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1September 2010For additional information or a copy of this presentation,please visit www.mtsallstream.com
2Safe harbour noticeThis presentation contains certain forward-looking information. Material factorsor assumptions were applied in drawing conclusions or making a forecast orprojection reflected in such forward information. Actual results may differmaterially from a conclusion, forecast or projection in such forward-lookinginformation. Additional information about such material factors andassumptions can be found in MTS’s filings with the Canadian securitiesregulatory authorities. Except as required by law, MTS disclaims any intentionor obligation to update or revise any forward-looking statements, whether as aresult of new information, future events or otherwise.
3Corporate overview
4Corporate profileMTS Allstream (TSX: MBT)Serving customers for more than 100 yearsMore than 1.94 million customer connectionsRevenues of 1.8 billion in 200930,000 kilometre national IP fibre network2,000 buildings in Canada connected with fibre6,000 employees – one of Canada’s topemployersMTSAllstream#1 in all telecom markets in ManitobaHighest in-region margins in Canadiantelecom industryCoast-to-coast national IP fibre networkfootprintA leading competitor to Bell and Telus innational business markets
5MTS Allstream product linesMTSWirelessHigh-speed InternetTelevision servicesConverged IPUnified communications, security andmonitoring servicesLocal accessLong distance and dataAllstreamConverged IPUnified communications and securityLocal accessLong distance and data
6First half 2010 (“H1/10”) summaryConsolidated financial results continue to reflect:Aggressive price competition from our main cable competitor in ManitobaImpact of the economic downturn on Allstream’s operationsUpdated 2010 financial outlook reflects H1/10 performance and revisedexpectations for balance of yearMTS continues to have strongest operating metrics, highest incumbentEBITDA margin in the Canadian telecom industry and the strongestcompetitive position vs. its cable competitorEarly results from 2010 strategic investments ahead of planAllstream’s EBITDA performance consistent for prior three quartersOn track to reach between 30 million to 40 million in annualized costsavings by year end 2010New dividend policy 70% to 80% of MTS free cash flows represents a morestable base and continues to provide an attractive yield
72010 strategic imperativesMaintain industry leading position with strong market share across allconsumer products lines - wireless, HSI, TV and wireline voiceDrive growth in IP-based services and related national market shareExpand fibre network and deploy innovative consumer bundlesAggressively improve cost structureProvide the best customer experienceProduce strong cash flows in support of our dividend policy
8Q2 2010 financial results (continuing operations)2010(in millions , except 0.66Free cash l expenditures/revenue13.3%Results sequentially in line with prior two quarters
9Proud recipient of numerous awards2008 Competitive Strategy LeadershippremierPARTNER2008 Partner of the Year2008 Community Contribution Award2008 Business Innovation
10MTS
11MTS strategic position (Manitoba)Industry-leading margins, strong cash engineMarket-leader in ManitobaFull-service provider with strong customer relationshipsPervasive infrastructure and strong brand recognitionBest distribution channels and richest bundling capabilitiesOnly incumbent telco in Canada able to offer a five product bundleAccelerating strategic investment in FTTH technology to secure and extendMTS’s competitive advantages in the Manitoba market
12Market leadership in ManitobaHighest in-region market share for a Canadian incumbent81%55%58%34%WirelineWirelessInternetMTS TV**Greater Winnipeg market
13Television serviceOffering digital television service since 200334% market share (Greater Winnipeg)Launched next generation of IPTV in 2009Provides most-advanced television experiencein Canada with whole home PVRBundled product provides access to fastestMTS Internet speeds, up to 32 MbpsdownstreamService currently available to 92% ofWinnipeg households
14Television performanceRevenue (in millions)6050 49.7Subscribers95,000 53.8 42.490,00040 28.53085,00080,000201075,000070,000200720082009H1 2010TV revenues grew to 28.5 million inH1/10 – up 7.5% from 26.5 million inH1/09ARPU rose 2.3% in H1/10Continuing to experience strongcustomer demand
15Manitoba wireless performanceSubscribers469,744458,478 459,554451,916446,293438,300Q1 2009Q2Q3Q4Q1 2010Q2Stable ARPU; north of 5658% growth in wireless data revenues in Q2No new wireless entrants expected in near termCurrently jointly building HSPA network with RogersCDMA alliance with Sprint NextelHighest wireless market share in Manitoba
16Lowest local NAS loss vs. peers* Unique bundles contributing to improving trend in NAS erosionNumber of customer bundles up 10.1% in H1/10-5.5%MTS-8.2%Telus-8.1%BCE* Residential Q2 2010 v. Q2 2009; source: company financials.Meeting the challenge of local competitionResidential line losses still industry-leading at 5.5%
