Bell Canada and MTS Announce Strategic Alliance and Partner to Create a new Growth-Oriented Western Company -- Natco Officially Named Bell Nexxia.

MONTREAL--(BUSINESS WIRE)--Jan. 27, 1999--Bell Canada (ME:BCE) (TSE:BCE) (VSE:BCE) (NYSE:BCE) and Manitoba Telecom Services Inc. (MTS) (WINNIPEG STOCK EXCHANGE:MBT) (TSE:MBT) (ME:MBT) today announced the signing of a binding agreement, which will see the two companies work together to expand Bell Canada's new national broadband/IP (Internet Protocol) company, Bell Nexxia, into western Canada.

The agreement includes an operating alliance between MTS and Bell Nexxia within Manitoba, as well as the creation of a new western based, growth-oriented telecommunications company named Newco, on an interim basis, that will compete in Alberta and British Columbia. As part of the agreement, Bell Canada will acquire a minority interest in MTS. These comprehensive business arrangements are subject to regulatory approval, as required.

John MacDonald, President and COO of Bell Canada, said: "The alliance with MTS will enable us to achieve the goal, set in 1998, to serve customers on a national basis. MTS is a very successful telecommunications provider in Canada, and we have a keen interest in seeing MTS continue to succeed both in Manitoba, and through expansion with Newco and Bell Nexxia into Alberta and British Columbia. This partnership is a building block for the continuing growth of both companies in new markets and in new areas of services for customers."

"The global telecommunications environment influenced the shaping of the new relationship between MTS and Bell Canada. The industry is becoming increasingly competitive and new service providers are significantly altering markets in which MTS competes," said Bill Fraser, MTS President & CEO. "Because of these changes, and to ensure the ongoing success of MTS we have chosen to partner with the largest and most advanced telecom company in Canada."

Bell's national broadband/IP company was announced last year by Bell and has been informally known as "Natco." In unveiling the official name "Bell Nexxia," President and CEO Terry Jarman said: "Bell Nexxia will quickly become the premiere national provider of telecommunication services in Canada. This partnership with MTS will allow both companies to expand in Western Canada, to capitalize on growth opportunities and to offer customers easy access to an entire range of communications services and technologies at competitive prices."

Bell Nexxia Agreement -- a New Operating Alliance

This agreement gives MTS distribution rights for Bell Nexxia's services as well as access to its intellectual property and will permit MTS to offer customers in Manitoba Bell Nexxia products and services as they evolve. Some of these include Internet-related services, extranets, wide area networks and managed networks, packaged with traditional voice services.

The alliance with Bell Nexxia will significantly strengthen MTS's ability to compete in Manitoba as the company offers new leading edge services and continues to maintain and enhance its low cost structure through this agreement. "For Bell Nexxia," said Mr. Jarman, "it's a critical element in our ability to compete nationally and meet the requirements of our customers."

Newco -- Competing in Alberta and British Columbia

The new competitive telecommunications company, Newco, will be created to offer telecommunications services in Alberta and British Columbia. These provinces have, for a number of years delivered some of the highest economic and population growth rates of any of the regions in Canada. In 1998 they generated approximately 24 percent of Canada's GDP. The region also has a strong business telecom market, which has been growing at 5.7 percent per year, and is currently estimated to be worth approximately $2.0 billion.

Newco, in conjunction with Bell Nexxia, will offer broadband and IP services, local access, long distance and data and integrated services to key market segments in Alberta and British Columbia. Bell Nexxia will focus on the large national customer segment with Newco providing technical and customer care service for Bell Nexxia's national customers with operations in Alberta and British Columbia. Newco's initial target markets include the cities of Vancouver, Edmonton and Calgary.

Newco will be two thirds owned by MTS and one third owned by Bell Canada. Bill Fraser, MTS President & CEO has been named Chairman of Newco, and an executive search is underway to hire the President & CEO. The official launch of Newco is planned for the second quarter of 1999.

"With the strengths and expertise of both MTS and Bell Nexxia, Newco will compete successfully in Alberta and British Columbia," said Terry Jarman. "MTS and Bell Nexxia share similar strategies for growth and are moving rapidly to increase their competitiveness in a global business environment. Our investment reflects our confidence in this strategic alliance with a very successful, financially sound and customer-oriented telecommunications provider."

Investing in the Long-term Success of MTS

As part of the agreement, Bell Canada will acquire a minority economic interest in MTS, which will more closely align the interests of the two companies and better assure the success of their respective businesses going forward. The ownership level will be achieved through the purchase by Bell Canada of 6.2 million MTS common shares and 7.8 million MTS preference shares to be issued from treasury, each at a price of $24 per share. The economic terms of the preference shares substantially mirror those of the common shares. This investment, in conjunction with an MTS share buy back program will result in Bell holding a 20 percent economic interest in MTS. As part of its investment in MTS, Bell Canada is entitled to nominate members to the board of directors commensurate with its ownership level.

MTS is Manitoba's only full-service provider of local, long distance, wireless, directory and multimedia telecommunications services. MTS operates a world class, fibre optic based, all digital, province-wide network. MTS common shares are listed on the Winnipeg, Toronto and Montreal stock exchanges under the trading symbol MBT.

Bell Canada, the largest Canadian telecommunications operating company, markets a full range of state-of-the-art products and services to more than seven million business and residential customers in Ontario and Quebec. Bell Canada's Internet web site is located at http://www.bell.ca. News releases, speeches and background information are in the library under the main menu. Our e-mail address is [e-mail].

NOTE: A media conference call will be held at 3:00 p.m. today to

talk about this major announcement. The call-in number is

1-800/273-9672.