Q1 2021 Telephone and Data Systems Inc and United States Cellular Corp Earnings Call
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Thank you Wayne and good morning, everyone and thank you for joining us.
We hope that you and all of your families are doing well.
I want to make you all aware of the presentation, we have prepared to accompany our comments. This morning, which you can find on the Investor Relations section of the Tds and U S cellular website.
With me today and offering prepared comments are from Tds, <unk> Executive Vice President and Chief Financial Officer from U S. Cellular LTE terrible President and Chief Executive Officer, Doug Chambers, Executive Vice President and Chief Financial Officer and from Tds Telecom.
Vicki <unk> senior Vice President of Finance and Chief Financial Officer.
This call is being simultaneously webcast on the Tds and U S cellular Investor Relations website.
Please see those websites for slides referred to on this call, including non-GAAP reconciliations.
We provide guidance for both adjusted operating income before depreciation and amortization for OIBDA and adjusted earnings before interest taxes, depreciation and amortization or EBITDA. The highlight the contributions of U S Cellular's wireless partnerships.
Tds and U S cellular filed the SEC forms 8-K, including the press releases and form 10-Q yesterday.
As shown on slide two of the information set forth in the presentation and discussed during this call contains statements about expected future results 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 versions included in our SEC filings.
In terms of our upcoming IR schedule slide three we're doing the Jpmorgan virtual non deal Road show on May 11, and then on June 16th we are attending the virtual investor corporate access event with the New York Stock Exchange.
And as always our open door policy remains an open phone or open video policy. So please reach out for us if you're interested.
Yes.
And I will now turn the call over the threat of eight.
Thanks, Jane and good morning, before speaking about the balance sheet.
But one of the thank you aware of unchanged frozen agility of the telecom further this quarter.
Disclosures.
The percentage of his skill segment from the.
The wireless and cable segments for the longer.
The reported.
We believe the strength not only aligns with how we manage the business and evaluate operating performance today, but also enhances the visibility into how Tds telecom is performing against its strategic objectives. The combined yield better depicts our progress and success in leveraging the single cost base to become the preeminent broad.
Operator, we see the change in segments.
Sorry, the change in.
So are you still there yes.
You cut out for a minute.
Okay. The combined view of better depicts our progress and success.
And leveraging of single cost base to become the preeminent broadband provider in each market in which we operate the changing segment reporting has no impact on the net income of Tds telecom for prior periods have been confirmed the prior periods have been confirmed for the current presentation. You will notice that we have made enhanced disclosures of our progress in building out fiber to the home.
And of our presentation today, so that you can more closely follow our progress and the very important initiative.
Also in terms of the results and impacting year over year comparisons I want to remind everyone. The way of a higher tax rate in 2021 compared to 2020 due to the income tax benefits of the cares Act, which provided of one time rate benefit in 2020 of that does not recur in 2021.
Regarding our balance sheet, both Tds and U S. Cellular are taking action to lower interest expense given the favorable market environment in April of Tds and U S. Cellular both announce redemptions of select senior notes Tds's redeeming $225 million of its $6, 875% senior notes and $300 million.
Of 7% senior notes and U S. Cellular's redeeming 275 million of the southern of quarter percent senior notes for a total of $800 million. We will continue to look for ways to avail ourselves of other low cost financing vehicles to further lower our interest expense.
As we've discussed on prior calls maintaining financial flexibility is one of the pillars of our corporate strategy over the years, we have worked to retain relatively low leverage levels long dated debt maturities sufficient undrawn revolving credit facilities and significant cash balances while at the same time, making sure we of the financial resources, we need to fund our business.
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As you see on slide four at the end of the first quarter Tds continues to have a good financial position, including ample available funding sources, consisting of cash and cash equivalents and available credit facilities, while we while we while we will be using some of our available cash and partially drawing on our Tds revolver to call the notes previous.
As we mentioned.
We believe we will have ample remaining cash balances as well as excellent access to the debt markets, if additional capital as required and as further steps to reduce our interest expense are taken.
U S cellular and Tds Telecom are currently both in investment cycles with U S. Cellular investing in network modernization, <unk> and spectrum and Tds telecom aggressively investing in fiber expansion in March Tds issued $420 million in perpetual preferred stock, which will be used primarily for funding for.
For deployments and the repayment of debt this transaction enabled us to raise significant proceeds while protecting our credit rating.
<unk> continues to return value to its shareholders, primarily through dividends flow Tds and U S. Cellular each opportunistically purchased the small amount of their shares in the quarter Tds purchased $3 million worth and U S cellular purchased $2 million worth of shares.
In sum we are in a financially solid position to take advantage of growth opportunities in each of our businesses.
I will now turn the call over to LTE.
Thanks, Pete and good morning, everyone.
The slide six of our.
The strategic imperatives are simple.
The design to drive growth and improved return on capital over time, I think we're off to a really good start this year.
I'll, let Don covered the operational and financial highlights for the first quarter.
Going to provide the key thoughts on strategic priorities.
