Q1 2021 Telephone and Data Systems Inc and United States Cellular Corp Earnings Call
And I ask a question. During this session you will need to press star one on your telephone Keybanc. If you require further assistance. Please press star zero.
It is now my pleasure to turn and nickel lubricate speaker today, you're seeing the Cowen. Please go ahead.
Thank you Graeme and good morning, everyone and thank you for joining us.
We hope that you and all your families are doing well.
And wants to make you all aware of the presentation and we are prepared to accompany our comments. This morning, which you can find on the Investor Relations section of the Tds and U S cellular websites.
With me today and offering prepared comments.
And from Tds, and Serena Executive Vice President and Chief Financial Officer from U S cellular LTE terrible President and Chief Executive Officer.
<unk> thousand 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 to highlight the contributions of U S Cellular's wireless partnerships.
Tds and U S cellular filed their SEC forms 8-K, including the press releases and form 10-Q yesterday.
As shown on slide two the information set forth and the presentation and discussed during this call contains statements about expected future results and financial result, and our 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 slides, three and we're doing the Jpmorgan and virtual non deal Road show on May 11, and then.
On June 16th we are attending a virtual investor corporate access event with the New York Stock Exchange.
And as always our open door policy remains and open phone or open video policy. So please reach out to us if you're interested.
And I'll now turn the call over and as the threat Inc.
Thanks, Jane and good morning, before speaking about the balance sheet and our fleet services.
But what I think you're aware unchanged growth.
And it teams.
From <unk>.
Further this quarter.
Sculpsure is well known for.
<unk> segment, and the wireline and cable segments from the reported.
We believe the strength not only aligns with how we managed 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 and leveraging a single cost base to become the preeminent broad.
Operator received the change in segments, where I'm sorry, he change and yes. So are you still there.
Yes, you cut out per minute.
Okay, and the combined view better depicts our progress and success.
And leveraging a single cost base to become the preeminent broadband provider in each market and which we operate the changing segment reporting has no impact on the net income of Tds telecom and prior periods and have been confirmed and prior periods have been confirmed for the current presentation. You will notice that we have made enhanced disclosures of our progress and building out fiber to the home.
And that our presentation today, so that you can more closely follow our progress and this very important initiative.
Also in terms of the results and impacting year over year comparisons I want to remind everyone that we have a higher tax rate in 2021 compared to 2020 due to the income tax benefits of the cares Act, which provided a one time rate benefit in 2020 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 and April Tds and U S. Cellular both announced redemptions of select senior notes Tds is redeeming $225 million of its $6, 875% senior notes and 300 million.
And of 7% senior notes and U S Cellular's redeeming $275 million of at 7.25% 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 and 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 have the financial resources, we need to fund our biz.
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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 previously.
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 our ticket.
U S cellular and Tds Telecom are currently boats and investment cycles with U S cellular investing and network modernization and <unk> and spectrum and Tds telecom aggressively investing in fiber expansion.
In March Tds issued $420 million and.
Perpetual preferred stock, which will be used primarily for funding fiber deployments and the repayment of debt. This transaction enabled us to raise significant proceeds while protecting our credit rating.
He is continues to return value to its shareholders, primarily through dividends and so Tds and U S. Cellular each opportunistically purchased a small amount of their shares and the quarter Tds purchased $3 million worth and U S cellular purchased $2 million worth of shares.
And some we are in a financially solid position to take advantage of growth opportunities and each of our businesses.
And I'll now turn the call over to LTE.
Thanks, Pete and good morning, everyone.
The slide six our.
Strategic imperatives are simple.
And designed to drive growth and improve return on capital overtime and I think we're off to a really good start this year.
And I'll, let Doug coverage and operational and financial highlights from the first quarter.
Going to provide a few thoughts on strategic priorities.
And on previous calls that one of our areas of opportunity is to enter into strategic partnerships and better leverage the value of our assets and the growth business.
And good progress on this objective and April by signing a tower MLA or a 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.
And I spoke to you last quarter and up from our new initiatives to drive growth.
And regionalized approach to drive market share and <unk>.
And for our business and government and prepaid segments.
Moving ahead full steam on these and I'm pleased with our progress and you see that year over year improvement in gross additions.
And improvements in churn from both postpaid and prepaid.
Both are 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 highlights strong local presence, we have and on market.