17Multi-year strategic investment in FTTH in ManitobaOver the next five years, MTS plans to accelerate FTTH technologydeployment across ManitobaTo face cable competition, expanding in 20 locations with no VDSL facilitiesExpected to strengthen MTS’s product leadership and create growth opportunity 125 million FTTH program expected to pass almost 120,000 homes inManitoba by year end 2015Broadband coverage expected to reach 65% of Manitoba households by2015 with either FTTH or VDSLExpect VDSL footprint to cover 96% of Winnipeg by early 2011Best VDSL and FTTH coverage in Canada for incumbentWill enable MTS to provide customers with access to its mostadvanced high-speed Internet (100Mbps with fibre) and television servicesProvides solid opportunities for growth in TV, broadband and bundlesLeverage HSPA billing environment to create single billing platformKeeping MTS ahead of the competition
18Allstream
19Allstream strategic positionNational IP fibre network spanning more than 30,000 km2,000 buildings with fibre1,000 buildings with copperCan reach 65% of corporate Canada on a cost-effective basisMore than 70,000 business customersPortfolio of innovative IP servicesRe-positioning Allstream business to benefit from strong demand for IP servicesStrategically investing in fibre network in targeted markets to expand reach andimprove profitability
20Q2 2010 Allstream operating highlightsAllstream resultsRevenues and EBITDAdecreased reflecting strongereconomy prior to Q3/09Sequential EBITDAimprovement of 2.3%Total business revenue declines per 0%-4.0%-6.0%Encouraged by IP salesmomentum in Q2Highest level over the pastsix quarters-8.0%-10.0%-12.0%AllstreamVerizonAT&T* Source: BMO Capital Markets; Company reportsAllstream experiencing same trends as other majorenterprise providers
21Lowest business access lines loss vs. 7.5%-8.7%Allstream business access lines compares favourably to peersMeeting the challenge of competition* Source: company financials Q2 2010
22Repositioning Allstream to cash neutralStrengthening and positioning business to benefit from strong demandfor IP-based products and servicesFastest growing portion of the 10 billion Canadian telecom enterprise marketMore than 25% of Allstream’s business generated from converged IPSolid track record with three year CAGR in IP revenues more than 10%Allstream’s highest margin product with average gross margin of 72%Pursuing disciplined metropolitan network expansion to drive IP growthand margin improvementThree year plan to extend fibre to an additional 675 multi-tenant buildingswithin 200 meters of existing national network in Toronto, Montreal andVancouver2010 investment success-based, up to 15 millionEnhancing ethernet capabilities in collocation areasMarket in select buildings estimated to represent 200 million revenueopportunity
232010 Canadian Ethernet & IP market opportunity*Total opportunity 3.8 B in 2010* 1.2 B 700 M 1.4 BLegacy data conversionCAGR (11.3%)EthernetLAN, DWDMCAGR 5.5%MPLSIPVPN MNSCAGR 15% 500 M**Global MPLSCanadianMultinationalsCAGR 15%* estimated addressable market** Sone & Associates 2010 CDN Data Market Report
24Repositioning AllstreamConverged IP revenues( millions)An IP-centric carrier with enhancedmargins300Through lower telco costs250Improved efficiencies200Reduced or eliminated legacy servicessupport150Highest margin product line –Converged IP100Expected to represent about 35% oftotal revenues by 201250020062007200820092010E2011E2012E
25Allstream trends over the next few yearsAllstream revenue trendsIP expected to grow at 10% to12%LD and legacy data revenuesexpected to decline between9% and 11%Other revenue lines (localaccess and unifiedcommunications) expected toremain relatively stable2010E2011EConverged IP2012E2013ELegacy Data and LD2014ELocal and other2015EInvestment in fibre network willenable shift of more business tohigher speed services
26Repositioning AllstreamAs IP sales grow, results expected to meaningfully improve as businessmoves to cash flow neutralCapital will be mostly success-based and around 100 million annuallyOn-net focus expected to lead to lower telco and operating costsOpportunity to benefit from changes to the foreign investmentrestrictions in telecom which is positive for AllstreamPotentially enables foreign investor interest in AllstreamPotentially enables establishment of strategic partnerships with a foreignprovider with customers in Canada
27Financial overview andperformance
282010 financial outlook (continuing operations)Updated outlookOriginal outlookRevenues 1.740 B to 1.790 B 1.780 B to 1.880 BEBITDA 570 M to 600 MEarnings per share 1.80 to 2.15Free cash flow 160 M to 190 M 175 M to 225 M14% to 16% ofrevenues14% to 16% ofrevenuesCapital expenditures 585 M to 635 M 2.00 to 2.15Updated outlook includes low end of previous outlook ranges
29Revised dividend policyMTS free cash flowforecasts support ourrevised dividend policyDividend and new MTSstrategic investmentsexpected to be fullyfunded from MTSoperationsMTS forecasted free cash flowcompared to new annualized dividend200.0 1.70 Annualized d dividend policy 70% to 80% ofMTS free cash flows representing 6.2% yield**Based on Aug 5, 2010 share price.
