Ready For Recovery
Pierre Blouin, CEO
Rendez-vous Financier – Les Affaires
October 29, 2009
Proud recipient of awards from:
2008 Business Innovation
2008 Competitive Strategy Leadership
2008 Partner of the Year
premierPARTNER
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Safe Harbour Notice
This presentation and associated commentary may contain certain forwardlooking information. Material factors or assumptions would have been applied
in drawing conclusions or making a forecast or projection reflected in such
forward information. Actual results may differ materially from a conclusion,
forecast or projection in any such forward-looking information, and may be
subject to significant risks. Additional information about Manitoba Telecom
Services Inc. (MTS) can be found in MTS’s filings with the Canadian securities
regulatory authorities. Except as required by law, MTS disclaims any intention
or obligation to update or revise any such forward-looking statements, whether
as a result of new information, future events or otherwise.
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Who We Are
MTS Allstream
Fourth-largest telecommunications company in
Canada
TSX:MBT
6,000 employees – one of Canada’s Top Employers
30,000-kilometre national network
Annual revenue of $1.9 billion in 2008
1.9 million customer connections*
Assets: $2.7 billion*
Consumer Markets division (MTS)
Enterprise Solutions division (Allstream)
#1 in all telecom products in
Manitoba
Coast-to-coast national IP network
footprint
Most profitable provider in
Canadian telecom industry
One of 3 telecom solutions providers
with Bell and Telus in Canadian business
markets
* As of June 30, 2009.
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History of MTS Allstream
1846
Montreal & Toronto Magnetic Telegraph Company founded
1908
Manitoba Government creates “Manitoba Government Telephones”
1992
Unitel Communications breaks 112-year monopoly in public
long distance voice communications
1996
Unitel changes its name to AT&T Canada Long Distance Services
1997
Manitoba Telecom Services Inc. debuts on the Toronto Stock
Exchange (TSX) under the trading symbol of MBT – January 7
2003
AT&T Canada is rebranded Allstream
2004
Manitoba Telecom Services completes acquisition of Allstream for
$1.7 billion
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Over 100 Years Of Innovation
1908
Manitoba Government Telephones established
1917
First city in Canada to receive all-dial service – Brandon (MB)
1926
First major city in North America to receive all-dial service – Winnipeg
1956
North America’s first use of the three-digit emergency phone number –
Winnipeg
1968
First Canadian city to have touch-tone service – Brandon
1988
World’s first dedicated fax network
1999
Canada’s first Multiprotocol Label Switching Internet protocol virtual
private network (“MPLS IP-VPN”)
2003
Launch of MTS TV in Manitoba
2009
Launch of MTS Ultimate (HD) TV and Canada’s first Whole Home
PVR - Winnipeg
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Foundation: Our Customers
Serving for over 100 years
Total customer connections
in first half 2009
1,953,871
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A Unique Player in the Marketplace
Regional in size with national reach
Focused on the customer
Proven innovator
Nimble competitor
Consumer Markets division
Enterprise Solutions division
Wireless
Converged IP
High-speed Internet
Unified Communications
Digital TV
Voice and data connectivity
Wireline voice
Professional and IT Services
Home security
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Our Products
Innovative Solutions
Consumer Markets division
Deepest pervasive fibre deployment in North America
Best distribution channels
Richest bundling capabilities
Operates under the MTS brand in Manitoba
Market-leader in Manitoba:
TV 34% (Greater Winnipeg)
High-speed Internet 60%
Home Phone 84%
Wireless 60%
Full-service provider with strong customer relationships
Pervasive infrastructure and brand recognition
As of June 30, 2009.
