Q3 2024 United States Cellular Corp Telephone and Data Systems Inc Earnings Call
Okay.
Operator: Thank you for standing by.
Thank you for standing by my name is <unk> and I'll be your operator today at this time I'd like to welcome everyone to Tds U S. Cellular third quarter 2024 operating results conference call.
Mandeep: My name is Mandeep and I'll be your operator. At this time, I'd like to welcome everyone to the TDS U.S. Cellular Third Quarter 2024 Operating Results Conference. All lines have been placed on me to prevent any background.
All lines have been placed on mute to prevent any background noise.
Mandeep: After the speaker submersed, there will be a question and answer session. If you'd like to ask questions during this time, simply press star 1. on your telephone keypad. If you'd like to withdraw your question, press star 1 again. Thank you.
After the Speakers' remarks, there'll be a question answer session, if you'd like to ask questions as time simply press star one.
On your telephone keypad, if you'd like to withdraw your question Press Star one again.
Colleen Thompson: I would now like to turn the call over to Colleen Thompson. Vice President, Corporate Relations. You may begin.
Speaker Change: I would now like to turn the call over to Colleen Thompson.
Speaker Change: Vice President corporate relations you may begin.
Colleen Thompson: Good morning, and thank you for joining us. We want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find on the Investor Relations section of the TDS and U.S. Cellular website.
Colleen Thompson: Good morning, and thank you for joining us we want to make you all aware of the presentation. We have prepared to accompany our comments. This morning, which you can find on the Investor relations sections of the Tds and U S cellular websites.
Colleen Thompson: With me today and offering prepared comments are from TDS, Vicki Villacrez, Executive Vice President and Chief Financial Officer, from U.S. 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. 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 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.
Colleen Thompson: With me today and offering prepared comments are from Tds, Vicki <unk> Executive Vice President and Chief Financial Officer from U S. Cellular LTE thorough of our President and Chief Executive Officer, Doug Chambers, Executive Vice President Chief Financial Officer and Treasurer.
Colleen Thompson: From Tds Telecom, Michelle broke lakey 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 website. Please see the websites for slides referred to on this call, including non-GAAP Reconciliations we provide guidance for both adjusted operating income before depreciation and amortization or OIBDA and adjusted earnings before interest taxes depreciation.
Colleen Thompson: <unk> and amortization or EBITDA to highlight the contributions of U S Cellular's wireless partnerships.
Colleen Thompson: Cellular's wireless partnership.
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. Please review the Safe Harbor paragraphs in our press releases and the extended version included in our SEC filing.
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 Villacrez. Vicki?
Colleen Thompson: And with that I will now turn the call over to Vicki Bellacruz sticky okay. Thank you Colin and good morning, everyone.
Vicki Villacrez: Okay. Thank you, Colleen. And good morning, everyone.
Vicki Villacrez: Before we begin, I do want to acknowledge the devastating impact of the recent hurricanes and the fires that swept through Rio Doce, New Mexico. Our hearts go out to all who were affected and suffered loss and I want to thank our teams especially who came together to offer support and assistance in all our affected communities when our customers and our communities needed us most. Thank you.
Vicki Bellacruz: Before we begin I do want to acknowledge the devastating impact of the recent hurricanes and fires that swept through Ria Delasau New Mexico.
Our Hearts go out to all who are affected and suffered loss and I want to thank our teams, especially who came together to offer support and assistance in all our affected communities, what our customers and our communities need us most.
Vicki Bellacruz: Thank you.
Vicki Villacrez: As I turn to the results, I want to highlight that we had another quarter of execution on the priorities that we set out during the year. As LT will cover in more detail, U.S. Cellular has made nice progress on monetizing portions of the spectrum that were not included in the proposed transaction with T-Mobile. These transactions really highlight the significant value and demand for these licenses. We have looked across our enterprise, entering into several other transactions that will help to focus our resources and further optimize our footprint.
Vicki Bellacruz: As I turn to the results I want to highlight that we had another quarter of execution on the priorities that we set out during the year.
Vicki Bellacruz: As al will cover in more detail U S. Cellular has made nice progress on monetizing portions of the spectrum that were not included in the proposed.
Vicki Bellacruz: Transaction with T. Mobile these transactions really highlights the significant value and demand for these licenses.
Vicki Bellacruz: We have one.
Vicki Bellacruz: Our enterprise entry into several other transactions that will help to focus our resources and further optimize our footprint.
Vicki Villacrez: First, the sale of our OneNet IT solutions closed in early September. The sale of OneNEC is accretive to free cash flow. We also reached agreements on divestitures of certain non-strategic assets at TDS Telecom, expected to close later this year.
Vicki Bellacruz: First the sale of our one <unk> solutions closed in early September.
Vicki Bellacruz: The sale of bottleneck is accretive to free cash flow. We also reached agreements on divestitures of certain non strategic assets at Tds Telecom expected to close later this year.
Vicki Villacrez: Turning to results, I am pleased with our third quarter performance. Both business units are focused on meeting their financial objectives, resulting in U.S. cellular increasing its profitability outlook for adjusted EBITDA and adjusted OEBDA, and TDS Telcom reaffirming its guidance. We ended the quarter in a solid cash and liquidity position. Sequentially, each quarter, our debt to EBITDA ratios have improved throughout 2024. Both businesses are continuing to generate positive free cash flow while continuing to invest in their networks. We are pleased to see the Fed cut interest rates in mid-September, as this drives modestly lower interest costs for us.
Vicki Bellacruz: Turning to results I am pleased with our third quarter performance. Both business units are focused on meeting their financial objectives.
Vicki Bellacruz: <unk> and U S cellular increasing its profitability outlook for adjusted EBITDA, and adjusted OIBDA and Tds Telecom reaffirming its guidance.
Vicki Bellacruz: We ended the quarter in a solid cash and liquidity position sequentially each quarter, our debt to EBITDA ratios have improved throughout 2024.
Both businesses are continuing to generate positive free cash flow, while continuing to invest in their networks. We.
Vicki Bellacruz: We are pleased to see the fed cut interest rates in mid September as this drives modestly lower interest cost for us will continue to manage our balance sheet through a combination of primarily long dated debt maturities issued at historically low interest rates will continue to maintain.
Vicki Villacrez: We'll continue to manage our balance sheet through a combination of primarily long-dated debt maturities issued at historically low interest rates.
Vicki Villacrez: We'll continue to maintain reasonable leverage and sufficient liquidity, all of which provides flexibility as we go into the fourth quarter, and look forward to execute on our operational objectives and longer-term strategic goals.
Vicki Bellacruz: Reasonable leverage and sufficient liquidity all of which provides flexibility as we go into the fourth quarter.
