Independent proxy advisory firm ISS recommends shareholders vote for TELUS' share exchange proposal

Independent proxy advisory firm ISS recommends shareholders vote for TELUS' 
share exchange proposal 
ISS concludes that "'support for this proposal is warranted for both classes'" 
of TELUS shareholders 
VANCOUVER, Oct. 1, 2012 /CNW/ - Institutional Shareholder Services Inc. (ISS), 
a leading independent global proxy advisory services firm, is recommending 
that shareholders vote in favour of TELUS' proposal to exchange its non-voting 
shares into common shares on a one-for-one basis. ISS is an independent proxy 
advisory firm relied upon by institutional investors for advice regarding 
significant shareholder votes. 
ISS stated, "This proposal represents another meaningful step forward in the 
company's governance regime, in resuscitating the principle that voting rights 
should be commensurate with economic interest…As the proposed transaction 
continues to align voting rights with economic interest, offers shareholders 
meaningful economic opportunity through increased trading liquidity and a dual 
listing on the NYSE, and has been ratified by a strong market response - and 
as the company's Articles effectively preclude any exchange ratio other than 
the proposed one-for-one exchange - a vote FOR the proposal is warranted." 
"This recommendation from a trusted neutral expert on corporate governance and 
proxy voting confirms that TELUS' proposal is fair and beneficial to all 
shareholders, and is consistent with the principles of good corporate 
governance and shareholder democracy," said Darren Entwistle, TELUS President 
and CEO. "We ask all of our shareholders to support our proposal, casting 
their votes for good governance and the value-creating benefits fostered by 
collapsing our share structure into one class of shares." 
Both ISS and Glass Lewis & Co., the other major global leading governance and 
proxy advisory services firm, recommended twice before (in initial and updated 
reports) in favour of a similar proposal TELUS put forward earlier this year. 
Prior to withdrawing its previous proposal, TELUS had the overwhelming support 
of its shareholders - excluding Mason, 92.4 per cent of total shares received 
were in favour of the proposal. This latest recommendation from ISS represents 
the third time it has supported TELUS' objective to move to a single class of 
outstanding shares via a one-for-one exchange ratio. 
ISS: "Beyond the current market prices, moreover, are the additional economic 
opportunities which may have helped fuel the market performance since 
announcement but cannot yet be fully realized in the market price: increased 
trading liquidity of a single, larger class of common shares; the additional 
market opportunity from a listing on the NYSE; and the elimination of any 
lingering investor uncertainty associated with a more complicated capital 
structure. Finally, there is the benefit of moving to one-vote-per-share, 
which tightly aligns economic interest with voting interest and control." 
TELUS has called a meeting on October 17 where all TELUS shareholders are 
being given a vote on the company's proposal to exchange non-voting shares 
into common shares on a one-for-one basis. 
TELUS issues letter encouraging shareholders to vote for the share exchange 
proposal 
TELUS sets the record straight on Mason's dissident tactics and empty voting 
Earlier today, TELUS sent a letter (below) to shareholders asking for their 
support in voting for its proposal to exchange non-voting shares for common 
shares on a one-for-one basis. 
This letter was sent in order to correct misinformation and self-interested 
advice sent to shareholders earlier this week by New York hedge fund Mason 
Capital in a dissident information circular. 
"Mason Capital's dissident circular contains an extensive amount of skewed and 
self-serving information that we feel compelled to correct," said Mr. 
Entwistle. "Their document appears to be just the latest in a series of 
attempts to create confusion and uncertainty in hopes of driving apart the 
price of our share classes so that Mason can profit from their empty voting 
strategy, a strategy which was strongly criticized in a recent Supreme Court 
of B.C. decision that said, 'The practice of empty voting presents a challenge 
to shareholder democracy… When a party has a vote in a company but no 
economic interest in that company, that party's interests may not lie in the 
well-being of the company itself. The interests of such an empty voter and the 
other shareholders are no longer aligned and the premise underlying the 
shareholder vote is subverted.' Justice Savage went on to say, 'only Mason 
stands to profit' if the price spread between common shares and non-voting 
shares increases and 'only Mason is indifferent to the overall value of TELUS 
itself.' Moreover, the highly respected U.S. law firm Wachtell, Lipton, Rosen 
& Katz - ranked the Most Prestigious Law Firm to Work For in the USA by the 
Avery Index - stated its support for the Court's decision, saying Mason's 
empty voting tactics are 'deeply pernicious'." 
After TELUS announced its initial conversion proposal earlier this year, Mason 
quietly amassed approximately 19 per cent of the company's common voting 
shares, but also borrowed and sold short non-voting and common shares so that 
they are left with a relatively minor economic interest in the company - a 
discredited practice called empty voting. Mason is trying to defeat TELUS' 
share exchange proposal and increase the difference in the trading price 
between TELUS' common and non-voting shares so that Mason can profit from its 
short/long hedging trades. 
According to Mason's latest disclosure, as of August 31 it has only a 70,900 
net share ownership stake in TELUS, a 0.02 per cent position, once its short 
position is subtracted from the shares they own. Mason shorted 14.7 million 
common shares and 18.0 million non-voting shares, while owning 32.8 million 
common shares. 
Notably, Mason did not disclose its current holdings to TELUS shareholders in 
its September 24 dissident circular so the current extent of their hedge 
position is not known. 
The Shareholder letter: 
Dear Fellow TELUS Shareholder, 
We are writing to ask you to please vote FOR TELUS' share exchange proposal. 
We put this proposal forward to address concerns our shareholders have 
expressed about the adverse impact of our dual class share structure on 
liquidity and trading volumes. We believe our proposal addresses these 
concerns and is beneficial and fair to holders of both common and non-voting 
shares. 
TELUS' proposal provides significant benefits for all shareholders 
If approved, our proposal would provide these benefits: 


