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MTS Reports Third Quarter Results Fourth Quarter 2006 Cash Dividend Declared

• Year to date 2006 financial performance consistent with full-year outlook • Free cash flow from continuing operations grows 25.1% to $248.9 million in first nine months • Double-digit growth in wireless, digital television, next generation data connectivity and high-speed

Internet revenues • Enterprise Solutions division reports third quarter EBITDA margin 220 basis points better than last

year • IP-VPN (“Internet Protocol-Virtual Private Network”) base continues to climb, reaching 158 customers • HDTV (“High Definition Television”) service launched in Winnipeg • Directories business sold for $281 million • Cost reduction program target increased to $120 million -- $78 million in annualized expense savings

achieved at September 30th Winnipeg, Manitoba, November 6, 2006 – Manitoba Telecom Services Inc. (“MTS” or the “Company”) (TSX: MBT) today reported solid third quarter results. The Board of Directors also declared the fourth quarter cash dividend at $0.65 per share. The fourth quarter dividend is payable on January 15, 2007 to shareholders of record at the close of business on December 15, 2006. “Our third quarter results clearly demonstrate that we are making good progress in positioning our business for long-term success in the Canadian communications industry,” said Pierre Blouin, Chief Executive Officer. “After nine months, our financial results are tracking right on plan. We have delivered significant, tangible results from our business review. Importantly, the Enterprise Solutions division continues to make solid progress. I’m pleased to report that this division has improved its third quarter EBITDA margin by 220 basis points over last year continuing the trend of improved margins over the last three quarters.” FINANCIAL HIGHLIGHTS – CONTINUING OPERATIONS 1

three months ended September 30 nine months ended September 30 (in millions of dollars) 2 2006 2005 3 2006 2005 3

Revenues 477.9 501.8 1,437.4 1,481.8 EBITDA 4 162.7 160.9 493.0 490.9 Basic EPS 5 0.62 0.61 1.93 1.92 Free Cash Flow 6 70.7 56.9 248.9 198.9 Note: The Company provides financial information on continuing operations in order to assist investors with understanding the Company’s underlying financial performance. The Company’s definition of continuing operations excludes certain items such as the Company’s directories business which has been reclassified as discontinued operations, following the announced sale of this business in the third quarter of 2006.

Quarterly Report for the period ending September 30, 2006

3

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Consistent with the Company’s expectations for 2006, results from continuing operations include EPS of $0.62 in the third quarter and $1.93 year to date, representing a slight increase over 2005; EBITDA of $162.7 million as compared to $160.9 million in the third quarter of 2005 and up modestly by 0.4% in the first nine months of 2006 to $493.0 million; and a year-over-year decline in revenues by approximately 4.8% to $477.9 million in the third quarter; and by 3.0% to $1,437.4 million in the nine months ended September 30, 2006. The year-over-year change in revenues is in line with the Company’s outlook and reflects managing the ongoing transition from legacy services to growth services. Free cash flow was up strongly in the quarter by 24.3% to $70.7 million and by 25.1% to $248.9 million in the first nine months of the year. “The strength of our free cash flow provides full support for our dividend, which at approximately $175 million represents one of the highest yields of any common stock listed on the TSX,” said Wayne Demkey, Chief Financial Officer. MTS Allstream Inc.’s (“MTS Allstream”) growth services also posted very strong performance, collectively increasing by approximately 14%, representing $62 million in new revenues in 2006. An important contributor to the Company’s 2006 financial performance is the very strong results it is achieving in aligning the cost structure. “When we initially established our cost reduction program, we had a target of $100 million in annualized cost savings after two years,” commented Mr. Demkey. “Through very diligent efforts, we have been able to accelerate the program, and we now expect to achieve $120 million in annualized cost savings by the end of 2006 -- $20 million more in savings, a year ahead of plan.” At September 30, 2006, work had been completed to achieve $78 million of these recurring annualized cost savings. So far this year, realized cost savings were $21 million in the third quarter, and $69 million in the first nine months of the year. The Enterprise Solutions division had a solid third quarter, consistent with its overall strategy to grow its non-legacy revenue base in a manner that drives improved profitability to the organization. Revenues of approximately $262 million were basically flat to what was generated in the second quarter of 2006. In the third quarter, it posted EBITDA performance of $49.5 million. Underlying these results was ongoing strong performance from the Enterprise Solutions division’s growth areas. Next generation data connectivity revenues climbed by 54.1% and IP-VPN customers increased to 158, reflecting the attractiveness and growing demand for MTS Allstream innovative next generation IP-based services to business customers. The Enterprise Solutions division also made good progress winning new business with customers in the quarter including PRIMUS Canada, Greyhound, Franklin Templeton, Government of Newfoundland and Labrador, The Windsor-Essex Catholic District School Board and Hydro One. In the Consumer Markets division, wireless revenues and cellular customers grew by 12.8% and 12.4% respectively, with strong increases from digital television as customers climbed by 27.2%, and high-speed Internet customers increased by 16.6% from a year earlier. The Company experienced strong net ads from TV in October. At 2,300 it is the highest monthly increase so far in 2006, and puts our TV market share at approximately 25%. Also, an additional 3,700 TV customers were added in the third quarter through our acquisition of Valley Cable Vision located in southern Manitoba. The Company’s back-to-school student campaign, launched in the fall to promote wireless and internet, showed excellent results. The number of additions doubled over last year’s results to more than 5,000 new customers. The continuing strong performance of the Consumer Markets

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division reflects the Company’s status as the clear communications leader in Manitoba. Customers continued to choose MTS Allstream as their supplier of multiple communications services. At the end of the third quarter, 73% of MTS TV customers were also MTS high-speed Internet customers, reflecting an increase over the last year. FINANCIAL HIGHLIGHTS – REPORTED

three months ended September 30 nine months ended September 30 (in millions of dollars) 2 2006 2005 3 2006 2005 3

Operating Revenues 477.9 507.7 1,447.3 1,486.1 EBITDA 152.9 161.8 489.6 479.8 Operating Income 69.8 82.7 244.7 245.1 Net Income 40.5 45.1 83.3 199.1 Basic EPS 0.60 0.67 1.23 2.94 Free Cash Flow 48.1 (9.8) 190.6 90.9 Total Capital Assets 7 1,467.1 1,502.9 1,467.1 1,502.9 Note: The Company’s directories business has been reclassified as discontinued operations following the sale of this business. In accordance with this treatment, in the “Financial Highlights – Reported” table above, only net income and Basic EPS include results from the directories business. In the third quarter of 2006, basic EPS was $0.60 compared to $0.67 in the third quarter of 2005. Over the same period revenue and EBITDA each decreased respectively from $507.7 million to $477.9 million and from $161.8 million to $152.9 million. In addition to the changes in continuing operations described above, the reported results were lower due to the impact from a positive retroactive regulatory decision in the third quarter of 2005 of $5.9 million, and higher restructuring and integration costs of $4.8 million in the third quarter of 2006. Year to date results reflect these same factors, and in addition, basic EPS includes non-cash adjustments to income tax expense in each of the second quarters of 2006 ($0.86) and 2005 ($0.14) to reflect changes to future income tax rates. As well, in the second quarter of 2005, a favourable non-cash gain of $1.07 was recorded in relation to the settlement of prior year's tax audits. Year to date reported results for revenue and EBITDA also reflect the impact of various positive retroactive regulatory decisions received in the second quarter of 2006 and the first quarter of 2005. 2006 OUTLOOK The Company’s 2006 financial outlook from continuing operations remains unchanged. On August 14, 2006, the Company entered into a definitive agreement to sell its directories business. This transaction closed on October 2, 2006. As prescribed by the Canadian Institute of Chartered Accountants’ Handbook, the directories business has been classified as discontinued operations in MTS’s financial statements. In the table below, the 2006 financial outlook has been provided excluding the directories business to facilitate the evaluation of performance from continuing operations on the same basis as the prescribed reporting format that is reflected in MTS’s financial statements.

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2006 Financial Outlook – Continuing Operations (includes directories business) (excludes directories business)

Revenues $1.925 B to $1.975 B $1.885 B to $1.935B EBITDA $655 M to $680 M $630 M to $655 M

EPS $2.35 to $2.65 $2.10 to $2.40

Free Cash Flow $285 M to $310 M $260 M to $285 M

Capital Expenditures $270 M $270 M Pension Solvency Funding On June 2, 2006, the federal government released draft amendments to the solvency funding regulations for federally regulated pension plans. Once the amended regulations come into effect, MTS anticipates filing revised actuarial funding valuation reports, which are expected to reduce its annual solvency payments. If new regulations had come into effect earlier in 2006; the Company’s total solvency payments for 2006 would be approximately $65 million to $70 million. Since the new regulations are not expected to come into effect in time to impact 2006 funding, the Company’s total 2006 solvency payments will be approximately $90 million to $95 million. Future solvency funding requirements will depend on the results of annual actuarial funding valuations which are affected by various factors, such as return on plan assets, changes in solvency liability discount rates, and any further action taken by the government on the requirements associated with solvency valuations. BUSINESS REVIEW On January 31, 2006, the Company announced that it would conduct a comprehensive business review to strengthen the fundamental business and evaluate its competitive position and strategic opportunities for creating and delivering long-term shareholder value. Since launching this review, the Company finalized its 2006 business plan and has delivered three quarters of financial performance that are solidly on track in relation to its outlook for the year. The performance of the Enterprise Solutions division has been improved by focusing on profitable operations, and the overall MTS Allstream cost structure has been strengthened with annualized recurring cost reductions of $78 million achieved so far in 2006. An important element of the business review is an assessment of the Company’s asset base to identify core and non-core assets. To date, non-core real estate holdings have been identified and listed for sale, and on August 14, 2006, the sale of MTS Allstream’s directories business to Yellow Pages Group Co. was announced. This transaction closed on October 2, 2006. “As part of our overall business review, there has been a comprehensive analysis underway on multiple scenarios including important potential growth strategies for the business,” said Mr. Blouin. “In light of last week’s announcement by the federal government regarding income trusts, we will be fully analyzing the implications of the proposed new legislation as it has implications for some of the scenarios.” The Company continues to benefit from its substantial $4 billion in accumulated tax deductions (consisting of $1.8 billion in tax losses and $2.2 billion in unutilized capital cost allowance). Taken together, MTS Allstream does not anticipate paying cash taxes until 2014.