Vicki Bellacruz: And look forward to execute on our operational objectives and longer term strategic goals.
Vicki Villacrez: Before turning the call over, we recently announced that Michelle Brukwicki will be leaving TDF in December, after 17 years with the enterprise. On behalf of the organization, I want to thank her for her leadership and wish her well in her next endeavor. With Michelle's upcoming departure, Chris Bossfield, who is currently TDS Telecom's Vice President of Financial Analysis and Strategic Planning, will be stepping into the role of Vice President of Finance and CFO at TDS Telecom. Michelle and Chris will be transitioning over the next.
Vicki Bellacruz: Before turning the call over we recently announced that Michelle Breck wiki will be leaving T. D. S. In December.
Vicki Bellacruz: After 17 years with the enterprise on behalf of the organization I want to thank her for her leadership and wish her well in her next endeavors with michelle's upcoming departure, Chris <unk>, who is currently Tds telecoms, Vice President financial analysis, and strategic planning will be stepping into the role.
Vicki Bellacruz: Vice President of finance and CFO at Tds Telecom.
Vicki Bellacruz: Michelle and Chris will be transitioning over the next months.
Vicki Villacrez: I'd also like to thank all of our associates for their hard work in these dynamic times.
Speaker Change: I'd also like to thank all of our associates for their hard work in these dynamic times and now L. T I'll turn it over to you.
LT Therivel: And now, LT, I'll turn it over to you. Thanks, Vicki. Good morning, everyone. I want to just briefly echo Vicki's sentiments regarding Hurricane Helene. I also want to pass along my sincere thanks to our network and operations teams that have worked tirelessly to restore our network and support our customers. Our operations have recovered, but it's going to take a long time for that area to fully recover, and everyone that's affected is certainly in our thoughts.
L. T: Thanks, Nikki good morning, everyone I wanted to briefly overview sentiments regarding hurricane Helane.
L. T: From a pass along my sincere thanks to our network and operations teams that have worked tirelessly to restore our network and support our customers.
L. T: Our operations have recovered, but it's going to take a long time for that area to fully recover and everyone. That's affected is certainly in our thoughts.
LT Therivel: With that, let's pivot to the materials. I'm going to take us to page 5, and that covers some recent highlights. First, following our announcement back in May, the process to sell our wireless operations and select spectrum to T-Mobile is proceeding as expected. As you may have seen, we filed our public interest statement with the FCC in September. We believe we're on track for a mid-2025 closing. We remain confident that the transaction with T-Mobile is the best long-term solution for our customers. It gives them the long-term benefits of greater scale and a more competitive network. The T-Bubble transaction will also provide us with an additional long-term tower tenant and a strengthened tower building.
L. T: With that let's pivot to the materials I'm going to take us to page five I'll cover some recent highlights.
L. T: First following our announcement back in May the process to sell our wireless operations in select spectrum to T. Mobile is proceeding as expected.
L. T: As you May have seen we filed our public interest statement with the FCC in September and we believe we're on track for a mid 2025 closing.
L. T: We remain confident that the transaction with T. Mobile is the best long term solution for our customers.
L. T: Gibson, the long term benefits of greater scale and a more competitive network.
L. T: The T mobile transaction will also provide us with an additional long term tower tenant and a strengthened tower business.
LT Therivel: If you recall, we began reporting separate wireless and tower segment information last quarter. We plan to continue to provide this detail going forward up to the expected close of the T-Mobile transaction. Also, as we talked about in our May announcement, after the proposed T-Mobile transaction, we'll be left with approximately 70% of our spectrum. We've been running a process to opportunistically monetize that spectrum. In October, we entered into agreements with multiple carriers to sell certain portions of those retained licenses. in exchange for aggregate proceeds of over $1 billion. Slide 6 shows our progress on the monetization and includes the sale of our 850 MHz spectrum and a portion of our AWS and PCS spectrum to Verizon.
L. T: If you recall, we began reporting separate wireless and tower segment information last quarter and we plan to continue to provide this detail going forward up to the expected close of the T mobile transaction.
L. T: Also as we talked about in our May announcement. After the proposed T mobile transaction will be left with approximately 70% of our spectrum.
L. T: We've been running a process to opportunistically monetize spectrum.
L. T: Tober, we entered into agreements with multiple carriers to sell certain portions of those retained licenses.
Exchange for aggregate proceeds of over $1 billion.
L. T: Slide six shows our progress on the monetization and it includes the sale of our 850 megahertz spectrum.
L. T: And a portion of our AWS and Pcs spectrum to Verizon as.
LT Therivel: as well as the sale of small portions of our CBRS, C-band, and 700 MHz spectrum to two other smaller network mobile operators. These license sale transactions are subject to regulatory approval and are also contingent on the close of our proposed transaction with T-Mobile. We're really pleased that we worked with multiple buyers, large and small, and that we were able to enter into agreements to realize substantial value for these licenses. And that was well in excess of our book.
L. T: As well as the sale of small portions of our CBR S. C band 700 megahertz spectrum to two other smaller network mobile operators.
L. T: These license sale transactions are subject to regulatory approval and there are also contingent on the close of our proposed transaction with T mobile.
L. T: We're really pleased that we worked with multiple buyers large and small and that we were able to enter into agreements to realize substantial value for these licenses.
L. T: Well in excess of our book value.
LT Therivel: Doug will be providing more details on the expected gain and the tax impacts associated with these license transactions. And we continue to work on opportunities for monetization of the remaining spectrum. But as this is an ongoing process, I won't be able to share any additional details today. but I will provide more updates in the...
L. T: Doug will be providing more details on the expected gain and the tax impact associated with these license transactions.
L. T: Now we continue to work on opportunities for monetization of the remaining spectrum, but as this is an ongoing process I won't be able to share any additional details today.
L. T: I will provide more updates as they become available.
LT Therivel: And I'll talk about the quarter. Our team remains highly focused on balancing improving subscriber momentum with delivering strong operational and financial performance, and you can see that in our results. As discussed last quarter, earlier this year we made promotional changes that have improved our subscriber trajectory while executing cost reduction initiatives that have enabled us to maintain strong profitability. We've continued to see the momentum from these changes in the third quarter and we improved retail net losses by 20,000 subscribers year over year. In addition, we've been committed to caring for our existing customers, and that includes conducting us days multiple times throughout 2024.
L. T: Now I'll talk about the quarter the.
L. T: The team remains highly focused on balancing improving subscriber momentum with delivering strong operational and financial performance and you can see that in our results.
As discussed last quarter earlier this year, we made promotional changes that have improved our subscriber trajectory.