For I think on previous calls that one of our areas of opportunity is to enter into strategic partnerships better leverage the value of our assets and the growth of business.
The progress on the subject of in April by signing of tower MLA or of Master lease agreement with this wireless.
We expect this agreement to contribute to our tower revenue growth beginning in 2022.
Any details on the day you won't have to remain confidential. So please keep that in mind, if you've got additional questions.
I spoke to the last quarter about some of our new initiatives to drive growth.
The regionalized approach to drive market share.
<unk> for our business from government and prepaid segments.
Moving ahead full steam on the Eve of I'm pleased with our progress you see that year over year improvement of gross additions.
An improvement in churn for both postpaid and prepaid.
Most of the excited for the next evolution of our brand journey and our new tagline Americans locally grown wireless.
U S. Cellular has always been known for its outstanding network.
Branding highlight strong local presence we have in our markets.
I think this is what sets us apart from our competition and.
And it reflects our culture and our values.
We're not competition and the competitive intensity the wireless industry remain top and we intend to respond as appropriate.
Given the total spend on the C band auction I'm expecting continued rational pricing.
Most of the promotional activity will remain related to device.
That's the world, we can live and economically.
A few words on our network of dish network performance continues to be a hallmark of our strategy. We will continue with our network modernization program and our multiyear of <unk> deployment.
Our view of each layer of spectrum low mid and millimeter wave.
Our initial deployment for coverages on clean low band spectrum the.
<unk> available to some degree in 18 states today.
We were largely satisfied with our C band purchases when combined with our <unk> holdings of mid band spectrum, nearly all of our operating footprint.
Also we deployed the millimeter wave spectrum in order of in order to offer fixed wireless access of three test market.
The pilot launch into the market is expected to occur in the third quarter of this year.
More formal items communicate our plans when the results from available.
We continue the optimistic on the performance capabilities of the millimeter wave spectrum.
The recently performed additional millimeter wave spectrum testing the base station and radio enhancements.
And we achieved the line of sight propagation distances of seven kilometers with average speeds approaching one gigabit per second.
This exceeds our results from last year, where we achieved businesses of five kilometers of average speeds of 100 Megabits per second.
Finally, I just want to say a word about talent.
I'm more convinced than ever that attracting and retaining talent and the significant differentiator.
And this past year of stressed everyone's approach to people, but I'm really pleased with how the U S. Cellular has responded.
And do you believe that the drivers of talent of yesterday arent the same as the drivers of tomorrow.
Pay and benefits will continue to be important, but we're going to need to think even harder about work flexibility.
Constant learning environment and.
In the visible focus on diversity equity and inclusion.
Really complete with a comprehensive strategy to help our team moved with warm day trips work environment.
The time between home of the office.
Third the associate for them working from home will start returning to the office of June on a volunteer basis.
But there'll be returning for a more flexible and smart environment.
I expect this will help us increase engagement.
I also think it's going to help us manage cost.
From the diversity front, we were recently ranked 70, <unk> well above all of our peers by Forbes.
As one of America's best employers for diversity in 2021.
This award and many others like it provide a brand recognition as the compete to attract and retain the very best talent.
Now I'm going to turn it over to Doug and you kind of cover the details of the quarter Doug <unk>.
Thanks, <unk> good morning.
You mentioned were off to a good start this year.
Let's start with the review of the customer results starting on slide seven.
Postpaid handset gross additions increased due to higher switching activity and our ability to capture a larger portion of debt for two group this year versus last year.
Switching proof of the increase was driven primarily by March activity, which was severely depressed last year as a result of the unfolding pandemic and with both for this year by stimulus payments.
Our ability to attract switchers increased year over year due primarily to the success of our dual requirements messaging of be promotional offerings.
We saw connected device growth decreased by 3000 per year over year.
This was driven by lower gross additions of internet products, such as hotspots from routers compared to the prior year when we experienced an increase in demand due to COVID-19.
The declines of the hotspot and broadened sales was partially offset by an increase of connected watch division.
Rapidly helped in the slide total smartphone connections increased by 13 pounds during the.
Order of about 56, thousands over the course of the past 12 months.
That helps to drive more service revenue given that the smartphone are approved by the $20 higher the feature phone Arco.
Next I want to comment on the postpaid churn rate shown on slide eight.
Currently churn on both handsets and connected devices continues to run at low levels.
Hosting the handset churn depicted by the blue bars, with zero point, 92% down from <unk>, 95% of year ago.
This was due to lower in voluntary churn, which continues to run lower year over year as a result of having acquired customers with a better credit mix and improved customer payment behavior.
Total postpaid churn provide enhancement and connected devices was one 2% for the first quarter of 2021 also lower than a year ago.
Now, let's turn to the financial results on slide nine.
Total operating revenues for the first quarter were one point or.
Two 3 billion, an increase of $60 million or 6% year over year.
Retail service revenues increased by $40 million million.
Two $685 million the.
The increase was primarily due to the higher average revenue per user, which I will discuss in a moment as well as an increase in average postpaid subscribers.