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The Company indicated that it is near the end of the business review process, and expects to provide a 2007 outlook and related business plans by year-end 2006. OTHER DEVELOPMENTS MTS Allstream announces Voluntary Reduction Program for Manitoba employees On October 2, 2006, MTS Allstream announced a Voluntary Reduction Program for its Consumer Markets division in 2006. Up to 325 workforce reductions, or 10% of that division, are targeted by this initiative, which represents an element of the Company’s ongoing Transition Phase II cost reduction program (“TP2 cost reduction program”). Announced in November 2005, the TP2 cost reduction program is designed to improve MTS Allstream’s cost structure and position it to grow profitably in the rapidly changing telecommunications industry. Annualized savings from this voluntary program are estimated at approximately $22 million and the cost associated with this program is expected to be approximately $20 million to $25 million. Hydro One awards MTS Allstream with three-year extension to data services contract On October 18, 2006, MTS Allstream announced that it had secured a three-year extension to its existing data services contract with Hydro One, the largest electricity delivery company in Ontario. With this extension of their existing ten-year relationship, MTS Allstream will continue to provide Hydro One with data services that focus on speed, low delay and reliability of data transfer, while delivering dedicated connectivity for bandwidth-intensive applications requiring real-time transport of voice, data and video. Hydro One’s business demands constant access to a robust, reliable data network and MTS Allstream assists Hydro One with consistently meeting these demands by equipping it with the power and performance it needs for several applications including e-mail and Intranet information sharing. MTS Allstream expands Wi-Fi network On October 23, 2006, MTS Allstream announced that it had expanded its wireless Internet service to more than sixty Manitoba locations and offers access to more than 300 locations across Canada. Access to the over 300 nationally-located Wi-Fi HotSpots is provided to MTS High Speed Internet and MTS Mobility customers through a relationship with FatPort®, a significant operator of public Wi-Fi HotSpots in Canada. The MTS Allstream Wi-Fi HotSpots in Manitoba are located in Winnipeg, Headingley, Brandon, Virden, and Morris at key places such as the MTS Centre, tourist attractions and dozens of other locations including shopping centres, coffee shops, restaurants, and truck stops. Plans exist to further expand MTS Allstream’s Wi-Fi network over the next year. MTS Allstream acquires Valley Cable Vision On September 12, 2006, MTS Allstream announced that it had purchased all of the shares of Valley Cable Vision (1997) Limited, a successful rural cable and Internet provider in southern Manitoba with 3,700 subscribers. This transaction advances MTS Allstream’s strategy of being Manitoba’s leading full-service provider of wireline, wireless, broadband Internet, and television services.

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High Definition TV available to MTS TV customers On August 24, 2006, MTS Allstream announced the latest in home entertainment with the introduction of MTS HDTV service. With MTS HDTV, customers who appreciate the next level in home entertainment can have the total experience right in their own home. MTS TV’s high definition service provides the range to enjoy all of today’s hit shows and live sports with a crystal clear picture and amazing digital sound, and also includes the popular MTS features of Video On Demand, E-mail On Demand and TV Call Display. PRIMUS Canada awards two-year contract extension to MTS Allstream On September 18, 2006, MTS Allstream announced that it had secured a two-year extension to its existing contract with PRIMUS Telecommunications Canada Inc. (“PRIMUS Canada”), the country’s largest alternative communications carrier. Over the past seven years, MTS Allstream and PRIMUS Canada have forged a solid partnership that has enabled PRIMUS Canada to offer innovative products to a greater number of customers across Canada. Under the terms of this contract, MTS Allstream will continue to supply PRIMUS Canada with IP data networking, long distance and local services to support PRIMUS Canada’s residential and commercial business across Canada. MTS Allstream solutions support new Manitoba emergency dispatch centre On September 21, 2006, MTS Allstream announced that it had been selected by the Manitoba Government to power the communications requirements of the new Medical Transportation Coordination Centre (“MTCC”). The MTCC is a dedicated dispatch centre for all rural and northern Manitoba emergency medical services, including northern medivacs. With communications technology provided by MTS Allstream, the MTCC is enabled to shorten ambulance response times and deploy emergency medical resources more efficiently. MTS Allstream equipped the MTCC’s eight agent positions with CML Sentinel FleetNet Dispatch workstations and installed a CML ECS-1000 switch to route the call traffic in and out of the centre. In addition, MTS Allstream will support MTCC’s communications operations with a five-year managed services contract and will provide ongoing digital network access. Manitoba Blue Cross moves forward with MTS Allstream On September 19, 2006, MTS Allstream announced that Manitoba Blue Cross had selected MTS Allstream for communications solutions to centralize its head office operations and move its communications systems to an IP-based platform. MTS Allstream’s communications support will enable Manitoba Blue Cross to complete the move effectively and to better serve its agents and customers once the move is completed. The project with Manitoba Blue Cross is an excellent example of how MTS Allstream can help customers make important operational changes, while simultaneously positioning them with state-of-the-art, IP-enabled technology they will need for future success. MTS Allstream submits comments on the federal government’s proposed Policy Direction to the CRTC On August 16, 2006, MTS Allstream announced that it had submitted its comments in response to the federal government’s proposed policy direction to the Canadian Radio-television and Telecommunications Commission (“CRTC”). MTS Allstream supports the goals articulated in the policy direction. These goals include ensuring that the Canadian telecommunications regulatory system is “more modern, flexible and efficient,” and the industry is “internationally competitive and successful” so that “Canadian consumers will benefit from a stronger competitive environment that will bring greater choice and even lower prices and better

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1 Refer to MTS’s third quarter 2006 interim MD&A for the definition of continuing operations. 2 Excludes basic EPS. 3 The prior period figures have been reclassified to conform to the current year’s presentation of discontinued operations. 4 EBITDA is earnings before interest, taxes, amortization, other income and discontinued operations. EBITDA should not be construed as an alternative to operating income or to cash flows from operating activities (as determined in accordance with Canadian generally accepted accounting principles) as a measure of liquidity. 5 EPS is earnings per share. 6 Refer to MTS’s third quarter 2006 interim MD&A for the definition of free cash flow. 7 2006 as at September 30; 2005 as at December 31

services.” MTS Allstream strongly recommended that mandated fair access to wholesale services continue in order to ensure a stronger competitive environment, especially in the business market sector.

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Unless otherwise indicated, this Management’s Discussion and Analysis (“MD&A”) of our financial results for the period ended September 30, 2006 is as at November 6, 2006. In this MD&A, “we”, “our”, and “us” refer to Manitoba Telecom Services Inc. (“MTS”). This interim MD&A should be read in conjunction with our interim consolidated financial statements and the discussion and analysis that accompanies our audited consolidated financial statements for the year ended December 31, 2005. This interim MD&A for the three and nine months ended September 30, 2006 updates the information contained in our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A. This interim MD&A includes forward-looking statements about our corporate direction and financial objectives that are subject to risks, uncertainties and assumptions. As a consequence, actual results in the future may differ materially from any conclusion, forecast or projection in such forward-looking information. Examples of statements that constitute forward-looking information may be identified by words such as “believe”, “expect”, “project”, “anticipate”, “could”, “target”, “forecast”, “intend”, “plan”, “outlook”, and other similar terms. Factors that could cause actual results to differ materially from those expected, and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection set out in such forward-looking information, include, but are not limited to, the items identified in the “Risks and Uncertainties” section and the “Material Assumptions” identified in the “Outlook” section of this interim MD&A, our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additional information relating to our company, including our Annual Information Form, is available on SEDAR at www.sedar.com. NNOONN--GGAAAAPP MMEEAASSUURREESS OOFF PPEERRFFOORRMMAANNCCEE In this MD&A, we provide information concerning continuing operations, EBITDA and free cash flow because we believe investors use them as measures of our financial performance. These measures do not have a standardized meaning as prescribed by Canadian generally accepted accounting principles (“GAAP”), and are not necessarily comparable to similarly titled measures used by other companies.

• Continuing Operations – We provide information that refers to our performance from continuing operations to assist investors in understanding the performance of our company.

Continuing operations in the first nine months of 2006 include synergies and exclude our directories business, which has been classified as discontinued operations; restructuring costs; the retroactive adjustment related to Telecom Decision CRTC 2006-20 in which the Canadian Radio-television and Telecommunications Commission (“CRTC”) approved MTS Allstream Inc.’s (“MTS Allstream”) application to review and vary the CRTC’s decision in MTS Allstream’s application to review and vary certain decisions relating to its Band F subsidy, Telecom Decision CRTC 2005-52 (the “Band F Decision”); the adjustment related to Aliant Telecom, Bell Canada, MTS Allstream, SaskTel and TCI – Approval of rates on a final basis for Access Tandem service, Telecom Decision CRTC 2006-22 and Aliant Telecom, Bell Canada, MTS Allstream, SaskTel and TCI – Approval of rates on a final basis for Direct Connection service, Telecom Decision CRTC 2006-23 (“the Direct Connect/Access Tandem Decisions”); solvency funding to our pension plans; the impact of changes in income tax rates on our tax asset; and the taxes recoverable related to the sale of our investment in Bell West Inc. (the “Bell West gain”). Continuing operations in the first nine months of 2005 include synergies and exclude our directories business, which has been classified as discontinued operations; restructuring costs; the estimated net positive retroactive portion of the impact from the decision of the CRTC in Competitor Digital Network Services, Telecom Decision CRTC 2005-6 (the “CDNA Decision”) and the positive retroactive portion associated with the Band F Decision; the gain arising from the sale of our investment in a wireless venture; a non-cash gain associated with the settlement of prior years’ tax audits; the impact of changes in income tax rates on our tax asset; solvency funding to our pension plans; and the taxes paid related to the Bell West gain.

• EBITDA – We define EBITDA as earnings before

interest, taxes, amortization, other income and discontinued operations. EBITDA should not be construed as an alternative to operating income or to cash flows from operating activities (as determined in accordance with Canadian GAAP) as a measure of liquidity.

• Free Cash Flow – We define free cash flow as cash

flow from operating activities, less capital expenditures, and excluding changes in working capital. Free cash flow is the amount of discretionary cash flow that we have for purchasing additional assets beyond our annual capital expenditure program, paying dividends, buying back shares or retiring debt.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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OOVVEERRVVIIEEWW MTS is a leading national communications provider in Canada, which earned $2.017 billion in revenue and net income of $213.7 million in 2005. Our objective is to build upon our many strengths as an agile national competitor and services innovator, and to ensure that we are profitably focused on our growth opportunities, particularly those being driven by customers migrating to Internet Protocol (“IP”) solutions, wireless, Internet and digital television services in Manitoba. In the first quarter of 2006, we announced changes to our organizational structure. Under this new structure, we have created a Consumer Markets division and an Enterprise Solutions division. Our Consumer Markets division is focused on the consumer and small business segments. Our Enterprise Solutions division is focused on the mid to large enterprise business markets across the country. Through this structure, which is centred around the customer, we believe that we are better positioned to compete in the marketplace and facilitate cost-effective operations. The financial and operating information, and any associated discussion in this MD&A, respecting our Consumer Markets division (formerly our MTS (Manitoba) division) and our Enterprise Solutions division (formerly our Allstream (National) division), are presented on the same basis as each division’s respective predecessor organization. We expect to begin reporting segmented information for the Consumer Markets division and the Enterprise Solutions division as soon as activities are completed to ensure that all of our systems are updated to reflect the new structure and that the information we report is complete and accurate. On August 14, 2006, we entered into a definitive agreement to sell our directories business. This transaction closed on October 2, 2006. As prescribed by the Canadian Institute of Chartered Accountants’ (“CICA”) Handbook, the directories business results have been classified as discontinued operations in our financial statements (see Note 5 to our financial statements). Consumer Markets division: the primary telecommunications provider in Manitoba which operates under the MTS brand. We serve residential and small business customers with a full suite of wireline voice, high-speed Internet and data, next generation wireless, digital television, and security and alarm monitoring services. Enterprise Solutions division: a customer-focused, agile innovator which offers a world-class portfolio of business solutions, including voice and data connectivity, infrastructure management and information technology (“IT”) services to business and wholesale customers. Our Enterprise Solutions division, which operates under our Allstream brand, has built a strong market share position that

spans the country, and includes many of Canada’s largest companies, as well as federal, provincial and municipal governments. On November 29, 2005 we launched our Transition Phase II cost reduction program (“TP2 cost reduction program”) to position the company to grow profitably and improve our cash flows in the rapidly changing telecommunications industry. Our TP2 cost reduction program builds on the success of our initial integration project by refining our market focus and aligning our cost structure for long-term competitive success. The TP2 cost reduction program represents a further integration of our two operating divisions, which is expected to achieve a minimum of $100 million in expense savings over the next two years. RREESSUULLTTSS OOFF OOPPEERRAATTIIOONNSS Earnings Per Share (“EPS”) ($)

three months ended September 30 2006 2005 EPS (Continuing Operations) 0.62 0.61 Discontinued Operations 0.07 0.05 Restructuring Costs (0.09) (0.04) Retroactive Band F Decision -- 0.05 Basic EPS 0.60 0.67

