After incurring hefty restructuring costs Canadian telco Manitoba Telecom Services (MTS) has reported a year-on-year 65% decline in net profit for the fourth quarter of 2005. While sales for the period remained stable at CAD503.7 million, net income fell from CAD42.3 million to CAD14.6 million. The slump is in line with a warning issued by the Winnipeg-based company last November, when it revealed plans to slash CAD100 million in costs within two years. To achieve its goal, MTS has cut projected capital expenditure for 2006 by approximately 15% to CAD270 million, as well as earmarking job losses of between 750 and 800 from a total employee base of 6,600.
The downsizing is thought to be a consequence of continuing pressure on MTS’s national telephony division, Allstream, acquired in June 2004. Rogers Communications and AT&T – former shareholders of Allstream – have steadily been shifting national traffic onto their own networks and away from Allstream’s ever since the sale of the unit to MTS. The loss of business with the two long-term customers has squeezed margins at Allstream, prompting incoming CEO Pierre Blouin to maintain that “this reinforces why the initiatives undertaken by MTS Allstream are absolutely necessary in my judgement”.