MTS Reports Solid Quarterly Results - Third Quarter 2005 Cash Dividend Declared -

Stock Symbol: MBT NewsRelease MTS Reports Solid Quarterly Results - Third Quarter 2005 Cash Dividend Declared - Fourth consecutive quarter of stable revenues together with solid profitability at National division MTS TV customers double over last year driving market share to 19% Double-digit growth in wireless revenues and customers Manitoba division high-speed Internet customer base increases by 24.3% Integration solidly on track with $30 million in annualized expense synergies achieved at June 30 th Winnipeg, July 28, 2005 Manitoba Telecom Services Inc. ( MTS ) today released its second quarter results. The Board of Directors also declared a third quarter cash dividend of $0.65 per share. We had yet another solid quarter of results in the strategic areas of the business driving our evolution, profitability and, ultimately, our long-term growth as a leading national communications provider in Canada, said Bill Fraser, CEO. We re very pleased with our progress in delivering stable revenues and solid profitability from the National division the Allstream team. And that s great news, a positive indication that, through the Allstream acquisition, we can deliver strong results while being an innovator intent on building national market share. These achievements, combined with solid growth from the Manitoba division in both revenues and EBITDA 1, continue to bode well in relation to our expectations for the year. Consolidated revenues for the quarter were $502.2 million, up by 59.9% from a year earlier, with EBITDA climbing 25.5% to $172.0 million and operating income increasing by 31.2% to $94.6 million. Earnings per share ( EPS ) from continuing operations 2 1 Earnings before interest, taxes, amortization and other (expense) income. Information concerning EBITDA is provided because management believes investors use it as a measure of MTS s financial performance. This measure does not have a standardized meaning as prescribed by Canadian generally accepted accounting principles ( GAAP ) and is not necessarily comparable to similarly titled measures used by other companies. EBITDA should not be construed as an alternative to operating income or to cash flows from operating activities (as determined in accordance with Canadian GAAP) as a measure of liquidity. 2 Continuing operations in 2005 exclude restructuring and integration costs, the estimated net positive retroactive portion of the impact from the decision of the Canadian Radio-television and Telecommunications Commission in Competitor Digital Network Service, Telecom Decision CRTC 2005-6, the gain arising from the sale of our investment in a wireless venture, a non-cash gain associated with the settlement of prior years tax audits, and the impact of changes in income tax rates on our tax asset. Continuing operations in the first six months of 2004 exclude the one-time gain resulting from the sale of our investment in Bell West Inc. ( Bell West ), as well as equity losses from Bell West and the one-time expense related to the costs of a settlement with Bell Canada. 3 Excludes earnings per share. 4 2005 at June 30 th ; 2004 at December 31 st. 1 were $0.75 in the second quarter compared to $0.59 in the second quarter of 2004. On a year to date basis, revenues were $997.3 million compared to $525.1 million, EBITDA climbed from $251.2 million in the first six months of 2004 to $331.1 million in 2005, and EPS from continuing operations was $1.43 versus $1.10 in 2004. The consolidation of the results of Allstream Inc. beginning June 4, 2004, together with solid performance from the National division and the Manitoba division, contributed to these consolidated results. Our financial performance is tracking well in relation to our expectations for the year, said Wayne Demkey, Executive Vice-President Finance & CFO. We ve accomplished a lot since the acquisition of Allstream revenues at the National division are stable as evidenced by four consecutive quarters of consistent performance, growth in profitability is being achieved, we re harvesting the benefits of our tax losses, and we re making excellent progress in relation to our integration efforts which, at the end of the quarter, represented annualized operating expense savings of $30 million. MTS also announced today that John MacDonald, President of its Allstream, National division, will be returning from medical leave and resuming his duties effective August 2, 2005. FINANCIAL HIGHLIGHTS (in millions of dollars) 3 3 months ended June 30 6 months ended June 30 2005 2004 2005 2004 Operating Revenues 502.2 314.0 997.3 525.1 Operating Income 94.6 72.1 174.7 130.6 EBITDA 172.0 137.1 331.1 251.2 Net Income (Loss) 111.5 (6.7) 154.0 211.8 Basic EPS (Loss) 1.65 (0.10) 2.27 3.20 Total Capital Assets 4 1,462.7 1,448.1 1,462.7 1,448.1

MANAGEMENT S DISCUSSION AND ANALYSIS Unless otherwise indicated, this Management s Discussion and Analysis ( MD&A ) of our financial results for the period ended June 30, 2005 is as at July 28, 2005. In this MD&A, we, our, and us refer to Manitoba Telecom Services Inc. ( MTS ) and its wholly owned subsidiaries. This interim MD&A should be read in conjunction with our interim consolidated financial statements and the discussion and analysis that accompanies our audited consolidated financial statements for the year ended December 31, 2004. This interim MD&A for the three and six months ended June 30, 2005 updates the information contained in our 2004 annual MD&A. This interim MD&A includes forward-looking statements about our corporate direction and financial objectives that are subject to risks, uncertainties and assumptions. As a consequence, actual results in the future may differ materially from those projected or suggested. 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, and other similar terms. Factors that could cause actual results to differ materially from those expected are identified in the Risks and Uncertainties section of this interim MD&A and our 2004 annual MD&A. Our Annual Information Form, as well as other information about our company, is available on our Web site at www.mts.ca, as well as on SEDAR at www.sedar.com. NON-GAAP MEASURES OF PERFORMANCE In this MD&A, we provide information concerning continuing operations, EBITDA, free cash flow and pro forma results because we believe investors use them as measures of our financial performance. These measures do not have a standardized meaning as prescribed by Canadian generally accepted accounting principles ( GAAP ) and are not necessarily comparable to similarly titled measures used by other companies. Continuing Operations We provide information that refers to our performance from continuing operations. Continuing operations in 2005 exclude restructuring and integration costs, the estimated net positive retroactive portion of the impact from the decision of the Canadian Radio-television and Telecommunications Commission ( CRTC ) in Competitor Digital Network Service, Telecom Decision CRTC 2005-6, (the CDNA Decision ), the gain arising from the sale of our investment in a wireless venture, a non-cash gain associated with the settlement of prior years tax audits, the impact of changes in income tax rates on our tax asset, and solvency funding to our pension plans. Continuing operations in the first six months of 2004 exclude the one-time gain resulting from the sale of our investment in Bell West Inc. ( Bell West ), as well as equity losses from Bell West, the one-time expense related to the costs of a settlement with Bell Canada ( Bell ) pursuant to an agreement we entered into with Bell (the Settlement Agreement ), and solvency funding to our pension plans. EBITDA We define EBITDA as earnings before interest, taxes, amortization and other (expense) income. EBITDA should not be construed as an alternative to operating income or to cash flows from operating activities (as determined in accordance 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 in working capital. Free cash flow is the amount of discretionary cash flow that we have for purchasing additional assets beyond our annual capital expenditure program, paying dividends, buying back shares or retiring debt. Pro Forma Information - To assist investors in understanding the performance of our company, we have included pro forma financial information throughout this MD&A to provide an indication of the consolidated results from continuing operations as if our acquisition of Allstream Inc. ( Allstream ) had occurred on January 1, 2004. The pro forma financial results exclude any one-time costs associated with the acquisition of Allstream. The pro forma financial information contained in this MD&A is unaudited. OVERVIEW MTS is the third largest national telecommunications provider in Canada. As a recognized leader and innovator in our industry, we are a 6,600 employee company that earned $1.5 billion in revenue and net income of $305.1 million in 2004. Our extensive Internet Protocol ( IP ) national network infrastructure, including 24,300 route kilometres of fibre optic cable, together with our professional services capabilities, enables us to profitably deliver a full range of connectivity services, and to create value-added solutions for our customers. By responding to the current and emerging requirements of customers in major markets across the country, we leverage our competitive strengths within two main operating divisions: Allstream (National) division (the National division ): a customer-focused, agile innovator that offers a world-class portfolio of business solutions, including voice and data connectivity, infrastructure management and information technology ( IT ) services to business and wholesale 2

