Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- United States Cellular Corp (USM, Financial) announced a pending transaction with T-Mobile, which is expected to unlock value for shareholders and provide benefits to customers.
- The company retained nearly 4,400 towers, equity partnership investments, and approximately 70% of spectrum assets, which are being monetized.
- Both business units delivered double-digit year-over-year improvements in adjusted EBITDA.
- USM paid down approximately $140 million in debt during the quarter, improving leverage ratios year-over-year and sequentially.
- The company continues to generate strong free cash flow and has a good cash and liquidity position.
Negative Points
- Service revenue declined by 2% due to a decrease in the average subscriber base.
- The competitive environment remains intense, with aggressive carrier promotions and cable wireless competition.
- Total net adds, including postpaid, showed a net loss of 21,000 in 2024, although improved from the previous year.
- The company is experiencing increased competitive pressures in its ILEC and cable markets, consistent with industry trends.
- Video cord-cutting continues to impact revenue, and the video attachment rate has been lower than planned.
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, and what areas need improvement?
A: The strengths lie in the geographical uniqueness of our towers, with relatively few competing towers within a mile or more. This makes them attractive for co-location as densification needs grow. The main area for improvement is increasing our co-location rates, which will drive profitability. We are optimistic about the segment's long-term potential.
Q: How are you planning for the transition towards marketing towers to potential co-locators while balancing the uncertainty of T-Mobile's tower selections?
A: We are marketing our entire tower portfolio aggressively to potential co-locators, independent of T-Mobile's selections. The uncertainty creates different financial outcomes, but we are prepared to manage either scenario. We believe the long-term demand for mobile data will drive the need for densification, supporting our co-location growth.
Q: What are the key drivers behind the improvement in postpaid phone subscriber losses?
A: The improvement is driven by better churn management and aggressive market offers. Our US DES plus days program has been effective in retaining existing customers, and our competitive postpaid offers have attracted new customers. We plan to continue these strategies to maintain momentum.
Q: Can you discuss the opportunities and relevance of 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 align with our strategic goals. Currently, our focus is on the T-Mobile transaction and monetizing remaining spectrum assets.
Q: How are you viewing the trend of convergence between fixed and mobile services, and its impact on operating margins?
A: Convergence is a significant trend, particularly with cable wireless players bundling services. This allows them to subsidize one product with the profit stream from another, creating competitive pressure. We are closely monitoring this trend and its implications for our business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
