MTS Allstream Reports Solid First Quarter 2011 Results

Highlights include:

• MTS Allstream EBITDA up by 14.7% on Allstream EBITDA improvement of $16.0 million
• MTS successfully launches 4G wireless network and iPhone 4
• MTS wireless revenues increase by 9.7% on ARPU growth of 3.6%
• Allstream's converged IP revenues up 7.9%; strong IP sales momentum continues
• $16.9 million achieved in annualized cost savings in Q1
• Board of Directors declares $0.425 per share Q2 cash dividend

WINNIPEG, MB, May 4, 2011- Manitoba Telecom Services Inc. (the "Company" or "MTS Allstream"), including its two operating divisions MTS and Allstream, today reported its first quarter 2011 financial results. The Company's results for the first quarter of 2011 are in line with its expectations and financial outlook for the full year.

"We are particularly pleased to report that MTS Allstream's overall EBITDA improved by nearly 15 per cent in the first quarter compared to the same quarter last year," said Pierre Blouin, Chief Executive Officer. This increase was driven mainly by a $16.0 million improvement in Allstream's EBITDA. MTS also delivered a strong quarter, producing top line revenue and EBITDA growth.

"Our first quarter results across the Company were strong and demonstrate that our strategy is working," said Mr. Blouin. "We are focused on driving growth in wireless, IP television, broadband and IP-based services; increasing high-margin on-net sales at Allstream through the expansion of our fibre network; and continuing our cost reductions. In the first three months of the year, we made excellent progress in each of these areas and are well positioned to deliver results in the 2011 outlook ranges."

QUARTERLY FINANCIAL HIGHLIGHTS

All financial metrics in this table are presented on a consolidated basis and reported in accordance with International Financial Reporting Standards ("IFRS").

MTS Allstream's EBITDA and EPS results in the first quarter of 2011 were higher when compared to the first quarter of 2010. Improvements in EBITDA and EPS were primarily due to better gross margins at Allstream together with the impact of cost savings. The overall revenue decline is attributable to lower Allstream revenues, which were expected and consistent with management's plan to focus on driving growth in high-margin, on-net revenues while discontinuing lower margin legacy revenues. Free cash flow of $24.4 million in the first quarter was also up when compared to a year ago due primarily to higher EBITDA and lower capital expenditures. In the first quarter, the Company achieved $16.9 million in annualized cost savings against its full-year target of annualized cost savings between $25 million and $35 million.

MTS

MTS's revenues and EBITDA were up by 3.0 per cent in the first quarter when compared to the same period last year, driven by a strong performance in the division's growth services revenues (wireless, high-speed Internet, and IP TV) which increased collectively by 9.4 per cent. Residential line losses continue to compare favourably to the industry at 5.9 per cent. The number of customers using MTS's bundled services climbed strongly in the first quarter by 6.1 per cent when compared to the same period a year ago. In the first quarter, MTS introduced a new four-service bundle to rural Manitobans, which means that more customers across the province are now eligible to receive bundled services.

Wireless revenues were up by 9.7 per cent in the first quarter when compared to the first quarter last year. Wireless average revenue per user reached $56.73 in the first quarter of 2011, driven by 40.5 per cent growth in wireless data revenues. MTS successfully launched its 4G wireless network on March 31, 2011. The new network provides faster high-speed data to 97 per cent of the population, improving on MTS's EVDO data coverage which reaches 72 per cent of the population. MTS customers also now have access to an exciting new array of smart-phones and handsets, and extensive international roaming on compatible GSM and 4G networks. On April 26, 2011, MTS launched the iPhone 4. Wireless subscriber additions, which were slow in Q1 leading up to our 4G (HSPA+) network launch, rebounded in April, leaving us well positioned to achieve our 2011 growth target for subscriber adds.

MTS's broadband and converged IP revenues were up by 7.2% in the first quarter when compared to the same period of 2010, driven by increases in high-speed Internet and IP TV revenues. IP TV revenues increased by 17.3 per cent in the quarter based on 1.1 per cent subscriber growth and higher average revenue per customer. MTS continues to improve its Ultimate TV services and in April further enhanced the service with the addition of a new feature - My PVR. Subscribers are now able to remotely program their PVR by accessing a web-based application, which enables MTS Ultimate TV customers to add, change or delete their Whole Home PVR recordings using any computer with an Internet connection or from select mobile devices.

"With our bundles and innovative products, we are well positioned to give Manitobans the best that today's technology has to offer. Our commitment to run fibre-to-the-home technology to over 20 new communities in Manitoba over the next five years, combined with our existing network, will allow MTS to bring broadband to 65 per cent of Manitoba households by 2013,"said Kelvin Shepherd, President of MTS. "Together, these investments in 4G and fibre-to-the-home will ensure we have the right network and product bundles to maintain our leading position in Manitoba for many years to come."