customers. Allstream has built a strong market share position that spans the country, and includes many of Canada s largest companies, as well as federal, provincial and municipal governments. 0.59 Earnings Per Share (Continuing Operations) 0.63 0.74 0.68 0.75 MTS (Manitoba) division (the Manitoba division ): the primary telecommunications provider throughout Manitoba; the clear leader. We serve residential and business customers across the province offering a full suite of wireline voice, high-speed Internet and data, next generation wireless, directory, MTS TV, and security and alarm monitoring services. ($) Per Share Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 RESULTS OF OPERATIONS Earnings Per Share ( EPS ) ($) Three months ended June 30 th 2005 2004 EPS (Continuing Operations) 0.75 0.59 Tax Audit Settlement 1.07 -- Future Tax Rate Adjustment (0.14) -- Restructuring & Integration Costs (0.03) -- Bell Settlement Costs -- (0.69) Basic EPS 1.65 (0.10) Note: Earnings per share for the three months ended June 30 th is based on the weighted average shares outstanding of 67.7 million for 2005, and 69.6 million for 2004. EPS from continuing operations increased by 27.1% to $0.75 in the second quarter, primarily due to the consolidation of Allstream s results effective June 4, 2004, as well as growth in the Manitoba division. This improvement was partly offset by higher debt charges and income tax expense. Basic EPS was $1.65 in the second quarter compared to ($0.10) in 2004. These results include a number of items that did not arise from continuing operations in the second quarters of 2005 and 2004. These include a non-cash gain associated with the settlement of prior years tax audits, and a non-cash charge to reflect a decrease in the value of our future income tax asset arising from a reduction in Manitoba s future income tax rates. Also included in basic EPS are restructuring and integration costs related to the integration of Allstream in the second quarter of 2005. In 2004, basic EPS included a one-time charge related to the Settlement Agreement with Bell. EPS ($) Six months ended June 30 th 2005 2004 EPS (Continuing Operations) 1.43 1.10 Tax Audit Settlement 1.07 -- Restructuring & Integration Costs (0.16) -- Future Tax Rate Adjustment (0.14) -- Retroactive portion of CDNA Decision 0.04 -- Gain on sale of Wireless Venture 0.03 -- Gain on Sale of Investment in Bell West -- 2.85 Bell Settlement Costs -- (0.72) Impact from Bell West -- (0.03) Basic EPS 2.27 3.20 Note: Earnings per share for the six months ended June 30 th is based on the weighted average shares outstanding of 67.7 million for 2005, and 66.2 million for 2004. EPS from continuing operations increased by 30.0% to $1.43 in the first six months of the year, primarily due to the consolidation of Allstream s results effective June 4, 2004 as well as growth in the Manitoba division. This improvement was partly offset by higher debt charges and income tax expense. Basic EPS was $2.27 in the first six months of 2005 compared to $3.20 in 2004. These results reflect a number of items that did not arise from continuing operations. For 2005, these include a non-cash gain associated with the settlement of prior years tax audits, and a non-cash charge to reflect a decrease in the value of our future income tax asset arising from a reduction in Manitoba s future income tax rates. Also included in basic EPS are restructuring and integration costs related to the integration of Allstream; a workforce reduction program undertaken in the first quarter of 2005; the estimated retroactive portion of the net positive impact from the CDNA Decision; as well as the gain on the sale of our ownership interest in a wireless venture. In 2004, basic EPS included the gain from the sale of our 40% interest in Bell West, a one-time charge related to the Settlement Agreement with Bell, and the equity losses from Bell West we realized prior to its sale. 3

EBITDA (in millions $) Q2/05 Q2/04 YTD/05 YTD/04 EBITDA (Continuing Operations) 175.9 137.1 343.3 251.2 Restructuring & Integration Costs (3.9) -- (16.5) -- Retroactive portion of CDNA Decision -- -- 4.3 -- EBITDA 172.0 137.1 331.1 251.2 EBITDA from continuing operations climbed by 28.3% to $175.9 million in the second quarter of 2005 and by 36.7% to $343.3 million for the first six months of the year. These increases are mainly attributable to the consolidation of Allstream s results effective June 4, 2004, together with growth in EBITDA in our Manitoba division. EBITDA increased to $172.0 million and $331.1 million in the second quarter and first half of 2005, respectively. Included in these results are certain items not from continuing operations, including restructuring and integration costs related to the integration of Allstream in the first two quarters of 2005, a workforce reduction program undertaken in the first quarter of 2005, and the estimated retroactive portion of the net positive impact from the CDNA Decision recorded in the first quarter of 2005. In Millions ($) 137.1 EBITDA (Continuing Operations) 176.5 176.1 167.4 175.9 Our operating revenues include those earned from the provision of data, local voice, long distance voice, wireless and other services. Consolidated revenues increased by 59.9% to $502.2 million in the second quarter of 2005, and by 89.9% to $997.3 million for the six months ended June 30, 2005. These increases are due to the consolidation of Allstream s results beginning June 4, 2004, together with growth in revenues from the Manitoba division. The National division continues to make solid progress in positioning the business for long-term growth. Revenues were $278.8 million in the second quarter representing the fourth consecutive quarter of stabilized revenue performance. Revenues for the first six months of 2005 at $559.3 million are tracking well in relation to our expectations for all of 2005. The Manitoba division had excellent performance through the first six months of the year, with revenues in the second quarter and year to date increasing by 4.3% to $223.4 million and $438.0 million respectively. Contributing to this improvement was strong growth in revenues from wireless, MTS TV, Internet and stable yearover-year performance from local and data services. These increases were partly offset by the estimated $1.6 million retroactive charge from the CDNA Decision that was recorded in the first quarter of 2005, and a marginal decline in long distance revenues. Consolidated revenues from continuing operations were essentially unchanged at $502.2 million in the second quarter, and down marginally by 1.2% in the first six months of 2005 when compared to pro forma revenues for the same periods in 2004. These changes reflect lower year-over-year revenues from legacy data and long distance services, which were largely offset by growth in revenues from wireless, local, IT, MTS TV and high-speed Internet services. Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Operating Revenues 495.9 503.9 495.1 502.2 REVENUES Operating Revenues (in millions $) Q2/05 Q2/04 YTD/05 YTD/04 Data 165.2 81.1 332.7 118.1 Local 139.5 103.0 275.7 188.4 Long Distance 121.5 63.3 242.8 93.8 Wireless 51.1 44.9 98.6 86.9 Other 24.9 21.7 47.5 37.9 Total 502.2 314.0 997.3 525.1 In Millions ($) 314.0 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 4

