MTS Allstream kicks cost cutting into high gear, looks to wireless, IPTV and enterprise for growth

MTS Allstream Inc. is going to ramp up cost cutting efforts in 2009 as part of an operational efficiency initiative it kicked off in 2008, president and CEO Pierre Blouin noted during the company's 2009 guidance conference call with analysts yesterday."We will take out more costs in 2009 than we did in 2008," said Blouin. The company expects to achieve $35 million to $45 million in operational efficiencies in 2009, double what it accomplished in 2008.MTS Allstream's CFO Wayne Demkey added: "We will re-engineer certain end-to-end processes in our enterprise solutions division, including staff reduction." He noted that the company will continue to "advocate for a more competitive regulatory framework," a reference to the CRTC's decision to deny MTS Allstream access to what it considered essential broadband network elements.That said, the company isn't stopping in its tracks. "We will also continue to push hard to expand our growth prospects," Blouin said. In 2009 MTS Allstream will roll out its Microsoft's IPTV platform in the Winnipeg market and expects to announce a wireless plan that is anticipated to cost $30 million to $50 million in incremental capital for network conversion. While the company is looking to expand beyond Manitoba, it will not be announcing an HSPA plan until there is further discussion with incumbents on conversion plans. The initial investment will be modest, and will be centred in Winnipeg."This allows us to be prudent with our capital," said Blouin. "A few weeks ago we qualified as ‘Canadian' for spectrum. We are still talking to new entrants as well as incumbents to better understand their plans - to see if there is opportunity to sell services to a new entrant, or provide backhaul. In our opinion some new entrants do need Canadian partners to meet the minimum requirements."Last month, the MTS chief executive didn't rule out the possibility of joining forces with a new entrant so that the Manitoba company could expand wireless operations beyond its incumbent territory. "The balance of the opportunities will depend on what exactly are their plans at the end of the day - when will they launch, if they launch - and from that we'll be able to see with the current landscape in telecom in Canada if there are opportunities there or not," Blouin explained.Overall, the company reported that the Manitoba economy was resilient, and public sector spending - the company's largest vertical - was strong. The intense focus on operational improvements, which will include some attrition, is expected to keep MTS Allstream in line for stable growth in 2009 of around 2%.On the residential side, the company is fairing much better than its incumbent brethren, and it appears that 2009 won't be any different. "At 4% per year we have the lowest residential line loss in Canada," said Kelvin Shepherd, president of MTS Allstream's consumer services division. "And we won back over 1,500 customers in 2008, with over 75% of these bringing at least two other service on top of voice."To keep up the pressure on competitors, MTS Allstream is forging ahead with its stated strategy. It will continue to drive fibre deeper into local markets, and will look for operational cost convergences in areas such as electronic billing, improved first call resolution, fewer network troubles, and streamlined procurement.The enterprise business is also expected to perform well in 2009. "The majority of our customers are on long term contracts - most are three years in length," said Dean Prevost, president of MTS Allstream's enterprise solutions.He pointed out that Allstream has been transitioning its market and technology focus for some time. Exposure to manufacturing and financial services has been diminishing in the past few years. And unified communications has grown 35% in the past nine months, with $15 million in sold order backlog."We are reducing our exposure to legacy business," said Demkey. "We are maintaining and growing margins - this is the third year in a row that we have achieved our guidance."

MTS Allstream kicks cost cutting into high gear, looks to wireless, IPTV and enterprise for growth

News | 12/18/2008 2:45 pm EST

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