    --  Increased liquidity and marketability of TELUS' common shares
        for the benefit of all shareholders -Today, TELUS has
        approximately 175 million common shares and 151 million
        non-voting shares. Approving the proposal would result in one
        much larger common share class of approximately 326 million
        shares being available for trading, which makes our shares
        potentially more attractive to larger institutional investors.
        In addition, there would be an 85 per cent increase in the
        amount of TELUS common shares available to be purchased by
        non-Canadian investors and the common shares would be more
        marketable as they would be listed on the New York Stock
        Exchange for the first time.
    --  Increased value to both classes of shares - The value of our
        common and non-voting shares immediately jumped in value on the
        initial announcement of our share conversion proposal last
        February and since then have appreciated to levels beyond that
        of the overall market index and TELUS' peers. The shares are up
        11 per cent and 14 per cent respectively for the period
        February 21, 2012 (the date we first announced our intent to
        combine our share classes) through to the end of September,
        despite the Toronto Stock Exchange index being down by more
        than two per cent during this same period.
    --  A capital structure aligned with best practice - Moving to a
        single class of issued and outstanding common shares would
        align TELUS' capital structure with what is generally viewed as
        best practice where all shares have one vote each.
    --  Fairness - Granting the right to vote to the holders of
        non-voting shares would enhance TELUS' leadership in respect of
        good corporate governance practices. Holders of our non-voting
        shares already have the same economic interest (such as the
        same dividend rights) as the holders of our common shares.
    --  A "one share - one vote" principle is strongly endorsed by the
        Canadian Coalition for Good Governance.
    --  Scotia Capital's fairness opinion concluded that the
        one-for-one-exchange ratio is fair, from a financial point of
        view, to common and non-voting shareholders, respectively.