Data Services (in millions $) 2005 2004 % change Q2 165.2 81.1 103.7 YTD 332.7 118.1 181.7 Our data line of business includes revenues earned from providing data, Internet and IT services. Data services connect data, video and voice networks to establish private connections across office locations and to integrate traffic over highly secure networks. We provide a wide range of Internet connectivity services to meet the needs of residential customers in Manitoba and business customers across the country. We also offer numerous hosting and security services across Canada. Our IT unit helps customers automate their business processes using Web-based technologies and applications. In addition, our National division offers fully integrated managed hosting and security services. Revenues from data services were $165.2 million in the second quarter of 2005 and $332.7 million during the first six months of the year, representing increases of 103.7% and 181.7%, respectively. These increases are mainly attributable to the consolidation of Allstream s results beginning on June 4, 2004. Data revenues, excluding the retroactive portion of the CDNA Decision recorded in the first quarter of 2005, have decreased by 2.2% in the second quarter of 2005 and by 3.1% for the six months ended June 30, 2005 when compared to the pro forma results for the same periods in 2004. These declines reflect lower data connectivity revenues associated with re-pricing of legacy services in the marketplace, as well as technology substitution. These decreases were partly offset by yearover-year improvements in IT services, together with continuing strong Internet revenue growth in our Manitoba division. As at June 30, 2005, our high-speed Internet customer base in our Manitoba division totaled 114,259 customers, which translates into strong year-over-year growth of 24.3%. Data Revenues 166.1 168.4 167.5 165.2 Local Services (in millions $) 2005 2004 % change Q2 139.5 103.0 35.4 YTD 275.7 188.4 46.3 Local services revenues from our Manitoba division include basic voice connections for residential and business customers, including enhanced calling features (such as Call Answer, Call Display, Call Waiting, and 3-Way Calling), payphone revenue, wholesale revenues from services provided to third parties, as well as contribution revenue. Through our National division, we provide a full range of local services to business customers on a national basis. These services allow customers to complete calls in their local calling areas and to access long distance, cellular networks, and the Internet. The local products provided by our National division offer a uniform service across all major markets in Canada. Local services revenues were $139.5 million in the first quarter and $275.7 million in the first six months of 2005, which is up by 35.4% and 46.3% respectively from the same periods of the previous year. These positive variances are primarily attributable to the consolidation of Allstream s financial results effective June 4, 2004. When compared to 2004 pro forma revenues from local services of $135.5 million and $271.0 million for the second quarter and year to date, local revenues improved by 3.0% and 1.7%, respectively. These levels of performance reflect increased revenues from our National division s wholesale business, together with higher contribution revenues. This improvement was partly offset by lower revenues from re-sold lines, reflecting our ongoing strategy of focusing on higher margin revenues through the utilization of our own facilities. Local Voice Services Revenues 138.3 139.5 135.9 136.2 In Millions ($) 81.1 In Millions ($) 103.0 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 5

Long Distance Services (in millions $) 2005 2004 % change Q2 121.5 63.3 91.9 YTD 242.8 93.8 158.8 Long distance services enable residential customers in Manitoba and business customers across Canada to communicate with destinations outside the local exchange. Our long distance voice service portfolio includes basic, domestic, cross-border and international outbound long distance, basic and enhanced toll-free services, calling cards and audio conferencing, as well as a variety of enhanced long distance services and features. Long distance revenues increased to $121.5 million in the second quarter and to $242.8 million in the first half of 2005, up by 91.9% and 158.8% as compared to the same periods in 2004, reflecting the consolidation of Allstream s financial results effective June 4, 2004. Relative to the 2004 pro forma results, long distance revenues declined by 7.0% in the second quarter and 8.9% year to date, due to competitive pressures associated with pricing across all market segments. These negative impacts were partly offset by higher international and U.S. traffic volumes. Strong customer increases and higher average monthly revenue per user ( ARPU ) were the primary contributors to the solid level of revenue performance. Our cellular customer base has increased by 11.8% to total 297,966 as at June 30, 2005. In addition, the growing popularity of our wireless services (including related data and other enhanced features) continued to drive increased utilization rates, resulting in ARPU of $54.48 in the first six months, representing a 2.8% improvement over the prior year. In Millions ($) 44.9 48.1 Wireless Revenues 46.9 47.5 51.1 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Long Distance Revenues 124.2 118.7 121.3 121.5 Other Revenues (in millions $) 2005 2004 % change Q2 24.9 21.7 14.7 YTD 47.5 37.9 25.3 In Millions ($) 63.3 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Other revenues consist of revenues earned from our directory business, digital television services and miscellaneous items. Directory revenues mainly include our Yellow Pages TM and White Pages telephone directories. Our digital television service, known as MTS TV, is offered across our broadband network platform and is targeted at residential customers in Winnipeg. Miscellaneous revenues primarily consist of security services and the sale and maintenance of terminal equipment. Wireless Services (in millions $) 2005 2004 % change Q2 51.1 44.9 13.8 YTD 98.6 86.9 13.5 Our wireless portfolio consists of cellular, wireless data, paging and group communications services that we offer in the Manitoba market. Revenues from wireless services were $51.1 million in the second quarter of 2005 and $98.6 million in the first six months of the year, representing growth of 13.8% and 13.5% compared with the same periods in 2004. Other revenues climbed by 14.7% to $24.9 million in the second quarter of 2005, and by 25.3% to $47.5 million during the first six months of the year. These increases primarily are due to growth in revenues from MTS TV and our subsidiary, AAA Alarm Systems Ltd., and the consolidation of Allstream s financial results beginning June 4, 2004. MTS TV continues to perform strongly in the market place with our total customer base increasing by 107.1% to 41,357 customers as at June 30, 2005, which translates into 18.9% of our addressable market. 6

In Millions ($) Other Revenues 31.6 22.6 21.7 21.6 24.9 Restructuring and Integration Costs (in millions $) Q2/05 Q2/04 YTD/05 YTD/04 Integration with Allstream 3.9 -- 7.5 -- Workforce Reduction Program -- -- 9.0 -- Total 3.9 -- 16.5 -- Restructuring and integration costs were $3.9 million in the second quarter of 2005, and $16.5 million during the first six months of the year. Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 OPERATING EXPENSES Operations Expense (in millions $) 2005 2004 % change Q2 326.3 176.9 84.5 YTD 649.7 273.9 137.2 For the three months ended June 30, 2005, operations expense was $326.3 million and $649.7 million year to date compared to $176.9 million and $273.9 million in the same periods of 2004. These year-over-year changes reflect the consolidation of Allstream s financial results effective June 4, 2004. Also included in our year to date 2005 results is a positive $5.9 million retroactive adjustment recorded in the first quarter of 2005 associated with the CDNA Decision. This adjustment reflects the net amount associated with the rates approved in the CDNA Decision for periods prior to 2005. The CDNA Decision established final rates for the facilities that our National division leases from incumbent local exchange carriers, as well as the facilities that our Manitoba division leases to competitors, and has a net positive impact on costs going forward. Compared to pro forma operations expense in the same period in 2004, operations expense in the second quarter decreased by 5.3% or by $18.1 million, and by 4.7% or $32.0 million year to date. These favourable variances are attributable to lower year-over-year salaries and benefits expenses, and synergies of approximately $12 million arising from the integration of Allstream. These factors were partly offset by increased costs to fund growth in our businesses. We estimated that the total costs associated with the acquisition of Allstream would be approximately $90 million. This amount includes (i) costs for MTS and Allstream professional fees ($24 million), which were included in the accounting for the acquisition of Allstream; (ii) costs related to restructuring and integration ($28 million), which were set up as a liability; and (iii) additional integration costs ($38 million), which were anticipated to be incurred in 2004 and 2005, and which will be expensed or capitalized depending on the nature of the expenditure. A liability of $28.0 million was set up for costs related to severance and for consolidating facilities, systems and operations of the acquired company. As at June 30, 2005, total costs charged against this liability were $11.2 million, leaving an outstanding liability of $16.8 million. The additional integration costs ($38 million) are a mix of expenses and capital expenditures, and are expected to largely be incurred during the 2004/2005 time frame. Of these integration costs, we expensed $5.5 million in 2004 and $7.5 million in the first six months of 2005 and incurred capital expenditures of $6.7 million in the first half of 2005. We recorded restructuring costs of $9.0 million related to workforce reduction programs we have undertaken in both our Manitoba division and National division during the first quarter of 2005. These costs represent severance costs and other employee-related costs associated with the elimination of approximately 185 positions. The net annualized savings associated with this initiative is estimated to be approximately $7 million. A proportionate amount of these estimated savings was included in our 2005 financial guidance. 7

