Q3 2019 Earnings Call
Session.
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I would not now like to to turn the conference over to your Speaker today, Jim again. Thank you. Please go ahead.
Thank you Jody good morning, everyone and thank you for joining US with me today and offering prepared comments are from U.S. cellular Ken Meyers President Chief Executive Officer done Chambers, Senior Vice President and Chief Financial Officer from Tds Telecom, Vicki Villacrez Senior Vice President Finance and Chief.
Natural officer.
This call is being simultaneously webcast on the T.D.F. in U.S. cellular Investor Relations website.
Please see the websites for slides referred to on this call, including non-GAAP reconciliations.
We provide guidance for both adjusted operating income before depreciation and amortization.
Position and adjusted earnings before interest taxes, depreciation and amortization.
To highlight the contributions of U.S. Cellulars wireless partnerships.
As shown on slide to the information set forth in the presentation and discussed during this call contain statements about expected future.
Vince and financial results that are forward looking and subject to risks and uncertainties.
Please review the Safe Harbor paragraphs in our press releases and the extended version in our SEC filings.
Tvs and us cellular filed their fccs SCC forms 8-K yesterday.
It's press releases in addition to our SEC Form 10-Q .
Taking a quick look at the upcoming IR schedule on slide three Ted Carlson, Doug Chambers, and I will be out on the road in New York with City on November 14th Dumb Chambers, and I will be doing one on ones at the Wells Fargo TMT conference in Las Vegas.
I guess on December 3rd Ken Meyers, Mike, Arizona in Arizona, three and I will be attending the EPS Global TMT conference on December 11th and Ken and I will be attending cities 2020, TMT West Conference on January 7th and please keep in mind that Tds has an open door policy. So if you're in the Chicago area and.
I'd like to meet with members of management.
Our team will accommodate you calendars permitting.
Before turning the call over I want to remind everyone that us cellular is registered to participate in the Fccs auction 103, and due to the anti collusion rules will be unable to respond to any.
Questions related to FCC auctions.
Now I'd like to turn the call over to Ken Meyers.
Thank you Jamie good.
Good morning, Thanks for joining us today.
I know the headlines for the quarter looked like another quarter of revenue and adjusted EBITDA growth, albeit with a small loughlin postpaid handset.
Additions.
But in fact, it was much much more than that.
That was a very busy quarter for us.
First quarter started off rather soft, but we picked up nice momentum throughout the quarter. Some of the many initiatives. We've been working on were implemented and progress was made on others.
Subscriber.
I'd picked up an improved month to month with positive net postpaid handset additions in September and again in October .
As we head into the busy holiday season, I'd like our position in the trends the receipt.
In the quarter service revenues grew 2% driven by positive trends.
In average revenue per user and roaming revenue.
Operating cash flow or operating income before depreciation and amortization grew 6%.
One of those major initiatives was the completion of a refreshing of our brand the launch of a new tagline, bringing fairness to wireless.
Our new brand positioning nicely captures all the US cellular has stood for for over three years in a pressure more modern look designed to broaden our appeal in the marketplace.
This bringing fairness to wireless campaign is the umbrella philosophy that covers our approach.
Public policy the mindset of our team of incredibly engaged associates.
At or approach to the marketplace.
Another significant endeavor was work to deliver new web based technology that powers, our online customer activity, including via their mobile devices.
This is a major.
Sure Plumbing project. The now allows our customers to have a better and faster online experience today provides the platform for future growth in this channel.
Another unexpected effort resulted in competitive pricing change in the quarter.
The team was able to.
And very quickly limiting the competitive impact of the change.
I must admit I remain amazed and baffled at the pricing strategy that play in this industry.
Our changes lowered pricing on select plans and implemented congestion based controls and sort of hard caps on unlimited plans.
As previously discussed.
Customers are continuing to hold onto their expensive devices longer holding dental equipment. So.
Our upgrade rate remains low at 6% the quarter.
Also device protection revenues grew 10% year over year and postpaid.
Penetration on that product is now at 48%.
Driving revenue remains a strategic priority and is key to our ability to improve profitability.
We ended the quarter, 71% of our postpaid customer base is on our new total plans.
And to drive a 2% increase in average revenue per user.
Also contributing to that ARPU increase for a higher mix of smartphones relative feature phone and connected devices.
And the growth in the device protection revenues that I mentioned.
The prepaid segment, especially.
