Manitoba Telecom Services Inc. Annual Information Form for the year ended December 31, 2006 March 21, 2007 CORPORATE STRUCTURE .......................................................................................................................................1 Name and incorporation ............................................................................................................................................1 Intercorporate relationships .......................................................................................................................................1 GENERAL DEVELOPMENT OF THE BUSINESS ...................................................................................................1 Business review.........................................................................................................................................................1 A sharpened strategic focus...................................................................................................................................2 Sale of non-core assets ..........................................................................................................................................2 Share buyback program.........................................................................................................................................2 Transition Phase II cost reduction program...........................................................................................................2 Acquisition and integration of Allstream ..................................................................................................................2 Initiatives to streamline business operations .............................................................................................................3 Key business arrangements with Bell........................................................................................................................3 Investment in broadband network .............................................................................................................................4 Regulatory developments ..........................................................................................................................................4 Telecommunications policy review.......................................................................................................................5 Essential facilities ..................................................................................................................................................5 Deferral account ....................................................................................................................................................5 VoIP services.........................................................................................................................................................5 Local forbearance ..................................................................................................................................................6 Price caps...............................................................................................................................................................6 DESCRIPTION OF THE BUSINESS ..........................................................................................................................6 Corporate strategy .....................................................................................................................................................6 Business segments .....................................................................................................................................................7 Data services..........................................................................................................................................................8 Local services ........................................................................................................................................................9 Long distance services...........................................................................................................................................9 Wireless services .................................................................................................................................................10 Other....................................................................................................................................................................10 Employee relations ..................................................................................................................................................11 Distribution channels...............................................................................................................................................11 Property, plant and equipment and distribution arrangements ................................................................................12 Environmental policy ..............................................................................................................................................13 Social responsibility ................................................................................................................................................13 Risk factors..............................................................................................................................................................14 Changes in competitive conditions......................................................................................................................14 Accelerated pricing pressure in legacy services ..................................................................................................14 AT&T relationship ..............................................................................................................................................14 Bell Mobility agreement......................................................................................................................................14 Changes in CRTC regulation...............................................................................................................................15 Pension solvency funding....................................................................................................................................15 Market conditions and economic fluctuations.....................................................................................................15 Collective agreements..........................................................................................................................................15 Rapid technological change and displacement ....................................................................................................15 Competition Bureau review of Allstream acquisition .........................................................................................15 Allstream/Inukshuk/NR Communications venture..............................................................................................16 Reorganizations .......................................................................................................................................................16 INCOME TAXES .......................................................................................................................................................16 LEGAL PROCEEDINGS ...........................................................................................................................................16 CAPITAL STRUCTURE............................................................................................................................................17 General description..................................................................................................................................................17 Credit facilities ........................................................................................................................................................17 Credit ratings ...........................................................................................................................................................17 Constraints...............................................................................................................................................................18 Substantial issuer bid...............................................................................................................................................18 Normal course issuer bids........................................................................................................................................19 Dividend policy .......................................................................................................................................................19 MARKET FOR SECURITIES....................................................................................................................................19 DIRECTORS AND OFFICERS..................................................................................................................................19 Directors ..................................................................................................................................................................19