Q4 2023 Telephone and Data Systems Inc Earnings Call

Operator: The Ultimate Parody Site! Good morning, and welcome to TDS and U.S. Cellular's 4th Quarter 2023 Operating Results Conference Call. All participants are in a listen-only mode.

Good morning, and welcome to Tds and U S cellular fourth quarter 2023 operating results conference call.

All participants are in a listen only mode. After.

Operator: After the speaker's presentation, we will conduct a question and answer session. To ask a question, you'll need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Colleen Thompson, Vice President of Corporate Relations. Thank you.

After the Speakers' presentation, we will conduct a question and answer session.

Ask a question you will need to press star followed by the number one on your telephone keypad.

As a reminder, this conference call is being recorded.

I would now like to turn the call over to Colleen Thompson Vice President of corporate relations. Thank you. Please go ahead.

Colleen Thompson: Good morning, and thank you for joining us. We want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find in the Investor Relations sections of the TDS and U.S. Cellular websites. With me today and offering prepared comments are from TDS, Vicki Villacrez, Executive Vice President and Chief Financial Officer; from U.S. Cellular, LT Thurvold, President and Chief Executive Officer; Doug Chambers, Executive Vice President, Chief Financial Officer, and Treasurer; and from TDS Telecom, Michelle Broek-Wicke, Senior Vice President of Finance and Chief Financial Officer. This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations websites.

Colleen Thompson: Good morning, and thank you for joining us we 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 sections of the Tds and U S cellular websites.

Colleen Thompson: With me today and offering prepared comments are from Tds, Vicki <unk> Executive Vice President and Chief Financial Officer from U S. Cellular LTE thorough vault, President and Chief Executive Officer, Doug Chambers, Executive Vice President and Chief Financial Officer, and Treasurer and from Tds Telecom, Michelle broke Lakey senior Vice President of Finance and Chief financial.

Colleen Thompson: Officer.

Colleen Thompson: This call is being simultaneously webcast on the Tds and U S cellular Investor Relations website. Please see the websites for slides referred to on this call, including non-GAAP reconciliations.

Colleen Thompson: Please see the websites for slides referred to on this call, including non-GAAP reconciliation. We provide guidance for both Adjusted Operating Income Before Depreciation and Amortization, or OIDA, and Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization, or EBITDA, to highlight the contributions of U.S. Cellular's wireless partnership. TDS and U.S. Cellular filed their SEC forms 8K, including the press releases, and our 10Ks earlier this morning.

Colleen Thompson: We provide guidance for both adjusted operating income before depreciation and amortization or OIBDA and adjusted earnings before interest taxes, depreciation and amortization or EBITDA to highlight the contributions of U S Cellular's wireless partnerships.

Colleen Thompson: Tds and U S cellular filed their SEC forms 8-K, including the press releases and our 10-K earlier this morning.

Colleen Thompson: As shown on slide two, the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risk and uncertainty. Please review the safe harbor paragraphs in our press releases and the extended version included in our SEC filing. And with that, I will now turn the call over to Vicki Villacrez.

Colleen Thompson: As shown on slide two the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward looking and subject to risks and uncertainties.

Colleen Thompson: Please review the Safe Harbor paragraphs in our press releases and the extended version included in our SEC filings.

And with that I will now turn the call over to Vicki Villa Chris Vickie. Okay. Thank you, calling hello, everyone. I Hope you are doing well. This morning, we'll take a quick look back at last year and also share with you our 2024 priorities and goals.

Vicki L. Villacrez: Okay. Thank you, Colleen. And, hello, everyone. I hope you are doing well.

Vicki L. Villacrez: This morning, we'll take a quick look back at last year and also share with you our 2024 priorities and goals. 2023 was a challenging year for the organization, yet the teams navigated it well, and we ended the year in a good place as we move into 2024. Before we get into the details, I want to reiterate that, as we announced on August 4th last year, we've embarked on a review of the strategic alternatives at U.S. Cellular. We are not going to comment on the process today except to say that it remains ongoing and that management of TDS and U.S. Cellular, along with both boards, are committed to a path that is in the best interest of the company and our shareholders. Given the nature of the process, we do not expect to have updates until it is concluded.

Speaker Change: 2023 was a challenging year for the organization you have the teams navigated it well and we ended the year in a good place as we move into 2024.

Speaker Change: Before we get into the details I want to reiterate that as we announced on August 4th last year, we've embarked on a review of the strategic alternatives at U S. Cellular we are not going to comment on the process today, except to say that it remains ongoing and that management of Tds and U S cellular along with both boards.

Speaker Change: We're committed to a path that is in the best interest of the company and our shareholders given the nature of the process. We do not expect to have updates until it is concluded.

Vicki L. Villacrez: Now let's talk about the business. In 2023, we will continue to make substantial investments in our businesses in order to improve our competitiveness while enhancing the customer experience. Over the last two years, TDS Telcom has invested heavily and increased its total footprint by 21%, setting it up for strong top and bottom line growth as evidenced by its guidance for 2024.

Now, let's talk about the business in 2023, we continue to make substantial investments in our businesses in order to improve our competitiveness, while enhancing the customer experience over the last two years Tds telecom invested heavily and increased its total footprints by 21% setting it up.

Speaker Change: For a strong top and bottom line growth as evidenced by telecom guidance for 2020 for U S. Cellular has made progress on its <unk> rollout and expect to continue investing in mid band deployment throughout 2024.

Vicki L. Villacrez: Sailor has made progress on its 5G rollout and expects to continue investing in mid-band deployment throughout 2024. U.S. Cellular also modestly delevered in 2023 and will continue to balance ongoing investments with the need to generate positive free cash flow. While reinvesting still remains a high priority, given the interest rate environment and the high cost of debt, we plan on slowing our CapEx investments for TDS Telecom in 2024, as you can see in our guidance. In spite of the high interest rate environment, TDS's weighted average cost of debt and preferred equity is 6.5%.

U S. Cellular also modestly de Levered in 2023, and will continue to balance ongoing investments with the need to generate positive free cash flow.

Speaker Change: While our reinvesting still remains a high priority given the interest rate environment and high cost of debt. We plan on slowing our capex investments for Tds Telecom in 2024 as you can see in our guidance.

Speaker Change: Despite the high interest rate environment, Tds's weighted average cost of debt and preferred equity is six 5%.

Vicki L. Villacrez: We believe that we have the right mix of both long-term maturities and shorter-term financing to help fund our investments while appropriately managing through the current interest rate environment. We ended the year maintaining access to liquidity, and we have a sizable amount of debt that isn't due for quite some time. I also want to note that in the fourth quarter, TDS-Telcom took a $547 million non-cash goodwill impairment charge in conjunction with our annual goodwill assessment. The charge was due to a combination of factors, primarily rising interest rates and competitive pressures in our ILAC legacy market. The non-cash charge eliminates all of the goodwill at TDS Telecom and does not impact reported adjusted EBITDA or adjusted OEBITDA.

Speaker Change: We believe that we have the right mix of both long term maturities and shorter term financings to help fund our investments while appropriately managing through the current interest rate environment.

Speaker Change: We ended the year, maintaining access to liquidity and we have a sizable amount of debt that isn't due for quite some time.

Speaker Change: I also want to note that in the fourth quarter Tds Telecom took a $547 million noncash goodwill impairment charge in conjunction with our annual goodwill assessment.

Speaker Change: This charge was due to a combination of factors, primarily rising interest rates and competitive pressures in our ILEC legacy markets.

Speaker Change: The noncash charge eliminates all of the goodwill at Tds Telecom and does not impact reported adjusted EBITDA or adjusted OIBDA.

Vicki L. Villacrez: From a consolidated enterprise perspective, I'm pleased that we are maintaining rigorous cost-disciplined programs focusing on both OPEX and CAPEX, which led to moderate full-year 2023 increases in adjusted EBITDA and reduced capital expenditures, while at the same time allocating our capital towards critical network investments. Before I turn the call over, as you probably saw earlier today, TDS announced its first quarter dividend, raising the rate modestly from 2023 as we balance the needs of our businesses and returns to our shareholders. I'd also like to take a moment to thank all of our associates for their exceptional hard work and dedication in these dynamic times. We are positioned well to execute against our priorities for 2024. And with that, I'll now turn the call over to L. Thank you, Vicki. Good morning, everybody.

Speaker Change: From a consolidated enterprise perspective, I am pleased that we are maintaining rigorous cost discipline programs, focusing on both opex and capex, which lead to moderate full year 2023 increases in adjusted EBITDA and reduced capital expenditures.

Speaker Change: And at the same time allocating our capital towards critical network investments.

Speaker Change: Before I turn the call over as you probably saw earlier today <unk> announced its first quarter dividend raising the rate modestly from 2023, as we balance the needs of our businesses and returns to our shareholders.

Speaker Change: I'd also like to take a moment to thank all of our associates for their exceptional hard work and dedication in these dynamic times, we are positioned well to execute against our priorities for 2024.

Speaker Change: And with that I'll now turn the call over to LTE.

LTE: Thank you Vicky and good morning, everybody. My remarks. This morning are going to primarily focus on our annual results highlighting the key achievements in 2023.

LT Thurvold: My remarks this morning are going to primarily focus on our annual results, highlighting the key achievements in 2023, but then I'll turn to our priorities for 2024. Doug will then cover the fourth quarter results in a little more detail, along with covering guidance. So let's start by reviewing the highlights on slide five.

LTE: But then I'll turn to our priorities for 2020 for Doug.

LTE: Doug will then cover the fourth quarter results in a little more detail along with covering guidance. So let's start by reviewing the highlights on slide five.

LT Thurvold: We've had a consistent message that we've reinforced in prior calls that our goal for 2023 was to properly balance subscriber objectives with financial goals. I think our results are a reflection of that deliberate approach. As we discussed throughout 2023, our challenge was driving subscriber growth and adding momentum in the context of an extremely competitive environment. We delivered on our operating cash flow and adjusted EBITDA guidance for the year. We were able to do so through solid growth in ARPU coupled with disciplined and efficient spending. For the full year, we delivered 2% growth in post-paid ARPU and a 3% increase in adjusted EBITDA. Last year was our first full year of offering flat-rate plans, and we ended the year with 17% of our post-paid handset customers on these plans, up from 5% around this time a year ago. And I'm really pleased with how they're performing.

LTE: We've had a consistent message that we've reinforced in prior calls that our goal for 2023 was to properly balance subscriber objectives with financial goals.

Doug Chambers: And I think our results are a reflection of that deliberate approach.

Doug Chambers: As we discussed throughout 2023, our challenge was driving subscriber gross add momentum in the context of an extremely competitive environment. We delivered on our operating cash flow and adjusted EBITDA guidance for the year, we were able to do so through solid growth in <unk>, coupled with disciplined and efficient spending for.

Doug Chambers: For the full year, we delivered 2% growth in postpaid <unk> and a 3% increase in adjusted EBITDA.

Doug Chambers: Last year was our first full year of offering flat rate plans and we ended the year with 17% of our postpaid handset customers on these plans.

Doug Chambers: Up from 5% around this time, a year ago, and I'm really pleased with how theyre performing many of our customers benefit from the options of this lower service plan pricing and exchange for lower promotional value and as a reminder, these plans generally provide the same economics to us as our traditional plans since we don't incur device expense.