Improved, especially average revenue per user and churn.
Oh prepaid still remains just about 10% of our business.
Roaming was a highlight with benefits showing on both the revenue side due to traffic growth and the expense side, where total cost fell 9%.
The organizations continues to manage costs.
Again data usage increased 36% this this quarter.
While true systems operating expense, excluding the the roaming benefit I talked about increased just 2%.
However, we did see higher Junaid this quarter as result of a number of.
Hi, T. related projects and higher bad debt expense.
Turning to the network our Fiveg in network modernization initiatives have been progressing nicely and we announced that we would launch Fiveg services in Iowa, and Wisconsin during the first quarter of 2020.
Also as we have.
Readied our network for Fiveg customers with Fourg devices are experiencing better network quality and improved speeds.
In addition, we will continue to roll out multi technology, we now reached 67% averse subscribers with bolted services in higher loads grandson, California, Washington.
And in Oregon on New England in the mid Atlantic areas.
We will continue to rollout voltage the remaining markets over the next year. So.
Finally, as you may occurred at the Ceta GSM May show in Los Angeles last week or seen and our recent filings the FCC I believe its critical.
For the industry to get access to significant amount of mid band spectrum quickly.
Yes, the world's is deploying on mid band today, and failure or delays and deploying mid band spectrum in the United States will not only impacts our customers.
Two room in other countries.
Severely inhibit.
Carriers ability to deliver meaningful fiveg services outside the larger cities.
Well I recognize solutions are not easy I applaud the fccs efforts to navigate the maze of difficult policy and technical issues involved.
It is.
Vitally important we make even more progress in this area quickly.
With that let me turn the call over now to Doug Chambers, We'll update you on the financial results Doug.
Thanks, Ken and good morning, everyone.
I wanted to talk first about postpaid handset connections shown on slide six.
Postpaid handset gross additions for the third quarter were 124000 down from 133000, you'll recall.
Due to an aggressive competitive environment that included service plan pricing changes and rich promotional offers for handsets.
Also in the third quarter 2018.
We saw a one time increase in gross additions due to the exit of a competitor in one of our key markets.
Postpaid handset net additions for the third quarter for negative 2000 down from positive 15000 last year driven by the decline in gross additions and slightly higher churn.
I'll touch more on churn in a moment.
On a sequential basis, both gross and net additions improved due in part to positive response to our price plan changes, which Ken discussed earlier in his comments and also to normal seasonal trends.
In addition.
In two gross additions of smartphones, we continue to have existing enhancing customers upgrading from feature phones to smartphones as you can see on the graph on the right side of the slide including the upgrades total smartphone connections increased by 22000 during the quarter.
And by 92000 over the course.
Over the past year.
That helps to drive more service revenue given that ARPU for smartphone is about $22 more than ARPU for a feature phone.
Next I want to comment on postpaid churn rate shown on slide seven.
Postpaid handset churn depicted by the Blue.
Ours was 1.09% for the third quarter of 29 team higher than last year, driven primarily by aggressive industry wide competition.
Sequentially postpaid handset churn increased partly due to seasonal trends that we didn't see an improvement in churn in the last.
Portion of the quarter, which we attribute in part to positive response from our customers to our price plan changes.
Total postpaid churn combining handsets and connected devices was 1.38% for the third quarter 2019 higher than a year ago.
In addition to the architect uptick in handset churn connected device churn was also higher year over year, primarily as result of Detections of connected Wearables.
Now, let's turn to the financial results.
Total operating revenues from third quarter work.
Were over 1 billion of 30 million.
Or 3% year over year.
Retail service revenues increased by 1% to 663 million.
The increase was due largely to higher average revenue per user, which I'll cover on the next slide.
Inbound roaming revenue was 54 million that was.
An increase of 9% driven by higher data volume.
Other service revenues increased by 7 million.
This was driven primarily by an out of period accounting adjustment related to tower rental revenues that resulted in $5 million of additional revenue being recognized this quarter.
Finally.
Equipment sales revenues increased by 15 million or 6%.
This was driven primarily by an increase in the in the average revenue per device. So.
Partially offset by a decrease in the number of devices sold.
As I mentioned earlier, there was a decrease in gross additions activity year over year.
And impacted device sales.
In addition, we're continuing to see that existing customers are holding onto their devices for increasingly longer periods.
In a slight decrease in upgrade transactions.
Now a few more comments about postpaid revenue shown on slide nine.