Amortization Expense (in millions $) 2005 2004 % change Q2 77.4 65.0 19.1 YTD 156.4 120.6 29.7 Amortization expense increased by 19.1% to $77.4 million, and by 29.7% to $156.4 million in the first six months of 2005. These increases reflect the consolidation of Allstream s assets, which resulted from the completion of our acquisition on June 4, 2004. Other Income (in millions $) 2005 2004 % change Q2 1.3 (72.7) n/m YTD 5.4 (71.7) n/m Other income was $1.3 million in the second quarter of 2005, and $5.4 million in the first six months of the year. This compares with ($72.7) million and ($71.7) million for the same periods in 2004. The year-over-year changes include a $2.7 million gain we realized on the disposition of our investment in a wireless venture in the first quarter of 2005, and a one-time cost of $75.0 million we recorded in the second quarter of 2004 associated with the Settlement Agreement with Bell. Debt Charges (in millions $) 2005 2004 % change Q2 15.1 9.5 58.9 YTD 30.3 17.8 70.2 Debt charges were $15.1 million in the second quarter and $30.3 million year to date, representing increases of 58.9% and 70.2%, respectively, from the same periods in 2004. These increased charges reflect higher average levels of outstanding debt. Additional debt along with the $645 million in proceeds from the disposition of our investment in Bell West in 2004 were used to finance our acquisition of Allstream, as well as the $800 million share buyback that we completed pursuant to our substantial issuer bid. Our debt to total capitalization ratio as at June 30, 2005 was 39.3%, and continues to provide us with financial strength and flexibility going forward. Income Tax Expense (Recovery) (in millions $) 2005 2004 % change Q2 (30.7) (3.4) n/m YTD (4.2) 59.4 n/m 2004 and $59.4 million for the first six months of 2004. Income tax expense was considerably lower in 2005, primarily due to the recognition of two non-cash items in the second quarter of 2005. These included a $72.5 million gain arising from a settlement of prior years tax audits, and a $9.6 million charge to reflect a decrease in the value of our income tax asset as a result of a reduction in Manitoba s future income tax rates. The recognition of the Bell West gain in the first quarter of 2004 and the settlement agreement with Bell in the second quarter of 2004 also impacted the year-over-year change. Our year to date effective tax rate has decreased from 21.9% in the first half of 2004 to (2.8%) in the first half of 2005, which is significantly lower than the statutory income tax rate in both years. The effective tax rate is lower in 2005 primarily due to the settlement of prior years tax audits in the second quarter of 2005, which was partly offset by a $9.6 million charge to reflect a decrease in the value of our income tax asset as a result of a reduction in Manitoba s future income tax rates. Our effective tax rate is lower than the statutory rate in 2004 due to the impact of the gain from the sale of our investment in Bell West, which was taxed at the lower capital gains rate. As a result of our Allstream acquisition on June 4, 2004, we have the benefit of tax loss carryforwards, which enables us to reduce taxes payable for a number of years going forward. The impact of the utilization of these tax losses has essentially eliminated cash taxes on earnings since June 2004. CONSOLIDATED QUARTERLY DATA Unaudited quarterly financial data for our eight most recently completed quarters is presented below: (in millions $, except earnings per share) Q2 2005 Q1 2005 Q4 2004 Q3 2004 Operating Revenues 502.2 495.1 503.9 495.9 Operating Income 94.6 80.1 92.6 95.0 Net Income 111.5 42.5 42.3 51.0 Earnings Per Share 1.65 0.63 0.63 0.61 Diluted Earnings Per 1.64 0.63 0.63 0.61 Share (in millions $, except earnings per share) Q2 2004 Q1 2004 Q4 2003 Q3 2003 Operating Revenues 314.0 211.1 215.9 215.0 Operating Income 72.1 58.5 46.7 58.1 Net (Loss) Income (6.7) 218.5 12.7 24.5 (Loss) Earnings Per Share (0.10) 3.47 0.20 0.39 Income tax recovery was ($30.7) million in the second quarter of 2005 and ($4.2) million in the first six months of the year, compared to ($3.4) million in the first quarter of 8 Diluted (Loss) Earnings Per Share (0.10) 3.43 0.20 0.39

Our Manitoba division historically has delivered consistently steady growth in financial performance. In the second quarter of 2004, we began consolidating Allstream s results, which is the primary reason for the significant increases in revenues and operating income in the last three quarters of 2004 and the first half of 2005. In addition to the steady performance of our Manitoba division, and the inclusion of our National division s results beginning on June 4, 2004, our consolidated financial results for the eight most recently completed quarters reflect: The recording of $72.5 million (non-cash) gain in respect of prior years tax audits in the second quarter of 2005, partly offset by a $9.6 million charge to reflect a decrease in the value of our income tax asset as a result of a reduction in Manitoba s future income tax rates. Workforce reduction initiatives that we undertook in the first quarter of 2005 and the fourth quarter of 2003, which resulted in restructuring charges of $9.0 million, and $5.1 million, respectively. The recognition of integration costs of $7.5 million in the first half of 2005 and $5.5 million in 2004. These costs are associated with the integration of Allstream s operations following the completion of our acquisition. The recording of a $4.3 million net positive retroactive impact in the first quarter of 2005 from the CDNA Decision. The recognition of a one-time gain in the amount of $2.7 million in the first quarter of 2005, resulting from the sale of our investment in a wireless venture. The recording of a provision against the carrying value of a long-term investment in the pre-tax amount of $7.0 million in the fourth quarter of 2004. The impact of our substantial issuer bid, which we completed on September 27, 2004, resulting in the purchase for cancellation of 1,966,775 Class B Preference Shares for cash consideration of $84.6 million and 16,637,870 Common Shares for cash consideration of $716.2 million in the third quarter of 2004. The recording of a one-time charge of $75.0 million ($47.8 million, net of taxes) in the second quarter of 2004 relating to our Settlement Agreement with Bell. This one-time pre-tax cost is reflected in our income statement as other expense. This cost is the reason for the loss per share in the second quarter of 2004. our investment in Bell West, which produced much higher earnings during the first quarter of 2004. Our 2003 results account for our 40% share of Bell West s net losses using the equity method of accounting for the entire year. Our 2004 results equity account for our 40% share of Bell West s net losses from January 1 st to February 2 nd. On February 2, 2004, we exercised our put option to sell our 40% ownership position in Bell West for $645.0 million. A change in our accounting policy for deferred alarm installation costs effective January 1, 2004. The quarterly information presented for 2003 has been restated for comparative purposes. A goodwill revaluation charge in the amount of $2.0 million related to our IT services (formerly referred to as e-business services), which we took in the fourth quarter of 2003. Earnings per share in 2003 were impacted by our purchase of 881,336 Common Shares for cancellation pursuant to our normal course issuer bids. LIQUIDITY AND CAPITAL RESOURCES Cash Flows from Operating Activities (in millions $) 2005 2004 $ change Q2 85.5 81.8 3.7 YTD 195.5 128.5 67.0 Cash flows from operating activities refers to cash we generate from our normal business activities. Cash flows from operating activities were $85.5 million in the second quarter and $195.5 million in the first six months of the year, compared to $81.8 million and $128.5 million in the second quarter and first six months of 2004, respectively. These increases are mainly attributable to the addition of operating cash flow from the National division, and organic growth from the Manitoba division partly offset by changes in non-cash working capital and higher debt charges. In addition, for the six months ended June 30 th the increase is also attributable to lower cash taxes due to the utilization of loss carryforwards. The recognition of a one-time gain of $232.6 million ($188.8 million, net of taxes) associated with the exercise of our put option on February 2, 2004 to sell 9