LT Thurvold: Many of our customers benefit from the options of this lower service plan pricing in exchange for lower promotional value. And as a reminder, these plans generally provide the same economics to us as our traditional plans since we don't incur devices. Our average contract rate for 2023 was just north of 62%. That's up a point and a half from the prior year, and that helped us to moderate churn. For the full year, we modestly reduced both post-paid and pre-paid churn. That's a nice result given the aggressive competitive environment.

Doug Chambers: Our average in contract rates for 2023 was just north of 62% that's up a point and half from the prior year.

Doug Chambers: It helped us to moderate churn.

Doug Chambers: For the full year, we modestly reduced both postpaid and prepaid churn.

Doug Chambers: That's a nice result, given the aggressive competitive environment.

LT Thurvold: Turning to growth initiatives, our third-party tower revenues reached a milestone, crossing $100 million in revenue and growing 8% for the year. As I mentioned last quarter, as the wireless industry moderated capital expenditures last year, we experienced a slowdown in new tenant and amendment activity, and I expect that will impact tower revenue growth rates in 2024. That being said, we remain bullish on the long-term outlook for our tower business.

Doug Chambers: Turning to growth initiatives, our third party tower revenues reached a milestone crossing $100 million in revenues and growing 8% for the year.

Doug Chambers: As I mentioned last quarter as the wireless industry is moderated capital expenditures last year, we experienced a slowdown in new tenants and amendment activity and I expect that will impact tower revenue growth rates also in 2024.

That being said, we remain bullish on the long term outlook for our tower business, although the near term activity has slowed the long term capacity needs of the industry youre going to require future densification.

LT Thurvold: Although the near-term activity has slowed, the long-term capacity needs of the industry are going to require future densification, and that's going to drive demand for our towers. We have a unique portfolio of towers that are still below the industry average in terms of co-location, so we have a lot of opportunity to grow. We also have strong momentum in fixed wireless. We finished the year with 114,000 customers.

Doug Chambers: And that's going to drive demand for our towers.

Doug Chambers: Have a unique portfolio of towers that are still below the industry average in terms of co location. So we have a lot of opportunity to grow.

Doug Chambers: We also have strong momentum in fixed wireless we finished the year with 114000 customers that's up 46% from a year ago.

LT Thurvold: That's up 46% from a year ago. And as a reminder, the vast majority of that growth has been on low bands. Now that we're rolling out mid-band spectrum, we're going to be able to offer higher speeds and capacity where that spectrum is deployed. Synthix Wireless leverages the same network as our mobility product and the same investments.

Doug Chambers: Over the last two years, we've seen strong performance with this product.

Doug Chambers: As a reminder, the vast majority of that growth has been a low band spectrum.

Doug Chambers: Now that we're rolling out mid band spectrum, we're going to be able to offer higher speeds and capacity where that spectrum is deployed.

Doug Chambers: Since fixed wireless Leverages, the same network as our mobility product in the same investments. We believe this is a cost efficient means to grow revenue into grow cash flows.

LT Thurvold: We believe this is a cost-efficient means to grow revenue and to grow capital. As I mentioned, we delivered a 3% increase in adjusted EBITDA over the prior year, and we did so through very disciplined and efficient spending. In fact, for the full year, we reduced cash expenses across LOE, system operations, and SG&X.

Doug Chambers: As I mentioned, we delivered a 3% increase in adjusted EBITDA over the prior year and we did so through very disciplined and efficient spending.

Doug Chambers: In fact for the full year, we reduced cash expenses across low system operations and SG&A.

LT Thurvold: This is impressive given the usage on the network increased almost 30% in 2023. Speaking of the network, about 80% of our traffic is carried by sites that are modernized for low-band fiber. During 2023, we shifted our focus from 5G modernization to mid-band. And similar to our previous network deployments, this will be a multi-year buildup. By the end of 2024, we expect to cover 30% of our POPs with mid

Doug Chambers: It is impressive given the usage on the network increased almost 30% in 2023.

Doug Chambers: Speaking of the network of 80% of our traffic is carried by sites that are modernized for low band <unk>.

Doug Chambers: During 2023, we shifted our focus from <unk> modernization to mid band deployment.

Doug Chambers: And similar to our previous network deployments this will be a multiyear build out.

Doug Chambers: By the end of 2024, we expect to cover 30% of our Pops with mid band.

LT Thurvold: And we'll have almost half of our data traffic running on sites that are equipped with mid-band spectrum. We plan to be targeted with this rollout in order to reach the most customers with the best technology as efficiently as possible. Finally, on the network, we shut down our CDMA network in mid-January of this year.

And we will have almost half of our data traffic running on sites that are equipped with mid band spectrum.

Doug Chambers: We plan to be targeted about this rollout in order to reach the most customers with the best technology as efficiently as possible.

Doug Chambers: Finally on the network.

Doug Chambers: <unk> set our CDMA network in mid January of this year.

LT Thurvold: The team did a great job helping our customers migrate, and the vast majority of them are now on more advanced technologies to provide a better network. Turning to slide 6, in 2024, our operational priorities will remain consistent. Our top priority remains to balance subscriber growth with financial discipline. We delivered nice ARPU growth last year, and we expect to modestly grow it again in 2024. We feel like there's still room to bring customers up to higher-value plans and offerings. In terms of promotions, we expect to focus heavily on retention, anticipating pulsing aggressive upgrade promotions throughout the year to ensure we're taking care of our customers and that we're retaining them. For Fixed Wireless in 2024, we expect our momentum to continue.

Team did a great job in helping our customers migrate the vast majority of them are now on more advanced technologies that provide a better network experience.

Doug Chambers: Turning to.

Doug Chambers: Six and 2024, our operational priorities remain consistent our top priority remains to balance subscriber growth with financial discipline.

Doug Chambers: We delivered nice ARPA growth last year, we expect to modestly grow it again in 2024.

Doug Chambers: We feel like there's still room to bring customers up to higher value plans and offerings.

Doug Chambers: And in terms of promotions, we expect to focus heavily on retention offers.

We anticipate pulsing aggressive upgrade promotions throughout the year.

Doug Chambers: To ensure we are taking care of our customers and that we're retaining them.

Doug Chambers: For fixed wireless in 2024, we expect our momentum to continue with the addition of mid band spectrum, we can provide an even better experience for our customers.

LT Thurvold: With the addition of mid-band spectrum, we can provide an even better experience for our customers, enabling us to better compete against other carriers and cable wireless providers. As I mentioned, we also expect tower revenues to grow, but not at the level that we saw in early 2023, probably closer to a low to single-digit pace in the near future. We plan to keep working on our multi-year cost reduction program. We've had strong success at reducing costs throughout 2023, but we still see room for more efficiencies in the upcoming year. With all that in mind, we once again intend to be cash flow positive in 2024. Now, briefly, I'd like to spend just a moment updating you on efforts to help bridge the digital divide. 41% of the populations that U.S. cellular covers are in rural America.

Doug Chambers: Enabling us to better compete against other carriers and cable wireless providers.

Doug Chambers: As I mentioned, we also expect tower revenues to grow but not at the level that we saw in early 'twenty three.

Doug Chambers: Probably closer to a low to single mid single digit pace in the near term we.

Doug Chambers: We plan to keep working on our multi year cost reduction program you've.

Doug Chambers: We've had strong success in reducing costs throughout 2023, we still see room for more efficiencies in the upcoming year.

Doug Chambers: With all that in mind, we once again intend to be cash flow positive in 2024.

Doug Chambers: Yeah.

Speaker Change: Briefly I'd like to spend just a moment updating you on efforts to help bridge the digital divide.

Speaker Change: 41% of the population of the U S. Cellular covers are in rural America.

LT Thurvold: And as I've discussed in past calls, it's more expensive to cover rural America, and there's a more challenging network coverage environment to help pay for the investments needed. We would not have been able to bring high-quality connectivity to many of these hard-to-serve communities without the support of the universal service. In Washington, there are two programs being rolled out that can spur further deployment of 5G networks and enhanced economic opportunities in rural areas, but those programs need to be aligned, and they need to be sequenced carefully. The first program is the 5G Fund for Rural America, you know it as the 5G Fund, that has over $9 billion allocated to improve 5G connectivity across the country. The second is to be, That's $42.5 billion allocated to it to enhance broadband connectivity for homes and businesses across the country. These are big dollars, and we as a nation owe it to rural America to spend the dollars effectively and efficiently. And as such, we believe the prudent course is to allow all of the BEAD funding decisions to be made before 5G fund allocations take place. And there are two reasons.

Speaker Change: As I've discussed in past calls, it's more expensive to cover Rural America.

Speaker Change: Challenging network coverage environment, and Theres less customer density to help pay for the investments needed.

Speaker Change: We would not have been able to bring high quality connectivity to many of these hard to serve communities without the support of the Universal Service Fund.

Speaker Change: In Washington, Theres, two program is being rolled out in the can spur further deployment of <unk> networks.

Speaker Change: And enhance economic opportunities in rural areas, but those programs need to be aligned and they need to be sequenced carefully.

First program is the <unk> for funds for Rural America, you know it is the <unk>.

Speaker Change: Matt has over $9 billion allocated to improve <unk> connectivity across the country.

Speaker Change: And the second is the bead programs, that's $42 5 billion allocated to it.

Speaker Change: To enhance broadband connectivity for homes and businesses across the country.

Speaker Change: And these are big dollars and we as a nation owe it to rural America to spend the dollars effectively and efficiently.

Speaker Change: And as such we believe the prudent course is to allow all of the bead funding decisions to be made before five fund allocations take place and there's two reasons for that.

LT Thurvold: First, BEAD will fund fiber density in areas that lack 5G coverage today, and that will significantly reduce the cost of power. And second, Speed will fund some fixed wireless deployments that will, by default, bring 5G mobile connections to those areas after we have visibility into fiber and fixed wireless deployments funded by BEAD. The 5G Fund can then further expand 5G mobile connectivity into rural areas that aren't covered. Speaking of Bede, we are encouraged by the opportunity we've seen so far. Several states within our territory, including Missouri and Illinois and Nebraska, have included fixed wireless access in their plans for bead devices.

Speaker Change: First bead will fund fiber density in areas that lacks <unk> coverage today.

Speaker Change: Will significantly reduce the cost of tower deployment.

Speaker Change: Second speed will fund some fixed wireless deployments that will by default spring <unk> mobile connections to those areas.

Speaker Change: And after we have visibility into fiber and fixed wireless deployments funded by bead.

Speaker Change: <unk> G Fund can then further expand expand <unk> mobile connectivity into rural areas that arent covered by <unk>.

Speaker Change: And speaking of <unk>, we are encouraged with the opportunity we've seen so far in <unk>.

Speaker Change: States within our territory, including Missouri, and Illinois in Nebraska have included fixed wireless access and their plans for <unk> deployment.

LT Thurvold: As I said in the past, we have a compelling product that can meet the speed requirements and deliver a strong broadband experience to un- and under-connected geographies in a relatively short period of time. We see a lot of advantages in working with the states on this, and we're going to continue to do that. Finally, before I hand it off to Doug, let me just share a few thoughts on guidance.

Speaker Change: <unk> said in the past, we have a compelling product that can meet the bead speed requirements and deliver a strong broadband experience to earn an under connected geographies in a relatively short period of time and we see a lot of advantages working with the states on this and we're going to continue to do so.

Speaker Change: And finally before I hand, it off to Doug Let me just to share a few thoughts on guidance.

