NewsRelease. Manitoba Telecom Services Inc. Reports Solid 2008 Results; Achieves Annual Guidance

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1 Stock Symbol: MBT NewsRelease This news release contains forward-looking statements. For a description of the related risk factors and assumptions, please see the section entitled Forward-looking Statements Disclaimer later in this news release. This release discusses results from Manitoba Telecom Services Inc. s continuing operations. The results, and the definition of continuing operations, should be read in conjunction with Manitoba Telecom Services Inc. s fourth quarter 2008 management s discussion and analysis dated February 5, 2009 (available at the Investors section of which is incorporated by reference in this release. Manitoba Telecom Services Inc. Reports Solid 2008 Results; Achieves Annual Guidance 2008 Highlights Achieved guidance for revenue, EBITDA, EPS, capital expenditures and free cash flow from continuing operations Full-year revenue grows for the first time since 2005 Revenues from growth services increase by 11% Free cash flow from continuing operations up by 1% for the full year 2008 annualized cost reductions of $30 million, meeting top end of savings target WINNIPEG, MB, February 5, 2009 Manitoba Telecom Services Inc., which includes its principal operating subsidiary, MTS Allstream Inc. (the Company or MTS Allstream ) (TSX: MBT), one of Canada s leading national communications companies, today reported fourth quarter and full-year financial performance. MTS Allstream delivered solid results in 2008 as we continued to execute on our strategy, said Pierre Blouin, Chief Executive Officer. The company achieved its guidance on the strength of continued performance by our Consumer Markets division in Manitoba and a record level of new contract wins by our Enterprise Solutions division. In a challenging environment, we were able to grow full-year revenue, free cash flow 1, EBITDA 2 and EPS 3 while maintaining one of the strongest balance sheets in the telecommunications sector. This performance reflects the continued strength of the Manitoba economy and gives us confidence that we can achieve our plan for Full-year revenue from continuing operations 4 increased by 0.8% to $1,921.5 million, EBITDA from continuing operations increased by 1.0% to $661.8 million, and free cash flow from continuing operations was up 1.1% to $261.3 million. EPS from continuing operations for the year grew $0.09 or 3.1% to $2.98, which was in line with the Company s guidance. Overall EBITDA margin performance was stable at 34.4% for Growth services revenues, which include wireless, high-speed Internet, digital television, converged Internet protocol ( IP ) and unified communications services, increased by 11.3% to $845.4 million for the year. Growth services contributed 44.6% of total revenue in the fourth quarter of 2008 and

2 2 44% for the year, which is well ahead of the 41.8% and 39.8% contributions, respectively, for the same periods of Demonstrating its continued ability to improve its cost structure, the Company achieved annualized cost savings of $29.7 million in 2008, reaching the high end of its objective for the year. Over the past three years, MTS Allstream has achieved significant annualized cost savings and shifted its product mix toward growth services while at the same time increasing EBITDA by 2.4%. FINANCIAL HIGHLIGHTS * in millions of dollars, except per share amounts three months ended December 31 change fiscal year ended December 31 change EPS (4.8%) % EBITDA % % Free cash flow n.m % Growth services revenues % % Legacy services revenues (7.2%) 1, ,147.1 (6.2%) Revenues (2.6%) 1, , % * From continuing operations. MTS Allstream provides financial information on continuing operations in order to assist investors in understanding its underlying financial performance. MTS Allstream s definition of continuing operations excludes certain non-recurring items such as restructuring costs and the retroactive impact of regulatory decisions. For more information, please see MTS Allstream s fourth quarter 2008 management s discussion and analysis ( MD&A ) in the Investors section of For the fourth quarter of 2008, EBITDA from continuing operations increased by 1.2% to $156.7 million as compared to the same period last year. Free cash flow from continuing operations was up significantly in the quarter, increasing to $39.4 million, while EPS from continuing operations was $0.59 per share. In 2008, MTS Allstream delivered full-year revenue growth for the first time since 2005, along with continued solid results for EBITDA and a 1.1% increase in free