Learn more about MTSAllstream's Q3 2012 results by visiting the MTS
Allstream "Investors" section.
WINNIPEG, Nov. 8, 2012 /CNW/ - Manitoba Telecom Services Inc. ("the Company"
or "MTSAllstream"), including its two operating divisions, MTS and
Allstream, today reported net earnings of $40.8million for the three months
ended September30,2012, compared with $37.0million for the three months
ended September 30,2011. Earnings per share ("EPS") were $0.61 in the third
quarter of 2012, up 8.9% over the prior year. Third-quarter results position
the Company to meet its financial guidance ranges on all metrics.
Q3 2012 highlights
-- EPS of $0.61, up 8.9%
-- Consolidated EBITDA grew 3.3% to $151.7 million
-- Allstream achieves eighth consecutive quarter of year-over-year
EBITDA growth, to $27.8 million
-- Allstream added 90 buildings to its IP fibre network; fibre-fed
buildings now total 2,644
-- Revenues from MTS wireless data were up 29.4%
-- Annual cost reduction target reached
-- Board of Directors declares $0.425 per share Q4 2012 cash
"We are satisfied with the overall results for the third quarter 2012," said
PierreBlouin, MTSAllstream's ChiefExecutiveOfficer. "The continuing
focus on our strategy to maintain our industry-leading position in Manitoba
and drive growth in IP-based services in the national business market has
delivered another quarter of solid growth in profitability."
"Our unmatched bundling capability in key growth services resulted in MTS's
solid third-quarter EBITDA growth of 1.6%. At Allstream, an EBITDA increase of
1.1% marks the eighth straight quarter of year-over-year growth, led by our
continuing improvement in margins. On a consolidated level, we have again met
our annual cost savings target for the eighth consecutive year, which speaks
to our commitment to aggressively improving our cost structure while
continuing to provide leading customer service."
MTS Allstream's solid third-quarter financial performance reflects ongoing
strategic focus on increasing profits and cash flows by investing in MTS's
wireless and broadband networks in Manitoba, and Allstream's converged
Internet protocol ("IP") nationally.
Consolidated financial results
(in millions $, except EPS) Q3 2012 Q2 2012 Q1 2012 Q4 2011 Q3 2011
Revenues 424.3 431.6 435.1 439.4 443.2
EBITDA(1) 151.7 153.5 154.0 146.9 146.9
EPS(2) $0.61 $0.67 $0.80 $0.56 $0.56
Free cash flow(3) 17.3 27.1 36.1 18.3 29.3
Capital expenditures 94.5 93.0 76.9 84.6 81.1
(1 )MTSAllstream defines EBITDA as "earnings before interest, taxes,
depreciation and amortization, and other income (expense)". See the "Notes"
section of this news release for further information.
(2) EPS is based on weighted average shares outstanding of 66.7million for
the three months ended September30,2012; 66.4million for the three
months ended June 30,2012; 66.2million for the three months ended
March31,2012; 65.9million for the three months ended December31,2011
and 65.7million for the three months ended September30,2011. The
increase in the number of weighted shares outstanding is mainly due to
participation in the Company's dividend reinvestment program.
(3) MTSAllstream defines free cash flow as "cash flows from operating
activities less capital expenditures, and excluding changes in working
capital". See the "Notes" section of this news release for further information.
-- Consolidated EBITDA grew 3.3% over Q3 2011, due to strong
revenue growth from strategic services at MTS, Allstream's
continued focus on converged IP revenues and improving margins,
and cost management, partly offset by declining revenues from
legacy business lines.
-- The Company generated strong revenue growth of 29.4% in
wireless data, 6.9% in high-speed Internet and 7.7% in IPTV
services, offset by an increase in planned legacy revenue
declines, resulting in a 4.3% year-over-year consolidated
-- For the eighth year in a row, the Company attained its annual
cost savings target, having achieved $26.3 million in
annualized cost savings at September 30, 2012, against a
guidance range of $25 million to $35 million for 2012.
-- Capital expenditures were higher than those in Q3 2011, mainly
due to the timing of investments in capital projects, such as
upgrades to the wireless billing system and Long Term Evolution
("LTE") deployment at MTS, and adding more on-net buildings at
Allstream. The Company's 2012 financial guidance included an
increase in capital spending; a large proportion of capital
spending is complete in the first nine months of 2012. The
Company is on track for its 2012 financial guidance for capital
spending and free cash flow.
