WINNIPEG – Manitoba Telecom Services, including its two operating divisions MTS and Allstream, has reported strong second quarter 2011 results and is increasing its financial outlook for revenues, EBITDA and EPS.
"Our past investments and strong focus on IP technology nationally and on unique bundles of home services in Manitoba contributed to another quarter of solid financial results for both MTS and Allstream," said Pierre Blouin, CEO.
MTS reports that the second quarter reflected strong growth in wireless, broadband and converged IP were offset by lower revenues from legacy services. As a result the company’s revenues were stable compared to the same period in the prior year. Solid EBITDA growth from both MTS and Allstream divisions contributed to MTS Allstream’s overall EBITDA growth of 8.6% in the second quarter year over year.
"We are pleased with the trends we saw in the second quarter. Overall, more customers are upgrading to higher value services, such as smartphones with larger data plans, higher-speed Internet plans and our premium Ultimate TV service," said Kelvin Shepherd, president of MTS. "This confirms that MTS’s value proposition – product leadership and innovative bundles at a fair price – is competitive and attractive to customers."
Earnings per share were $0.76 in the second quarter of 2011 – an increase of $0.22 or 40.7% compared to the same period in the prior year. The increase was mainly due to strong EBITDA growth and a $10.3 million decrease in depreciation and amortization expense. The depreciation expense decrease resulted from $20.7 million of additional scientific research and experimental development ("SR&ED") investment tax credits for the 2005 to 2008 taxation years recognized in the second quarter. It also reflects management’s increased focus on SR&ED investment over the past several years.
Free cash flow reached $57.8 million in the second quarter, compared to $33.3 million a year ago, due primarily to higher EBITDA and the impact of the $20.7 million one-time SR&ED investment tax credit adjustment. This was partly offset by higher wireless costs of acquisition related to wireless data growth.
MTS achieved $20.6 million in annualized cost savings in the first six months of 2011. Management says it remains on track to reach its full-year target of annualized cost savings of between $25 million and $35 million.
MTS expects strong growth in wireless, high-speed Internet, IP TV and converged IP revenues to continue into the second half of 2011, pushing revenue, EBITDA and EPS higher than original 2011 guidance ranges.
For 2011 it now expects revenues of $1.7 billion to $1.78 billion and EBITDA of $580 million to $610 million.
MTS’s revenues and EBITDA were up by 2.9% and 6.8%, respectively, in the second quarter of 2011 when compared to the second quarter of 2010. The increases were driven by strong growth in wireless, high-speed Internet, and IP TV revenues which increased collectively by 9.6% year over year.
MTS says its bundling strategy continues to deliver strong results, with bundled customers creating higher than average revenue and lower churn. The number of customers using MTS’s bundled services grew by 4.2% when compared to the same period of 2010.
Wireless revenues were up by 9.3% in the first half of the year when compared to the same period last year, driven by a 45.5% increase in wireless data revenue growth, higher average revenue per user and subscriber growth. Since the launch of its 4G wireless network on March 31, 2011, MTS has seen an increased demand for smartphones. In the second quarter, two thirds of gross additions signed up for a data plan which bodes well for continuing strong growth in wireless data revenues.
MTS’s broadband and converged IP revenues were up by 10.0% in the second quarter of 2011 when compared to the same period of 2010, reflecting increases in IP TV, high-speed Internet and converged IP revenues. IP TV revenues increased by 17.8% in the quarter, based on 2.3% subscriber growth and a 16.4% increase in average revenue per user, year over year.
In Selkirk, Manitoba, the first community where MTS deployed fibre-to-the-home technology starting in 2010, MTS says it is making excellent progress. Some 80% of Selkirk households are now eligible for fibre-to-the-home services, and MTS is experiencing a strong take-up of its premium Ultimate TV services in this community in connection with this deployment. MTS is also on track to launch its fibre-to-the-home technology in four new communities in rural Manitoba in the second half of the year – Steinbach, Dauphin, Thompson and The Pas.
"We are already seeing the benefits of our investment in our 4G wireless network in our financial results, and we are gearing up for the deployment of fibre-to-the-home technology in four new communities this fall," added Shepherd. "Our fibre-to-the-home plans are the most cost-effective way to improve our broadband capabilities in locations where we do not currently have existing VDSL broadband service and provides MTS with new growth and bundling opportunities."
In the second quarter of 2011, Allstream’s EBITDA improved by $4.6 million or 19.7% when compared to the same period in the prior year. It marks Allstream’s third consecutive quarter of year-over-year EBITDA growth. The company attributed the improved margins to lower operating costs, and lower restructuring expenses in the second quarter of 2011 compared to the same period in 2010.
Converged IP revenues were up by 10.6% in the second quarter when compared to the same period last year. Allstream is supporting this IP growth with continued success-based investments that are adding new fibre-fed buildings to its network.