Cash Flows used in Investing Activities (in millions $) 2005 2004 $ change Q2 83.9 282.0 (198.1) YTD 147.2 328.2 (181.0) Investing activities represent cash used for acquiring, and cash received from disposing of, long-term assets and other long-term investments. Cash flows used in investing activities were $83.9 million in the second quarter, as compared to $282.0 million a year ago. This decrease is due to cash utilized in 2004 for the acquisition of Allstream of $226.5 million (net of cash acquired and share issue costs), which was partly offset by higher capital expenditures in 2005 associated with the consolidation of Allstream s results. In the first half of 2005, cash flows used in investing activities were $147.2 million compared to $328.2 million in 2004. This decrease is due to cash utilized for the acquisition of Allstream of $226.5 million in 2004 (net of cash acquired and share issue costs), which was partly offset by higher capital expenditures in 2005 associated with the consolidation of Allstream, higher capital spending in the Manitoba division due to timing differences, as well as our acquisition of Reliable Alarms Limited for $4.2 million in the first quarter of 2005. Partially offsetting this increase were proceeds of $8.1 million from the sale of our investment in a wireless venture, and the discontinuance of funding to Bell West. Free Cash Flow (in millions $) Q2 2005 Q2 2004 YTD 2005 YTD 2004 Free Cash Flow (Continuing Operations) 72.5 59.8 154.5 98.5 Pension solvency funding (15.2) (28.0) (22.8) (28.0) Restructuring & Integration CAPEX (5.4) -- (6.7) -- Restructuring & Integration Expense (3.9) -- (16.5) -- Retroactive portion of CDNA Decision -- -- 4.3 -- Bell Settlement Costs -- (75.0) -- (75.0) Consolidated Free Cash Flow 48.0 (43.2) 112.8 (4.5) Free cash flow refers to cash flow from operating activities, less capital expenditures, and excluding changes in working capital and excludes the $12.5 million non-cash adjustment to current tax expense that was part of the tax audit settlement recorded in Q2 2005. Free cash flow from continuing operations was $72.5 million in the second quarter, which is up from $59.8 million from the previous year. In the first six months of 2005 free cash flow from continuing operations was $154.5 million as compared to $98.5 million during the same period in 2004. These increases are mainly attributable to the addition of operating cash flow from the National division, lower cash taxes due to the utilization of loss carryforwards, and organic growth from the Manitoba division. These factors were partly offset by increased capital expenditures flowing from the consolidation of Allstream, timing of capital expenditures in our Manitoba division in the first quarter, as well as higher debt charges. Consolidated free cash flow was $48.0 million in the second quarter of 2005 and $112.8 million in the first six months of the year, as compared to ($43.2) million and ($4.5) million in the same periods of the previous year. In addition to the items noted above, consolidated free cash flow also includes restructuring and integration costs, pension solvency funding, a positive retroactive adjustment associated with the CDNA Decision and Bell Settlement costs. Cash Flows (used in) from Financing Activities (in millions $) 2005 2004 $ change Q2 (45.4) 231.1 (276.5) YTD (94.4) 249.9 (344.3) Financing activities refer to actions we undertake to fund our operations through equity capital and borrowings. Cash flows used in financing activities were $45.4 million in the second quarter, as compared to cash flows from financing activities of $231.1 million in 2004. In the second quarter of 2005, we paid cash dividends of $44.0 million, and $34.9 million of maturing long-term debt was repaid largely by the issuance of notes payable in the amount of $32.0 million. In the second quarter of 2004, cash flows from financing activities were $231.1 million, reflecting the issuance of medium term notes in the amount of $350.0 million to fund our acquisition of Allstream and the repayment of notes payable in the amount of $102.5 million partly offset by dividends paid of $15.7 million. For the first six months of 2005, cash flows used in financing activities totaled $94.4 million, as compared to cash flows from financing activities of $249.9 million in the same period in 2004. These results reflect dividends paid of $87.9 million in 2005 versus $31.4 million in 2004, the issuance of medium term notes in 2004 to fund the Allstream acquisition and repay short term notes payable, as compared to the issuance of notes payable of $32.0 million used for the repayment of maturing long-term debt of $44.6 million in 2005. In 2005, we also received proceeds of $4.0 million from the issuance of Common Shares that were issued pursuant to the exercise of stock options. 10

Credit Facilities (in millions $) Capacity Utilized at June 30/05 Medium Term Note Program 350.0 220.0 Commercial Paper 150.0 32.0 Operating Line of Credit 50.0 13.9 Total 550.0 265.9 We have arrangements in place that allow us to access the debt and commercial paper markets for funding when required. Borrowings under these facilities are typically used to fund new initiatives, refinance maturing debt, and manage cash flow fluctuations. In addition to our medium term note program, we have additional credit facilities available in the amount of $200.0 million, which consist of a commercial paper program of $150.0 million, and a $50.0 million operating line of credit. As at June 30, 2005, we had $32.0 million in outstanding commercial paper and $13.9 million in undrawn letters of credit outstanding against our operating line of credit. Capital Structure (in millions $) June 30/05 December 31/04 Long-term Debt and Notes Payable Shareholders Equity 943.7 956.3 1,456.0 1,384.6 Total Capitalization 2,399.7 2,340.9 Debt to Capitalization 39.3% 40.9% Our capital structure illustrates the amount of our assets that are financed by debt versus equity. During the first six months of this year, we repaid $44.6 million in long-term debt and issued $32.0 million in commercial paper. This, together with growth in retained earnings, contributed to an improvement in the debt to total capitalization ratio to 39.3% as at June 30, 2005, which represents excellent financial strength and flexibility. We launched a normal course issuer bid on December 15, 2004, under which we may purchase up to 3,360,000 Common Shares, or approximately 5% of the public float, for cancellation. Purchases of Common Shares can be made for cancellation on the open market through the facilities of The Toronto Stock Exchange at market prices over a 12-month period, ending no later than December 14, 2005. These purchases will be made where management is of the view that the acquisition of Common Shares is the most appropriate use of the company s funds. It also is expected that the purchase of Common Shares pursuant to this normal course issuer bid will enhance the value of the remaining shares of our company. As at June 30, 2005, no shares had been purchased for cancellation pursuant to the issuer bid. Credit Ratings S&P Senior debentures Outlook: Stable BBB+ S&P Commercial paper Outlook: Stable A-1 (Low) DBRS Senior debentures Trend: Stable BBB (high) DBRS Commercial paper Trend: Stable R-1 (low) Two leading rating agencies, Standard & Poor s ( S&P ) and Dominion Bond Rating Service ( DBRS ), analyze MTS and assign ratings based on their assessments. We have consistently been assigned solid investment grade credit ratings. DBRS s rating on our senior debentures is BBB (high) and R-1 (low) on our commercial paper. S&P s rating of our long-term corporate credit and senior unsecured debt is BBB+, and our commercial paper is rated A-1 (Low). DBRS confirmed our credit ratings in conjunction with our most recent debt offering in September 2004. On June 30, 2005 S&P confirmed our credit ratings. Outstanding Share Data as at July 20, 2005 Authorized: Unlimited number of Preference Shares of two classes issuable in one or more series Unlimited number of Common Shares of a single class Issued: Shares Number Book Value (in millions $) Common 67,718,497 1,314.0 Stock options: Options Number Weighted Average Exercise Price Per Share Outstanding 1,901,720 $39.18 Exercisable 653,640 $33.15 Subsequent Event Acquisition of Delphi Solutions Corp. On July 5, 2005, we acquired all of the issued and outstanding shares of Delphi Solutions Corp. ( Delphi ) for the purchase price of approximately $15 million. Delphi strengthens our competitive position in the sale, installation and maintenance of customer premise-based telecommunications equipment. It also supports our converged services portfolio and enhances our ability to effectively sell new IP-based solutions. 11