Doug Chambers: Our guidance assumes a continuation of an industry-wide, aggressive, competitive environment that includes aggressive competition from cable wireless players, coupled with a focus on cost reductions and efficient capital spend at U.S. Cellular. Our focus remains on maximizing return on capital while generating positive free cash flow. We'll be pulling the available levers to improve both of these measures. I want to thank the entire team for their hard work and ongoing commitment to serving our customers, and I'll now turn the call over to, Okay, thanks LT. Good morning everybody. Let's start with a review of our customer results on slide 7. For the quarter, postpaid HANSEC gross additions decreased by $25,000, and net additions correspondingly declined $33,000, largely due to the intense competitive environment as well as an increase in churn partially attributable to a decline in our in-contract rate.

Speaker Change: Our guidance assumes a continuation of an industry wide aggressive competitive environment that includes aggressive competition from cable wireless players.

Doug Chambers: And that's coupled with a focus on cost reductions and efficient capital spend at U S. Cellular.

Our focus remains on maximizing return on capital, while generating positive free cash flow will be pulling the available levers to improve both of these measures over time.

Doug Chambers: Want to thank the entire team for their hard work and ongoing commitment to serving our customers and I'll now turn the call over to Tom.

Tom: Okay. Thanks, <unk> good morning, everybody, let's start with a review of our customer results on slide seven for the quarter postpaid handset gross additions decreased by 25000 net additions correspondingly declined 33000, largely due to the intense competitive environment as well as in <unk>.

Tom: Increase in churn, partially attributable to a decline in our in contract right.

Tom: Connected device results were largely in line with the prior year and included a strong fixed wireless results that LTE previously mentioned.

Doug Chambers: Connected device results were largely in line with the prior year and included the strong fixed wireless results that LT previously mentioned. Moving to slide eight, prepaid gross additions declined 18,000, driven by the competitive environment, a lower pool of prepaid gross ads, which is partially due to the availability of lower-end postpaid offerings, and a reduced number of national retailers offering our full suite of prepaid products as we rationalize our prepaid distribution based on profitability. This decrease in gross additions was mitigated by an improvement in prepaid churn as we continue to enhance both pricing and digital engagement with our prepaid customers during 2023, and as a result, prepaid net additions decreased $11,000. Now, let's turn to the financial results, starting on slide 9. Service revenue declined 3% due to a decrease in our average retail subscriber base, partially mitigated by an increase in postpaid ARPU, which was largely driven by a decrease in promotional cost amortization.

Tom: Moving to slide eight prepaid gross additions declined 18000, driven by the competitive environment, a lower pool of prepaid gross adds which is partially due to the availability of lower end postpaid offerings and a reduced number of national retailers offering our full suite of prepaid products as we wrap.

Tom: Utilize our prepaid distribution based on profitability.

Tom: This decrease in gross additions was mitigated by an improvement in prepaid churn as we continue to enhance both pricing and digital engagement with our prepaid customers during 2023 and as a result prepaid net additions decreased 11000.

Tom: Now, let's turn to the financial results starting on slide nine.

Tom: Service revenue declined 3% due to a decrease in our average retail subscriber base, partially mitigated by an increase in postpaid <unk>, which was largely driven by a decrease in promotional cost amortization.

Tom: Power results are shown on slide 10.

Doug Chambers: Tower results are shown on slide 10. The business delivered a solid quarter with $25 million in third-party tower revenues, which represents 3% growth, and as LT mentioned, we are bullish on the long-term revenue opportunities of the tower business. On the next slide, as disclosed last quarter, our own power is well diversified from a geographic and revenue distribution standard. Next, let's turn to our quarterly operating performance, shown on slide 12. For this discussion, I will refer to adjusted operating income before depreciation and amortization as adjusted operating income.

The business delivered a solid quarter with $25 million of third party tower revenues, which represents 3% growth and as <unk> mentioned, we are bullish on the long term revenue opportunities of the tower business.

Tom: On the next slide as disclosed last quarter, our own towers are well diversified from a geographic and revenue distribution standpoint.

Tom: Next let's turn to our quarterly operating performance shown on slide 12.

For this discussion I will refer to adjusted operating income before depreciation and amortization as adjusted operating income.

Doug Chambers: As I mentioned, service revenues declined 3%, but this decline was more than offset by expense decreases which resulted in a 19% increase in adjusted operating income. Loss on equipment or equipment sales plus cost of equipment sold decreased 38% as a result of lower transaction volume and lower promotional cost per transaction, partially due to higher adoption of flat rate plans where customers are not eligible for higher levels of device discounts. Consistent with the industry, we saw a decline in upgrade rates, which contributed to lower equipment sales.

Tom: As I mentioned service revenues declined 3%. However, this decline was more than offset with expense decreases which resulted in a 19% increase in adjusted operating income.

Tom: Loss on equipment or equipment sales less cost of equipment sold decreased 38% as a result of lower transaction volume and lower promotional cost per transaction, partially due to higher adoption of flat rate plans, where customers are not eligible for higher levels of device discounts.

Tom: Consistent with the industry, we saw a decline in upgrade rates, which contributed to lower equipment sales.

Doug Chambers: Selling general and administrative expenses decreased 7 percent, driven by decreases in bad debts expense, the continued favorable impact from the reduction in workforce executed in the second quarter of 2023, lower selling-related expenses driven by decreased transaction volumes, and ongoing expense discipline across categories. Let's turn to our 2024 guidance on slide 14. Our 2024 guidance contemplates the impact of our subscriber-based decline in 2023, modest or approved growth, and a highly competitive and promotional environment as we continue to balance subscriber growth with financial discipline. We expect ranges of approximately $2.95 to $3.05 billion in service revenues. $750 to $850 million in adjusted operating income and $920 million to $1.02 billion in adjusted EBITDA.

Tom: Selling general and administrative expenses decreased 7% driven by decreases in bad debts expense to continued favorable impact from the reduction in workforce executed in the second quarter of 2023, lower selling related expenses driven by decreased transaction volumes and ongoing expense discipline across key.

Tom: Categories.

Tom: Let's turn to our 2024 guidance on slide 14.

Tom: Our 2020 guidance contemplates the impact of our subscriber base decline in 2023 modest <unk> growth in a highly competitive and promotional environment as we continue to balance subscriber growth with financial discipline.

Tom: We expect ranges of approximately $2 $95 billion to $3.05 billion in service revenues.

Tom: 752 $850 million in adjusted operating income and 920 million to 1.02 billion in adjusted EBITDA.

Tom: These ranges include the impact of shutting down our CDMA network from both a revenue and cost perspective in January 2024 at the time of the shutdown. We had approximately 18000 remaining CDMA connections and we are still working to provide these customers with new devices to access our network.

Doug Chambers: These ranges include the impact of shutting down our CDMA network from both a revenue and cost perspective in January 2024. At the time of the shutdown, we had approximately 18,000 remaining CDMA connections, and we are still working to provide these customers with new devices to access our network. This is down substantially from 174,000 CDMA customers at the beginning of 2023 and, as LT mentioned, reflects the great work by our marketing and sales teams to ensure our CDMA customers transition to new devices to be able to continue service upon the shutdown. These customers will not be reflected as defections or churn in our 2024 results. However, the subset of these customers that ultimately defect will have the impact of reducing 2024 service revenue.

Tom: This is down substantially from 174000 CDMA customers at the beginning of 2023 and as <unk> mentioned reflects the great work by our marketing and sales teams to ensure our CDMA customers transition to new devices to be able to continue service upon the shutdown.

Tom: These customers will not be reflected as defections or churn in our 2024 results. However, the subset of these customers that ultimately the fact, we will have the impact of reducing 2020 for service revenues.

Tom: In addition, shutting down our CDMA network is projected to result in approximately $40 million and run rate annual operating expense savings starting in 2025.

Tom: Further we expect the CDMA network shutdown to be accretive to 2024 adjusted operating income.

Tom: For capital expenditures, we expect to invest between $550 million to $650 million as we continue our mid band <unk> deployment, while prudently managing the level of this investment and the free cash flow of our business.

Doug Chambers: In addition, shutting down our CDMA network is projected to result in approximately $40 million in run rate annual operating expense savings starting in 2025. Further, we expect the CDMA network shutdown to be accretive to 2024 adjusted operating income. For capital expenditures, we expect to invest between $550 million and $650 million as we continue our mid-band 5G deployment while prudently managing the level of this investment and the free cash flow of our business. I will now turn the call over to Michelle Berkwicki. Thank you.

Tom: I'll now turn the call over to Michelle Berrey quickie shelf.

Michelle Berrey: Thank you, Doug and good morning, everyone.

I am pleased to report on Tds Telecom 2023 accomplishments on slide 15, we are successfully executing on our fiber growth strategy that began many years ago.

Michelle Berrey: We had strong momentum in 2023, which is positioning us well for 2024, we.

Speaker Change: We ended 2023 with all of our expansion communities initially launched in.

Speaker Change: In 2023, we exceeded our fiber address delivery goal by adding 217000, new marketable fiber service addresses that's up 24% from our initial 2023 target and it's quite an accomplishment for this team.

Michelle Broek-Wicke: Thank you, Doug, and good morning, everyone. I'm pleased to report on TDS Telecom's 2023 accomplishments on slide 15. We are successfully executing on our fiber growth strategy that began many years ago. We had strong momentum in 2023, which is positioning us well for 2024. We ended 2023 with all of our expansion communities initially launched.

Speaker Change: As we make progress on our fiber deployment, we also focus on growing broadband penetration for.

Speaker Change: For the year, we grew total broadband connections, 6% mainly from growth in our expansion markets.

Speaker Change: And finally to address the broadband needs of our most rural markets. We successfully secured enhanced ATM funding, which provides us with $90 million of annual regulatory revenue support for the next 15 years.

Michelle Broek-Wicke: In 2023, we exceeded our fiber address delivery goal by adding 217,000 new marketable fiber service addresses. That's up 24% from our initial 2023 target, and it's quite an accomplishment for this team. As we make progress on our fiber deployments, we also focus on growing broadband penetration. For the year, we grew total broadband connections by 6%, mainly from growth in our expansion market. And finally, to address the broadband needs of our most rural markets, we successfully secured enhanced ACAM funding, which provides us with $90 million of annual regulatory revenue support for the next 15 years. That's $1.3 billion in total, in exchange for delivering high-speed broadband to approximately 270,000 addresses.

Speaker Change: One $3 billion in total.

Speaker Change: In exchange for delivering high speed broadband to approximately 270000 addresses.

Speaker Change: Turning to slide 16, let me describe the vision, we have for Tds Telecom.

Speaker Change: We are transforming ourselves into a fiber broadband company.

Doing this through investments in all of our market types expansion cable and ILEC markets.

Speaker Change: First is our expansion fiber expansion program.

Speaker Change: Today, we have 370000 service addresses in our expansion markets.

Speaker Change: We are 100% fiber and we plan to continue growing our footprint in our expansion markets over the next several years.

Speaker Change: Next our cable markets, we have approximately 500000 cable service addresses which are already enabled with one gig speeds using DOCSIS three one and fiber.

Michelle Broek-Wicke: Turning to slide 16, let me describe the vision we have for TDS Telecom. We are transforming ourselves into a fiber broadband company. We're doing this through investments in all of our market types, expansion, cable, and ILF markets. First, our Fiber Expansion Program. Today, we have 370,000 service addresses in our expansion markets.

