MANITOBA TELECOM SERVICES INC. $41 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 64.6 million; Market cap: $2.6 billion; SI Rating: Average) is Manitoba’s main provider of regular and wireless phone services, with over 90% of the market.

The company also owns Allstream, which provides communication services to businesses across Canada. Allstream accounts for 60% of Manitoba Tel’s revenue, but just 40% of its profit.

The company recently dissolved a partnership it formed with the Canada Pension Plan Investment
Board and The Blackstone Group L.P. to bid on the new wireless spectrum. Instead, Manitoba Tel may
bid for the new spectrum on its own. Without partners to help absorb start-up costs, the company
will probably limit any expansion of its wireless operations to Manitoba.

Meanwhile, strong demand for wireless services is helping Manitoba Tel offset weaker revenue at its
traditional phone businesses. In the first quarter of 2008, wireless revenues grew 11.1% from a year
earlier. The company now gets 14% of its revenue from wireless.

Another area of growth is Internet service. In the latest quarter, the number of subscribers grew 9.7%. However, revenue jumped 21.3%, as users converted to high-speed service.

Manitoba Tel has substantially completed a major restructuring of Allstream. Part of the restructuring
plan included new sales teams focused on the smaller businesses that larger phone companies tend
to overlook. Thanks to this approach, Allstream won 133 new contracts in the first quarter of 2008,
including a $2.4 million deal with Passport Canada. Total revenue in the quarter was $478.8 million.

Savings from the restructuring should let Manitoba Tel keep paying its $2.60 dividend, which
yields 6.3%. The stock now trades at 13.6 times its forecast 2008 earnings of $3.02 a share.

Manitoba Tel is a buy.