Manitoba Telecom Services Inc. reports 2014 fourth-quarter and full-year results

Learn more about Manitoba Telecom Services Inc.'s 2014 results by visiting www.mtsallstream.com/investors/financials.

Consolidated

  • Jay Forbes appointed new CEO, launches strategic review
  • Board of Directors declares $0.425 per share Q1 2015 cash dividend

MTS

  • Strategic services revenues up 3.6%
  • Customers with bundled services up 5.7%; 57.5% of bundled customers choose four-, five-, or six-service bundles

Allstream

  • Converged IP revenues up 10.4% in Q4 2014 and 8.0% for full year 2014

WINNIPEG, Feb. 4, 2015 /CNW/ - (TSX:MBT) Manitoba Telecom Services Inc. ("the Company"), including its two primary operating subsidiaries, MTS Inc. ("MTS") and Allstream Inc. ("Allstream"), today reported results for the quarter and year ended December 31, 2014.

Consolidated

Consolidated financial results

($ millions, except EPS and capital expenditures/revenues)

2014


2013


Revenues

1,612.0


1,633.7


EBITDA1

565.9


551.3


EPS2

$1.70


$(1.24)


Free cash flow3

154.5


121.0


Capital expenditures/revenues

17.9%


18.1%


1 The Company 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 77.6 and 68.2 million for the twelve months ended December 31, 2014 and December 31, 2013, respectively. The increase in the number of weighted average shares outstanding is due to the December 2013 issuance of 8,855,000 common shares and participation in the Company's dividend re-investment program.

3 The Company defines free cash flow as "cash flows from operating activities less capital expenditures, and excluding changes in working capital, pre-funded pension solvency payments, pension plan lawsuit payments, spectrum costs, and non-cash taxes". See the "Notes" section of this news release for further information.

The Company's 2014 financial performance reflects a strategic focus on delivering solid cash flows by leveraging investments in MTS's wireless and broadband networks in Manitoba and Allstream's Internet protocol ("IP") fibre network nationally.

  • Revenues: strong revenue growth from wireless data, converged IP, broadband, and EPIC Information Solutions ("EPIC") were insufficient to offset legacy revenue declines, and the loss of wireless wholesale revenues.
  • EBITDA: up over 2013 mainly due to transaction and restructuring costs in 2013 and 4.9% growth in revenues from strategic lines of business in 2014, partly offset by legacy revenue declines.
  • Earnings per share ("EPS"): up from 2013, mainly due to the 2013 pension plan decision costs, the write-down of Allstream's long-term assets, and transaction and restructuring costs. 2014 EPS was impacted by increased depreciation and amortization expense due to Allstream being held for sale in 2013, partly offset by the scientific research and experimental development investment tax credits ("SR&ED ITCs").
  • Free cash flow: up from 2013 mainly due to increased EBITDA, lower finance costs and lower capital expenditures.
  • Capital expenditures: $288.3 million, down from 2013. When adjusted for the $23.6-million SR&ED ITCs recorded in 2014, capital expenditures were up $15.9 million or 5.4% over 2013, in line with the Company's 2014 plans to allow for investment in growth and strategic initiatives at MTS and Allstream.

Quarterly consolidated financial results









($ millions, except EPS)

Q4 2014


Q3 2014


Q2 2014


Q1 2014


Q4 2013

Revenues

404.8


402.4


403.3


401.5


408.5

EBITDA1

135.7


140.1


142.5


147.6


128.0

EPS2

$0.31


$0.47


$0.37


$0.54


$(1.25)

Free cash flow3

20.1


27.6


34.0


72.8


3.6

Capital expenditures

81.8


84.7


78.2


43.6


87.7

1 The Company 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 78.1 million for the three months ended December 31, 2014; 77.7 million for the three months ended September 30, 2014; 77.4 million for the three months ended June 30, 2014; 77.1 million for the three months ended March 31, 2014; and 70.3 million for the three months ended December 31, 2013. The increase in the number of weighted average shares outstanding is due to the December 2013 issuance of 8,855,000 common shares and participation in the Company's dividend re-investment program.