Inbound roaming revenue was $28 million.
That was the decrease of $9 million year over year, driven by a decrease of the data volume.
One of the factors contributing to the data volume decrease is the merger of sprint and T mobile migration of the sprint roaming traffic to T Mobile's network.
Other service revenues for $58 million, an increase of $4 million year over year, including a 9% increase in tower rental revenue.
Finally, the equipment sales revenue increased by $51 million year over year due to an increase in units sold and increased sales of higher price units as well as the increase in the accessory sales as a result of higher volume.
Now, let's see of our conference for postpaid revenue shown on slide 10.
Average revenue per user of our connection.
<unk> thousand 765 for the first quarter up 42.
Of approximately 1% year over year.
On a per account basis average revenue grew by $2 three three cents of 2% year over year.
The increases were driven primarily by an increase in regulatory recovery revenues.
Favorable plan and product offering mix and an increase in device protection revenues.
Turning to slide the Robin as we continue our multiyear network modernization of the IP rollout to all of our towers remains very important by the.
Owning their powers, we ensure we became the operational flexibility to add new equipment.
Other changes to our sales sites without incurring additional costs, which is very important, particularly given our current technology evolution.
As you can see on the slide with the assistance of our third party marketing agreement.
The steady growth of tower rental revenue as I mentioned first quarter power of rental revenues increased by 9% year over year.
Hello to you noted earlier, the new Master lease agreement, we signed with dish wireless.
The continued to focus of growing revenues from the strategic assets.
Moving to slide 12, I want to comment on adjusted operating income before depreciation amortization and accretion and gains the losses to keep things simple I'll refer to the expenditure as adjusted operating income.
As shown at the bottom of the slide adjusted operating income of $258 million, an increase of the 12% year over year.
As I commented earlier total operating revenues were $1 3 billion, a 6% increase year over year.
Total cash expenses were 700, 765 billion, increasing $33 million or 5% year over year.
For the system operations expense increased 3% year over year.
Excluding roaming expense system operations expense increased by 2% due to higher costs.
Normally the expense increased $1 million or 4% year over year, resulting from the 80% increase in the off net feet of volume that was largely offset by a decrease in rates.
Cost of equipment sold increased $58 million or 26% year over year due to an increase of units sold and increased sales of higher priced smartphones as well as higher accessories sales volume.
Selling general and administrative expenses decreased $30 million or 9% year over year, driven primarily by the decrease in bad debt expense adds.
<unk> expense decreased $26 million due to lower write offs driven by fewer non current customers as a result of of better credit mix and improved customer payment behavior.
<unk> recorded bad debt expense in the first quarter of the 2020 related to the FCC keep Americans connected pledge, which contributed to the year over year decrease in addition advertising expense decreased year over year.
Turning to slide 13, I'll touch on adjusted EBITDA, which starts with adjusted operating income and incorporates the earnings from our equity method investments along with the interest and dividend income.
EBITDA for the quarter was $302 million to the increase of $21 million for 8% year over year equity.
Equity and earnings of unconsolidated entities decreased by $3 million or 7%.
I'd like to cover our guidance for the full year 2021 for a comparison for showing our 2020 actual results our guidance assumes the COVID-19 does not cause any significant incremental economic consequences that would negatively impact our business.
The total service revenues, we have increased the midpoint by $25 million to a range of three five to 315 billion.
This increase was driven by an increase in our projections for build revenues and miscellaneous service charges.
We have raised the midpoint of our adjusted operating income and adjusted EBITDA range by $25 million by increasing the low end of the ranges with no change to the high end of the ranges.
And the new ranges of 800 $850 million to $950 million.
1.15 to $1 125 billion respectively.
In addition to the increase in our projections for service revenues the updated range incorporates favorability net debt.
Selling and marketing expenses.
This favorability was partially offset by the expected increase the velocity of equipment for the remainder of the year compared to our earlier projections.
For capital expenditures, we are maintaining our guidance range of $7 75 to <unk> 75 billion.
We have provided the breakdown by major category.
I'll now turn the call over to Vicki billet price Vicky.
Thanks, Doug and good morning, everyone.
I am very pleased with our results for the third quarter.
We had strong growth in both broadband connections and revenue.
Overall weak <unk>.
Total or Dan the Nexgen.
Third consecutive quarter.
We added 13000 fiber service addresses to our footprint and continue to execute on our fiber strategy.
Overall, we grew our top line 4%.
And Pete referenced earlier the change to one segment reporting results in a combined presentation of our wireline and cable operation.
We have been on the trajectory to integrate our businesses around the common strategy of providing superior broadband service and complementing that with value added video and voice service bundling.
Whether it is our markets, where we of upgrading copper.
Our building fiber.
Provided that the three that one capability, we are striving for increased internet speed.
<unk> serve our customers.
On a combined basis.
We are able to offer one gigabyte speed okay.
The 5% of our total service addresses.
We remain committed to our strategic priority.
We've been investing it in for several years.
Our primary strategic objective is to provide growth by investing in our high speed broadband services.