Note: EPS for the three months ended September 30 is based on weighted average shares outstanding of 68.1 million for 2006, and 67.7 million for 2005. EPS from continuing operations was $0.62 in the third quarter of 2006, which is slightly up from $0.61 as compared to the same period in 2005. Our Enterprise Solutions division and our Consumer Markets division delivered solid results from their respective growth services, and achieved excellent gains in reducing costs, which helped to offset the impacts of continuing strong competition and technology migration to lower priced IP-based services by customers in our industry. Higher amortization expense, which was offset by lower income tax expense due to lower statutory income tax rates and higher other income, contributed to increased EPS in the third quarter of 2006, as compared to the same period in 2005. Basic EPS was $0.60 in the third quarter of 2006, as compared to $0.67 in the same quarter during 2005. These results also reflect a number of additional items that did not arise from continuing operations, which include restructuring costs during the third quarter of both 2005 and 2006; the positive retroactive impact from the Band F Decision in 2005; and discontinued operations.

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EPS (Continuing Operations)

0.60 0.630.68

0.620.61

Q 3/05 Q 4/05 Q 1/06 Q 2/06 Q 3/06

$

EBITDA(Continuing Operations)

160.9 163.2

155.7

167.1162.7

Q 3/05 Q 4/05 Q 1/06 Q 2/06 Q 3/06

in m

illio

ns $

EPS ($)

nine months ended September 30 2006 2005 EPS (Continuing Operations) 1.93 1.92 Discontinued Operations 0.19 0.16 Tax Audit Settlement -- 1.07 Restructuring Costs (0.18) (0.19) Future Tax Rate Adjustment (0.86) (0.14) Retroactive Band F Decision 0.09 0.05 Retroactive Direct Connect/Access Tandem Decisions 0.06 --

Retroactive CDNA Decision -- 0.04 Gain on Sale of Wireless Venture -- 0.03 Basic EPS 1.23 2.94

Note: EPS for the nine months ended September 30 is based on weighted average shares outstanding of 68.0 million for 2006, and 67.7 million for 2005. EPS from continuing operations was $1.93 in the first nine months of 2006, which was slightly up from $1.92 as compared to the same period in 2005. Our Enterprise Solutions division and our Consumer Markets division delivered solid results from their respective growth services, and achieved excellent gains in reducing costs, which helped to offset the impacts of competition and technology migration by customers of our industry. Higher amortization expense, as well as lower income tax expense due to lower statutory rates, contributed to EPS in the first nine months of 2006, as compared to the same period in 2005. Basic EPS was $1.23 in the first nine months of 2006, as compared to $2.94 in 2005. These results reflect a number of items that did not arise from continuing operations. In 2006, these include a future tax rate non-cash adjustment due to a decrease in statutory income tax rates, positive adjustments related to the retroactive Band F Decision and the retroactive Direct Connect/Access Tandem Decisions, restructuring costs, and discontinued operations. In 2005,

these include a non-cash gain associated with the settlement of prior years’ tax audits, restructuring costs, a future tax rate adjustment due to a decrease in statutory income tax rates, positive adjustments related to the CDNA Decision and the Band F Decision, as well as the gain on the sale of our ownership interest in a wireless venture and discontinued operations. EBITDA

(in millions $) Q3/06 Q3/05 YTD/06 YTD/05

EBITDA (Continuing Operations) 162.7 160.9 493.0 490.9

Restructuring Costs (9.8) (5.0) (20.0) (21.3)

Retroactive Band F Decision -- 5.9 9.9 5.9

Retroactive Direct Connect/Access Tandem Decisions

-- -- 6.7 --

Retroactive CDNA Decision -- -- -- 4.3

EBITDA 152.9 161.8 489.6 479.8

EBITDA from continuing operations was essentially unchanged at $162.7 million in the third quarter of 2006 and $493.0 million year to date. These results reflect growth in wireless, digital television and Internet services, which were offset by declines in legacy services in our Consumer Markets division, as well as strong improvements in revenues from our Enterprise Solutions division’s next generation services which were offset by pressure due to aggressive pricing in the long distance and legacy data services markets. Also contributing to these results are our cost reduction initiatives, which have realized consolidated savings across our organization of $69 million as at September 30, 2006. Consolidated EBITDA was $152.9 million in the third quarter of 2006 versus $161.8 million a year earlier, and $489.6 million in the first nine months of 2006 versus $479.8 million in 2005. These results include impacts from restructuring costs and regulatory decisions as detailed in the above table.

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Operating Revenues(Continuing Operations)

501.8 494.2 480.4 477.9479.1

Q 3/05 Q 4/05 Q 1/06 Q 2/06 Q 3/06

in m

illio

ns $

REVENUES Operating Revenues

(in millions $) Q3/06 Q3/05 YTD/06 YTD/05 Data 165.6 170.7 495.8 503.4 Local 134.4 148.4 419.8 424.1 Long Distance 99.0 117.7 304.0 360.5 Wireless 61.5 54.5 173.0 153.1 Other 17.4 16.4 54.7 45.0 Total 477.9 507.7 1,447.3 1,486.1

Our operating revenues include those earned from the provision of data, local voice, long distance voice, wireless and other services, which includes digital television service. Consolidated revenues were $477.9 million in the third quarter of 2006 and $1,447.3 million year to date. These are lower primarily due to decreased revenues from long distance, local and data services. Partly offsetting these results were strong increases in revenues from growth services in our Enterprise Solutions division, including next generation data connectivity, as well as strong increases from wireless, digital television, and Internet services in our Consumer Markets division. With respect to year to date, IT services associated with our acquisition of Delphi Solutions Corp. (“Delphi”) on July 5, 2005 also contributed to growth in revenues. In addition, our revenues were impacted by a number of retroactive regulatory adjustments. In the second quarter of 2006, we received a retroactive payment of $9.9 million associated with the Band F Decision, while in the third quarter of 2005, we received an earlier retroactive payment of $5.9 million which also is associated with the Band F Decision, and in the first quarter of 2005, we received a $1.6 million retroactive charge associated with the CDNA Decision. Operating Revenues

(in millions $) Q3/06 Q3/05 YTD/06 YTD/05

Revenue (Continuing Operations) 477.9 501.8 1,437.4 1,481.8

Retroactive Band F Decision -- 5.9 9.9 5.9

Retroactive CDNA Decision -- -- -- (1.6)

Revenue 477.9 507.7 1,447.3 1,486.1

Data Services

(in millions $) 2006 2005 % change Q3 165.6 170.7 (3.0) YTD 495.8 503.4 (1.5)

Our data line of business includes revenues earned from providing data, Internet and IT services. Data services connect data, video and voice networks to establish private connections across office locations and to integrate traffic over highly secure networks. We provide a wide range of Internet connectivity services to meet the needs of residential customers in Manitoba and business customers across the country. We also offer numerous hosting and security services to business customers across Canada. Revenues from data services were $165.6 million in the third quarter of 2006, as compared to $170.7 million in the corresponding period in 2005. Revenues were $495.8 million in the first nine months of 2006 versus $503.4 million for the same period in 2005. Included in our year to date results comparison is a $1.6 million retroactive charge associated with the CDNA Decision, which occurred in the first quarter of 2005. The quarterly and year to date performance reflects increases in revenues from next generation data connectivity services, year to date IT services due to our acquisition of Delphi, and Internet services. These increases helped to offset lower legacy data connectivity revenues, which, in part, were attributable to our changing relationship with AT&T Corp. The strong performance in our next generation data connectivity revenues reflects customer migration to IP-based solutions and our Enterprise Solutions division’s ability to deliver leading edge solutions to our customers. Our IP virtual private network customer base has grown strongly, increasing to 158 as at September 30, 2006. Strong growth in our high-speed Internet customer base in Manitoba also continues in 2006. As at September 30, 2006, our high-speed Internet customer base totalled 140,564, translating into strong year-over-year growth of 16.6%.

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Data Services Revenues

170.7 172.4166.2 165.6164.0

Q 3/05 Q 4/05 Q 1/06 Q 2/06 Q 3/06

in m

illio

ns $ Local Voice Services Revenues

147.2138.2

148.4140.2

134.4

Q 3/05 Q 4/05 Q 1/06 Q 2/06 Q 3/06

in m

illio

ns $

Local Services

(in millions $) 2006 2005 % change Q3 134.4 148.4 (9.4) YTD 419.8 424.1 (1.0)

Local services revenues from our Consumer Markets division include basic voice connections for residential and business customers, including enhanced calling features (such as Call Answer, Call Display, Call Waiting and 3-Way Calling), payphone revenue, wholesale revenues from services provided to third parties, as well as contribution revenue. Through our Enterprise Solutions division, we provide a full range of local services to business customers on a national basis. These services allow customers to complete calls in their local calling areas and to access long distance, cellular networks and the Internet. The local products provided by our Enterprise Solutions division offer a uniform service across all major markets in Canada. Local services revenues in the third quarter of 2006 were $134.4 million as compared to $148.4 million in the same period of the previous year, and on a year to date basis, decreased modestly from $424.1 million in 2005 to $419.8 million in 2006. These decreases primarily reflect the competitive local telephony environment in Winnipeg. Partly offsetting the pressure on the revenues of our Consumer Markets division were increased revenues from higher wholesale revenues by our Enterprise Solutions division. The modest decrease in year to date revenues reflects the impact of the competitive environment in which our Consumer Markets division operates, which was offset by higher retroactive payments associated with the Band F Decision which we received during 2006 and 2005 in the amounts of $9.9 million and $5.9 million, respectively, and higher wholesale revenues from our Enterprise Solutions division. Competition from cable telephony offerings began in the local Manitoba market in mid-2005, which has contributed to an 8.2% decrease in residential network access service year-over-year. Our Consumer Markets division has

one of the most advanced suites of communications offerings of any operator in North America, and we are confident in our ability to continue to compete successfully in the Manitoba market. Long Distance Services

(in millions $) 2006 2005 % change Q3 99.0 117.7 (15.9) YTD 304.0 360.5 (15.7)

Long distance services enable residential customers in Manitoba and business customers across Canada to communicate with destinations outside the local exchange. Our long distance voice service portfolio includes basic, domestic, cross-border and international outbound long distance, basic and enhanced toll-free services, calling cards and audio conferencing, as well as a variety of enhanced long distance services and features. Long distance revenues were $99.0 million in the third quarter of 2006, as compared to $117.7 million in the previous year. In the first nine months of 2006, long distance revenues decreased to $304.0 million from $360.5 million in 2005. These results reflect competitive pressures that are associated with pricing across all market segments. Our Consumer Markets division continued to experience decreased revenue due to local line losses and customer migration to lower priced plans along with wireless and e-mail substitutions. Lower rates in the domestic, cross-border and international markets, which were partly offset by higher volumes in these markets, negatively impacted the long distance revenues of our Enterprise Solutions division.

