june 2013 - personal | bell mts · 2013-06-26 · 4 mtsallstream.com | tsx : mbt •after closing...

www.mtsallstream.com June 2013

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mtsallstream.com | TSX : MBT

Safe harbour notice

This presentation contains certain forward-looking information. Material factors or assumptions were 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 such forward-looking information. Therefore, forward-looking statements should be considered carefully and undue reliance should not be placed on them. Additional information about such material factors and assumptions can be found in MTS Allstream’s filings with Canadian securities regulatory authorities. Except as required by law, MTS Allstream disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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• MTS has agreed to sell Allstream to Accelero Capital in transaction valued at $520 million.

• Transaction is expected to close in the second half of 2013, subject to receipt of Investment Canada approval and customary closing conditions.

• Sale enables Allstream to accelerate its strategy towards achieving long-term sustainable growth.

• MTS will continue to be the pension sponsor for existing Allstream retirees.

o Allstream employee pension plans will be retained by Allstream but MTS has committed to funding pre-closing solvency deficit.

Key elements of the transaction

Allstream sale - announced May 24

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• After closing costs, MTS expects to realize net proceeds of approximately $405 million.

• Proceeds will help fund pension obligations o MTS will use $170 million for additional pension plans prefunding. o We expect no need for additional payments until 2016. o MTS will use $70 million in short-term debt to pre-fund pension

obligations.

• MTS will determine its planned use of the remaining transaction proceeds upon the close.

This transaction makes MTS stronger, benefits all our stakeholders and aligns our investment profile and value with our investors’ expectations.

Planned use of proceeds

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• Leading, pure-play regional telecom provider.

• Strong, industry-leading EBITDA margins, stable and growing.

• Large free cash flows support our dividend policy.

• Solid revenue profile with approximately 60% of revenues from strategic services including 38% from wireless.

o Q1 2013 strategic services growth of 2.4%, over Q1 2012.

• No cash taxes until 2019 or later.

• No additional pension solvency payment requirement expected before 2016 (with no future funding if long-term interest rates rise by 1% or more).

• Continued focus on cost management.

A stronger MTS

TSX : MBT - investment profile

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Memorable brand

Top coverage

Superior customer retention

Best bundles

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mtsallstream.com | MBT : TSX 7

MTS – Manitoba’s leading full-service

communications provider

Photo courtesy of Gerry Kopelow

• First in Manitoba to launch 4G LTE network.

• FTTH network growth – broadband expansion continues, currently in 11 communities.

• 90+ retail locations across the province.

• Unsurpassed brand recognition – MTS Centre and MTS Iceplex.

• 3,000 employees with a long track record of serving Manitobans.

• Economic impact in Manitoba close to $1 billion per year.

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MTS – the market leader in Manitoba

We continue to leverage our competitive advantages to maintain strong market share and grow revenues.

Wireless Wireline

Internet IPTV

* Greater Winnipeg area.

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MTS - solid revenue growth

Wireless data revenues, up 26.5% ($ millions)

Q1 2013 $29.6

Q1 2012 $23.4

Internet revenues, up 4.9% ($ millions)

Q1 2013 $27.8

Q1 2012 $26.5

IPTV revenues, up 2.6% ($ millions)

Q1 2013 $19.9

Q1 2012 $19.4

Strategic services

60%

40%

Q1 2013 revenue mix

Legacy services

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MTS - driving success

Wireless customers and ARPU

$60.25 Q1 2013 493,216

Q1 2012 488,571 $59.78

Q1 2011 483,722 $56.73

IPTV customers and ARPU Q1 2013 98,289

Q1 2012 95,695

$66.63

$66.35

Q1 2011 90,468 $58.63

$41.57

High-speed Internet customers and ARPU

Q1 2013 196,643

Q1 2012 190,247 $40.01

Q1 2011 184,899 $36.86

ARPU growth in all strategic product lines.

Some of the highest ARPU in Canada and growing.

