Annual Address to Shareholders 2012 Annual General Meeting May 10, 2012 Pierre Blouin Chief Executive Officer Manitoba Telecom Services Inc. Check Against Delivery
AGM 2012 - CEO Speech Good Morning/Bonjour. 2011 was a significant year in the progress of your company. We stayed highly focused on our strategy and it paid off. The Company met or exceeded its 2011 financial targets and delivered a total shareholder return of 10%. MTS continues to be the clear leader in its home market of Manitoba. 2011 was a milestone year for Allstream with solid improvements in its performance. We invested over $300M to expand our fibre and wireless networks and to deliver the best technology there is creating growth opportunities for our business. We also did it more efficiently, with $25M reduction in operating costs. And we can t forget how proud we were to welcome the NHL and the Winnipeg Jets back to their home at the MTS Centre. The Jets return has been great for Winnipeg, Manitoba, and I believe it s a great national story and it s been great for the MTS brand. With strong performance in 2011, positive changes in our regulatory environment, and about 5,500 talented employees across Canada, MTS Allstream is well positioned to deliver another solid year in 2012. But as always we must remain focused. And that is why Focused is our theme for the year. In a fast evolving market with rapid technology evolution, being focused means making smart strategic decisions about where you put your resources and how, you drive results. Providing this focus is our leadership team, and I would like to take a moment to introduce some of them to you. Please stand when I call your name. o Kelvin Shepherd, President, MTS o Dean Prevost, President, Allstream o Paul Beauregard, Chief Legal Officer and Corporate Secretary o Wayne Demkey, Chief Financial Officer o Chris Peirce, Chief Corporate Officer o Aliana Rozenek, Chief Human Resources Officer o Mike Strople, Chief Technology Officer o Brenda McInnes, Vice President and Treasurer; and o Debbie LeBlanc, Vice-President, Customer Care for MTS 2
HIGHLIGHTS OF 2011 2011 was indeed a successful year for our company. As I mentioned, we met our 2011 improved financial guidance across all metrics. Earnings per share increased by 17%, EBITDA grew by 5%, Free cash flow was up by more than $95 million; and We realized robust revenue, ARPU and subscriber growth across our key services being wireless, internet, television in Manitoba and converged IP in the business markets nationally. What these results show is that telecommunication products and services are becoming a very important part of our customers lives. I think you will agree that wherever you go, wherever you live or work, telecom services are a key part of your every day. In fact, Telecom services are an increasingly vital strategic asset for the businesses we serve, and one of the largest budget items for most households in Canada. And, we see this as a big opportunity for the future of our Company. The key to capturing this opportunity is our ability to connect our customers to ever-faster and more sophisticated networks. This is a significant opportunity and we are determined to lead the market, and we are taking actions toward that goal. This focus on leading technologies is enabling your company to deliver better results - both for MTS and Allstream, and it is the right strategy for us. MTS On that note, let s spend a few minutes on MTS. MTS has been the provider of choice for Manitobans for 104 years. Our employees are working day in and day out to bring new products and services to communities across Manitoba and lead the market through technology innovation and investment. 3
In 2011: We brought FTTH to communities like Steinbach and Dauphin bringing the capability to reach Internet speeds of over 100 Mbps faster than the speed available in most large cities in Canada!! We completed the expansion of our HSPA wireless data network to cover 97% of Manitobans. And we expect to continue to make similar investments in 2012, in particular with the planned launch of a new very high speed wireless data network later this year called LTE (for long term evolution). In total, MTS invested more than $200 million in Manitoba last year. This is one of the many ways we contribute to the economy of this province. Indeed, our focus at MTS for 2012 will be the same that delivered these solid results in 2011. This means more smartphones, more unique services, more coverage, more speed and More FTTH including communities like The Pas and Thompson. And importantly, continued improvements to the customer experience. ALLSTREAM Turning to Allstream I said at last year s AGM we believed Allstream was on a path toward a better performance and clearly, 2011 showed it! We ve had some challenges but the 2011 results speak for themselves: 21% growth in IP sales 34% year-on-year increase in EBITDA $55M improvement in free cash flow, making Allstream close to cash flow neutral These are the results of our focused strategy on selling IP solutions on Allstream s network in the national business market while exiting lower-margin lines of business. A key metric to enable this success is bringing our network to more potential customers. Allstream added close to 300 buildings in 2011 to its network, 99 in the first 3 months of 2012 bringing our total to about 2500 in Canada. 4