Average revenue per user or connection was 40 616 for the third quarter of 85 cents or 2% year over year.
The increase was driven by several factors, including a shift in device mix to smartphones increased device protection revenue.
And the shift in service planned mix to higher priced plans.
37% of our postpaid connections are now find unlimited plans versus 23% year ago.
Partially offsetting these increases were higher promotional sales expenses.
Also there was a decrease in Universal service fund.
Revenues, resulting from the Fccs December 2018 ruling that revenues from text and multimedia messaging services are no longer assessable under the Universal Service Fund.
As a result, this year eurosite of stock charging customers and will no longer pay the FCC us up these on these.
Revenue streams.
Because this change also affected general and administrative expense by a like amount it is neutral to earnings.
Looking through this change ARPU on a comparable basis increased by $1.21 year over year versus the reported increase of 85 cents a pretty.
Wrong result.
On a per account basis average revenue grew by 45 cents year over year.
Excluding the USS impact that I, just discussed ARPA increased by $1.39 or 1.2%.
Let's move next to our profitability measures.
First.
I want to comment on adjusted operating income before depreciation amortization and accretion and gains and losses to keep things simple I'll refer to this measure as adjusted operating income.
As shown at the bottom of the slide adjusted operating income was 208 million up 6%.
From a year ago.
Correspondingly the margin as a percentage of total operating revenues was up about a half a percentage point to 20%.
For those watching service revenue margin. The current quarter result was 27% an increase of one percentage point year over year.
As I commented.
Earlier total operating revenues increased by 30 million or 3% year over year some of that increase in revenues offset by higher operating expenses, which in total grew by 19 million or 2%.
Total system operations expense was essentially flat.
Roaming expense, which is in.
Included here decreased 9% due primarily to lower rates, partially offset by 29% increase in off net data usage.
Excluding roaming expense system operations expense increased by 2% as result of increased network maintenance expenses and cell site brands.
Okay.
Cost of equipment sold increased due primarily to a higher average cost per device sold partially offset by a decrease in a number of devices sold.
SGN expenses increased 3% year over year in large part due to higher costs related to information systems initiatives.
Sure.
Next is adjusted EBITDA, which starts with adjusted operating income and incorporates the earnings from our equity method investments along with interest and dividend income.
Adjusted EBITDA for the third quarter was 256 million of 5% from year ago.
Most of the improvement is due to the increase in adjusted operating income.
We also saw an increase in equity in earnings of unconsolidated entities.
Adjusted operating income and adjusted EBITDA do not include depreciation amortization and accretion expense.
In connection with network modernization and Fiveg initiatives were upgraded several of the network equipment elements. This results in.
The recognition of accelerated depreciation on the assets being replaced.
Depreciation amortization and accretion expense is up 10% for the year to date period, and we expect a similar increase in our full year results.
Next I'd like to cover our guidance for the full year 2019.
Which is shown on slide 12 for comparison were also showing our 2018 actual results.
For total operating revenues, we now expect a narrower range of approximately 3.95 4.5 billion, reflecting increased visibility as we move into the last quarter of the year.
For adjusted operating income before depreciation and amortization, we have narrowed the range to 752 850 million.
Correspondingly, we have narrowed the range for adjusted EBITDA to 925 million to 1.25 billion.
For capital expenditures.
The guidance is the same is provided in August our expenditures through the third quarter were 467 million.
Now I'll turn the call over to Vicki Villacrez.
Okay. Thank you Doug good morning, everyone.
I'm pleased to report on our efforts to grow the business by building out new fiber.
Yes.
This transformation that man discipline and focus on execution and we are moving steadily towards our strategic growth initiatives as outlined on slide 14.
At the same timely continued promote higher sales and customer satisfaction in our existing market.
Among.
There are many accomplishments I'd like to highlight several that occurred during the third quarter.
We launched a third new out of territory market advancing our fiber footprint.
Second we entered into an agreement to purchase another cable company.
Third we enable.
Threed outlined for an October launched in one of our key cable market.
You'll also notice that the graphic presentation on slide 14 has been modified to show service addresses by fee.
To better illustrate the transition of the work we're doing upgrade our.
With eight can stay broadband grant and fiber investment.
Moving to slide 15 on a combined basis total revenues held nearly steady with last year. Despite challenges in the commercial market and expected reductions in wholesale revenue.