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Wireless: Unmatched Footprint in Manitoba
97% of Manitoba population
covered with service
72% of Manitoba population
covered with EVDO data
technology
HSPA data network to be
completed with similar
footprint by early 2011
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Broadband
Close to 100% coverage of
Winnipeg
85% of Manitoba homes
covered
179 communities served
32 Mbps – fastest speed of
any telco in Canada
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Most Advanced TV Experience in Canada
MTS Ultimate TV
Most advanced TV experience in
Canada – ahead of Bell and Telus
Unique Whole Home PVR
HDTV
First to deploy
Microsoft “Mediaroom”
Three simultaneous HDTV signals
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Alliances with Rogers Communications and
Sprint Nextel
Shared HSPA network
deployment represents best
opportunity for long-term value
creation
Parties to split network deployment
and operating costs
Efficient upgrade path to LTE
HSPA creates potential to further
grow data ARPU
• Enables MTS to offer larger
selection of CDMA handsets to
Manitoba customers on a more
cost-effective basis
• Access to Sprint’s data applications
• Strengthens MTS’s wireless market
leadership in Manitoba while HSPA is
deployed
Strengthening leading market offering through alliances
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Enterprise Solutions division
Operating under the Allstream brand
State-of-the art national infrastructure
Strong portfolio of innovative IP
services
Main competitor in business markets
across Canada
Allstream created through the gradual amalgamation of CNCP,
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Unitel, MetroNet, Netcom, Montage and AT&T Canada
Converged IP – Strong Growth
Customized streamlined networks
High bandwidth service
IP now one of the largest
Allstream product lines, including:
Secure Connect
Wavelength
Virtual Workplace
Revolutionizing communications for Canadian businesses
Reducing our customers’ environmental footprint
Enabling customers to compete, with our Unified
Communications solutions
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Solid Enterprise Customer Base
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Allstream Wireless Opportunity
Able to offer customers unique
wireline/wireless bundles not previously
seen in Canadian enterprise market
More choice for Canadian business
Positioned to leverage wireline/wireless
convergence
Allstream well-positioned to sell wireless products:
Already has enterprise wireless business
applications
National sales force
Rogers roaming partner on the best Canadian and
international networks
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Transition to
Growth Services
Wireless, Broadband, Converged IP, TV
Continued Momentum on Growth Services
Strategy
Highest wireless subscriber growth in
Canada*
1st half/09 Growth
Subscriber Growth
Wireless, high-speed Internet and
digital TV revenues climbed 8.8%
through 1st half/09
Revenue Growth
10%
10%
9%
7%
Continuing to focus on engaging
customers in multiple service
relationship
4%
4%
1st half/09 bundled customer growth
up 5%
Digital TV
Internet
Wireless
*Based on company information to June 30, 2009 for Rogers Communications, Bell Canada, Telus Communications Company, and MTS
Allstream.
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First Half 2009 Growth Services Revenues
Converged IP
11.9%
Digital Television
7.3%
Wireless
9.9%
High-speed Internet
10.2%
47% of total revenues
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Growth Revenue Transition
Maintaining Steady EBITDA Margins
Consumer division
51% 52%
52%
Enterprise division
MTS Allstream
52%
34% 34%
2006
2007
2008 Q2/09
40%
24%
23%
2006
2007
34%
34%
22% 20%
2008
44%
Q2/09
2006
2007
2008
Q2/09
47%
Revenue
Growth
Legacy
2007
2008
Q2 2 0 0 9
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All figures from continuing operations.
Our Environmental Commitment
Wireless devices diverted from
the landfill
Played a key role in helping One
Million Acts of Green reach its
goal
Eliminated 550 tonnes of
greenhouse gas emissions in
2008 alone through teleworking
program
Placed oxo-biodegradable bags in
retail shops
We are committed to reducing our impact on the environment,
and to helping our customers, employees,
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and stakeholders do the same
Foundation: Our Employees
Hardworking and dedicated employees
are one of our greatest assets
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Financial Profile
Stable Industry with Growth Potential
The telecom industry has continued to grow revenues in the face of a recession,
with an expected CAGR of 2.8% from 2007 to 2011
Growth of 3.2% and 2.8% is expected in 2010 and 2011, respectively
Telecom Industry Total Revenue ($ millions)
$42,229
2007A
$43,889
$44,418
2008A
2009E
BCE
Rogers
Source: Public disclosures and CIBC Research estimates.
Telus
$45,839
2010E
Bell Aliant
$47,113
2011E
MTS
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Strong Free Cash Flow and Healthy Balance
Sheets
The free cash flow CAGR from 2007 to 2011 is estimated to be 6.5%
Telecom companies have kept healthy balance sheets, with all the companies
currently around 1.5x – 2.0x leverage
Telecom Industry Total Free Cash Flow1 ($ millions)
$5,961
2007A
$6,721
$6,400
2008A
BCE
2009E
Rogers
Telus
Bell Aliant
$7,102
$7,666
2010E
2011E
MTS
Telecom Industry Current Leverage (Net Debt / LTM EBITDA)
2.1x
Rogers
2.1x
Bell Aliant
1.7x
1.6x
TELUS
Telus
MTS
1.5x
BCE
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Source: Public disclosures and CIBC Research estimates.