L. T: While executing cost reduction initiatives that have enabled us to maintain strong profitability.
L. T: We've continued to see the momentum from these changes in the third quarter and we improved retail net losses by 20000 subscribers year over year.
L. T: In addition, we've been committed to caring for our existing customers and that includes conducting us days multiple times throughout 2024 and.
LT Therivel: And as a reminder, us days are periods where highly attractive promotional offers are made available to our existing customers. We believe this focus in our existing customers through us days and through other promotional investments. has contributed to improved post-pay handset churn for each of the first three quarters of 2024. We plan on continuing to award our existing customers through us days, other promotional offers in the future. For the industry as a whole, while the pool of available subscribers was down again in the quarter on a year-over-year basis, Our share of growth ads increased, and that allowed us to keep post-paid handset growth ads flat.
L. T: And as a reminder, our stays are periods, where highly attractive promotional offers are made available to our existing customers.
L. T: We believe this focus on our existing customers through stays and through other promotional investments.
L. T: Has contributed to improved postpaid handset churn for each of the first three quarters of 2024.
L. T: Plan on continuing.
L. T: Ward.
Customers through us days.
L. T: Promotional offers in the fourth quarter.
L. T: For the industry as a whole while the pool of available subscribers was down again in the quarter on a year over year basis our.
L. T: Our share our share of gross adds increased and that allowed us to keep postpaid handset gross adds were flat.
LT Therivel: This is particularly noteworthy in the context of our deal. Postpaid handset net losses improved by 10,000 year over year due to an improvement in churn. Again, partially attributable to our focus on rewarding our existing customers with attractive promotions and continuing to deliver a strong network. We've also seen nice improvement in prepaid due to our competitive pricing and promotional strategy. including our compelling multi-line pricing which began in May of this year. And I'm really pleased with our improved subscriber momentum, particularly given that we've seen no let-up in competitive intensity. And that's from either the large mobile network operators or the cable wireless.
L. T: This is particularly noteworthy in the context of our deal announced.
L. T: Postpaid handset net losses improved by 10000 year over year due to an improvement in churn again, partially attributable to our focus on rewarding our existing customers with attractive promotions.
L. T: And continuing to deliver a strong network experience.
L. T: We've also seen nice improvement in prepaid due to our competitive pricing and promotional strategies, including our compelling multiline pricing, which began in may of this year.
L. T: And I'm really pleased with our improved subscriber momentum, particularly given that we've seen no let up in competitive intensity and that's from either the large mobile network operators or the cable wireless players.
LT Therivel: Our postpaid ARPU also increased 2% partially due to customers realizing the value of our higher tier plans. We had 54% of our postpaid handset customers on the top two tier plans compared to 46% a year. And given the cost pressures associated with those continued promotional investments, as well as inflation, and the ongoing deployment of 5G. The teams have been doing an excellent job managing costs, with expenses down year over year in all major categories. And I'm really proud of our efforts to balance subscriber growth with financial distance.
L. T: Our postpaid <unk> also increased 2%, partially due to customers realizing the value of our higher tier plans.
L. T: We had 54% of our postpaid handset customers on the top two tier plans compared to 46% a year ago.
L. T: And given the cost pressures associated with those continued promotional investments as well as inflation and the ongoing deployment of five G.
L. T: The teams have been doing an excellent job managing cost with expenses down year over year in all major categories.
And I'm really proud of our efforts to balance subscriber growth with financial discipline, and that's enabled us to raise our full year profitability guidance this quarter.
LT Therivel: And that's enabled us to raise our full-year profitability guide. Turning to the network, we currently have over 80% of our data traffic already handled by sites that have been upgraded with low-band fiber. and that provides strong 5G coverage in our... And so consistent with our 5G network investments in 2024, future 5G network investments will predominantly be dedicated to the deployment of mid-band spectrum, and that's going to enhance 5G speed and capacity. And we noted previously that we expected capital expenditures for the full year to trend toward the lower end of our guidance range.
L. T: Turning to the network. We currently have over 80% of our data traffic already handled by sites that have been upgraded with low band <unk>.
L. T: And that provides a strong five <unk> coverage in our footprint.
L. T: So consistent with our <unk> network investments in 2024.
L. T: <unk> network investments will predominantly be dedicated to the deployment of mid band spectrum, and that's going to enhance <unk> speed and capacity.
L. T: And we noted previously that we expected capital expenditures for the full year to trend towards the lower end of our guidance range.
LT Therivel: And this quarter, we lowered our capital guidance to reflect Before I turn the call over to Doug, I want to congratulate the team for U.S. Cellular being ranked number one in the North Central Region J.D. Power Study, reinforcing that our ongoing 5G network investments are resulting in a strong customer experience. And as all these results demonstrate, we're executing on the strategic initiative that we've laid out for the business earlier this year, and I believe we're well-positioned heading into the busy holiday season.
L. T: In this quarter, we lowered our capital guidance to reflect that.
L. T: Before I turn the call over to Doug I want to congratulate the team for U S. Cellular being ranked number one in the north Central region J D power study.
L. T: Forcing that our ongoing <unk> network investments are resulting in a strong customer experience.
L. T: And as all of these results demonstrate we are executing on the strategic initiatives that we've laid out for the business earlier this year I.
And I believe we're well positioned heading into the busy holiday season.
Doug Chambers: I want to thank the team for their hard work, and I'll now turn the call over. Thanks, LT. Good morning.
L. T: I want to thank the team for their hard work and I will now turn the call over to Doug.
Doug Chambers: Thanks, <unk> good morning, before discussing quarterly results I want to provide some additional details on the proposed license sales transaction.
Doug Chambers: Before discussing quarterly results, I want to provide some additional details on the proposed license sales transaction that LT previously highlighted, and some broader impacts to our license portfolio. subject to closing the pending T-Mobile transaction and regulatory approvals of the license transaction. We expect proceeds of just over $0.0 billion on the licensed sale transactions announced in October and highlighted on slide. These licenses have a net book value of approximately $590 million, and after transaction fees and transaction accounting adjustments, We expect to recognize a gain on the license sales upon the respective close. Further, we expect total cash taxes related to these recently announced spectrum transactions to be in the range of $200 to $250 million for U.S.
Doug Chambers: <unk> previously highlighted and some broader impacts to our licensed portfolio.
Doug Chambers: Subject to closing the pending T mobile transaction and regulatory approvals of the license transactions. We expect proceeds of just over $1 billion on the license sale transactions announced in October and highlighted on slide six.
Doug Chambers: These licenses have a net book value of approximately $590 million and after transaction fees and transaction accounting adjustments, we expect to recognize a gain on the license sales upon their respective close dates.