As a reminder, in the third quarter last year Tds Telecom received an additional 4 million of support revenue provided to the ATM program, which was retroactive to January 2017.
Total cash expenses increased 3% currently.
And our fiber market launch activity ramps up but also due to a 2 million of increased legal expense in the quarter.
As a result, adjusted EBITDA decreased 9% 73 million from a year ago.
Capital expenditures increased 50% $81 million as we can.
Thank you to invest in our fiber deployment and rural broadband expansion program.
We also enable DOCSIS three dot one in our Ben cable market, which allows us to offer one gig broadband services.
And finally, we expect our capital spending to be even higher in the fourth quarter due to our.
Fiber deployment strategy in our new market.
Specifically in this quarter, we launched our third new territory fiber market and our southern Wisconsin cluster.
We are in various stages that construction and while we've experienced some delay we expect to launch for additional.
Market in this cluster yet this year and early next year.
As I previously announced construction is progressing into new audits territory plaster targeting 80000 total service addresses one in MS Central Wisconsin, which is comprised of eight communities in and around.
Even look quite and Wassa and the second one in quarterly Idaho, which includes three surrounding communities.
These clusters fit the criteria, we are targeting for our growth.
They are under there for broadband and have attractive demographics with potential for how close are up.
As a result.
Our fiber deployment strategy over the last several years, 29% of our wireline service addresses are now served by fiber.
Cyber enables our ability to provide the services, our customer demand, including both high speed broadband and video.
Additionally, we.
Continue to make progress on our network construction under both ATM in state broadband program.
On the ATM front, we are on pace to meet our first stated obligations under the program.
As we completed 31000 of our required 64000 service.
With broadband speeds up to 25 three.
As a result, we have reached our first FCC milestone in 10 out of 24 day ahead of our deadline, which is at the end of next year.
We also continue to improve speed capabilities to additional.
Just addresses that our enhanced by our construction under this program.
On the cable acquisition from.
Tds entered into an agreement to purchase the assets of continue on a broadband video and voice operator, located just north of Charlotte North.
Carolina.
Our purchase price of 80 million.
Continuum offered type C fiber and co App based services passing a total of 40000 locations.
This transaction is expected to close in the fourth quarter of 2019.
Now, let's turn to our segments beginning with wireline on slide 16.
From a broadband perspective residential revenues grew 2% and customers are continuing to choose higher speeds of up to one gig in our fiber market.
In total 28% of all broadband customers are now taking one.
800, megabit speeds are greater compared to 22% a year ago.
Driving a 4% increase in average residential revenue for connection in the quarter.
Wireline video connections grew 8% compared to the prior year.
Video remains an important.
However of growth in our I'd like markets as we continue to rollout IP TV to more customer.
On average our IP TV markets continue to hold about 30% video penetration with some markets nearing 50%.
About 80% horizon TV customers are on Triple play.
No.
Customers find value and taking all three services given the rural nature of our jury geographical footprint and the bundling pricing.
In addition, turn on these bundles continue to remain very low.
Our third quarter results highlight the success of our video.
Strategy and its importance to our customary our plans with regard to the cloud TV platform called Tds TV plus remains an important initiative.
We're now aiming to rollout cloud TV in the first quarter of next year. After a successful test market is completed.
Looking at the wireline financial results on slide 18.
Total revenues decreased 4% to 169 million.
Residential revenues increased 3% due to grow from video and broadband connections as well as growth from within the broadband product mix.
Partially.
Offset by a 4% decrease and residential voice connection.
Commercial revenues decreased 9%, primarily driven by lower Si Lok connection as we continue to execute on a strategy to maximize cash flow in these markets, which are coming under renewed.
There are some de regulation.
Wholesale revenues decreased 5 million or 11%.
Parents in 2018.
I mentioned earlier Tds Telcom received an additional 4 million of retroactive ATM support revenue last year.
Wireline cash expenses increased 2% due primarily to increases in legal and consulting expenses, we continue to see reduce cost of providing service.
For our declining legacy products, partially offset by higher video programming <unk>.
Employee expenses, while still slightly lower than last.
Last year are increasing as we staff for our new fiber market.
All in including the discrete items of ATM and legal cost discussed earlier that impact year over year comparisons.
Wireline adjusted EBITDA decreased 16% to 52 million.
Moving to table on slide 19.
The table connections grew 2% to 338000.
Driven by a 7% increase in total Robin connection as a result broadband penetration increase.