I think this is what sets us apart from our competition and it reflects our culture and our values.
We're not competition and the competitive intensity the wireless industry remain top and.
And we intend to respond as appropriate.
Given the total spend on the C band auction I'm expecting continued rational pricing and that.
Most of the promotional activity will remain related to device and I think.
That's the world, we can live and economically.
A few words and our network and dish.
And network performance continues to be a hallmark of our strategy.
And our network modernization program and our multiyear <unk> deployment.
And <unk> over each layer of spectrum low band and millimeter wave.
Our initial deployment for coverages on clean low band spectrum <unk> available to some degree and 18 states today.
And we're largely satisfied with our CS and purchases and.
When combined with our <unk> holdings in our mid band spectrum, and nearly all of our operating footprint.
Also we deployed millimeter wave spectrum and order off in order to offer fixed wireless access and three test market.
A pilot launch in those markets is expected to occur and the third quarter of this year.
And more formalized and communicate our plans and the results become available.
We continue to be optimistic and the performance capabilities and millimeter wave spectrum.
And recently performed additional millimeter wave spectrum testing the base station and radio enhancement and.
And we achieved a line of sight propagation distances and seven kilometers with average speeds approaching one gigabit per second and <unk>.
<unk> and our results from last year, where we achieved a five kilometers with average speeds of 100 Megabits per second.
Finally, I just want to say, we're and on talent.
I'm more convinced than ever that attracting and retaining talent and a significant differentiator.
And this past year has stressed everyone's approach to people and I'm really pleased with how U S. Cellular has responded.
And do you believe that the drivers of talent and yesterday arent the same as the drivers of tomorrow.
Pay and benefits from continued to be important and we're going to need to think even harder about work flexibility.
Constant learning environment and.
And a visible focus on diversity equity and inclusion.
We are nearly complete and a comprehensive strategy to help our team moved toward more matrix work environment.
Splitting time between home and the office.
Third associates that and working from home will start returning to be office and June on a volunteer basis.
But there will be returning to a more flexible and smart environment.
I expect this will help us increase engagement and.
And also make it is going to help us managed costs.
From the diversity front and the recently ranked 75, well above all of our peers by Forbes.
And as one of America's best employers for diversity and 2021.
This award and many others like it provide a brand recognition as we compete to attract and retain the very best talent.
Now I'm going to turn it over to Doug and he is going to cover the details of the quarter Doug and.
Thanks, <unk> good morning, and.
You mentioned were off to a good start this year.
Let's start with a review of customer results starting on slide seven.
Postpaid handset gross additions increased due to higher switching activity and.
And our ability to capture a larger portion of that from two group this year versus last year.
The increase was driven primarily by March activity, which was severely depressed last year as a result of the unfolding pandemic and was bolstered this year by stimulus payments.
Our ability to attract switchers increased year over year due primarily to the success of our dual requirements messaging and promotional offerings.
We saw connected device growth decreased by 3000 and year over year and.
This was driven by both growth additions of Internet products, such as hotspots and routers compared to the prior year and we experienced an increase in demand due to COVID-19.
The declines and hotspot and broadened sales was partially offset by an increase and connected watch division.
Rapid accompanying slide total smartphone connections increased by 13 volume during the quarter and by 56000 and over the course of the past 12 months.
And that helps to drive more service revenue given that smartphone is about $20 higher and 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 handset churn depicted by the blue bars with zero point, 92% now and from <unk>, 95% a year ago.
This was due to lower and voluntary churn, which continues to run lower year over year as a result of having acquired customers and a better credit mix and improved customer payment behavior.
Total postpaid churn and provide enhancement and connected devices was 112% for the first quarter of 2021, and also lower than a year ago.
Now, let's turn to the financial results on slide nine.
Total operating revenues from the first quarter were one two.
<unk> 3 billion and increase of $60 million or 6% year over year.
Retail service revenues increased by $40 million million.
$685 million.
The increase was primarily due to a higher average revenue per user, which I will discuss and enrollment as well as and increasing average postpaid subscribers.
Inbound roaming revenue was $28 million and that was a.
<unk> of $9 million year over year, driven by a decrease and data volume.
One of the factors contributing to this data volume decrease is the merger of sprint and T mobile and the migration of the sprint roaming traffic to T Mobile's network.