Doug Chambers: Further we expect total cash taxes related to these recently announced spectrum transit transactions to be in the range of $200 million to $250 million for U S. Cellular.
Doug Chambers: Cellular and $150 to $200 million for TDF. This is in addition to estimated cash taxes on the pending T-Mobile transaction, which we expect to be in the range of $225 to $325 million for U.S. Cellular and $150 to $250 million for TDS. Additionally, as a result of our efforts to monetize spectrum assets not subject to the Securities Purchase Agreement with T-Mobile, U.S. Cellular was required to review and update the groupings of licenses or units of accounting for purposes of impairment testing. As a result of this review, our millimeter wave licenses in the 28, 37, and 39 GHz bands were identified as a separate unit of accounting.
Doug Chambers: 150 to 200 million for TBS. This.
This is in addition to estimated cash taxes on the pending T mobile transaction, which we expect to be in the range of $225 million to $325 million for U S. Cellular.
Doug Chambers: 100, $150 million to $250 million for Tds.
Doug Chambers: Additionally, as a result of our efforts to monetize spectrum assets not subject to the securities purchase agreement with T. Mobile U S. Cellular was required to review and update the groupings of licenses or units of accounting for purposes of impairment testing.
Doug Chambers: As a result of this review our millimeter wave of licenses in the 28 37, and 39 gigahertz bands were identified as a separate unit of accounting.
Doug Chambers: Due in part to industry-wide challenges related to operationalizing this millimeter-wave spectrum, U.S. Cellular estimated the fair value of these licenses to be less than their corresponding carrying value, and this was the primary driver of U.S.
Doug Chambers: Due in part to industry industry wide challenges related to operationalize. This millimeter wave spectrum U S. Cellular estimated the fair value of these licenses to be less than their corresponding carrying value and this was the primary driver of U S. Cellular recording a loss on impairment of licenses of 136 million.
Doug Chambers: Cellular recording a loss on impairment of licenses of $136 million, or $102 million net of tax, in the third quarter of 2024. After recognition of the loss and impairment of licenses, the carrying value of our millimeter-wave spectrum, not subject to the T-Mobile transaction, is $161 million.
Doug Chambers: Or 102 million net of tax in the third quarter of 2024.
Doug Chambers: After recognition of the loss on impairment of licenses the carrying value of our millimeter wave spectrum not subject to the T mobile transaction is $161 million.
Doug Chambers: Now let's review the financial results starting on slide 10. Service revenues declined 2% driven by declines in the average subscriber base, partially offset by a higher post-paid ARPU as LT discussed previously. System operations expense decreased 2% as cost optimization actions, including the shutdown of our CDMA network in the first quarter of 2024, more than offset increases that resulted from our ongoing mid-band 5G deployment. Further, selling general and administrative expenses decreased 3% and excluding the impact of strategic alternatives expenses included in this expense category decreased 5% due to decreases in sales-related expenses, bad debts expense, as well as decreases across various other general and administrative categories due to cost optimization initiatives.
Speaker Change: Now, let's review the financial results starting on slide 10.
Speaker Change: Service revenues declined 2% driven by declines in the average subscriber base, partially offset by a higher postpaid ARPA as LTE discussed previously.
Speaker Change: System operations expense decreased 2% as cost optimization actions, including the shutdown of our CDMA network in the first quarter of 2024 more than offset increases that resulted from our ongoing mid band by G deployment.
Speaker Change: Further selling general and administrative expenses decreased 3% and excluding the impact of strategic alternatives expenses included in this expense category decreased 5% due to decreases in sales related expenses bad debts expense as well as decreases across various other general and administrative <unk>.
Speaker Change: <unk> due to cost optimization initiatives. This led to an improvement in adjusted operating income before depreciation and amortization of 1% and an improvement in adjusted EBITDA, which incorporates the earnings from our equity method investments along with interest and dividend income of 3%.
Doug Chambers: This led to an improvement in Adjusted Operating Income before depreciation and amortization of 1% and an improvement in Adjusted EBITDA, which incorporates the earnings from our equity method investments along with interest and dividend income of 3%.
Doug Chambers: Slides 11 and 12 present the separate results for the wireless and power segment. Tower revenue from third parties increased 1% in the third quarter as co-location growth has slowed relative to recent years and was also impacted by defections, including sprint-related defections. As we have discussed on prior calls, the wireless industry has moderated capital expenditures beginning in 2023, and we experience a corresponding slowdown in new tenant and amendment activity, which is impacting tower revenue growth rates in 2024. Again, we remain bullish on the long-term outlook for our towers business and the long-term capacity needs of the industry that will drive demand for towers.
Speaker Change: Slides 11, and 12 presents a separate results for the wireless and towers segment power revenue from third parties increased 1% in the third quarter as co location growth has slowed relative to recent years and was also impacted by defections, including sprint related defections.
Speaker Change: As we have discussed on prior calls the wireless industry is moderated capital expenditures beginning in 2023, and we experienced a corresponding slowdown in new tenant and amendment activity, which is impacting tower revenue growth rates in 2024.
Speaker Change: Again, we remain bullish on the long term outlook for our towers business and the long term capacity needs of the industry that will drive demand for towers further the pending transaction with T mobile, which is subject to regulatory approval and their commitment to these 2015 incremental towers for an initial term of <unk>.
Doug Chambers: Further, the pending transaction with T-Mobile, which is subject to regulatory approval, and their commitment to lease 2015 incremental towers for an initial term of 15 years, is expected to significantly increase third-party tower revenue.
Speaker Change: 15 years is expected to significantly increase third party tower revenues.
Doug Chambers: Briefly on free cash flow, on a year-to-date basis through September 30th, due to improved profitability and moderated capital expenditures, we generated free cash flow of $331 million, a $94 million increase over the prior year. This has allowed us to repay $163 million of debt in the first nine months of 2024 and an additional $40 million of debt in October, which has further improved our leverage ratio.
Speaker Change: Briefly on free cash flow on a year to date basis through September 30th due to improved profitability and moderated capital expenditures, we generated free cash flow of 331 billion a $94 million increase over the prior year. This has allowed us to repay $163 million.
Speaker Change: That in the first nine months of 2024, and an additional $40 million of debt in October which has further improved our leverage ratios.
Doug Chambers: 20-24 Financial Guides is on slide 13. Given this late stage of the year, relative to the guidance we initially issued in February 2024, we are narrowing the ranges of our guidance for service revenues to $2.95 to $3.0 billion. and capital expenditures from $250 to $600 million. Further, we are narrowing and raising the ranges of our guidance for adjusted income before depreciation and amortization to $800 to $875 million and adjusted EBITDA to $970 million to $1.045 billion, reflecting the successful cost management results that we expect to achieve in the full year 2024.