Independent leading proxy advisory firm, ISS, recommends both classes of 
shareholders vote FOR this proposal

Institutional Shareholder Services Inc. (ISS), a leading independent global 
proxy advisory services firm, has stated, "As the proposed transaction 
continues to align voting rights with economic interest, offers shareholders 
meaningful economic opportunity through increased trading liquidity and a dual 
listing on the NYSE, and has been ratified by a strong market response - and 
as the company's Articles effectively preclude any exchange ratio other than 
the proposed one-for-one exchange - a vote FOR the proposal is warranted."

Living up to the promise we made to you

In May, we withdrew a similar proposal (which also provided for a one-for-one 
ratio), after Mason Capital, a New York-based hedge fund, put in place a 
trading strategy that was contrary to the interests of TELUS shareholders.

Mason's net economic interest in our company is only 70,900 shares, 
representing just 0.02 per cent of our total shares outstanding, yet it 
controls approximately 19 per cent of the votes associated with our common 
shares.

Our previous proposal had the overwhelming support of our shareholders - 
excluding Mason, 92.4 per cent of total shares received were in favour of the 
proposal. It also received the endorsement of the two leading independent 
proxy advisory firms that institutional investors rely on for advice: ISS and 
Glass Lewis. However, it was clear that given Mason's actions and its large 
voting position (despite having a minor economic investment in TELUS), our 
proposal would not have passed if it had gone to a vote in May. This is 
because only 67 per cent of common shareholders cast votes, which makes it so 
important that as many as possible vote FOR our proposal to overcome Mason's 
large position.

When we withdrew our previous proposal, we committed to reintroducing a 
similar proposal in due course on the same one-for-one ratio so as to preserve 
its value-enhancing shareholder benefits. This was our promise to you - a 
promise we fulfilled when we introduced our share exchange proposal on August 
21.

Mason is once again actively seeking to defeat our proposal because, if the 
proposal is defeated, and the trading price of the non-voting shares decreases 
more than the trading price of the common shares, Mason would then profit from 
the increased difference between the two share prices.

In other words, Mason does not realize a profit by promoting long-term share 
value appreciation. This is in stark contrast to shareholders like you whose 
interest is in seeing TELUS shares appreciate in value.

Independent third-party corporate governance advisor ISS said, "If 
announcement of the transaction itself increased the company's market value 
higher, voting down the transaction should logically result in the loss of 
some or all of that incremental market value."

Supreme Court of B.C. and highly respected U.S. law firm strongly criticize 
Mason's empty voting tactics

As the Supreme Court of British Columbia recently observed in connection with 
Mason's efforts to disrupt our share exchange proposal, "only Mason stands to 
profit" if the price spread between common shares and non-voting shares 
increases and "only Mason is indifferent to the overall value of TELUS 
itself." Indeed, the highly respected New York-based law firm Wachtell, 
Lipton, Rosen & Katz - ranked the Most Prestigious Law Firm to Work For in the 
USA by the Avery Index - stated its support for the court's decision, saying 
Mason's empty voting tactics are "deeply pernicious" and asking the U.S. 
Securities and Exchange Commission "to undertake comprehensive regulatory 
reform to address the ongoing abuse" of investment arrangements by parties 
like Mason.

Our proposal, which was thoroughly and objectively analyzed, is fair to 
holders of each class of shares

In an effort to ensure our proposal would be in TELUS' best interests and 
would be fair to the holders of common shares and non-voting shares, 
respectively, TELUS' Board of Directors put in place a process that was 
consistent with the best standards of corporate governance. The Board's 
process included, among others, the following steps:
    --  Formation of a Special Committee of the Board composed of
        independent directors to consider the proposal.
    --  Direction to this Committee to follow a thorough process
        consistent with the highest governance standards.
    --  Obtaining extensive expert financial and legal advice to assist
        in the decision-making process.
    --  Obtaining a fairness opinion from independent financial
        advisors, Scotia Capital, that stated, in their view, the
        one-to-one exchange ratio is fair from a financial point of
        view to holders of shares of each class, respectively.
    --  Structuring the transaction such that the proposal requires the
        approval of all shareholders - a simple majority of the common
        shares and at least two-thirds of the non-voting shares voted
        at the meetings - and court approval.
    --  It is important to note that since our share exchange proposal
        only affects the legal rights of non-voting shareholders (and
        does not affect the legal rights of common shareholders) and
        does not involve amendments to our Articles, approval of the
        common shareholders is not legally required. However, given
        TELUS desires to act consistent with good governance practices,
        we decided to provide for common shareholder approval at 50 per
        cent plus one vote and, in this fashion, ensure that both
        classes of shareholders are consulted. ISS supports this
        approach, saying, "an affirmative vote from a majority of
        shareholders is usually considered sufficient evidence of a
        clear shareholder mandate."