Allstream

During the first quarter of 2011, Allstream continued to show signs of improvement as it advanced its initiatives to improve results, profitability and its cash flows. These initiatives include focusing on winning high-margin on-net IP revenues, discontinuing sales or exiting various legacy services, reinvesting cash flows from legacy services into IP platforms and reducing costs. In the first quarter, Allstream's EBITDA improved by $16.0 million when compared to the first quarter last year, which marks Allstream's second consecutive quarter of year-over-year EBITDA growth. The increase is partly attributable to an $11.7 million reduction in restructuring costs from 2010. Even if these are excluded, EBITDA increased by 17.6 per cent demonstrating solid performance in the quarter.

"The evidence is there - we are improving Allstream's performance. We started to see meaningful improvements in the business in the fourth quarter of 2010, and that trend is continuing," said Dean Prevost, President of Allstream. "In April, it looks like we had our best month of IP sales ever."

Allstream continues to benefit from the increasing market demand for IP-based services. Converged IP revenues were up by 7.9 per cent in the first quarter when compared to the same period last year. Based on sales activity in the quarter and during the month of April, the Company remains on track to achieve its target of 10 per cent to 12 per cent converged IP revenue growth by the end of 2011. Allstream is supporting this growth with success-based investments that are adding new fibre-fed buildings to our network. In the first quarter of 2011, Allstream added a total 75 buildings to the network. This increased Allstream's total number of fibre-fed buildings to 2,164 at March 31, 2011.

A significant part of Allstream's investment plan began in 2010, when the Company announced a multi-year program to expand Allstream's IP fibre network and increase profitability. This program specifically targets select multi-tenant buildings that are very close to existing fibre assets and can be connected at a very low cost. These investments extend Allstream's on-net reach and provide incremental high-margin revenue opportunities. Since Allstream launched this initiative 12 months ago, the Company has extended fibre into 141 new multi-tenant buildings on a cost-effective basis and won a total of 187 new IP contracts.

Subsequent Pension Solvency Funding

On March 25, 2011, the federal government announced that new federal pension regulations allowing letters of credit to satisfy a portion of pension solvency obligations would be implemented effective April 1, 2011.

In the first quarter of 2011, the Company contributed $24.4 million in pension solvency payments to meet its 2011 funding obligations. With the implementation of the new federal pension regulations, management expects to satisfy any remaining pension solvency funding obligations in 2011 using letters of credit.

Dividend

The Company's Board of Directors declared a cash dividend of $0.425 per share for the second quarter of 2011, which is payable on July 15, 2011 to shareholders of record on June 15, 2011.

Quarterly Conference Call

MTS Allstream's first quarter 2011 conference call with the investment community is scheduled for 8:30 a.m. (Eastern Time) on Wednesday, May 4, 2011. Investors, media and the public are invited to listen to the conference call. The dial-in number is 1-888-231-8191. A live audio Webcast of the conference call can be accessed by visiting the Investors section of the MTS Allstream website (www.mtsallstream.com). A replay of the conference call will be available until midnight (Eastern Time) on May 18, 2011, and can be accessed by dialing 1-800-642-1687 or 1-416-849-0833 (access code 55991094).

Note

MTS Allstream's interim Management's Discussion and Analysis ("MD&A") for the three months ended March 31, 2011 and supplementary financial information are available in the Investors section of the MTS Allstream website at www.mtsallstream.com.

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 companies, providing innovative communications for the way Canadians live and work today. The Company has more than 100 years of experience, with 5,500 employees across Canada dedicated to a mission of delivering true value as seen through the eyes of our customers. MTS Allstream has nearly two million customer connections spanning business customers across Canada and residential consumers throughout the province of Manitoba. The Company's extensive national broadband and fibre optic network spans almost 30,000 kilometres. Manitoba Telecom Services Inc.'s common shares are listed on Toronto Stock Exchange (trading symbol: MBT). Customers, stakeholders and investors who want to learn more about MTS Allstream are encouraged to visit: www.mtsallstream.com.

Forward-looking Statements Disclaimer

This news release includes forward-looking statements and information (collectively, the "statements") about our corporate direction, business opportunities, operations, 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. Therefore, forward-looking statements should be considered carefully and undue reliance should not be placed on them. Examples of statements that constitute forward-looking information may be identified by words such as "believe", "expect", "project", "should", "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 include, but are not limited to, matters identified in the "Risks and Uncertainties" section and elsewhere in our interim MD&A for the first quarter of 2011, as well as our 2010 annual MD&A, and our Annual Information Form, all of which are available on SEDAR at www.sedar.com.

Please note that forward-looking statements reflect our expectations as at the date hereof. 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 except as required by law. This news release and the financial information contained herein have been reviewed by our Audit Committee and approved by our Board of Directors.

Footnotes:

1. EPS is earnings per share.

2. EBITDA is earnings before interest, taxes, depreciation and amortization and other income (expense). EBITDA should not be construed as an alternative to operating income or to cash flows from operating activities (as determined in accordance with InternationalFinancial Reporting Standards) as a measure of liquidity. Refer to MTS Allstream's first quarter 2011 interim MD&A for more information.

3. Refer to MTS Allstream's first quarter 2011 interim MD&A for the definition of free cash flow.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Investors: Paul Peters
Investor Relations
(204) 941-6178
investor.relations@mtsallstream.com

Media: Selena Hinds
Corporate Communications
(416) 345-3576 or
(204) 941-8576
media.relations@mtsallstream.com