Q1 2024 United States Cellular Corp Earnings Call

Desiree: Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the TDS and U.S. Cellular First Quarter 2024 Operating Results Conference Call. All lines have been placed on mute to prevent any background noise.

Ladies and gentlemen, thank you for standing by my name is desert Ray and I will be your conference operator today.

Desert Ray: At this time I would like to welcome everyone to the Tds and U S. U S. Cellular first quarter 2024 operating results conference call.

Desert Ray: All lines have any please on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If.

Desiree: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to rephrase your question, again, press the star 1. I would now like to turn the conference over to Colleen Thompson, Vice President, Corporate Relations. Please go ahead.

Desert Ray: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Desert Ray: If you would like to withdraw your question again press the star one.

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 US Cellular, LT Therivel, President and Chief Executive Officer; Doug Chambers, Executive Vice President, Chief Financial Officer, and Treasurer; and from TDS Telecom, Michelle Brukwicki, Senior Vice President of Finance and Chief Financial Officer.

I would now like to turn the conference over to Choline Thomson Vice President Corporate Relations. Please go ahead.

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 with.

Colleen Thompson: With me today and offering prepared comments are from Tds, Vicki Villa Kress executive.

Rice, President and Chief Financial Officer from U S. Cellular LTE favorable President and Chief Executive Officer, Doug Chambers, Executive Vice President and Chief Financial Officer, and Treasurer and from Tds Telecom, Michelle broke wiki senior Vice President of Finance and Chief Financial Officer.

Colleen Thompson: This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations websites. Please see the websites for slides referred to in this call, including Non-Gap 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 A-K, including the press releases and our 10-Qs, earlier this morning.

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 we.

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.

Tds and U S cellular filed their SEC forms 8-K, including the press releases and our 10-Qs 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 filings. 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.

Colleen Thompson: And with that I will now turn the call over to Vicki Bill or Chris Vickie. Okay. Thank you Colin and good morning, everyone. Before we talk about the results for the quarter I want to once again reiterate that as announced on August four as last year, we embarked on our review of strategic alternatives at U S. Cellular I'm unable to comment on the process.

Vicki L. Villacrez: Okay. Thank you, Colleen. Before we talk about the results for the quarter, I want to once again reiterate that, as announced on August 4th last year, we embarked on a review of strategic alternatives at US Cellular. I'm unable to comment on the process at this time except to say that it remains active and ongoing. Management of TDS and U.S. Cellular, along with both boards, remain committed to a path that is in the best interest of the company and our shareholders. Given the nature of the process, we don't expect to have updates until it's concluded.

Vicki: At this time, except to say that it remains active and ongoing management of Tds and U S. Cellular along with both boards remain committed to a path that is in the best interest of the company and our shareholders.

Speaker Change: Given the nature of the process, we don't expect to have updates until its concluded.

Vicki L. Villacrez: Okay, now let's talk about the business unit results. I'm pleased that both business units are showing notable year-over-year improvements in adjusted EBITDA and delivering on their profitability targets set at the beginning of the year. TDS Telecom is realizing the benefits of our multi-year fiber investments with both top and bottom line growth in the quarter. And U.S. Telecom reported a nice improvement in ARPU in addition to ongoing cost discipline.

Speaker Change: Okay now, let's talk about the business unit results I am pleased that both business units are showing notable year over year improvement in adjusted EBITDA and delivering on their profitability targets set at the beginning of the year.

Speaker Change: Tds Telecom is realizing the benefits of our multiyear fiber investments with both top and bottom line growth in the quarter and U S reported a nice improvement in <unk>. In addition to ongoing cost discipline.

Vicki L. Villacrez: From a consolidated perspective, we are maintaining our focus on both OPEX and CAPEX costs while at the same time prudently allocating our capital towards critical network investments that are advancing our technology. For example, at TDS Telecom, we are expanding our fiber footprint, and at US Cellular, our mid-band rollout remains on track.

Speaker Change: From a consolidated perspective, we are maintaining our focus on both opex and capex costs, while at the same time prudently allocating our capital towards critical network investments that are advancing our technologies.

At Tds Telecom, we are expanding our fiber footprint and at U S. Cellular are mid band rollout remains on track.

Vicki L. Villacrez: As we announced this morning, TDS entered into a $375 million unsecured debt facility and borrowed $300 million at closing. The proceeds will be used for general corporate purposes, including the advancement of TDS Telecom's Fiber Build program. As you will hear Michelle speak later in the call, TDS Telecom's FIBER strategy is working. TDS Telecom is reporting strong growth as expected, both on the top and bottom lines, which gives us the confidence to keep investing in the FIBER program.

Speaker Change: As we announced this morning Tds entered into a $375 million unsecured debt facility and borrowed 300 million at closing that.

Proceeds will be used for general corporate purposes, including the advancement of Tds telecoms fiber build program.

Speaker Change: As you will hear Michelle speak later on the call Tds telecoms fiber strategy is working.

Speaker Change: Telecom is reporting strong growth as expected both top and bottom line, which gives us the confidence to keep investing in the fiber program.

Vicki L. Villacrez: TDS's overall long-term weighted average cost of debt and preferred equity increased 30 basis points with this borrowing to 6.8%, which is favorable in the current interest rate environment. We will continue to manage our balance sheet through a combination of long-dated debt maturities issued at historically low interest rates, reasonable leverage, and sufficient liquidity, all of which provides flexibility to execute against our current operational objectives and longer-term strategic goals. I will now turn the call over to LT.

Speaker Change: G D S. As overall long term weighted average cost of debt and preferred equity increases 30 basis points with this borrowing to six 8%, which is favorable in the current interest rate environment.

Speaker Change: We will continue to manage our balance sheet through a combination of long dated debt maturities issued at historically low interest rates.

Speaker Change: Reasonable leverage and sufficient liquidity all of which provides flexibility to execute against our current operational objectives and longer term strategic goals I will now turn the call over to L. T.

Laurent Therivel: Thank you, Vicki. Good morning, everybody.

Laurent Therivel: Thank you Becky and good morning, everybody. If you turn to slide five you can see our quarterly highlights.

Laurent Therivel: If you turn to slide five, you can see our quarterly highlights. As you can see, we delivered strong bottom-line results driven by solid R2 growth and effective expense discipline. Postpaid ARPU was up 3%, which is impressive given that approximately 40% of our postpaid handset gross ads over the past year have elected for our lower priced flat rate. And as a reminder, those flat rate plans offer lower pricing, but they're not eligible for a richer device promotion, and therefore they yield similar overall economics as our legacy Unlimited. Another contributing factor to our postpaid ARPU increase has been continuing to move our customers to our higher value top two

Laurent Therivel: As you can see we delivered strong bottom line results driven by solid <unk> growth and effective expense discipline.

Laurent Therivel: Allstate RP was up 3%, which is impressive given that approximately 40% of our postpaid handset gross adds over the past year have elected our lower priced flat rate plans.

Laurent Therivel: As a reminder, a slot rate plans offer lower pricing, but they're not eligible for a literal device promotions.

Laurent Therivel: Therefore, the yield similar overall economics as our legacy unlimited plans.

Laurent Therivel: A contributing factor to our postpaid ARPA increase.

Laurent Therivel: Continuing to move our customers to our higher value top two tier plans.

Laurent Therivel: We had 51% of our handset customers on those top tiers at the end of March 24, compared to 42% a year ago. Co-State Shearn was also a bright spot in the quarter, down five basis points year over year.

Laurent Therivel: Well, we have 51% of our handset customers on those top tiers at the end of March 24.

Laurent Therivel: Compared to 42% a year ago.

Laurent Therivel: Postpaid churn was also a bright spot in the quarter down five basis points year over year.

Laurent Therivel: During the quarter, we focused on retention through personalized promotional offers, as well as pulsing in aggressive mass upgrade offers. We saw solid results from our new US Days retention program, and you can expect to see continued investment in retention throughout the year. Postpaid handset gross ads continued to be a challenge in the first quarter, and a significant driver of the gross ad challenges was a 16% year-over-year decline in the total pool of available subscribers. We made some changes to our promotions during Q1, and we've made some additional changes more recently to remove trade-in and plan requirements on our lead promotion.

Laurent Therivel: During the quarter, we focused on retention you personalize promotional offers as well as posting an aggressive mass upgrade offers.

Laurent Therivel: We saw solid results from our new US Daves retention program you can expect to see continued investment in retention throughout this year.

Laurent Therivel: Postpaid handset gross adds continue to be a challenge in the first quarter and a significant driver of the growth challenges.

Laurent Therivel: With a 16% year over year decline in the total pool of available subscribers.

Laurent Therivel: You made some changes in our promotions during Q1, we made some additional changes more recently removed trade in and plan requirements on our lead promotions.

Laurent Therivel: And while it takes time to fully assess the impact of those changes, we're encouraged by the early results, and we expect to continue to assess and adjust our promotions as necessary to drive improved subscriber growth. Briefly on cable wireless, as I mentioned in past calls, they've become a formidable competitor in our. We compete against cable wireless across about two-thirds of our footprint. While they have a mid-single-digit market share across that area, they're currently winning about 15% of the share of post-paid handset gross advertising revenue by offering low-cost plans which can be bundled with their fixed broadband products, and they're now beginning to offer device promotions more frequently.