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Wireless Services Revenues

54.5 54.6 53.8

57.7

61.5

Q 3/05 Q 4/05 Q 1/06 Q 2/06 Q 3/06

in m

illio

ns $

Other Revenues

17.419.8

16.4

19.617.7

Q 3/05 Q 4/05 Q 1/06 Q 2/06 Q3/06

in m

illio

ns $

Long Distance Services Revenues

117.7107.2

100.2 99.0104.8

Q 3/05 Q 4/05 Q 1/06 Q 2/06 Q 3/06

in m

illio

ns $

Wireless Services

(in millions $) 2006 2005 % change Q3 61.5 54.5 12.8 YTD 173.0 153.1 13.0

Our wireless portfolio consists of cellular, wireless data, paging and group communications services that we offer in the Manitoba market. Revenues from wireless services increased to $61.5 million in the third quarter of 2006, representing year-over-year growth of 12.8%. Wireless revenues for the first nine months of 2006 increased by 13.0% on a year-over-year basis to reach $173.0 million. Strong customer growth, complemented by increased average monthly revenue per user (“ARPU”), was the primary contributor to these solid levels of performance. Our cellular customer base grew by 12.4% to 343,260 as at September 30, 2006. The expanding popularity of our wireless services, including related data features such as text messaging, and other enhanced features, also continued to drive increased utilization rates, and contributed to an ARPU of $56.53 for the first nine months of the year, representing a 1.2% improvement over the same period in the previous year.

Other Revenues (in millions $) 2006 2005 % change

Q3 17.4 16.4 6.1 YTD 54.7 45.0 21.6

Other revenues consist of revenues earned from our digital television services and miscellaneous items. Our digital television service is offered across our broadband network platform and is targeted at residential customers in Winnipeg. Miscellaneous revenues primarily consist of security and alarm monitoring services, and the sale and maintenance of terminal equipment. Other revenues climbed by 6.1% to $17.4 million in the third quarter of 2006 from $16.4 million in 2005, and on a year to date basis, from $45.0 million to $54.7 million. These increases were primarily due to strong revenue growth from digital television services. For the nine months ended September 30, 2006, digital television revenues increased by 44.4% to $23.1 million. This increase reflects strong year-over-year growth in customers and video on demand service revenues. Our subscriber base increased to 59,442 as at September 30, 2006, representing an increase of 27.2% and we also acquired 3,700 Valley Cable Vision television customers. OPERATING EXPENSES Operations Expense

(in millions $) 2006 2005 % change Q3 315.2 340.9 (7.5) YTD 937.7 985.0 (4.8)

In the third quarter of 2006, operations expense experienced a decrease of 7.5%, as compared to 2005. For the nine months ended September 30, 2006, operations expense was $937.7 million, as compared to $985.0 million in the

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same period of 2005. Contributing to these year-over-year decreases are lower expenses flowing from our TP2 cost reduction program, which contributed approximately $69 million in realized savings in the first nine months of 2006. Partly offsetting the savings were higher expenses for our growth operations, and for year to date the acquisition of Delphi. Transition Phase II Cost Reduction Program In late 2005, we undertook an extensive, two-year cost reduction program, known as our TP2 cost reduction program, to achieve annualized savings of a minimum of $100 million. As at September 30, 2006, we have completed activities that represent annualized expense savings of $78 million. We describe these as achieved annualized expense savings. In the first nine months of 2006, we have realized savings of $69 million. This means we have taken $69 million of expense out of our cost base in the first nine months of 2006. To achieve the minimum target of $100 million in savings, we expect to incur approximately $100 million in one-time costs. The table below summarizes our estimates of how these costs will be recorded in 2005 and 2006: Q4 2005 Restructuring and Integration Expense $35.4 M

2006 Forecast Costs * $35 M to $45 M

Q4 2006 Restructuring and Integration Expense** $20 M to $25 M

Total Estimated Cost of Program $100 M * These costs are expected to be comprised of both expense and capital expenditure items. ** Associated with our Voluntary Reduction Program that was announced on October 2, 2006. The majority of the $100 million in total expected costs will be cash flowed in 2006. These costs are comprised of $35.4 million in severance costs accrued in 2005, and $35 million to $45 million that will be charged in 2006, as either an expense or a capital expenditure depending on the nature of the item, and $20 million to $25 million in severance costs associated with our Voluntary Reduction Program (targeting up to 325 positions), which was announced on October 2, 2006. To September 30, 2006, $24.1 million has been paid against the severance accrued in 2005, $20 million has been expensed, and $1.9 million has been recorded as a capital expenditure. Restructuring Costs

(in millions $) 2006 2005 % change Q3 9.8 5.0 96.0 YTD 20.0 21.3 (6.1)

Restructuring costs associated with our cost reduction program were $9.8 million in the third quarter and $20.0 million in the first nine months of 2006. In the first nine months of 2005, we incurred $21.3 million in restructuring expense associated with previous cost reduction programs. Amortization Expense

(in millions $) 2006 2005 % change Q3 83.1 79.1 5.1 YTD 244.9 234.7 4.3

Amortization expense was $83.1 million in the third quarter of 2006, as compared to $79.1 million in the same period of the previous year. Year to date amortization expense increased by 4.3% to $244.9 million in 2006, as compared to $234.7 million in 2005. These increases resulted from increases in plant in service and in deferred wireless amortization costs. Other Income

(in millions $) 2006 2005 % change Q3 3.0 1.1 n.m. YTD 3.4 6.5 (47.7)

Other income was $3.0 million in the third quarter of 2006, versus $1.1 million in the previous year. This increase was primarily due to a gain on a sale of property. In the first nine months of 2006, other income decreased to $3.4 million from $6.5 million in 2005. This decrease is primarily attributable to a $2.7 million gain realized in the first quarter of 2005 on the disposition of our investment in a wireless venture. Debt Charges

(in millions $) 2006 2005 % change Q3 15.6 15.3 2.0 YTD 46.3 45.6 1.5

Debt charges were marginally higher year-over-year at $15.6 million in the third quarter and $46.3 million year to date. These increases primarily reflect higher levels of short-term interest in 2006 versus 2005, and were partly offset by lower long-term interest costs due to maturing debt. As at September 30, 2006, we had $895.1 million of outstanding debt, as compared to $1,004.2 million as at December 31, 2005. Our debt to total capitalization ratio at September 30, 2006 was 39.1%, and continues to provide us with financial strength and flexibility going forward.

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Income Tax Expense (in millions $) 2006 2005 % change

Q3 21.4 26.7 (19.9) YTD 131.5 18.0 n.m.

We have the benefit of substantial loss carryforwards, as a result of our acquisition in 2004 of Allstream Inc. (“Allstream”), which allows us to reduce our taxable income to zero without utilizing our substantial and growing capital cost allowance (“CCA”) pools. Through the utilization of the loss carryforwards, followed by utilization of our deferred CCA deduction, we project that we will not pay cash taxes any earlier than 2014. Our income tax expense in the third quarter of 2006 decreased by 19.9% to $21.4 million, as compared to $26.7 million in the same quarter of the previous year. This decrease is largely due to lower before tax income earned during the third quarter of 2006 than in the third quarter of 2005. Year to date, income tax expense increased from $18.0 million in 2005 to $131.5 million in 2006 due to several non-cash adjustments which were made during these periods. In the second quarter of 2006, we recorded a $58.6 million non-cash charge, to reflect a decrease in the book value of our income tax asset, as a result of a reduction in future income tax rates. A similar adjustment of $9.6 million was recorded in the second quarter of 2005 for a reduction in future income tax rates in Manitoba. As well, in the second quarter of 2005, a non-cash gain of $72.5 million associated with the settlement of prior years’ tax audits was recorded. All of these adjustments to income tax expense are non-cash impacting.

CONSOLIDATED QUARTERLY DATA Unaudited quarterly financial data for our eight most recently completed quarters is presented below:

(in millions $, except earnings per share)

Q3 2006

Q2 2006

Q1 2006

Q4 2005

Operating Revenues 477.9 489.0 480.4 494.2

Operating Income 69.8 95.1 79.8 34.0

Net Income (Loss) before discontinued operations

35.8 (6.2) 40.7 10.8

Net Income (Loss) 40.5 (1.2) 44.0 14.6

Earnings (Loss) Per Share before discontinued operations

0.53 (0.09) 0.60 0.16

Diluted Earnings (Loss) Per Share before discontinued operations

0.52 (0.09) 0.60 0.16

Earnings (Loss) Per Share 0.60 (0.02) 0.65 0.22

Diluted Earnings (Loss) Per Share 0.59 (0.02) 0.65 0.22

(in millions $, except earnings per share)

Q3 2005

Q2 2005

Q1 2005

Q4 2004

Operating Revenues 507.7 491.3 487.1 494.9

Operating Income 82.7 87.0 75.4 87.1

Net Income before discontinued operations

41.8 106.7 39.5 38.8

Net Income 45.1 111.5 42.5 42.3

Earnings Per Share before discontinued operations

0.62 1.58 0.58 0.58

Diluted Earnings Per Share before discontinued operations

0.61 1.57 0.58 0.57

Earnings Per Share 0.67 1.65 0.63 0.63

Diluted Earnings Per Share 0.66 1.64 0.63 0.62

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Our consolidated financial results for the eight most recently completed quarters reflect the ongoing performance of our business in the marketplace as well as: • Effective October 2, 2006, we sold our directories

business for $281 million. As prescribed by the CICA Handbook, the directories business results have been classified as discontinued operations in our financial statements.

• The recording of a $58.6 million charge in the

second quarter of 2006 to reflect a decrease in the value of our income tax asset, as a result of a reduction in future income tax rates.

• The recording of amounts respecting a number of

regulatory decisions: a $9.9 million retroactive positive impact from the Band F Decision and a $6.7 million retroactive positive impact from the Direct Connect/Access Tandem Decisions, which both occurred in the second quarter of 2006; a $5.9 million positive retroactive impact in the third quarter of 2005 from the Band F Decision; and a $4.3 million net positive retroactive impact in the first quarter of 2005 from the CDNA Decision.

