sell our trade receivables, we retain reserve accounts, which are retained interests in the securitized trade receivables, and servicing rights. As at June 30, 2021, we had sold to the trust (but continued to recognize) trade receivables of $138 million (December 31, 2020 - $123 million). Short-term borrowings of $100 million (December 31, 2020 - $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) is comprised of amounts drawn on our bilateral bank facilities.

June 30, 2021|41

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

23 accounts payable and accrued liabilities

June 30,

December 31,

As at (millions)

2021

2020

Accrued liabilities

$

1,283

$

1,251

Payroll and other employee-related liabilities

510

545

Restricted share units liability

49

18

1,842

1,814

Trade accounts payable

987

855

Interest payable

173

173

Indirect taxes payable and other 1

108

126

$

3,110

$

2,968

1 The opening balance of indirect taxes payable and other has been adjusted as set out in Note 18(c).

24 advance billings and customer deposits

June 30,

December 31,

As at (millions)

2021

2020

Advance billings

$

570

$

551

Deferred customer activation and connection fees

6

7

Customer deposits

26

34

Contract liabilities

602

592

Other

167

180

$

769

$

772

42|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

Contract liabilities represent our future performance obligations to customers in respect of services and/or equipment for which we have received consideration from the customer or for which an amount is due from the customer. Our contract liability balances, and the changes in those balances, are set out in the following table:

Three months

Six months

Periods ended June 30 (millions)

Note

2021

2020

2021

2020

Balance, beginning of period

$

821

$

824

$

806

$

801

Revenue deferred in previous period and recognized in current period

(618)

(593)

(593)

(577)

Net additions arising from operations

598

571

588

573

Additions arising from business acquisitions

1

-

1

5

Balance, end of period

$

802

$

802

$

802

$

802

Current

$

727

$

721

Non-current

27

Deferred revenues

66

70

Deferred customer activation and connection fees

9

11

$

802

$

802

Reconciliation of contract liabilities presented in the Consolidated statements of financial position - current

Gross contract liabilities

$

727

$

721

Reclassification to contract assets for contracts with contract liabilities less than contract assets

6(c)

(113)

(142)

Reclassification from contract assets for contracts with contract assets less than contract liabilities

6(c)

(12)

(9)

$

602

$

570

25 provisions

Written put

Asset

options and

retirement

Employee-

contingent

(millions)

obligation

related

consideration

Other

Total

As at April 1, 2021

$

664

$

38

$

203

$

124

$

1,029

Additions

-

19

8

7

34

Reversals

-

-

(2)

(1)

(3)

Uses

-

(10)

-

(25)

(35)

Interest effects

3

-

3

-

6

Effects of foreign exchange, net

-

-

-

-

-

As at June 30, 2021

$

667

$

47

$

212

$

105

$

1,031

As at January 1, 2021 1

$

661

$

42

$

202

$

129

$

1,034

Additions

-

34

8

25

67

Reversals

-

-

(2)

(3)

(5)

Uses

(1)

(29)

-

(45)

(75)

Interest effects

7

-

4

-

11

Effects of foreign exchange, net

-

-

-

(1)

(1)

As at June 30, 2021

$

667

$

47

$

212

$

105

$

1,031

Current

$

6

$

40

$

-

$

25

$

71

Non-current

661

7

212

80

960

As at June 30, 2021

$

667

$

47

$

212

$

105

$

1,031

June 30, 2021|43

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

1 The opening balance of written put options and contingent consideration has been adjusted as set out in Note 18(c).

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 16(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 and contingent consideration

In connection with certain business acquisitions we have established provisions for written put options in respect of non-controlling interests. Provisions for some written put options are determined based on the net present value of estimated future earnings results and all such provisions require us to make key economic assumptions about the future. Similarly, we have established provisions for contingent consideration. No cash outflows for the written put options are expected prior to their initial exercisability and no cash outflows for contingent consideration are expected prior to completion of the periods in which the contingent consideration can be earned.

Other

The provisions for other include: legal claims; non-employee-related restructuring activities; contract termination costs and onerous contracts related to business acquisitions; and costs incurred in connection with the COVID-19 pandemic. 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 contract termination costs and onerous contracts acquired.