200 basis points to 44% compared to the prior year.
Here.
On slide 20, total cable revenue increased 8% to $62 million driven primarily by growth in residential connection.
Our focus on broadband growth has led to a 6% increase in average residential revenue per connection.
He has extensive increased 5% due.
Nearly two additional maintenance in the quarter.
As a result cable adjusted EBITDA increased 14% 21 million.
In addition, EBITDA margin increased to 34% from 32%.
On slide 21 week.
Provided our 2019 guidance, which is on changed from the guidance we shared at the beginning of the year.
We expect our revenue trends to continue and plan for growth and expenses as we ramp up to launch new fiber market with some of the fiber construction delays, we've experienced we will be challenged.
Spend all of our capital this year and expect to be at the near the low end of the range.
And in closing I'd like to thank all of our employees for their continued efforts and look forward to updating you on February on our fiber construction and resolve.
Now I'll turn the call back to Jane.
Great and Jody, we'd like to open up the call for questions.
Certainly as a reminder to ask a question you want me to press Star one on your telephone to withdraw your question press, the pound or hashed Keith.
Please standby Walmart we compare it compiled the came in a roster.
My first question comes.
I'm still line of Philip Cusick Jpmorgan. Please go ahead. Your line is open [noise].
Now you're just just teasing Rick so [laughter].
[laughter], maybe we can.
Hi, guys.
Maybe we can dig into the wireless momentum during the quarter.
Ken.
Can you take us a as granular as you can through the months and what changed the things exited better and maybe a little bit up you on September strength continued on October . Thank you.
Yeah, I would say that.
June July July August , we're just slow okay.
What changed in September was everything from the launch of all the brand refresh which increased advertising as well as the impact of pricing changes the one in late in August .
To respond to somebody else's move so.
You had a double there.
On the launch of the new iPhone was late in the quarter had had minimal impact.
But we saw a carry through right through October or just like go the September so it was more on notably different in terms of.
Or traffic everything.
And and that was driven.
It sounds like more of a gross that issue, but churn was up quite a bit this well what's going on there.
Oh, you know of what's going on is if I look at total we're still getting through the connected devices.
Stuff where.
You know inexpensive tablet to put out a year ago come off their year commitment and people just don't have to keep those on New York, you'll continue to see that I'm I think a the modeling suggests through early part of next year.
Sure.
Similarly to watch us.
Those two nice they worked well connected to the phone.
I'm not seeing a lot of stickiness on the revenue side there so.
You're going to continued I think.
To watch.
I'll soon.
We struggle with the revenue off of some of the.
Called connected devices call them, the accessories, right, where the core phone is right there and I don't.
Needed, especially given the weight some of the unlimited packages are structured that I can get at that.
Data, one way or another.
Right and then have you seen last quarter, you called out cable and terms a new competition have you seen that continue or has there been a little bit of a slowdown there since they've they've been in the market for for a while.
I'd say that it's similar effect is not increasing and then the and what.
And what it is if you think about how that's priced we feel all the pressure and are very very low end customer that isn't using but oh digger two a month and given the pricing is is very low it definitely bundle. It in it so nothing that I'm interested in Jason right now.
Okay, alright, thanks, very much Gus.
Our next question comes from the line of Ric Prentiss Raymond James. Please go ahead. Your line is open.
Thanks, Good morning, I guess or.
Our Freaky Friday, Phil and I switched places like a Disney movie [laughter] Halloween.
No what a follow up with some of Bill's questions. There in prior quarters. You've also mentioned that you were starting to see some winback effort.
As cable moves and can you update its a little bit on that or are you trying to win back those customers as they are lower usage to lower and customers.
The real low lens one.
We aren't there's not a lot of value there Oh, what we are doing is no specifically identifying any that may be more account related or ones that hub.
Greater usage, where the value proposition that we offer is more compelling and will we will continue to that.
We've got L.A. ongoing lifecycle management program that we execute against.
Okay and kind of thinking your prepared remarks, you mentioned pauses as in September and October for postpaid was that postpaid phone or postpaid total.
Oh well.
Oh, both both were pause it ends up.
Total october's, it's good to see the trend on positive postpaid Bose.
And that you had seen churn improvement later in the quarter with the refresh on the brand and the a and the rate plans.
Back down to a more normal level or just kind of closing the gap just trying to gauge how much improvement the.
Refresh in the.
Ray plays have had.