While it takes time to fully assess the impact of those changes we're encouraged by the early results and we expect to continue to assess and adjust our promotions as necessary to drive improved subscriber results.

Briefly on cable wireless as Ive mentioned in past calls they've become a formidable competitor in our footprint.

Laurent Therivel: We compete against cable wireless across about two thirds of our footprint, while they have a mid single digit market share across that area are currently running about 15% of the share of postpaid handset gross adds.

Laurent Therivel: Offering low cost plans, which can be bundled with their fixed broadband products and they're now beginning to offer device promotions more frequently.

Laurent Therivel: We estimate they offload approximately 90% of their traffic to Wi-Fi, and that's 10 to 20 percentage points higher than the estimated Wi-Fi offloads of US Cellular. And we believe the same goes for the other large wireless carriers. Higher offload to Wi-Fi means lower usage on cellular.

We estimate the offload approximately 90% of their traffic to Wi Fi and that's 10% to 20 percentage points higher than the estimated Wi Fi off loads of U S. Cellular.

And we believe the same goes for the other large water scarce.

Laurent Therivel: Higher offload to Wi Fi means lower usage on cellular we believe this dynamic as well as their ability to cross subsidize their bundled with wireline profits.

Laurent Therivel: We believe this dynamic, as well as their ability to cross-subsidize their bundle with wireline profits, means they could potentially make even more aggressive future moves on pricing and Now, our chart results show we're competing effectively, but we're going to need to ensure we have the right pricing and promotional constructs to remain competitive, while we generate sufficient returns to invest in our network and provide our customers with a great experience. We have another strong quarter in fixed wireless. We've grown this subscriber base by 42% compared to the prior year, ending the quarter with 124,000 subscribers. Prepaid net losses improved year over year, as we saw improvement in our prepaid sharing rate, which decreased by 24 basis points. Over the past year, we made enhancements to our prepaid distribution, and we expanded our digital engagement, and we're seeing the results of those efforts in our reduced churn and improved lifetime economics of our

Laurent Therivel: It means they could potentially make even more aggressive future moves on pricing and promotion.

Laurent Therivel: Our churn results show, we're competing effectively but we're gonna need to ensure we have the right pricing and promotional construct to remain competitive.

Laurent Therivel: While we generate sufficient returns to invest in our network and provide our customers with a great experience.

Okay.

Laurent Therivel: We had another strong quarter in fixed wireless you've grown this subscriber base by 42% compared to the prior year.

Laurent Therivel: Ending the quarter with 124000 subscribers.

Laurent Therivel: Prepaid net losses improved year over year as we saw improvement in our prepaid churn rate, which decreased 24 basis points.

Over the past year, we made enhancements to our prepaid distribution and we expanded our digital engagement.

Laurent Therivel: And we're seeing the results of those efforts and our reduced churn and improved lifetime economics of our prepaid customers.

Laurent Therivel: So to touch on the business space and particularly 5G use cases, we're seeing some interesting emerging examples of using advanced network capabilities to help drive innovation. Particularly if you're part, one example is a recent partnership with Rockwell Automation to deploy a 5G private cellular network within their connected enterprise lab. Rockwell sees their customers looking for guidance in real time or near real-time decision making with their applications, and Private 5G provides the lower latency and higher bandwidth to enable those applications.

Laurent Therivel: Just to touch on the business space, particularly five G. Use cases, we're seeing some interesting emerging examples of using advanced network capabilities helped drive innovation, particularly through partnerships.

Laurent Therivel: One example is our recent partnership with Rockwell automation to deploy a <unk> private cellular network within their connected enterprise lab.

Rockwell is seeing your customers looking for guidance in real time or near real time decision, making with their applications.

Laurent Therivel: In private five <unk> provides the lower latency and higher bandwidth to enable those applications.

Laurent Therivel: We've already deployed a number of private cellular networks, and we see a lot of opportunities in the manufacturing and utility space going forward. Another example is a recently announced partnership with Kate, which is using our patent-pending MVNO revolution architecture to deliver an ultra-private and secure mobile wireless experience that keeps people connected securely wherever they are. With wireless being a part of our everyday lives, there is a heightened need for privacy and security.

Laurent Therivel: Already deployed a number of private cellular networks, and we see a lot of opportunities in the manufacturing in the utility space going forward.

Laurent Therivel: Another example is our recently announced partnership with Kate.

Laurent Therivel: They're using our patent pending <unk> Revolution architecture to deliver an ultra private and secure mobile wireless experience that keeps people connected securely wherever they are.

With wireless being a part of our everyday lives as a heightened need for privacy and security.

Laurent Therivel: I'm really pleased to partner with CAPE as they offer a differentiated and innovative solution that protects customers' data. Turning to the network, our mid-band deployment is on track. And I'm pleased with the results that we're seeing where we deploy in the. By the end of 2024, we expect to have mid-band on cell sites that handle almost 50% of our data traffic. And we're seeing a strong correlation between the percent of traffic handled by our mid-band network and a corresponding increase in both perception and a higher net promoter.

Laurent Therivel: We're really pleased to partner with cases, they offer a differentiated innovative solution to protect customers' data.

Laurent Therivel: Turning to the network or mid band deployment is on track and I'm pleased with the results that we're seeing where we deploy them at bay.

Laurent Therivel: By the end of 2024, we expect to have mid band on cell sites that handle almost 50% of our data traffic.

Laurent Therivel: We're seeing a strong correlation in the percent of traffic handled by our mid band network.

Laurent Therivel: And a corresponding increase in both perception and a higher net promoter score and.

Laurent Therivel: We're excited about the value this network is delivering to both our mobility and our fixed wireless. Finally, with respect to our financial results, our cost optimization program continues to deliver strong results, as we increased our profitability and our adjusted OIDA by 11% in the quarter. Doug will provide some additional detail in his section, but I'm pleased with the financial results that we're delivering, even in the face of subscribers. A brief note on Washington; the Affordable Connectivity Program was initially created to help close the digital divide, and we're really disappointed that the program was not renewed. I have spoken in the past that there are two obstacles to bridging the digital divide in the world.

Laurent Therivel: We're excited about the value of these networks delivering to both our mobility and our fixed wireless customers.

Laurent Therivel: Finally, with respect to our financial results our cost optimization program continues to deliver strong results.

Laurent Therivel: As we increased our profitability and our adjusted OIBDA by 11% in the quarter.

Laurent Therivel: Doug will provide some additional detail in his section, but I'm pleased with the financial results that were delivering even in the face of subscriber challenges.

Laurent Therivel: A brief note on Washington, the Affordable connectivity program was initially created to help close the digital divide and we're really disappointed that the program was not renewed.

Laurent Therivel: I've spoken in the passengers to obstacles to bridging the digital divide in this country, particularly in rural America, and that's infrastructure investments and affordability investment.

Laurent Therivel: Particularly in rural America, that's infrastructure investment and affordability. Bede and the 5G Fund may help with infrastructure, but affordability still remains a challenge for many customers. ACP provided support to many people in our footprint. It's disappointing that we couldn't find a way to support them. Our exposure is relatively minimal, but we're committed to continuing to serve these customers, and we have a plan to provide them with special discounted offers to ensure that they're able to. Before I turn the call over to Doug, I want to recognize and thank all of our associates for their exceptional hard work and dedication towards helping our customers Doug, it's over to you.

Laurent Therivel: Indeed in the <unk> fund may help with infrastructure, but affordability is still remains a challenge for many customers.

Laurent Therivel: <unk> provided support to many people in our footprint, it's disappointing that we couldn't find a way to support them.

Laurent Therivel: Our exposure is relatively minimal, but we're committed to continuing to serve these customers.

Laurent Therivel: We have a plan to provide them with special discounted offers to ensure that they are able to stay connected.

Laurent Therivel: Before I turn the call over to Doug I want to recognize and thank all of our associates for their exceptional hard work and dedication towards helping our customers stay connected to what matters most each day.

Doug: Doug over to you.

Douglas Chambers: Thanks, Monty. Good morning.

Doug: Good morning, before we go through the quarterly results I want to remind you that we sunset. The C. D. It may not work in January of this year at the time of the shutdown, we had 11000 postpaid and 2000 prepaid connections still dependent on the network.

Douglas Chambers: Before we go through the quarterly results, I want to remind you that we shut down the CDMA network in January of this year. At the time of the shutdown, we had 11,000 postpaid and 2,000 prepaid connections still dependent on the network. These customers were removed from their respective bases and are not reflected as defections or churn in the first quarter results. We expect the CDMA network shutdown to be accretive to 2024 adjusted OIDA and to result in approximately $40 million in run-rate annual operating expense savings beginning in 2025. Let's review the customer results on slide six.

These customers were removed from their respective bases that are not reflected as infections or churn in the first quarter results.

