Q3 2019 Earnings Call
The recession.
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Good night 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.
Neutral officer.
This call is being simultaneously webcast on the T.D.S. and U.S. cellular Investor Relations Web site.
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 Angiox cellular filed their says SCC forms 8-K yesterday.
It's press releases in addition to our SEC forms 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 dump 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 Irizarry, Ryan Irrs, Ari 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 seven.
And please keep in mind that Tds has an open to our policies. 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 use 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 auction.
Now I'd like to turn the call over to Ken Meyers.
Thank you Jane.
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 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 and 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 like our position in the trends of 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 oil for years in eight fresher 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 mindsets of our team of incredibly engaged associates.
And our 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 was a major.
Your plumbing project. The now allows our customers drove 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.
On very quickly limiting the competitive impact of the change.
I must admit I remain a me some vessels 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 sales.
Our upgrade rate remains low at 6% in 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 priorities and is key to our ability to improve profitability.
The 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.
The improved especially average revenue per user in churn.
So prepaid still remains just about 10% of our business.
Roaming was a highlight with better the FID showing on both the revenue side due to traffic growth and the expense side, where total costs fell 9%.
The organizations continues to manage costs.
Again data usage increased 36% does 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 the number of.
The key related projects and higher bad debt expense.
Turning to the network, our Fiveg and 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 improve speeds.
In addition, we will continue to roll out multi technology.
We now reached 67% of our subscribers with voltage services in Iowa, Wisconsin, 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 or so.
Finally, as you may have heard as the CTO a 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 amounts of mid band spectrum quickly.
The rest of the world is deploying on mid band today and failure or delays in deploying mid band spectrum in the United States will not only impacts our customers.
Two room in other countries both.
Severely inhibit.
Carriers ability to deliver meaningful fiveg services outside the larger cities.
Well I recognize solutions are not easy.
Plot, 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 will 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 can discussed earlier in his comments and also to normal seasonal trends.
In addition.
In two gross additions of smartphones, we continued 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 the 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 hires on last year, driven primarily by aggressive industry wide competition.
Sequentially postpaid handset churn increased partly due to seasonal trends, we did 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 uptick 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 for the 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 are 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 plan mix to higher priced plans.
37% of our postpaid connections are now on 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 out based 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.
Long result.
On a per account basis average revenue grew by 45 cents year over year.
Excluding the USLF impact that I, just discussed ARPA increased by $1.39 or 1.2%.
Let's move next to our profitability measures.
First I.
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 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.
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 rent.
Yeah.
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.
As to the 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 a 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 in Fiveg initiatives, we are 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 the period and we expect to similar increase in our full year results.
Next I want 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 that narrower range of approximately 3.95 to 4.05 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 and good morning, everyone.
I'm pleased to report on our efforts to grow the business by building out new fiber.
Okay.
This transformation that man discipline and focus on execution.
We are moving steadily towards our strategic growth initiatives as outlined on slide 14.
At the same time, we continued to 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.
Third 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 access.
Threed outline for in October launched in one of our key cable market.
You will 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.
Annualized 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.
Can 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 audits territory vibrant market and our southern Wisconsin class there.
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 clustered targeting 80000 total service addresses one in mid Central Wisconsin, which is comprised of eight communities in and around.
Even point 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 underserved 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 theres by fiber.
Cyber enables our ability to provide the services our customers demand, including both high speed broadband and video.
Additionally, we.
Continue to make progress on our network construction under both ATM and 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 bird FCC milestone in 10 out of 24 stay ahead of our deadline, which is at the end of next year.
We also continue to improve speed capabilities to additional.
With that addresses that our enhanced frack construction under this program.
On the cable acquisitions Brown.
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 offers high speed fiber and COACT 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 and 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, as growth in our I'd like markets as we continue to rollout IP TV 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, churn on these bundles continue to remain very low.
Our third quarter results highlight the success of our video.
Strategy and its importance to our customer our plans with regard to the cloud TV platform called Tds TV plus remains an important initiative.
We are 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 revenue decreased 4% for 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 connections.
Commercial revenues decreased 9%, primarily driven by lower see like connection as we continue to execute on a strategy to maximize cash flow in these markets, which are coming on or renewed.
From deregulation.
Wholesale revenues decreased 5 million or 11%.
Parents to 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 comparison.