Speaker Change: Our 2024 financial guidance on slide 13.
Speaker Change: Given this late stage of the year relative to the guidance. We initially issued in February 2024, we are narrowing the ranges of our guidance for service revenues to $2 95 to three <unk> billion.
Billion.
Speaker Change: And capital expenditures from two $550 million to $600 million further we are narrowing and raising the ranges of our guidance for adjusted income before depreciation and amortization, two $800 million to $875 million and adjusted EBITDA to 970 million.
Speaker Change: Two 1.045 billion, reflecting the successful cost management results that we expect to achieve in the full year 2024, I will now turn the call over to Michele Buck wiki.
Michelle Brukwicki: I will now turn the call over to Michelle Brukwicki. Thank you, Doug, and good morning, everyone. Let's turn to slide 15 for our third quarter highlights. This quarter, we reached an important milestone in that 50% of our service addresses are now served by Fiber. We continue to grow our footprint, expanding service addresses 9% year over year. The team delivered 32,000 new marketable Fiber addresses in the quarter, bringing our year-to-date total to 87,000, making progress on our 125,000 marketable Fiber service address goal for the year. Our fiber broadband strategy is continuing to deliver good results, contributing to a 2% increase in total operating revenue and a 21% increase in adjusted EBITDA for the quarter.
Michele Buck: Thank you, Doug and good morning, everyone.
Michele Buck: Let's turn to slide 15 for our third quarter highlights.
Michele Buck: This quarter, we reached an important milestone in that 50% of our service addresses are now served by fiber.
Michele Buck: We continue to grow our footprint expanding service addresses 9% year over year.
The team delivered 32000, new marketable fiber addresses in the quarter, bringing our year to date total to 87000, making progress on our 125000 marketable fiber service address goal for the year.
Michele Buck: Our fiber broadband strategy is continuing to deliver good results contributing to a 2% increase in total operating revenue and a 21% increase in adjusted EBITDA for the quarter.
Michelle Brukwicki: We also grew total residential broadband connections 4% year over year. Our fiber strategy is extremely important. Fiber in our expansion and incumbent markets is providing growth, helping to overcome industry-wide competitive pressures facing our copper and cable markets. Moving to slide 16, you can see where we are on our longer-term scorecard. We are targeting 1.2 million marketable fiber service addresses. We ended the quarter with 886,000. This reflects progress in growing fiber through our expansion markets, as well as fibering up our incumbent markets. We are also targeting 60% of our total service addresses to be served by fiber.
Michele Buck: We also grew total residential broadband connections and 4% year over year.
Michele Buck: Our fiber strategy is extremely important fiber in our expansion in incumbent market is providing growth helping to overcome industry wide competitive pressures facing our copper and cable market.
Michele Buck: Moving to slide 16, you can see where we are on our longer term scorecard.
Michele Buck: We are targeting $1 2 million marketable fiber service addresses we ended the quarter with 886000.
Michele Buck: This reflects progress in growing fiber through our expansion markets as well as fiber up our incumbent market.
Michele Buck: We are also targeting 60% of our total service addresses to be served by fiber we ended the quarter with 50%.
Michelle Brukwicki: We ended the quarter with 50%... And finally, we are expecting to offer speeds of 1 gig or higher to at least 80% of our footprint. We finished the quarter with 74% at gig speed. These goals do not include fiber deployments that will be completed through the enhanced ACAM program. Therefore, these goals will increase once we add in eACAM fiber addresses. We're working closely with the FCC to finalize our precise service address obligations. Our original offer required building to approximately 270,000 addresses, but we expect the final obligation to be lower. We will provide updated goals when we have more certainty on the final address reconciliation.
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 74% at gig speeds.
These goals do not include fiber deployments that will be completed through the enhanced ATM program. Therefore, these goals will increase once we add an EAA cam fiber addresses.
Michele Buck: Working closely with the FTC to finalize our precise service address obligations.
Michele Buck: Our original offer required building to approximately 270000 addresses but we expect the final obligation to be lower we.
Michele Buck: We will provide updated goals when we have more certainty on the final address reconciliation.
Michelle Brukwicki: On slide 17, you can see we are growing our footprint with a 9% 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 79% of our customers taking 100 megabits per second or greater, up from 75% a year ago. We continue to increase the availability of gig plus speeds, and customer take rates of these speeds are growing, with 20% of our customer base on one gig or higher at the end of the quarter. Turning to slide 18, we had 2,700 residential broadband net ads in the quarter, which contributed to 4% growth in residential broadband connections year over year.
Michele Buck: On Slide 17, you can see we are growing our footprint with a 9% 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 79% of our customers, taking 100 megabit per second or greater up from 75% a year ago.
Michele Buck: We continue to increase the availability of gig plus speeds and customer take rates of these speeds are growing with 20% of our customer base on one gig or higher at the end of the quarter.
Michele Buck: Turning to slide 18, we had 2700 residential broadband net adds in the quarter, which contributed to 4% growth in residential broadband connections year over year.
Michelle Brukwicki: As we deliver new fiber service addresses, our teams are marketing and selling into those addresses. This quarter, we added 7,600 residential broadband net ads in our expansion markets. While this is providing growth, the pace of net ads has been slower than expected. We remain focused on driving up penetrations in our new expansion markets. Specifically, we've been working to increase the number of door-to-door sales reps, including augmenting our internal staff with external resources. Leading indicators are showing improvement in our sales. Looking at the big picture, we are confident in the fundamentals of our fiber program and still targeting approximately 40% broadband penetration once markets hit a steady state.
Michele Buck: As we deliver new fiber service addresses our teams, our marketing and selling into those addresses.
Michele Buck: This quarter, we added 7600 residential broadband net adds in our expansion markets.
Michele Buck: While this is providing growth the pace of net adds has been slower than expected.
We remain focused on driving our penetration and our new expansion market.
Michele Buck: Specifically, we have been working to increase the number of door to door sales reps, including augmenting our internal staff with external resources.
Michele Buck: Leading indicators are showing improvement in our sales.
Michele Buck: Looking at the Big picture, we are confident in the fundamentals of our fiber program and still targeting approximately 40% broadband penetration once markets hit a steady state in.
Michelle Brukwicki: In addition, these markets are operating efficiently and contributing to both revenue and adjusted EBITDA growth. Our expansion markets are more cost-effective than our business cases expected, and we're seeing that fiber markets are the most efficient networks to run.
In addition, these markets are operating efficiently and contributing to both revenue and adjusted EBITDA growth.