Other service revenues were $58 million and increase of $4 million year over year, including a 9% increase and tower rental revenues.
And the marine 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 an increase and accessory sales as a result from higher volume.
Now, let's see what conference hosted revenue shown on slide 10.
Average revenue per user or connection was 47 65 from the first quarter up 42 or <unk>.
Approximately 1% year over year.
On a per account basis average revenue grew by $2, three 3% or 2% year over year.
The increases were driven primarily by and increase in regulatory recovery revenues.
Both plan and product offering mix and and increasing device protection revenues.
Turning to slide 11, as we continue our multi year and network modernization and <unk> rollout.
All of our towers remains very important and <unk>.
And their powers, we ensure we became the operational flexibility to add new equipment and make other changes to our cell sites without incurring additional costs, which is very important, particularly given our current technology evolution.
And you can see on the slide with the assistance of our third party marketing agreement, we have seen steady growth and tower rental revenues as I mentioned first quarter tower rental revenues increased by 9% year over year.
You noted earlier, new Master lease agreement, we signed with dish wireless and we will continue to focus and growing revenues from these strategic assets.
Moving to slide 12, I wanted 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 $258 million and increase of 12% year over year.
And they commented earlier total operating revenues were $1 3 billion, a 6% increase year over year.
Total cash expenses were $7 $765 million increased $33 million or 5% year over year.
Total system operations expense increased 3% year over year.
Excluding roaming expense system operations expense increased by 2% due to higher certain costs.
Relative expense increased $1 million or 4% year over year, resulting from an 80% increase and off net data 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 in 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 a decrease and bad debt expense bad debt expense decreased $26 million due to lower write offs driven by fewer non <unk> customers as a result, and a better credit mix and improved customer payment behavior.
We also recorded bad debt expense and the first quarter of 2020 related to the FCC's keep Americans connected pledge, which contributed to the year over year decrease in addition advertising expense decreased year over year.
Turning to slide 13, and I'll touch on 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 quarter was $302 million and increase of 21 million or 8% year over year.
Equity and earnings of unconsolidated entities decreased by $3 million or 7%.
I want to cover our guidance for the full year 2021 from a comparison, we're showing our 2020 actual results. Our guidance assumes that COVID-19 has not caused any significant incremental economic consequences that would negatively impact our business.
And total service revenues, we have increased the midpoint by 25 million to a range of three five to three <unk>, one 5 billion.
This increase was driven by increased and our projections for build revenues and miscellaneous service charges.
We have raised the midpoint of our adjusted operating income and adjusted EBITDA ranges by 25 million and increasing a boat and of the ranges with no change to the high end of the ranges.
And the new ranges.
$850 million to $950 million and one <unk>.
And 52112 5 billion respectively.
In addition to the increased and our projections from service revenues the updated ranges incorporate durability data.
And selling and marketing expenses.
This favorability was partially offset by an expected increase from Boston equivalent for the remainder of the year compared to our earlier projections.
For capital expenditures, we are maintaining our guidance range of 775 to <unk> 75 billion and we.
We have provided a breakdown by major category.
I will 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 and both broadband connections and revenue.
Overall weak real hurdle or Danny and Nextgen.
Third consecutive quarter.
We added 13000 fiber service addresses to our footprint.
Revenue to execute on our fiber strategy.
Overall, we grew our top line 4%.
And Pete referenced earlier, the change to one segment reporting results and a combined presentation of our wireline and cable operations.
We have been on a trajectory to integrate our businesses around the common strategy and providing superior broadband service Inc.
Complementing that with value added video.
And voice service bundling.
Whether it is our markets, where we have upgraded copper are building fiber or provided DOCSIS three one capability, we are striving to increase internet sales.
To better serve our customers.
And a combined basis.
We are able to offer one gigabyte speed okay.
55% of our channel service addresses.
We remain committed to our strategic priority.
We've been invested and for several years.
Our primary strategic objective is to provide growth by investing and our high speed broadband services, we have a multifaceted approach to this growth that includes leveraging our existing network and.
Constructing greenfield fiber and.
Opportunistic location.
With support from the FCC's, a cam program and state broadband grants.
And yes, telecom and also deploying high speed broadband customers and rural areas with and our incumbent market.
If you turn to slide 17 of the earnings came from patients total residential connections increased 4%.
And our residential broadband growth in new and existing markets.