3 The Company defines free cash flow as "cash flows from operating activities less capital expenditures, and excluding changes in working capital, pre-funded pension solvency payments, pension plan lawsuit payments, spectrum costs and non-cash taxes". See the "Notes" section of this news release for further information.

More information regarding Q4 2014 results can be found in the Company's 2014 annual MD&A, which is available on the Company's website at http://www.mtsallstream.com/investors/financials and is available at www.sedar.com.

MTS

MTS operating revenues





%






%

($ millions)

Q4 2014


Q4 2013


variance


2014


2013


variance

Wireless

91.4


93.6


(2.4)


365.7


375.3


(2.6)

Broadband and converged IP

62.0


59.0


5.1


241.9


228.1


6.0

Information solutions

5.1


3.4


50.0


22.4


4.5


n.a.*

Unified communications, security and monitoring

9.9


12.0


(17.5)


36.9


35.8


3.1

Local access

59.7


59.7



241.5


251.9


(4.1)

Long distance and legacy data

15.9


17.4


(8.6)


65.8


71.0


(7.3)

Other

7.0


6.3


11.1


27.6


28.4


(2.8)

Total operating revenues

251.0


251.4


(0.2)


1,001.8


995.0


0.7

* not applicable












MTS delivered overall growth in revenues from strategic services (wireless, broadband and converged IP and information solutions), up 3.6% over 2013, which was offset by declines in legacy lines of business (local access, long distance and legacy data). Internet and IPTV segments are performing well, providing solid growth in both subscribers and revenues. MTS has performed well in its wireless business with 1.0% growth in subscribers maintaining its market share in a competitive four-player wireless market. MTS's strong wireless data revenues, post-paid subscriber growth and low churn reflect the underlying strength of its competitive market position, while facing some of the most aggressive wireless price competition in Canada, and a decline in wireless wholesale revenues.

MTS wireless revenues





%






%

($ millions)

Q4 2014


Q4 2013


variance


2014


2013


variance

Subscriber revenues

89.4


88.4


1.1


353.4


352.1


0.4

Wholesale revenues

2.0


5.2


(61.5)


12.3


23.2


(47.0)

Total wireless revenues

91.4


93.6


(2.4)


365.7


375.3


(2.6)

  • Wireless subscriber revenues: up from 2013, benefiting from an increase in wireless data revenues, and post-paid subscriber growth which was 2.3% for the year, partly offset by a decline in voice revenues driven by competitive pricing pressure in Manitoba. Currently, 74% of MTS's growing post-paid subscriber base now has data plans, driven by increasing demand for smartphones and data usage. Since 2013, subscribers with data plans increased by 33,735, or 12.3%, reflecting the value of MTS's feature-rich data plan offering and contributing to industry-leading post-paid churn of 0.96%.
  • Wireless wholesale revenues: down as expected, as other carriers move their customers from MTS's legacy CDMA network to their own networks. Revenues from CDMA roaming were down from $16.7 million in 2013, to $9.1 million in 2014.

MTS broadband and converged IP revenues





%






%

($ millions)

Q4 2014


Q4 2013


variance


2014


2013


variance

Internet revenues

32.7


30.6


6.9


128.5


117.7


9.2

IPTV revenues

21.9


21.5


1.9


85.2


82.0


3.9

Converged IP revenues

7.4


6.9


7.2


28.2


28.4


(0.7)

Total broadband and converged IP revenues

62.0


59.0


5.1


241.9


228.1


6.0

  • Internet revenues: up over 2013, resulting from an increase in the high-speed Internet subscriber base and growth in residential high-speed average revenue per user, which reflects the increasing popularity of MTS's competitive Internet offering and demand for premium high-speed service.
  • IPTV revenues: up over 2013, driven by IPTV subscriber growth, reflecting the quality of MTS's feature-rich television offering. As at December 31, 2014, 90.8% of MTS's increasing IPTV subscriber base subscribed to its premium IPTV service - MTS Ultimate TV®.