Michele Buck: Our expansion markets are more cost effective than our business cases expected and we're seeing that fiber markets are the most efficient networks to run.
Michelle Brukwicki: Now, moving on to our incumbent ILEC Mark. Where we have upgraded our network from copper to fiber, we've been able to effectively defend and compete. We had positive fiber broadband net ads in the quarter, which did not fully offset net losses in our copper areas. With support from the Enhanced ACAM Program, we will get even more fiber into our ILAC over the next few years, which will help us defend these markets. In our cable markets, consistent with the industry, we experience net broadband losses, primarily due to Lex upgrading and fiber overbuilders increasing their presence in our markets.
Michele Buck: Now moving onto our incumbent ILEC markets.
Michele Buck: Where we have upgraded our network from copper to fiber, we've been able to effectively defend and compete.
Michele Buck: We had positive fiber broadband net adds in the quarter, which did not fully offset net losses in our copper areas.
Michele Buck: With support from the enhanced a Cam program, we will get even more fiber into our ILEC over the next few years, which will help us defend these markets.
Michele Buck: In our cable markets consistent with the industry, we experienced net broadband losses, primarily due to less upgrading and fiber overbuild, there's increasing their presence in our markets.
Michelle Brukwicki: To mitigate these impacts, we continue to promote our strong product, capable of delivering gig speeds using DOCSIS 3.1. We also strategically overbuild our networks with fiber in certain areas, and we put fiber in all new greenfield builds. In addition, we implement strategies to attract and save customers to mitigate market-specific competitive challenges.
Michele Buck: To mitigate these impacts we continue to promote our strong product capable of delivering gig speeds using DOCSIS three one.
Michele Buck: We also strategically overbuild, our networks with fiber in certain areas and we put fiber in all new Greenfield builds.
Michele Buck: In addition, we implement strategies to attract and save customers to mitigate market specific competitive challenges.
Michelle Brukwicki: Now a couple more comments on that ad. We continued to see impacts from two discrete items that we also mentioned in the second quarter. First, we experienced additional ACP disconnects this quarter, 600 in ILEC and 500 in CABLE. Second, we had an additional 1,000 cable net losses this quarter due to the wildfire in Rio Doce, New Mexico, that occurred in June. Now, turning to the middle graph, average residential revenue per connection increased 5%. This was due primarily to price increases. With increases in broadband connections and revenue per user, we saw 5% growth in residential revenues.
Now a couple more comments on net adds.
Michele Buck: We continued to see impacts from two discrete items that we also mentioned in the second quarter.
Michele Buck: First we experienced additional ACP disconnect. This quarter 600 in ILEC and 500 in cable.
Michele Buck: Second we had an additional 1000 cable net losses this quarter due to the wildfire in reynosa in new Mexico that occurred in June.
Michele Buck: Now turning to the middle graph average residential revenue per connection increased 5%. This was due primarily to price increases.
Michele Buck: With increases in broadband connections and revenue per user we saw 5% growth in residential revenues.
Michelle Brukwicki: Specifically, expansion markets delivered $29 million of residential revenues in the quarter, compared to $20 million a year ago. As expected, commercial revenues decreased 4% in the quarter as we continue to decommission our SELAC markets. Lastly, wholesale revenues decreased 3% as customers migrate to lower cost products. On slide 19, you can see our quarterly performance. Operating revenues were up 2% in the quarter, as the growth in residential revenues was partially offset by the decline in commercial and wholesale revenues. As our fiber connections and revenues grow, coupled with a 4% decrease in cash expenses for the quarter, we are seeing nice growth in adjusted EBITDA, up 21%.
Michele Buck: Typically expansion markets delivered $29 million of residential revenues in the quarter compared to $20 million a year ago.
Michele Buck: As expected commercial revenues decreased 4% in the quarter as we continued to decommission our CLEC markets.
Michele Buck: Lastly, wholesale revenues decreased 3% as customers migrate to lower cost products.
Michele Buck: On Slide 19, you can see our quarterly performance.
Michele Buck: Operating revenues were up 2% in the quarter as the growth in residential revenues was partially offset by the decline in commercial and wholesale revenues.
Michele Buck: As our fiber connections and revenues grow coupled with a 4% decrease in cash expenses for the quarter. We are seeing nice growth in adjusted EBITDA up 21%.
Michelle Brukwicki: Capital expenditures were $78 million in the quarter, down 55% from last year as planned.
Capital expenditures were $78 million in the quarter down 55% from last year as planned.
Michelle Brukwicki: Slide 20 shows our 2024 guidance, which is unchanged from last quarter. In closing, I want to thank all of the TDS Telecom Associates for their energy and passion as they care for our customers and communities.
Slide 20 shows our 2024 guidance, which was which is unchanged from last quarter.
In closing I want to thank all of the Tds Telecom associates for their energy and passion as they care for our customers and communities.
Michelle Brukwicki: As Vicki mentioned, this is my last earnings call at TDS. It has been my privilege to work with so many talented people during my time here. Thank you all. I'm proud of what we have accomplished, and I believe TDS Telecom has a bright future and is in good hands with Chris Botfeld as CFO.
Speaker Change: As Vicki mentioned this is my last earnings call at Tds.
It has been my privilege to work with so many talented people during my time here. Thank you all.
Speaker Change: Proud of what we've accomplished and I believe Tds Telecom has a bright future and is in good hands with Chris box all the CFO.
Colleen Thompson: I will now turn the call back over to Colleen.
Speaker Change: I will now turn the call back over to Colleen.
Colleen Thompson: Okay, operator, we are now ready for the first question. Thank you. We will now begin the question and answer session.
Colleen Thompson: Okay. Operator, we're now ready for the first question.
Speaker Change: Thank you we will now begin the question and answer session.
Colleen Thompson: If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad, raise your hand and join the queue. If you'd like to withdraw your question, simply press star 1 again. You are called upon to ask your question and are listening via loudspeaker on your device. Please pick up your handset and ensure that your phone is not on mute when asking your question.
Have dolls and would like to ask a question. Please press star one on your telephone keypad raise your hand and joined the queue.
Speaker Change: To withdraw your question simply press Star one again.
Speaker Change: Are called upon to answer your question or listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Rick Prentiss: Again, press star 1 to join the Our first question comes from a line of Rick Prentiss with Raymond James.
Speaker Change: Again.
Speaker Change: Sir wanted to join the queue.
Speaker Change: Our first question comes from the line of Ric Prentiss with Raymond James. Please go ahead.
Rick Prentiss: Please go ahead. Thanks.
Rick Prentiss: Good morning, everybody. Good morning, Rick. Good morning. Thanks.
Ric Prentiss: Hi, good morning, everybody.