• The recognition of restructuring costs for our TP2 cost

reduction program in the first, second and third quarters of 2006 in the amounts of $3.1 million, $7.1 million and $9.8 million, respectively, and $35.4 million in the fourth quarter of 2005.

• The recognition of restructuring costs in each of the

four quarters in 2005 in the amounts of $3.6 million, $3.9 million, $5.0 million and $5.0 million, listed chronologically; and in the fourth quarter of 2004 in the amount of $3.3 million. These costs are associated with the initial integration of Allstream’s operations following the completion of our acquisition.

• The recording of a provision against the carrying value

of a long-term investment in the pre-tax amount of $4.5 million and $7.0 million in the fourth quarters of 2005 and 2004, respectively.

• A workforce reduction initiative that we undertook in

the first quarter of 2005, which resulted in restructuring charges of $9.0 million.

• The acquisition of Delphi on July 5, 2005 for a purchase

price of approximately $15 million. • The recording of a $72.5 million (non-cash) gain in

respect of prior years’ tax audits in the second quarter of 2005, which was partly offset by a $9.6 million charge to reflect a decrease in the value of our income tax asset as a result of a reduction in future income tax rates in the province of Manitoba.

• The recognition of a one-time gain in the amount of $2.7 million in the first quarter of 2005 resulting from the sale of our investment in a wireless venture.

LLIIQQUUIIDDIITTYY AANNDD CCAAPPIITTAALL RREESSOOUURRCCEESS Cash Flows from Operating Activities

(in millions $) 2006 2005 $ change Q3 74.8 86.5 (11.7) YTD 383.6 271.7 111.9

Cash flows from operating activities refers to cash we generate from our business activities. Cash flows from operating activities were $74.8 million in the third quarter, as compared to $86.5 million in the same period of 2005. Year to date cash flows from operating activities increased by $111.9 million to $383.6 million in 2006, from the same period in 2005. The year-over-year decrease in the third quarter is mainly attributable to changes in working capital offset by a one-time cash payment associated with tax paid in 2005 resulting from the Bell West gain. The year to date increase is mainly attributable to changes in working capital resulting from an accounts receivable securitization program, which was undertaken in April 2006, and by a one-time cash payment associated with tax paid in 2005 resulting from the Bell West gain, which was partly offset by higher pension solvency funding. Cash Flows used in Investing Activities

(in millions $) 2006 2005 $ change Q3 70.4 98.2 (27.8) YTD 183.4 244.5 61.1

Investing activities represent cash used for acquiring, and cash received from disposing of, long-term assets and other long-term investments. Cash flows used in investing activities were $70.4 million in the third quarter, as compared to $98.2 million a year ago. This decrease is primarily due to decreased capital expenditures and lower acquisition costs. In the third quarter of 2006, we acquired Valley Cable Vision (1997) Limited for cash consideration of $4.3 million, and in the third quarter of 2005, we acquired Delphi for approximately $15 million. Year to date, cash flows used in investing activities decreased to $183.4 million in 2006 from $244.5 million in 2005. Contributing to this year-over-year reduction were decreased capital spending and lower acquisition costs, which were offset by proceeds of $8.1 million from the sale of our investment in a wireless venture.

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Free Cash Flow (in millions $) Q3

2006 Q3

2005 YTD 2006

YTD 2005

Free Cash Flow (Continuing Operations) 70.7 56.9 248.9 198.9

Pension Solvency Funding (27.6) (25.3) (69.4) (47.9)

Restructuring Expense (9.8) (5.0) (20.0) (21.3)

Retroactive Direct Connect/Access Tandem Decisions

-- -- 6.7 --

Restructuring Capital Expenditures (1.6) (4.3) (1.9) (11.0)

Retroactive Band F Decision -- 5.9 9.9 5.9

Taxes on Bell West Gain 16.4 (38.0) 16.4 (38.0) Retroactive CDNA Decision -- -- -- 4.3

Consolidated Free Cash Flow 48.1 (9.8) 190.6 90.9

Free cash flow refers to cash flow from operating activities, less capital expenditures, and excluding changes in working capital and a $12.5 million non-cash adjustment to current tax expense that was part of the tax audit settlement recorded in the second quarter of 2005. Free cash flow from continuing operations was $70.7 million in the third quarter and $248.9 million in the first nine months of this year, which is up $13.8 million and $50.0 million from the same periods in the previous year, respectively. These increases are primarily attributable to lower capital expenditures year-over-year. Consolidated free cash flow, which includes items not from continuing operations, was $48.1 million in the third quarter of 2006, as compared to ($9.8) million in the same period of the previous year. In addition to the item noted above, consolidated free cash flow during the third quarter of 2006 also reflects higher restructuring expenses and pension solvency funding. Year to date consolidated free cash flow was higher due primarily to lower capital expenditures and due to tax paid in 2005 resulting from the Bell West gain, offset by higher pension solvency funding. Cash Flows (used in) from Financing Activities

(in millions $) 2006 2005 $ change Q3 (19.0) 9.3 (28.3) YTD (226.5) (85.1) (141.4)

Financing activities refer to actions we undertake to fund our operations through equity capital and borrowings. Cash flows used in financing activities were $19.0 million in the third quarter, as compared to cash flows from financing activities of $9.3 million in 2005. In the third quarter of 2006, we paid cash dividends of $44.3 million, and issued notes payable in the amount of $24.7 million. In the third quarter of 2005, we paid cash dividends of

$44.0 million and repaid long-term debt in the amount of $15.5 million, and issued net notes payable of $67.8 million. Year to date, cash flows used in financing activities were $226.5 million, as compared to $85.1 million in 2005. In the first nine months of 2006, we paid cash dividends of $132.3 million, and repaid net notes payable and long-term debt of $61.0 million and $48.1 million, respectively. In the first nine months of 2005, we paid cash dividends of $131.9 million and repaid long-term debt in the amount of $60.1 million and issued net notes payable of $99.8 million. Credit Facilities

(in millions $) Capacity Utilized at Sept. 30/06

Medium Term Note Program 350.0 220.0 Commercial Paper 150.0 47.0 Accounts Receivable Securitization 150.0 123.0 Operating Line of Credit 100.0 17.2

Total 750.0 407.2

We have arrangements in place that allow us to access the debt and commercial paper markets for funding when required. Borrowings under these facilities are typically used to fund new initiatives, refinance maturing debt, and manage cash flow fluctuations. In addition to our medium term note program, we have additional credit facilities available in the amount of $400.0 million, which consist of a fully back-stopped commercial paper program of $150.0 million, an accounts receivable securitization program of $150.0 million and a $100.0 million operating line of credit. As at September 30, 2006, we utilized $47.0 million of our commercial paper program, $123.0 million of our accounts receivable securitization program, and $17.2 million of our operating line of credit, which represent undrawn letters of credit. Capital Structure

(in millions $) Sept. 30/06 December 31/05 Long-term Debt and Notes Payable 895.1 1,004.2

Shareholders Equity 1,394.8 1,429.8

Total Capitalization 2,289.9 2,434.0 Debt to Capitalization 39.1% 41.3%

Our capital structure illustrates the amount of our assets that are financed by debt versus equity. During the third quarter, we issued $24.7 million, net in short term debt. Our debt to total capitalization ratio of 39.1% as at September 30, 2006 continues to represent excellent financial strength and flexibility.

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Credit Ratings S&P – Senior debentures BBB+

S&P – Commercial paper A-2

DBRS – Senior debentures BBB (high)

DBRS – Commercial paper R-1 (low)

Two leading rating agencies, Standard & Poor’s (“S&P”) and Dominion Bond Rating Service (“DBRS”), analyze us and assign ratings based on their assessments. We have consistently been assigned solid investment grade credit ratings. DBRS’s rating on our senior debentures is “BBB (high)” and “R-1 (low)” on our commercial paper. DBRS confirmed our credit ratings on August 14, 2006, and maintained its negative outlook. On March 8, 2006, S&P confirmed our credit rating on our long-term corporate credit and senior unsecured debt of “BBB+”, and revised its rating on our commercial paper to “A-2”. The outlook remained unchanged at negative. Outstanding Share Data as at October 23, 2006 Authorized: • Unlimited number of Preference Shares of two classes

issuable in one or more series • Unlimited number of Common Shares of a single class

Issued:

Shares Number Book Value (in millions $)

Common 68,181,307 1,331.8

Stock options:

Options Number Weighted Average Exercise Price Per Share

Outstanding 1,731,850 $40.12 Exercisable 500,790 $36.07

Subsequent Events Completion of Directories Business Transaction On August 14, 2006, we entered into a definitive agreement to sell our directories business for an effective value to us of $281 million. This transaction closed on October 2, 2006. As prescribed by the CICA Handbook, the directories business results have been classified as discontinued operations in our financial statements. Workforce Reduction Program On October 2, 2006, we announced a workforce reduction program for our Consumer Markets division. We estimate the costs associated with this initiative to be approximately $20 million to 25 million, which will be recorded as a one-time charge to income in the fourth quarter of 2006.

Contractual Obligations, Financial Instruments, Off-Balance Sheet Arrangements, and Other Financial Arrangements Our contractual obligations, financial instruments, off-balance sheet arrangements, and other financial arrangements remain substantially unchanged from those that were disclosed in our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A, except as noted below. For additional details, please consult our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A, which are available on our Web site at www.mtsallstream.com. Commitment On May 30, 2002, the CRTC issued Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34 (“Decision 2002-34”), which governs local rates charged to residential and business customers, and the rates that incumbent telephone companies may charge their competitors. In Decision 2002-34, the CRTC established a regulatory deferral account mechanism, which is to be used to fund qualifying initiatives, such as rate reductions, rebates and service improvement plans. On February 16, 2006, the CRTC issued Disposition of funds in the deferral accounts, Telecom Decision CRTC 2006-9 (“Decision 2006-9”). In this decision, the CRTC determined that the funds accumulated in our deferral account should be used for the expansion of broadband services, for initiatives to improve accessibility to telecommunications services for persons with disabilities, and for certain rate reductions. The estimate of the balance to be cleared from our deferral account for these initiatives is about $20 million. We have used approximately $5 million of the accumulated balance to fund reductions in our rates for basic local residential services and for certain optional features. These rate proposals were approved by the CRTC and came into effect on June 1, 2006. After these rate reductions, we have a remaining deferral account balance of approximately $15 million, subject to adjustment dependent upon the CRTC’s consideration of a number of outstanding issues, which could reduce the final balance. CCRRIITTIICCAALL AACCCCOOUUNNTTIINNGG EESSTTIIMMAATTEESS AANNDD AASSSSUUMMPPTTIIOONNSS Our critical accounting estimates and assumptions remain substantially unchanged from those that were disclosed in our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A. For additional details, please consult our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A, which are available on our Web site at www.mtsallstream.com.