44|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

26 long-term debt

(a) Details of long-term debt

June 30,

December 31,

As at (millions)

Note

2021

2020

Senior unsecured

TELUS Corporation senior notes

(b)

$

16,184

$

15,021

TELUS Corporation commercial paper

(c)

197

731

TELUS Communications Inc. debentures

448

622

Secured

TELUS International (Cda) Inc. credit facility

(e)

1,092

1,804

Other

(f)

317

273

18,238

18,451

Lease liabilities

(g)

1,694

1,837

Long-term debt

$

19,932

$

20,288

Current

$

1,913

$

1,432

Non-current

18,019

18,856

Long-term debt

$

19,932

$

20,288

(b) TELUS Corporation senior 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 that, 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.

Interest is payable semi-annually. The notes require us to make an offer to repurchase them 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.

June 30, 2021|45

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

At any time prior to the respective maturity dates set out in the table below, the notes are redeemable at our option, in whole at any time, or in part from time to time, on not fewer than 30 days' and not more than 60 days' prior notice. On or after the respective redemption present value spread cessation dates set out in the table below, the notes are redeemable at our option, in whole but not in part, on not fewer than 30 days' and not more than 60 days' prior notice, at redemption prices equal to 100% of the principal amounts thereof. In addition, accrued and unpaid interest, if any, will be paid to the date fixed for redemption.