Speaker Change: Morning, Rick Good morning.
Doug Chambers: A couple questions. Thanks for the color on some of the cash taxes impacts. I wanted to probe a little further on the T-Mobile sale and the Verizon Spectrum sale. Are those fully using a net of NOLs and other tax shields? Or is that kind of the gross liabilities that you might be applying more shields to them?
Ric Prentiss: Thanks, a couple questions. Thanks.
Ric Prentiss: Color on some of the tax cash taxes impacts wanted to probe a little further on the T mobile sale in the Verizon spectrum sale are those fully using.
They net of Nols and other tax shield or is that kind of the gross liabilities that you might be applying more shields to them.
Doug Chambers: Yeah, Rick, Doug here on that question. That is net of what we expect to use for both NOLs and for interest carry forward. And that's the reason why the TDS cash taxes or S&P be lower because they have more of those attributes, NOLs, and interest-carry forwards than U.S. cellular does. Make sense. And on the Verizon spectrum sale, you mentioned that there also be some fees and other items for the for the non-cash tax items. Is it probably a couple? And that's also going to impact the eventual gain that we recognize upon close of that transaction.
Speaker Change: Yes, Doug.
Speaker Change: Doug here on that question that is net of what we expect to use for both Nols.
Speaker Change: And for interest Carryforward and Thats the reason why the Tds.
Speaker Change: Cash taxes are estimated to be lower because they have.
Speaker Change: More of those attributes Nols and interest carryforward and U S cellular does.
Speaker Change: Makes sense and on the Verizon spectrum sale, you mentioned that there also be some fees and other items for the from a non cash tax items is it probably a couple of them.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: And that's also going to impact the eventual gain that we recognized upon close of that transaction.
Doug Chambers: Okay, that makes sense. And so the lease before closing, is that implying that, you know, the T-Mobile deal closes, but then you can't free up the spectrum immediately? Well, it implies that the T-Mobile deal may close and we may not yet have, we may not have regulatory approval for the Verizon spectrum. Okay, so I would assume there's got to be some integration time for T-Mobile to kind of migrate the customers off of the USM network over to the T-Mobile network. Is that like a year's time frame or something? Correct. There is a spectrum lease for up to a year after the close of the T-Mobile deal where T-Mobile may lease most of our spectrum for that period of time.
Speaker Change: Okay that makes sense and so the lease before closing does that imply that the T. Mobile deal closes, but then you can free up the spectrum immediately.
It implies that the T mobile deal May close and we may not yet.
Speaker Change: Not have regulatory approval.
Speaker Change: For the horizon spectrum deal.
Speaker Change: Okay.
Speaker Change: There's got to be some integration time for T mobile to kind of migrate customers off of the U S. M network over to the T. Mobile network is that like a year's timeframe, where somebody could correct. There is a spectrum lease for up to a year. After the close of the T mobile deal where T mobile.
Speaker Change: Most of our spectrum for that period of time.
Doug Chambers: make sense. Okay. And then when you think about the spectrum sale to Verizon and the game that that would imply, obviously, philosophical, assuming things go through, what would the use of proceeds would be? Is that like a special dividend thought? And if it is special dividend thought, what are the thoughts of TDS? Is that to reduce leverage? Is that to start applying more capex? Just philosophically knowing that we've got a lot of bridges to still cross.
Speaker Change: Makes sense, Okay, and then when you think about the spectrum sale to Verizon in the game with that one.
Imply.
Obviously philosophical assuming things go through what was the use of proceeds would be is that like a special dividend thought as it is special dividend what are the thoughts of Tds is to reduce leverage as assets are applying more capex just philosophically neither we got a lot of.
Speaker Change: Bruce just a sole cros.
Doug Chambers: Yeah, good morning, Rick. You know, obviously, first and foremost, right now, we're focused on getting these transactions closed. And I would like to say and repeat, we're very pleased with the value these transactions are unlocking for our shareholders. And so our top priority is to get to a successful close. When we get closer to that closing, I expect discussions on use of proceeds to begin. And any use of proceeds would be the decision of the U.S. Cellular Board of Directors. If there is a special dividend and TDS got its share, it would be an opportunity for TDS to do a number of things that would include paying down the potential to pay down debt, improve leverage, help the advancement and potential acceleration of the fiber deployment program that we have in place at TDS CalCom, as we continue to be bullish on that and really pleased with the results that we're seeing across our markets, as well as the expansion into new markets.
Speaker Change: Yeah, Good morning, Rick.
Speaker Change: Obviously first and foremost right now we're focused on getting these transactions closed and.
I would like to say and repeat we're very pleased with the value. These transactions are unlocking for our shareholders and so our top priority is to get to a successful close when we get closer to.
Speaker Change: To that to that closing I expect discussions on use of proceeds to begin any use of proceeds would be the decision of the U S cellular board of directors.
If there is a special dividend and Tds got its share it would be an opportunity.
Speaker Change: <unk> T S.
Speaker Change: To do a number of things that would include paying down the potential to pay down debt.
Speaker Change: Improved leverage helped the advancement and potential acceleration of the fiber deployment program that we have in place at Tds Telecom as we continue to be bullish on that and really pleased with the results that we're seeing.
Speaker Change: Across our markets as.
Speaker Change: As well as the expansion into new markets and Tds may look at returning value to shareholders. So.
Doug Chambers: And TDS may look at returning value to shareholders. So more to comments early. Again, our focus is on getting. Makes sense.
Marta comments early again, our focus is is is on getting to close.
Speaker Change: Makes sense.
LT Therivel: One other more long-term question for LT on the wireless side. A lot of people beginning of the year were worried, would there be a quote super cycle or was the iPhone refresh going to drive competitive changes on loss on equipment or what would happen in the switcher pool? How are you viewing AI broadly from a wireless operator standpoint of what it could help you do, but also what it might do as far as on the handset side?
Speaker Change: They are more long term question.
Speaker Change: For LTE on the on the wireless side.
A lot of people beginning of the year, we're worried would there be called Super cycle was the iPhone refresh drive competitive changes on loss on equipment or what would happen in the switching pool.
Speaker Change: How are you viewing AI broadly from a wireless operator standpoint of when it could help you do but also what it might do as far as on the on the handset side.
LT Therivel: Yeah, morning, Rick. I guess I'll give you two viewpoints on it. Let me start with the handset side. The jury is still completely out, right? So we, like every other operator, actually saw a decline in upgrade rates. People are hanging on to their devices for longer, and it's unclear to me if that is because their consumers still see relatively little differentiation between next generations of devices. or if they're waiting for this most recent upgrade, in this case from Apple, where some of the AI capabilities for the device are beginning to kind of become unveiled, and I just think it's too early to tell.