You're asking at a level of detail that I don't have in front of you're right now right.
But and when you talk about the new rate plans, how should we think about that trend on what it means the ARPU is or are you expecting that you've gotten a.
Aggressive to the point, where ARPU upward bias given smartphones, an unlimited would starts flattening out or is there still the ability to say look we've got protection plans. We've got unlimited we got smartphones. So we continue to see upward dynamic on market.
Yeah, I'm expecting to still to continue to see the upward dynamic.
As we continue to manage the base look at other services that we can put in there like the device protection or whatever it is imperative that we continue to grow that revenue.
And so all our efforts are aimed at that and that's what our that's what our plans are designed to do.
And Doug called out there.
Change in the U.S. up as far as those some of those yourself. These be lower both revenue and expense did that start in third quarter was that a previous quarter. This year that that happened.
Kevin We've had that you all your.
First three quarters, because there was a December last year.
Vent and so we'll see that again.
In the fourth quarter, then the year over year effect will go away.
Exactly so where they get to the lapping huh. Okay. Then one for Vicki Vicki you mentioned called out 2 million I think you said and legal and consulting I. Suppose is what was that board is that kind of one off in your.
You're done with that so we've got a back to a more normal level, obviously without the retro from Threeq to 18.
Yeah, well legal and consulting where onetime items legal matter with the onetime payment to resolve commercial litigation.
Okay, and then Ted I know you can't.
Talk a millimeter wave, but any thoughts on the C. Band you guys were enjoyed saying signatory on an interesting letter that seem to build a lot of consensus any thought on can we get C band action from the FCC This year and get some kind of move forward on a [noise].
Auction process next year.
I can only hope you know I. It Oh, you talked about last week I mentioned that here use the industry needs mill, a mid band we need a lot of it we need a lot of it right away and anything that gets us there is something that will support if there is a.
Better.
Way to get it to get more integrated faster. We'll go there I really don't care. How we do it was just I think it's just critical to get it and get it soon.
Okay. Thanks, guys.
Thanks, a lot.
Our next question comes on line of Simon Flannery of Morgan Stanley .
Please go ahead your line is open.
All right. Thank you very much yeah, just following up on Rick's point on see abandon mid band spectrum.
One of the elements of the filing included reserve prices I guess, there's always this question of if you have a nationwide reserve price or if there's something that reflects perhaps.
The greater demand in an urban area so that.
You're not having to pay the price that New York City might have as a reserve price. So you do you think theres an opportunity there for a differential reserve prices urban versus more regional markets.
Also how you're thinking about Crs playing into this mid band spectrum do you think that's a viable.
Solution or is that really just to kind of indoor and small cell and any thoughts on a given the sort of numbers that are being thrown around by you know the on the on the satellite side of things any thoughts about how you would fund.
Your spectrum spend thank you.
Okay boy lots lots of questions there.
What's.
Let's start with.
Yeah, I would fully expect that you'll see.
Like you have with all spectrum different prices based upon the demographics of the individual markets that are being licensed I know that we all grown economic models the inside.
How much you know spectrum is worth in various areas and I don't I don't think that would change with respect to see vrs versus the C band.
Mike Irizarry Ceos in the room I'll throw the both good question to him and just a second.
But we're interested in both okay generically anything any spectrum is good but are they.
On how you're thinking about yeah. Thanks, Ken Good morning, Warner not.
CB ours is not in our view that alternative to see ban theres not enough of it and currently the power levels are significantly less.
First and then what's plan for C band So while it has a place and you know our Fiveg strategy leave you see band it's critical.
Two offering high speed and capacity and a less dense areas.
Great. Thank you I'm funding.
Well funding will.
We have in place.
Multiple funding vehicles that have been untapped Peter Sereda CFO of TD us is actually in the room to Pete you I'd Love funding sure.
Yeah. So we've got Lonore cash from a balance sheet right now.
We've got an undrawn ERP receivable securitization that we put in place a couple of years ago. So we've got ample capacity under that we've got a open bank lines on drawn and we also.
Worst case, we have adequate access to the capital markets. So there's lots of sources for cats to do this.
Great. Thank you.
Thanks thoughts on how good we can.
Okay.
Our next question comes from the line of survey of Gamco investors. Please go ahead. Your line is open.
Thank you good morning, guys.
Phil's question is for Kim owns a power from so I think last quarter you guys.