cash flow, said Wayne Demkey, Chief Financial Officer. For 2009, we are well-positioned for continued success with a growing share of revenue from growth services, significant additional cost saving initiatives underway and the flexibility and certainty that comes from having a strong balance sheet. The Company s Board of Directors declared a cash dividend of $0.65 per share for the first quarter of 2009, which is payable on April 15, 2009 to shareholders of record on March 16, DIVISIONAL HIGHLIGHTS Enterprise Solutions division The Company s Enterprise Solutions division delivered solid performance for This division set a record for contract wins in 2008 with $331.5 million in new contracts, a 38% increase over $240.7 million in contract wins that were achieved in The Company achieved these gains by leveraging

3 3 improvements to its market focus and leadership in IP-based products, as well as its efforts to target the Canadian mid-market segment. Converged IP data revenues continued their strong performance in the fourth quarter of 2008, increasing by 10.4% over the same period in 2007, while IP-virtual private network ( IP-VPN ) customer count increased by 19.2% to 311, reflecting continued demand for innovative next generation IP-based services offered to business customers. The Enterprise Solutions division continued to win important new contracts, with recent business wins with HMV Canada ( HMV ), the Government of Newfoundland and Labrador, the City of Kamloops and the City of New Westminster, demonstrating the continued diversity of the customer base. Consumer Markets division On the strength of its well-developed bundling strategy and continued strong performance of growth services, the Consumer Markets division continued to deliver strong margin performance for its incumbent operations in Manitoba. For the fourth quarter of 2008, consumer high-speed Internet services once again delivered double-digit growth in revenues, as compared to the same period last year, with revenues increasing by 14.7% and was also very successful in 2008 overall, with revenue increasing by 19.2% and customers increasing by 6.3% in the full year as compared to Wireless revenues increased by 7.7% and customers grew by 10.2% year over year. In the fourth quarter of 2008, digital television revenues increased by 9.6% and customers increased by 10.1% as compared to the fourth quarter of For the full year, digital television revenues increased by 17.2% and the customer base increased by 10.1%. The Company s market share increased to 34%, with 84,500 customers in the city of Winnipeg, the largest market served by the Consumer Markets division. The ability to grow its digital TV base successfully in 2008 bodes well for the upcoming introduction of a new IPTV high-definition television service in Winnipeg OUTLOOK In 2009, MTS Allstream expects to deliver growth of up to 2% in overall revenue, EBITDA, EPS and free cash flow as it continues to execute on its long-term strategy. MTS Allstream expects to see stability in its Enterprise Solutions division, which will continue to benefit from a well-diversified customer base which includes a significant number of public sector customers, a strong sales backlog of $47 million, solid sales funnel, and from new efficiency initiatives launched in the third quarter of The Enterprise Solutions division has achieved stronger levels of recurring revenue during 2008 which will support its expected steady performance into The Consumer Markets division expects to deliver growth in 2009 supported by continued strong performance from wireless, high-speed Internet and digital television. Backed by bundle strategies and superior customer value proposition, this division has, to date, continued to deliver a best-inclass in-region margin performance in Manitoba for its residential customer base. This is expected to continue in 2009 as MTS deploys new and innovative IPTV services to customers in Winnipeg, its major market. The division will also be supported by a strong provincial economy in Manitoba. The most recent forecasts available for the Manitoba economy call for growth of 1.0% for MTS Allstream has doubled its target cost reduction range for 2009 to between $35 million to $45 million. It expects to reduce operating costs and enhance productivity by optimizing certain key internal business processes and refocusing the sales team based on a process launched in the third