Information solutions revenues

  • EPIC was acquired in September 2013 and has performed as expected, providing $22.4 million in revenues in 2014. This line of business will eventually include revenues generated by MTS's new data centre. Construction of the data centre is on track, with the opening in mid-2015.

MTS unified communications, security and












monitoring revenues





%






%

($ millions)

Q4 2014


Q4 2013


variance


2014


2013


variance

Unified communications revenues

6.7


8.8


(23.9)


24.0


23.1


3.9

Security and monitoring revenues

3.2


3.2



12.9


12.7


1.6

Total unified communications, security and monitoring

revenues

9.9


12.0


(17.5)


36.9


35.8


3.1

  • Unified communications revenues: up over 2013, due to greater hardware sales.
  • Security and monitoring revenues: up over 2013, reflecting increased alarm monitoring revenue.

MTS legacy services revenues





%






%

($ millions)

Q4 2014


Q4 2013


variance


2014


2013


variance

Local access revenues

59.7


59.7



241.5


251.9


(4.1)

Long distance revenues

8.7


9.6


(9.4)


36.7


40.4


(9.2)

Legacy data revenues

7.2


7.8


(7.7)


29.1


30.6


(4.9)

Total legacy revenues

75.6


77.1


(1.9)


307.3


322.9


(4.8)

  • Local access revenues: down from 2013, reflecting a combination of declines in residential local access lines resulting from wireless substitution and a reduction in business local access lines.
  • Long distance revenues: down from 2013, mainly due to decreased long distance rates and customers replacing long distance calling with email, text messaging and social networking.
  • Legacy data revenues: down from 2013, as a result of customers continuing to migrate towards converged IP services.

Allstream

Allstream operating revenues





%






%

($ millions)

Q4 2014


Q4 2013


variance


2014


2013


variance

Converged IP

68.0


61.6


10.4


261.3


241.9


8.0

Unified communications, hosting and security

22.2


20.0


11.0


78.5


76.0


3.3

Local access

31.9


37.1


(14.0)


133.7


154.7


(13.6)

Long distance and legacy data

31.3


35.9


(12.8)


132.1


155.5


(15.0)

Other

8.2


11.7


(29.9)


38.5


45.5


(15.4)

Total operating revenues

161.6


166.3


(2.8)


644.1


673.6


(4.4)

Allstream's 2014 performance reflects its continuing transition to an IP-based company, with strong growth in IP revenues, offset by declining legacy services revenues.

Allstream converged IP





%






%

(revenues in $ millions)

Q4 2014


Q4 2013


variance


2014


2013


variance

Converged IP revenues

68.0


61.6


10.4


261.3


241.9


8.0

Converged IP gross margin %

73.2%


75.2%


(2.0) pts


73.2%


75.1%


(1.9) pts

Fibre-fed buildings







3,215


3,003


7.1

  • Converged IP revenues: up from 2013, building on the momentum of sales efforts and installation progress. Shared Services Canada circuit installations are nearly 85% complete, and contributing $8.1 million in revenues in 2014. Once completed this contract will represent $1.4 million of monthly recurring revenues.

Allstream unified communications, hosting and security revenues

Revenues up from 2013, mainly due to increased service contracts and growth in hosting.

Corporate update

($ millions)

Q4 2014


Q4 2013


variance


2014


2013


variance

Local access revenues

31.9


37.1


(14.0)


133.7


154.7


(13.6)

Long distance revenues

15.4


17.7


(13.0)


66.7


76.7


(13.0)

Legacy data revenues

15.9


18.2


(12.6)


65.4


78.8


(17.0)

Total legacy revenues

63.2


73.0


(13.4)


265.8


310.2


(14.3)

  • Local access revenues: down from 2013, partly due to Allstream's decision to exit from low-margin resold business lines and pricing pressures.
  • Long distance revenues: down from 2013, mainly due to decreased volumes as customers replace long distance calling with alternative forms of communication, often migrating to IP-based services.
  • Legacy data revenues: down from 2013, largely due to a combination of competitive churn, customer migration to IP-based services and re-pricing of services.