Partially offset by a decrease and points connect strength.
Total telecom broadband residential connections grew 9% and the quarter as we continue to fortify our network with fiber.
And into new markets.
Bolstered by this growth wireline broadband residential connections grew 10% and cable increased 8%.
Total drop and penetration continued to increase.
100 basis points, 38%.
Overall higher value product mix and price increases drove a 5% increase and average residential revenue per connection.
Cable average residential revenue per connection and reflects a higher mix and.
Video connections relative to wireline.
Our investment and Tds, TV, plus and our expansion into new markets will drive video connects from growth.
On slide 18, you can see the broadband connection growth across all markets.
This quarter, we achieved a major milestone reaching half a million total broadband subscribers.
Residential broadband revenue grew.
Teen percentage in total and the quarter.
We are operating up to one gigabyte broadband speeds and both our fiber and DOCSIS three that one market.
And one gigabyte product is an important tool that allows us to defend market and win over customers and new market and.
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 offerings.
Our next generation and video platform enhances the customer viewing experience and as a.
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.
Your line growth of 7% driven by our expansion markets, nearly offset losses and our cable Michael.
Video continues to remain important to our customers. Our strategy is to increase our video connections through the offering of our cloud based Tds TV plus product.
And this crop this rollout of this product currently covers about 60% of our total operations.
We continue to be bullish on our fiber strategy and so on slide 20.
Fiber is the most economical long term solutions have delivered the best broadband experience.
Selecting the right markets remains key and we have and attractive funnel of markets identified.
In fact quarterly and Idaho, and Spokane, Washington caught the list of the country hottest emerging housing market.
And this is according to the recent rate data by the Washington Channel.
And our marketing and sales techniques enable us to effectively market and a neighborhood level.
This gives us tremendous flexibility over the timing and execution to consistently target and high broadband postbank.
Our strategy to cluster market as critical as it gives us economies of scale and better returns overtime.
Additionally, our strategy capitalizes and strong macro economic trends such as we're all in and work at home environment.
Strong population migration and 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 multiyear fiber footprint expansion, which includes fiber into current markets and also expansion into new markets.
As a result of this strategy over the last several years 321000 or 38% of our wireline service addresses are now served by fiber.
Which is up from 32% and year ago.
This is driving revenue growth, while also expanding the total wireline footprint.
The 855000 and service and that's it.
Moving on to slide 22, we've highlighted that.
Total service addresses for the clusters that are in construction and we are actively marketing.
We have completed 321 fiber services <unk> through the first quarter and are working to build out the footprint and these announced market.
620000 and service addresses by 2024.
We have identified other attractive opportunities, where we can be first to market and.
Back to France, our flag and these markets and the near future.
Which will increase sales numbers.
We continue to be pleased with overall take rate and 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 to Cabo in 2021 from the prior year.
On slide 23, total revenues increased 4% to $249 million largely driven by the strong growth and residential revenues, which increased 9% and telecom.
The chart includes residential revenue mix, which highlights the increasing contribution of our expansion market.
Incumbent wireline markets also showed impressive growth.
6%.
Increases in broadband and video connections as well as increases from within the broadband product mix.
This was partially offset by a 2% decrease and residential voice connection.
Cable residential revenues grew 9% due to an 8% increase and broadband connection.
Commercial revenues, which can which can continue to be impacted by fee like declined decreased 6% to $47 million and a quarter.
And wholesale revenue decreased 3% to 45 million and primarily to reductions and special access and.
And the content wireline market.
So let me sum up the combined financial results for the quarter as shown on slide 24.
Revenue increased 4% from the prior year.
As growth from our fiber expansions and increases in cable and broadband subscribers exceeded the declines we experienced and our legacy business.
Cash expenses increased 5% due to additional employee and advertising expense related to our expansion markets.
We also saw increases and video programming cost and information processing expenses, while we are making investments to simplify and consolidate our support systems.
Adjusted EBITDA declined 1% to $81 million and lower interest income compared to last year.
Capital expenditures increased 30% from last year to $70 million as they continue to increase our investment and fiber deployment.
Success based spend for new customer himself.
And finally moving to slide 25.
Presenting guidance, which is unchanged from what we shared in February.
We have had strong broadband connection growth across all our markets of operations 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 delivery schedule.
And I will continue to update you as we move through the year.