Doug: We expect the CDMA network shutdown to be accretive to 2024, adjusted OIBDA and to result in approximately $40 million run rate annual operating expense savings beginning in 2025.

Doug: Let's review the customer results on slide six.

Douglas Chambers: Postpaid handset gross additions decreased by 30,000 due to the intense competitive environment and, as LT mentioned, a 16% reduction in the pool of available customers. Correspondingly, postpaid handset net additions were down $22,000. Connected device net additions were slightly improved for the quarter, up 2,000 due to higher demand for fixed wireless home internet, as well as a decrease in hotspot churn.

Doug: Postpaid handset gross additions decreased by 30000 due to the intense competitive environment and as Earl mentioned, a 16% reduction in the pool of available customers.

Doug: Correspondingly postpaid handset net additions were down 22000.

Doug: Connected device net additions were slightly improved for the quarter up 2000, due to higher demand for fixed wireless home internet as well as a decrease in hotspot sure.

Douglas Chambers: Prepaid Net Losses Improved by 10,000 Connections Due to Improvements in Prepaid Churn Previously Discussed by LTE Now, let's turn to the financial results starting on slide. Total operating revenues for the quarter decreased 4% as service revenues declined 2% and equipment sales declined 10%. The primary drivers of lower service revenue are declines in the average postpaid subscriber base, partially offset by a higher postpaid ARPU, as LT discussed previously. Equipment sales declined due to a decrease in smartphone devices sold as a result of lower gross additions and upgrades, which was partially offset by an increase in price per unit sold due to customer demand for more expensive devices, as well as a decrease in promotional expense as customers continue to opt for flat-rate price Decline in upgrade rates and the corresponding decline in equipment sales is consistent with the industry. Now, let's turn to Tower results on slide 9.

Doug: Prepaid net losses improved by 10000 connections due to improvements in prepaid churn previously discussed by L. T.

Now, let's turn to the financial results starting on slide eight total operating revenues for the quarter decreased 4% as service revenues declined 2% and equipment sales declined 10%.

Doug: Mary drivers of lower service revenue or declines in the average postpaid subscriber base, partially offset by a higher postpaid ARPA as LTE discussed previously.

Equipment sales declined due to a decrease in smartphone devices sold as a result of lower gross additions and upgrades, which was partially offset by an increase in price per unit sold due to customer demand for more expensive devices as well as a decrease in promotional expenses customers continued to opt for a flat rate.

Doug: <unk> plans, which are not eligible for higher levels of device discounts to.

Doug: The decline in upgrade rates and the corresponding decline in equipment sales is consistent with the industry.

Now, let's turn to tower results on slide nine.

Douglas Chambers: The business delivered a solid quarter with $25 million in third-party tower revenues, which represents 3% growth. As we noted last quarter, the wireless industry has moderated capital expenditures, which will impact our revenue growth rates in the short term, but we are bullish on the long-term revenue opportunities of the tower business. Next, let's turn to our quarterly operating performance shown on slide 11. For this discussion, I will refer to adjusted operating income before depreciation and amortization as adjusted operating income. As I mentioned, operating revenues declined 4%, but this decline was offset by a decrease in cash expenses compared to the prior year of 70%.

Doug: The business delivered a solid quarter with $25 million of third party tower revenues, which represents 3% growth as.

As we noted last quarter the wireless industry is moderated capital expenditures, which will impact our revenue growth rates in the short term, but we are bullish on the long term revenue opportunities of the tower business.

Douglas Chambers: Lawson Equipment or Equipment Sales Plus cost of equipment sold decreased 40% as a result of lower transaction volume and lower promotional cost per transaction, partially due to higher adoption of flat rate plans as previously discussed. Selling general and administrative expenses decreased 4%, driven by lower employee-related expenses, which includes decreases attributable to both the second quarter 2023 reduction in workforce and sales expenses partially due to the decrease in gross ad and upgrade volume, partially offset by increases in expenses related to the Strategic Alternatives Review.

Doug: Next let's turn to our quarterly operating performance shown on slide 11.

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

Doug: As I mentioned operating revenues declined 4%. However, this decline was offset by a decrease in cash expenses compared to the prior year of 7%.

Doug: Whilst equivalent or equipment sales less cost of equipment sold decreased 40% as a result of lower transaction volume and lower promotional cost per transaction, partially due to higher adoption of Blackberry plans as previously discussed.

Doug: Selling general and administrative expenses decreased 4% driven by lower employee related expenses, which includes decrease is attributable to both the second quarter 2023 reduction in workforce and sales expenses, partially due to the decrease in gross add and upgrade volumes partially offset by.

Doug: Creases and expenses related to the strategic alternatives review.

Douglas Chambers: Wrapping up this slide, as LT mentioned, adjusted operating income increased 11%, and adjusted EBITDA, which incorporates the earnings from our equity method investments, along with interest and dividend income, increased 8%. Both of these amounts have been adjusted to exclude $7 million of expenses related to our Strategic Alternatives Review.

Doug: Wrapping up this slide as <unk> mentioned adjusted operating income increased 11% and adjusted EBITDA, which incorporates the earnings from our equity method investments along with interest and dividend income increased 8%.

Doug: Both of these amounts have been adjusted to exclude 7 million of expenses related to our strategic alternatives review.

Douglas Chambers: Our Cost Optimization Program continues to deliver strong results. Despite expected service revenue declines for the full year 2024 and cost increases that result from our ongoing mid-band 5G deployment, we expect our full year adjusted operating income margin as a percent of service revenues to remain relatively flat in 2024. The full year 2024 cost profile is expected to be positively impacted by the shutdown of our CDMA network in the first quarter of 2024, the reduction in force executed in the second quarter of 2023, and cost savings from initiatives across all areas of the business.

Doug: Our cost optimization program continues to deliver strong results. Despite expected service revenue declines for the full year 2024 and cost increased as a result of our ongoing mid band <unk> deployment, we expect our full year adjusted operating income margin as a percent of service revenues to remain relatively flat in 2024.

Doug: For full year 2024 cost profile is expected to be positively impacted by the shutdown of our CDMA network in the first quarter of 2020 for the reduction in force executed in the second quarter of 2023 and cost savings from initiatives across all areas of the business. Our associates have done an excellent job of identifying.

Douglas Chambers: Our associates have done an excellent job identifying and executing these initiatives, and we remain focused on this program in 2024 to drive further cost-safety. Our capital expenditures decreased compared to the same period last year, partially due to the timing of mid-band capital expenditures in each respective period. In addition, we expect capital expenditures for the full year 2024 to trend toward the lower end of our guidance range and be less than 2023 capital expenditures.

Doug: Executing these initiatives and we remain focused on this program in 2020 forward to drive further cost savings.

Doug: Our capital expenditures decreased compared to the same period last year, partially due to the timing of mid band capital expenditures in each respective period.

Doug: In addition, we expect capital expenditures for the full year 2024 to trend towards the lower end of our guidance range and be bus in 2023 capital expenditures.

Douglas Chambers: As shown on slide 12, our 2024 financial guidance remains unchanged from the guidance we issued in February of this year as we remain on track to our financial plan. I will now turn the call over to Michelle Brukwicki.

Doug: As shown on slide 12, our 2024 financial guidance remains unchanged from the guidance we issued in February of this year as we remain on track to our financial plan.

Doug: I'll now turn the call over to Michelle for a quickie shelf.

Michelle Brukwicki: Thank you, Doug. And good morning, everyone.

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

Michelle Brukwicki: Turning to slide 14, as Vicki mentioned, the key highlight for TDS Telecom is that our fiber strategy is working. For the past several years, we've made significant investments in our fiber program, and our financial results are starting to reflect the benefits of those investments. We just delivered our strongest quarter of revenues and profitability since starting our fiber program. Our FIBA results, combined with our disciplined expense management, produced a 5% increase in revenue and a 38% increase in adjusted EBITDA for the quarter.

Michelle: Turning to slide 14, and Vicki mentioned the key highlight for Tds Telecom is that our fiber strategy is working for the past several years, we've made significant investments in our fiber program and our financial results are starting to reflect the benefits of those investments.

Michelle: We just delivered our strongest quarter of revenues and profitability since starting our fiber program. Our fiber results combined with our disciplined expense management produced a 5% increase in revenue and a 38% increase in adjusted EBITDA in the quarter.

Michelle Brukwicki: In addition to delivering strong financial results, the team continues to deliver a steady cadence of marketable fiber service addresses, with 28,000 this quarter. We're on track to reach our annual goal of 125,000 marketable fiber service addresses that we shared with you in February. As we deliver these fiber addresses, we are also successfully selling into those addresses.

Michelle: In addition to delivering strong financial results. The team continues to deliver a steady cadence of marketable fiber service addresses with 28000 this quarter.

Michelle: We're on track to reach our annual goal of 125000 marketable fiber service addresses that we shared with you in February.

Michelle: As we deliver these fiber addresses we are also successfully selling into those addresses.

Michelle Brukwicki: Overall, we are achieving the broadband penetrations projected in our business cases. In the first quarter, we reached a major milestone, exceeding 100,000 residential broadband connections in our expansion market. Moving to slide 15, you can see where we're at on our longer-term scorecard.

