Investo In estor Day r Day and and 20 2013 13 Outl Outloo ook - PowerPoint PPT Presentation

Investo In estor Day r Day and and 20 2013 13 Outl Outloo ook Ev k Even ent Febr bruar uary 14, 14, 2013 2013 mtsallstream.com | MBT : TSX

Senior leadership team Pierre Blouin Wayne Demkey Kelvin Shepherd Dean Prevost Chief Executive Officer Chief Financial Officer President, MTS President, Allstream Chris Peirce Aliana Rozenek Mike Strople Paul Beauregard Chief Corporate Chief Human Chief Technology Chief Legal Officer Officer Resources Officer Officer and Corporate Secretary mtsallstream.com | MBT : TSX Page 2

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. mtsallstream.com | MBT : TSX Page 3

Wayne ayne Demk emkey ey Chief Financial Officer, MTS Allstream mtsallstream.com | MBT : TSX Page 4

MTS Allstream 2012 summary Continued to: • Deliver steady improvements • Follow our strategic objectives • Produce consistent results mtsallstream.com | MBT : TSX Page 5

Financial scorecard All 2012 outlook targets met.      mtsallstream.com | MBT : TSX Page 6

MTS - solid revenue growth Wireless data revenues, up 29.7% ($ millions) 2012 $116 2012 revenue mix 2011 $90 60% Internet revenues, up 8.4% ($ millions) 2012 $110 40% 2011 $102 IPTV revenues, up 11.2% ($ millions) Legacy services Strategic services 2012 $79 2011 $71 Revenues EBITDA EBITDA margin $980.6 million, up 0.4% $405.5 million, up 1.1% 50.5%, up 0.3 points mtsallstream.com | MBT : TSX Page 7

Allstream strategic growth Converged IP revenues, up 1.6% ($ millions) 2012 $244 2012 revenue mix 2011 $240 42% EBITDA, up 6.3% ($ millions) 2012 $115 58% 2011 $109 Gross margin (percent) Legacy services Strategic services 2012 59.5% Strong sales focus on high-margin IP 2011 55.3% Revenues EBITDA Gross margin $758 million, down 8.2% $115 million, up 6.3% 59.5%, up 4.2 points mtsallstream.com | MBT : TSX Page 8

2013 Outlook mtsallstream.com | MBT : TSX Page 9

2013 outlook Significant improvement expected in 2013 free cash flow 2012 results 2013 outlook Revenues $1.704B $1.630 to 1.730B EBITDA $585M* $590 to $630M Earnings per $2.19* $1.75 to $2.15 share Free cash flow $118M $160 to $200M Capital 19.8% of 17 to 19% of expenditures revenues revenues *adjusted for IAS 19 mtsallstream.com | MBT : TSX Page 10

Revenues MTS Allstream (in billions $) 2013E $1.630 to $1.730 2012 $1.704 2011 $1.766 MTS (in millions $) 2013E 2012 $981 2011 $976 Allstream (in millions $) 2013E 2012 $758 2011 $826 mtsallstream.com | MBT : TSX Page 11

EBITDA – 2013 increase Legacy Strategic revenue revenue declines and growth exits Operational $590 - $630M efficiencies $585M* 2012 2013E *Adjusted for IAS 19 impact mtsallstream.com | MBT : TSX Page 12

Cost reductions (in millions $) 2013E $30 to $40 2012 $33.6 2011 $28.8 mtsallstream.com | MBT : TSX Page 13

EPS EBITDA Amortization $2.19* Tax Other $1.75 - $2.15 2012 2013E *Adjusted for IAS 19 impact mtsallstream.com | MBT : TSX Page 14

Capital expenditures (percent) 17 to 19% 2013E of revenues 2012 19.8% of revenues $338M $288M 2011 16.3% of revenues mtsallstream.com | MBT : TSX Page 15