Contractual Obligations, Financial Instruments, Off- Balance Sheet Arrangements, and Other Financial Arrangements Our contractual obligations, financial instruments, offbalance sheet arrangements, and other financial arrangements remain substantially unchanged from those that were disclosed in our 2004 annual MD&A, except as noted below. For additional details, please consult our 2004 annual MD&A, which is available on our Web site at www.mts.ca. Commitment On May 30, 2002, the CRTC issued Regulatory framework for second price cap period, Decision CRTC 2002-34, ( Decision 2002-34 ) which governs local rates charged to residential and business customers and the rates that incumbent telephone companies may charge their competitors. In Decision 2002-34, the CRTC established a regulatory deferral account mechanism, which is to be used to fund qualifying initiatives, such as rate reductions, rebates and service improvement plans. We estimate our deferral account commitment to be approximately $20 million as at June 30, 2005. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS Our critical accounting estimates and assumptions remain substantially unchanged from those that were disclosed in our 2004 annual MD&A. For additional details, please consult our 2004 annual MD&A, which is available on our Web site at www.mts.ca. CHANGES IN ACCOUNTING POLICIES, INCLUDING INITIAL ADOPTION Our changes in accounting policies, including initial adoption remain substantially unchanged from those that were disclosed in our 2004 annual MD&A. For additional details, please consult our 2004 annual MD&A, which is available on our Web site at www.mts.ca. RISKS AND UNCERTAINTIES Our risks and uncertainties remain substantially unchanged from those that were disclosed in our 2004 annual MD&A, except as noted below. For additional details, please consult our 2004 annual MD&A, which is available on our Web site at www.mts.ca. Changes in CRTC Regulation The CRTC governs the telecommunications and broadcast industries in which we operate. In Manitoba, we operate as an incumbent local exchange carrier ( ILEC ). Our National division operates as a competitive local exchange carrier ( CLEC ). Our National division is the number two competitor for business telecommunications services in every region across Canada. Current regulatory proceedings and policy issues, which could, in the future, have a significant impact on our business, are described below. Deferral Account Proceeding Our ILEC operations in Manitoba currently are subject to price cap regulation as established by the CRTC in Decision 2002-34. This regulation is effective for a four-year period that began on June 1, 2002. It requires certain prices to be adjusted annually by an amount equal to inflation less a productivity factor of 3.5%. To the extent that these amounts and certain other rating elements relate to residential services, they are accumulated in a regulatory deferral account. As at June 30, 2005, we have estimated our deferral account commitment to be approximately $20 million. On March 24, 2004, the CRTC invited proposals on the most appropriate way of disposing of the surpluses that have accumulated in the deferral accounts of the ILECs during the first two years of the second price cap period. We have proposed to dispose of the surplus in our deferral account by using the surplus to compensate for revenue loss associated with the deferral of business increases that arose as a result of our 2002 price cap filing. We have made a number of other suggestions regarding the use of the surplus in this account in order to facilitate our ability to continue to offer reliable and affordable high-quality services that are accessible to urban and rural area customers, while also ensuring that the competitive balance is not affected adversely. We also have suggested that the surplus funds be used to make up the additional subsidy required in relation to our Band F rate group for 2002 and 2003. Finally, we have requested that our deferral account be closed effective January 1, 2005. Some of the CLECs are seeking access to the monies in the deferral accounts of all ILECs to fund further reductions to competitors. If granted, such arrangements could provide our National division with improved access to competitive local services outside of Manitoba. A decision from the CRTC with respect to the use of deferral account balances is expected in 2005. Voice over Internet Protocol ( VoIP ) Proceeding On May 12, 2005, the CRTC issued Regulatory framework for voice communication services using Internet Protocol, Telecom Decision CRTC 2005-28, which outlines the regulatory framework applicable to VoIP. In general, the CRTC maintained its preliminary view that, to the extent VoIP services provide access to and/or from the public switched telephone network, these services should be subject to the existing regulatory framework, including the requirement that the ILECs offer such services in accordance with tariffs approved by the CRTC. 12

This view reflects the position we put forward in the proceeding initiated by the CRTC to review the regulatory framework. The CRTC also recognized that the interconnection regime established prior to the wider deployment of IP or packet-based technology should be altered to ensure that interconnection of packet-based and circuit switched networks are efficient and equitable. To this end, the CRTC established an industry group to develop proposals for an interconnection framework for the next generation of networks and facilities. However, the CRTC did not make any findings with respect to competitor access to the underlying local access and transport facilities used to provide retail VoIP. We will continue to pursue the issues related to such access in other proceedings and through applications as required. High-Cost Serving Areas Proposed Band F In 2003, we filed an application requesting that a monthly subsidy in the amount of $10.14 per residential network access service in Band F be sourced from the CRTC s national contribution fund. In its decision, the CRTC approved, on an interim basis, a monthly subsidy of $4.05 per residential network access service in Band F. We asked the CRTC to review and vary this decision on the basis that the costs associated with the provision of services in Band F justify a higher subsidy as the lower monthly subsidy amount was based on erroneous information. A decision on this application is expected in 2005. Quality of Service In March 2005, the CRTC finalized the quality of service regime applicable to the provision of service by ILECs to retail customers and to competitors. On March 24, 2005, in Retail quality of service rate adjustment plan and related issues, Telecom Decision CRTC 2005-17, the CRTC established a system of customer rebates to be paid by the ILECs should annual quality performance with respect to indicators within the control of the ILECs fall below a minimum standard. The intent of the regime is to ensure that service quality does not suffer at the expense of productivity improvements. The new regime required that our ILEC operation provide its local service customers with a very small rebate for the 2002 to 2004 period. This rebate, which is taking the form of a credit, is being included in our billing statements to be issued to customers in June and July 2005. On March 31, 2005, in Finalization of quality of service rate rebate plan for competitors, Telecom Decision CRTC 2005-20, the CRTC adopted several of the arguments put forth by our National division and other CLECs regarding the need to significantly strengthen the system of measuring the quality of service provided to competitors and the penalties payable by way of competitor rebates in the event of substandard quality of service. The CRTC agreed that ILECs such as Bell, by offering inferior service to competitors, were effectively granting themselves a preference in terms of ability to service end customers. This decision should enhance the ability of our National division to compete effectively and grow market share. Telecommunications Policy Review During the first quarter of 2005, the federal government announced its intention to appoint a panel to review telecommunications policy and regulation. This panel is to report back to the Minister of Industry prior to the end of 2005. The scope of the review addresses three main themes, namely regulation, access and information, and communications technologies adoption. The panel has been appointed and released a consultation paper in early June 2005. This paper outlines the scope of the review as well as the timing and process for participation. Submissions are due on August 15, 2005 and replies to other parties comments must be filed by September 15, 2005. We are actively participating in this review. Local Forbearance In April 2005, the CRTC initiated a proceeding inviting comments on the framework for forbearance or deregulation of local exchange services. The purpose of this proceeding is to establish the appropriate criteria for determining whether competition in a particular ILEC s local exchange market is sufficient to allow the CRTC to either reduce competitive safeguards, such as winback restrictions, or completely cease regulating the prices for these services. This proceeding will include a public consultation to be held in September 2005. We have filed a submission in the initial comment phase of this proceeding indicating that the criteria for forbearance established by the CRTC in Review of regulatory framework, Telecom Decision CRTC 94-19 is the criteria that should be used to determine whether, and when, it is appropriate for the CRTC to deregulate. Our submission advocates that the best way to determine whether competition has reached a sustainable level is to gradually reduce the degree of regulatory oversight through the use of a transitional regime. This approach would allow increased pricing flexibility to those ILECs facing increased competition in-region, while ensuring that forbearance is not granted prematurely. This transition is a necessary step, as premature deregulation would allow these ILECs to preempt and/or stifle the development of a truly competitive market. We also emphasized the importance of ensuring that all the ILEC network facilities and services required by competitors to compete are available at the appropriate rates, terms and conditions. Municipal Rights-of-Way On June 17, 2005, the CRTC issued Telecom Decision CRTC 2005-36 to resolve our dispute with the City of Edmonton ( Edmonton ) over the terms of access to Edmonton s light rail transit ( LRT ) tunnels. We argued that the LRT tunnels were a public place within the meaning of the Telecommunications Act (Canada), and therefore, as is the case with municipal rights-of-way are subject to jurisdiction of the CRTC. We argued that the terms requested by Edmonton were not in keeping with the 13