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CCHHAANNGGEESS IINN AACCCCOOUUNNTTIINNGG PPOOLLIICCIIEESS,, IINNCCLLUUDDIINNGG IINNIITTIIAALL AADDOOPPTTIIOONN Our accounting policies, including initial adoption, remain substantially unchanged from those that were disclosed in our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A. For additional details, please consult our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A, which are available on our Web site at www.mtsallstream.com. RRIISSKKSS AANNDD UUNNCCEERRTTAAIINNTTIIEESS Our risks and uncertainties remain substantially unchanged from those that were disclosed in our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A, except as noted below. For additional details, please consult our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A, which are available on our Web site at www.mtsallstream.com. Developments in Federal Regulation The telecommunications and broadcast industries in which we operate are regulated federally. We operate as both an incumbent local exchange carrier in Manitoba and as a competitor local exchange carrier nationally. In addition, pursuant to Broadcasting Decision CRTC 2002-235, the CRTC granted us a Class 1 regional broadcasting distribution licence to operate as a broadcasting distribution undertaking serving Winnipeg and its surrounding areas. Policy developments and regulatory decisions or proceedings that were issued or commenced during the third quarter that are significant to our business are described below. Telecommunications Policy Review On March 22, 2006, the final report (the “Report”) of the Telecommunications Policy Review Panel was submitted to the federal Minister of Industry and released to the public. The Report is substantial, including over 120 recommendations for modernization of the telecommunications policy framework in Canada. The Government of Canada has indicated that it will respond substantively after reviewing the Report over the next number of months, and on June 13, 2006, as an interim measure, the Minister of Industry tabled in Parliament a proposed policy direction to the CRTC which responds in part to the Report. Included in the draft policy direction is a direction to the CRTC to review the regulatory framework regarding mandated access to wholesale network services. Comments from stakeholders have been requested in conjunction with the tabling of this proposed policy. We are commenting and emphasizing to the government, the importance of wholesale competitor access to the public

network infrastructures controlled by the incumbent telephone companies in achieving the government’s overall goal of a stronger competitive environment. Deferral Account On February 16, 2006, the CRTC issued Decision 2006-9. In this decision, the CRTC determined that the funds accumulated in our deferral account should be used for the expansion of broadband services, initiatives to improve accessibility to telecommunications services for persons with disabilities, and certain rate reductions. The estimate of the balance to be cleared from our deferral account for these initiatives is about $20 million. We have used approximately $5 million of the accumulated balance to fund reductions in our rates for basic local residential services and for certain optional features. These rate proposals were approved by the CRTC and came into effect June 1, 2006. After these rate reductions, we have a remaining deferral account balance of approximately $15 million, subject to adjustment dependent upon the CRTC’s consideration of a number of outstanding issues, which could reduce the final balance. Groups representing consumers and Bell Canada (“Bell”) each have been granted leave to appeal Decision 2006-9 from the Federal Court of Appeal. As well, another company, Barrett Xplore Inc., has appealed this decision to the federal government, and also has made an application to the CRTC to review and vary its decision. These proceedings may delay the final drawdown of the balance of the deferral account. We are analyzing Decision 2006-9 and have submitted proposals for the CRTC’s consideration that meet the goals and objectives of this decision, and are consistent with our business goals. VoIP Reconsideration On May 12, 2006, in response to an appeal by Bell, TELUS Communications Inc. (“TELUS”), and Saskatchewan Telecommunications (“SaskTel”), the Minister of Industry asked the CRTC to reconsider Regulatory framework for voice communications services using Internet Protocol, Telecom Decision CRTC 2005-28 (“Decision 2005-28”) regarding the regulatory treatment of the provision of local voice over Internet Protocol (“VoIP”) service by incumbent telephone companies. In Decision 2005-28, the CRTC found that VoIP services were offered in the same market as other basic local voice services and, therefore, determined that VoIP services should be accorded the same regulatory treatment as basic local voice services, such as the obligation to file tariffs for this service. In the proceeding that the CRTC initiated to canvass views on this reconsideration, we expressed agreement with the CRTC’s original findings, and indicated that there is no sound basis for having different regulatory treatment for VoIP and local voice services when offered using traditional technology. On September 1, 2006, the CRTC issued Telecom Decision 2006-53 (“Decision 2006-53”), which reaffirmed the regulatory

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treatment of VoIP services as established in Decision 2005-28. The Governor in Council has ninety days from the date of Decision 2006-53 to vary or rescind this decision. Local Forbearance On April 6, 2006, the CRTC issued Forbearance from the regulation of retail local exchange services, Telecom Decision CRTC 2006-15 (the “Forbearance Decision”). The Forbearance Decision sets out the details of the framework for forbearance from the regulation of local exchange services, including local forbearance criteria, and outlines the scope of forbearance to be granted and the adoption of transitional measures to aid in the development of sustainable local competition. On September 1, 2006, the CRTC issued Telecom Public Notice 2006-12 (the “Re-consideration”) to re-assess the market share thresholds set out in the Forbearance Decision. Evidence in the Re-consideration proceeding indicated that local competition in the residential market was taking hold more quickly than the CRTC had anticipated when it issued the original Forbearance Decision. As well, the Re-consideration does not extend to the non-market share loss forbearance criteria such as the existence of competitor wholesale access tariffs and satisfaction of quality of service indicators by the applicant. A decision in this proceeding is expected in early 2007. Aliant Telecom Inc. (“Aliant”), Bell, TELUS and SaskTel also have been granted leave to appeal the Forbearance Decision to the Federal Court of Appeal, and also have appealed this decision to the federal Cabinet. Price Caps On May 9, 2006, the CRTC issued Review of price cap framework, Public Telecom Notice CRTC 2006-5, which invited proposals for the regulation of the incumbent retail services that remain subject to rate regulation. The incumbent telephone companies, including our Consumer Markets division, have been subject to price caps, a form of incentive regulation, since 1998. This will be the third price cap review undertaken by the CRTC. The regime that will be put in place as a result of this proceeding will commence in June 2007, and likely be in place for a number of years. We are participating in this proceeding, which is expected to conclude this fall, and expect that the CRTC will issue a decision in the second half of 2007. We are proposing a regime that reflects the emergence of competition in the residential market by offering greater pricing flexibility, and increasing reliance on competitive market forces to set price rather than artificial regulatory mechanisms such as the deferral account mechanism. Pension Solvency Funding We have defined benefit pension plans which provide retirement benefits to our employees. These plans are funded as determined through periodic actuarial valuations.

On June 2, 2006, the federal government released draft amendments to the solvency funding regulations for federally regulated pension plans. Once the new regulations come into effect, revised actuarial funding valuation reports are expected to be filed to obtain the desired solvency relief. We anticipate filing revised valuations to enable the extension of our solvency funding payments from five years to ten years. We expect to make solvency funding payments of approximately $90 million to $95 million in 2006 based on current regulations, since the new regulations are not expected to come into effect in time to impact 2006 funding. The actual amount of the 2007 funding under the ten-year amortization will be determined in valuations to be completed once the draft regulations are finalized. Future solvency funding requirements will depend on the results of annual actuarial funding valuations which are affected by various factors, such as return on plan assets, changes in solvency liability discount rates, and any further action taken by the government on the requirements associated with solvency valuations. 22000066 OOUUTTLLOOOOKK This outlook includes forward-looking information about our corporate direction and financial objectives that are subject to risks, uncertainties and assumptions. As a consequence, actual results in the future may differ materially from any conclusion, forecast or projection in such forward-looking information. Examples of statements that constitute forward-looking information may be identified by words such as “believe”, “expect”, “project”, “anticipate”, “could”, “target”, “forecast”, “intend”, “plan”, “outlook”, and other similar terms. Factors that could cause actual results to differ materially from those expected, and material factors or assumptions applied in drawing a conclusion or making a forecast or projection set out in such forward-looking information, include, but are not limited to, the items identified in the “Risks and Uncertainties” section and the “Material Assumptions” identified in the “Outlook” section of this interim MD&A, our second quarter 2006 interim MD&A, our first quarter 2006 interim MD&A, and our 2005 annual MD&A. Our 2006 financial outlook from continuing operations remains unchanged. Effective October 2, 2006, we sold our directories business. As prescribed by the CICA Handbook, the directories business results have been classified as discontinued operations in our financial statements.

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2006 Financial Outlook Continuing Operations (includes directories business)

Revenues $1.925 billion to $1.975 billion

EBITDA $655 million to $680 million

EPS $2.35 to $2.65

Free Cash Flow $285 million to $310 million

Capital Expenditures $270 million

In the following table, our 2006 financial outlook is provided excluding the directories business to facilitate the evaluation of performance from continuing operations on the same basis as the prescribed reporting format that is reflected in our financial statements. 2006 Financial Outlook Continuing Operations (excludes directories business)

Revenues $1.885 billion to $1.935 billion

EBITDA $630 million to $655 million

EPS $2.10 to $2.40

Free Cash Flow $260 million to $285 million

Capital Expenditures $270 million

Pension Solvency Funding On June 2, 2006, the federal government released draft amendments to the solvency funding regulations for federally regulated pension plans. Once the amended regulations come into effect, we anticipate filing revised actuarial funding valuation reports, which are expected to reduce our annual solvency payments. If new regulations had come into effect earlier in 2006; our total payments for 2006 would be approximately $65 million to $70 million. Since the new regulations are not expected to come into effect in time to impact 2006 funding, our total 2006 solvency payments will be approximately $90 million to $95 million. Future solvency funding requirements will depend on the results of annual actuarial funding valuations which are affected by various factors, such as return on plan assets, changes in solvency liability discount rates, and any further action taken by the government on the requirements associated with solvency valuations. Business Review On January 31, 2006, we announced that we would conduct a comprehensive business review to strengthen our fundamental business and evaluate our competitive position and strategic opportunities for creating and delivering long-term shareholder value.

Since launching our review, we finalized our 2006 business plan and have delivered three quarters of financial performance that are solidly on track in relation to our expectations for the year. The performance of our Enterprise Solutions division has been improved by focusing on profitable operations, and our overall corporate cost structure has been strengthened with annualized cost reductions of $78 million achieved so far in 2006. In addition, we have securitized our receivables and are realizing working capital improvements. An important element of our business review is an assessment of our asset base to identify core and non-core assets. To date, non-core real estate holdings have been identified and listed for sale, and effective October 2, 2006, we sold our directories business to Yellow Pages Group Co. Work has progressed regarding the strategic elements of our business review with comprehensive analyses of multiple scenarios, including potential growth strategies for the business under consideration. The October 31, 2006 federal government’s announcement of a new tax plan, that will change the taxation of income trusts and corporations, has implications for some of the scenarios. We will be fully analyzing the implications of the proposed new legislation. The review is advancing on track and we expect the completion of the review by year-end 2006. At that time, we plan to provide a 2007 Outlook and related business plans. NOTICE OF DIVIDEND RECORD DATE Notice is hereby given that the close of business on December 15, 2006 has been fixed as the record date for the purpose of determining those shareholders entitled to receive payment of MTS’s fourth quarter dividend. The dividend, in the amount of $0.65 per Canadian per Common Share, has been declared payable January 15, 2007 to shareholders of record at the close of business on December 15, 2006. This notice is provided in accordance with section 128(4) of The Corporations Act (Manitoba). This report and interim MD&A contain forward-looking statements and there are risks that actual results may differ materially from those contemplated by these forward-looking statements. Forward-looking statements reflect our expectations as at November 6, 2006. Additional information on these risks can be found in our filings with the Canadian securities regulatory authorities. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This report, interim MD&A, and the financial information contained herein have been reviewed by our Audit Committee and approved by our Board of Directors.

