Introduction. Strategic Position

Transcription

1 Notice This presentation contains certain forward-looking statements and there are risks that actual results may differ materially from those contemplated by these forward-looking statements. Readers should consult Manitoba Telecom Services Inc. s filings with the Canadian securities commissions for further information on these risks. 1

2 Introduction Bill Fraser President & CEO Wayne Demkey Executive Vice-President Finance & CFO Cheryl Barker President & COO MTS Communications Inc Brad Woods Director Investor Relations Strategic Position Dominant Position in Manitoba Strong & Growing Cash Flows Industry-Leading Profitability Excellent Financial Flexibility Bell West Put Option 2

3 MTS Strategy EXPAND DEFEND TRANSFORM Strategic Elements Defend Local Long Distance Directory Transform Wireless Internet Expand Digital TV 3

4 Leadership Position - Manitoba The MTS Advantage Full Service Provider Customer Ownership/Relationship Brand Recognition Pervasive Infrastructure Defendable Market Leadership Position - Manitoba Lines of Business Local Long Distance Wireless Internet ** Market Share * 97% 76% 68% 55% * December31, 2003 **Combined high-speed & dial-up 4

5 Core Lines of Business Revenue Generating Units 1,200,000 NAS Wireless Internet TV 1,000, , , , ,000 0 Q Q Q Q Wireless Growth (%) Revenue Customers

6 Wireless ARPU* $56 $49 $50 $50 $60 Aliant Rogers AT&T Bell Canada MTS Telus Mobility Three months ended Sept 30 th, 2003 *Average monthly revenue per customer Wireless Postpaid Churn Rate* 1.1% 1.3% 1.8% MTS Bell Canada Rogers AT&T *Nine months ended Sept 30 th,

7 Wireless Manitoba Network Extensive Network Coverage 96% of population CDMA 800 MHz -- Winnipeg, Brandon & secondary locations CDMA 1.9 GHz -- Winnipeg Digital network supports wireless data applications Wireless Future Growth Drivers Increased penetration Wireless Data Launched 1xRTT Q4/02 in Winnipeg Allows for data transmission speeds up to 144 kbs; facilitates improvements in voice efficiencies Text messaging, downloadable ring tones, Camera phones, games 7

8 Wireless Penetration Rates 32% 36% 43% Manitoba 2003 Manitoba 2004 Canada 2004 Broadband Initiative Bandwidth enhancements for business & residential customers Matching investment to customer demand Major win; Manitoba government data network $50 M over 5 years; opportunity to expand High-speed Network Footprint Manitoba 79% Winnipeg & Brandon 96% 8

9 High-Speed Internet Market Share* 42% 46% 2002 *At December High-Speed Internet Customers * *At December 31 61,628 77,643 11,157 34, E Mid-Teen Growth 9

10 Internet Revenues ($ Millions) % High-Speed Service Offerings Residential DSL Starter Plan (128 Kbps) DSL High-Speed (up to 1.5 mbps) Price/Month $26.95 $39.95 Business Professional (up to 5.0 mbps) Network * (up to 5.0 mbps) Price/Month $69.95-$ $ $ * Includes router to create high-speed network connection 10

11 Broadband Growing Opportunities $220 $200 $180 VOD Interactive Entertainment Monthly Revenue Per Customer $160 $140 $120 $100 $80 $60 $40 $20 Telephony Basic Local Enhanced Long Distance Wireless Internet HSI Digital TV $0 Digital Television Opportunity Digital Television Opportunity Rationale Profitable growth opportunity First to market triple play: Voice, Internet & Television Excellent value proposition Leverages existing network, back office & brand strength Customer demand for alternative provider 11

12 Digital Television Winnipeg TV Market Distribution Cable + Satellite Satellite Antenna 9% Digital Wire line 20% 6% 3% Market Size No TV 3% Winnipeg Q Analog Cable 59% $100M+ MTS TV Over 200 TV channels currently Single set-top box Three simultaneous video signals High-speed Internet through same box On-screen calling features Fully digital MTS Portal Interactive guide 12