And that I want to thank all our associates and.
And their continued dedication to our challenging growth agenda.
We have had a successful start to the year and look forward to updating you on our second quarter.
And with that now I'll turn the call back over to you again.
Thanks, Vicki and operator, we're ready to take questions.
Sure.
And as a reminder to ask a question you will need to press star one on your telephone keypad.
We enjoy your questions fresh day bounty.
Please standby and 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.
Okay.
Thank you our first slide.
The guidance is at U S cellular came in strong and the quarter.
And as we think about run rate and obviously increased.
The low and they kept the high and flat demand.
You mentioned youre expecting maybe higher loss and equivalent promotions and so as you think through that.
As cost of service for what a good run rate level and with the competitive advantage do you think youll be able to achieve positive postpaid phone adds.
And in future quarters, and maybe for the year.
Good morning, and so with respect to.
The run rate of our guidance and and we mentioned before.
I'll kick it off with revenue.
Kris, resulting from display and revenues as well and as.
The favorability and regulatory Rutgers and refi index.
And from a run rate perspective, and selling and marketing expenses, a little bit backend loaded towards.
And of the year and we also have some peaks.
Some operations expenses.
Second and third quarter with heavy construction and maintenance season and so.
And the one maybe not quite uniform throughout the year and we look at that.
Yes.
And I think you cited the reasons for the <unk>.
<unk>.
And your comments with respect to.
And with.
The increase and subscribers low.
<unk> and subscribers, but we're certainly we've stated that.
We are.
Gary.
Focused on growing market share as well as growing our sub base. So vpns.
The answer to that question is yes.
Okay and.
And for Vicki on the Tds side similar question and then.
Strong quarter.
And 1 million of adjusted EBITDA.
Should we think as far as why you wouldnt be headed towards the high end of that guidance or why Couldnt guidance go up I assume there is some sales and marketing and cost of services increases as you roll out more and more markets, but just wondering.
And with trends on Tds Telecom.
Yes, thank you for that question.
We did out and a strong quarter very pleased with our quarter and where we're headed.
And it's certainly the strong start has given us some headroom and the year.
And as you know, we're ramping up our construction and our fiber deployment, both with and our incumbent markets and in new expansion markets and thats going to ramp up through the year and so while I expect new growth revenue to come in for the year. We are also going to be ex.
Experienced and higher costs with the launches of those new markets.
Every day.
Turning up new.
New neighborhoods and and and as these come into the fold.
And yes.
The upfront costs associated with that.
But we're well on track for hitting for hitting and staying within our range of guidance at this point.
Okay.
Hello.
Last question would be supply chain.
And the wholesalers and the issues we've heard other people on their conference calls talking about these skittish on the supply chain and any concerns on handset supplies network supplies and LG.
Out of the handset business, but just as from a supply chain standpoint from U S. Cellular those sorts of network side and from Tds Telecom.
And it does seem like given the 150000 service addresses 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 are the two big ones and we're paying attention to Lg's first.
We are well prepared for that mostly <unk> most of <unk> sales are and the prepaid side of our business and we've got.
Fairly robust.
Device ecosystem. So that does not concern me I think we're well prepared and we can serve the demand that's out there.
Chipset side of the house and pay a lot of attention to thus far.
And not seeing effects on our business. Thus far is there are impacts we think we can manage it should have one and I'm paying a lot more attention to.
Im not sure if I would use the word skittish, but.
Concerns certain ways from that one word that one we're kind of work and more closely and thus far and no impact, but that's not to say that it could.
If we start to see that ramp.
And you want to answer the telecom infrastructure services.
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.
And our suppliers, where it's made sense.
And and having those choices.
Right now I think the biggest risk I see is the lead times are getting longer and therefore, we have to be more diligent and our forecasting and our sourcing of our products Inc.
Much farther in advance and.
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 to the availability of electronics and gear.
And that's associated with our fiber and belt and Youre thinking about pad connectors drive.
And <unk> modem chipsets are and modem.
And so these are kind of the areas, where we're seeing longer longer lead times and so our partnership with our with our suppliers is a really important.
Thus far we haven't had any issues with starts and fiber and.
And we do secure that inventory with a longer lead time now as I think about your second part of your question, which is.
And we deliver at 13000, and and service addresses and the first quarter, but we're looking to scale up and double down on the full year of delivering 150000 and service addresses and.