The Special Committee carefully considered a range of different possible 
exchange ratios and concluded a one-for-one ratio was the most appropriate for 
a number of reasons, including:
    --  The common shares and non-voting shares have the same economic
        rights, such as the right to any dividends, or distributions or
        a share of proceeds on any winding up of TELUS.
    --  Our corporate Articles provide for a one-for-one conversion
        ratio in two circumstances: the elimination of foreign
        ownership restrictions and in a takeover bid. In a takeover
        bid, a "coat-tail" provision for non-voting shares ensures that
        any premium to be paid to voting shares also goes to the
        non-voting shares.
    --  We had proposed a one-for-one exchange ratio in 2006 in
        connection with our planned conversion into an income trust, as
        recommended by the financial advisor we had retained. As you
        may recall, this proposal did not proceed (despite widespread
        shareholder support) after the federal government announced a
        change in tax policy.

Given the Articles and our history, it should be expected that an exchange 
would eventually occur on a one-for-one basis. Indeed, the fact our Articles 
provide for a one-to-one conversion right of non-voting shares into common 
shares in the event of the elimination of foreign ownership restrictions was 
central to ISS' determination that "support for this proposal is warranted for 
both classes" of TELUS shareholders.

TELUS engages soliciting dealer group

Scotia Capital, the Special Committee and the Board were well aware that a 
central issue was the fairness of the transaction to holders of common shares 
and carefully considered this matter. It is disingenuous of Mason to suggest 
that Scotia Capital was incapable of being objective about what is fair to 
holders of both classes of shares as Canadian dual-class share collapse 
transactions have never involved a separate fairness opinion from a different 
bank for each class of shares.

Similarly, it is disingenuous of Mason to suggest that our Special Committee 
should have been comprised of members of our Board who were not in some way 
exposed to the performance of TELUS' non-voting shares. Most directors of 
leading Canadian companies - including TELUS - are expected to have direct or 
indirect exposure to the performance of the shares of their company in order 
to align their interests with those of the company and its shareholders. It 
would therefore have been impossible to set up a Special Committee with 
directors who were not in some way exposed to the performance of our 
non-voting shares as every member is either directly or indirectly exposed.

The fact a TELUS Director has direct or indirect exposure to the performance 
of TELUS' non-voting shares should only be of concern if that interest is 
sufficiently material that the Director would be susceptible to having that 
interest influence their decision in a manner that might prevent them from 
putting TELUS' interests ahead of their own. The level of economic exposure to 
the non-voting shares that members of TELUS' Board and the Special Committee 
have is fully disclosed in our public disclosure and does not constitute a 
material interest.

In the case of Darren Entwistle, TELUS' President and CEO (who was not on the 
Special Committee and who has the largest investment in TELUS of all Board 
members), common shares make up 59 per cent of his total TELUS share ownership 
and he has received the entirety of his after-tax salary in the form of common 
shares since the beginning of 2010.

In fact, when it comes to claims about conflicts of interest, it bears 
repeating that Mason has little substantial net economic interest in TELUS' 
shares and stands to profit handsomely through its shorting and hedge trading 
strategy if it defeats the proposal, devalues our shares and widens the spread 
between the two share classes. Mason's claims about a conflict of interest are 
without merit and designed solely to advance its objective of profiting 
through the destruction of shareholder value.