Redemption present

Principal face amount

value spread

Effective

Outstanding at

Issue

interest

Originally

financial

Basis

Cessation

Series

Issued

Maturity

price

rate 1

issued

statement date

points 2

date

2.35%Notes, Series CT

March 2015

March 2022 3

$

997.31

2.39

%

$

1.0

billion

$

1.0

billion

35.5

Feb. 28, 2022

3.35%Notes, Series CJ

December 2012

March 2023

$

998.83

3.36

%

$

500

million

$

500

million

40

Dec. 15, 2022

3.35%Notes, Series CK

April 2013

April 2024

$

994.35

3.41

%

$

1.1

billion

$

1.1

billion

36

Jan.2, 2024

3.75%Notes, Series CQ

September 2014

January 2025

$

997.75

3.78

%

$

800

million

$

800

million

38.5

Oct. 17, 2024

3.75%Notes, Series CV

December 2015

March 2026

$

992.14

3.84

%

$

600

million

$

600

million

53.5

Dec. 10, 2025

2.75%Notes, Series CZ

July 2019

July 2026

$

998.73

2.77

%

$

800

million

$

800

million

33

May 8,2026

2.80%U.S. Dollar Notes 4

September 2016

February 2027

US$

991.89

2.89

%

US$

600

million

US$

600

million

20

Nov. 16, 2026

3.70%U.S. Dollar Notes 4

March 2017

September 2027

US$

998.95

3.71

%

US$

500

million

US$

500

million

20

June 15, 2027

2.35%Notes, Series CAC

May 2020

January 2028

$

997.25

2.39

%

$

600

million

$

600

million

48

Nov. 27, 2027

3.625%Notes, Series CX

March 2018

March 2028

$

989.49

3.75

%

$

600

million

$

600

million

37

Dec. 1, 2027

3.30%Notes, Series CY

April 2019

May 2029

$

991.75

3.40

%

$

1.0

billion

$

1.0

billion

43.5

Feb. 2, 2029

3.15%Notes, Series CAA

December 2019

February 2030

$

996.49

3.19

%

$

600

million

$

600

million

39.5

Nov. 19, 2029

2.05%Notes, Series CAD

October 2020

October 2030

$

997.93

2.07

%

$

500

million

$

500

million

38

July 7, 2030

2.85%Sustainability-Linked Notes, Series CAF

June 2021

November 2031

$

997.52

2.88

% 5

$

750

million

$

750

million

34

Aug. 13, 2031

4.40%Notes, Series CL

April 2013

April 2043

$

997.68

4.41

%

$

600

million

$

600

million

47

Oct. 1, 2042

5.15%Notes, Series CN

November 2013

November 2043

$

995.00

5.18

%

$

400

million

$

400

million

50

May 26, 2043

4.85%Notes, Series CP

Multiple 6

April 2044

$

987.91

6

4.93

% 6

$

500

million 6

$

900

million 6

46

Oct. 5, 2043

4.75%Notes, Series CR

September 2014

January 2045

$

992.91

4.80

%

$

400

million

$

400

million

51.5

July 17, 2044

4.40%Notes, Series CU

March 2015

January 2046

$

999.72

4.40

%

$

500

million

$

500

million

60.5

July 29,2045

4.70%Notes, Series CW

Multiple 7

March 2048

$

998.06

7

4.71

% 7

$

325

million 7

$

475

million 7

58.5

Sept. 6, 2047

4.60%U.S. Dollar Notes 4

June 2018

November 2048

US$

987.60

4.68

%

US$

750

million

US$

750

million

25

May 16, 2048

4.30%U.S. Dollar Notes 4

May 2019

June 2049

US$

990.48

4.36

%

US$

500

million

US$

500

million

25

Dec. 15, 2048

3.95%Notes, Series CAB

Multiple 8

February 2050

$

997.54

8

3.97

% 8

$

400

million 8

$

800

million 8

57.5

Aug. 16, 2049

4.10%Notes, Series CAE

April 2021

April 2051

$

994.70

4.13

%

$

500

million

$

500

million

53

Oct. 5, 2050

1 The effective interest rate is that which the notes would yield to an initial debt holder if held to maturity.
2 For Canadian dollar-denominated notes, 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 the redemption present value spread cessation date, or (ii) 100%of the principal amount thereof.

For U.S. dollar-denominated notes, 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.

3 On July 16, 2021, we exercised our right to early redeem, on August 17, 2021, all of our 2.35% Notes, Series CT. The long-term debt prepayment recorded in the three-month period ended September 30, 2021, is estimated to be approximately $10million before income taxes.
4 We have entered into foreign exchange derivatives (cross currency interest rate exchange agreements) that effectively converted the principal payments and interest obligations to Canadian dollar obligations as follows:

Canadian

Interest rate

dollar equivalent

Exchange

Series

fixed at

principal

rate

2.80% U.S. Dollar Notes

2.95

%

$

792 million

$

1.3205

3.70% U.S. Dollar Notes

3.41

%

$

667 million

$

1.3348

4.60% U.S. Dollar Notes

4.41

%

$

974 million

$

1.2985

4.30% U.S. Dollar Notes

4.27

%

$

672 million

$

1.3435

46|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

5 If we have not obtained a sustainability performance target verification assurance certificate for the fiscal year ended December 31, 2030, the note will bear interest at a rate of 3.85%for the period from November 14, 2030, through November 13, 2031. Similarly, if we redeem the notes and we have not obtained a sustainability performance target verification assurance certificate at the end of the fiscal year immediately preceding the date fixed for redemption, the interest accrued (if any) will be determined using a rate of 3.85%.
6 $500million of 4.85%Notes, Series CP were issued in April 2014 at an issue price of $998.74and an effective interest rate of 4.86%. This series of notes was reopened in December 2015 and a further $400million of notes were issued at an issue price of $974.38and an effective interest rate of 5.02%.
7 $325million of 4.70%Notes, Series CW were issued in March 2017 at an issue price of $990.65and an effective interest rate of 4.76%. This series of notes was reopened in February 2018 and a further $150million of notes were issued at an issue price of $1,014.11and an effective interest rate of 4.61%in March 2018.
8 $400million of 3.95%Notes, Series CAB were issued in December 2019 at an issue price of $991.54and an effective interest rate of 4.00%. This series of notes was reopened in May 2020 and a further $400million of notes were issued at an issue price of $1,003.53and an effective interest rate of 3.93%.

(c) TELUS Corporation commercial paper

TELUS Corporation has an unsecured commercial paper program, which is backstopped by our $2.75 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, 2020 - $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 June 30, 2021, we had $197 million (December 31, 2020 - $731 million) of commercial paper outstanding, all of which was denominated in U.S. dollars (US$159 million; December 31, 2020 - US$574 million), with an effective average interest rate of 0.31%, maturing through July 2021.