Speaker Change: 16% of our cable addresses our fiber today and going forward, we will add more fiber opportunistically in certain markets and a new greenfield areas.

Speaker Change: And finally in our incumbent wireline markets, which we also refer to this as our ILEC. We have just over 800000 service addresses today.

Michelle Broek-Wicke: They are 100% fiber, and we plan to continue growing our footprint in our expansion markets over the next several years. Next are our cable markets. We have approximately 500,000 cable service addresses, which are already enabled with 1GIG speeds using DOCSIS 3.1 and FIBER.

Speaker Change: 43% of those addresses are fibered up.

Speaker Change: We've been working to bring higher speeds to our ILEC for over a decade enhanced a cam will help us put even more fiber into our ILEC network in order to meet the required speeds of 100 Megabits per second down and 20 Megabits per second up.

Michelle Broek-Wicke: 16% of our cable addresses are fiber today, and going forward, we will add more fiber opportunistically in certain markets and in new greenfield areas. And finally, in our incumbent wireline markets, which we also refer to as our ILEC, we have just over 800,000 service addresses today. Forty-three percent of those addresses are fibered up. We've been working to bring higher speeds to our ILAC for over a decade, and enhanced ACAM will help us put even more fiber into our ILAC network in order to meet the required speeds of 100 megabits per second down and 20 megabits per second up. The EA-CAM builds are expected to take place over the next several years.

Speaker Change: Cam builds are expected to take place over the next several years.

Speaker Change: So as you can see we have plans for how we will serve customers in each of our market types.

Speaker Change: We have many investment opportunities ahead of us with our fiber expansion and EAA Cam builds that will require capital spending as we've consistently stated we will prioritize our projects and continue to pace and manage our spending on these investments to stay within prudent capital and leverage levels.

Speaker Change: Moving to slide 17, I'll review, our longer term goals that we've set at Tds Telecom, we have been making solid progress on these goals.

Speaker Change: First across our entire footprint, we're targeting approximately $1 2 million marketable fiber service addresses.

Michelle Broek-Wicke: So, as you can see, we have plans for how we will serve customers in each of our market types. We have many investment opportunities ahead of us with our fiber expansion and EA-CAM builds that will require capital spending. As we've consistently stated, we will prioritize our projects and continue to pace and manage our spending on these investments to stay within prudent capital and leverage levels. Moving to slide 17, I'll review our longer-term goals that we've set at TDF Telecom. We've been making solid progress on these goals. First, across our entire footprint, we're targeting approximately 1.2 million marketable fiber service addresses. We added 89,000 fiber addresses in the fourth quarter, which was our highest quarter to date. We ended the year with 799,000 total Fiber Service Addresses.

Speaker Change: We added 89000 fiber addresses in the fourth quarter, which is our highest quarter to date.

Speaker Change: We ended the year with 799000 total fiber service addresses.

Speaker Change: So we've accomplished two thirds of our goal already.

Speaker Change: We are targeting 60% of our total service addresses to be served by fiber. We ended 2023 with fiber to 47%.

Speaker Change: This reflects progress in growing fiber through our expansion markets as well as fiber ing up our incumbent markets.

Speaker Change: And finally, we are expecting to offer speeds of one gig or higher.

Speaker Change: <unk>, 80% of our footprint, we finished 2023 with 72% at gig speeds and Thats, a combination of our fiber and DOCSIS three one technologies.

Another important metric to measure the success of our fiber program as broadband penetration.

Michelle Broek-Wicke: So we've accomplished two-thirds of our goal already. We are targeting 60% of our total service addresses to be served by fiber. We ended 2023 with fiber to 47%. This reflects progress in growing fiber through our expansion markets, as well as fibering up our incumbent markets. And finally, we are expecting to offer speeds of 1 gigabit or higher to at least 80% of our footprint. We finished 2023 with 72% at gigabit speed. And that's a combination of our fiber and DOCSIS 3.1 technology. Another important metric to measure the success of our fiber program is broadband penetration.

The lower right graph shows our business case expectation for broadband penetration and our new expansion markets.

Speaker Change: We expect to achieve penetration rates of about 40% in a steady state, which is generally year four or five.

Speaker Change: We are meeting or exceeding our business case expectations at the same time that we're growing our footprint.

Speaker Change: On Slide 18, you can see that we grew our total service addresses 12% year over year.

Shown on the right side of the slide we are increasing take rates for higher broadband speeds with 76% of residential broadband customers choosing 100, megabits per second or greater.

Michelle Broek-Wicke: The lower right graph shows our business case expectation for broadband penetration in our new expansion market. We expect to achieve penetration rates of about 40% in a steady state, which is generally year four or five. We are meeting or exceeding our business case expectations at the same time that we're growing our footprint. On slide 18, you can see that we grew our total service addresses 12% year over year. As shown on the right side of the slide, we are increasing take rates for higher broadband speeds, with 76 percent of residential broadband customers choosing 100 megabits per second or greater, and 16 percent are choosing 1 gig or higher at the end of the quarter. Our broadband investments are producing positive results. As shown on slide 19, we had 7,200 residential broadband net ads in the quarter, which contributed to a 6% growth in residential broadband connections for the year.

16% are choosing one gig or higher at the end of the quarter.

Speaker Change: Our broadband investments are producing positive results.

Speaker Change: As shown on slide 19, we had 7200 residential broadband net adds in the quarter, which contributed to a 6% growth in residential broadband connections for the year.

Speaker Change: This was largely driven by increases in expansion markets.

Speaker Change: Net additions from our expansion in ILEC fiber markets more than offset the connection losses, and copper and cable markets.

Speaker Change: Average residential revenue per connection was up 5% in the quarter due to price increases and product mix, partially offset by increased promotional activity.

Speaker Change: As shown in the chart on the right. We grew residential revenue, 6% in the quarter with expansion market revenues increasing to $23 million.

Speaker Change: As expected our commercial revenues decreased 13% in the quarter as we continued to decommission our CLEC markets.

Michelle Broek-Wicke: This was largely driven by increases in expansion markets. Net additions from our expansion and IELEC fiber markets more than offset the connection losses in copper and cable markets. Average residential revenue per connection was up 5% in the quarter due to price increases and product mix partially offset by increased promotional activity. As shown in the chart on the right, we grew residential revenue 6% in the quarter, with expansion market revenues increasing to $23 million. As expected, our commercial revenues decreased 13% in the quarter as we continue to decommission our SELEC market.

Speaker Change: On slide 20, I will share some financial highlights.

Speaker Change: Total operating revenues increased 2% in the fourth quarter and 1% for the full year as residential revenues offset commercial and wholesale declines.

Almost 70% of our 2023 fiber service addresses were completed in the back half of the year as such we are just starting to ramp up penetration and revenues in those markets.

Michelle Broek-Wicke: On slide 20, I will share some financial highlights. Total operating revenues increased 2% in the fourth quarter and 1% for the full year, as residential revenues offset commercial and wholesale decline. Almost 70% of our 2023 Fiber Service Addresses were completed in the back half of the year. As such, we are just starting to ramp up penetration and revenues in those markets. Cash expenses decreased 4% in the quarter and increased 2% for the year.

Speaker Change: Cash expenses decreased 4% in the quarter and increased 2% for the year.

Speaker Change: Adjusted EBITDA grew 19% in the quarter and was down 2% for the year remember.

Speaker Change: Remember that cost to get a community initially launched are incurred upfront before revenue start to grow we are now starting to see more expansion market revenue growth along with very discipline disciplined cost management across our organization, which is resulting in an improved adjusted EBITDA this quarter.

Michelle Broek-Wicke: Adjusted EBITDA grew 19% in the quarter and was down 2% for the year. However, it is important to remember that costs to get a community initially launched are incurred up front before revenues start to grow. We are now starting to see more expansion market revenue growth, along with very disciplined cost management across our organization, which is resulting in an improved adjusted EBITDA this quarter. Full year capital expenditures of $577 million were up from the prior year due to increased investment in fiber deployment.

Speaker Change: Full year capital expenditures of $577 million were up from the prior year due to increased investment in fiber deployment.

Speaker Change: Had great momentum with our fiber builds in 2023, so we opportunistically chose to pull capital forward and get more service addresses than we originally planned.

Speaker Change: We also added more internal construction crews, which required upfront investment in 2023, but are expected to benefit build costs in future years.

Michelle Broek-Wicke: We had great momentum with our fiber bills in 2023, so we opportunistically chose to pull capital forward and get more service addresses than we originally planned. We also added more internal construction crews, which required upfront investment in 2023 but are expected to benefit build costs in future years. On slide 21, we've provided guidance for 2024. We are forecasting total telecom revenues of $1.07 to $1.1 billion. This reflects our goal of top-line growth driven by continued improvements in residential revenues, primarily from our expansion markets, offsetting pressures in our ILAC copper markets. Adjusted EBITDA is expected to be between $310 million and $340 million in 2024.

Speaker Change: On slide 21, we've provided guidance for 2020 for.

Speaker Change: We are forecasting total telecom revenues of 1.07 to $1 1 billion.

Speaker Change: This reflects our goal of top line growth driven by continued improvement in residential revenues, primarily from our expansion markets offsetting pressures in our ILEC copper markets.

Speaker Change: Adjusted EBITDA is expected to be between 310 and $340 million in 2024 as previously discussed we incurred upfront costs in 2022, and 2023 to get our new expansion markets launched as penetrations and revenues grow in those markets, we expect to see.

Speaker Change: Adjusted EBITDA increase.

Speaker Change: In 2024, we're planning to deliver about 125000 fiber service addresses we.

Speaker Change: We pulled forward some capex spend and addresses into 2023, so we will be slowing the pace of our build and our spending in 2024 again will the size and pace, our capital expenditures commensurate with our financial capacity.

Michelle Broek-Wicke: As previously discussed, we incurred upfront costs in 2022 and 2023 to get our new expansion markets launched. As penetrations and revenues grow in those markets, we expect to see adjusted EBITDA increase. In 2024, we're planning to deliver about 125,000 fiber service addresses. We pulled forward some CapEx spend and addresses into 2023, so we'll be slowing the pace of our builds and our spending in 2024. Again, we'll resize and pace our capital expenditures commensurate with our financial capacity. With that said, capital expenditures are expected to be between $310 and $340 million in 2024.

Speaker Change: With that said capital expenditures are expected to be between 310 and $340 million in 2024.

Speaker Change: And we believe we can deliver a meaningful number of fiber service addresses with lower capital spending in 2024 for the following reasons.

Speaker Change: First all of our expansion markets have been initially launched that means our upfront capital spending is behind us and we can leverage the foundational systems that we've put in place over the last several years.

Second we have also invested in our own internal construction crews to supplement building out fiber in certain areas.

Speaker Change: These crews provide us with both operational and financial flexibility.

Speaker Change: And finally, another reason capex is expected to be lower in 2024 is because we will be doing planning and engineering for our he can build a cam builds during 2024, we do not expect capital spend on these projects to ramp up until after this year.

Michelle Broek-Wicke: And we believe we can deliver a meaningful number of fiber service addresses with lower capital spending in 2024 for the following reasons. First, all of our expansion markets have already been initially launched. That means our upfront capital spending is behind us, and we can leverage the foundational systems that we've put in place over the last several years. Second, we have also invested in our own internal construction crews to supplement building out fiber in certain areas. These crews provide us with both operational and financial flexibility. And finally, another reason CapEx is expected to be lower in 2024 is because we will be doing planning and engineering for our EA-CAM builds during 2024. We do not expect capital spend on these projects to ramp up until after this year.