guideline established by the CRTC in Telecom Decision CRTC 2001-23 ( Decision 2001-23 ). The CRTC agreed with our position and ordered us to negotiate terms of access with Edmonton that reflect the guidelines established by the CRTC in Decision 2001-23. It is expected that Edmonton will appeal this decision to the Federal Court of Appeal. OUTLOOK In 2005, we expect to see top line growth, as well as growth in profitability. Our strong levels of free cash flow more than sustain our dividend requirements. Going forward, we expect free cash flow will continue to grow. Our 2005 capital program is budgeted at approximately $325 million, representing a capital intensity ratio of approximately 15% to 16%. Capital will primarily be used to fund growth in the business. Our 2005 guidance, as announced on December 10, 2004, is as follows: 2005 Financial Outlook Revenues EBITDA $2.04 B to $2.08 B $705 M to $720 M EPS $2.95 to $3.05 Cash EPS $4.80 to $4.90 Free Cash Flow $280 M to $300 M 2005 financial outlook includes gross synergies of approximately $27 million, and excludes integration costs. Integration costs include estimated integration expenses and integration capital. THIRD QUARTER DIVIDEND The Board of Directors of MTS today declared a quarterly cash dividend of $0.65 per share. The third quarter dividend is payable on October 14, 2005 to shareholders of record at the close of business on September 15, 2005. This news release and interim MD&A contain forwardlooking statements and there are risks that actual results may differ materially from those contemplated by these forward-looking statements. Forward-looking statements reflect our expectations as at July 28, 2005. Additional information on these risks can be found in our filings with the Canadian securities regulatory authorities. We disclaim any intention or obligation to update or revise any forwardlooking statements, whether as a result of new information, future events or otherwise. This news release, interim MD&A, and the financial information contained herein have been reviewed by our Audit Committee and approved by our Board of Directors. MTS is Canada s third-largest national communications provider, with 6,600 dedicated employees focused on delivering outstanding value to its customers. Seamlessly blending innovative solutions and world-class technology, MTS connects its customers to the world. Through its Manitoba operations, MTS serves residential and business customers in the province, with a full suite of wireline voice, data services, next generation wireless, and MTS TV services. MTS s National division serves business customers with a world-class portfolio of connectivity, infrastructure management and information technology services. Spanning more than 24,300 kilometres, MTS has an extensive national broadband fibre optic network and provides international connections through strategic alliances and interconnection agreements with other international service providers. MTS s Common shares are listed on The Toronto Stock Exchange (trading symbol: MBT). MTS s Web site is located at www.mts.ca. Notes: 1. Supplementary financial information is available in the Investors section of the MTS Web site at www.mts.ca. 2. MTS s second quarter 2005 conference call with the investment community is scheduled for 4:00 p.m. eastern time on Thursday, July 28, 2005. The dial-in number is 1-800-814-4859. A live audio Webcast of the investor conference call can be accessed by visiting the Investors section of the MTS Web site (www.mts.ca). A replay of the conference call will be available until midnight August 7, 2005 and can be accessed by dialing 1-416-640-1917 or 1-877-289-8525 (access code 21128230#). The audio Webcast will be archived on MTS s Web site. -30- For further information, please contact: Investors: Media: Brad Woods Vice-President Investor Relations (204) 941-8283 investor.relations@mts.ca Melanie Lee Lockhart Director Corporate Communications (204) 941-7495 media.relations@mts.ca 14

MANITOBA TELECOM SERVICES INC. CONSOLIDATED STATEMENT OF INCOME (unaudited) For the period ended June 30 Three months ended Six months ended (in millions, except earnings per share) 2005 2004 2005 2004 Operating revenues Data services $ 165.2 $ 81.1 $ 332.7 $ 118.1 Local services 139.5 103.0 275.7 188.4 Long distance services 121.5 63.3 242.8 93.8 Wireless services 51.1 44.9 98.6 86.9 Other 24.9 21.7 47.5 37.9 502.2 314.0 997.3 525.1 Operating expenses Operations 326.3 176.9 649.7 273.9 Restructuring and integration (Note 2) 3.9-16.5 - Amortization 77.4 65.0 156.4 120.6 407.6 241.9 822.6 394.5 Operating income 94.6 72.1 174.7 130.6 Other income (expense) 1.3 (72.7) 5.4 (71.7) Debt charges (15.1) (9.5) (30.3) (17.8) Gain on sale of investment in Bell West - - - 232.6 Equity losses - - - (2.5) Income (loss) before income taxes 80.8 (10.1) 149.8 271.2 Income taxes (Note 3) Current (12.7) (6.7) (13.7) 49.1 Future (18.0) 3.3 9.5 10.3 (30.7) (3.4) (4.2) 59.4 Net income (loss) for the period $ 111.5 $ (6.7) $ 154.0 $ 211.8 Basic earnings (loss) per share (Note 4) $ 1.65 $ (0.10) $ 2.27 $ 3.20 Diluted earnings (loss) per share (Note 4) $ 1.64 $ (0.10) $ 2.27 $ 3.16 15

MANITOBA TELECOM SERVICES INC. CONSOLIDATED STATEMENT OF RETAINED EARNINGS (unaudited) For the period ended June 30 Three months ended Six months ended (in millions) 2005 2004 2005 2004 Retained earnings, beginning of period $ 57.5 $ 501.4 $ 59.0 $ 298.6 Net income (loss) for the period 111.5 (6.7) 154.0 211.8 Dividends declared (44.0) (15.7) (88.0) (31.4) Retained earnings, end of period $ 125.0 $ 479.0 $ 125.0 $ 479.0 16