So mentions that you've been working because outside so I'm too.
Mark is the towers shot to increase or at least a rate. So could you update us on the progress on that transcends have you seen an improvement in lease up rates and also kind of looking longer term, maybe over medium term or how.
Do plan to maximize the value of she'll sizable tower portfolio, how considering you a similar operational priorities, but also taking advantage of without five wireless petroleum's accounts is that you guys home.
Okay, Sergei I'm going to let Doug talk about kind of the progress to date, a before I'd throw to him.
Let me talk about the you know the back side of that question a little bit.
No we have.
Entered into agreement with a company to put more marketing efforts behind the Howard portfolio to lease it up more however.
In doing that you know I'm still going to you know the stubborn and say that that work is subject to you know our engineering needs. As we are doing our network modernization. We are once again moving all over the tower, where you're going with a tower top amplifiers on some of things.
We are putting you know mimo antennas in other places.
And you know well there is value significant value in the towers. The fact of the matter remain that we've got a wireless business that requires us to control that real estate.
So that we can control the quality of the service, which is what the whole business is based upon what we but having said that we are continuing continuing to try to get more revenue out of that asset Doug.
With respect to the new marketing arrangement, we're about one year into that that relationship and.
Overall, we're very pleased with the results so far some of the accounting under the new arrangements different and affects the financial statement. Harrison's Q3, Q3, as we work through the transition so on a comparable basis net contribution to operating income increased 5% year over year as it relates to our tower D C business.
And I were continuing to work on driving more growth in the future.
Thanks, Doug.
Right and just a quick follow up on is that what were tower rental revenue assumes a quarter on what was the girls right.
Yes it.
17 billion in the quarter.
And that the growth rate was slight it was higher.
Then, 8% or higher than 5%, sorry, but as I said in Soc Hot comparable based on some of the accounting changes that took place upon the transition to the new service provider.
Right understood. Thank you and and other question Ah Ah Onez, you'll sit or.
Related to the buyback so for the first time I think since 2016, you repurchased or 21 minute on the war. So U.S.M. scheurer seems a quarter could you talk little bit developed the main reasons for this was it just what innovation or was there are other aspects so working and a in.
Oh Im sorry, you you've had this program I believe since 2009 now you have remaining a stabilization to buyback over 5 million shares show given the current valuation.
Should we expect yourself to get more aggressive Ah onez buyback.
Well certainly this is Peter so you know.
At this program is primarily designed for to offset dilution from options and then alright shoes and things like that so that we can continue to keep our tax consolidation. So we will we have been in the market from time to time, we will be from time to time to two to prevent that dilution. So.
Yes, I guess the answer is overtime, we will do we will be doing that as as a situation arises.
Okay and the related question for you if its or owns it to Tds. Ron So is the mark to Dallas ownership and U.S. over to Mark other things implied a relation on Tds Telecom I is below.
Three times, a EBITDA, so given that valuation or we'll buy back has become a larger portion of your capital returns in the near term obviously taking into consideration you overall capital allocation plans, but also given the valuations imply violation of Tds telecom.
Well certainly we're not.
As we've discussed.
Past, we're not happy with that valuation, but the reality is given all the projects that were working on now Vicki talked about the fiber rollouts and everything.
I think for the time being we're gonna stay put on on stock repurchase of the Tds level.
Okay.
And my last question is a full vicki on cable from so obviously you are in process of acquiring.
Essence of continuum in North Carolina could you talk a little bit ER.
Oh, what attracted you to assess that or how does that compare to your prior cable.
Yes, and also as a company generates a 21 million in revenues last fiscal year, what kind of margins whores, they generating at that point.
Sure Hi, good morning today.
You know cable acquisitions continue to be an important part of our gross growth strategy. In addition to our fiber.
So in that program.
And as I've talked about the path, we specifically look for opportunities that meet our target criteria, which are for example under served for broadband.
Attractive household market growth and a target market demand premium entertainment services and so.
You know continue on which serve customers just north of Charlotte North Carolina meets the criteria and at the same time has a culture that focuses on providing outstanding customer service, which I think a line really well with T.D.S. as long standing Michelle I'm sorry, It was just really a great fit.
And then you don't have an upgraded network in its offering up to 500, megabits see and in some areas where it has fiber in place, it's offering up to one gig speeds and that's about 5% maybe of the footprint.
So we're really excited perhaps infinium join our.