(d) TELUS Corporation credit facility

As at June 30, 2021, TELUS Corporation had an unsecured revolving $2.75 billion bank credit facility, expiring on April 6, 2026, (December 31, 2020 - $2.25 billion bank credit facility, expiring on May 31, 2023) with a syndicate of financial institutions, which is to be used for general corporate purposes, including the backstopping of commercial paper.

The TELUS Corporation credit facility bears interest at prime rate, U.S. Dollar Base Rate, a bankers' acceptance rate or London interbank offered rate (LIBOR) (as such terms are used or defined in the credit facility), plus applicable margins. The credit facility contains customary representations, warranties and covenants, including two financial quarter-end ratio tests. These tests are that our leverage ratio must not exceed 4.25:1.00 and our operating cash flow to interest expense ratio must not be less than 2.00:1.00, all as defined in the credit facility.

Continued access to the TELUS Corporation credit facility is not contingent upon TELUS Corporation maintaining a specific credit rating.

June 30,

December 31,

As at (millions)

2021

2020

Net available

$

2,553

$

1,519

Backstop of commercial paper

197

731

Gross available

$

2,750

$

2,250

June 30, 2021|47

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

We had $298 million of letters of credit outstanding as at June 30, 2021 (December 31, 2020 - $190 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. Further, we arranged $359 million of incremental letters of credit to allow us to participate in Innovation, Science and Economic Development Canada's 3500 MHz band spectrum auction that was held in June-July 2021, as further described in Note 18(a); such letters of credit will remain outstanding until such time as our final payment for any awarded spectrum licences has been made.

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

As at June 30, 2021, TELUS International (Cda) Inc. had a credit facility, secured by its assets, expiring on January 28, 2025, with a syndicate of financial institutions and, joined in 2020, by TELUS Corporation. The credit facility is comprised of US$620 million (TELUS Corporation as an approximately 7.5% lender) and US$230 million (TELUS Corporation as a 12.5% lender) revolving components and amortizing US$600 million (TELUS Corporation as 12.5% lender) and US$250 million term loan components. The credit facility is non-recourse to TELUS Corporation. The outstanding revolving components and term loancomponents had a weighted average interest rate of 2.10% as at June 30, 2021.

June 30, 2021

December 31, 2020

Revolving

Term loan

Revolving

Term loan

As at (millions)

components

components 1

Total

component

component

Total

Available

US$

696

US$

N/A

US$

696

US$

132

US$

N/A

US$

132

Outstanding

Due to other

135

756

891

653

775

1,428

Due to TELUS Corporation

19

73

92

65

75

140

US$

850

US$

829

US$

1,679

US$

850

US$

850

US$

1,700

1 We have entered into a receive-floating interest rate, pay-fixed interest rate exchange agreement that effectively converts our interest obligations on US$98of the debt to a fixed rate of 2.64%.

Relative to amounts owed to the syndicate of financial institutions, excluding TELUS Corporation, we have entered into foreign exchange derivatives (cross currency interest rate exchange agreements) that effectively convert an amortizing amount of US$394 of the principal payments, and associated interest obligations, to European euro obligations with an effective fixed interest rate of 0.65% and an effective fixed economic exchange rate of US$1.0932:€1.00. These have been accounted for as a net investment hedge in a foreign operation (see Note 4).

The TELUS International (Cda) Inc. 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 ratio tests. The TELUS International (Cda) Inc. quarter-end net debt to operating cash flow ratio must not exceed: 5.25:1.00 through fiscal 2021; 4.50:1.00 during fiscal 2022; and 3.75:1.00 subsequently. The quarter-end 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 components are 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 and December 22, 2022, for the US$250 million component, respectively.

(f) Other

Other liabilities bear interest at 3.34%, are secured by the associated AWS-4 spectrum licences and a real estate holding, and are subject to amortization schedules, which results in the principal being repaid over the periods to maturity, the last period ending March 31, 2035.