And with the support of that extended network footprint, Allstream serves some of the most recognizable corporations in the country like Starbucks, Canadian Tire, WestJet, BCBG Max Azria, Scotiabank and HMV, to name a few. We have momentum we continue to believe that our strategy for this business is the right one, and while it is still a work in progress, the results we are seeing show that we are on the right path. REGULATORY CHANGE As a company, we have long argued that the existing foreign investment restrictions limit competition and hinder access to risk capital and strategic partnerships for companies of our size. The recent federal government s announcement to loosen restrictions on foreign investment in the Canadian telecom sector is good news for our Company. The removal of these restrictions will expand the range of strategic alternatives available that can strengthen our business and increase value, in particular for Allstream. The change is also good for the Canadian economy. More investment means greater choice and better competition. That s good for the consumer and businesses and for national productivity. COMMMUNITY One area that is ingrained in our corporate culture is our commitment to the communities we serve. Nationally with the help of our employees, we are a proud and involved supporter of United Way. Last year, as you saw in the video, we brought our technology to help Manitobans deal with the flooding that affected so many by deploying river cams to help monitor water levels. We support educational organizations around the province, and sponsored over 30 community festivals across Manitoba last year. We are also active in the communities we serve outside of Manitoba. Just last week we announced that we will be the presenting partner for the Global Relay Gastown Grand Prix to bring this historic event back to Vancouver But today our focus really is on Manitoba. 5
On Tuesday, we announced that MTS will be the exclusive provider of telecommunications services to the Winnipeg Blue Bombers Football Club, in their new home, the Investors Group Field. In recognition of this great new partnership, I would like to recognize Mr. Jerry Maslowsky, Vice President, Marketing from the Blue Bombers, and thank him for joining us today. MTS will provide all telecommunications services in the stadium including our IPTV service and the infrastructure necessary to enable HD television coverage. We look forward to the next football season with this new association! I m also very pleased to announce a new sponsorship with another important Manitoba institution and our hosts for today s meeting the Winnipeg Art Gallery. As many of you know, this year marks the 100th anniversary of the Art Gallery and we are thrilled to be supporting the activities and events that are planned to celebrate the centennial celebrations. As part of our partnership, we will be providing the Winnipeg Art Gallery with a variety of telecommunications products and services. I would like to recognize Mr. Stephen Borys, Executive Director, and Mrs. Pam Simmons, Director of Development of the Art Gallery who are with us today congratulations! GOING FORWARD STRATEGIC FOCUS As you can see, MTS Allstream is active and engaged with our customers and communities, and we are focused on delivering value to our shareholders. Our solid results in 2011 show that our strategy is working and we expect to deliver a similar performance in 2012. Looking at our Q1 results, we are on track. In fact, MTS Allstream delivered a total return to shareholders of 19% in the first quarter of 2012. Our first quarter performance is the second best return for public telecom corporations in North America! I will close by thanking our Chair, David Leith and the members of our Board of Directors for their counsel and wish Don Penny all the best in his retirement from our Board. Don has made a significant contribution to MTS Allstream s success and we will miss him. A huge thank you to all our employees who keep our services running regardless of the challenges brought by mother nature and keep the company winning against its competitors. 6
Because of them, in 2011 we have answered over 4 million requests from our customers and based on their feedback in independent customer surveys, MTS is the Manitoba leader and Allstream, the national business market leader for customer experience. CONCLUSION MTS Allstream is involved in an exciting industry bringing technologies and products that are part of everybody s life at home and at work. The success of our business strategies gives us confidence and enthusiasm that we are on the right path toward creating improved shareholder value. Thank you. 7