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MTS Allstream Inc. is one of Canada’s leading national communication solutions providers, delivering innovative products and services through its Consumer Markets and Enterprise Solutions divisions. Our Consumer Markets division serves small business customers nationally and residential customers in Manitoba with a full suite of wireline voice, high-speed Internet and data, next generation wireless, digital television, security and alarm monitoring services. Our Enterprise Solutions division provides national business customers with a world-class portfolio of IP-based connectivity, managed network services, and professional services. MTS Allstream's extensive national broadband fibre optic network spans more than 24,300 kilometres, and provides international connections through strategic partnerships and interconnection agreements with other international service providers. MTS Allstream is a subsidiary of Manitoba Telecom Services Inc. whose common shares are listed on The Toronto Stock Exchange (trading symbol: MBT). For more information, please visit: www.mtsallstream.com. Note: Supplementary financial information is available in the Investors section of the MTS Web site at www.mtsallstream.com. MANITOBA TELECOM SERVICES INC. P.O. Box 6666 333 Main Street Winnipeg, Manitoba, Canada R3C 3V6 1-888-544-5554

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MANITOBA TELECOM SERVICES INC.CONSOLIDATED STATEMENT OF INCOME(unaudited)

For the periods ended September 30(in millions, except earnings per share) 2006 2005 2006 2005

Operating revenues Data services $ 165.6 $ 170.7 $ 495.8 $ 503.4 Local services 134.4 148.4 419.8 424.1 Long distance services 99.0 117.7 304.0 360.5 Wireless services 61.5 54.5 173.0 153.1 Other 17.4 16.4 54.7 45.0 477.9 507.7 1,447.3 1,486.1

Operating expenses Operations 315.2 340.9 937.7 985.0 Restructuring and integration costs (Note 2) 9.8 5.0 20.0 21.3 Amortization 83.1 79.1 244.9 234.7 408.1 425.0 1,202.6 1,241.0

Operating income 69.8 82.7 244.7 245.1

Other income 3.0 1.1 3.4 6.5 Debt charges (15.6) (15.3) (46.3) (45.6)

Income before income taxes and discontinued operations 57.2 68.5 201.8 206.0

Income taxes (Note 4) Current (5.7) (0.7) (18.2) (14.4) Future 27.1 27.4 149.7 32.4

21.4 26.7 131.5 18.0 Income before discontinued operations $ 35.8 $ 41.8 $ 70.3 $ 188.0

Income from discontinued operations, net of tax (Note 5) $ 4.7 $ 3.3 $ 13.0 $ 11.1

Net income for the period $ 40.5 $ 45.1 $ 83.3 $ 199.1

Basic earnings per share (Note 6) Income before discontinued operations $ 0.53 $ 0.62 $ 1.04 $ 2.78 Net income $ 0.60 $ 0.67 $ 1.23 $ 2.94

Diluted earnings per share (Note 6) Income before discontinued operations $ 0.52 $ 0.61 $ 1.03 $ 2.77 Net income $ 0.59 $ 0.66 $ 1.22 $ 2.93

Three months ended Nine months ended

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MANITOBA TELECOM SERVICES INC.CONSOLIDATED STATEMENT OF RETAINED EARNINGS(unaudited)

For the periods ended September 30(in millions) 2006 2005 2006 2005

Retained earnings, beginning of period $ 51.1 $ 125.0 $ 96.6 $ 59.0

Net income 40.5 45.1 83.3 199.1

Dividends (44.3) (44.1) (132.6) (132.1)

Retained earnings, end of period $ 47.3 $ 126.0 $ 47.3 $ 126.0

Three months ended Nine months ended

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MANITOBA TELECOM SERVICES INC.CONSOLIDATED BALANCE SHEET(unaudited)

(in millions) September 30, 2006

AssetsCurrent assets Accounts receivable (Note 3) $ 94.5 $ 212.6 Prepaid expenses 31.6 20.5 Future income taxes (Note 4) 113.0 130.9 Assets of discontinued operations (Note 5) 19.8 26.5

258.9 390.5

Property, plant and equipment 3,568.0 3,517.7Accumulated amortization 2,100.9 2,014.8

1,467.1 1,502.9

Investments 2.9 3.1Other assets 266.0 186.9Future income taxes (Note 4) 671.8 803.6Goodwill and other intangible assets 91.2 97.2

$ 2,757.9 $ 2,984.2

Liabilities and shareholders' equity

Current liabilities Bank indebtedness $ 17.9 $ 9.9 Accounts payable and accrued liabilities 298.9 362.4 Advance billings and payments 36.2 54.2 Notes payable 47.0 108.0 Current portion of long-term debt 106.5 48.1 Current portion of capital lease obligations 4.4 4.3 Liabilities of discontinued operations (Note 5) 2.1 3.5

513.0 590.4

Long-term debt 741.6 848.1Long-term portion of capital lease obligations 18.1 17.5Deferred employee benefits 42.9 51.2Other long-term liabilities 45.6 45.3 Future income taxes (Note 4) 1.9 1.9

1,363.1 1,554.4 Shareholders' equity Share capital (Note 9) 68,165,307 Common Shares (2005 - 67,739,257) 1,331.0 1,315.0 Contributed surplus 16.5 18.2 Retained earnings 47.3 96.6 1,394.8 1,429.8

$ 2,757.9 $ 2,984.2

December 31, 2005

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MANITOBA TELECOM SERVICES INC.CONSOLIDATED STATEMENT OF CASH FLOWS(unaudited)

For the periods ended September 30(in millions) 2006 2005 2006 2005

Cash flows from operating activities Income before discontinued operations $ 35.8 $ 41.8 $ 70.3 $ 188.0 Add (deduct) items not affecting cash Amortization 83.1 79.1 244.9 234.7 Future income taxes 27.1 27.4 149.7 32.4 Gain on sale of investment - - - (2.7) Deferred wireless costs (7.3) (7.2) (19.9) (19.9) Pension funding and net pension credit (29.6) (28.6) (75.8) (54.5) Other, net 0.4 (0.5) (4.0) (0.6) Decrease in taxes payable on Bell West gain - (38.0) - (38.0) Changes in non-cash working capital (34.7) 12.5 18.4 (67.7) Cash flows from operating activities 74.8 86.5 383.6 271.7

Cash flows from investing activities Capital expenditures, net (61.4) (83.8) (174.6) (236.0) Acquisition (Note 7) (4.3) (14.4) (4.3) (18.6) Proceeds on sale of investment - - - 8.1 Other, net (4.7) - (4.5) 2.0 Cash flows used in investing activities (70.4) (98.2) (183.4) (244.5)

Cash flows from financing activities Dividends (44.3) (44.0) (132.3) (131.9) Repayment of long-term debt - (15.5) (48.1) (60.1) (Repayment) issuance of notes payable, net 24.7 67.8 (61.0) 99.8 Issuance of share capital (Note 9) 2.6 0.9 14.4 4.9 Other, net (2.0) 0.1 0.5 2.2 Cash flows (used in) from financing activities (19.0) 9.3 (226.5) (85.1)

Cash flows before discontinued operations (14.6) (2.4) (26.3) (57.9)

Cash flows from discontinued operations (Note 5) 9.1 7.1 18.3 16.5

Net increase in (bank indebtedness) cash and cash equivalents (5.5) 4.7 (8.0) (41.4)

(Bank indebtedness) cash and cash equivalents, beginning of period (12.4) (14.5) (9.9) 31.6

Bank indebtedness, end of period $ (17.9) $ (9.8) $ (17.9) $ (9.8)

Three months ended Nine months ended

MANITOBA TELECOM SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited) (All financial amounts are in $ millions, except where noted.)

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1. Significant accounting policies The interim consolidated financial statements of Manitoba Telecom Services Inc. (the “Company”) have been

prepared in accordance with Canadian generally accepted accounting principles. These interim consolidated financial statements have been prepared using the same accounting policies and methods of their application as the Company’s audited consolidated financial statements for the year ended December 31, 2005, except for the adoption of an accounting policy to address accounts receivable securitization, effective April 11, 2006.

These interim consolidated financial statements should be read in conjunction with the Company’s audited

consolidated financial statements for the year ended December 31, 2005.

Accounts receivable securitization The Company accounts for the transfer of receivables as a sale when the Company is deemed to have

surrendered control over the transferred receivables in exchange for proceeds. When the receivables are sold, the Company removes the receivables sold from the balance sheet, recognizes the assets received and the liabilities incurred at fair value, and records a gain or loss on sale in other income. The Company also retains reserve accounts, which are retained interests in the securitized receivables. The Company measures the fair value of the receivables transferred based on the present value of expected future cash flows, using management’s best estimates of the key assumptions. The amount of gain or loss recognized on the sale of receivables depends in part on the carrying amount of the receivables involved in the transfer, allocated between the fair values of the receivables sold and the reserve accounts at the date of sale. The Company continues to service the receivables and recognizes a servicing liability on the date of sale, amortizing this liability to earnings over the expected life of the transferred accounts receivable.

2. Restructuring and integration In the fourth quarter of 2005, the Company launched a cost reduction program for the further integration of its

operating divisions and corporate functions. This program includes both workforce reduction initiatives and activities to improve network access costs and further integrate compatible functions and processes, and is expected to continue into 2007. The Company has recognized integration expenses for the three and nine months ended September 30, 2006 in the amounts of $9.8 million and $20.0 million, respectively. The outstanding restructuring liability as at December 31, 2005 relating to the workforce reduction element of the program was $35.1 million. During 2006, $23.8 million of payments were applied against this liability, leaving an outstanding liability of $11.3 million as at September 30, 2006. The Company expects the workforce reduction program will be substantially completed by the end of 2006.

Prior year comparative figures include amounts for earlier restructuring and integration initiatives, and workforce

reduction programs. The restructuring and integration initiatives commenced in 2004 after the acquisition of Allstream Inc. and were substantially completed at December 31, 2005. As well, the workforce reduction initiative undertaken in the first quarter of 2005 has been substantially completed.

3. Accounts receivable securitization On April 11, 2006, the Company established an accounts receivable securitization program with an arm’s length

securitization trust pursuant to an agreement, which expires on April 11, 2011. Under the terms of this agreement, the Company has the ability to sell, on a revolving basis, an undivided ownership interest in its accounts receivable, up to a maximum of $150.0 million. During the term of the agreement, the Company is subject to certain risks of default which, should they occur, could cause the agreement to be terminated early. The undivided ownership interest is sold on a fully-serviced basis and the Company receives no fee for ongoing servicing responsibilities. As at September 30, 2006, the Company has recorded a servicing liability in the amount of $0.2 million.