-- Free cash flow was $17.3 million, down $12.0 million over Q3
2011, mainly due to the timing of certain capital projects and
to higher required pension funding, partly offset by EBITDA
-- The 8.9% increase in EPS over Q3 2011 is mostly attributable to
EBITDA growth and lower finance costs, partly offset by lower
MTS produced EBITDA growth of 1.6%, while maintaining a leading EBITDA margin
of 50.2% in the third quarter of 2012. Wireless data, high-speed Internet and
IPTV services generated strong revenue growth, which offset declines in local,
long distance and legacy data revenues. MTS increased the number of customers
with bundled services by 10.5%, to almost 96,000, in the third quarter of 2012.
MTS operating revenues
Q3 Q3 % YTD YTD %
(in millions $) 2012 2011 change 2012 2011 change
Wireless 91.5 91.5 - 272.2 263.5 3.3
Broadband and converged IP 53.5 50.1 6.8 159.6 144.6 10.4
Unified communications, security 8.9 8.3 7.2 27.0 25.5 5.9
Local access 66.9 69.1 (3.2) 201.1 208.7 (3.6)
Long distance and legacy data 18.9 20.8 (9.1) 57.2 63.6 (10.1)
Other 6.9 7.0 (1.4) 20.0 21.2 (5.7)
Total MTS operating revenues 246.6 246.8 (0.1) 737.1 727.1 1.4
MTS maintained its leadership position in Manitoba's wireless market, with
market share at 53% in Q3 2012.
-- On September 14, 2012, MTS announced that it would offer the
iPhone 5 in Canada beginning Friday, September 28. The iPhone 5
launch was positively received by customers.
-- Year-to-date wireless revenue growth was 3.3%, driving a 2.4%
increase in year-to-date blended wireless average revenue per
user ("ARPU"), to $60.58. Wireless revenues increased 1.8% in
Q3 2012, when one-time retroactive revenues from wholesale
customers received in Q3 2011 are excluded.
-- Wireless data revenues grew 29.4% in Q3 2012, driving a 31.2%
increase in year-to-date wireless data ARPU, to $19.18. At
September 30, 2012, 53.5% of all postpaid wireless subscribers
had data plans - up from 39.9% at Q3 2011.
-- MTS's extensive wireless network, with LTE technology currently
available in Winnipeg and Brandon and 4G HSPA coverage to over
97% of Manitoba's population, is expected to drive continued
strong demand for wireless data services.
-- Q3 2012 postpaid subscribers totaled 400,442, up 3.5% over
Q3 2011. Postpaid wireless subscriber growth was partly offset
by a decrease in lower-ARPU prepaid and wholesale customers. As
a result, wireless subscribers were stable over Q3 2011 and
totaled 494,564 at September 30, 2012.
-- Postpaid wireless churn was a leading 0.89% in Q3 2012, in line
with postpaid churn of 0.87% in Q3 2011, reflecting the loyalty
of MTS's bundled customers. Total customers subscribing to
MTS's unique bundles were up 10.5% over Q3 2011.
Internet and IPTV delivered strong performance, with both revenues and ARPU up
-- Internet revenues grew 6.9% to $27.7 million in Q3 2012, due to
a growing subscriber base and price increases. Year-to-date
high-speed residential ARPU was up 8.6% over Q3 2011, to
-- IPTV revenues grew 7.7% to $19.5 million in Q3 2012, driven by
increased ARPU and subscriber growth. Year-to-date IPTV ARPU
was up 9.0% over Q3 2011, to $66.79.
-- At September 30, 2012, MTS had a total of 102,039 television
customers, of which 95,374 are IPTV subscribers, representing a
year-over-year increase of 2.3% in IPTV customers. A growing
customer base shows there is continued demand for flexibility
in theme groups, high-quality digital picture and sound, and
the innovative features that make MTS's television service
MTS remains disciplined in finding the right balance between financial
performance and maintaining market share in local access, legacy data and long
-- Local access revenues declined in Q3 2012, mainly due to
wireless substitution and local competition.
-- Long distance revenues declined in Q3 2012, mainly due to
customers replacing long distance calling with email, text
messaging and social networking.
-- Legacy data revenues declined in Q3 2012, mainly due to a
decrease in wholesale data services.
Allstream's performance in the third quarter of 2012 demonstrated continued
progress on its strategic objective: to drive growth in on-net IP-based
services and improve profitability. EBITDA increased by $0.3million in the
third quarter of 2012, compared to the same period of 2011, marking the eighth
straight quarter of year-over-year EBITDA growth. Allstream revenue for the
period reflected a year-over-year increase in high-margin on-net IP revenues,
which were offset by legacy revenue declines. The continuing focus on on-net
services improved gross margins to 58.6% in the third quarter of 2012 and,
along with diligent cost management, contributed to overall EBITDA growth.