Michelle: Overall, we are achieving the broadband penetrations projected in our business cases.

Michelle: In first quarter, we reached a major milestone exceeding 100000 residential broadband connections in our expansion markets.

Michelle: Moving to slide 15, you can see where we're at on our longer term scorecard.

Michelle Brukwicki: We are targeting 1.2 million marketable fiber service addresses. We ended the quarter with 827,000, so we're two-thirds of the way there. We're also targeting 60% of our total service addresses to be served by fiber. We ended the quarter with 49%. This reflects progress in growing fiber through our expansion markets, as well as fibering up our incumbent markets. We also refer to this as our ILAC.

Michelle: We are targeting $1 2 million marketable fiber service addresses we ended the quarter with 827000.

Michelle: So we're two thirds of the way there were.

Michelle: We're also targeting 60% of our total service addresses to be served by fiber we ended the quarter with 49%.

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

Michelle: We also refer to this as our ILEC.

Michelle Brukwicki: At the end of the quarter, 44% of our ILEC addresses were fibered out. And finally, we are expecting to offer speeds of 1 gigabit or higher to at least 80% of our footprint. We finished the quarter with 73% at gig speed. On slide 16, you can see that we are growing our footprint with a 12% increase in total service addresses year over year. As shown on the right side of the slide, we see increased demand for higher broadband speeds, with 78% of our customers taking 100 megabits per second or greater, up from 72% a year ago. We continue to increase the availability of Gig Plus B's.

Michelle: At the end of the quarter, 44% of our ILEC addresses where fiber dark.

Michelle: And finally, we are expecting to offer speeds of one gig or higher to at least 80% of our footprint. We finished the quarter with 73% at gig speeds.

Michelle: On Slide 16, you can see that we are growing our footprint with a 12% increase in total service addresses year over year.

Michelle: As shown on the right side of the slide where we see increased demand for higher broadband speeds with 78% of our customers, taking 100, megabits per second or greater up from 72% a year ago.

Michelle: We continue to increase the availability of gig plus speeds come.

Michelle Brukwicki: Customer take rates for these feeds are growing, with 17% of our customer base on one gig or higher at the end of the quarter. Our broadband investments are driving meaningful results. As I mentioned in the last call, during 2024, we are focusing on driving broadband penetrations in our new expansion markets, and we are executing as planned. As shown on slide 17, we had 6400 residential broadband net ads in the quarter, which contributed to 6% growth in residential broadband connections year-over-year.

Michelle: Customer take rates in these speeds are growing with 17% of our customers customer base on one gig or higher at the end of the quarter.

Michelle: Our broadband investments are driving meaningful results.

Michelle: As I mentioned in our last call. During 2024, we are focusing on driving broadband penetrations and our new expansion markets and we are executing as planned.

Michelle: As shown on slide 17, we had 6400 residential broadband net adds in the quarter, which contributed to 6% growth in residential broadband connections year over year.

Michelle Brukwicki: We see strong broadband connection growth in our expansion market. We also continue to see incumbent copper customers convert to fiber where available, protecting our base and providing a better customer experience. The enhanced ACAM program will get even more fiber into our ILAC markets to serve these customers. Average residential revenue per connection was up 7% due primarily to price increases. And with increases in broadband connections and revenue per user, we saw 10% growth in residential revenues. Specifically, expansion markets delivered $26 million in residential revenues in the quarter, compared to $15 million a year ago. As expected, commercial revenues decreased 9% in the quarter as we continue to decommission our SELAC market.

Michelle: We see strong broadband connection growth in our expansion markets.

Michelle: We also continue to continue to see incumbent copper customers convert to fiber where available protecting our base and providing a better customer experience.

Michelle: The enhanced ATM program will get even more fiber into our ILEC markets to serve these customers.

Michelle: Average residential revenue per connection was up 7% due primarily to price increases.

Michelle: And with increases in broadband connections and revenue per user we saw 10% growth in residential revenues.

Michelle: Specifically expansion markets delivered $26 million of residential revenues in the quarter compared to $15 million a year ago.

Michelle: As expected commercial revenues decreased 9% in the quarter as we continued to decommission our CLEC markets.

Michelle Brukwicki: Lastly, wholesale revenues increased 3% due to the incremental revenues we have started to receive under the Enhanced ACAM program. On slide 18, you can see our quarterly performance. Operating revenues were up 5% in the quarter, as the growth in residential revenues and wholesale was partially offset by the decline in commercial revenues. However, strong expense management led to a 6% decrease in cash expenses for the quarter. As our penetrations and revenues grow, along with this disciplined cost management, we are seeing nice growth in adjusted EBITDA, up 38% in the quarter. Capital expenditures were $87 million in the quarter, down 33% from last year.

Michelle: Lastly, wholesale revenues increased 3% due to the incremental revenues, we have started to receive under the enhanced ATM program.

Michelle: On Slide 18, you can see our quarterly performance.

Michelle: Operating revenues were up 5% in the quarter as the growth in residential revenues in wholesale was partially offset by the decline in commercial revenues.

Michelle: Strong expense management led to a 6% decrease in cash expenses for the quarter.

Michelle: As our penetrations in revenues grow along with this disciplined cost management, we are seeing nice growth in adjusted EBITDA up 38% in the quarter.

Michelle: Capital expenditures were $87 million in the quarter down 33% from last year.

Michelle Brukwicki: Slide 19 shows our 2024 guidance, which remains unchanged from what we shared with you in February. We are confident in our plans for both top and bottom line growth this year through increasing our fiber penetrations and effective cost management. Turning to CapEx, we are committed to pacing our capital spend this year in line with our profitability. For the next few years, we are balancing the priorities of both our Fiber Expansion Program and the Enhanced ACAM Program.

Michelle: Slide 19 shows our 2024 guidance, which remains unchanged from what we shared with you in February.

Michelle: We are confident in our plans for both top and bottom line growth this year through increasing our fiber penetrations and effective cost management.

Michelle: Turning to Capex, we are committed to pacing our capital spend this year in line with our profitability.

Michelle: For the next few years, we are balancing the priorities of both our fiber expansion program and the enhanced ATM program.

Michelle Brukwicki: We are carefully planning and engineering both programs to keep them progressing at a pace to meet our build commitments that's also commensurate with our financing capacity. In closing, I want to thank all of the TDF telecom associates for their focus on our strategic priorities. This quarter's strong results reflect the hard work of our entire team. We have good momentum after the first quarter, and I continue to be excited about the opportunities ahead. I'll now turn the call back over to Colleen. Okay.

Michelle: We are carefully planning and engineering, both programs to keep them progressing at a pace to meet our build commitments. That's also commensurate with our financing capacity.

Michelle: In closing I want to thank all of the Tds Telecom associates for their focus on our strategic priorities.

Michelle: This quarter's strong results reflect the hard work of our entire team.

Michelle: We have good momentum after the first quarter and I continue to be excited about the opportunities ahead.

Michelle: I'll now turn the call back over to Colleen.

Colleen Thompson: Okay, we will now open up the call to your questions. As a reminder today, our focus is on the quarter, and we will not be taking questions on the review of strategic alternatives for U.S. Cellular. Operator, we're ready for the first question.

Colleen Thompson: Okay. We will now open up the call to your questions. As a reminder, today our focus is on the quarter and we will not be taking questions on the review of strategic alternatives for U S cellular operator.

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

Operator: Thank you.

Desiree: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is on mute when asking your question. Again, press the star 1 to join the call. Your first question comes from the line of Ric Prentiss with Raymond James.

Speaker Change: We will now begin the question and answer session.

Speaker Change: If you have dialed in and would like to ask a question. Please press star one on your telephone keypad Teresa has joined the queue.

Speaker Change: If you would like to withdraw your question simply press Star one again.

If you are called upon to ask you a question in a listening via speakerphone on your device. Please pickup your handset to ensure that your phone is on mute when asking a question again from <unk> to join the queue.

Speaker Change: Your first question comes from the line of Ric Prentiss with Raymond James Your line is open.

Speaker Change: Okay.

Ric Prentiss: A couple of questions. First, LT, I think last quarter we talked a little bit about the tower segment. Doug, you talked about how there is growth, but obviously the industry is moderating. I want to just check in.

Ric Prentiss: Couple of questions.

Ric Prentiss: First.

Ric Prentiss: I think last quarter, we talked a little bit about the tower segment, Doug you talked about how there's growth, but obviously the industry is moderating.

Laurent Therivel: Last quarter, LT, you said if you were to create tower segment reporting and create an anchor contract between the tower company or the tower business and the wireless business, you couldn't go back. I think that's kind of your phraseology. Any update on those thoughts, and what would be the problems if you couldn't go back on that front? And an associated question, maybe over to Vicki, have you thought about, I'm sure you have, but what are your thoughts on lending against the tower segment, particularly vis-a-vis the most recent debt you brought on, which is SOFR plus seven, which has got to be in the 12% range?