MANITOBA TELECOM SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited) (All financial amounts are in $ millions, except where noted.)

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3. Accounts receivable securitization (continued) The Company is required to maintain reserve accounts, classified as retained interests, in the form of additional

accounts receivable over and above the cash proceeds received, to absorb credit losses on the receivables sold. For financial statement purposes, the reserve accounts have been included in accounts receivable. The trust has no recourse to the undivided ownership interest in the retained receivables, other than through the reserve accounts. The fair value of the reserve accounts approximates carrying value as a result of the short collection cycle and negligible credit losses. As at September 30, 2006, the Company had received $123.0 million on the sale of its accounts receivable to the trust, which is comprised of the outstanding undivided ownership interest held by the trust of $157.3 million and the reserve accounts of $34.3 million.

During the three and nine months ended September 30 2006, the Company recognized a pre-tax gain of

$0.2 million and a pre-tax loss of $1.0 million, respectively, on the sale of accounts receivable, which is recorded in other income.

The following table is a summary of certain cash flows received and paid to the trust for the three and nine months ended September 30, 2006:

Three months ended September 30, 2006

Nine months ended September 30, 2006

Proceeds from new securitizations - 150.0 Proceeds from collections reinvested in revolving period securitizations

416.0

803.0

The key assumptions used to determine the loss on sale of receivables and the fair values attributed to the retained interest for the three and nine months ended September 30, 2006, are as follows:

2006 Annual discount rate 4.51% Weighted average life of receivables sold (days) 36 Credit loss ratio 0.76% Servicing fee liability 1.0%

4. Income taxes A reconciliation of the statutory income tax rate to the effective income tax rate is as follows:

2006 2005 Combined basic federal and provincial statutory income tax rate 35.9% 36.1% Change in substantively enacted tax rates 29.0 4.7 Large corporations tax - 1.7 Other items 0.3 1.4 Settlement of prior years’ tax audits - (35.2) Effective tax rate 65.2% 8.7%

MANITOBA TELECOM SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited) (All financial amounts are in $ millions, except where noted.)

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4. Income taxes (continued) The balances of future income taxes as at September 30, 2006 and December 31, 2005 represent the future

benefit of unused tax losses, and temporary differences between the tax and accounting bases of assets and liabilities. The major items giving rise to future income tax assets and liabilities are presented below:

2006 2005 Non-capital loss carryforwards 631.1 803.5 Property, plant and equipment 289.4 255.2 Other 11.1 32.3 Total future income tax asset 931.6 1,091.0 Valuation allowance (148.7) (158.4) Net future income tax asset 782.9 932.6

Future income taxes are comprised of:

2006 2005 Current future income tax asset 113.0 130.9 Long-term future income tax asset 671.8 803.6 Long-term future income tax liability (1.9) (1.9) Net future income tax asset 782.9 932.6

During the nine months ended September 30, 2006, the Company recovered $2.9 million in cash income taxes

(2005 - paid $25.8 million). As at September 30, 2006, the Company had non-capital loss carryforwards available to reduce future years’

taxable income, which expire as follows:

2008 176.7 2009 1,639.2 2010 and beyond 8.2 1,824.1

MANITOBA TELECOM SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited) (All financial amounts are in $ millions, except where noted.)

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5. Discontinued operations On August 14, 2006, the Company announced that it had entered into a definitive agreement to sell its directories

business to Yellow Pages Group Co. On October 2, 2006, this sale transaction was completed, and the Company received proceeds on disposition in the amount of $275 million. The directories business is part of the Consumer Markets division.

The following table provides further information on the composition of revenues and income related to

discontinued operations:

2006 2005 Revenue 29.1 27.4 Income from discontinued operations before income taxes 20.2 17.4 Future income tax expense related to discontinued operations 7.2 6.3 Income from discontinued operations, net of tax 13.0 11.1

The following table provides further information on the composition of assets and liabilities related to

discontinued operations:

2006 2005 Assets

Current assets 13.2 12.7 Property, plant and equipment, net 3.7 4.7 Other long-term assets 2.9 9.1

Assets of discontinued operations 19.8 26.5

Liabilities Current liabilities 1.9 3.2 Long-term liabilities 0.2 0.3

Liabilities of discontinued operations 2.1 3.5 The following table provides further information on cash flows relating to discontinued operations:

2006 2005 Cash flows from operating activities 18.5 17.7 Cash flows used in investing activities (0.2) (1.2) Cash flows from discontinued operations 18.3 16.5

MANITOBA TELECOM SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited) (All financial amounts are in $ millions, except where noted.)

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6. Earnings per share

The following table provides a reconciliation of the information used to calculate basic and diluted earnings per share:

2006 2005

Net income – basic and diluted Income before discontinued operations 70.3 188.0 Income from discontinued operations, net of tax 13.0 11.1 Net income 83.3 199.1

Weighted average shares outstanding (in millions) Weighted average number of shares outstanding – basic 68.0 67.7 Dilutive effect of outstanding stock options 0.1 0.3 Weighted average number of shares outstanding - diluted 68.1 68.0

Basic earnings per share ($) Income before discontinued operations 1.04 2.78 Discontinued operations 0.19 0.16 Net income 1.23 2.94

Diluted earnings per share ($) Income before discontinued operations 1.03 2.77 Discontinued operations 0.19 0.16 Net income 1.22 2.93

7. Acquisition

Effective August 31, 2006, the Company acquired all of the outstanding shares of 2892031 Manitoba Ltd. and its wholly-owned subsidiary Valley Cable Vision (1997) Limited, a provider of cable and Internet services in rural Manitoba, for cash consideration of $4.3 million. This acquisition was accounted for using the purchase method, and the purchase price has been allocated on a preliminary basis to property, plant and equipment of $1.7 million and intangible assets of $2.6 million. The operating results of this business are included in the Company’s consolidated operating results from the effective date of acquisition.

8. Foreign currency forward contracts The Company has a foreign exchange hedging program to manage foreign currency exposure, which arises in the

normal course of business operations. As at September 30, 2006, the Company has outstanding foreign currency forward contracts to purchase $2.8 million U.S. These contracts mature periodically beginning in October 2006 and ending in December 2006. As at September 30, 2006, the fair value of the foreign currency forward contracts approximate the amounts hedged by the Company.

MANITOBA TELECOM SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited) (All financial amounts are in $ millions, except where noted.)

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9. Stock-based compensation

The following tables provide further information on outstanding stock options as at September 30, 2006 and 2005:

2006 2005

Number of shares

Weighted average exercise price per share

Number of

shares

Weighted average exercise price per share

Outstanding, beginning of period 2,301,960 39.32 1,699,200 35.94 Granted 362,000 39.57 408,000 48.88 Exercised (426,050) 33.54 (169,140) 29.00 Terminated (471,460) 41.86 (57,100) 41.22 Outstanding, end of period 1,766,450 40.09 1,880,960 39.21

Exercisable, end of period 529,590 36.21 660,880 33.18

Year granted

Options

outstanding

Options

exercisable

Weighted average exercise price per share

Expiry date 2006 352,000 - 39.59 2016 2005 703,600 73,200 43.45 2015 2004 198,300 89,580 45.61 2014 2003 151,180 87,740 34.84 2013 2002 192,400 118,100 34.25 2012 2001 64,620 56,620 37.27 2011 2000 45,600 45,600 31.14 2010 1999 13,750 13,750 16.99 2009 1997 45,000 45,000 14.63 2007

During the year, 426,050 stock options were exercised for cash consideration of $14.4 million, of which

$16.0 million was credited to share capital and $1.6 million was charged to contributed surplus.

10. Employee future benefits

The Company’s total benefit cost for all of its defined benefit and defined contribution pension plans, supplemental pension arrangements and other non-pension employee future benefits for the three and nine months ended September 30, 2006 is $4.9 million and $13.4 million, respectively.

11. Segmented information On February 28, 2006, the Company announced changes to its organizational structure. Under this new

structure, the Company renamed its reportable operating segments as the Consumer Markets division and the Enterprise Solutions division. The Consumer Markets division provides a full range of local, data, long distance, wireless, digital television, security system and telecommunications equipment sales to residential and small business customers in Manitoba. During 2006, the Company announced that it would be disposing of its directories business (Note 5) and, as such, no longer includes the results of operations from the directories business in the Consumer Markets division. The Enterprise Solutions division provides local, data, long distance, information technology services and telecommunications equipment sales to business customers in Canada. In the future as the Company further segments its customer base, there will be changes in the reporting responsibilities of each division for both revenues and expenses.

MANITOBA TELECOM SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited) (All financial amounts are in $ millions, except where noted.)

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11. Segmented information (continued) The Company evaluates performance based on EBITDA (earnings before interest, taxes, amortization, and other

income). EBITDA, as reported below, includes intersegment revenues and expenses. The Company accounts for intersegment revenues and expenses at either prices that approximate current market prices or cost, depending on the type of service. The following tables provide further segmented information:

Three months ended September 30

Consumer Markets

Enterprise Solutions

Other

Total 2006 2005 2006 2005 2006 2005 2006 2005 Operating revenue External

216.3

227.3

261.6

280.4

-

-

477.9

507.7

Internal 4.7 3.0 2.9 3.4 6.8 5.6 14.4 12.0 EBITDA 112.0 119.7 43.1 43.8 (2.2) (1.7) 152.9 161.8

Nine months ended September 30

Consumer Markets

Enterprise Solutions

Other

Total

2006 2005 2006 2005 2006 2005 2006 2005 Operating revenue External

656.8

646.4

790.5

839.7

-

-

1,447.3

1,486.1

Internal 13.6 8.7 9.1 6.2 20.4 16.7 43.1 31.6 EBITDA 353.3 336.6 138.1 147.2 (1.8) (4.0) 489.6 479.8

Reconciliation of consolidated net income is as follows:

Three months ended September 30

Nine months ended September 30

2006 2005 2006 2005

Consolidated net income Total EBITDA 152.9 161.8 489.6 479.8 Amortization (83.1) (79.1) (244.9) (234.7) Other income 3.0 1.1 3.4 6.5 Debt charges (15.6) (15.3) (46.3) (45.6) Income tax expense (21.4) (26.7) (131.5) (18.0) Income before discontinued operations 35.8 41.8 70.3 188.0 Income from discontinued operations, net of tax

4.7

3.3

13.0

11.1

40.5 45.1 83.3 199.1

12. Subsequent event On October 2, 2006, the Company announced a workforce reduction program for its Consumer Markets division.

The Company estimates the costs associated with this initiative to be approximately $20 to 25 million, which will be recorded as a one-time charge to income in the fourth quarter of 2006.

MANITOBA TELECOM SERVICES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (unaudited) (All financial amounts are in $ millions, except where noted.)

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13. Comparative figures The prior period figures have been reclassified when necessary to conform to the current year’s presentation for

discontinued operations.

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MANITOBA TELECOM SERVICES INC. P.O. Box 6666 333 Main Street Winnipeg, Manitoba, Canada R3C 3V6 1-888-544-5554

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