We have a multifaceted approach to this growth that includes leveraging our existing network and constructing greenfield fiber.
Kenneth six locations.
With support from the FCC's ATM program and state broadband grants.
The S cellcom.
The decline high speed broadband the customers on a rural areas within our incumbent market.
If you turn to slide 17 of the earnings presentation total residential connections increased 4%.
The residential broadband growth in new ended for full market.
Partially offset by a decrease in voice connections.
Total telecom broadband residential connections grew 9% in the quarter as we continue to fortify our network for fiber.
And with the new Michael.
Bolstered by this growth wireline broadband residential connections grew 10% in cable increased 8%.
Total broadband penetration continued to increase of 100 basis points, 38%.
Overall higher value product mix and price increases drove a 5% increase in average residential revenue per connection.
Cable average residential revenue per connection reflect the higher mix of video connections relative to wireline.
Our investment in Tds, TV, plus anarch spansion into new markets or drive video <unk> excellent growth.
On Slide 18, you can see the broadband connection growth across all markets the.
This quarter, we achieved a major milestone reaching half of million total broadband subscribers.
Residential broadband revenue grew.
Teen percents in total in the quarter.
We are operating up to one gigabyte broadband speed and both of our fiber and DOCSIS three one market.
The one gigabyte product is an important tool that allows us to defend market and win over customers of new markets.
Areas, where we offer one gig service, we are seeing 17% of our new customers.
Taking the superior product.
Now turning to slide nine we have augmented our success growing broadband with our Tds TV plus the offerings are.
Our next generation video platform enhances the customer of viewing experience that adds up.
Bundle. These products provided best in class customer service and help us to increase our broadband market share and reduce churn.
Residential video connections held nearly flat wireline growth of 7% driven by our expansion markets nearly offset losses in the cable market.
Video continues to remain important to our customers. Our strategy is to increase our video connections through the offering of our cloud based for the SUV truck product.
This crap this rollout of this product currently covers about 60% of our total operation.
We continue to be bullish on the fiber strategy, let's say of selling on slide 20.
Fiber is the most economic for long term solutions have delivered the best broadband experience.
Selecting the right markets remains key and we have an attractive funnel of markets identified.
In fact, Quarterlane, Idaho, and Spokane, Washington topped the list of the country hottest emerging housing market.
The business. According to the recent racing for the Washington Channel.
Our marketing and sales techniques enable us to effectively market at a neighborhood level.
This gives us tremendous flexibility over the timing and execution of consistently target the high broadband for freight.
Our strategy to cluster market as critical as it gives us the economies of scale and better returns over time.
Additionally, our strategy capitalizes on strong macro economic trends such as we're all a work at home environment.
The strong population migration in our chosen markets.
Favorable advances in technology and by price and support for rural broadband bundle.
Slide 21 shows the progress we are making this year and our multi year of fiber footprint expansion, which.
Which includes fiber into the current market.
Also expansion into new markets.
As a result of the strategy over the last several years 321000, or <unk> 38 percentage of our wireline service addresses are now served by fiber.
Which is up from 32% a year ago.
This is driving revenue growth, while also expanding the total wireline footprint.
The 855000 service assets.
Moving on to Slide 22, we've highlighted the total service addresses for the clusters that are in construction and we are actively marketing.
We have completed 321000 fiber service addresses for the first quarter and are working to build out the footprint and these announced market the fifth.
620, thousands of service addresses by 2024.
We have identified other attractive opportunities, where we can the first to market.
In fact, the plant our flag and the markets in the near future.
Which will increase sales numbers.
We continue to be pleased with overall take rate in the areas we have once per day.
Our pre registration rates, which indicate the demand we are trying to satisfy or even higher than our expectation.
And we have a very high conversion rate when construction is completed.
We are scaling up and are expecting our fiber service address delivery could double in 2021 from the prior year.
On slide 23, total revenues increased 4% for $249 million largely driven by the strong growth in residential revenue, which increased 9% in total.
The chart includes residential revenue mix, which highlights the increasing contribution of our expansion market.
Incumbent wireline markets also showed impressive growth of 6% due to increases in broadband and video connections as well as increases from within the broadband product mix.
This was partially offset by a 2% decrease in residential voice connection.
Cable residential revenues grew 9% due to an 8% increase in broadband connection.
Commercial revenues, which for 10, which can continue to be impacted by the like declines the.
Decreased 6% for $47 million in the quarter.
And wholesale revenue decreased 3% for $45 million due primarily to reductions in the special access.
Convent wireline market.
So let me sum up the combined financial results for the quarter as shown on slide 24.
Revenues increased 4% from the prior year as growth from our fiber expansions and increases in cable broadband subscribers exceeded the declines we experienced in our legacy business.
Cash expenses increased 5% due to additional employee in the advertising expense related to our expansion market.
We also saw increases in video programming cost the information processing expenses, but we are making IP investments the simplify and consolidate our support system.
Adjusted EBITDA declined 1% to $81 million and lower interest income compared to last year.