Our construction is is not without challenges or obstacles.
But.
We expect that really to ramp up these are complex.
Large.
Project.
And so securing.
Hearing.
The contractors and the labor for free.
And is building out the fiber is also a critical component of our sourcing and as we think about planting flags and new markets.
Sure.
Working and.
And <unk>.
Contracting with those 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 if I can first.
You're talking about the market go into promotions on handset discounts I heard you that churn remains low and then and voluntary and particular as well are you seeing and voluntary churn ticking up at all of them and what sort of reopened and any shift and where customers are going when they leave.
Slight upticks involuntary 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 switcher pool.
Answer the second question is no there is not a big shift and where they're going so so the.
And the we don't publish it but our win share and our loss share and our port ratios to different carriers has remained generally constant and so not a big shift there.
No no impact from sort of cable and getting more aggressive with T mobile.
Showing up a little bit more niche markets.
We're not seeing we're not seeing it yet 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 the category of <unk>.
And what have you done force lately I heard you say that new fiber addresses will double this year versus last I think a 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 our work footprint.
Yeah. So.
Great Great question.
We're very focused on scaling up our operations doubling our fiber.
<unk> and CRE.
And fiber patients over last year.
I think definitely separate the organization is scaling up and and last year.
And we more than doubled the prior years so.
We are very much focused and how can we go faster how can we accelerate themselves and it's.
It's a real partnership quite frankly with the city.
And the cities that we're building and the support that we need from the city officials.
And the partnership with our suppliers and our cause.
Construction contractors and.
And then our own tools and.
And we're learning and.
And.
And we'll take those learnings and we put them into the into the next sales.
And <unk>.
And of course, there is always going to be challenges as you run into different obstacles.
The way, but we're learning and and pushing our way through those.
And in terms of.
Good question around the ILEC competitors.
And we were very confident and 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 are you now a third of our own footprints 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 and and we've got a head start.
Thanks Ricky.
Your next question comes from Cheyenne Prairie 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 and the rollout of these and the impacts from when do you think we'll see the full benefits of these programs coming through and the results. Obviously, some good progress this quarter, but.
Do you think we'll see more 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 on the other.
Okay great.
And then Vicki and perhaps some thoughts from the infrastructure Bill.
Broadband funding from municipalities and others. How are you thinking about if there are opportunities for Tds there.
And it's also great great. Thank you.
Hey, good morning, Simon and Brian in terms of growth drivers.
I'd point at four and let me just kind of give you give you a bit of AR.
And update on each one of these so.
And the ones I talked about on previous calls from <unk>.
Regionalization and taking a regional approach.
Started doing that and so we started trialing different different promotional activity and different regions.
Frankly think of it as doing a day testing on a regional basis, and it's working and we.
Think we were able to pretty quickly honed down on on which promotions resonate.
Which one zone, which drive traffic.
And so from a regional perspective, I think that one is working nicely and it's where I would expect it to be and you can see some of the results from our postpaid and what we're doing from their perspective.
We've talked about prepaid.
Youre already starting to see some of the results of the greater focus on prepaid and our results and this quarter and I expect thats going to pick up for the rest of the year and.
Initial focus was around lifecycle management I talked about and the.
Initially, we would reach out to our prepaid customers pretty irregular and the sense that we send them and note. When we joined the network and some of the note when they ran out of eligibility and we send them and note when they were no longer a customer.
We're starting to become much more active around that and and reaching out to our prepaid customers more often.
Is it the opportunity to bring down churn you see that and the results gives us the opportunity to expand our booth will also allows you to do and you have churn that goes down and we're expanding our food you can get more aggressive from an acquisition perspective, so I'm comfortable with where we're at from a prepaid perspective.
Business and government still work in progress I'm comfortable with what with what we put in place, but this is just from a longer term initiative.
So we hired Dr. Jim Curran from.
And sprint I think she's put a lot of really good initiatives in place around expanding channels.
So we started to get a bit more aggressive on the indirect side partnering with value added resellers parkland and 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 and in terms of see EBIT more increase in activity from the business and government sector and has longer lead time and I would expect it to.
And the final one that I talked about has increased and partnerships.
And so you've already seen the impact of us taking a more aggressive approach and partnerships with additional NOI and <unk>.
