WINNIPEG – MTS Allstream recorded double-digit customer and revenue growth in its wireless, high-speed Internet, digital TV and converged IP services in the first quarter ended March 31, according to financial results released May 8.
But the company had 3,000 fewer residential phone lines as continued competitive pressures impacted all lines of business related to MTS Allstream’s traditional legacy services in the quarter with customers migrating to newer IP-based growth services.
Although the number of residential phone lines was down 3,000 lines in the first quarter of 2007, the figure is about half the loss recorded in the same quarter of 2006. The improvement was attributed to MTS Allstream’s winback strategy, which provides customers with bundled product packages – local service, calling features, long-distance, high-speed Internet, digital television and home security offered through subsidiary AAA Alarm Systems Ltd.
“This represents our fifth consecutive quarter of solid performance gains,” said CEO Pierre Blouin.
Revenues for the wireless, high-speed Internet, digital TV, converged Internet protocol and unified communications ("the growth services") were up 9.7% to $173.9 million in the quarter from the same period a year ago. The growth services contributed about 37% of total revenues in the first quarter of 2007, up from about 33% in the first quarter of 2006.
Revenues in the first quarter of 2007 from the company’s legacy services were down by 8.8%, or by $28.4 million, from the previous year.
The number of wireless customers grew 11.6% compared to the same period a year earlier, with revenues increasing 13.9% to $61.3 million. The primary driver of the improved performance was the company’s growing cellular customer base, which rose 11.6% to 360,778 at March 31. More customers subscribing to enhanced data features contributed to higher wireless revenues and average revenue per user of $55.37 at quarter-end for a 2.7% improvement over the first quarter of 2006.
The number of high-speed Internet customers rose 18.2%, while revenues grew 12.3%. The company had 154,846 high-speed customers at March 31.
The amount of digital TV customers climbed 27% to 69,156 compared to the first quarter of 2006, with revenues jumping 41.4% to $9.9 million. The subscriber base represents a 28% market share in Winnipeg and surrounding area. The number of digital TV subscribers had surpassed 70,000 by April 24. The average revenue per subscriber (ARPS) for its TV service increased 5.3% to reach $46.80 in the quarter. A price increase was implemented in the quarter, and the TV service’s pay-per-view service that was implemented in the fourth quarter of 2006 also contributed to the improved ARPS. Movie Central on Demand was added to MTS’s digital TV service on February 13.
Revenues for MTS Allstream’s legacy services declined 12.8%, primarily because of re-pricing, churn and a drop in legacy data revenues related to decreased network traffic from AT&T and Rogers, which are migrating to their own networks.
Consolidated EBITDA for MTS Allstream was up 6.3% to $170.2 million in the first quarter of 2007 as a result of the increases in the growth services. Gains in the growth services were offset by revenue declines in long distance, legacy data, and local services.
MTS Allstream’s cost reduction initiatives also had a positive impact. The costs for the company’s 2007 efficiency program are expected to be $30 million to $40 million. It had incurred costs of $7.2 million as of March 31, including $3.9 million in restructuring expenses, $2.5 million in restructuring capital expenditures, and a restructuring charge of $8.5 million related to a workforce reduction in the fourth quarter of 2006. The 2007 efficiency program had achieved about $17 million in annualized saving as at March 31.