4 4 quarter of MTS Allstream expects that these initiatives will also enable it to improve customer service by speeding order execution times. Benefiting from significant past investments in its network infrastructure and a strong balance sheet, the Company expects to maintain capital expenditures at 13% to 15% of revenues, while also achieving moderate growth in free cash flow. Free cash flow is expected to be between $250 million and $280 million, which will support the dividend to shareholders and all other cash requirements including pension solvency and restructuring costs. The Company has adopted a prudent expenditure and investment strategy that is scalable, providing flexibility to adjust the pace of investment according to economic conditions Financial Outlook Continuing Operations Revenues $1.900 B to $1.980 B EBITDA $645 M to $685 M EPS $2.90 to $3.20 Free cash flow $250 M to $280 M Capital expenditures 13% to 15% of revenues For assumptions underlying the Company s 2009 outlook, refer to Material Assumptions in the Company s release dated December 17, 2008 and its fourth quarter 2008 interim MD&A, which are filed on SEDAR and the Company s Web site. OTHER DEVELOPMENTS The following are various announcements made recently by MTS Allstream. Enterprise Solutions division announcements On February 4, 2009, MTS Allstream announced the award of several projects, in partnership with Plato Consulting, Infotech Solutions, and Tamarack Technologies, with the Government of Newfoundland and Labrador contracts that total over half a million dollars. Projects include the construction of a secure socket layer virtual private network that provides end-point security, access control and threat prevention and will be used by remote workers to securely access corporate networks. On January 23, 2009, MTS Allstream announced the signing of a 40-month contract extension with HMV. The contract extends a previous agreement between the two companies, providing HMV with managed multi protocol label switching, Internet, and voice communications; including toll-free and long-distance services. On December 16, 2008, MTS Allstream announced that it had been selected as the winner in the Solutions Awards category at the 2008 Microsoft Partner Program IMPACT Awards. The sixth annual IMPACT awards recognize excellence across the large and diverse community of Microsoft's Canadian technology partners. On December 16, 2008, MTS Allstream announced the signing of a three-year, $13.5 million contract extension with Selectcom Telecom. The contract services include a full suite of enterprise telecommunications services such as domestic long distance, international long

5 5 distance, calling cards, toll-free, multiprotocol label switching, Internet services, local lines and private lines. On December 16, 2008, MTS Allstream announced that it had completed a $1.2 million contract for Prairie Rose School Division for the provision and installation of a wireless wide area network to 28 locations within the school division, which covers an area spanning 1,400 square miles in southwest Manitoba. On December 15, 2008, MTS Allstream announced that the Royal College of Physicians and Surgeons of Canada (the College ), the national organization that oversees postgraduate medical education in Canada, selected MTS Allstream to implement the first phase of a business transformation project that will improve its efficiency with information and administrative processes to better serve the over 42,000 members of the College. On November 27, 2008, MTS Allstream announced that it had been certified as an approved scanning vendor. This service will help customers adhere to the payment card industry ( PCI ) data security standard ( DSS ). PCI DSS is an industry-wide standard developed by the major credit card companies. It requires merchants and service providers who store, process or transmit cardholder data to adopt information security controls and processes to ensure data confidentiality. This comprehensive standard helps protect cardholder data from fraud and identity theft. On November 6, 2008, MTS Allstream announced it had been named Mitel premierpartner of the year in Canada in recognition of its strong revenue performance and exceptional growth in the field of unified communications. As Mitel premierpartner of the year, MTS Allstream has demonstrated outstanding performance in a number of areas including its strong focus on the Mitel portfolio of unified communications platforms and applications and true engagement as a Mitel partner. Consumer Markets division announcements On January 27, 2009, MTS Allstream announced that it has been asked to support LG Electronics Canada ("LG"), the manufacturer of the LG 150 mobile handset, in LG's voluntary recall of approximately 13,000 LG 150 handsets sold by MTS. The recall follows a decision by Industry