Speaker Change: Along with that we have pulled back on capital in our incumbent markets, knowing that <unk> investment will be coming soon.

Speaker Change: Although capital spending on new fiber builds is expected to be lower in 2024, we will not be slowing down our sales efforts, we will be very focused on ramping up broadband penetration and revenues across all of our deployed fiber addresses during 2024.

Speaker Change: Before turning over the call I want to once again. Thank the team we have an amazing group of associates, who navigated a dynamic and challenging year.

Speaker Change: The team has demonstrated time and again, they can execute and pivot as the business evolves. We ended the year with a lot of momentum and I look forward to what 2024 brings.

Michelle Broek-Wicke: Along with that, we have pulled back on capital in our incumbent markets, knowing that EA-CAM investment will be coming soon. However, although capital spending on new fiber builds is expected to be lower in 2024, we will not be slowing down our sales efforts. We will be very focused on ramping up broadband penetration and revenues across all of our deployed fiber addresses in 2024. Before turning over the call, I want to once again thank the team.

Speaker Change: I'll now turn the call back to Colleen.

Colleen Thompson: Okay. Just as a reminder, we will not be answering questions related to the strategic review of U S cellular today.

Colleen Thompson: Operator, we are ready for the first question.

Colleen Thompson: Thank you as a reminder to ask a question. Please press star followed by one on your telephone keypad.

Our first question comes from Ric Prentiss from Raymond James. Please go ahead. Your line is open.

Ric Prentiss: Thanks, Good morning, everybody.

Ric Prentiss: Good morning, Rick.

Ric Prentiss: Hey, a.

Ric Prentiss: Couple of questions first.

Michelle Broek-Wicke: We have an amazing group of associates who have navigated a dynamic and challenging year. The team has demonstrated time and again that they can execute and pivot as the business evolves. We ended the year with a lot of momentum, and I look forward to what 2024 brings.

Ric Prentiss: I think people were a little surprised that there was a shelf filing.

Ric Prentiss: At U S for I guess since it's the mix shelf that preferred maybe some depositary shares explain to us what's the purpose of that show up in that two other quick follow ups.

Speaker Change: Yes, Rick.

Colleen Thompson: Okay, just as a reminder, we will not be answering questions related to the Strategic Review of U.S. Cellular today. Operator, we are ready for the first question. Thank you.

Speaker Change: First off the shelf filing we made we've made a shelf filing actually both at Tds and U S. Cellular right now, we're giving ourselves flexibility to keep all our options open. This is really an.

Operator: As a reminder to ask a question, please press star followed by one on your telephone keypad. Our first question comes from Ric Prentiss from Raymond James. Please go ahead; your line is open. Thanks. Good morning, everybody. Good morning, Rick.

Rick: And administrative.

Rick: At this point and it's in conjunction with replenishing our shelves.

Rick: And specifically at U S. Cellular are shelf was set to expire in may and we're getting ahead of it with the 10-K filing.

Ric Prentiss: Hey, a couple questions. First, I think people are a little surprised that there's a shelf filing at USM for, I guess it says it's a mixed shelf debt, preferred, maybe some depository shares. Explain to us what the purpose of that shelf is. And I've got two other quick follow-ups.

Rick: So at this point, we don't really have any specific current intentions to use it now.

Rick: Okay.

Rick: Second question is LTE.

Rick: You talked and Doug you talked about churn and gross adds on the postpaid side.

LT Thurvold: First off, the shelf filing. We made a shelf filing actually both at TDS and at U.S. Cellular. Right now, we're giving ourselves flexibility to keep all our options open. This is really an administrative thing at this point, and it's in conjunction with replenishing our shelves. And specifically at U.S. Cellular, our shelf was set to expire in May, and we're getting ahead of it with the 10K filing. So at this point, we don't really have any specific current intentions to use it. The second question is, LT, you talked, and Doug, you talked about churn and gross ads on the post-paid side. Looking at slide 7, obviously, there had been a tick-up.

Rick: On slide seven obviously, there had been a tick up.

Rick: Even seasonally on the churn side. If you also mentioned youre going to focus in 'twenty four and retention how should we think about churn going into 'twenty four is because third and fourth quarter indicative of kind of what we think is happening in the competitive universe or youre going to really be attempting to get back to prior year levels.

Speaker Change: Yes. Good morning, So a few things with that one is when you look at the fourth quarter churn about half of that increase about five basis points was due to some involuntary churn that got pushed from Q3 to Q4 based on some systems issues, we had with our collections Q. So thats one time, that's not going to recur and as well as he mentioned during his remarks.

Speaker Change: We're very focused on retention in 2024 and invest in a lot of our promotional dollars in retaining our existing customers. So our expectation our goal in 2020 for us to bring churn down I will say.

LT Thurvold: Even seasonally, on the churn side, I think you also mentioned you're going to focus on 24 and retention. How should we think about churn going into 24? Is the third and fourth quarter indicative of kind of what we think is happening in the competitive universe, or are you going to really be attempting to get down back to prior year levels? Yeah, good morning, Rick.

Speaker Change: Early in 'twenty four we're seeing some good signs in the order to keep.

Speaker Change: Highly focused on postpaid handset churn in particular.

Speaker Change: Okay and.

Then.

Speaker Change: On the tower segment, obviously, some pressure there capex spending in the industry has kind of slowed down a little bit.

Doug Chambers: So a few things with that one is when you look at the fourth quarter churn, about half of that increase, about five basis points, was due to some involuntary churn that got pushed from Q3 to Q4, based on some systems issues we had with our collections queue. So that's one time that's not going to recur. And as Lelty mentioned during his remarks, we're very focused on retention in 2024 and investing a lot of our promotional dollars in retaining our existing customers. So our expectation, or you know, our goal in 2024 is to bring churn down. I will say, early in 24, we're seeing some good signs, and you should keep highly focused on postpaid handset churn in particular. Okay, and then... On the tower segment, obviously, there is some pressure there.

Speaker Change: I know in the past we've talked about.

Speaker Change: Why not put in place a tower segment reporting.

Speaker Change: Anchored contract between us and our wireless and U S. Cellular towers can you update us as far as thinking about why not put in place a contractual relationship between U S cellular towers and U S cellular wireless.

Speaker Change: Eric So I mean, just kind.

Eric: Kind of two questions. There I mean, the first is from a from a slowdown perspective this is industry wide.

Speaker Change: Not surprising.

Speaker Change: As we've as we've heard both while the other wireless carriers report.

Speaker Change: The pullback in Capex, there, primarily complete with their mid band rollout.

Speaker Change: So everybody's pulling back a bit from a spend perspective and not affect new tenancies and effects amendments and you've also seen that in all the other tower companies.

LT Thurvold: CapEx spending in the industry has kind of slowed down a little bit. I know in the past we've talked about why not put in place a tower segment reporting, and write an anchor contract between U.S. Cellular Wireless and U.S. Cellular Towers? Can you update us as far as thinking about why not put in place a contractual relationship between U.S. Cellular Towers and U.S. Cellular Wireless? Eric, so I mean the kind of two questions there.

Speaker Change: The earnings results and so we're not immune to that.

Speaker Change: Long term, we do remain really bullish on our towers, we have I believe strong MLA in place with all the wireless carriers.

Speaker Change: My sense is that I mean without knowing their strategy. My sense is dish is taking a breather.

Speaker Change: After hitting their last build out obligation, but they've got more to come.

Speaker Change: If I fast forward, what's going to drive.

Speaker Change: Further capacity expansion in the wireless industry.

LT Thurvold: I mean, the first is from a slowdown perspective, this is industry-wide, not surprising. You know, as we've, as we've heard, both, All the other wireless carriers report pullbacks and CapEx. They're primarily complete with their mid-band rollout, and so everybody's pulling back a bit from a spend perspective, and that affects new tenancies, it affects amendments.

There is no new spectrum on the horizon.

Speaker Change: Can talk about this and have done a different in a different topic.

Speaker Change: It doesn't even have spectrum authority right now and so there's just no new spectrum on the horizon. So the way to add capacity is going to be more radios or work hours and that means more long term growth of the tower segment and so we remain optimistic about it.

Speaker Change: Even though we did see a bit of a slowdown in 'twenty three and we expect that slowdown to increase in 'twenty four and as far as your question about the separate segment reporting we continue to evaluate it.

LT Thurvold: And you've also seen that in all the other tower companies' earnings results. And so we're not immune to that. Long term, we do remain really bullish on our towers. We have, I believe, strong MLAs in place with all the wireless carriers. My sense is that, without knowing their strategy, my sense is Dish is taking a breeder after hitting their last build out obligation, but they've got more to come. If I fast forward, what's going to drive further capacity expansion in the wireless industry? There's no new spectrum on the horizon.

Speaker Change: Frankly and to be transparent on this this is this is one of those things that once you do it you can't dial it back.

Speaker Change: And so we're trying to be deliberate and disciplined about what information, we provide and when and how we provide it we have heard you and others in terms of a desire to have more information on our towers and we provided that and so we've continued we continue to provide more detail.

Speaker Change: On that tower business separate segment reporting is not something that we're ready to pull the trigger on just yet but that may be something we do in the future.

Speaker Change: Great. Thanks, everyone stay well.

LT Thurvold: We can talk about this on a different topic. I mean, the FCC doesn't even have spectrum authority right now, and so there's no new spectrum on the horizon.

Speaker Change: Thanks, Rick Thanks, Greg next question. Our next question comes from Simon Flannery from Morgan Stanley. Please go ahead. Your line is open.

LT Thurvold: So the way to add capacity is going to be more radios or more towers. And that means more long-term growth for the tower segment. And so we remain optimistic about it, even though we did see a bit of a slowdown in 23, and we expect that slowdown to increase in 24. And as far as your question about separate segment reporting is concerned, we continue to evaluate it. You know, Frankly, and to be transparent about this, this is one of those things that once you do it, you can't dial it back.

Simon Flannery: Great. Thank you very much good morning to start off do you have any <unk>.

Simon Flannery: Sizing of any exposure to ACP across the businesses.

Simon Flannery: Good morning, Simon Yes reduced so we're under indexed in ACP, we have about 20000 ACP customers and so.

Simon Flannery: We just don't have a lot there our marketing teams are working on giving those customers a soft landing to the extent that ACP does go away, which is the current expectation.

LT Thurvold: And so we're trying to be deliberate and disciplined about what information we provide and when and how we provide it. We have heard from you and others in terms of a desire to have more information on our towers, and we have provided that. And so we continue to provide more detail on that tower business. However, separate segment reporting is not something that we're ready to pull the trigger on just yet, but that may be something we do. Great. Thanks, everyone. Stay well.

Simon Flannery: So.

Simon Flannery: Short answer is minimal exposure.

Speaker Change: Yes, Simon at the Tds Telecom side very similar story, we have about 19000 customers enrolled and ACP and we too are following the FTC's direction in terms of winding down that program. We're working with all of those customers in order to try to find the right broadband product for them there might be a little exposure there.

Ric Prentiss: Thanks Rick. Thanks Rick. Next question. Our next question comes from Simon Flannery from Morgan Stanley. Please go ahead, your line is open. Great, thank you very much. Good morning. To start off, do you have any sizing of any exposure to ACP across the businesses? Good morning, Simon.