Note: As of October 26, 2009.
1 Free cash flow calculated as EBITDA less capital expenditures, cash taxes and interest expense. Does not include pension funding and one-time charges.
Recession Proof
Telco stocks have held up nicely in light of the recent recession
LTM Relative Share Price Performance
120
Index (100 = August 1, 2008)
110
100
Canadian Telco Index (11.1%)
90
S&P 500 Index (14.2%)
80
S&P / TSX Index (16.8%)
70
60
50
40
Aug-08
Sep-08
Oct-08
Dec-08
Jan-09
Mar-09
Apr-09
Jun-09
Jul-09
Aug-09
Oct-09
Source: Bloomberg Financial Markets.
Note: As of October 26, 2009. Telco Index excludes BCE since its performance was impacted by the failed LBO process.
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First Half 2009 Financial Results*
Revenue - $947.2 million
EBITDA - $322.5 million
Free Cash Flow - $128.6 million
EPS - $1.38
* From Continuing Operations as of June 30, 2009.
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Share Price Returns
Total Return of $100 Investment
Manitoba Telecom share
price outperforming most
peers over recent years
$100 invested in MBT
shares on January 6, 1997
would have been worth
$440.11 as of September
30, 2009
MTS
S&P/TSX Comp
$100 $129 $166 $186 $340 $313 $329 $418 $484 $422 $513 $537 $495
$100 $115 $115 $149 $160 $140 $122 $155 $178 $221 $259 $284 $195
Jan
6/97
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
31/97 31/98 31/99 31/00 31/01 31/02 31/03 31/04 31/05 31/06 31/07 31/08
You would have earned a compound annual return of 12.3% over
this time
Current dividend yield one of the highest on the TSX
$2.5B returned to shareholders since 1997
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Manitoba Telecom Share Price vs. Peers
Share Price Performance June 30, 2008 - October 23, 2009
MTS
Telus
BCE
-19.7%
S&P/TSX
Comp
S&P/TSX
Telecom
-21.3%
-22.9%
-25.4%
-
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Foundation: Strong Balance Sheet
Solid investment grade credit ratings
Able to access capital markets:
$75 million term loan in February
$350 million in notes issued in 2009
$500 million MTN program renewed for 25 months in October
Peer group net debt to
capitalization*
39%
MTS
50%
36%
BCE
MTS Debt Ratings
DBRS
BBB
S&P
BBB+
TELUS
As at June 30, 2009.
Credit Facilities Expected to Cover All Refinancing
Requirements up to 2011
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Stable Revenues and EBITDA from Continuing
Operations Through Economic Downturn
$ millions
Revenues
474
467
165
Q1 2007
171
Q2
489
476
165
Q3
155
Q4
EBITDA
486
479
169
Q1 2008
480
171
Q2
165
Q3
483
476
157
Q4
163
Q1 2009
464
159
Q2
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Allstream in Quebec
Quebec Customer Base
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Allstream in Quebec
Over 400 employees, with offices in Montreal and Quebec City
10,000 business customers
Investment of over $38 million in the past five years to improve the highcapacity data network serving Montreal and major cities of Quebec
Offers major enterprise products including IP connectivity, unified
communications and network security
Network assets of $74 million in the province
Two Quebec-based acquisitions strengthen Unified Communications solutions
delivery and presence in Quebec marketplace:
Vision IP acquired on September 29, 2009, a Cisco Silver Partner in Canada
MultiNet acquired on November 7, 2007, a business with a base of over 7,000 customers,
including 3,500 in Quebec
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MTS Allstream - An Investment That
Delivers Value
Strong record of delivering cash to shareholders
Stock provides one of the strongest yields on the TSX
Positioned strategically for the future
Stable results through challenging economic times
Solid financial profile
Cash flows from continuing operations support dividend and
operating needs
Strong balance sheet provides flexibility for business
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Well Positioned
For our 2nd Century of Operations
Questions?