Mason relies on an analysis that does not provide a formal opinion of fairness

Mason relies heavily on selective data that Blackstone has assembled in order 
to try and support its position. However, as Blackstone states in their 
disclaimer notice, neither their analysis or results of their services "shall 
constitute an opinion, valuation, or recommendation with respect to any 
proposed or potential conversion transaction or conversion ratio, and neither 
may be relied upon as an opinion, valuation, or recommendation by Mason or any 
third party."In comparison, Scotia Capital has provided a formal "opinion" 
as to the fairness of the exchange ratio. Notably, Blackstone may receive an 
additional fee from Mason contingent on the outcome of the TELUS share 
exchange: in other words, it stands to make even more money from its analysis 
if TELUS' proposal is defeated. By comparison, TELUS paid Scotia Capital a 
fixed fee for its advice and opinion and none of that fee was dependent on 
whether the proposal was adopted or not.

The Blackstone analysis fundamentally relies on the idea that there is a loss 
of value to common shareholders, despite the initial and sustained positive 
market reaction by both share classes, above those experienced by TELUS' 
industry peers, as a result of TELUS' initial proposal announcement. The 
Blackstone analysis also does not consider the fact that TELUS is widely held 
and does not have a controlling shareholder and that therefore this is not a 
situation where it is desirable or necessary to pay a premium in order to 
return control of the company to its shareholders.In selecting its list of 
precedents to consider, Blackstone omits a number of the more relevant 
Canadian precedents, in favour of U.S. precedents. As noted by Scotia Capital, 
most Canadian dual-class share collapse precedents have been done at a 
one-for-one ratio, and since 2000 in all 13 instances where such companies had 
coat-tail provisions (like TELUS does) a one-for-one ratio was used.Even 
disregarding the more relevant Canadian precedents, 18 of the 25 transactions 
on Blackstone's own list were done at a one-for-one basis.

We need to hear your voice - please vote now FOR our proposal

Moving to a single class of issued and outstanding shares is in the long-term 
best interests of holders of common shares and holders of non-voting shares. 
We urge you not to let the short-term trading strategies of an opportunistic 
hedge fund such as Mason frustrate a proposal that is in the best interests of 
TELUS and shareholders who have a real economic interest in TELUS. The 
exchange proposal is responsive to feedback from those shareholders and is 
aimed at aligning TELUS' capital structure with what is generally viewed as 
best practice.

As the proposal requires the support of a simple majority of the votes cast by 
the holders of common shares at the general meeting of TELUS and two-thirds of 
the votes cast by the holders of non-voting shares at the class meeting of 
holders of non-voting shares, each voting separately as a class, your vote is 
extremely important. Please vote FOR our proposal. Call our proxy solicitation 
agent Laurel Hill toll free at 1-877-304-0211 to make sure your vote is 
received before the proxy deadline.

Please see the enclosed voting information insert. Note that despite Mason's 
incorrect comments to the contrary, if you sign and date your proxy but do not 
indicate how you want to vote, your shares will be voted in favour of the 
proposal only if you appoint as proxyholder the nominees set out in the proxy 
approved by the Supreme Court of B.C.

We firmly believe this proposal is fair and beneficial to all shareholders, is 
widely supported by shareholders with a true economic stake in our company, 
and is consistent with the principles of good corporate governance. TELUS has 
been the top-performing incumbent telco in the world when it comes to 
producing total shareholder return (price appreciation and dividends), by 
achieving a 180 per cent return since 2000. We have outperformed our next 
closest peer over this time by 47 per cent. Thank you for your continued 
support, and we ask that you please vote FOR, as every vote matters.