The Board of Directors ("the Board") appointed Jay Forbes Chief Executive Officer of Manitoba Telecom Services Inc., effective January 1, 2015. Prior to joining the Company, Jay served as President and CEO of information services provider Teranet, President of Ingram Micro's European, Middle Eastern and African operations and President and CEO of Aliant, where he transformed the company into the second-largest regional local exchange carrier in North America.

Pensions
Supreme Court of Canada decision
The Company is continuing to implement the settlement agreement reached with its MTS unions and retiree representatives, which was previously announced by the Company on September 24, 2014 and approved by the Manitoba Court of Queen's Bench on November 3, 2014. The settlement agreement provides for the distribution of $140 million plus interest at a rate of 2% per annum from July 1, 2014 to November 3, 2014, with approximately $28 million paid by the Company directly to MTS employees who are members of the Manitoba Telecom Services Inc. and Participating Subsidiaries Employee Pension Plan (the "MTS Plan") and approximately $112 million distributed from the MTS Plan to retirees and other persons with interests in the MTS Plan. In 2014, an initial distribution of $15.0 million was paid by the Company and $39.9 million was paid by the MTS Plan. The remaining distribution to MTS employees will be paid directly from the Company on February 6, 2015, while the remaining payments from the MTS Plan to retirees and the majority of other persons with interests in the MTS Plan are also being distributed the week of February 6.

Solvency deficiency
During 2014, the Company's pension plans performed strongly and generated an average return exceeding 10%. However, falling interest rates have increased the Company's solvency deficit from $206 million at January 1, 2014 to an estimated $395 million at January 1, 2015.

Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.425 per share for the first quarter of 2015, payable on April 15, 2015 to shareholders of record at the close of business on March 16, 2015.

The first-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
MTS will hold its fourth-quarter and annual 2014 results conference call with the investment community on Wednesday, February 4 at 5 p.m. (Eastern Time). Participants include Jay Forbes, Chief Executive Officer and Wayne Demkey, Chief Financial Officer.

To participate, please dial toll-free 1-888-231-8191 or 647-427-7450. A replay will be available until February 11, 2015 by dialing 1-855-859-2056 and entering passcode 64090691.

Investors, media and the public are invited to participate on a listen-only basis by logging into the live audio webcast of the conference call on the Company's website (www.mtsallstream.com/investors) or by entering http://event.on24.com/r.htm?e=923158&s=1&k=DFBE54A790EA1EE9768F25AAC985D298.

A replay of the conference call will be available on the Company's website for one year.

Notes

EBITDA

($ millions)

Q4 2014


Q4 2013


%
variance


2014


2013


%
variance

Operating revenues

404.8


408.5


(0.9)


1,612.0


1,633.7


(1.3)


Operating expenses

(356.4)


(349.8)


(1.9)


(1,363.2)


(1,356.3)


(0.5)


Transaction and restructuring costs


(13.5)


n.a.*



(35.2)


n.a.*


Depreciation and amortization

87.3


82.8


(5.4)


317.1


309.1


(2.6)

EBITDA

135.7


128.0


6.0


565.9


551.3


2.6

* not applicable












(1) The Company defines EBITDA as "earnings before interest, taxes, depreciation and amortization, and other income (expense)". The term "EBITDA", as it relates to 2014 and 2013 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.