Ric Prentiss: Wanted to just check in last quarter. You said, if you were to create tower segment reporting and prune the anchor contract between the tower company. The tower business in the wireless business you Couldnt go back I think as we kind of your phraseology.

Ric Prentiss: Any update on that thoughts and what would be the problems of you can't go back on that front and associated question maybe over to Vicky.

Vicky: Have you thought about I'm sure you have but what are those.

Vicky: Thinking on lending against the tower segment, particularly vis a vis the most recent that you brought on which is silver plus seven which has got to be in the 12% range.

Vicky: Thanks.

Laurent Therivel: Hey Rick, good morning. So I'll take your first question about, you know, segment reporting around towers. It continues to be something that we look at. One of the things that we've tried to do in response to both your questions and others is to provide a little bit more detail on the towers. You can see that again in our slides as well as Doug's comments; we're going to try to continue to do that moving forward. You know, my comment about not going back. I mean, one of the things that we've noticed is that once you provide a certain level of information, it's not a great idea to start to reel that back in.

Hey, Rick good morning.

Vicky: So I'll take your first question about segment reporting around towers. It's continues to be something that we look at one of the things that we've tried to do in response to both of your questions and others is to provide.

Little bit more detail on the towers, you can see that again in our slides as well as doug's comments and we're going to try to try to continue to do that moving forward.

Vicky: My comment about not going back I mean, one of the things that we've noticed is.

Vicky: And once you provide a certain level of information.

Vicky: Not a it's not a great idea to start to reel that back and so one of the things. We want to do is you want to be deliver if you want to be disciplined when we start to share more detailed financials on those towers.

Laurent Therivel: And so one of the things we want to do is we want to be deliberate. We want to be disciplined when we start to share more detailed financials on those towers. We continue to work through it. I would expect that you can see more detailed financials in the coming quarters, but I'm going to stop a little bit short of providing an actual delivery date on that.

Vicky: We continue to work through it.

Vicky: Would expect that you can see more detailed financials in coming quarters, but I'm going to stop a little bit short of providing an actual delivery date on that.

Laurent Therivel: The broad trends on towers, by the way, I mean, they remain consistent with what you've seen in past quarters. So not to reiterate too much what you heard from us last quarter, but near term, we continue to see that slowdown in terms of overall capital spending across the industry. And so we're seeing a bit of a slowdown in new applications and in co-locations and so on. But in the long run, we remain really bullish on those towers for two reasons.

Vicky: The broad trends on towers by the way I mean, they remain consistent with what <unk> seen in past quarters, so not to not to reiterate too much what you heard from us last quarter, but near term, we continue to see that slowdown in.

Vicky: In terms of overall capital spending across the industry.

Vicky: And so we're seeing a bit of a slowdown in new applications and in co locations and so on long run we remain really bullish on those towers for two reasons.

Laurent Therivel: The first thing is, as you get into future iterations of G, whether it's a 5G advanced or a 6G, that's going to be driven by one of two things. It's going to be driven by more spectrum, or it's going to be driven by network densification. And the FCC, as you know, does not have spectrum authority right now. I think that's a problem.

Vicky: First is as you get into <unk>.

Vicky: Future iterations of Gs, whether it's <unk> advanced or <unk>.

Vicky: That's going to be driven by one of two things, it's going to be driven by more spectrum or it's going to be driven by network densification.

And the FCC is you know does not have spectrum authority right now I think thats a problem.

Vicky: But nonetheless, we.

Laurent Therivel: But nonetheless, we do not have a mechanism right now to put new spectrum to work. NTIA has its spectrum plan in place, but there's not necessarily new spectrum that's targeted to be auctioned off for a long time. Spectrum sharing appears to be where they're focusing their efforts. And so what that means is that if you're going to go towards 6G, you're going to need to be focusing more on densification than you will on new spectrum.

Vicky: We do not have a mechanism right now to put new spectrum to work.

Vicky: NTIA has their spectrum plan in place, but there is not necessarily new spectrum, that's targeted to be auctioned off for a long time.

Vicky: From sharing appears to be where they are focusing their efforts.

Vicky: What that means is that if youre going to go towards <unk> youre going to need to be focusing more on densification than you will on your spectrum.

Laurent Therivel: And that's good news for Towers. The other reason we're bullish in the long run on this is that our overall co-location rate remains low relative to some of the other players. We've increased it steadily over time. So I'm pleased with the momentum. We still have a lot of room to grow.

Vicky: And Thats good news for towers.

Vicky: The other reason, where we're bullish in the long run on this is just our overall co location rate remains low relative to some of the other players we have increased steadily over time.

Vicky: So I'm pleased with the momentum we still have a lot of room to grow and so broadly optimistic on this segment more detailed financials to come but not exactly sure when Ricky Let me turn to you for <unk> Yeah. Thank you I'll take good morning, Rick.

Laurent Therivel: And so broadly optimistic on this segment, more detailed financials to come, but not exactly sure when. Vicki, let me turn to you for a question. Yeah, thank you, LT. Good morning, Rick. First off, let me just level set.

Ricky: First off let me just level set this borrowing.

Vicki L. Villacrez: This borrowing was done at the TDS level, and it's largely for general corporate purposes, but primarily for the advancement of our FIBER program. So, you know, you commented on the price. I think it's marginally more expensive, for sure, in this high interest rate environment. It's, but in the grand scheme of our total structure, capital structure, it's increasing our weighted average cost of debt by just 30 basis points, 6.5 to 6.8.

Ricky: Then at the Tds level.

Ricky: And it is largely for general corporate purposes, but primarily for the advancement of our fiber program.

Ricky: So you know you you commented on the price I think it's marginally more more expensive.

Ricky: For sure in this high interest rate environment.

Ricky: But in the Grand scheme of our total structure capital structure, it's increasing our weighted average cost of debt by just 30 basis points six five to six eight.

Vicki L. Villacrez: It's, it's, it's, what I'm excited about here is that it's giving us the flexibility that we need and the optionality that we need to continue to advance our fiber program. We're very pleased with the fiber program, as you heard Michelle talk about today, and I think that's demonstrated by TDS Telecom's strong growth in the first quarter, as well as the guidance that they set out for themselves for the year.

Ricky: Yes.

Ricky: If what I'm excited about here is that.

Ricky: It's giving us the flexibility that we need and the optionality that we need to continue to advance our fiber program. We're very pleased with the fiber program as you heard Michelle talk about today and I think that's demonstrated by Tds telecom strong growth in the first quarter as well as the guidance that they set out for.

Ricky: Themselves for the year.

Michelle Brukwicki: Okay, and speaking of which, a question for Michelle as well. Obviously, really strong numbers on the OIBTA line for TDS Telecom demonstrating, and hopefully, you know, the fiber is working as you said. The guidance for OIBTA for the year 310 to 340, you put up Low 90s in the quarter. Are we expecting maybe some costs that are coming in in the next three quarters? I mean, what would be different as we kind of look at this thing? Hopefully, we will see continued penetration gains on the costs that have already been spent, OPEX and CAPEX. What would cause EBITDA pacing to slow down the rest of the year?

Ricky: Okay.

Speaker Change: Hey, Rich a question for Michel as well, obviously really strong numbers on the OIBDA line.

Speaker Change: For Tds telecom, demonstrating and hopefully the fibers is working as you said.

The guidance for OIBDA for the year 310 to 340, you've put up.

Rich: Low 90 days in the quarter are we expecting maybe some costs that are coming in in the next three quarters I mean, what would be different as we kind of look at this thing hopefully we see continued penetration gains on the costs that have already been spent opex and capex.

What would cause EBITDA pacing to slow down the rest of the year I guess.

Michelle Brukwicki: Yeah, hi Rick. Thanks for the question. Yeah, we are really pleased with our adjusted EBITDA in the first quarter, the 38% increase that we saw compared to last year. So that increase was a result of revenue increases, but it's also a result of very diligent cost management. And the entire telecom team is focused on expenses. So we are really trying to time our expenses very prudently, in terms of like our hiring in new markets, just in time for when we need those resources, and the timing of our spending on marketing and advertising to just be right when we need to optimize the benefits of that spend.

Speaker Change: Yeah, Hi, Rick Thanks for the question, Yes, we are really pleased with our adjusted EBITDA in the first quarter, the 38% increase that we saw compared to last year.

Speaker Change: That increase was a result of revenue increases, but it's also a result of very diligent cost management.

Speaker Change: And the entire telecom team is focused on expenses. So we are really trying to time, our expenses very prudently in terms of like our hiring in the new markets. Just in time for when we need those resources the timing of our spending of marketing and advertising to just be right when we need to optimize the burner.

Michelle Brukwicki: And being very prudent with things like travel and entertainment and finding ways to cut back. So there is an element of cost management that is timing. We're doing a great job at managing our costs, but there is some timing that you're going to see, you know, happen throughout the year. So at this point, we've reaffirmed our guidance range for adjusted EBITDA at that 310 to 340 range that you mentioned.

Speaker Change: <unk> of that spend.

Speaker Change: And being very prudent with things like travel and entertainment and finding ways to cut back. So there is an element of the cost management that is timing.