Our family of companies and when we close we'll have more information for you about the about the numbers that were for looking at for guidance Dexter.
Thank you.
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Our next question.
Come from the line Zach Silver B. Riley FBR. Please go ahead your line is open.
Okay, great. Thanks for taking the question I just had one for can you guys towards the end of last year flag an opportunity to use both the.
Some of the market setting everything you said it was about 500000 pops are coming out on the.
Much of that so can you refrain that opportunity for us and whether anything has changed on that front right.
In terms of how your how you see the opportunity and also the timing of that.
Yeah, exactly specifically, what you're referring to for everybody else is a we had licensed areas immediately adjacent to our.
Current footprint, primarily northern Wisconsin, and Sioux City, Iowa, we continue to build out those areas couple of zoning a challenges.
Probably pushes back to the first quarter of next year, but those.
Turning challenges are behind US now and we're continuing to make progress working on distribution as we speak so no still excited about the opportunity Republic is going to slip about three months it looks like.
Got it and then I guess more of a high level question, just yeah with the launch of Fiveg in a couple of markets.
Coming up I think somebody asked a couple of quarters ago, but just high level.
And any updated thinking about how you know what we'll monetize that that technology, either the rep residential or commercial side.
So looks really fascinating to me at least around Fiveg in March.
We're on your new U.S. was a year ago. It was all about Oh use cases and business to business and all of that revenue was really long lead time revenue that would the amount of time it takes to bring a city along a tone. Even along is you know not measured in months.
Once.
And what you've seen in the last year is.
Really the consumer market drumbeat around it and you know.
Yes, you've seen a couple of times the pricing there, but nothing real clear that so people have unlocked how to capture some of that values that that's it.
It's a watch point upper on although the use cases that is consumer and that we're very interested in is the fixed wireless and we've been doing that when afford you today and the capacity pick up that we get with my.
Hi, G., so I think ellipses compete even better there.
Got it alright, thank you very much gun.
Our next question comes from a line of Michael Rollins of Citi. Please go ahead. Your line is open.
Hi, Thanks, and good morning, two questions if I could please.
First one is when you look at your wireless business. It's a portfolio of market can you share with US just high level observation, so whether you're seeing differences in certain market areas performance in terms of subscribers and revenue growth versus other areas and maybe what did a common carrier.
Arresting, so where you're outperforming and underperforming.
Then just secondly, yeah, just taking a step back.
Order opportunities strategic partnering opportunities that you see that that.
Instead of using the past that might be opportunity or.
U.S. Taylor and or Tds to revisit you think about the dynamics of the industry moving forward. Thanks.
Thanks, Mike Yeah, so with respect to the first one you're right. It's a portfolio just like everybody has a portfolio and in different markets Hello.
Different either <unk> underlying economics or different competitive.
Positioning or in our case different spectrum and coverage.
Oh properties. So there are some markets.
In our portfolio that are much higher than the 10%.
Prepaid rate that we talk about as a company average okay.
So there are also some words very very tiny and ill tell you you we have historically seen as an example.
Very very strong bad debt results out of what I will call the mid America farming markets.
And you know your prepaid market. So got the higher churn. So there's a lot of differences across the portfolio and we deploy different strategies.
To maximize the or out of what I call. Each one of those mines. So in some places we push prepaid because that's what the economy and the customer base in the market once.
With respect to you know looking at how else do you.
Build value in the operation, we are always looking at that and as.
The landscape changes in this industry potentially again, well, assuming certain transactions actually move forward or maybe they don't there's opportunities there we are.
Our Oh looking at analyze discussing how else could we either use our network or or partner up and serves some other network needs. So yes were.
In order to yes, that's where I would like it to be long term, we need to continue.
When you on revenue and cost and that doesn't necessarily have to come out of just our consumer market.
And so when you think about things going to strategic running.
No. It that the you know some of the trip.
Transactions or or knee.
You know proposed wireless transaction that's out there he until that gets resolved.
It's hard for used to take any steps forward.
You know strategically is that is that the.
We definitely issue right now well until its resolved the.
Interested or the ability of other parties to commit is.
There's money at best right I mean, no other everybody's got to see where the <unk> all the pieces fall. So you can.
Decide what's the next best move and everybody is looking at the same board, saying yeah.
So if this happens go this way, but if that happens maybe go a different way, we're still waiting for that.
Thank you.
Thanks, a great weekend.
No no further questions at this time, ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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