There’s no getting around it for MTS — the 1,000-pound elephant in the room is the company’s on-going efforts to sell its national telecommunications division, Allstream.
At the company’s annual meeting in Winnipeg Thursday, CEO Pierre Blouin reiterated the party line, "We will not be providing any update until there is something definitive to say."
That’s unfortunate for shareholders who continue to watch MTS shares head south, near 52-week lows, while shares of competitors such as Bell and Telus approach 52-week highs.
All three companies released first-quarter results in the last couple of days with MTS failing to hit analysts’ targets, sending its shares down 32 cents on Wednesday and another 30 cents on Thursday to close at $32.16.
In an investor report on Thursday, Greg MacDonald, analyst for Macquarie Capital Markets, said, "Without an asset sale, we think the stock has $3- to $4 downside while a take-out probably provides $6- to $8 upside."
MTS announced a "strategic review" of Allstream in September, which is corporate finance-speak for "looking for a buyer."
Even though Allstream — the leader in IP communications and the only national provider that focuses exclusively on the business telecommunications market — reported its 10th consecutive increase in EBITDA (earnings before interest, taxes, depreciation and amortization) and its first positive cash flow in years, its revenues dipped by 14 per cent.
The division was put into play after the CRTC loosened foreign-ownership restrictions for some telecommunications companies, allowing MTS to look outside of Canada for buyers.
Blouin said the strategic review could take as much as a year. There is plenty of talk saying a deal is imminent — and the price has been coming down — but there is no information to announce.
And while MTS continues to produce increases in its growth lines from its market-leading Manitoba operations such as mobility, TV and Internet, MTS took a hit in the first quarter from wholesale mobility revenue when competitors, who previously paid MTS a fee to use its network, migrated their customers to their own networks.
Dvai Ghose, an analyst with Canaccord Genuity, says the theme for MTS’s first-quarter results was "weakening trends" and lowered his target price on the shares from $30 to $29.
"The first-quarter results were weaker than expected and highlight some worrying trends," Ghose said.
For him they include lack of revenue and EBITDA growth in MTS’s incumbent division.