Manitoba Telecom Services Inc., including its two primary operating subsidiaries, MTS Inc. and Allstream Inc., today released fourth-quarter and full-year results. MTS Allstream met 2012 financial guidance on all metrics and its 2013 financial guidance demonstrates continued progress.



  • MTS Allstream:
    • Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) up 2.5 per cent to $609.5-million;
    • Earnings per share (EPS) up 3.1 per cent to $2.63;
    • Annual cost reduction target reached, with $33.6-million in cost savings;
    • Prefinanced $70-million into MTS pension plan;
    • Board of directors declares first quarter 2013 cash dividend of 42.5 cents per share.
  • MTS:
    • Wireless data revenues up 29.7 per cent;
    • Wireless data average revenue per user (ARPU) up 28.9 per cent;
    • Internet protocol television (IPTV) revenues up 11.2 per cent;
    • IPTV ARPU up 7.3 per cent;
    • High-speed Internet revenues up 8.4 per cent;
    • High-speed Internet ARPU up 8 per cent.
  • Allstream:
    • Ninth consecutive quarter of year-over-year EBITDA growth;
    • Increased EBITDA margin to 15.2 per cent;
    • Best-ever quarter for Internet protocol (IP) sales wins, including $55-million contract to provide IP services to Shared Services Canada.
  • Outlook:
    • Continued strength at MTS and Allstream;
    • Significant increase in free cash flow expected from EBITDA growth and lower capital expenditures.


"MTS Allstream continued to advance its strategy and market position in 2012 by launching the first and only 4G long-term evolution (LTE) wireless network in Manitoba, extending Allstream's national fibre network to another 335 buildings and achieving our annual cost reduction target for the eighth consecutive year," said Pierre Blouin, chief executive officer. "We are proud of what we have accomplished and the value we are creating for shareholders. With increasing EBITDA and EPS, nine quarters in a row of profitability improvement at Allstream, and several strategic projects completed, we expect to deliver continued performance gains and increased free cash flow in 2013."

MTS Allstream -- annual results

MTS Allstream's increased profits and 2012 performance are the result of diligent execution and investments the company has made in recent years in MTS's wireless and broadband networks in Manitoba, as well as Allstream's converged Internet protocol network nationally.


                      CONSOLIDATED FINANCIAL RESULTS             (in millions of dollars, except per-share amounts)                                  2012 results       2012 outlook 2011 resultsRevenues                              $1,704.1   $1,675 to $1,775     $1,765.6EBITDA                                   609.5         590 to 630        594.4EPS                                       2.63       2.20 to 2.65         2.55Free cash flow                           117.6         110 to 150        129.8Capital expenditures/revenues            19.8%         18% to 20%        16.3%



  • Revenues: $1,704,100,000, down 3.5 per cent in 2012, mostly due to legacy revenue declines, including $33.3-million in planned legacy reductions at Allstream, partly offset by strong revenues from most strategic lines of business. Excluding declines from legacy lines of business, revenue increased by 2.2 per cent over 2011 on the strength of increased revenues across most strategic lines of business;
  • EBITDA: $609.5-million, up 2.5 per cent in 2012 due to improving margins, particularly at Allstream, which achieved a $62.4-million decrease in direct costs and an $11.9-million decrease in operating expenses;
  • EPS: $2.63, up 3.1 per cent in 2012, mostly attributable to EBITDA growth and lower income tax expense;
  • Free cash flow: $117.6-million, down 9.4 per cent in 2012, mainly due to higher capital expenditures for strategic 2012 investments, partly offset by EBITDA growth and lower pension financing;
  • Capital expenditures: $338-million, up 17.4 per cent in 2012, mostly due to the company's investment in LTE wireless technology and the favourable one-time $20.7-million impact of the scientific research and experimental development investment tax credit recorded in 2011;
  • Annual cost savings: $33.6-million, marking the eighth consecutive year in which the company achieved its annual cost-savings target;


MTS -- annual results

MTS produced EBITDA growth of 1.1 per cent, while maintaining a leading EBITDA margin of 50.5 per cent in 2012. Wireless data, high-speed Internet and IPTV services generated strong revenue growth, which offset declines in local, long-distance and legacy data revenues. In 2012, MTS increased the number of customers with bundled services by 8.5 per cent to 96,503, and had ARPU growth in all strategic product lines.