48|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

(g) Lease liabilities

Lease liabilities are subject to amortization schedules, which results in the principal being repaid over various periods, including reasonably expected renewals. The weighted average interest rate on lease liabilities was approximately 4.19% as at June 30, 2021.

(h) Long-term debt maturities

Anticipated requirements to meet long-term debt repayments, calculated for long-term debts owing as at June 30, 2021, are as follows:

Composite long-term debt

Other

denominated in

Canadian dollars

U.S. dollars

currencies

Long-term

Long-term

debt,

debt,

Currency swap agreement

Years ending December 31

excluding

Leases

excluding

Leases

amounts to be exchanged

Leases

(millions)

leases

(Note 19)

Total

leases

(Note 19)

(Receive) 1

Pay

Total

(Note 19)

Total

2021 (remainder of year)

$

8

$

198

$

206

$

221

$

14

$

(210)

$

216

$

241

$

22

$

469

2022

1,266

264

1,530

327

26

(28)

28

353

36

1,919

2023

532

142

674

33

22

(28)

28

55

30

759

2024

1,118

127

1,245

33

10

(28)

28

43

23

1,311

2025

1,019

102

1,121

688

8

(397)

431

730

14

1,865

2026-2030

4,809

284

5,093

1,363

12

(1,364)

1,459

1,470

32

6,595

Thereafter

5,438

296

5,734

1,549

-

(1,550)

1,646

1,645

17

7,396

Future cash outflows in respect of composite long-term debt principal repayments

14,190

1,413

15,603

4,214

92

(3,605)

3,836

4,537

174

20,314

Future cash outflows in respect of associated interest and like carrying costs 2

6,893

345

7,238

2,263

16

(2,211)

2,282

2,350

36

9,624

Undiscounted contractual maturities (Note4(b))

$

21,083

$

1,758

$

22,841

$

6,477

$

108

$

(5,816)

$

6,118

$

6,887

$

210

$

29,938

1 Where applicable, cash flows reflect foreign exchange rates as at June 30, 2021.
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 as at June 30, 2021.

27 other long-term liabilities

June 30,

December 31,

As at (millions)

Note

2021

2020

Contract liabilities

24

$

66

$

61

Other

4

5

Deferred revenues

70

66

Pension benefit liabilities

542

926

Other post-employment benefit liabilities

60

64

Restricted share unit liabilities

5

17

Derivative liabilities

4(d)

128

155

Investment in real estate joint ventures

21(b)

8

12

Other

24

15

837

1,255

Deferred customer activation and connection fees

24

9

10

$

846

$

1,265

June 30, 2021|49

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

28 owners' equity

(a) TELUS Corporation Common Share capital - general

Our authorized share capital is as follows:

June 30,

December 31,

As at

2021

2020

First Preferred Shares

1

billion

1

billion

Second Preferred Shares

1

billion

1

billion

Common Shares

4

billion

4

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 the 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.

During the three-month period ended March 31, 2021, we issued approximately 51 million Common Shares for gross proceeds of $1.3 billion.

As at June 30, 2021, approximately 8 million Common Shares were reserved for issuance from Treasury under a dividend reinvestment and share purchase plan (see Note 13(b)); approximately 24 million Common Shares were reserved for issuance from Treasury under a restricted share unit plan (see Note 14(b)); and approximately 90 million Common Shares were reserved for issuance from Treasury under a share option plan (see Note 14(d)).

(b) Purchase of TELUS Corporation 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. In June 2021, we received approval for a normal course issuer bid to purchase and cancel up to 16 million of our Common Shares (up to a maximum amount of $250 million) from June 4, 2021, to June 3, 2022.

(c) Subsidiary with significant non-controlling interest

Our TELUS International (Cda) Inc. subsidiary is incorporated under the Business Corporations Act (British Columbia) and has geographically dispersed operations with principal places of business in Asia, Central America, Europe and North America.