Free cash flow





%






%

($ millions)

Q4 2014


Q4 2013


variance


2014


2013


variance

EBITDA

135.7


128.0


6.0


565.9


551.3


2.6

Add back (deduct):












Other income (expense)

(1.7)


(1.0)


(70.0)


(2.5)


(0.8)


n.a.*

Finance costs

(15.4)


(20.2)


23.8


(65.9)


(81.1)


18.7

Current cash income tax (expense) recovery


0.5


n.a.*


(0.2)


0.5


n.a.*

Loss on disposal of assets

3.6


1.2


n.a.*


6.0


3.1


(93.5)

Deferred wireless costs

(23.8)


(21.2)


(12.3)


(71.1)


(72.2)


1.5

Pension funding and net pension expense

3.5


4.2


16.7


11.9


16.9


29.6

Other operating activities, net


(0.2)


n.a.*


(1.3)


(0.7)


(85.7)

Capital expenditures, net of SR&ED ITCs

(81.8)


(87.7)


6.7


(288.3)


(296.0)


2.6

Free cash flow for the period

20.1


3.6


n.a.*


154.5


121.0


27.7

* not applicable











(2) The Company defines free cash flow as "cash flows from operating activities, less capital expenditures and excluding changes in working capital, pre-funded pension solvency payments, pension plan lawsuit payments, spectrum costs and non-cash taxes". Free cash flow is the amount of discretionary cash flow that the Company has for making additional investments, paying dividends, buying back shares and/or retiring debt. The term "free cash flow", as it relates to 2014 and 2013 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.

(3) More information can be found in the Company's 2014 annual MD&A, 2014 audited consolidated financial statements for the year ended December 31, 2014 and 2014 Annual Information Form, which are available on the Company's website at www.mtsallstream.com/investors/financials and at www.sedar.com.

Forward-looking statements disclaimer

This news release includes forward-looking statements and information (collectively, "statements") including, but not limited to, statements pertaining to the Company's corporate direction, business opportunities, operations, financial objectives, future financial results and performance, 4G Long Term Evolution ("LTE") wireless network expansion, fibre-to-the-home ("FTTH") deployment, national IP fibre network expansion, pension funding, as well as other statements that are not historical facts. 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. All forward-looking statements are made pursuant to the safe harbour provisions of applicable Canadian securities legislation.

Forward-looking statements are subject to risks, uncertainties and assumptions. As a consequence, actual results in the future may differ materially from any forward-looking conclusion, forecast or projection, whether expressed or implied. Therefore, forward-looking statements should be considered carefully and undue reliance should not be placed on them.

Please note that forward-looking statements in this news release reflect Management's expectations as at February 4, 2015, and thus, are subject to change thereafter. 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 Audit Committee and approved by the Company's Board of Directors.

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 2014 annual MD&A, which is available on the Company's website at www.mtsallstream.com/investors/financials and at www.sedar.com.

About Manitoba Telecom Services Inc. (MTS Allstream)
MTS Allstream (trading symbol: MBT) is one of Canada's leading national communications solutions companies, with more than 100 years of experience and approximately 5,000 employees across Canada. Providing full-service telecommunications support for residential and business customers in Manitoba, MTS offers the latest in wireless technology, broadband services, IPTV, voice services, home security, information solutions, and an extensive range of business solutions. Across Canada, Allstream is a leader in IP communications and the only national provider focused exclusively on the business telecommunications market. MTS Allstream has nearly two million customer connections spanning business customers across Canada and residential consumers throughout Manitoba. The Company's extensive national fibre optic network spans more than 30,000 kilometres. MTS Allstream has been recognized for leadership in social responsibility and governance practices.

MTS Allstream's common shares are listed on the TSX (trading symbol: MBT). For more information about the MTS Allstream group of companies, please visit: www.mtsallstream.com.

SOURCE Manitoba Telecom Services Inc.

For further information: Investors: Paul Peters, Investor Relations, 204-941-6178, investor.relations@mtsallstream.com; Media: Melanie McKague, Corporate Communications, 204-941-8576, media.relations@mtsallstream.com

RELATED LINKS
http://www.mts.mb.ca

Organization Profile

Manitoba Telecom Services Inc.

More on this organization

MTS Allstream

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890