MTS Allstream (Toronto: MBT) Q4 revenue declines slightly amidst strong data, TV growth

MTS Allstream (Toronto: MBT.TO) has set a strong IP-based foundation for its residential (IPTV) and business service segments, but the near-term realities of declining legacy revenues and the ongoing economic recovery continued to be a slight drag on the service provider's Q4 and 2010 year revenue.

During the fourth quarter, MTS Allstream reported CAD 444.5 million (USD 449 million), down slightly from the same period in 2009 of CAD 453.8 million (USD 458 million) in Q3 2010.

For the year 2010, MTS Allstream's revenue of CAD 1.776 billion was in line with its previously set outlook of CAD 1.740 billion (USD 1.76 billion) to CAD 1.790 billion (USD1.81 billion).

At MTS, the service provider continued to see continued uptick in both broadband and digital TV revenues. In the fourth quarter, MTS' digital TV revenues increased 14.7 percent, reflecting what it said was 4 percent subscriber growth and higher customer ARPU. A big contributor to MTS' Digital TV growth was broader availability of its Ultimate TV offering, which it said is available to 95 percent of Winnipeg homes, an increase over the 70 percent mark it saw at the end of 2009.  

Broadband adoption also was up 2.1 percent in Q4 with customers increasing by 1.6 percent in the period. Looking forward in 2011, MTS plans to up its broadband ante by deploying Fiber to the Home (FTTH) networks in four new communities (Steinbach, Dauphin, Thompson and The Pas) where it does not currently have a VDSL-based offering to compete with the local cable operator.

Kelvin Shepherd, President of MTS, believes that its continued expansion of FTTH will attract "more customers in these markets to take advantage of our bundled offerings."

No less important is the business customer it serves via its Allstream division.  

Even though the economic recovery did not happen as quickly as Allstream would have liked, it did see EBITDA improve 14.6 percent in Q4 2010 over Q4 2009. MTS Allstream believes that its results will continue to improve in 2011 as it expands the growth of its high-margin IP-based services.

Evidence that its bet on IP-based business services was paying off was clearly seen in its converged IP product line. Representing 27 percent of the unit's overall revenues, converged IP revenues grew 9.7 percent during the fourth quarter and totaled CAD 217.4 million (USD 219 million) for the year 2010.

Dean Prevost, President of Allstream, said that "We have sustained our strong IP sales levels through the fourth quarter 2010 making our double digit growth target for IP services in 2011 well within our reach."

As Allstream looks forward into 2011, the unit plans to continue to focus on signing up more customers for its on-net IP services and continuing to redirect its network investment from legacy services to IP-based service platforms. This investment included a targeted program to extend its on-net IP fiber-based access to an additional 675 office buildings over three years. At the end of Q4 2010, Allstream won 52 new IP contracts, bringing the total number of IP contracts it won through this investment program to 139 customers.

Similar to other U.S.-based service providers, MTS Allstream's recent results show the growing pains that all wireline operators are going through as IP-based services continue to replace legacy TDM-based residential and business services.

For more:
- see the release
- see FierceTelecom's Q4 earning's summary

Related articles:
MTS Allstream: IP, broadband services drive Q3 53 percent profit rise
Allstream racks up 46 customer wins on expanded fiber network
MTS Allstream sells professional services group to PricewaterhouseCoopers
NetIQ to monitor MTS Allstream UC deployments
MTS Allstream expands IPTV, whole home PVR

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