Speaker Change: We're doing a great job at managing our cost, but there is some that timing and then youre going to see happen throughout the year. So at this point, we've reaffirmed our guidance range for adjusted EBITDA at that $3 10 to $3 40 range that you mentioned and at the midpoint of that range of $3 25 that implies about a 14% increase.

Michelle Brukwicki: And at the midpoint of that range of, you know, 325 dollars, that implies about a 14% increase in adjusted EBITDA year over year, which is still a very healthy increase. But, you know, we don't expect to see the 38% increase in the first quarter carry through the entire year. So that's why, at this point, we're maintaining our guidance range where it is.

Speaker Change: And adjusted EBITDA year over year, which is still a very healthy increase.

Speaker Change: But we don't expect to see the first quarter, the 38% carry through the entire year. So that's why at this point, we're maintaining our guidance range where it is.

Ric Prentiss: All right. I appreciate it. Everyone stay well. Thanks, Rick.

Speaker Change: Makes sense alright appreciate everyone stay well thanks, Rick next question.

Desiree: Thanks, Rick. Next question.

Michael Rollins: Our next question comes from the line of Michael Rollins with Citi. Your line is open.

Speaker Change: Our next question comes from the line of Michael Rollins with Citi. Your line is open.

Michael Rollins: Okay. Thank you and good morning, I have an operational question pardon me and then a strategic question. So first with the operational question. Just curious if you could share some additional perspective on.

Michael Rollins: Thanks and good morning. I have an operational question, pardon me, and then a strategic question. So first for the operational question, just curious if you could share some additional perspective on the potential and timing to turn around the gross ad trajectory. You know, whether it's the effort on Grossad or Churn on the postpaid phone side, can you share the path to get back to a neutral or positive condition on the phone subscription.

Michael Rollins: The potential and timing.

Michael Rollins: Turning around the gross add trajectory.

Michael Rollins: And.

Michael Rollins: Whether it's the effort on gross adds or churn on the postpaid side can you share the path.

Michael Rollins: Get back to neutral or positive condition.

Michael Rollins: Subscription.

Laurent Therivel: And then on the strategic side, I'm curious, as you're continuing to push forward with the FIBR strategy, have you contemplated on the TDS side, the idea of going from a retail business to a wholesale business and offering broadband access? Other providers. Wireless, other firms that can help. TDS, continue to push forward and penetrate the market. Thanks.

Michael Rollins: And then on the strategic side I'm curious as you are.

Continuing to push forward with the fiber strategy have you contemplated that the GDS side.

The idea of going from a retail business.

Michael Rollins: To our wholesale business and offering broadband access.

Michael Rollins: Two.

Other providers.

Michael Rollins: Wireless other firms that can help.

Michael Rollins: GBS continue to push forward and penetrate the market.

Laurent Therivel: Hey, Mike. Good morning. It's LT.

Michael Rollins: Hey, Mike Good morning, It's LT I'll take your first question and then I'll probably hand, the second question to Michel to answer about wholesale and fiber.

Laurent Therivel: I'll take your first question, and then I'll probably hand the second question to Michelle to answer about wholesale and fiber. So, I mean, clearly, the path to positive net ads needs to be driven by both improvements in churn and improvements in Gross Ads. I'm not telling you anything you don't already know.

LT: So I mean, clearly the path to positive net adds needs to be driven by both improvements in churn.

Laurent Therivel: Let's start with improvements in churn. I'm really pleased with the progress that we've made in churn. As you can see in the quarter, churn is down pretty significantly. I think that's driven by two things. One, it's driven by the pool being. But it's also being driven by some pretty aggressive upgrade actions that we took both late last year as well as in the first quarter. So I referenced Us Days.

LT: And improvements in gross adds not telling anything you don't know, let's start with improvements in churn.

LT: I'm really pleased with the progress that we've made in churn as you can see in the quarter churn is down.

LT: Pretty significantly.

LT: That's driven by two things one it's driven by the pool being down.

LT: But it's also being driven by some pretty aggressive upgrade actions that we've taken both late last year as well as in the first quarter. So I referenced US days. This is a program that we kicked off this year to help drive upgrades and to help bring churn down we're very pleased with the success that we've seen.

Laurent Therivel: This is a program that we kicked off this year to help drive upgrades and to help bring churn down. We're very pleased with the success that we've seen. It's a small set of, I think we run it for about two weeks, special offers for existing customers to come in and take advantage of.

LT: It's a small set of it's I think we run it over about two weeks.

LT: Special offers for existing customers to come in and take advantage of.

Laurent Therivel: Upgrade their devices, get them back in contract, and thus reduce churn. And that back in contract element is really the biggest driver of churn reduction. The more customers we can get in contract, the lower the churn, the better the path to positive churn. The second element is around improving growth. First quarter slow, and not so slow for U.S. Cellular, but slow for the industry as a whole, right? The overall pool of available subscribers is down 16%, as I mentioned in my comment, probably the biggest drop that I've seen, I think, since COVID. And I think that's really driven by a few things. One is, Unknown Attendee, United States Cellular Corp. The other piece, though, is if you're going to go drive.

LT: Grade their devices to get back to get them back in contract.

LT: Reduce churn in that back in contract element is really the biggest driver of churn reduction more customers, we can get and contract the lower the churn the better the path to positive net adds.

LT: The second element is around improving gross adds.

LT: First quarter slow and Nacho slow for U S cellular but slow for the industry as a whole at the overall pool of available subscribers down 16% I mentioned that in my comments.

LT: The biggest drop that I've seen I think since COVID-19.

LT: And I think that's really driven by a few things one is <unk>.

LT: Perversely positive and that we and other carriers have done a good job getting customers back in contracts I think people are satisfied I think youre pleased with their services and so there arent as many people looking to churn.

LT: Those contracts that we're offering are also being done over a longer period of time.

LT: And again, that's not just us the industry as a whole.

LT: The other piece, though is if youre going to go drive.

Laurent Therivel: Postpaid Gross Ads: you have to get the network and the price equation right. And one of the things that we did here in the first quarter was we got a lot more aggressive on the back end of the quarter with promotions, particularly around trade-ins. So we lifted the trade-in requirements and the plan requirements. And by lifting those plan requirements and those trading requirements at the very back end of the first quarter and going into the early second quarter, we've seen some improvements that I'm optimistic about.

LT: Postpaid gross ads is you have to get the network and the price equation right and one of the things that we've done here in the first quarter is we got a lot more aggressive on the back end of the quarter.

With promotions, particularly around trade and so we lifted trading requirements and plan requirements and by lifting those plan requirements and those trading requirements on the very back end of the first quarter and going into early second quarter. We.

Laurent Therivel: And so you put those things together, continuing to see meaningful improvements in churn that we've seen so far. And if we can maintain the momentum that we're seeing late in the quarter and so far going into April, I think we're heading in the right direction in terms of overall net, I'll highlight one other dynamic, though, and it doesn't really show up as much in overall subscriber net ads, but I think it's going to be an increasingly meaningful one as we go into the back end of this year, so into the second half, and into next, and that has to do with the business side.

LT: We've seen some improvements that I'm that I'm optimistic about and so you put those things together are continuing to see meaningful improvements in churn that we've seen so far if we can maintain the momentum that were seeing late in the late in the quarter and so far going into April I think we're heading in the right direction in terms of in terms of overall net adds.

LT: I'll highlight one other dynamic though.

LT: And it doesn't really show up as much in overall subscriber net adds but I think it's going to be an increasingly meaningful one as we go.

LT: Into the backend of this year, so into the second half and into next and that has to do with the business segment.

Laurent Therivel: One of the things we've observed with 5G is that the really interesting new use cases are not coming up through consumers. Fixed wireless is a great business for us. But we've talked in the past about how difficult it is to sustain fixed wireless. It doesn't pay for itself, right? It doesn't pay for the capital network.

LT: One of the things we've observed with five G is that the really interesting new use cases are not coming up through consumer fixed.

LT: Fixed wireless is a great business for us, but we've talked in the past about it's difficult to sustain fixed wireless doesn't pay for itself or it doesn't pay for the capital necessary.

Laurent Therivel: And so, what we need to find are those other use cases that help to monetize 5G over and above just positive consumer net ads. And business revenues and business use cases are key to that. So I referenced what we did with Rockwell, I referenced what we did with CAPE; we have a series of interesting IoT deals in flow. We've been investing in this segment, we've been investing in distribution around the business and our solutioning around business.

LT: And so what we need to find is those other use cases that help to monetize <unk> over and above just positive consumer net adds.

LT: Business revenues and business use cases or so.

LT: So I referenced what we did with Rockwell I referenced what we did with Cape We have a series of interesting Iot deals and flow.

LT: Investing in this segment, we've been investing in the distribution around business and our solutions around business.

Laurent Therivel: I think it's going to help us in the long run because those 5G investments will be paid for much more with enterprise than the 4G investments. For example, mobile video paid for 4G; you're going to need enterprise. So I think you put those things together, improved churn, that we've seen so far already, and we're already seeing in our results, recent improvements in overall gross ads by getting more promotional, and layer on top of that some of the investments we're making in enterprise.