50|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

In February 2021, TELUS International (Cda) Inc. made an initial public offering of subordinate voting shares; both TELUS Corporation and a TELUS International (Cda) Inc. non-controlling shareholder individually also offered subordinate voting shares in conjunction with the initial public offering. Due to the voting rights associated with the remaining multiple voting shares held by TELUS Corporation, as at June 30, 2021, it retained a 67.0% voting and controlling interest and a 55.2% economic interest in TELUS International (Cda) Inc. subsequent to the public purchase of subordinate voting shares; as at December 31, 2020, TELUS Corporation held a 62.6% voting, controlling and economic interest. Changes in ownership interests of our TELUS International (Cda) Inc. subsidiary during the six-month period ended June 30, 2021, are set out in the following table.

Effect of initial public offering and secondary

offering on owners' equity recorded amounts

Net cash

Income

Six-month period ended June 30, 2021 (millions)

proceeds

taxes

Net

Other

Total

Initial public offering of subordinate voting shares by TELUS International (Cda) Inc

$

630

$

(10)

$

640

TELUS International (Cda) Inc. subordinate voting shares secondarily offered by TELUS Corporation

197

4

193

$

827

$

(6)

$

833

Contributed surplus

$

440

$

(8)

$

432

Non-controlling interests

393

(1)

392

$

833

$

(9)

$

824

Summarized financial information

Summarized financial information of our TELUS International (Cda) Inc. subsidiary is set out in the following table.

Three months

Six months

As at, or for the periods ended (millions) 1

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

December 31, 2020

Statement of financial position

Current assets

$

786

$

746

Non-current assets

$

3,836

$

4,055

Current liabilities

$

777

$

689

Non-current liabilities

$

1,837

$

2,696

Statement of income and other comprehensive income

Revenue and other income

$

658

$

611

$

1,297

$

1,077

Net income

$

19

$

71

$

24

$

78

Comprehensive income (loss)

$

(25)

$

45

$

(59)

$

85

1 As required by IFRS-IASB, this summarized financial information excludes inter-company eliminations.

June 30, 2021|51

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

29 contingent 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, 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 and, in some cases, other wireless carriers and telecommunications service providers.

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:

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' mobile 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 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. The Supreme Court of Canada granted us leave to appeal this decision and on April 4, 2019, granted our appeal and stayed the claims of business customers.

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 mobile services with us in the period from January 21, 1999, to April 2010. We have appealed the certification decision. 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. Subject to a number of conditions, including court approval, we have now settled both the British Columbia and the Alberta class actions.

52|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

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 since 2016.

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 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. On June 28, 2021, the Quebec Superior Court approved the discontinuance of this claim against TELUS. 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.

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 mobile customers, and by charging our mobile customers inflated rate plan prices and termination fees higher than those permitted under the Act. The claim was later amended to also seek compensation for amounts paid by class members to unlock their mobile devices. The authorization hearing was held on April 30 and May 1, 2019, and on July 15, 2019, the Quebec Superior Court dismissed the authorization application. The Plaintiff's appeal of this decision was dismissed by the Quebec Court of Appeal on July 23, 2021.

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.

30 related 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 Team.

June 30, 2021|53

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

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

Three months

Six months

Periods ended June 30 (millions)

2021

2020 1

2021

2020 1

Short-term benefits

$

5

$

3

$

8

$

6

Post-employment pension 2and other benefits

2

2

4

3

Share-based compensation 3

19

16

36

16

$

26

$

21

$

48

$

25

1 To reflect the expanded roles and responsibilities of Executive Team members who are not also Executive Leadership Team members, in fiscal 2021 we have expanded our definition of key management personnel so as to include all Executive Team members and we have applied such definition retrospectively.
2 Our Executive Team members are members of our Pension Plan for Management and Professional Employees of TELUS Corporationand certain other non-registered, non-contributory supplementary defined benefit pension plans.
3 We accrue an expense for the notional subset of our restricted share units with market performance conditions using a Monte Carlo simulation-determined fair value. Restricted share units with an equity settlement feature are accounted for as equity instruments. The expense for restricted share units that do not ultimately vest is reversed against the expense that was previously recorded in their respect.