Allstream operating revenues
Q3 Q3 % YTD YTD %
(in millions $) 2012 2011 change 2012 2011 change
Converged IP 60.7 60.4 0.5 182.6 178.7 2.2
Unified communications and 18.4 22.2 (17.1) 59.4 66.0 (10.0)
Local access 43.6 48.6 (10.3) 138.1 147.9 (6.6)
Long distance and legacy data 45.1 51.5 (12.4) 141.7 162.1 (12.6)
Other 18.4 23.1 (20.3) 58.1 72.2 (19.5)
Total Allstream operating 186.2 205.8 (9.5) 579.9 626.9 (7.5)
Revenues from convergedIP and wins in IP sales were both up in Q32012,
reflecting Allstream's continued focus on improving profitability.
-- 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. Adjusting for the
impact of this contract, converged IP revenues would have grown
5.5% over Q3 2011 and 7.1% in the first nine months of the
year. The Company now expects that IP revenues from this
customer will be down about $12 million in 2012, which
represents about half of the revenues reported for this
customer in 2011. IP revenues will continue to be affected by
this contract in 2013.
-- Allstream added a total of 90 buildings to its national IP
fibre network in Q3 2012, raising its total number of fibre-fed
buildings to 2,644 at September 30, 2012, for an increase of
14.3% when compared to September 30, 2011.
-- New customers to be connected to Allstream's 30,000-kilometre
IP fibre network include Syneron Canada Corporation; Metalogix;
Apex Public Relations Inc.; Grey Advertising; Prospero Learning
Solutions; Skyworks Solutions, Inc.; a.p.i. alarm Inc.; BSTREET
Communications Inc.; Fidus Systems Inc. and First Affiliated
-- Demand for IP services continues to drive sales at the same
pace as in 2011, when Allstream achieved its best-ever year for
IP sales wins. This success has contributed to converged IP
revenue growth of $0.3 million, to $60.7 million in Q3 2012.
-- Growth in converged IP gross margins also continued, reaching
73.5% in Q3 2012, up from 71.0% in Q3 2011.
"The expansion of our IP fibre network in major urban centres across Canada is
a key driver of our success in the IP market," said Dean Prevost, President of
Allstream. "We continue to cost-effectively grow the numbers of both fibre-fed
buildings and on-net customers, to drive growth in on-net revenues and
Allstream continues to focus on IP revenue growth, by exiting low-margin
legacy services and transitioning existing customers to IP-based services.
-- Revenues from local access services and other services declined
in Q3 2012, as per Allstream's decision to exit low-margin
-- Long distance revenues declined by 15.6% to $22.1 million in
Q3 2012, mainly due to decreased volumes and lower rates.
-- Legacy data revenues declined by 9.1% to $23.0 million in
Q3 2012, reflecting customers' continued transition to
broadband and other IP-based services.
MTSAllstream and its Board of Directors announced that the Company would
undertake a wide-ranging strategic review of its Allstream business, on
September13,2012. The Company does not intend to disclose any developments
with respect to this strategic review process until such time as the Board
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.
The Company is obtaining the assistance of Stikeman Elliott LLP as external
legal advisors during this exploratory process, as well as of CIBC World
Markets and Morgan Stanley as financial advisors. The Board of Directors has
formed a Strategic Committee to oversee this review. Kishore Kapoor has been
named Chair of the Strategic Committee and will serve on the committee along
with David Leith and H. Sanford Riley.
The Company's Board of Directors declared a quarterly cash dividend of $0.425
pershare for the fourth quarter of 2012, payable on January15,2013 to
shareholders of record at the close of business on December14,2012.
The fourth-quarter dividend is designated an "eligible" dividend under the
Income Tax Act (Canada) and any corresponding provincial legislation. Under
this legislation, individuals resident in Canada may be entitled to enhanced
dividend tax credits that reduce income tax otherwise payable.
Investment Community Conference Call
MTSAllstream will hold its third-quarter 2012 results conference call with
the investment community on Thursday, November8,2012 at 8:30 a.m.
(Easterntime). Participants will include Pierre Blouin,
ChiefExecutiveOfficer, and Wayne Demkey, ChiefFinancialOfficer.
To participate, please dial toll-free 1-888-231-8191 or 647-427-7450. A replay
will be available until November 22, 2012, by dialing 1-855-859-2056 and
entering passcode 34377963.
Investors, media and the public are invited to participate, on a listen-only
basis, by logging in to the live audio webcast of the conference call on the
MTS Allstream "Investors" page or by entering:
A replay of the conference call will be available on MTS Allstream's website
for one year.
(1) MTS Allstream defines EBITDA as "earnings before interest,
taxes, depreciation and amortization, and other income
(expense)". The term "EBITDA", as it relates to 2012 and 2011
results prepared using International Financial Reporting
Standards ("IFRS"), does not have any standardized meaning
according to IFRS. It is therefore unlikely to be comparable
to similar measures presented by other companies.