Wireless services:


  • Wireless revenues: $362.1-million, up 1.6 per cent, driven by a 1.2-per-cent increase in year-to-date blended wireless ARPU, partly offset by a decline in wholesale wireless revenues;
  • Wireless data revenues: $116.3-million, up 29.7 per cent, driven by a 28.9-per-cent increase in wireless data ARPU;
  • Handset expansion: iPhone 5 on Sept. 28, 2012, Sony Xperia T on Nov. 23, 2012, and Samsung Galaxy S III on Dec. 13, 2012;
  • First to launch LTE technology in Winnipeg and Brandon, on Aug. 28, 2012;
  • 4G LTE/HSPA+ coverage: Over 97 per cent of Manitoba's population is expected to drive continued strong demand for wireless data services.


Internet and IPTV services


  • Internet revenues: $110.1-million, up 8.4 per cent, due to a growing subscriber base and higher ARPU;
  • IPTV revenues: $78.5-million, up 11.2 per cent, driven by increased ARPU and subscriber growth;
  • In 2012, MTS deployed MTS fibre to the home (FTTH) in four more communities; IPTV service is now available to 95 per cent of Winnipeg households, to 98 per cent of Brandon households, to 94 per cent of Portage La Prairie households and to a growing number of homes in nine other communities;
  • 77 per cent of IPTV customers subscribe to the higher-ARPU Ultimate TV service, up from 64 per cent in 2011.


Unified communications, security and monitoring:


  • Unified communications revenues: $23.9-million, up 5.3 per cent, due to increased equipment sales;
  • Security and monitoring revenues: $12.3-million, in line with the prior year.


Local access, legacy data and long distance services:


  • Local access revenues: $266.5-million, down 3.9 per cent, mainly due to price changes on features and to line losses from wireless substitution and some local competition;
  • Long-distance revenues: $44.4-million, down 11.4 per cent, mainly due to customers replacing long-distance calling with e-mail, text messaging and social networking;
  • Legacy data revenues: $31.7-million, down 6.8 per cent, mainly due to a decrease in wholesale data services.


Allstream -- annual results

Allstream's performance in 2012 demonstrated continued progress on its strategic objective to drive growth in on-Net, IP-based services and improve profitability, as demonstrated by nine consecutive quarters of year-over-year EBITDA growth and a $6.8-million increase in EBITDA as compared with 2011. Allstream revenue for the year reflected a 1.6-per-cent increase in high-margin, on-Net IP revenues, which was offset by legacy revenue declines. The continuing focus on on-Net services improved gross margins to 59.5 per cent in 2012 and, along with diligent cost management, contributed to strong overall EBITDA growth.

Converged IP:


  • Converged IP revenues: $243.6-million, up 1.6 per cent;
  • Allstream's converged IP revenue growth continues to be partially offset by an increase in disconnects related to a decision by a government of Ontario department to change its procurement policy on telecommunications services for individual doctors' offices and clinics. Excluding the impact of this contract, converged IP revenues would have grown 6.5 per cent in 2012;
  • Converged IP gross margins: 73.5 per cent, up from 71.3 per cent in 2011;
  • 335 buildings added to national IP fibre network -- totalling 2,723 fibre-fed buildings at Dec. 31, 2012, for an increase of 14 per cent over 2011;
  • IP sales for the year were up 15.8 per cent over the prior year, with significant contract wins with Shared Services Canada and Loblaw Companies Ltd.


Unified communications, hosting and security:


  • Unified communications, hosting and security revenues: $78.3-million, down 9.7 per cent, due to decreases in one-time product sales and management's shift away from stand-alone, low-margin security product sales, partly offset by a 5.1-per-cent increase in hosting revenue.


Legacy services:


  • Local access revenues: $179.7-million, down 8.6 per cent, due to Allstream's decision to accelerate its exit of low-margin wholesale resold business lines;
  • Long-distance revenues: $91.8-million, down 14 per cent, mainly due to decreased volumes and lower rates;
  • Legacy data revenues: $94.2-million, down 9.6 per cent, reflecting customers' continued transition to broadband and other IP-based services.