Speaker Change: To customers, who may not land with us, but we actually also see this as an opportunity there as ACP customers of other companies that might be looking for a new provider and we'd be happy to serve them and we've got efforts in place to try to attract those customers. So impacts would be minimal and anything is included in our guidance.

Simon Flannery: Yes, we do. So, we're under-indexed in ACP. We have about 20,000 ACP customers. And so, you know, we just don't have a lot there.

Speaker Change: That's very helpful and then on the wireless affiliates.

LT Thurvold: Our marketing teams are working on giving those customers a soft landing to the extent that ACP does go away, which is the current expectation. And so, you know, the short answer is minimal exposure. Yeah, and Simon, on the TDS Telecom side, a very similar story. We have about 19,000 customers enrolled in ACP, and we, too, are following the FCC's direction in terms of winding down that program. We're working with all of those customers in order to try to find the right broadband product for them. There might be a little exposure there to customers who may not end up with us, but we actually also see this as an opportunity. There are ACP customers of other companies that might be looking for a new provider, and we'd be happy to serve them, and we've got efforts in place to try to attract those customers. So the impact would be minimal, and anything is included in our guidance. Great, that's very helpful. And then on the wireless affiliates, just looking at the guidance, it seems like the expectation is for a fairly similar contribution to EBITDA in 24 versus 23. Is that right?

Speaker Change: Just looking at the guidance it seems like the expectation is for fairly similar contribution to EBITDA and 24 versus 23 is that right.

Any comments on the trends there or any growth.

Speaker Change: Growth expectations on that.

Speaker Change: Yes, Youre exactly right Simon we're expecting that to be relatively flat in 'twenty four relative to what you saw in 2003, So no significant changes there and obviously, we don't we don't directly control those entities or the distributions, but our expectation is pretty flat.

Speaker Change: Great and then just the last one on the beads timing I know LTE you talked about the program on the <unk> and.

Speaker Change: And working with your states.

Speaker Change: I know, we're going through sort of challenged processes and so forth, but what's your latest view on when we'll actually see.

Speaker Change: Actual awards take place on when we'll know more about the <unk> role and so forth.

Speaker Change: Yes.

Speaker Change: So that I think dollars Simon will probably start to flow late this year.

Doug Chambers: And any comments on the trends there or any growth expectations on that? Yeah, you're exactly right, Simon, we're expecting that to be relatively flat in 24, relative to what you saw in 23. So no significant changes there. And obviously, we don't, you know, we don't directly control those entities or the distributions, but our expectation is pretty flat. Great. And then there's the last one on bead timing.

Speaker Change: I think the majority of dollars, we're probably start coming in in 2025.

Speaker Change: I also expect to have a bit of.

Speaker Change: Call It a sequenced.

Speaker Change: Or you could call it <unk>.

Speaker Change: Two on funding plans.

Speaker Change: My expectation is that.

Speaker Change: States will first come out with quite aggressive plans in terms of expectations of fiber build out expectations of low cost pricing plans.

LT Thurvold: I know, LT, you talked about the program and 5G. In working with your states, I know we're going through sort of challenge processes and so forth, but what's your latest view on when we'll actually see actual awards take place and when we'll know more about the FWA role and so forth? I think dollars, Simon, will probably start to flow late this year.

Speaker Change: Expectations of a whole bunch of other let's call it overhead associated with those plans.

Speaker Change: It'll be interesting to see how much uptake they get right is this round one a bead going to be.

LT Thurvold: I think the majority of dollars will probably start coming in in 2025. I also expect to have a bit of a, call it a, sequence, or you could call it a, you know, take two on funding plans. My expectation is that... States will first come out with quite aggressive plans in terms of expectations of fiber being bailed out, expectations of low-cost pricing plans, expectations of a whole bunch of other, let's call it overhead, associated with those plans. It'll be interesting to see how much uptake they get, right? Is this, is round one of bead going to be a tremendous success, or is round one of beading going to be art off all over again? I think that's a question that still needs to be answered.

Speaker Change: Tremendous success or as round, one a beta going to be art off all over again.

Speaker Change: I think that's a question that still needs to be answered based on our conversations I still feel quite optimistic about the long term role of fixed wireless that.

Speaker Change: We can play, particularly far more rural states.

Speaker Change: Clear to me if that will be kind of part of the first round.

Speaker Change: With some of the states that we're talking about or if it's going to be later, but I wouldn't expect meaningful dollars to flow until next year.

Speaker Change: Great. Thanks, a lot.

Okay next question.

Speaker Change: Our next question comes from Michael Rollins from Citi. Please go ahead. Your line is open.

Thanks, and good morning, just following up on on the bead topic. When you look at U S cellular.

LT Thurvold: Based on our conversations, I still feel quite optimistic about the long-term role of fixed wireless that we can play, particularly for our more rural states. It's unclear to me if that will be kind of part of the first round with some of the states that we're talking about, or if it's going to be later, but I wouldn't expect meaningful dollars to flow until next year. Great. Thanks a lot.

Michael I. Rollins: As well as CBS can.

Michael I. Rollins: Can you frame the type of financial capacity you have to go after big opportunities and.

Michael I. Rollins: If there are significant.

Michael I. Rollins: Wins.

Michael I. Rollins: Does that influence capital allocation for each side.

Speaker Change: Thank you.

Speaker Change: Yeah, Hey, Mike you want me to take that first for Tds Sure go ahead Joe.

Simon Flannery: Okay, next question. Our next question comes from Michael Rollins from Citi. Please go ahead, your line is open. Thanks, and good morning.

Joe: Yes, So hi, Mike.

Joe: For Tds Telecom.

An important distinction here so they're the two federal broadband programs. The first one is the enhanced ATM program and the second one is speed.

Michael I. Rollins: Just following up on the bead topic, when you look at U.S. cellular, as well as TDS, can you frame the type of financial capacity you have to go after beat opportunities? And if there are significant... wins, how does that influence capital allocation for each side or both? Thank you. Do you want me to take that first for TDS? Sure, go ahead, Michelle.

Joe: And it's our understanding that if addresses are under the enhanced ATM program, which we opted into in almost all of our states. Those addresses also cannot be funded by bead, which makes sense that you won't have to federal programs funding. The same addresses so because we've opted to be a large participant in the EAA.

Michelle Broek-Wicke: Yeah, so hi Mike. For TDS Telecom, there's an important distinction here. So there are two federal broadband programs. The first one is the Enhanced ACAM program, and the second one is BEAD.

Joe: Cam program at Tds Telecom, we actually don't plan to be a bead participant so.

Joe: So for capital allocation our.

Joe: Our competing priorities, our fiber expansion program and the enhanced a cam program and B does not enter into that equation in any significant way.

Michelle Broek-Wicke: And it's our understanding that if addresses are under the enhanced ACAM program, which we opted into in almost all of our states, those addresses also cannot be funded by BEAD, which makes sense that you wouldn't have two federal programs funding the same addresses. So because we've opted to be a large participant in the EA CAM program, at TDS Telecom, we actually don't plan to be a BEAD participant. So for capital allocation, our, Our competing priorities are our Fiber Expansion Program and the Enhanced ACAM Program, and bead does not enter into that equation in any significant way. So let me tackle it from a from a fixed wireless perspective, Mike. So first.

Speaker Change: So let me tackle it from a from a fixed wireless perspective, Mike So first.

Speaker Change: The first place I would point to is where there are going to be bead opportunities that can be served within the radius of our current tower built.

Speaker Change: Where we can do that it's a pretty simple equation.

Speaker Change: Utilize.

Speaker Change: Existing mobile capacity.

Speaker Change: We've leveraged at that capacity towards serving our fixed wireless need and if we can do that with the support of <unk>, all the better and so for those homes and businesses. We think we have a really compelling return on capital equation.

LT Thurvold: The first place I would point to is where there are going to be bead opportunities that can be served within the radius of our current tower. Where we can do that, it's a pretty simple equation. We utilize... Assisting Mobile Capacitors.

Comes along with that what percentage of those are going to be I have no clue.

Speaker Change: Alright, we kind of have to wait and see what the what the states come out with.

Speaker Change: There is a second.

Speaker Change: Second set of homes, obviously that are that are not currently reached by either fiber or buy.

LT Thurvold: We've leveraged that capacity towards serving a fixed wireless need, and if we can do that with the support of B-dollars, all the better. And so for those homes and businesses, we think we have a really compelling return on capital equation that comes along with that. But what percentage of those are going to be, I have no clue. We kind of have to wait and see what the states come out with.

Speaker Change: A sufficient sufficiently strong enough mobile signal.

Speaker Change: We can deliver a compelling fixed wireless product and for that you need to put a new tailwind.

Speaker Change: The reason that we've advocated for b.

Speaker Change: And the reason.

I'll go back to our sequencing.

Speaker Change: That I made earlier.

Speaker Change: I expect the bead will create a significantly denser fiber grid completely irrespective of fixed wireless.

LT Thurvold: There are a second set of homes, obviously, that are not currently reached by either fiber or by a sufficiently strong enough mobile signal that we could deliver a compelling fixed wireless product. And for that, you need to put a new tower in. The reason that we've advocated for the bead is, and the reason I'll go back to our sequence, point that I made earlier. I expect the bead will create a significantly denser fiber grid, completely irrespective of fixed wire.

Speaker Change: That will bring our overall cost down to serve.

Speaker Change: And if I can I've mentioned this number before but our cost to put a tower in rural America is between 652 1 million $652 million.

Speaker Change: If would be dollars I can bring that down to 100 or 200 K.

Speaker Change: And that could create a pretty compelling investment opportunities.

Speaker Change: Ill.

Speaker Change: I'll point she though.

Speaker Change: I'll point she though.

LT Thurvold: So that will bring our overall cost down to serve. And if I can, you know, I've mentioned this number before, but our cost to put a tower in rural America is between $650,000 and $1,000,000. If, with B dollars, I can bring that down to $100K or $200K, then that could create a pretty compelling investment opportunity. I'll point you out, though, from an overall high-level guidance, I'll point you to the priority that I finished our conversation with about 2024, which is that we're laser focused on return on capital. And so if there are opportunities in 24 or in 25 that help us expand return on capital, meaning we can have a really efficient use of our internal capital spend, and we can drive attractive returns on it, we'll participate. But if it's not a good use of capital, we won't, and I've also made that really clear to both the state and to NTIA.

From an overall high level guidance I'll point, you to the priority that I finished our conversation with about 2024, which is we're laser focused on return on capital.

Speaker Change: And so if there are bead opportunities in 24 or 25 that help us expand return on capital, meaning we can have really efficient use of our internal capital spend and.

Speaker Change: And we can drive attractive returns on it we will participate.

Speaker Change: If it's not a good use of capital we want and I have also made that really clear to both to states.

Speaker Change: Into NTIA. These programs have to be structured in a way that it's a positive return on capital equation not just for U S. Cellular for anyone that's got to participate in so if we were to expand our capital spend in the future because of <unk>. It would be because we see returns that are over and above the current.

LT Thurvold: These programs have to be structured in a way that it's a positive return on capital equation, not just for U.S. Cellular, but for anyone that's going to participate. And so if we were to expand our capital spend in the future because of BEAD, it would be because we see returns that are over and above the current ones that we would expect as part of our, Thanks. And just one more for you, LT.

Speaker Change: So we would expect as part of our long term plans.

