Ready For Recovery Pierre Blouin, CEO Rendez-vous Financier Les Affaires October 29, 2009 Proud recipient of awards from: 2008 Competitive Strategy Leadership 2008 Business Innovation 2008 Partner of the Year premierpartner 1
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. 2
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) #1 in all telecom products in Manitoba Most profitable provider in Canadian telecom industry * As of June 30, 2009. Enterprise Solutions division (Allstream) Coast-to-coast national IP network footprint One of 3 telecom solutions providers with Bell and Telus in Canadian business markets 4
History of MTS Allstream 1846 Montreal & Toronto Magnetic Telegraph Company founded 1908 Manitoba Government creates Manitoba Government Telephones 1992 1996 Unitel Communications breaks 112-year monopoly in public long distance voice communications 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 5
Over 100 Years Of Innovation 1908 Manitoba Government Telephones established 1917 First city in Canada to receive all-dial service Brandon (MB) 1926 1956 1968 1988 1999 2003 First major city in North America to receive all-dial service Winnipeg North America s first use of the three-digit emergency phone number Winnipeg First Canadian city to have touch-tone service Brandon World s first dedicated fax network Canada s first Multiprotocol Label Switching Internet protocol virtual private network ( MPLS IP-VPN ) Launch of MTS TV in Manitoba 2009 Launch of MTS Ultimate (HD) TV and Canada s first Whole Home PVR - Winnipeg 6
Foundation: Our Customers Serving for over 100 years Total customer connections in first half 2009 1,953,871 7
A Unique Player in the Marketplace Regional in size with national reach Focused on the customer Proven innovator Nimble competitor Consumer Markets division Wireless High-speed Internet Digital TV Wireline voice Home security Enterprise Solutions division Converged IP Unified Communications Voice and data connectivity Professional and IT Services 8
MTS Centre Winnipeg Home to NHL again? 9
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. 11
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 12
Broadband Close to 100% coverage of Winnipeg 85% of Manitoba homes covered 179 communities served 32 Mbps fastest speed of any telco in Canada 13
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 14
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 15
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, Unitel, MetroNet, Netcom, Montage and AT&T Canada 16
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 17
Solid Enterprise Customer Base 18
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 19
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 Revenue Growth Wireless, high-speed Internet and digital TV revenues climbed 8.8% through 1 st half/09 10% 9% 10% 7% Continuing to focus on engaging customers in multiple service relationship 1 st half/09 bundled customer growth up 5% 4% 4% Digital TV Internet Wireless *Based on company information to June 30, 2009 for Rogers Communications, Bell Canada, Telus Communications Company, and MTS Allstream. 21
First Half 2009 Growth Services Revenues 47% of total revenues Converged IP 11.9% Digital Television 7.3% Wireless 9.9% High-speed Internet 10.2% 22
Growth Revenue Transition Maintaining Steady EBITDA Margins Consumer division Enterprise division MTS Allstream 51% 52% 52% 52% 24% 23% 22% 20% 34% 34% 34% 34% 2006 2007 2008 Q2/09 2006 2007 2008 Q2/09 2006 2007 2008 Q2/09 40% 44% 47% Revenue Growth Legacy 2 0 0 7 2 0 0 8 Q2 2 0 0 9 23 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, and stakeholders do the same 24
Foundation: Our Employees Hardworking and dedicated employees are one of our greatest assets 25
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 $43,889 $44,418 $45,839 $47,113 2007A 2008A 2009E 2010E 2011E BCE Rogers Telus Bell Aliant MTS Source: Public disclosures and CIBC Research estimates. 27
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 $5,961 Telecom Industry Total Free Cash Flow 1 ($ millions) $6,400 $6,721 $7,102 $7,666 2007A 2008A 2009E 2010E 2011E BCE Rogers Telus Bell Aliant MTS Telecom Industry Current Leverage (Net Debt / LTM EBITDA) 2.1x 2.1x 1.7x 1.6x 1.5x Rogers Bell Aliant TELUS Telus MTS BCE Source: Public disclosures and CIBC Research estimates. 28 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 120 110 Index (100 = August 1, 2008) 100 90 80 70 60 50 Canadian Telco Index (11.1%) S&P 500 Index (14.2%) S&P / TSX Index (16.8%) 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. 29
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. 30
Share Price Returns 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 $100 $100 Jan 6/97 $129 $115 Dec 31/97 $166 $115 Dec 31/98 Total Return of $100 Investment $186 $149 Dec 31/99 $340 $160 Dec 31/00 MTS $313 $140 Dec 31/01 $329 $122 Dec 31/02 S&P/TSX Comp $418 $155 Dec 31/03 $484 $178 Dec 31/04 $422 $221 Dec 31/05 $513 $537 $495 $259 $284 $195 Dec 31/06 Dec 31/07 Dec 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 31
Manitoba Telecom Share Price vs. Peers Share Price Performance June 30, 2008 - October 23, 2009 MTS Telus BCE S&P/TSX Comp S&P/TSX Telecom -19.7% -22.9% -28.4% -21.3% -25.4% 32
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* 50% MTS Debt Ratings 39% 36% DBRS BBB S&P BBB+ MTS As at June 30, 2009. BCE TELUS Credit Facilities Expected to Cover All Refinancing Requirements up to 2011 33
Stable Revenues and EBITDA from Continuing Operations Through Economic Downturn $ millions Revenues EBITDA 467 474 476 489 479 486 480 476 483 464 165 171 165 155 169 171 165 157 163 159 Q1 2007 Q2 Q3 Q4 Q1 2008 Q2 Q3 Q4 Q1 2009 Q2 34
Allstream in Quebec
Quebec Customer Base 36
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 37
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 38
Well Positioned For our 2 nd Century of Operations
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