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Wireless boosts Manitoba Tel profit but revenue sapped by ‘legacy line’ of business

Manitoba Telecom Services Inc. generated growth from its wireless, high-speed Internet and TV services, but its quarterly revenue was eroded by declines in traditional phone use and other services with older technologies.

The Winnipeg-based telecom company said Thursday that it had a profit of $40.8-million in its third fiscal quarter, up from $37-million a year earlier.

The company's profit equalled 61 cents per share, compared with 56 cents in the third quarter of 2011.

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Manitoba Tel said its overall revenue was down, falling to $424.3-million from $443.2-million, with both of its main divisions showing lower operating revenue.

The company has Manitoba's largest telecom business and operates nationally through MTS Allstream, which provides large-scale services to corporate, institutional and government customers across Canada.

"We continue to generate growth in our strategic lines of business including wireless data, IPTV, high-speed Internet and converged IP [services]," chief financial officer Wayne Demkey told a conference call.

"The quarter-over-quarter revenue decrease is attributable to declines in our legacy line of business."

MTS said local phone revenue declined in the quarter, mainly due to wireless substitution and local competition.

Long distance revenue declined in the quarter as a result of customers replacing long distance calling with e-mail, text messaging and social networking, the company said.

Legacy data revenue declined, mainly because of a decrease in wholesale data services.

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But revenue from its Internet TV service grew 7.7 per cent to $19.5-million in the quarter and Internet revenue advanced 6.9 per cent to $27.7-million.

MTS had a total of 102,039 television customers of which most were IPTV subscribers, representing a year-over-year increase of 2.3 per cent in digital IPTV customers.

Wireless data revenue for MTS grew 29.4 per cent in the quarter with the blended average revenue per customer at $60.58.

"This growth offset declines in legacy revenues, which now account for less than 35 per cent of total revenues for the MTS division," Mr. Demkey told financial analysts.

MTS said its wireless subscriber base as of Sept. 30 was 494,000, of which 400,000 were post-paid customers. Postpaid customers are usually on lucrative three-year smartphone contracts.

The MTS Allstream division provides Internet protocol communications such as network and data backup systems and business Internet services.

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Mr. Demkey said Allstream's revenue growth will be affected by a previously announced decision by the Ontario government to cut back on a contract.

MTS now expects that IP revenue from this customer will be down about $12-million in 2012, about half of the revenue reported for Ontario government in 2011, Mr. Demkey said.

"We expect IP revenues will continue to see some impact from this contract reduction in the first half of 2013."

Mr. Demkey said revenue from Internet protocol services have increased to 33 per cent of Allstream's total revenue.

The company said at this point that it doesn't intend to comment on the strategic review of Allstream, which opens up the possibility of the sale of the division. The review began in September.

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