Speaker Change: Thanks, and just one other for you LTE going back to slide seven I'm, just looking at the trajectory.

Speaker Change: Postpaid.

Speaker Change: Handset gross adds and I'm wondering if you can unpack a bit more of what's happening on the gross head Brian for U S cellular.

Michael I. Rollins: Going back to slide 7, I'm just looking at the trajectory of postpaid handset gross ads. And I'm wondering if you can unpack a bit more of what's happening on the gross ad front for U.S. cellular, and are there opportunities to start to bend the curve on this and get greater output on that front? Thanks. Yeah, the, I mean, it's the thing that has driven the slowdown in gross ads. It's a pretty simple equation,

Speaker Change: And are there opportunities to start to bend the curve on this and.

Speaker Change: Get greater output on that front.

Speaker Change: Yes.

Speaker Change: I mean, the thing that has driven the slowdown in growth as it's a pretty simple equation and it's been the expansion and the rise of the cable wireless players.

LT Thurvold: And it's been the expansion and the rise of the cable wireless player. If I rewind three years, they had a share of essentially zero in our marketplace, are in the markets where we operate across our footprint. Even though we see cable competing by now in about two-thirds of our footprint, they're still not everywhere, and their market share is still only in the three to 4% range. But their share of gross ads is about 50. And so how are they able to do this? Well, it's, it's, it's really twofold.

Speaker Change: If I rewind three years, they had a share of essentially zero in our marketplace.

Speaker Change: We are in the markets, where we operate across our footprint.

Speaker Change: Even though we see table competing by now and about two thirds of our footprint there is still not everywhere.

Speaker Change: And their market share is still only in the 3% to 4% but.

Speaker Change: But their share of gross adds it's about 15%.

Speaker Change: So how are they able to do this well it's really twofold. The first is they.

LT Thurvold: The first is that they offload, almost 90%, depending on which statistics you look at, let's call it 90% of their traffic is offloaded to Wi-Fi. For us, that number is about 80. 80% of the usage of our devices is done on Wi-Fi versus 20% on cellular, and that doesn't sound like a big difference until you think about it from a usage perspective on cellular. And then you say, okay, well, 10% of a cable device user is on cellular, and they have to turn around and pay for that from a wholesale rate perspective. Whereas 20% of our usage is on cellular, so it's double the usage on the cellular network. And so their overall network economics are quite attractive.

Speaker Change: Offload almost 90% depending on on.

Speaker Change: Which which statistics you look at let's call it 90% of their traffic is offloaded to Wi Fi.

Speaker Change: For us that number is about 80% to.

Speaker Change: 80% of the usage of our devices has done on Wi Fi versus 20% is on cellular and that doesn't sound like a big difference until you think about it from a usage on cellular perspective, and then you say, okay, well, 10% of our cable device users is on cellular and they have to turn around and pay for that from a wholesale rate perspective.

Speaker Change: Or is 20% of our usage is on cellular so to double the usage on the cellular network.

Speaker Change: So their overall network economics are quite attractive.

LT Thurvold: And you couple that with their ability to essentially cross-subsidize their plans with profits from their wire line business, different people can agree whether or not it's a profitable business for the cable wireless players or not. But these are smart people, and they're driven by economics, and so they wouldn't be in the business if they didn't find a way to make money.

Speaker Change: Couple that with their ability to essentially cross subsidize their plans.

Speaker Change: With profits from their wireline business.

Speaker Change: Different people can agree whether or not.

Speaker Change: A trough with a wireless is a profitable business for the cable wireless players or not but.

Speaker Change: These are smart people and they are driven by economics, and so they wouldn't be in the business. So they didn't find a way to make money and I think they are either making money on wireless even with the price competition youre, putting in place or at the very least a breaking even and they're seeing the benefit on churn and so.

LT Thurvold: And I think they're either making money on wireless, even with the price competition they're putting in place, or at the very least, they're breaking even, and they're seeing the benefit of churn. And so, the combination of better offload economics coupled with being able to cross-subsidize with their wireless plans makes a difference. And you know, we've got Spectrum in our markets offering a $29 plan for a month, with one line free. So you're talking 15 bucks a month, unlimited on the Verizon network.

Speaker Change: The combination of better off load economics, coupled with being able to cross subsidize with their wireless plans. It makes a difference.

Speaker Change: We've got spectrum in our markets.

Speaker Change: Offering at $29 plan for the month.

Is one line free so you are talking 15 Bucks a month unlimited on the Verizon network.

LT Thurvold: That's significant price pressure that's been put in place over time. And that's affected us, affected everybody in the industry. I mean, that is the major driver of change that has occurred. And so how do you deal with that?

Speaker Change: That's significant price pressure that's been put in place over time.

And thats affected us, especially to everybody in the industry. I mean that is the that is the major driver of change that has occurred.

LT Thurvold: Well, I mean, the first thing is, and we talked about this earlier in the call, we're really investing in retaining our customers. We invest in trying to provide a great customer experience. We've invested significantly in our digital platform that's there to ensure that customers have a smooth and seamless experience. We've put aggressive promotions in place. We went through the holidays with our existing famous new pricing, and you can expect us to pulse that in and out throughout the year.

Speaker Change: So how do you deal with it well I mean the <unk>.

Speaker Change: First is and we've talked about this earlier in the call, we're really investing in retaining our customers.

Speaker Change: Invest in trying to provide a great customer experience, we've invested significantly in our digital platform.

Speaker Change: It's there to ensure that customers have a smooth and seamless experience.

Speaker Change: We've put aggressive promotions in place.

Speaker Change: We went through the holidays with existing team has new pricing and you can expect us to pull set in and out throughout the year and so step one will be to really continue to invest in customer retention.

LT Thurvold: And so step one will be to really continue to invest in customer retention. And the second step, and this is a big one for us, is we need to enhance our network. We talked about rolling out mid-band.

Speaker Change: The second step and this is a big one for US is to continue to enhance our network experience.

Speaker Change: Talked about rolling out mid band.

LT Thurvold: Everywhere will be modernized for 5G. We see better customer results and higher customer perception of our network. Everywhere we roll out mid-band, we see the same thing.

Speaker Change: Everywhere will be modernized for five G. We see better customer results in higher customer perception of our network.

Speaker Change: Everywhere, where we rollout midband, we see the same thing and so we pivoted our capital spending we.

LT Thurvold: And so we've shifted our capital spending. We haven't, by and large, completed it, but we've slowed the rest of our 5G modernization. By now, you've already got 80% of our traffic being carried on 5G modernized sites. So we've pivoted the capital spend towards mid-band. And that mid-band investment will create a better customer experience, and we think it will compete well in the marketplace. And it will combine a good network experience with an attractive price point. It's always been network and price that operate in our industry, and we expect that to continue. But that's the fundamental change, Mike, in the industry over the last couple of years has been the rise of cable wireless. I don't see that changing in the near term.

Speaker Change: By and large we haven't completed it but we've slowed the rest of our <unk> modernization by now you've already got 80% of our traffic being carried on <unk> modernized sites. So we've pivoted the capital spend towards mid band mid band investment will create a better customer experience.

Speaker Change: And we think it will compete well in the marketplace and the combination of good network experience with an attractive price point, it's always been network and price that operates in our industry, we expect that to continue.

But that's that's the fundamental change Mike in the industry has been over the last couple of years has been the rise of cable wireless.

Speaker Change: I don't see that changing in the near term.

Speaker Change: I continue to think that we offer a really attractive alternatives of a great network and an attractive price, we're going to keep doing that we're going to keep competing.

Michael I. Rollins: I continue to think that we offer a really attractive alternative of a great network and an attractive price. We're going to keep doing that. We're going to keep competing. But that's what's driven the challenges in gross ads, and that's what we're doing to address them. Thanks, and one other quick one.

Speaker Change: But that's what's that's what's driven the challenges in gross adds and that's what we're doing to address it in the future.

Speaker Change: Thanks, and one other quick one you mentioned the overlap with cable in terms of the.

Speaker Change: Competitive nature against the wireless footprint that you have what's the overlap competitively with the big three wireless national providers.

LT Thurvold: You mentioned the overlap with cable in terms of the competitive nature against the wireless footprint that you have. What's the overlap competitively with the big three wireless national providers? So we see them in, you mean the 60% or so odd number that I quoted in terms of the percentage of our markets where we compete against them, and you're asking what that number would be for AT&T, Verizon, and T-Mobile? Yeah, for each of them, you know, what's the percent overlap against each of those three national wireless players? Yeah, it's substantially all. It's greater than 90% for all the big three. Thanks, that's very helpful.

So we see them in the.

Speaker Change: 60% some odd that I quoted in terms of the percentage of our markets, where we compete against them and you are asking what the comp what the what that number would be for AT&T Verizon T mobile, yes for each of them whats the percent overlap against each of those three national wireless players.

Speaker Change: Yes, it's substantially all its greater than 90% for all of the big three.

Speaker Change: Thanks Thats helpful.

Speaker Change: Thanks for taking my questions.

Speaker Change: Absolutely have a good day.

Speaker Change: Our last question will come from Sergey <unk> from Gamco investors. Please go ahead. Your line is open.

Sergey: Good morning, guys good morning, Chris.

Michael I. Rollins: Thanks for taking my questions. Absolutely. Our last question will come from Sergey Dluzhevskiy from Gamco Investors. Please go ahead, your line is open.

Sergey: Morning.

Sergey: My first question is for LTE on fixed wireless so this seaborne being deployed.

Sergey Dluzhevskiy: Good morning, guys. Thank you for taking the questions. Good morning, Sergey. Good morning.

Sergey: And in general need them back.

Sergey: North Korea.

Sergey: How does that impact your approach to fixed wireless over medium term and also what is the addressable market.

LT Thurvold: My first question is about LT on fixed wireless. So, this C-band being deployed and, in general, mid-band being deployed for you, how does that impact your approach to fixed wireless over the medium term? And also, what is the addressable market that you see for fixed wireless now so that you have all your spectrum that you can deploy over the next few years? And also, how do you think about the capacity needs for fixed wireless over the next few years? Thanks, Sergey.

Sergey: Fixed wireless now that you have all your spectrum.

Sergey: Does it become clear over the next few years and also how do we think about the capacity needs for fixed wireless or thanks to you.

Speaker Change: Yeah. Thanks, Greg.

Speaker Change: So let me start with the overall market opportunity I referenced this number in the past it hasnt changed we see the overall opportunity for this business at around 400000 subscribers.

LT Thurvold: So let me start with the overall market opportunity. I've referenced this number in the past, and it hasn't changed. We see the overall opportunity for this business at around 400,000 subscribers. That's a combination of two factors.

Speaker Change: That's a combination of two factors.

Speaker Change: It's a combination of.

Speaker Change: The market dynamics.

LT Thurvold: The Market Dynamics, where we believe this product is competitive, versus the network dynamics of, I mean, this is a product that rides on top of the investments that have been made in mobility. I've been transparent about this in the past. This is not a product that pays for itself, right?

Speaker Change: We believe this product is competitive.

Speaker Change: Versus the network dynamics.

Speaker Change: I mean this is a product that rides on top of the investments that have been made in mobility.

Speaker Change: <unk> been transparent about this in the past this is not a product that pays for itself right. It doesn't pay for all the capital requirements that are needed to put new radios and new towers in place and so you put capacity in place for the mobile subscriber and then you pivot that capacity, where you have an available and you serve the needs of fixed wireless and so you put those two things together we see.