Canada, which regulates mobile handsets, to remove the LG 150 model from its list of certified mobile phones for sale in Canada. On December 23, 2008, MTS Allstream announced new roaming coverage for MTS Mobility customers throughout most areas of Mexico, including many tourist destinations coast to coast. On December 22, 2008, MTS Allstream announced the availability of four new products from Kyocera Wireless Corp. ("Kyocera"), a leading global manufacturer of wireless phones and devices, for customers in Manitoba. The new portfolio includes the Neo E1100 phone, the Mako S4000 phone, Kyocera's KPC680 ExpressCard TM featuring CDMA2000@ 1x Evolution-Data Optimized ( EV-DO ) Revision A technology, and the Kyocera KR2 Mobile Router. On December 15, 2008, MTS Allstream became the first service provider in Canada to offer customers the ability to download binary runtime environment for wireless ("BREW") applications to their BREW-enabled devices, which will allow MTS Mobility customers in Manitoba to shop for a wide variety of value-added services. MTS Mobility subscribers with CDMA2000 EV-DO or CDMA2000 1X capable devices will be able to download a variety of BREW content, including games and applications. On November 10, 2008, MTS Allstream announced the launch of a new hosted phone system that will provide a significant opportunity for small businesses in the Greater Toronto Area to improve their operations by helping them to control costs and boost efficiency. Hosted phone system utilizes MTS Allstream s privately managed, secure data

6 6 network, providing customers business-grade performance and the same high-quality voice service they are accustomed to, without the need to buy, lease, or maintain an on-site phone system. Corporate announcements On December 1, 2008, MTS Allstream announced that it had joined the One Million Acts of Green, a new online initiative recently launched by the Canadian Broadcasting Corporation in partnership with Cisco Canada. MTS Allstream's 6,000 employees will participate in the program as a community group. The objective of the One Million Acts of Green is to mobilize Canadians to collectively register one million acts of green by June 2009 and be a force for change around the world. On November 28, 2008, MTS Allstream announced that it was proud to once again sponsor Operation Red Nose, a unique designated driver program that operates free of charge for individuals who are unfit to drive home during the holiday season. On November 27, 2008, MTS Allstream announced the appointment of Dean Prevost as President of its Enterprise Solutions division, reporting to Chief Executive Officer, Pierre Blouin, and effective December 1, In addition, the Company announced Chris Peirce, formerly Chief Regulatory Officer, was appointed Chief Corporate Officer, effective January 1, With these changes, the Company has reduced the size of its executive leadership team from 10 to 8 members. Summary of MTS Allstream recognition 2009 Future Leaders of Manitoba Council award for Tori Sweezy, Manager, Customer Care, Consumer Markets division Manitoba Chambers of Commerce Lieutenant Governor s Award for Outstanding Contribution to the Community Community Contribution Award from The Winnipeg Chamber of Commerce. Recognized as one of Manitoba s Top 20 Employers for Canadian Project Excellence award in Best Practices, in partnership with the Ontario Association of Community Care Access Centres, recognizing outstanding performance and achievement through the application of recognized project management best practices. Digital television service recognized in the consumer fixed and mobile services innovations at the 2008 Global Telecoms Business Innovation Awards Frost and Sullivan Competitive Strategy Leadership Award in the North American Consumer Communication and Entertainment Wallet Share Growth category Microsoft Partner of the Year for Information Worker Solutions, Unified Communications Special Recognition Award from Canada s Telecommunications Hall of Fame Cisco Partner Regional Market Mover Award for Canada recipient of the Manitoba Historical Society Centennial Business Award. Quarterly Conference Call MTS s fourth quarter 2008 conference call with the investment community is scheduled for 4:00 p.m. (Eastern time) on February 5, Investors are invited to listen to the conference call. The dial-in number is A live audio Webcast of the investor conference call can be accessed by visiting the Investors section of the MTS Allstream Web site ( A replay of the conference call will be available until midnight (Eastern Time) on February 15, 2009, and can be accessed by dialing or (access code #).