LT: It's going to help us in the long run because those <unk> investments will be paid for much more with enterprise.

LT: And then the <unk> investments.

LT: <unk> video paid for <unk> youre going to need enterprise to pay for <unk>. So I think you put those things together.

Improved churn.

LT: You've seen so far already we're already seeing in our results recent improvements in overall gross adds by getting more promotional and layer on top of that some of the investments we're making in enterprise and I think you have a path towards more attractive not just subscribers, but also more attractive financials Michelle.

Laurent Therivel: And I think you have a path towards more attractive, not just subscribers, but also more attractive findings. Michelle, let me hand it to you to answer the question around how we're thinking about wholesale on the fiber side. Yes. Thanks, LT. And thanks, Mike, for the question.

LT: Michelle let me hand, it to you to answer the question around how we're thinking about wholesale on the fiber side.

Michelle Brukwicki: Yep, thanks, LT. And thanks, Mike, for the question. So yeah, we're building our fiber networks, Mike. I mean, we have thought about all the different ways to leverage those networks. We certainly do, you know, work with wireless companies if there's a way for us to provide fiber to towers, and you know, for things like that. We certainly do that. But in terms of opening it up, you know, and being a hotel provider, that's not, that's not where we're going with these at this point. Our business model, our long-term vision is to own our networks and to serve our customers on those networks.

Michelle: Yeah, Thanks, <unk> and thanks, Mike for the question.

Michelle: So, yes, where we are building our fiber networks, Mike I mean, we have thought about all the different ways to leverage those networks.

We certainly do.

Michelle: Work with wireless companies. If there is a way for us to provide fiber to towers and for things like that we certainly do that but in terms of opening it up and being a wholesale provider that's not that's not where we're going with these at this point our business model. Our long term vision is to own our networks and to serve our.

Michelle Brukwicki: And we think that we can do a really great job serving those customers and offering them the products and services that they need and want at competitive prices. And so we think that, you know, we do that in a very high-quality way. And so, you know, at this point, we're not considering opening up our networks to others.

Michelle: <unk> on those networks and we think that we can do a really great job, serving those customers and offering them the products and services that they need and want at competitive prices and so we think that that we do that in a very high quality way and so at this point, where we're not considering opening up our networks to other.

<unk>.

Thanks very much.

Okay. Thanks, Mike.

Sergey Dluzhevskiy: The next question comes from the line of Sergey Dluzhevskiy with Gancor Investors.

Next question comes from the line of Sergey Lubinsky at again part investors. Your line is open.

Sergey Dluzhevskiy: Good morning. Thank you for taking the questions. My first question is for LT, around competition with cable. So, as you said, you're competing with cable across about two-thirds of your footprint. They have been quite aggressive. Obviously, you're dealing with larger companies, which are, in turn, responding to even larger players in the wireless industry. So, in this environment, what could US Cellular do effectively as a regional provider to improve its competitive position over the medium term? And specifically, in competition with cable, what has been working better for you over the past few quarters, based on your experience?

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

Sergey Dluzhevskiy: My first question is for LTE.

LTE around competition.

Sergey Dluzhevskiy: Cables or as you said cable.

Sergey Dluzhevskiy: It wasn't being as cable across about two thirds of your footprint very hoping quite aggressive targets for your dealing with larger companies.

Sergey Dluzhevskiy: Or and torn responding.

Sergey Dluzhevskiy: Even larger players in the wireless industry. So.

Sergey Dluzhevskiy: In this environment.

Sergey Dluzhevskiy: What <unk> effectively as a regional provider to improve its competitive position over the medium term and specifically in <unk>.

Sergey Dluzhevskiy: Additionally, with cable what has been the working better for you over the past few quarters based on your experience.

Laurent Therivel: It's okay. Yeah, so I put in a bit of numbers. I know I mentioned these in the intro, but the interesting challenge that we're facing with the cable players is the first one, which is, cross-subsidizing wireless with wireline, so using wireline profits to help subsidize a wireless business. And that's a challenging dynamic to fight against from a pricing perspective, right? In some cases, we've got cable in the marketplace for 29 bucks, unlimited with one line free for a year. So you're talking about 15 bucks a month on the Verizon network.

Speaker Change: Yes, Sir.

Speaker Change: Yes, so I mean to put a bit of numbers I know I mentioned these in the intro but.

Speaker Change: The interesting.

Speaker Change: Challenge that we're facing with the cable players.

Speaker Change: The first is something that.

Speaker Change: We saw in Europe.

Speaker Change: In the LTE days, which is <unk>.

Cross subsidizing wireless with wireline, so using wireline profits to help.

Speaker Change: Help subsidize the wireless business and.

Speaker Change: That's a challenging dynamic.

Speaker Change: To finance from a pricing perspective and in some cases, we've got cable in the marketplace at 29 Bucks unlimited with one line free for a year. So youre talking about 15 Bucks a month on the Verizon network.

Laurent Therivel: And so it's a challenging pricing dynamic to fight against. And then I mentioned the Wi-Fi offloading dynamics. In many cases, their Wi-Fi offload is much higher than ours, and so correspondingly, their use of cellular is lower.

Speaker Change: And so it is a challenging pricing dynamic to fight against that I mentioned, the Wi Fi Offloading dynamics.

Speaker Change: In many cases in many cases they are using their Wi Fi offload is much higher than ours and so the core correspondingly their use of cellular is lower.

Laurent Therivel: So what do we do to compete? At its core, our industry still competes on network and price. And so the first thing that you can do is you can bring the price of the bundle down to compete against wireless, excuse me, to compete against cable. And we're doing that with fixed wireless, right? So one of the things that I'm very pleased about is the success of our fixed wireless business, and a lot of those customers come with bundled lines. And so kind of go back, go back at them, you know, fight the war on their turf, so to speak.

Speaker Change: What do we do to compete.

Speaker Change: At its core our industry still compete on network and price.

Speaker Change: And so the first thing that you can do is you can bring the price of the bundle down to compete against wireless excuse me to compete against cable and.

Speaker Change: And we're doing that with fixed wireless right. So one of the things that I am very pleased about is the success of our fixed wireless business and a lot of those customers come with bundles lines.

So.

Speaker Change: Kind of go back go back Adam.

Speaker Change: Fight the war on their turf so to speak.

Laurent Therivel: And I think the success of our fixed wireless business is proof that this strategy is a good one. I think the second thing that you can do is make sure that you're paying a lot of attention to your existing customer base and you're protecting them as best you can, and so your contract rates go up. And consequently, our churn rate going down is another good dynamic around our ability to compete successfully with cable. The third piece, Sergey, is that I also think that this is a long game, right?

Speaker Change: And I think the success of our fixed wireless business is proof around that strategy being being a good one.

I think the second the second thing that you can do is make sure that you're paying a lot of attention to your existing customer base and you're insulating them as best you can.

Speaker Change: And so our in contract rates going up and consequently, our churn rate going down.

Speaker Change: As another good dynamic around our ability to compete successfully with cable.

Speaker Change: The third piece certainly as I say also think that this is a long game.

Laurent Therivel: In the long run, it is very difficult to compete in our industry if you don't have owner's economics. In the short to medium term, as I referenced, right, they've got, they have a share of gross ads that is much higher than their existing market share, and so there's still room, plenty of room to grow. But in the long run, investing in a really high-quality network experience is another insulating factor that will be able to help you compete.

Speaker Change: In the long run it is very difficult to compete in our industry. If you don't have owners economics.

Speaker Change: The short to medium term I referenced right they've got.

Speaker Change: They have a share of gross adds it is much higher than your existing market share.

Speaker Change: And so theres still room plenty of room to grow.

Speaker Change: But in the long run investing in a really high quality network experience is another insulating factor to be able to help you compete successfully and so we have to invest and we have to invest behind a mid band we have to invest behind high speeds quality <unk> and <unk>.

Laurent Therivel: And so we have to invest; we have to invest in a mid-band, we have to invest in high speeds, quality 5G, and make sure that we have a highly competitive network. And so your ability as a wireless player to invest not just in low prices but also in high speeds and high quality, to me, in the long run, is the best way to compete against the cable wireless players. They have plenty of room to grow, but we think we can compete aggressively.

Speaker Change: Making sure that we have a highly competitive network.

Speaker Change: So your ability as a wireless player to invest not just in low prices, but also in high speeds and high quality to me in the long run is the best way to compete against the cable wireless players that have plenty of room to grow but we think we can compete aggressively.

Sergey Dluzhevskiy: Another question is on towers. If you could maybe summarize your primary objectives for the tower business for this year or maybe over the next two years, Obviously, you mentioned the current environment as well as companies largely past the mid-band deployments and lowering the capital spending plan that impacted overall revenue trajectory in the near term. But even in this environment, I guess, what are the opportunities to improve revenue trajectory and what are the primary objectives over the next year?

Speaker Change: Got it.

Another question is on towers.

Speaker Change: If you could.

