Cable / Telecom News

MTS reports Q2 2016 results, provides update on BCE purchase

bce mts 2.jpg

Still waiting on regulatory approvals

WINNIPEG — With the release of its second quarter 2016 financial results late Wednesday afternoon, Manitoba Telecom Services (MTS) took the opportunity to update the investment community about its pending acquisition by BCE Inc. and its ongoing transformation efforts.

Since the announcement on May 2 that BCE intended to purchase MTS, the Manitoba telco received almost unanimous shareholder approval for the acquisition at a special MTS shareholder meeting held on June 23, and subsequently received approval from the Manitoba Court of Queen’s Bench on June 29.

“The overwhelming support shown by our shareholders in voting for the BCE transaction reaffirms our belief that this is the right step to take and that this transaction will provide compelling benefits, not only for our shareholders, but for our customers and for Manitobans,” Jay Forbes, MTS president and CEO, said in a news release announcing the company’s second quarter results.

“We quickly secured both shareholders and Manitoba Court approvals and we continue to work co-operatively with the regulators to secure the remaining regulatory approvals.”

MTS said it has made the necessary filings with the CRTC, the Competition Bureau, and Innovation, Science and Economic Development Canada (ISED), and it expects the BCE transaction to close in late 2016 or early 2017, once the required regulatory approvals have been granted.

Once the transaction is completed, the rebranded Bell MTS entity will operate as the headquarters for the Western Canada operations of BCE, and will focus on delivering the benefits of expanded broadband communications infrastructure, ongoing technology development and enhanced community investment in Manitoba, MTS said. As part of the acquisition deal, BCE has committed to a five-year, $1 billion plan to expand and offer advanced telecom services and products to Manitobans after the closing of the transaction, MTS added.

MTS and BCE have already released some details of their future investment plans, announcing in May that the companies plan to complete wireless coverage on Manitoba Highway 75 to ensure continuous broadband wireless coverage along Manitoba’s main transportation corridor linking Winnipeg and the United States. In addition, the two companies announced in July their strategy for expanding mobile and wireline broadband communications networks in rural, remote and indigenous communities in northern Manitoba.

MTS also provided an update regarding its business workstream transformation program, saying its management and back-office redesign and capital investment process redesign have been completed, along with its brand transformation, and customer service and online strategy roadmap. Workstreams launched so far in 2016 include: pricing, promotions and discounts rationalization; Information Services transformation; contact centre and channels transformation; online experience improvement; network and field services transformation; and procurement and working capital management processes upgrades.

MTS said it expects its transformation program will deliver annualized free cash flow improvements of approximately $100 million, with the majority of the improvements realized by the end of 2017. One-time cash costs associated with achieving these improvements of roughly the same amount are expected to be incurred over the same period, MTS said. As of the end of the second quarter 2016, MTS has implemented workstreams that are expected to generate $53 million in annual free cash flow savings, the company said in its news release.

“As we progress with the three-year transformation journey that we started in late 2015, we remain focused on serving our customers and transforming our business. These improvements are already having a material impact on our results with a 4.8% improvement in EBITDA before restructuring and transformation charges, and a near doubling of free cash flow per share in Q2 2016,” Forbes said.

MTS experienced only modest growth in operating revenues in Q2 2016, achieving $252.3 million in revenues, which represents only a $1.6 million or 0.6% increase from its Q2 2015 revenues of $250.7 million. However, its operations expense in Q2 2016 was down $3.9 million or 2.9% from Q2 2015, primarily due to the company’s voluntary workforce reduction program, launched in late 2015 to streamline back-office support functions. This program delivered savings in salaries and benefits amounting to $4.8 million in Q2 2016, which is in line with forecasted savings to be realized in 2016 of $17 million, MTS said.

Earnings per share from continuing operations was $0.16 in Q2 2016, down by $0.06 from Q2 2015, largely due to higher restructuring and transformation expenses, partially offset by lower operations expense, the company said.

Finally, MTS’s free cash flow of $54.5 million in Q2 2016 represented an 87.9% increase when compared to its Q2 2015 free cash flow of $29 million. The company’s free cash flow per share increased by $0.36 or 97.3% when comparing Q2 2016 to Q2 2015.

The full details of the company’s second quarter 2016 financial results can be found here.

www.mts.ca