Free cash flow – 2013 increase Decreased Other Tax $160 - $200M CAPEX Increased EBITDA $118M* 2012 2013E *Adjusted for IAS 19 impact mtsallstream.com | MBT : TSX Page 16

Unique tax asset $ 300M estimated NPV of tax asset • Tax asset worth $4.48 per share (December 31, 2012) • No expectation to pay cash taxes till at least 2019 mtsallstream.com | MBT : TSX Page 17

Pension funding • We have prefunded $70 million into the MTS pension plan using existing borrowing facilities • Allstream pension funding for 2013 using letters of credit • The outcome of the strategic review may inform us further regarding our options for funding the pension requirements in the longer term mtsallstream.com | MBT : TSX Page 18

Our path forward mtsallstream.com | MBT : TSX Page 19

Pier Pierre e Blouin louin Chief Executive Officer, MTS Allstream mtsallstream.com | MBT : TSX Page 20

Strategic review – ongoing mtsallstream.com | MBT : TSX Page 21

2012 – A busy year with results Financial highlights 2012 2011 Y/Y ($ millions, except per share amounts) Revenues − MTS 980.6 976.3 0.4% − Allstream 758.2 825.7 (8.2%) EBITDA − MTS 495.5 490.1 1.1% − Allstream 115.3 108.5 6.3% Adjusted earnings per share $2.63 $2.55 3.1% Free cash flow 117.6 129.8 (9.4%) Annualized cost reductions 33.6 28.8 16.7% Total shareholder return 15.08% 9.94% N/A MTS subscribers (#) Wireless 497,367 496,432 0.2% High-speed Internet 193,690 189,366 2.3% IPTV 97,232 95,476 1.8% Home phone 289,915 311,046 (6.8%) Allstream ($) IPC sales wins (average MRR) 572,000 494,000 15.8% mtsallstream.com | MBT : TSX Page 22

MTS – How are we making progress? Wireless customers and ARPU 2013E 2013E 2012 497,367 $60.35, up 1.2% 2011 496,432 $59.66 2012 2013E IPTV customers and ARPU • ARPU growth in all 2013E strategic product 2012 97,232 $66.92, up 7.3% lines • First and only 2011 95,476 $62.38 provider to offer 2013E LTE in Manitoba High-speed Internet customers and ARPU • FTTH expanded to 2013E 11 communities $41.65, up 8.9% 2012 193,690 • Large network investments 2011 189,366 $38.56 completed mtsallstream.com | MBT : TSX Page 23

MTS – How are we making progress? Bundled customers 2013E 2012 96,500 2011 89,000 • Delivering highest EBITDA margin in Canada at 50.5% 85,000 2010 • Unique and flexible bundles • Very low churn and Four-service bundles Two and three-service bundles higher ARPU • Mostly in four-service bundles mtsallstream.com | MBT : TSX Page 24

Allstream – How are we making progress? Number of fibre-fed buildings 2013E • 40% growth in fibre- 2,723 2012 connected buildings with installation costs down 30% 2012 2,388 2011 over past three years • Large reductions of spend with other carriers, bringing Telco intercarrier costs (in millions $) improved performance and 2013E reliability • Customer experience at world class level $180 2012 $215 2011 mtsallstream.com | MBT : TSX Page 25

Allstream – more on-net, more profit On-net IP revenues (percent)* 2013E 2013E 2012 61% 2012 • IP on-net focus delivering 2011 55% revenue strength • Nine quarters of year- over-year EBITDA growth Total EBITDA margin (percent) • Revenue down but 2013E EBITDA growth • #1 data supplier to Federal Government 2012 15.2% 2011 13.1% * Includes on-net and near-net mtsallstream.com | MBT : TSX Page 26

CRTC’s wireless code of conduct • MTS supports development of uniform national code • Consumer protection legislation already exists in Manitoba • Support several suggested initiatives: unlocking of devices; clear disclosure of pricing; effective notification of usage • Code should set minimum standards for transparency while fostering competition and investment mtsallstream.com | MBT : TSX Page 27