As disclosed in Note 14, we made initial awards of share-based compensation in 2021 and 2020, 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 related expense will be recognized rateably over a period of years and thus only a portion of the 2021 and 2020 initial awards are included in the amounts in the table above.

Six-month periods ended June 30

2021

2020

Number of

Notional

Grant-date

Number of

Notional

Grant-date

($ in millions)

units

value 1

fair value 1

units

value 1

fair value 1

TELUS Corporation

Restricted share units

1,249,218

$

32

$

35

981,088

$

25

$

33

TELUS International (Cda) Inc.

Restricted share units

427,093

14

14

-

-

-

Share options

167,693

1

1

-

-

-

15

15

-

-

$

47

$

50

$

25

$

33

1 In respect of restricted share units, notional value is determined by multiplying the equity 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 14(b)). In respect of share options, fair values have been determined using an option pricing model. Noshare options were awarded to our key management personnel in fiscal 2020.

The amount recorded for liability-accounted restricted share unit and share options awards outstanding at June 30, 2021 was $13 million (December 31, 2020 - $10 million).

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, TELUS Corporation Common Shares or cash. Deferred share units entitle directors to a specified number of TELUS Corporation Common Shares. Deferred share units accounted for as liabilities were paid out when a director ceased to be a director, for any reason, at a time elected by the director in accordance with the Directors' Deferred Share Unit Plan; during the three-month period ended June 30, 2020, no amount was paid out. As at June 30, 2021 and December 31, 2020, no liability-accounted awards were outstanding.

54|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

During the three-month periods ended June 30, 2021 and 2020, key management personnel exercised no TELUS International (Cda) Inc. share options. During the six-month period ended June 30, 2021, key management personnel exercised 215,973 TELUS International (Cda) Inc. share options (2020 - NIL) which had an intrinsic value of $7 million (2020 - NIL) at the time of exercise, reflecting a weighted average price at the date of exercise of $39.58 (2020 - N/A).

Employment agreements with members of the Executive 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 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 six-month periods ended June 30, 2021, 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 (2020 - $1 million) and $4 million (2020 - $3 million), respectively.

(c) Transactions with real estate joint venture

During the three-month and six-month periods ended June 30, 2021 and 2020, we had transactions with the TELUS Sky real estate joint venture, which is a related party, as set out in Note 21. As at June 30, 2021, we had recorded lease liabilities of $88 million (December 31, 2020 - $76 million) in respect of our TELUS Sky lease and monthly cash payments are made in accordance with the lease agreement; one-third of those amounts is due to our economic interest in the real estate joint venture.

31 additional statement of cash flow information

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

Three months

Six months

Periods ended June 30 (millions)

Note

2021

2020

2021

2020

OPERATING ACTIVITIES

Net change in non-cash operating working capital

Accounts receivable

$

(61)

$

(1)

$

25

$

24

Inventories

58

33

44

102

Contract assets

8

114

27

199

Prepaid expenses

5

52

(123)

5

Accounts payable and accrued liabilities

134

210

31

90

Income and other taxes receivable and payable, net

(5)

67

(85)

145

Advance billings and customer deposits

(2)

1

(4)

16

Provisions

(14)

(72)

(2)

(117)

$

123

$

404

$

(87)

$

464

INVESTING ACTIVITIES

Cash payments for capital assets, excluding spectrum licences

Capital asset additions

Gross capital expenditures

Property, plant and equipment

17

$

(753)

$

(693)

$

(1,335)

$

(1,295)

Intangible assets subject to amortization

18

(214)

(174)

(376)

(324)

(967)

(867)

(1,711)

(1,619)

Additions arising from leases

17

55

110

113

192

Additions arising from non-monetary transactions

(1)

1

-

6

Capital expenditures

5

(913)

(756)

(1,598)

(1,421)

Other non-cash items included above

Change in associated non-cash investing working capital

142

62

77

(53)

$

(771)

$

(694)

$

(1,521)

$

(1,474)

June 30, 2021|55

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

(b) Changes in liabilities arising from financing activities

Statement of cash flows

Non-cash changes

Foreign

Redemptions,

exchange

Beginning

Issued or

repayments

movement

End of

(millions)

of period

received

or payments

(Note 4(e))