Maybe to summarize your primary objectives for the power business for this year or maybe over the next two years. Obviously you mentioned the current environment, there's wireless companies.

Speaker Change: Well it depends a mid band deployments on lowering our capital spending plan.

That impacted overall revenue trajectory in the near term, but even in this environment I guess what are the opportunities to improve revenue trajectory on what does the primary objectives over the next few years.

Laurent Therivel: Yeah, so I would, Sergey, I would, I would, I would chunk it up a little bit in terms of, you know, let's call it a one to two year timeframe versus a three to five year timeframe. For the next one to two years, I mean, the objective is simple. It's continue to grow revenue, and the easiest way to do that is to be a co-location partner of choice. And so we continue to market those towers aggressively, the ones that we already have in place.

Speaker Change: Yes, so I figured I would I would chunk it up a little bit in terms of let's call. It a one to two year timeframe versus a three to five year timeframe.

Speaker Change: For the next one to two years I mean, the objective is simple it's continue to grow revenue.

Speaker Change: And the easiest way to do that is to be a co location partner of choice.

Speaker Change: So we continue to market those towers aggressively the ones that we already have in place.

Laurent Therivel: We've talked in the past about potentially being able to open up other assets on those towers to people to co-locate with us. And so co-location rates and continuing to improve that co-location rate are probably our primary objective. We think we are well positioned to do so. The challenge is in the next one to two years.

Speaker Change: But we've talked in the past about potentially being able to open up other assets on those towers people to co locate with us.

Speaker Change: So co location rate and continuing to improve that co location right.

Speaker Change: It's probably our primary objective.

Speaker Change: We think we are well positioned to do so.

Speaker Change: The challenge is in the next one to two years.

Laurent Therivel: How much co-location activity, how much new tower build activity will there be for? And so there's kind of a secondary objective in the next one to two years, which is to make sure that we're financially healthy and we're built for the long term. That's something that we've always focused on as a business, not just in our tower business but, you know, more broadly. And so I feel good about the long-term trajectories and our ability to, you know, weather the storm of the next year or two as operators, not just US Cellular, but others kind of pull back a little bit on What we want to be positioned for is that three to five year time frame when, If I, as I talked about a little bit in my answer to Rick, If we don't see more spectrum come online.

Speaker Change: How much co location activity, how much new tower build activity, whether it will there be for operators.

Speaker Change: So theres kind of a secondary objective in the next one to two years, which is to make sure that we're financially healthy and we're built for the long term.

Speaker Change: That's something that we've always focused on as a business.

Speaker Change: Not just in our tower business, but more broadly and so I feel good about the long term trajectory and our ability to.

Speaker Change: Whether the storm of next year or two as operators not just U S cellular that others kind of pull back on capital what.

Speaker Change: What we want to be positioned for is that three to five year timeframe.

Speaker Change: When.

Speaker Change: If I, if as I talked about a little bit in my answer to Rick's question. If we don't see more spectrum come online.

Laurent Therivel: Operators are going to have to densify, and if they densify, we think we're in a very good position. In previous earnings calls, we've shared how our tower portfolio, in many cases, a large portion of our tower portfolio doesn't have another tower within a mile, two miles, three miles of its tower. So it's not one of these situations.

Speaker Change: Operators are going to have to densify.

Speaker Change: And if they densify, we think we're in a very good position.

Speaker Change: In past earnings call, we shared how our tower portfolio in many cases, a large portion of our tower portfolio doesn't have another tower.

Laurent Therivel: Most of our towers don't have these situations where you have one tower, and there's another one right next to it. And so it's very difficult to differentiate yourself other than by price. In our case, we're differentiated by location. And as some of our competitors have to densify into rural America, we think that our portfolio is really well situated. And so in the long run, we see some really attractive growth on that. So the co-location rate and, let's call it, a healthy financial profile would be the metric for the next year or two. Long term, it would be overall top line revenue growth and potentially even new tower expansion when we can invest to support other people's densification.

Speaker Change: Within a mile two miles three miles of its tower. So it's not one of these situations most of our towers don't have these situations, where you have one tower and there is another one right next to it and so it's very difficult to differentiate yourself other than by price.

Speaker Change: Case in where we are differentiated by location.

Speaker Change: And as some of our competitors have to densify into Rural America, you didn't get.

Speaker Change: Our portfolio is really well situated and.

Speaker Change: So in the long run we see some really attractive growth on that so co location right and let's call. It a healthy financial profile will be the metric for the next year or two long term it would be it would be overall topline revenue growth.

Speaker Change: And potentially even new tower expansion, when we can invest to support other people's Densify Densification efforts.

Sergey Dluzhevskiy: Yeah, great. And my last question is for Michelle.

Speaker Change: Great.

Speaker Change: My last question is.

Speaker Change: For Michele I think a few quarters ago, you highlighted the pick up in the overbuilding in your ILEC markets.

Michelle Brukwicki: I think a few quarters ago, you highlighted a pickup in overbuilding in your ILAC markets. Maybe if you could provide an update on where the situation is now, how you typically respond to an overbuilder, and your approach in 2024? And also, as you think about your fiber build, could you talk about how you prioritize your build, keeping the overbuilding activity in mind and other factors into some kind of priority.

Michele: But maybe if you could provide an update.

<unk> is now how do we typically respond to an overbuild or.

Michele: Approach in 'twenty 'twenty four and also as you think about your fiber build if you could talk about how you prioritize the build.

Michele: Things overbuilding through with their minds and other factors.

Michele: Or are you kind of.

Michele: Prioritize.

Michelle Brukwicki: Hi Sergey. Thank you for the questions. So yeah, if we kind of take our markets, you know, individually, we certainly have been balancing our fiber spending over the last few years, and it's heavily gone into expansion markets. But we've also put a significant amount of investment into our ILEC markets, so our ILECs are 44% fibered up at this point. So that goes a long way to defending areas, you know, on our ILEC properties.

Speaker Change: Yeah, Hi, Sergey Thank you for the question.

Speaker Change: So, yes, if we kind of take our markets.

Speaker Change: Individually, we certainly have been balancing our fiber spending over the last few years.

Sergey Dluzhevskiy: It's heavily gone into expansion markets, but we've also put a significant amount of investment into our ILEC markets. So our ILEC or 44% fibered up at this point.

Sergey Dluzhevskiy: So that goes a long way to defending.

Sergey Dluzhevskiy: Areas in our ILEC properties.

Michelle Brukwicki: At the moment, we're not doing a lot of spending in our ILEC markets this year because we've got EA-CAM coming. So this year, we're focusing on engineering and getting our plans lined up so that those builds can start going in 2025, and we'll be fulfilling our EA-CAM commitments over the next few years.

Sergey Dluzhevskiy: At the moment, we're not doing a lot of spending in our ILEC markets. This year, because we've got <unk> coming.

Sergey Dluzhevskiy: This year, we're focusing on engineering and getting our plans lined up so that those builds can start going in 2025.

Sergey Dluzhevskiy: And will be.

Sergey Dluzhevskiy: Fulfilling our EAA Cam commitments over the next few years, that's going to take a lot more fiber into our ILEC as well and so that is going to serve as another great defense mechanism in our ILEC markets on top of all of the investment that we've already put in ourselves over the last many years like over the last decade really.

Michelle Brukwicki: That's going to take a lot more fiber into our ILEC as well. And so that is going to serve as another great defense mechanism in our ILEC markets on top of all of the investment that we've already put in ourselves over the last many years, like over the last decade really. So that's our plan for the ILEC. There is competitive, you know, overbuilding that is happening in certain areas of our ILEC.

Sergey Dluzhevskiy: So that's that's our plan for the ILEC there is competitive.

Overbuilding that is happening in certain areas of our ILEC that certainly is present, but we have tried to defend as much as possible with being preemptive and getting our fiber there as quickly as possible.

Michelle Brukwicki: That certainly is present, but we have tried to defend as much as possible by being preemptive and getting our fiber there as quickly as possible. And with, you know, going into the enhanced A-CAM program to help fortify our ILEC even further.

Sergey Dluzhevskiy: And with.

Sergey Dluzhevskiy: Going into the enhanced ATM program to help fortify our ILEC even further.

Michelle Brukwicki: So, thank you. Thanks, Sergey.

Speaker Change: Thank you.

Speaker Change: Thanks Kurt.

Speaker Change: Okay.

Colleen Thompson: There are no further questions at this time. Ms. Colleen Thompson, I turn the call back over to you. Okay, thank you.

Speaker Change: There are no further questions at this time, Ms. Colleen Samson I'll turn the call back over to you.

Colleen Thompson: Okay, thanks everyone for your time today. Please reach out to IR if you have additional questions, and have a great weekend.

Colleen Thompson: Okay. Thanks, everyone for your time today, please reach out to IR. If you have additional questions and have a great weekend.

Operator: Operator, we can close out the call. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Speaker Change: Operator, we can close out the call.

Speaker Change: Ladies and gentlemen. This concludes today's conference call you may now disconnect.

Speaker Change:

Speaker Change:

Speaker Change: Okay.