Corporate update

The strategic review process announced on Sept. 13, 2012, is continuing as the board of directors approves a particular course of action or otherwise determines that further disclosure is appropriate or required. There is no assurance or expectation that any changes will be made as a result of this process.

Pension financing

As the strategic review in continuing, the company prefinanced $70-million into the MTS pension plan from short-term debt. Allstream pension solvency requirements will continue to be financed from letters of credit. As a result, the company expects no further impact on free cash flow in 2013.


The company's board of directors declared a quarterly cash dividend of 42.5 cents per share for the first quarter of 2013, payable on April 15, 2013, to shareholders of record at the close of business on March 15, 2013.

2013 outlook

MTS Allstream's 2013 financial guidance reflects continued improvement on its strategic objectives. MTS Allstream expects to deliver significant increases in free cash flow and growth across the company's strategic product lines in 2013. The company's financial guidance for 2013 is shown in the relevant table.


                       2013 FINANCIAL OUTLOOK         (in millions of dollars, except per-share amounts)                                       2013 outlook  2012 adjusted resultsRevenues                           $1,630 to $1,730               $1,704.1EBITDA                                   590 to 630                  585.1EPS                                    1.75 to 2.15                   2.19Capital expenditures/revenues            17% to 19%                  19.8%Free cash flow                           160 to 200                  117.6


MTS Allstream expects consolidated revenues in 2013 to be slightly lower than 2012, as revenue growth from strategic services such as wireless, broadband and converged IP will not fully offset the expected and planned reductions in legacy services.

EBITDA growth in 2013 will come from a combinaton of cost savings achieved during the prior year and gross margin improvement. The company plans additional cost reductions in 2013 in the range of $30-million to $40-million, having achieved $33.6-million in cost savings in 2012.

MTS Allstream is anticipating 2013 EPS to be lower than that in 2012, as the favourable impact of EBITDA improvements will be more than offset by higher fixed-asset amortization. For comparison purposes, 2012 EPS included 15 cents for a non-cash tax-rate adjustment. When normalized for this tax impact and the effect of IAS 19 changes, 2012 EPS would have been $2.04.

Total capital spending is expected to be lower in 2013 compared with 2012 due to the completion of several significant capital projects, such as the 4G LTE wireless network launch and improvements to billing systems. The company's 2013 capital program includes FTTH deployment to three more Manitoba communities and Allstream's success-based IP fibre expansion nationally.

The expected significant increase in 2013 free cash flow over the prior year can be attributed to planned EBITDA increases and lower capital expenditures as noted above.

A discussion of the material risks and assumptions associated with this outlook can be found in the company's 2012 annual management's discussion and analysis.

Investor day and 2013 outlook event

MTS Allstream will hold an investor day and 2013 outlook event for the investment community on Feb. 14, 2013, at 8 a.m. (Eastern Time) in Toronto, in lieu of a quarterly results conference call. Investors, media and the public are invited to participate on a listen-only basis by dialling 1-888-231-8191 or 1-647-427-7450. A replay will be available until midnight (Eastern Time) on Feb. 28, 2013, and can be accessed by dialling 1-855-859-2056 and entering access code No. 85365835.

There will also be a live audio webcast of the presentation, available on MTS Allstream's website.

A replay of the audio webcast will be available following the event on the company website for a period of one year.

Fourth-quarter financial information

MTS Allstream -- fourth-quarter results


      CONSOLIDATED FINANCIAL RESULTS         (in millions of dollars,         except per-share amounts)                                                                                             Q4 2012   Q4 2011 Revenues                     $413.1    $439.4   EBITDA                        150.3     146.9     EPS                        55 cents  56 centsFree cash flow                 37.1      18.3   Capital expenditures           73.6      84.6  


Allstream -- fourth-quarter results

New customers to be connected to Allstream's 30,000-kilometre IP fibre network include: Artifex Studios Ltd., Ceratec, Dialogic Corp., Ehvert Engineering, Gree Canada Inc., Influitive Corp., Keller Williams VIP Realty, Kernaghan Adjusters Ltd., Novarex Canada Inc., Pulse Energy Inc. and The Suburban.

Adjusting for the impact of the government of Ontario contract reduction, converged IP revenues would have grown 4.9 per cent over the fourth quarter of 2011.

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