Taking into details on the contract itself and just to kind of give you an idea about.
And what that means.
<unk>, what does it mean to be more aggressive from a partnership perspective.
We hired we arent off and Summerford to come and run that portfolio and 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 to people that are interested in getting access to our towers.
The secret and our co location rates and lower than the industry average and you've got to fix that.
All those things that you can do and we're fairly tactical to make yourself more attractive and bring your cycle time down processing applications based on 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 and our towers. So we can pass right, we would reserve and pretty.
Pretty significant amount of Rad center space or overall tower space for potential network expansion, we're still reserving and we brought that down a little bit so that we could expand the.
Amount of capacity and could have available to partners.
And we did as we said look we've got asset systems towers, and the form of generators and shelters and backhaul and.
And we're willing to share that with our partners.
The economics makes sense and so.
And we've taken those actions I think 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 and encouraged.
And I expect to see those efforts continue to bear fruit and <unk>.
Certainly throughout the rest of this year and particularly going into next.
Thank you and I'll hand, it over to you for the for the other question.
Sure.
And the infrastructure proposal.
<unk>.
We're watching that.
As it develops.
And we've seen summary information.
But I think I think the details our sales forthcoming.
I think critics are taking.
And at different elements.
But but I expect the broadband portion.
And I expect the broadband portion for likely survive the process.
And the total spending where it ends up may be scaled back a bit on that.
Sure but.
And.
I think it's too early right now to speculate on how specifically the belts and drive further growth.
Tds telecom, but we're definitely.
Watching its development.
And so.
Standing back from just from additional funding from government programs.
We have a long history and yet participating and right now. We're currently active as you know and the FCC's old Cam program.
And without that level of support and we would not be able to make the economics work to build the <unk>.
<unk> remote areas that we're building right now and as we're in the fifth year of that program.
We filled out to half.
Of the 160000 location obligations under that program and.
And we have more work to do under that but we're also and active discussions with the FCC and others on ex.
Bending the ATM program.
Because if you if you recall.
Started that program was about 25 Megabits, Inc.
And through the pandemic and acceleration of broadband adoption and growth that we're seeing and and the adoption of higher speed.
We're talking about maybe expanding that program to build out to even higher speeds.
Longer term so.
And we're also participating and state broadband programs.
And the FCC's Lifeline broadband program ABB and.
And so.
And also the the American rescue plan, we're evaluating participation and that so lots of opportunities.
And that are that are in play and we can update you as moving forward.
Great. Thank you.
Your next question comes from Michael Rollins from Citi. Your line is open.
Hi, good morning.
And when I go back to the comments LTE you were making about partnerships and just curious if you're also considering.
Turning his strategic relationships with the industry, if you look and 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>.
Yes.
Simple answer is yes.
And I have been.
<unk> been fairly clear on even on past calls.
And we're interested and a variety of different ways for us to better serve our customers better improve return on capital and I think that if you.
Look and see what the C band.
The amount of money that was spent and the industry on C band and the amount of money, that's going to be required to deploy that C band spectrum.
And it's incumbent upon us as an industry to be creative on the way that we think about deploying that and when we think about getting the best speeds and the best experiences to our customers and the most capital efficient way.
And so even and the simple answer is yes, and we're certainly evaluating those options. These things take a lot of time.
And they will just happen overnight and Thats something were looking at.
Okay.
Thanks.
Your next question comes from trade case, and this FC from Gamco investors.
Good morning, guys. Thank you for taking the questions.
My first question is for LTE.
Obviously, it's great to see.
And this agreement 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 bit about the background from this deal how it.
And.
Got to that point and also maybe just in general talk about how the conversations with other companies what types of companies are you talking about about potential lease agreements and was there any non.
And traditional players that you're okay.
Yes, there is still so how the deal came about I mean, obviously and fairly limited in what I can share, but let me just broadly I think that we tried to make it fairly clear that we were open for business and as far as our tower assets.
I think that we have a relatively attractive value proposition. So my my traditional competitors from a wireless business perspective, I think about AT&T, Verizon and T mobile and the tower business, obviously I have a different set of competitors and so I think about our value.
<unk> and viewed to be those competitors a little bit different.
I think we've got the opportunity to provide better levels of cash.
Customer service faster cycle times and talked about that.
I also think we have a set of assets that we can share and Colombo shelters generators, and so on and some of our competitors cant.
