Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Both business units delivered double-digit year-over-year improvements in adjusted EBITDA.
- Improved profitability drove increased free cash flow year-over-year and sequentially.
- U.S. Cellular paid down approximately $140 million in debt in the quarter.
- TDS Telecom is maintaining its focus on free cash flow by pacing capital expenditures commensurate with EBITDA generation.
- The company ended the quarter in a good cash and liquidity position.
Negative Points
- Service revenue declined 2% due to a decrease in the average subscriber base.
- The competitive environment remains intense with aggressive carrier promotions and cable wireless competition.
- Video cord-cutting continues to impact revenue, with lower-than-planned video attachment rates.
- The ramp-up of broadband net adds has been slower than expected.
- The company is experiencing increased competitive pressures in its ILEC and cable markets.
Q & A Highlights
Q: As you look at your tower portfolio pro forma for the T-Mobile transaction and closing, what are the strengths of this portfolio? What are some areas of improvement, and what would be the main selling point to potential colocators?
A: The strengths lie in the geographical uniqueness of our towers, which are often located in areas with few competing towers. This makes them attractive for colocators who need to densify their networks. The main opportunity is to grow our colocation rates, which will improve margins over time. (Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer)
Q: How are you planning for the transition towards being able to market your towers, considering the uncertainty around which towers T-Mobile will select?
A: We are marketing our entire tower portfolio aggressively to potential colocators, independent of T-Mobile's selections. The uncertainty creates different financial scenarios, but we are not de-prioritizing any towers in our marketing efforts. (Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer)
Q: What are the key drivers behind the improvement in postpaid phone subscriber losses?
A: The improvement is driven by better churn rates and aggressive market offers. Our US DES plus days program has been effective in retaining existing customers, and our attractive promotional offers have improved gross add performance. (Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer)
Q: What are your thoughts on partnering with infrastructure funds or private equity for fiber deployments?
A: We have considered various financing alternatives, including preferred equity issuances and debt. We remain open to different structures that would be best for the enterprise. (Michelle Brukwicki, Senior Vice President of Finance and Chief Financial Officer - TDS Telecom)
Q: How are you viewing convergence, particularly fixed with mobile, and its impact on operating margins?
A: Convergence is a significant trend, especially with cable wireless growing their market share. The ability to use profit streams from one product to subsidize another is a challenging equation but offers opportunities for growth. (LT Therivel, President and Chief Executive Officer - UScellular)
Q: Can you provide more details on the financial outlook for your towers business post-transaction with T-Mobile?
A: Post-transaction, we expect longer-term adjusted OI margins for the tower segment to be in excess of 50%. This excludes nonrecurring expenses such as decommissioning costs. (Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer)
Q: What are the main factors contributing to the strong free cash flow in the first six months of 2024?
A: The strong free cash flow is driven by adjusted EBITDA growth and prudent management of both capital expenditures and working capital. (Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer)
Q: How is TDS Telecom progressing with its broadband strategy and fiber expansion?
A: We are seeing strong financial results with a 4% increase in operating revenues and a 32% increase in adjusted EBITDA. We are also expanding our footprint with a 10% increase in total service addresses year over year. (Michelle Brukwicki, Senior Vice President of Finance and Chief Financial Officer - TDS Telecom)
Q: What impact did the wildfires in Ruidoso, New Mexico, and the end of the ACP program have on your broadband connections?
A: The wildfires resulted in approximately 1,000 broadband connection losses, but we have reestablished services to over 90% of the community. The end of the ACP program led to 2,400 disconnections out of 19,080 customers. (Michelle Brukwicki, Senior Vice President of Finance and Chief Financial Officer - TDS Telecom)
Q: What is the current focus of TDS in terms of financial strategy and leverage?
A: We are focused on the T-Mobile transaction, monetizing remaining spectrum, and maintaining strong leverage ratios. We are also concentrating on broadband penetration and capital investments. (Vicki Villacrez, Executive Vice President and Chief Financial Officer)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