Other

period

THREE-MONTH PERIOD ENDED JUNE 30, 2020

Dividends payable to holders of Common Shares

$

371

$

-

$

(371)

$

-

$

372

$

372

Dividends reinvested in shares from Treasury

-

-

131

-

(131)

-

$

371

$

-

$

(240)

$

-

$

241

$

372

Short-term borrowings

$

100

$

-

$

-

$

-

$

-

$

100

Long-term debt

TELUS Corporation senior notes

$

14,763

$

1,000

$

(900)

$

(132)

$

(2)

$

14,729

TELUS Corporation commercial paper

459

-

(454)

(5)

-

-

TELUS Communications Inc. debentures

621

-

-

-

1

622

TELUS International (Cda) Inc. credit facility

1,285

-

(68)

(50)

-

1,167

Other

281

-

(3)

-

1

279

Lease liabilities

1,699

-

(81)

(6)

109

1,721

Derivatives used to manage currency risks arising from U.S. dollar-denominated long-term debt - liability (asset)

(655)

461

(434)

158

78

(392)

18,453

1,461

(1,940)

(35)

187

18,126

To eliminate effect of gross settlement of derivatives used to manage currency risks arising from U.S. dollar-denominated long-term debt

-

(461)

461

-

-

-

$

18,453

$

1,000

$

(1,479)

$

(35)

$

187

$

18,126

THREE-MONTH PERIOD ENDED JUNE 30, 2021

Dividends payable to holders of Common Shares

$

404

$

-

$

(404)

$

-

$

428

$

428

Dividends reinvested in shares from Treasury

-

-

153

-

(153)

-

$

404

$

-

$

(251)

$

-

$

275

$

428

Short-term borrowings

$

100

$

-

$

-

$

-

$

-

$

100

Long-term debt

TELUS Corporation senior notes

$

14,987

$

1,250

$

-

$

(42)

$

(11)

$

16,184

TELUS Corporation commercial paper

918

-

(700)

(21)

-

197

TELUS Communications Inc. debentures

622

-

(175)

-

1

448

TELUS International (Cda) Inc. credit facility

1,168

-

(60)

(13)

(3)

1,092

Other

320

-

(3)

-

-

317

Lease liabilities

1,757

-

(124)

(3)

64

1,694

Derivatives used to manage currency risk arising from U.S. dollar-denominated long-term debt - liability (asset)

61

707

(741)

68

(33)

62

19,833

1,957

(1,803)

(11)

18

19,994

To eliminate effect of gross settlement of derivatives used to manage currency risk arising from U.S. dollar-denominated long-term debt

-

(707)

707

-

-

-

$

19,833

$

1,250

$

(1,096)

$

(11)

$

18

$

19,994

56|June 30, 2021

Table of Contents

notes to condensed interim consolidated financial statements

(unaudited)

Statement of cash flows

Non-cash changes

Foreign

Redemptions,

exchange

Beginning

Issued or

repayments

movement

End of

(millions)

of period

received

or payments

(Note 4(e))

Other

period

SIX-MONTH PERIOD ENDED JUNE 30, 2020

Dividends payable to holders of Common Shares

$

352

$

-

$

(723)

$

-

$

743

$

372

Dividends reinvested in shares from Treasury

-

-

261

-

(261)

-

$

352

$

-

$

(462)

$

-

$

482

$

372

Short-term borrowings

$

100

$

200

$

(200)

$

-

$

-

$

100

Long-term debt

TELUS Corporation senior notes

$

14,479

$

1,000

$

(900)

$

150

$

-

$

14,729

TELUS Corporation commercial paper

1,015

612

(1,692)

65

-

-

TELUS Communications Inc. debentures

621

-

-

-

1

622

TELUS International (Cda) Inc. credit facility

431

765

(68)

45

(6)

1,167

Other

267

-

(191)

-

203

279

Lease liabilities

1,661

-

(165)

17

208

1,721

Derivatives used to manage currency risk arising from U.S. dollar-denominated long-term debt - liability (asset)

(37)

1,699

(1,650)