Q3 Q3 % YTD YTD %
(in millions $) 2012 2011 change 2012 2011 change
Operating revenues 424.3 443.2 (4.3) 1,291.0 1,326.2 (2.7)
Operating expenses (353.1) (376.7) 6.3 (1,070.1) (1,098.2) 2.6
Depreciation and 80.5 80.4 0.1 238.3 219.5 8.6
EBITDA 151.7 146.9 3.3 459.2 447.5 2.6
(2) MTS Allstream defines free cash flow as "cash flows from operating
activities, less capital expenditures and excluding changes in
working capital". Free cash flow is the amount of discretionary
cash flow that the Company has for purchasing additional assets
beyond its annual capital expenditure program, paying dividends,
buying back shares and/or retiring debt. The term "free cash
flow", as it relates to 2012 and 2011 results prepared using IFRS,
does not have any standardized meaning according to IFRS. It is
therefore unlikely to be comparable to similar measures presented
by other companies.
Q3 Q3 $ YTD YTD $
(in millions $) 2012 2011 change 2012 2011 change
Cash flows from operating 145.8 157.8 (12.0) 337.1 260.0 77.1
Changes in non-cash (34.0) (47.4) 13.4 7.8 54.9 (47.1)
Capital expenditures (94.5) (81.1) (13.4) (264.4) (203.4) (61.0)
Free cash flow for the 17.3 29.3 (12.0) 80.5 111.5 (31.0)
(3) More information can be found in MTS Allstream's third-quarter 2012
interim Management's Discussion and Analysis ("MD&A"),
third-quarter 2012 Financial Statements, 2011 annual MD&A and 2011
Annual Information Form, which are available in the "Investors"
section of the MTS Allstream website at
will be available on SEDAR at
Supplementary information for the three and nine months ended September
30,2012 is also available in the "Investors" section of the MTSAllstream
website at www.mtsallstream.com.
Forward-looking statements disclaimer
This news release includes forward-looking statements and information
(collectively, "the statements") about the Company's corporate direction,
business opportunities, operations, financial objectives and future financial
results and performance that are subject to risks, uncertainties and
assumptions. As a consequence, actual results in the future may differ
materially from any conclusion, forecast or projection in such forward-looking
statements.Therefore, forward-looking statements should be considered
carefully and undue reliance should not be placed on them. Examples of
statements that constitute forward-looking information may be identified by
words such as "believe", "expect", "project", "should", "anticipate", "could",
"target", "forecast", "intend", "plan", "outlook", "see", "set", "pending" and
other similar terms.
Factors that could cause anticipated opportunities and actual results to
differ materially include, but are not limited to, matters identified in the
"Risks and uncertainties" section and elsewhere in the Company's 2011Annual
MD&A, which is available in the "Investors" section of the MTSAllstream
website at www.mtsallstream.com and on SEDAR at www.sedar.com.
Please note that forward-looking statements reflect Management's expectations
as at November7,2012. The Company disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law. This news
release and the financial information contained herein have been reviewed by
the Company's AuditCommittee and approved by the Company's Board of
Manitoba Telecom Services Inc. (MTSAllstream)
MTSAllstream is one of Canada's leading national communication solutions
companies, providing innovative communications for the way Canadians live and
work today. The Company has more than 100 years of experience, with 5,500
employees across Canada. MTSAllstream's business is dynamic and consists of
two operating divisions. In Manitoba, MTS is the leading full-service
telecommunications provider for residential and business customers. MTS's
suite of services includes the latest in wireless technology, broadband
services, IPTV, voice services, home security and an extensive range of
business solutions. Across Canada, Allstream is a leader in IP communications
and the only national provider that focuses exclusively on the business
telecommunications market. MTSAllstream has nearly twomillion customer
connections, spanning business customers across Canada and residential
consumers throughout the province of Manitoba. The Company's extensive
national fibre optic network spans more than 30,000 kilometres. MTSAllstream
has spent 11consecutive years on the Jantzi Social Index for leadership in
social responsibility, and is the recipient of the 2011 Governance Gavel Award
from the Canadian Coalition of Good Governance, recognizing clear and
effective public disclosure and leading governance practices. MTSAllstream's
common shares are listed on the TSX (trading symbol: MBT). Customers,
stakeholders and investors who want to learn more about MTSAllstream are
encouraged to visit www.mtsallstream.com. For more information about MTS's
products and services, please visit www.mts.ca. For more information about
Allstream's products and services, please visit www.allstream.com.
Investors: Paul Peters Investor Relations (204) 941-6178
firstname.lastname@example.org Media: Selena Hinds Corporate
Communications (416) 345-3576 or (204) 941-8576
SOURCE: MTS Allstream
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