Yours sincerely,

"Signed"

Brian Canfield
Chair, TELUS Board of Directors

"Signed"

Darren Entwistle
President and CEO, TELUS

More information about the proposal is set out in TELUS' August 30, 2012 
Information Circular, which is available at www.sedar.com and at 
www.telus.com/investors. Please be aware this letter contains statements about 
expected future events of TELUS that are forward-looking and subject to 
certain risks and uncertainties, including those described in the 
"Forward-Looking Statements" section of TELUS' August 30, 2012 Information 
Circular. You should also be aware that permission was not requested to quote 
from the ISS Report.

TELUS follows standard practice and engages soliciting dealer group

In addition, TELUS is forming a soliciting dealer group and engaging CIBC as a 
soliciting dealer manager in connection with the share exchange meeting.

CIBC will form and manage a soliciting dealer group comprised of members of 
the Investment Industry Regulatory Organization of Canada to solicit proxy 
votes from retail common shareholders in favour of the proposed share exchange.

In accordance with standard practice in Canada and as compensation for their 
time and services, TELUS will pay the members of the soliciting dealer group a 
fee of $0.10 per TELUS common share voted in favour of the proposed share 
exchange that is solicited by a member of the soliciting dealer group from a 
Canadian retail common shareholder. The fees are subject to: (a) the amount 
paid for any single beneficial common shareholder holder shall not be less 
than $50 or more than $1,500 per soliciting dealer; and (b) the minimum fee of 
$50 shall only be paid for any one beneficial shareholder where the number of 
common shares owned and voted by such beneficial common shareholder is greater 
than or equal to 200. Fees will only be paid for common shares voted in favour 
of the share exchange and if the exchange is approved. No solicitation fees 
will be paid if the arrangement resolution is not adopted.

Forward looking statement:
This news release contains statements about expected future events of TELUS 
that are forward-looking. By their nature, forward-looking statements require 
the Company to make assumptions and predictions and are subject to inherent 
risks and uncertainties. There can be no assurance that the share exchange 
proposal will receive the necessary voting approval and, if not approved, the 
market price of non-voting shares and/or common shares may decline given that 
share prices in both classes increased on the announcement of the February 
proposal. In addition, there can be no assurance that the pending or new court 
proceedings will find in favour of the October 17 meeting proceeding as 
planned, the final court order in respect of the Arrangement will be granted 
and that the associated benefits for TELUS shareholders will be realized. 
There is significant risk that the forward-looking statements will not prove 
to be accurate. Readers are cautioned not to place undue reliance on 
forward-looking statements as a number of factors could cause actual future 
events to differ materially from that expressed in the forward-looking 
statements. Except as required by law, TELUS disclaims any intention or 
obligation to update or revise forward-looking statements. Permission was not 
requested to quote from the ISS report.

About TELUS
TELUS (TSX: T, T.A; NYSE: TU) is a leading national telecommunications company 
in Canada, with $10.6 billion of annual revenue and 12.8million customer 
connections including 7.4million wireless subscribers, 3.5million wireline 
network access lines, 1.3million Internet subscribers and 595,000 TELUS TV 
customers. Led since 2000 by President and CEO, Darren Entwistle, TELUS 
provides a wide range of communications products and services including 
wireless, data, Internet protocol (IP), voice, television, entertainment and 
video.

In support of our philosophy to give where we live, TELUS, our team members 
and retirees have contributed more than $260million to charitable and 
not-for-profit organizations and volunteered 4.2million hours of service to 
local communities since 2000. Fourteen TELUS Community Boards lead TELUS' 
local philanthropic initiatives. TELUS was honoured to be named the most 
outstanding philanthropic corporation globally for 2010 by the Association of 
Fundraising Professionals, becoming the first Canadian company to receive this 
prestigious international recognition.

For more information about TELUS, please visit telus.com.
    Media relations: Shawn Hall (604) 697-8176 shawn.hall@telus.com

Investor relations: Darrell Rae (604) 697-8192 ir@telus.com

SOURCE: TELUS Corporation

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