And frankly, I think that as a wireless operator.
I'm also a customer and towers and I understand with my customers want and we are trying to take a fairly customer friendly approach that some of our competitors don't always do.
And so you put all that together I think we're able to offer a pretty good value proposition and clear.
And our value proposition resonated with dish and I fully expect that that's going to resonate with others as well.
And we were fairly actively marketing those assets, we have a partnership with a marketing firm to help us with that.
They do a pretty good job, beating the bushes for cash for potential customers and I expect those colocation rates to go up over time.
And those are dollars that drop right to the bottom line from positive cash flow and.
I'm optimistic about that business and we're going to keep at it.
Great and.
On a related question.
Your sister company to just telecom has meaningfully improved as growth profile through fiber builds and.
And just our business and maybe running it's more like a tower company and potentially becoming similar.
Growth vehicle for U S cellular eventually and enhancing revenue and profitability profile and helping increase.
Elevation multiples.
I mean in terms of the strategic opportunity for the tower business I agree I imagine the reason we're investing in this.
And it can be and attractive driver of growth.
From a revenue perspective, I would argue more volume from cash flow perspective right.
And attractive vehicle for growth for us.
And we talked about I think we kind of covered the separate company question and the past them.
Not something that we're interested in doing.
And I think we see a lot of benefits and the operational synergies and provides us.
The interesting thing is that in the past, we really looked at those operational synergies. It's primarily one sided meaning we own towers may provide benefit to our network organization.
What we're realizing is that there is another side benefit and b.
Being a network company that uses those towers you can provide benefit to your customers differentially and I've talked about that already but I think there is upside and both sides of the tower business.
And you can expect to see us continue to push on that asset.
Great.
Thank you My next question is.
Pete.
So.
There were some buybacks and in the quarter.
And our buybacks as opposed to U S cellular and.
Alright Tds.
Yes.
But if one Marshall settlers take to market.
And which is transforming and growing fiber and cable broadband business is trading still and implied multiple of around three and five times EBITDA. So why isn't this a level, where you guys could do and more meaningful buyback.
Or maybe a more consistent approaches while still balancing your capital allocation.
Objectives.
Good morning, sorry, guys and 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 and all the things that Vicki and LTE has been talking about today and returning.
Cash to our shareholders through both the dividend don't forget about the dividend and share repurchase and.
All of this this quarter that we we went out and we raised some capital and a rating agency friendly way I'm talking about those perpetual preferred securities. So the.
And the rating is very important to Tds as part of our.
Our long term sustainability and the enterprise and so again and it's just a balance that we have to maintain and as we ramp up the funnel that fiber funnel that Vicki as discussed.
And I would have to make sure that we've got the funds to make those investments and all 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.
And we'll do as much as we can and maintaining a balanced.
Great and.
And my last question is from Vijay.
And from the competitive environment and.
The markets.
Particularly and as expansion fiber markets Youre, certainly seeing nice broadband connection growth.
Those expansion markets and.
I was wondering what kind of competitive response have you seen so far from the incumbent players and has anyone.
Got it and particular aggressive and some of those markets.
Hi.
You know right now.
Comp it.
Competitive response has been.
And the minimum minimal levels right now Sergei and and.
Watching for and <unk>.
Switching for a number of things.
One.
Response from the cable company.
And as we go into these new.
Market with fiber expansion quite frankly, we expect to share the market with the income back cable company.
Like if they've upgraded their network are both able to offer one gig speeds and and.
And we're even evening down the road to offer multi gig.
And the ILEC or the incumbent telephone company.
For the most part we've not seen any significant competitive response from them.
Now I know some companies are now talking about fiber to finance plans, but.
And these markets we get in there we finished our construction and <unk> and with our pre registration.
Sign ups.
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 overbuild.
All of our builders, whether they are coming into the same market.
Or are there.
<unk> net beating us to new market that we that we have our eyes set on them and right now that I think that the.
That's the biggest focus there's a lot of opportunity and the U S.
Our our funnel our fibre channel is is.
Why.
And as we're looking at our most attractive markets I think getting getting to market first and is.
This is Keith.
Alright, thank you.
There are no further questions at this time I would now like the clinical data we're back to Jim for closing remarks.
I'd like to thank everybody for joining us today and look forward to further updates.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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