13 Digital Television MTS TV / High-Speed Internet Bundle Basic plus 6 channels & full high-speed Internet $69.95 per month ($10 savings) Launched October 2003 MTS TV customers with High-Speed Internet: Sept 30, % Dec 31, % Digital Television Customers 26,000-28, ,809 8,693 Jan 2003 Sept 2003 Dec E 13

14 Digital Television Network Coverage Targets * % E 42% 66% 2005E 85% *Percentage of Winnipeg at Dec 31st Digital Television Financial Projections 2004 Revenues EBITDA Positive $12-$14 M 2005 Net Income Positive

15 Bell West Put Option Rationale Exercised February 2, 2004 Estimated proceeds of $645 million Pretax gain in Q1/04 of $230 million Tax estimated at $43 million Attractiveness of the Return 24% on Bell Intrigna transaction 8% on all Bell West funding Proceeds due by August 3, 2004 Notice This presentation contains certain forward-looking statements and there are risks that actual results may differ materially from those contemplated by these forward-looking statements. Readers should consult Manitoba Telecom Services Inc. s filings with the Canadian securities commissions for further information on these risks. 15

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17 Financial Overview Baseline* 2003 Performance EPS 4.6% $1.83 EBITDA Revenues 2.1% 1.1% $448.4 M $844.7 M *Excludes impact from western operations and one-time charges Baseline Financial Performance ($ Millions) Revenues EBITDA EPS ($) ** ** *2002 excludes restructuring charge ** 2003 excludes restructuring charges

18 Financial Overview Baseline Operations Expense Per RGU* Twelve months ended December 31 $459 $436 $390 $390 $375 $ *Revenue Generating Units (NAS, Wireless, Internet,TV) Financial Overview Continual Focus on Profitability Baseline Cost Reductions: Re-engineering Initiatives Contract Renegotiations Workforce Reductions Bell Alliance Synergies 18

19 Debt Ratio 100% 39.1* *Proforma Total LT Debt * <5 Years Debt Portfolio Term To Maturity Schedule for LT Debt $461.3 M Weighted Average Cost % $379.4 M 5-7 Years >7 Years * At December 31, 2003 $81.9 M $ 0.0 M Average Term to Maturity years 19

20 Balance Sheet Strength 13.7 EBITDA/Interest* Manitoba Telecom BCE Aliant Telus A A A BBB MTS Aliant BCE Telus Rogers BB+ * EBITDA/Interest 9 months ended Sept 30, ** Standard & Poors long-term ratings as of Jan Financial Overview Baseline CAPEX ($ Millions) F 20

21 Baseline Capital Intensity * (Percent) % NexGen MTS (ex-nexgen) Long-Term Canadian Average ** E 2005E *Capex as a % of revenues **Source: RBC Capital Markets Sept Baseline Free Cash Flow * (Millions) $31 M $36 M * After dividends and excluding changes in working capital $45-50 M E 21

22 Cash Utilization Debt Reduction Share Buybacks Dividend Increases Accretive Core Acquisition with Identifiable Synergies Invest in Core Business for Growth Dividend Track Record ($/share) Quarterly Dividend Annualized % * Q4 01 Q4 02 Q4 03 *Since inception 22

23 Share Buybacks Repurchased 7.4 Million Shares Since 1999 Cash Utilization Cash Deployed Share Buybacks * Dividends Paid ** * From 1999 to March 2003 ** Dividends paid since 1997 $178 M $353 M $531 M 23

24 Baseline Financial Outlook 2004F EPS EBITDA Revenues 6-8% 3-5% 3-5% Summary Market Leader in Manitoba Industry Leading Profitability Proven Value Creation Strategies Return-Based investment Philosophy Attractive Risk Profile 24

25 Summary Strong Balance Sheet Excellent Credit Ratings Growing Cash Flows Consistent Cash Utilization Policy 25