MANITOBA TELECOM SERVICES INC. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) For the period ended June 30 Three months ended Six months ended (in millions) 2005 2004 2005 2004 Cash flows from operating activities Net income $ 111.5 $ (6.7) $ 154.0 $ 211.8 Add (deduct) items not affecting cash Amortization 77.4 65.0 156.4 120.6 Future income taxes (18.0) 3.3 9.5 10.3 Gain on sale of investment in Bell West - - - (232.6) Gain on sale of investment - - (2.7) - Equity losses - - - 2.5 Deferred wireless costs (5.9) (5.1) (12.7) (10.3) Pension funding and net pension credit (18.9) (41.1) (26.0) (45.2) Other, net (1.3) (4.3) (0.1) (6.8) Increase in taxes payable on Bell West gain - - - 38.0 Changes in non-cash working capital (59.3) 70.7 (82.9) 40.2 Cash flows from operating activities 85.5 81.8 195.5 128.5 Cash flows from investing activities Capital expenditures, net (84.3) (54.3) (153.1) (92.8) Acquisition (Note 5) - (226.5) (4.2) (226.5) Proceeds on sale of investment - - 8.1 - Increase in investment in Bell West - - - (8.0) Other, net 0.4 (1.2) 2.0 (0.9) Cash flows used in investing activities (83.9) (282.0) (147.2) (328.2) Cash flows from financing activities Dividends paid (44.0) (15.7) (87.9) (31.4) Issuance of long-term debt - 350.0-350.0 Repayment of long-term debt (34.9) - (44.6) - Issuance (repayment) of notes payable, net 32.0 (102.5) 32.0 (68.0) Issuance of share capital (Note 6) 0.4-4.0 - Other, net 1.1 (0.7) 2.1 (0.7) Cash flows (used in) from financing activities (45.4) 231.1 (94.4) 249.9 (Decrease) increase in cash and cash equivalents (43.8) 30.9 (46.1) 50.2 Cash and cash equivalents (bank indebtedness), beginning of period 29.3 14.9 31.6 (4.4) (Bank indebtedness) cash and cash equivalents, end of period $ (14.5) $ 45.8 $ (14.5) $ 45.8 17

MANITOBA TELECOM SERVICES INC. CONSOLIDATED BALANCE SHEET (unaudited) (in millions) June 30, 2005 December 31, 2004 Assets Current assets Cash and cash equivalents $ - $ 31.6 Accounts receivable 202.8 212.7 Prepaid expenses 44.7 34.6 Future income taxes (Note 3) 131.1 126.3 378.6 405.2 Property, plant and equipment 3,362.7 3,287.6 Accumulated amortization 1,900.0 1,839.5 1,462.7 1,448.1 Investments 8.3 12.9 Other assets 150.6 140.7 Future income taxes (Note 3) 851.9 869.8 Goodwill and other intangible assets 87.6 87.4 Liabilities and shareholders' equity $ 2,939.7 $ 2,964.1 Current liabilities Bank indebtedness $ 14.5 $ - Accounts payable and accrued liabilities 335.6 412.6 Advance billings and payments 47.8 50.0 Notes payable 32.0 - Current portion of long-term debt 63.6 60.1 Current portion of capital lease obligations 3.4 2.1 496.9 524.8 Long-term debt 848.1 896.2 Long-term portion of capital lease obligations 19.1 19.9 Deferred employee benefits (Note 7) 68.3 83.7 Other long-term liabilities 49.4 49.4 Future income taxes (Note 3) 1.9 5.5 1,483.7 1,579.5 Shareholders' equity Share capital (Note 6) 67,718,497 Common Shares (2004-67,570,117) 1,314.0 1,309.5 Contributed surplus 17.0 16.1 Retained earnings 125.0 59.0 1,456.0 1,384.6 $ 2,939.7 $ 2,964.1 18

MANITOBA TELECOM SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004 (Unaudited) (All financial amounts are in millions, except where noted) 1. Significant accounting policies The interim consolidated financial statements of Manitoba Telecom Services Inc. (the Company ) have been prepared in accordance with Canadian generally accepted accounting principles. These interim consolidated financial statements have been prepared using the same accounting policies and methods of their application as the Company s audited consolidated financial statements for the year ended December 31, 2004. These interim consolidated financial statements should be read in conjunction with the Company s audited consolidated financial statements for the year ended December 31, 2004. Effective June 4, 2004, the Company acquired 100% of the issued and outstanding shares of Allstream Inc. ( Allstream ). The Company s consolidated financial statements include the assets, liabilities and results of operations of Allstream from the date of acquisition. Accordingly, the comparative figures in these interim consolidated financial statements do not include the results of operations of Allstream for the five months ended May 31, 2004. 2. Restructuring and integration The Company recorded restructuring and integration expenses during the six months ended June 30 as follows: 2005 2004 Integration with Allstream 7.5 - Workforce reduction 9.0-16.5 - Integration with Allstream With the acquisition of Allstream on June 4, 2004, the Company formulated plans to restructure and integrate certain network, information technology, finance and administrative functions of Allstream. It is expected that these key restructuring and integration activities, which commenced in 2004, will be substantially completed in 2005. As a result of this restructuring and integration, the Company expects to incur severance and other employee-related costs, as well as costs to consolidate facilities, systems and operations. The Company estimates that total costs related to the restructuring and integration in 2004 and 2005, as well as costs incurred in 2004 to complete the acquisition of Allstream, will total $90.0 million. This amount includes costs already incurred by each of the Company and Allstream to complete the acquisition in the amount of $24.0 million, restructuring and integration costs that will be expensed or capitalized as incurred in the amount of $38.0 million, and restructuring and integration costs related to the acquired company that were recorded as a liability as part of the purchase consideration allocation in the amount of $28.0 million. In association with the overall integration plan, the Company initiated activities to restructure certain network, information technology and administrative functions of the acquiring Company. Total restructuring and integration costs associated with these activities, which will either be expensed or capitalized when these activities occur, are estimated to be $38 million. Approximately $2 million of these costs are for severance and employee-related costs, while the remainder is for other operational restructuring and integration associated costs. On a segmented basis, approximately $28 million to $33 million relates to the MTS (Manitoba) division, $4 million to $9 million relates to the Allstream (National) division, and $1 million relates to the Company s other segment. Since commencing its restructuring and integration initiative, the Company has recognized cumulative restructuring and integration expenses in the amount of $13.0 million, of which $5.5 million was recognized in 2004, and $7.5 million has been recognized in 2005. Of the cumulative amount incurred to date, $10.6 million relates to the MTS (Manitoba) division, $1.4 million relates to the Allstream (National) division, and $1.0 million relates to the Company s other segment. 19

MANITOBA TELECOM SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004 (Unaudited) (All financial amounts are in millions, except where noted) 2. Restructuring and integration (continued) In conjunction with the acquisition of Allstream in 2004, the Company recorded a liability in the amount of $28.0 million as part of the purchase consideration allocation for restructuring and integration costs related to the acquired company. As at June 30, 2005, total costs charged against this liability were $11.2 million, leaving an outstanding liability of $16.8 million. Workforce reduction During the first quarter of 2005, the Company initiated a workforce reduction program in order to improve efficiencies and reduce costs. This restructuring charge represents severance costs and other employee-related costs. Total restructuring costs paid to June 30, 2005 were $4.8 million, leaving an outstanding restructuring liability balance of $4.2 million as at June 30, 2005. 3. Income taxes A reconciliation of the statutory income tax rate to the effective income tax rate for the period is as follows: 2005 2004 Combined federal and provincial statutory income tax rate 36.1% 37.6% Other items, including federal capital taxes and nondeductible amounts 3.1% 0.3% Bell West gain and equity losses subject to capital gains rates - (16.0%) Settlement of prior years tax audits (48.4%) - Change in substantially enacted tax rates 6.4% - Effective tax rate (2.8%) 21.9% The balances of future income taxes as at June 30, 2005 and December 31, 2004 represent the future benefit of unused tax losses, and temporary differences between the tax and accounting bases of assets and liabilities. The major items giving rise to future income tax assets and liabilities are presented below: 2005 2004 Non-capital loss carryforwards 875.6 976.7 Property, plant and equipment 201.4 157.6 Other 62.5 15.8 Total future income tax asset 1,139.5 1,150.1 Valuation allowance (158.4) (159.5) Net future income tax asset 981.1 990.6 Future income taxes are classified in the financial statements as follows: 2005 2004 Current future income tax asset 131.1 126.3 Long-term future income tax asset 851.9 869.8 Long-term future income tax liability (1.9) (5.5) Net future income tax asset 981.1 990.6 During the six month period ended June 30, 2005, the Company paid $2.2 million of income taxes (2004 - $17.8 million). 20