Capital expenditures increased 30% from last year of $17 million is the continued to increase our investment from fiber deployment for success.
S based spend per new customer installs.
And finally moving to slide 25.
We have presented guidance, which is unchanged from what we share it in February.
We have had strong broadband connection growth across all our markets of operation combined with increased average residential revenue per connection.
We continue their rapid advancement of our fiber deployment and new market.
But we have portions of our fiber build that depend on third parties, which may impact our ability to stay on a very aggressive service and the delivery schedule.
I will continue to update you as we move through the year.
That I want to thank all our associates.
Their continued dedication to our challenging growth agenda.
We have had a successful start for the year and look forward to updating you on the second quarter.
And with that now I'll turn the call back over to you Jane.
Thanks, Vicki and operator, we're ready to take questions.
Sure.
As a reminder, the ask the question you will need for fresh star one on your telephone Keybanc.
Enjoy your question crashed the bounty.
Please stand by while we compile the Q&A roster.
Your first question comes from Ric Prentiss from Raymond James Your line is open.
Thanks, Good morning, everyone.
Good morning, Rick.
Right.
Well first of all.
The guidance is at the U S cellular came in strong in the quarter.
As we think about run rating obviously the increased.
The low end of kept the home slides with you mentioned.
The higher loss on the equivalent with promotions. So as you think through the.
Cost of service for the good run rate level with the competitive environment do you think youll be able to achieve positive postpaid phone adds.
In future quarters of maybe for the year.
Good morning growth.
So with respect to.
The run rate of our guidance and you mentioned the call.
Look it up with the service revenue.
The increase resulted from the Spanish revenues as well as Bob.
The <unk> regulatory revenues in <unk>.
From a run rate perspective, selling and marketing expenses for a little bit backend loaded towards the.
The end of the year and we also have some peaks.
<unk> from operations expenses interest.
Second and third quarter with heavy construction and maintenance season. So.
The run rate not quite uniform throughout the year when we look at that.
Yes.
So again I think we cited the reasons for the the guidance.
The comments with respect to.
With the.
The increase in subscribers.
Some of these projects, but we're certainly we've stated debt.
We are.
Gary.
Focused on growing market share as well as growing our sub base. So.
I think the answer the questions yes.
Okay.
And for Vicki on the on the TV side similar question of them.
Strong quarter.
$81 million of adjusted EBITDA.
Should we think as far as why you wouldnt be headed towards the high end of that guidance for why Couldnt guidance go up I assume there is some sales and marketing and cost of service increases as you rollout more and more markets, but just wondering.
The trends on Tds Telecom.
Yeah. Thank you for that question.
We did out of the strong Carter, you're very pleased with our quarter and where we're headed.
And it's certainly the strong start has given us some headroom on the year.
And as you know, we're ramping up our construction and our fiber deployment, both within our incumbent markets and in new expansion markets and that's kind of ramp up through the year and so while I expect new growth revenue to come in for the year. We are also going to the.
Variance being higher cost with the launches of the whole market.
Every day.
Turning up new.
New neighborhoods and and and as these come into the fold.
We have the upfront cost associated with that.
But we're well on track for hitting for hitting and staying within our range of guidance at this point.
Thanks for.
Hum.
Last question with the supply chain.
The U S cellular side any issues, we've heard other people on their conference call talking about the skittish on the supply chain any concerns on the handset supplies network supplies I know of LG.
Out of the handset business, but just as from the supply chain samples from U S cellular closer to the network side of from Tds Telecom.
It does seem like given the 150000 service addresses the out of this year might be tough.
Just kind of talking about.
Hey, Rick.
Two drivers on the supply chain side that you mentioned and I think for the two big ones that we're paying attention to LG is the first.
We are well prepared for that mostly achieved most of the <unk> sales are in the prepaid side of our business and we've got.
Fairly robust.
The ecosystem. So that does not concern me I think we are well prepared as we can serve the demand that's out there.
Chipset side of the house I pay a lot of attention to thus far.
Not seeing the effects on our business. Thus far is there are impacts we think we can manage it for that one of them being a lot more attention to.
Im not sure of I would use the word skittish, but confer.
Concerns certain ways for that one word that one we're kind of looking more closely at thus far no impact, but that's not to say that.
Got it.
If we start to see that ramp.
So do you want to answer the the telecom infrastructure side.
Yeah sure.
We've been watching the supply chain very carefully and we're in constant touch with many of our suppliers.
And in some cases, we diversified.
Our suppliers, where it's made sense.
And having the choices helps debt.
Right now I think the biggest risk I see is the lead times are getting longer and therefore, we have to be more diligent in our forecasting and our sourcing of our products.
Much farther in advance.
And so some of some of the capital spend starts to go towards building up inventory.
Not significant yet, but definitely something we're watching.
Or sensitive for the availability of the electronics thing here.
That's associated with our fiber of belt, when Youre thinking about pad connectors drive all of them.
<unk> modem the chipsets are in modem.
