No matter what the condition of the wall behind your tub-and-shower unit, plan on tearing out everything right down to the studs. Combo units are often put up over drywall, greenboard and other materials that cannot be used with a tile shower. Disconnect the plumbing in the shower and remove any of the external pieces. Cut the unit up into manageable portions with a reciprocating saw, then pull it out. Tear out the walls behind the unit and any setting or leveling material that may have been installed beneath the tub as well.
Take steps to ensure your inner walls and studs are protected from any moisture that may infiltrate the tile and install a vapor barrier over them. While tile is impervious to moisture, cracks that form in the caulk or grout in the shower may let moisture through. If this moisture reaches the studs, it can cause swelling or warping of the wood, as well as mold or mildew problems. To protect them, staple plastic sheeting to the top of the shower stall and let it roll down the studs to the floor. Follow the recommendations of the shower pan's manufacturer to determine if a vapor barrier is necessary here as well.
Shower Pan and Backerboard
Install the shower pan and drain in the floor of the new shower. You have several options for a tile shower, including an acrylic pan, a ready-to-tile pan or a custom-built copper pan. Once it is installed, screw cement backerboard sheets directly to the studs to get the walls of the shower ready to receive tile. Backerboard will not swell or disintegrate with moisture, making it the ideal material for shower walls. Leave a 1/8-inch gap between the sheets, as well as between the bottom of the sheets and the shower pan. Screw the sheets to the studs every 6 inches, sinking the screwheads slightly below the surface. Apply fiberglass tape to the seams between the sheets and cover the tape with a thin coat of mortar to seal them.
If you've chosen to tile the floor of your shower as well, plan on using tiles measuring 2 inches or smaller in size to accommodate the pitch of the pan to the drain; wall tile can be any size. Tile the shower floor first, beginning in the back, center of the pan and moving out evenly to each side. Set the tiles using a portland cement-based mortar suitable for the type of tile you are using. Tile the shower walls at least 24 hours after the pan, beginning with the bottom center of the back wall of the shower, then the two side walls moving toward the opening. Allow the mortar to cure for 24 hours before grouting the tile and installing the exterior plumbing.