30Strong history of returning cash to shareholdersDividends( millions) 412.6Share Buybacks 891.63002502001501005001997 199819992000 200120022003 200420052006 200720082009H12010 2.7B returned to shareholders since 1997
31Leading peers in total return*200%MTS 150%Rogers 100%TELUS50%BCE0%20002009H12010-50%-100%*Total return including reinvestment of dividends from Dec. 31, 1999 to June 30, 2010. Source: BloombergStrong track record of delivering shareholder value
32Credit metricsPeer Group Net Debt/EBITDA *MTS Net Debt/EBITDA *1.9x1.7xMTS1.6xBCE1.7x1.2xTELUS20071.3x2008* As at June 30, 2010Investment grade credit ratings2009
33Focus on cost efficiencyAnnualized cost reductions 58.4(in millions) 41.6EBITDA margins 30 - 40 29.734%34%34%33%200720082009H1 2010 29.2H1/102007200820092010E 390 million in annualized savingsachieved since 20052010 program target range is 30million to 40 million 29.2 million achieved H1/10EBITDA margin from continuingoperations stable2010 expectation is for continuedstabilityMargins remained stable throughrecessionLong history of disciplined cost management
34Unique tax assets – no cash tax payment before 2019Estimated NPV tax assets atJune 30, 2010: 320MRevised multi-yearforecasts extend tax sheltertwo more years20102011201220132014201520162017Tax asset worth 5.00 per share20182019
35Long history of stabilityRevenues( millions)462455165Q1 2007171Q2477464165Q3464155Q4169Q1 2008472467171Q2EBITDA468464165Q3157Q4451163Q1 2009453451159Q2157Q3442146Q4145Q1 2010461149Q2* Results adjusted for discontinued operations
36MTS Allstream summaryMTS provides solid foundation for companyStrategically investing in FTTH in Manitoba to ensure MTS’sleadership and competitiveness for years to comeAllstream positioned to benefit from expected strong demandgrowth for IP products and an improving economyDemonstrated stability over time based on strong fundamentals,regional market strengths, strong financial metrics and attractivedividend
37Appendix – definitionsContinuing operations:We provide information that refers to our performance from continuing operations to assist investors inunderstanding the performance of our Company.Continuing operations in 2010 excludes our non-telecommunications information technology consulting business,which has been classified as discontinued operations; restructuring costs; costs related to our high-speed packetaccess (“HSPA”) deployment and related billing implementation.Continuing operations in 2009 excludes our non-telecommunications IT consulting business, which has beenclassified as discontinued operations; restructuring costs; the costs to transition certain wireless servicerequirements away from Bell Mobility to new suppliers and to our wireless platform; costs related to our HSPAdeployment and related billing implementation; costs related to certain regulatory proceedings; certain costsassociated with our transition from Canadian GAAP to International Financial Reporting Standards (“IFRS”); arebate related to use of deferral account funds pursuant to Telecom Decision CRTC 2008-1 (“Decision 2008-1”); theimpact of changes in statutory income tax rates and other rate adjustments on our tax asset; and solvency fundingto our pension plans.EBITDA:We define EBITDA as earnings before interest, taxes, amortization and other income. EBITDA should not beconstrued as an alternative to operating income or to cash flows from operating activities (as determined inaccordance with Canadian GAAP) as a measure of liquidity.Free cash flow:We define free cash flow as cash flow from operating activities, less capital expenditures, and excluding changes inworking capital. Free cash flow is the amount of discretionary cash flow that we have for purchasing additionalassets beyond our annual capital expenditure program, paying dividends, buying back shares and/or retiring debt.
2015 with either FTTH or VDSL Expect VDSL footprint to cover 96% of Winnipeg by early 2011 Best VDSL and FTTH coverage in Canada for incumbent Will enable MTS to provide customers with access to its most advanced high-speed Internet (100Mbps with fibre) and television services Provides solid opportunities