LT Thurvold: It doesn't pay for all the capital requirements that are needed to put new radios and new towers in place. And so you put capacity in place for the mobile subscriber, and then you pivot that capacity where you have it available, and you serve the needs of fixed wireless. And so when you put those two things together, we see a market opportunity of about 400,000. Usually, you would see growth rates starting to slow. As you reach the kind of customer scale that we've reached, so when you first roll out a product, you know, the first 5,000, the first 10,000 customers, you see fantastic growth, right? But then as you start hitting scale, the numbers become more challenging.

Speaker Change: A market opportunity of about 400000.

Speaker Change: But usually.

Speaker Change: You would see growth rates starting to slow.

Speaker Change: As you reach the kind of customer scale that we have reached so and when you first rollout of product.

Speaker Change: First 5000, the first 10000 customers you see fantastic growth right, but then as you start hitting scale the numbers become more challenging.

Speaker Change: Impact of mid band for US is all of a sudden we can offer a drastically faster product that competes.

LT Thurvold: The real impact of MidBand for us is that, all of a sudden, we can offer a drastically faster product that competes, not just in rural areas, not just in underserved areas, and not just where the competitor is DSL or satellite or nothing. We can offer 300 meg on a mid-band enabled product. And so that competes extremely well against cable. And so we expect that mid-band product to be the key driver of growth going into 2024 and into 2025, and it opens up new geographies for us. As I mentioned, we should have 30% of our towers carrying almost 50% of our traffic fired up with mid-band by the end of the year. And we'll be doing that on a steady cadence.

Speaker Change: Not just in rural areas not just in an underserved and not just where the competitor is DSL or satellite or nothing.

Speaker Change: We can offer 300 Meg.

Speaker Change: On a mid band enabled product into.

Speaker Change: So that competes extremely well against cable.

Speaker Change: And so we expect that mid band product to be the key driver of growth going into 2024 and in 2025.

Speaker Change: And it opens up new geographies for us.

Speaker Change: As I mentioned, we should have 30% of our towers carrying almost 50% of our traffic fired up with mid band by the end of the year, we'll be doing that on a steady cadence and every time, we upgrade the product will be upgraded tower with mid band that shows up in for our stores as a opportunity to sell an enhanced broadband product to our fixed.

LT Thurvold: And every time we upgrade a product, we upgrade a tower with mid-band, that shows up in our stores as an opportunity to sell an enhanced broadband product to our fixed wireless customers. And so the net impact of it all is that, you know, we expect that attractive growth that we've seen in fixed wireless to continue, notwithstanding, the fact that that business continues to scale to larger and larger numbers. So hopefully, that gives you a sense about how we're thinking about it and about the impact of fixed wireless. I mean, excuse me, of mid. Yes, thank you. And my second question is for Doug.

Speaker Change: Wireless customers and so the net impact of it all is that we expect that that attractive growth that we've seen in fixed wireless to continue notwithstanding the fact that that business continues to scale.

Speaker Change: To larger and larger numbers. So far that gives you a sense about how we're thinking about it the impact of fixed wire I mean excuse me.

Speaker Change: Mid band.

Speaker Change: Yes. Thank you.

Speaker Change: My second question is for Doug.

Speaker Change: Yes.

Doug Chambers: You've made some progress, obviously, on the cost optimization program, but it's still a focus for you in 2024. If you could provide more color on maybe which cost categories do you see as opportunities for more meaningful cost reduction over the next 12 to 18 months? How should we think about that?

Doug Chambers: You made some progress on the strong cost optimization program, but it's still a.

Doug Chambers: Our focus for you in 2024, if you could provide more color on maybe reached close categories do you see as opportunities for more meaningful cost reduction over the next 12 to 18 months, how should we think about them.

Doug Chambers: Yeah, well, Sergey, first of all, you see the progress we've made on that, and when you look at our, you know, 2022 margin compared to our 2023 margin, which went from 25% to 27%, as we talked about in our remarks, the program's working. And just to emphasize, you know, we have this program organized across our business, we have 12 campuses, we have accountability from all of our leaders, and everybody's delivering on this program. So it's been really successful. We'll continue to go across the whole business for savings; we still have opportunities in really all of our areas. But as far as you know where most of the dollars are, it sort of follows our P&L, right?

Doug Chambers: Yes.

Doug Chambers: Sergey first of all you see the progress we've made on that and when you look at our 2022 margin compared to our 2023 margin with a 25% to 27% as we talked about.

Sergey: The program is working and just to emphasize we have this program organized across our business. We have 12 campuses. We have accountability from all of our leaders and everybody has deliberated on this program. So it's been really successful we'll continue to.

Sergey: Go across the whole business for savings, we still have opportunities.

Sergey: Really all of our areas, but as far as where most of the dollars are it sort of follows our P&L right. So we have a lot of dollars of course in engineering Opex that will continue to provide significant savings.

Doug Chambers: So we have a lot of dollars, of course, in engineering, OPEX, that'll continue to provide significant savings, as well, you know, marketing, and IT. So, you know, we're really proud of what we've done so far. There's more to do, and it's going to be across the business. Sergey, I'll just chime in.

Sergey: Well market in it so.

We believe.

Speaker Change: We are really proud of what we've done so far.

Speaker Change: There's more to do and it's going to be across the business.

Speaker Change: I'll just chime in and thank you for directing the cost question to the CFO seat.

Speaker Change: Occasionally has something to do with it too so I don't want that.

Speaker Change: I wont dump it all on Doug.

LT Thurvold: Thank you for directing the cost question to the CFO, but the CEO occasionally has something to do with it too, so I won't dump it all on Doug. You know, one thing that we've seen a lot of success with is our efforts around automation and our efforts around transparency and flexibility for our customers. And so the example I'll give there is the upgraded bill that we provide to our customers. So we both have we've rolled out a new bill format. The first change that we made was almost a year ago, where we changed our approach to proration. The second thing that we've done is we recently launched an entirely new format for our customers, providing them with a lot of transparency about what they can expect, how the bill breaks down, and what they can expect the following month. It's all automated, and that has significantly driven down calls to care. It's significantly reduced what I would call service-driven visits to our stores. We still love to see our customers in our stores, so those don't bother me. But it helps if a customer is walking into the store with the intent to buy rather than with a bill.

Speaker Change: One thing that we've seen a lot of we've seen a lot of success.

Speaker Change: Our efforts around automation and our efforts around transparency and flexibility for our customers and so the example, I'll give there is the upgraded bill that we provided to our customers. So we both we've rolled out a new bill format.

Speaker Change: The first change that we made was almost a year ago, where we changed our approach to proration.

Speaker Change: The second thing that we've done is we've recently launched an entirely new format for our customers providing them a lot of transparency what they can expect how the bill breaks down what they can expect the following months. It's all automated that is significantly driven down cost of care with significantly reduced what I would call.

Speaker Change: Service driven visits to our stores, we still love to see our customers in our stores. So theres no bother me.

Speaker Change: But it helps if a customers walking in the store with intent to buy rather than with a billing question.

Speaker Change: So simple moves like that moves that are focused on transparency moves that are focused on flexibility our upfront investments that we make but they would also bring down costs, but they bring down costs without any kind of a negative experience on the customer in fact, it's a positive experience on a customer and you can probably expect to see more of those automation and digital investments from us.

Speaker Change: In this year and beyond as well.

Speaker Change: Got it and my last question question on this call Michelle So you've made significant investments by this firm expanding.

Michelle: Fiber footprint and Youre still continuing or is your fiber build.

LT Thurvold: And so simple moves like that, moves that are focused on transparency, moves that are focused on flexibility, they're upfront investments that we make, but they also bring down costs without any kind of negative experience for the customer. In fact, it's a positive experience for the customer, and you can probably expect to see more of those automation and digital investments from us this year. Okay, and my last question is for Michelle.

Michelle: Given where you are right now in terms of both things.

Speaker Change: How do you feel about conversion of your pricings into paying fiber customers.

Michelle: And also maybe if you could provide more color as far as what has been working lately.

Michelle: Terms of the conversion of <unk> into paying customers and what's still needs to be improved in your opinion in 2024.

Michelle: Hi, Sergey Thanks for the question so.

Yes, we have had a lot of success in continuing to grow our footprint and getting our builds.

Michelle Broek-Wicke: So you've made a significant investment, obviously, in expanding your fiber footprint, and you still continue with your fiber build. I guess given where you are right now in terms of passings, how do you feel about converting your passings into paying fiber customers? And also, maybe you could provide more color as far as what has been working lately for you in terms of the conversion of passing visitors into paying customers and what still needs to be improved, in your opinion, in 2024? Hi, Sergey.

Speaker Change: Really progressing in 2023, we had our biggest year yet.

Speaker Change: And what we're seeing in terms of customers.

Customer sales and conversions into our service address is actually becoming paying service addresses.

Speaker Change: Is meeting and exceeding what we had expected to see and this is happening generally across all of the markets that we've been launching so in our broadband penetration. We do have a chart in one of our slides that shows you. How we expect that broadband penetration to ramp over the first few years after addresses get launched in year one.

Michelle Broek-Wicke: Thanks for the question. So, yes, we had a lot of success in continuing to grow our footprint and getting our build, you know, really progressing in 2023. We had our biggest year yet.

Speaker Change: We expect it to be about 25% to 30% so of the addresses that we launch about 20% or 30% of those addresses turned into paying customers and thats what were seeing and then slowly over the next few years that continues to build until you get to about a steady state of what we expect about 40% broadband penetration.

Michelle Broek-Wicke: And what we're seeing in terms of, you know, customer sales and conversions into, you know, our service addresses actually becoming paying service addresses is meeting and exceeding what we had expected to see. And this is happening generally across all of the markets that we've been launching in. So, in our broadband penetration, we do have a chart on one of our slides that shows you how we expect broadband penetration to ramp up over the first few years after addresses get launched. In year one, we expect it to be about 25 to 30 percent.

Speaker Change: <unk> in those markets. So a few of our markets have been.

Speaker Change: <unk> and around for long enough to be able to get to steady state and in all of those early markets. We are all over the 40% broadband penetration that we had been looking for.

Speaker Change: So we're really pleased with how the builds have been going and then also how the sales and marketing and customer conversion processes have been going.

Michelle Broek-Wicke: So, of the addresses that we launch, about 25 or 30 percent of those addresses turn into paying customers. And that's what we're seeing. And then slowly, over the next few years, that continues to build until you get to about a steady state of what we expect, about 40 percent broadband penetration in those markets. So, a few of our markets have been launched and around for, you know, long enough to be able to get to steady state. And in all of those early markets, we are over the 40 percent broadband penetration rate that we had been looking for.

Speaker Change: Alright, thank you.

Speaker Change: We have no further questions I'll turn the call back over to Colleen Thompson for closing remarks.

Okay. Thanks, everyone for your time today, please reach out to IR with any additional questions and have a great weekend.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

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Speaker Change: Sure.

Speaker Change: Great.

Michelle Broek-Wicke: So we're really pleased with how the builds have been going and then also how the sales and marketing and customer conversion processes have been going. Great, thank you. We have no further questions. I'll turn the call back over to Colleen Thompson for closing remarks. Okay, thanks everyone for your time today. Please reach out to IR with any additional questions and have a great weekend. This concludes today's conference call. Thank you for your participation. You may now disconnect.

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Speaker Change: Okay.

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Speaker Change: Thanks.

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