And so the these are kind of the areas, where we're seeing longer longer lead times and so our partnership with our with our suppliers is really important.
Thus far we haven't had any issues with sorry for the fiber.
And reduce the chair of that inventory with the longer lead time now as I think about your second part of your question, which is you know.
We delivered 13 thousands of service addresses in the first quarter, but we're looking to scale up and double down on the full year of delivering 150000 service addresses.
And.
Our construction is is not without challenges or obstacles.
But the.
We expect that really to ramp up these are complex large.
Project and so for carrying the sharing.
The contractors and the labor for for building out the fiber is also a critical component of of our sourcing.
And as we think about planting flags in new markets.
Yeah.
Working and the.
Contracting with the suppliers continues to be critical.
Okay, Thanks, and stay well.
Thank you.
Okay.
Your next question comes from CL King from Jpmorgan. Your line is open.
Hi.
Hi, guys. Thank you.
A couple of if I can first.
LTE, you're talking about the market go into promotions on handset discounts.
Thank you the churn remains low and then in voluntary in particular, the slow are you seeing in front of voluntary churn ticking up at all of you would sort of reopened and any shift in where customers are going when they leave.
Slight upticks in voluntary churn, but I think completely in line with what you would expect when you start to start to see a little bit of a larger switch or pool.
The answer to the second question is no there is not a big shift in where they're going so so the.
The we don't publish it but our win share in our loss share in our core ratios to different carriers has remained generally constant so not a big shift there.
No no impact from sort of cable of getting more aggressive with T mobile.
Showing up a little bit more of these markets. We're.
We're not seeing we're not seeing it yet I mean, I'm not suggesting that there is zero impact, but in terms of incremental impact.
I mean, thus far thus far we're not seeing.
Okay. Thank you and then Vicky under.
Under the category of.
One of you done for us lately.
Can you say that new fiber addresses will double this year versus last I think of 150000, you said can you accelerate that fiber construction further.
And any sign of incumbent telcos building and from the areas that you find attractive outside of the luck footprint.
Yes.
Great Great question.
We are we're very focused on scaling up our operations doubling our fiber.
The number of constructed fiber for patients over the last year.
I think definitely south of the organization is the scaling up and last year.
We more than double of the prior year so.
We are.
Much focused on how can we go faster how can we accelerate for themselves and it's the it's a real partnership quite frankly with the city.
The cities that we're building in the support that we need from the city officials the.
Partnership with our suppliers and our our construction contractors.
And then our own sales and.
We're learning.
And and.
And we'll take the learnings and we put them into the into the next film.
And of course, there's always going to be challenges as you run into different obstacles for.
The out the way, but we're learning and pushing our way through those.
In terms of of.
Good question around the ILEC competitors.
We were very confident in our fiber strategy and we feel we've got a significant head start.
Over.
Over the other telcos that are just starting to now focus on deploying fiber fiber we've been doing this for a long time we've.
Fibroid up or.
A third of our own footprint are overbuilt, our own markets and we've learned from that and and I think I think we're just continuing to accelerate our program in.
We've got a head start.
Thanks Ricky.
Your next question comes from chime with Larry from Morgan Stanley. Your line is open.
Alright, Thank you very much good morning LT.
You talked a little bit about some of the new initiatives to focus on growth give us a sense of where we are in the rollout of these and the impact when do you think we'll see the full benefits of these programs.
Coming through in the results obviously, some good progress this quarter, but.
Do you think we'll see more of as we go through the year and maybe any thoughts on just what's driving the total industry adds that we've seen here I think you mentioned stimulus checks from one level, but any other thoughts would be great.
And then Vicky, perhaps some thoughts on the infrastructure Bill.
Broadband funding for municipalities and others. How are you thinking about is the opportunity for TTS there.
Any thoughts of great great. Thank you.
Hey, good morning Simon.
Brian in terms of growth drivers.
I'd point of for and let me just kind of give you give you a bit of an.
For an update on each one of the so.
One of the ones I talked about on previous calls.
The regionalization of taking the regional approach.
We've started doing that and so we started trialing different different promotional activity in different regions.
Frankly, you think of it as doing a day testing on a regional basis and it's working.
We think we were able to pretty quickly honed down on on which promotions resonate.
Which we don't which drive traffic.
And so from a regional perspective, I think of that that one is working nicely, it's where I would expect it to be and you can see some of the results from our postpaid what we're doing for both the perspective.
We've talked about prepaid.
You are already starting to see some of the results of the greater focus on prepaid in our results for this quarter and I expect that's going to pick up for the rest of the year.
The initial focus was around lifecycle management.
Talked about the initially.
Initially we would reach out to our prepaid customers pretty irregular in the sense that we send them of note. When we joined the network with some of the note when they ran out of eligibility we send them. The note when there were no longer of customer.
We're starting to become much more active around that and in reaching out to our prepaid customers more often.
Is it the opportunity to bring down churn you see that in the results gives us the opportunity to expand our booth will also allows you to do when you have churn the goes down of our expanded markers you can get more aggressive from an acquisition perspective, so I'm comfortable with where we're at from the prepaid perspective.