Wireline adjusted EBITDA decreased 16% to 52 million.
Moving to cable on slide 19.
Total table connections grew 2% to 338000.
It's driven by a 7% increase in total for Robin connection as a result broadband penetration increase.
200 basis points to 44% compared to the prior year.
Here.
On slide 20, total cable revenues 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.
Half expenses increased 5% do.
Nearly two additional maintenance in the quarter.
As a result cable adjusted EBITDA increased 14% 21 million.
In addition, EBITDA margin increased 34%.
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.
To 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 I love when we compare compiled the Q and a roster.
My first question comes.
The line of Philip Cusick Jpmorgan. Please go ahead. Your line is open [noise].
And 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.
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 just like the September so it was more on notably different in terms of.
Our traffic everything.
And and that was driven <unk>.
It's almost like more of a gross that issue, but churn was up quite a bit that's well what's going on there.
Oh no of what's going on is if I look at total we're still getting through the connected device.
Stuff where.
You know inexpensive tablets put out a year ago come off their year commitment and people just don't have to keep those on new you'll you'll continue to see that 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 industry.
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 exponentially.
Given the way 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 or in terms of 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 gig or two a month and given the pricing is is very low, but then they bundle it in its own nuts, and then I'm interested in chasing right now.
Okay, alright, thanks, very much less.
Our next question comes from a 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 on 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 us 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 ones 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 think in your prepared remarks, you mentioned positive adds in September and October for postpaid was that postpaid phone or postpaid total.
Oh well as.
Both both were positive then.
Tempur October's, it's good to see the trend on positive postpaid Bose.
And that you had seen churn improvement a later in the quarter with the refresh on the brand and the Oh 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.
Refreshing the re plays a pad.
You are asking to the level of detail. It 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 to ARPU is or are you expecting that you've gotten a.
Aggressive to the point, where ARPU upward bias given smartphones, an unlimited would start flattening out or is there still the ability to say listen we've got protection plans. We've got on limited 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 all our efforts are aimed at that and that's what our out that's what our plans are designed to do.
And Doug called out there.
Change in the U.S. after as far as those are 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 happens.
Mm Hmm, we've had that you all your through the first three quarters, because there was a December last year.
Vent and so we'll see that again.
In the fourth quarter than 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 in legal and consulting I. Suppose is what was that or is that kind of one off in your.
You're done without doing that 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 payments to resolve commercial litigation.
Okay, and then Ted I know you.
Talk a millimeter wave, but any thoughts on the C. Band you guys were joint 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 Oh, you're talking 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.
Better.
Way to get it to get more integrated faster. We'll go there I really don't care, how we do it we just did I think it just critical to get it and get it soon.
Okay. Thanks, guys.
Thanks, a lot.
Our next question comes on line up Simon Flannery of Morgan Stanley .
Please go ahead your line is open.
Great. Thank you very much yeah, just following up on Rick's point on C band and mid band spectrum.
One of the elements of the filing included reserve Priceless 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 indeed do you think there's 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 the you know the on the on the satellite side of things any talks 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 run 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 or 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.
How you're thinking about yeah. Thanks, Ken good morning, or not it's CB ours is not in our view their alternative to see band Theres not enough of it and currently the power levels are significantly less.
So then then what's planned for C band So while it has a place and you know our Fiveg strategy, we do see band it's critical.
Two offering high speed and capacity into less dense areas.
Great.
Thank you I'm funding.
Well funded well.
We have in place.
Multiple funding vehicles that have been untapped Peter three to CFO of TD us is actually in the room to Pete you I'd Love funding sure.
So we've got laundering 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 to enter that we've got a open bank lines, our undrawn and we also.
Worst case, we have adequate access to the capital markets. So there's lots of sources for cash to do this.
Great. Thank you.
Not done how good we can.
Okay.
And our next question comes from the line of survey of Gamco investors. Please go ahead. Your line is open.
Thank you good morning, guys.
So his question is for Kim owns a tower from show I think last quarter you guys.
So mentions that you've been working with them outside so I'm too.
Mark is the towers to entries or at least shop right. So I could you update us on the progress on is that transcends have you seen an improvement in leased up rates and also kind of looking longer term, maybe over medium term or how.
