Manitoba Telecom Services Inc. has named a new chief executive who will have to grapple with the future of the company's annual dividend and the fate of its Allstream unit when he takes charge in the new year.
MTS said Monday that Jay Forbes, who was most recently the CEO of electronic land registration company Teranet Inc. before departing that role in 2013, will take over as CEO on Jan. 1.
The Winnipeg-based regional telecommunications provider said it enlisted two executive recruiting firms to help with an international search for a new leader since announcing in August that Pierre Blouin planned to retire later this year.
Mr. Blouin, who took over as CEO at MTS in 2005, was unable to complete the sale of the company's Allstream division last year after Ottawa blocked a $520-million deal to sell it to Egyptian investment firm Accelero Capital Inc.
Allstream, which offers fibre-optic telecom services to government and businesses across Canada, has been a drag on MTS's share price over the past decade – its shares are down about 40 per cent since it announced it would buy the business in April, 2004, in a deal worth $1.7-billion. Whether to undertake another strategic review of the division will be one of the major issues facing the new CEO.
Analysts have also warned in recent months that the new CEO's first task could be slashing the company's dividend. MTS has maintained an annual dividend of $1.70 a share since 2010 (when it cut its $2.60-a-share payout by 35 per cent).
Although its Manitoba wireless business has more than half of the retail market share in the province, it has faced revenue pressure due to increased pricing competition from Big Three national carriers BCE Inc., Rogers Communications Inc. and Telus Corp.
Meanwhile, Allstream has made improvements on EBITDA (earnings before interest, taxes, depreciation and amortization) through improved operating margins, but top-line revenue growth has been elusive. Payments to address pension solvency deficits are also putting a strain on free cash flow, all of which analysts say could motivate the incoming CEO to cut the annual dividend.
Mr. Forbes said he sees a number of opportunities to create growth at the company, noting in a statement Monday, "MTS Allstream has a wealth of strategic assets, a strong and capable work force and great brands."
"To better understand the best pathways for achieving this, my first few months in the role will be largely focused on gaining a deeper understanding of customer needs, organizational capabilities and investor expectations. Thereafter, we will share a refreshed view of our strategy to create meaningful value," he said.
While at Teranet in 2010, Mr. Forbes struck a $1-billion deal with the province of Ontario extending the company's operation of the province's land registry system for 50 years.
Mr. Forbes also has a telecommunications background, having served as CEO of Aliant Inc. (the predecessor to Bell Aliant Inc., which BCE Inc. recently privatized) from 2001 to 2006. He was the president of U.S. electronics distributor Ingram Micro Inc.'s Europe, Middle East and Africa operations from 2007 to 2009.
Mr. Forbes, who will be based in Winnipeg, was not available for comment Monday.
"We see the 'fit,' given the combination of core telecom experience and technology and restructuring experience, against the backdrop of improving Allstream performance and an eventual exploration of strategic options for the asset," RBC Dominion Securities Inc.'s Drew McReynolds said Monday, adding he sees the news as neutral for MTS stock.