This is the government still a work in progress I'm comfortable with what with what we put in place, but this is the longer term initiatives.
So we hired the hired Jim Curran from.
Both the sprint I think she has put a lot of really good initiatives in place around expanded channels.
So we've started to get a bit more aggressive on the indirect side partnering with value added resellers parkland the master agents.
Things take time, and I expect that that's going to be picking up and youll probably start to see results. Late this year early next in terms of from in terms of see the more increase in activity from the the government sector has longer lead time and I would expect the chip.
From the final one that I talked about has increased from partnerships.
So you've already seen the impact of us taking a more aggressive approach the partnerships with the dish NOI.
Keeping of the details on the contract itself just to kind of give you an idea about kind of.
What that means.
<unk>, what does it mean to be more aggressive from the partnership perspective.
We are we aren't off and some are for to come and run that portfolio as well as other things roaming business development strategy and one of the things that we've looked at is how can we become a more attractive partner for people that are interested in getting access to our towers.
The secret of our co location rate's been lower than the industry average and you've kind of fixed debt.
All of those things that you can do the fairly tactical to make yourself more attractive you can bring your cycle time zone processing applications. We've done that cycle times are down considerably over the last six months.
The thing that we did is we took a look at some of the policies in our towers. So in the past right. We would reserve pretty pretty significant amount of Rad Center space for overall tower states for potential network expansion, we're still reserving it we brought that down a little debt. So that we can expand the amount of capacity you have available to partners.
For the thing we did is we said look we've got assets of those towers in the form of generators shelters backhaul.
The share that with our partners.
The economics makes sense so.
We've taken those actions I think of the dish deal is the first example of those actions bearing fruit.
And I expect to see more so hopefully that gives you some flavor about how we're doing from a growth perspective I'm encouraged.
To see.
Those efforts continue to bear fruit and certainly throughout the rest of this year and particularly going into next.
Given the hand it over to you for the for the other question.
Sure.
On the infrastructure proposal.
We're watching that.
As they develop.
We've seen summary information.
But I think I think the details are still forthcoming I think critics are taking.
At the different elements.
But but I expect the broadband portion not.
I expect the broadband portion for likely survive the process.
The total spending where it ends up may be scaled back a bit, but you know I'm not sure but.
I think it's too early right now to speculate on how specifically the bill is going to drive growth.
Of the growth at Tds Telecom.
Definitely.
Watching its development, but.
Standing back from just from additional funding from government programs.
We have a long history of participating and right now. We're currently active as you know in the absence of old Cam program.
And without that level of support we would not be able to make the economics work to build for the very remote areas that we're building right now and as we're in the fifth year of that program.
We filled out.
Half of.
Of the 160000 location obligations under that program and we have more work to do under that but we're also in active discussions with the FCC and others.
The extending the ATM program.
Because if you if you recall of the start of that program was about 25, Megabits and true the pandemic and acceleration of broadband adoption and growth that we're seeing in the adoption of higher speed.
We're talking about made the extending that program to build out to even higher speeds.
Longer term so.
And we're also participating in the state broadband programs the.
SEC Lifeline broadband program ABB.
And so.
And also of the <unk>.
American rest of the plant.
<unk> participation in that so lots of opportunities.
That are that are in play and we can update you as we move forward.
Great. Thank you.
Your next question comes from Michael Rollins from Citi. Your line is open.
Hi, good morning of.
I don't want to go back to the comments LTE youre, making about partnerships and just curious if you're also considering for.
Alternative strategic relationships with the industry. If you look at direction of competition in your markets is there an opportunity to improve the structure of your markets.
And to be able to just help that longer term competitive.
<unk>.
Simple answer is yes.
Ben.
Entirely clear on even on past calls debt.
We're interested in a variety of different ways for us to better serve our customers better improve return on capital.
And I think the debt.
Look at some of the C band the.
The amount of money that was spent in the industry on C band the amount of money, that's going to be required to deploy that C band spectrum I think it's incumbent upon us as an industry to be creative on the way that we think about deploying that the way we think about getting the best speeds of the best experiences to our customers for the most capital efficient way.
And so you know the answer.
Simple answer is yes, we're certainly evaluating those options these things take a lot of time.
It will just happen overnight because that's something we're looking at.
Sure.
Thanks.
Your next question comes from trade case of this FC from Gamco investors your range.
Good morning, guys. Thank you for taking the questions.
My first question is for LTE.
Obviously, it's great to see.
Net lease agreements with dish wireless and I understand that you guys are limited as far as what you can say, but could you maybe talk a little of it's about the background of this deal how it.
Got to that point and also maybe just in general talk about how's the conversations with other companies and what types of companies are you talking about about the potential of lease agreements.
And the non traditional players that you're okay.
Yes, Theres a simple so I mean, how the deal came about I mean, obviously I'm fairly limited in what I can share, but let me just broadly I think that we tried to make it fairly clear that we will.
We're open for business as far as our tower assets.