We plan to maximize the value if you'll sizable tower portfolio are considering U.S. idle or operational priorities, but also taking advantage of without fiveg wireless portfolio as a country as of two 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 the company to put more marketing efforts behind the power 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 were going with a tower top amplifiers on some of things.
We are putting you know mimo antennas and other places.
And you know whoa, there is value significant value in the towers. The fact of the matter remains 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 in effects of financial statements comparisons Q3 Q3.
He worked through the transition so on a comparable basis net contribution to operating income increased 5% year over year as it relates to our tower leasing 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.
You did.
17 billion in the quarter.
And that the growth rate was slight it was higher.
And 8% or higher than 5%, sorry, but as I said, it's not caught 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 will sit or.
Related to the buyback so for the first time I think since 2016, you repurchased or 21 minute divorce of U.S.M. scheurer seems like water, but could you talk little bit develop the main reasons for this was it just of automation or wars or other aspects are working and a in.
Oh I'm sorry, you you've had this program I believe since 2009 and you have remaining a stabilization to buy back over 5 million shares show given the current valuation.
Should we expect us out to get more aggressive Ah onez buyback.
Well certainly this is Peter so you know.
This program is primarily designed for to offset dilution from options, and then or choose 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 pits are owns it did you do yes, Ron. So you remarked today was the ownership and U.S. over to Mark other things the implied or what duration 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 implies valuation of Tds telecom.
Well, it's their guy we're not you know as we've discussed.
The past, we're not happy with that valuation, but the reality is given all the projects that were working on now picky 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 for Vicki on cable from so obviously you are in the process of acquiring.
Essence of continuum in North Carolina could you talk a little bit ER.
About what attracted you to this asset or how does that compare to your prior cable.
Yes, and also as a company generated 21 million in revenues last fiscal year, what kind of margins whores, they generating at that point.
Sure Hi, good morning Sergei.
You know cable acquisitions continue to be an important part of our gross growth strategy. In addition to our fiber.
Why not program.
And as I've talked about in the past, 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 premiums 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 Tvs as longstanding Misha I'm sorry. It was just really a great fit.
If anyone has an upgraded network in its offering up to 500, megabits speed and in some areas where it has fiber in place it's offering up to one gig seats and that's about 5% maybe of the footprint.
So we're really excited to have continuum join our.
Our family of companies and when we close well, we'll have more information for you.
About the about the numbers that were for looking at for guidance Dexter.
Thank you.
[noise] again, if he would like to ask your question. Please press star one on your telephone.
Our next question.
Come from the line Zach Silva of B. Riley FBR. Please go ahead. Your line is open.
Okay, great. Thanks for taking my 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's setting everything you said it was about 500000 pots, we're coming out on the.
Launch of that so can you refrain that opportunity for us and whether anything has changed on that front.
In terms of how your how do 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.
Adding 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 five you had 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 <unk> residential or commercial side.
So what's 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 in 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 good and no.
Yes, you've seen a couple of times the pricing there, but it's nothing real clear that so people have unlocked how to capture some of that values that that's it.
It's a watch point now for the use case it is consumer and that we're very interested in is the fixed wireless and we've been doing that when a fourg today and the capacity pick up that we get with <unk>.
Hi, Gee, I think ellipses compete even better there.
Got it.
Thank you very much kind of.
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 what do you look at your wireless business. It's a portfolio of market can you share with us just high level observations.
What do you you're seeing differences in certain market areas you performance in terms of subscribers and revenue growth versus other areas and maybe wasn't a common carrier.
Interesting, so where are your outperforming and underperforming.
Then just secondly, yeah, just taking a step back.
Our order opportunities strategic partnering opportunities that you see that that maybe some of you had passed that might be opportunity or.
You asked Taylor and or Tds to revisit and 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 Oh 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 till the if 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 based in the market once.
With respect to.
Looking at.
How else do you.
Build value in the operation, we're always looking at that and as.
The landscape changes in this industry potentially again, assuming certain transactions actually move forward or maybe they don't there's opportunities there we are.
Our no 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 on the strategic running.
Is it that the you know some of the the trip.
Transactions or or me.
You know proposed wireless transaction that's out there. He did you pull that gets resolved.
It's hard for you to take any steps forward.
You know strategically is that is that the.
Definitely issue right now well until its resolved the.
Interest or the ability of other parties to commit is.
As muddied 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 very 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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