7 7 MTS Allstream s interim MD&A for the three months ended December 31, 2008 and supplementary financial information are available in the Investors section of the MTS Allstream Web site at About Manitoba Telecom Services Inc. Manitoba Telecom Services Inc., through its wholly owned subsidiary MTS Allstream Inc., is one of Canada s leading national communication solutions providers, delivering innovative products and services through its Enterprise Solutions and Consumer Markets divisions. The Enterprise Solutions division, which operates under the Allstream brand nationally and under the MTS Allstream brand in Manitoba, is a leading competitor in the national business and wholesale markets. This division offers customers a portfolio of solutions tailored to the needs of medium and large businesses looking for success in a world of rapidly evolving technology Internet protocol connectivity, unified communications, IT consulting and security services, and voice and data connectivity services. The Consumer Markets division leads every telecommunications market segment in Manitoba, delivering a full suite of next generation wireless, high-speed Internet and data, digital television and wireline voice services under the MTS brand, as well as small business services in select markets across Canada under the Allstream brand, and security and alarm monitoring services through the company s subsidiary AAA Alarm Systems Ltd., which also operates in other western provinces. The company s extensive national broadband fibre optic network spans more than 24,300 kilometres, and provides international connections through strategic alliances and interconnection agreements with other international service providers. Manitoba Telecom Services Inc. s common shares are listed on The Toronto Stock Exchange (trading symbol: MBT). For more information, please visit: Forward-looking Statements Disclaimer This news release includes forward-looking statements and information (collectively, the statements ) about our corporate direction, business opportunities, operating and dispute resolution activities, financial objectives, and future financial results and performance that are subject to risks, uncertainties and assumptions. As a consequence, actual results in the future may differ materially from any conclusion, forecast or projection in such forward-looking statements. Forward-looking statements reflect our expectations as at February 5, Examples of statements that constitute forward-looking information may be identified by words such as believe, expect, project, anticipate, could, target, forecast, intend, plan, outlook, see, set, pending, and other similar terms. Factors that could cause anticipated opportunities and actual results to differ materially from those expected, and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection set out in such forward-looking statements, include, but are not limited to, the items identified in our interim MD&As for the first, second, third and fourth quarters of 2008, and our 2007 annual MD&A. Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Factors that could cause anticipated opportunities and actual results to differ materially include, but are not limited to, the intensity of competitive activity from both traditional and new competitors (competitive conditions); the ability to retain major customers (customer relationships); decisions by the federal regulator that affect our ability to compete effectively or to enter into new business opportunities (developments in federal regulation); general economic and market conditions and the level of consumer confidence and spending, and the demand for, and prices of, our products and services (market conditions and economic fluctuations); fluctuations in pension plan funding requirements (pension solvency funding); the ability to manage labour relations effectively (collective agreements); the ability to anticipate, and respond to, changes in technology (technology); and other risk factors listed from time to time in our comprehensive public disclosure documents, including our 2007 Annual Report and in other filings with the Canadian securities regulatory authorities.

8 8 Unless otherwise stated, all amounts are expressed in Canadian dollars. For further information, refer to the Risks and Uncertainties sections in our 2007 annual MD&A and our interim MD&As for the first, second, third and fourth quarters of Additional information relating to our Company, including our Annual Information Form, is available on SEDAR at This news release and the financial information contained herein have been reviewed by our Audit Committee and approved by our Board of Directors. FOR FURTHER INFORMATION, PLEASE CONTACT: Investors: Media: Ian Chadsey Vice-President, Investor Relations (204) Greg Burch Manager, Corporate Communications (416) or (204) Footnotes 1 Refer to MTS Allstream s fourth quarter 2008 interim MD&A for the definition of free cash flow. 2 EBITDA is earnings before interest, taxes, amortization, other income and discontinued operations. EBITDA should not be construed as an alternative to operating income or to cash flows from operating activities (as determined in accordance with Canadian generally accepted accounting principles) as a measure of liquidity. 3 EPS is earnings per share. 4 Refer to MTS Allstream s fourth quarter 2008 interim MD&A for the definition of continuing operations.