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MTS results* : Strong and growing free cash flow

and EBITDA

* Excludes Allstream results.

2012 2013E

$130.1M

Free cash flow EBITDA

Completion of certain 2012 capital investments such as our wireless billing system upgrades

and 4G LTE wireless network build, leads to increased free cash flow in 2013.

$477.5M

2012 2013E

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MTS owns the home in Manitoba

Over 97K bundled customers in Q1 2013, up 6.6% over Q1 2012.

• MTS offers unique bundles - wireless, television, Internet, home phone and security services.

• Bundled customers have less than half the churn of customers who are not on a bundle.

Focus on growth in wireless, IPTV and high-speed Internet.

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• Unmatched bundling service plans.

• Unique and flexible bundle plans.

• Very low churn and higher ARPU with bundled customers.

Two and three-service bundles Four-service bundles

Bundled customers

2013E

2010 85,000

2011 89,000

2012 96,500

Bundles - our customers’ preference

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MTS’s fibre optic network

• Launched in 2010 our fibre-to-the-home FiON network is now deployed in 11 communities in Manitoba and covers close to 30,000 homes in Manitoba.

• Part of our commitment to grow the reach and quality of our

broadband networks.

• Our combined FTTH and VDSL networks allow us to provide high-speed Internet and IPTV to over 95% of Manitoba’s two major urban centres and a growing number of other communities.

Providing customers with higher quality, more reliable services.

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MTS – solid wireless results

Bell Rogers Telus MTS Bell Rogers Telus MTS

Wireless data revenue growth

Wireless revenue growth

Bell Rogers Telus MTS

Blended wireless ARPU

$55.92

$59.68 $60.25

22%

23.9%

6.8*%

3.2%

6.3%

26.5%

6.5% 17%

$60.04

* Subscriber revenues, less one-time equipment sales.

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$290M

Tax asset value

estimated NPV of tax asset as at March 31, 2013

• Tax asset worth $4.30 per share (March 31, 2013). • MTS retains all of the tax assets as part of the Allstream sale. • Annual cash savings of $45 to $50 million. • No expectation to pay cash taxes until 2019 or later.

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Credit metrics

MTS Telus BCE Bell

Aliant

Net debt2 to capitalization 54.6% 46.8% 52.3% 46.4%

Net debt/EBITDA 1.6x 1.6x 2.0x 2.3x

EBITDA coverage 10.2x 12.0x 9.1x 8.9x

DBRS rating/trend BBB/stb A(1)/stb BBB(h)/stb BBB/stb

S&P rating/trend BBB/stb BBB+/stb BBB+/stb BBB/stb

1 Source: Company financials 2 Debt due within one year + long-term debt – capital leases + securitized receivables less cash, all as of December 31, 2012.

Telco comparisons (December 31, 2012)1

Post Allstream sale announcement, S&P and DBRS confirm MTS’s investment credit rating.

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MTS strategies

• Build on MTS market leadership in Manitoba.

• Increase MTS growth product revenues.

• Grow our base of high-value bundled and multi-service customers.

• Expand broadband coverage and capabilities for TV and high-speed Internet.

• Expand 4G LTE coverage.

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EBITDA EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and other income. EBITDA should not be construed as an alternative to operating income or to cash flows from operating activities (as determined in accordance with International Financial Reporting Standards) as a measure of liquidity. Free cash flow Free cash flow is a non-IFRS measure of performance. MTS Allstream defines free cash flow as “cash flows from operating activities, less capital expenditures and excluding changes in working capital and pre-funded pension solvency payments”. 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 2013 and 2012 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.

Appendix - definitions

For further information, please contact:

Investors Media

Paul Peters – Investor Relations Selena Hinds – Corporate Communications

204-941-6178 204-941-8576

[email protected] [email protected]

Investors section www.mtsallstream.com/investors

june 2013 - personal | bell mts · 2013-06-26 · 4 mtsallstream.com | tsx : mbt •after closing...

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