That we have of relatively attractive value proposition so when the mine.
My traditional competitors from the wireless business perspective, I think about AT&T Verizon T mobile in the tower business, obviously I have a different set of competitors and so I think about our value proposition to give the b those competitors a little bit different.
I think we've got the opportunity to provide better levels of customer service faster cycle times talked about that.
I also think we have a set of assets debt that we can share in the fourth.
One of the shelters generators and so on the some of our competitors cant.
And frankly, I think that adds of wireless operator.
I am also a customary towers may understand what my customers want and we are trying to take a fairly customer friendly approach that some of our competitors don't all of it.
And so you put all of that together I think we're able to offer of pretty good value proposition and clearly the value proposition resonated with dish and I fully expect that that's kind of resonate with others as well.
I mean, we were fairly actively marketing those assets, we have the partnership with the marketing firm to help us with that.
They do a pretty good job, beating the bushes for credit for potential customers and I expect those colocation rates to go up over time.
Those are dollars of drop right to the bottom line from positive cash flow.
The domestic about that business and we're going to keep for it.
Great.
On the related question.
Just the company. If you just telecom has meaningfully improved the growth profile through fiber builds and.
It was the tower business, maybe running it's more of like a tower company potentially with the comment similar growth vehicle for you of cellular eventually enhancing revenue and profitability profile and helping increase volume.
Multiple of the stock.
I mean in terms of the strategic opportunity for the tower business I agree I imagine the reason we're investing in this.
I think of it can be an attractive driver of growth.
For the revenue perspective, I would argue more volume from a cash flow perspective right.
It's an attractive vehicle for growth for us.
I mean, we talked about I think we've kind of covered the <unk>.
The company question in the past and that's not something that we're interested in doing so I think we see a lot of benefits in the operational synergies of provides us.
The same thing is that in the past, we really looked at those operational synergies. It's primarily one sided meaning we on towers may provide benefit to our network of organization.
What we're realizing is that there is another side benefit.
Being the network company that uses the towers you can provide benefit to your customers differentially I talked about that already but I think there is upside in both sides of the tower business.
And you can expect to sales continue to push on that asset.
Great.
Thank you My next question is for <unk>.
So.
There were some buybacks in the quarter.
Minor buybacks as most of you of cellular and the.
Tds.
But if one marcio cellular mistake the market telecom, which is transforming for growing fiber and cable broadband business is trading still of implied multiple of around three five times EBITDA. So why isn't just the level, where you guys could do in a more meaningful buyback or maybe a more.
Systems, the torches, while still balancing you asked given the location objectives.
Good morning, Sarah Thanks for the question.
We've talked about in the past the balance that we're trying to maintain between having the dry powder to invest in all of the things that Vicki and LTE has been talking about today.
And returning.
The cash to our shareholders through both the dividend don't forget about the dividend and share repurchase and you.
We saw this this quarter that we we went out and we raised some capital in our rating agency friendly way I'm talking about those perpetual preferred security so.
The rating is very important to Tds as part of our.
The long term sustainability of the enterprise and so again, it's just the balance that we have to maintain and as we ramp up the funnel that the fiber funnel the the Vicki as discussed.
We have to make sure that we've got the funds to.
To make those investments all of the significant investments that we've been talking about here. So.
We're going to continue to look at that balance.
And.
It probably will never satisfy you.
We will do as much as we can maintain that balance.
Great.
My last question is for Vicki.
Kind of one of the competitive environment.
The markets.
Particularly in the expansion of fiber markets Youre, certainly seeing nice broadband connection growth.
Of those expansion markets.
I was wondering what kind of competitive response have you seen so far from the incumbent players and has anyone got them, particularly the aggressive and some of those markets.
Hi.
You know right now.
Comping the comp.
Competitive response has been.
And the minimum minimal levels right now so okay and.
I'm watching for and.
I'm watching for a number of things one is its response from the cable company.
As we go into these new.
Markets with fiber expansion quite frankly, we expect to share of the market with the income back cable company.
If they've upgraded their network for both able to offer one gig speeds in.
And worry the naming.
Down the road to offer of multi gig.
On the Iraq are the incumbent telephone company.
For the most current we've not seen it.
Any significant competitive response from them.
Now I know some companies are now talking about five of the financing planned for but in these markets. We get in there we finished our construction and with our pre registration.
Sign ups for.
We have we get significant market share early in the first the first 12 months.
So that strategy is working very well the third thing we.
Watch for us certainly as other fiber over of belt.
All of our builders, whether they are coming into the same market.
Or are there.
<unk> net leading us to new market that debt, we have our eyes set on them and right now I think that the.
That's the biggest focus there's a lot of opportunity in the U S for.
Our our funnel of fibre channel is is the.
Wide.
And as we're looking at our most attractive markets I think getting getting to market first of is.
This is Keith.
Alright, thank you.
There are known for Great question at this time I would now like to turn the call back to Jim for closing remarks.
I'd like to thank everybody for joining us today and look for into further updates.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
Yes.
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