Speaker Change: Yes, good morning, I guess I'll give you two viewpoints on it let me start with the handset side.
Speaker Change: <unk> is still completely out right. So we like every other operator actually saw a decline in upgrade rates people are hanging on their devices for longer and it's unclear to me if that is because their consumers still see.
Speaker Change: Relatively little differentiation between next generations of devices.
Speaker Change: Or if they are waiting for this most recent upgrade in this case from Apple.
Speaker Change: Where some of the AI capabilities for the device are beginning to kind of be kind of unveiled and I. Just think it's too early to tell but we certainly have not seen a super cycle to date.
LT Therivel: We certainly have not seen a super cycle to date, but I think it's too early, right? This is – a lot of the AI capabilities can now be delivered via software upgrades, so it's not going to require those customers who have already purchased the new device to go get a new one. And so we'll see, right? I played around with some of the capabilities. They're pretty interesting. And I think that those, and I think they'll mature over time. And so I think from a, let's call it a consumer-facing standpoint, AI truly changing the customer experience.
Speaker Change: But I think it's too early right.
Speaker Change: This is a lot of the AI capabilities can now be delivered via software upgrades. So it's not going to require.
Speaker Change: It's not going to acquire those customers who have already purchased the new device to go get a new one.
Speaker Change: So we'll see.
Speaker Change: Alright.
Speaker Change: I played around with some of the capabilities.
Pretty interesting and I think that those and I think they will mature over time, and so I think from a.
Speaker Change: Let's go to consumer facing standpoint.
Speaker Change: AI truly changing the customer experience it hasnt yet but.
LT Therivel: It hasn't yet, but it may. And I think it displays a lot of promise. Where we are seeing impact is on the cost side of our operation. And so I see a lot of promise in AI, for example, in care, being able to provide a better customer experience in our care centers, not necessarily replacing. humans, but providing them with better prompts, next best offers. Here's what we suggest. Here's how we propose you You say you could do it more effectively, more efficiently. One of the things we're seeing is it's taking us a lot less time to ramp up care associates, because of some of these AI capabilities.
Speaker Change: But it may and I think display is a lot of promise, where we are seeing impact is on the cost side of our operations.
So I see a lot of promise and AI for example in care.
Speaker Change: Being able to provide a better customer experience and our care centers.
Speaker Change: Not necessarily replacing.
Speaker Change: Humans, but.
Speaker Change: Providing them with better pronged next best offers here's what we suggest here's how we propose you analyze customer hears that you could do it more effectively more efficiently.
Speaker Change: One of the things we're seeing is it's taking us a lot less time to ramp up tier associates because of some of these AI capabilities and so that can help us from attrition that can help us from training that can help us be more efficient over time, I expect that same level of efficiency to translate into our stores into our digital experience.
LT Therivel: And so that can help us from attrition, it can help us in training, it can help us be more efficient. Over time, I expect that same level of efficiency to translate into our stores, into our digital And so from a cost perspective, I do think we're already seeing a fair amount of benefit, and that's reflected in some cases in some of the year-over-year expense savings that we've seen. A lot of those expense savings are driven by our care team. They're doing a fantastic job managing expenses, and AI is helping there. So consumer side, jury's still out.
Speaker Change: And so from a from a cost perspective I do think we are already seeing a fair amount of benefit.
Speaker Change: And Thats reflected in some cases in some of the year over year expense savings that we've seen.
Speaker Change: There are a lot of those expense savings were driven by our care team, they're doing a fantastic job managing expenses and AI is helping there so.
Speaker Change: <unk> jury is still out on long term bullish.
LT Therivel: I'm long-term, bullish. Near-term operational efficiency, we're already there.
Speaker Change: Near term operational efficiency were already seeing the benefits of it.
LT Therivel: Great.
LT Therivel: Thanks, everybody.
Speaker Change: Great. Thanks, everybody.
LT Therivel: Thanks Eric.
Speaker Change: Thanks, Eric Operator next question.
Sebastiano Petti: Operator, next question. Our next question comes from the line of Sebastian Petti with J.P. Morgan. Please go ahead. Hi, thank you for taking the question. Just a quick clarification, housekeeping here, in terms of in the TDS press release, I think you called out Disagreements to Sell ILAC and Cable Properties. Is that above and beyond what you've kind of already identified? Or is there anything else perhaps in process there?
Speaker Change: Our next question comes from the line of Sebastian Kathy with JP Morgan. Please go ahead.
Alright. Thank you for taking the question just a quick clarification.
Speaker Change: Housekeeping here in terms of the GDS press release, I think you called out.
Does the agreement to sell ILEC in cable properties is that above and beyond what you've kind of already identified or is there anything else.
Speaker Change: Absent process there.
Michelle Brukwicki: In addition, you know, I guess, L.T., thinking about the Remainco Tower Portfolio Proforma for all the different transactions. out there. I mean, as you think about it, do you see USM as a, you know, net acquirer, perhaps, of towers, or the tower portfolio, you know, expanding over time, as that perhaps comes the operating business? Or is it more about, you know, increasing tenancies, preparing the business, you know, for further densification, some of the towers that you'll see across the wireless ecosystem from there? Thanks, Sebastiano.
Speaker Change: In addition, I guess.
Speaker Change: T.
Speaker Change: Thinking about the remain co tower portfolio pro forma for all the different transactions.
Speaker Change: <unk>.
Speaker Change: Out there I mean, as you think about it.
Speaker Change: You see U S San Jose.
Speaker Change: Net acquirer, perhaps of towers or the tower portfolio expanding over time.
Speaker Change: That perhaps some of the operating business or is it more about increasing tenancies preparing the business.
Speaker Change: For further densification and some of the hotel, whether youll see across the wireless ecosystem from there.
Speaker Change: Thanks, Ross, Jonathan I want to tackle that.
LT Therivel: Michelle, do you want to tackle the first one? Yeah, hi, Sebastiano. Yeah, the divestitures that Vicki mentioned, the non-strategic ILEC and cable divestitures are the same ones that we have disclosed over the last few months. We had a couple of small Virginia ILECs that we are divesting. We announced that in the second quarter, and we also announced in third quarter the sale of our Texas cable property. And those are the ones that I was referring to, and those are the ones that we expect to close here very, very soon in the fourth quarter.
Speaker Change: So let's talk about first of all.
Speaker Change: Yes, Hi, Sasha.
Yes.
Speaker Change: Divestitures that Vicki mentioned, the nonstrategic ILEC in cable divestitures are the same ones that we have disclosed over the last few months.
We had a couple of small Virginia ILEC that we are divesting, we announced that in the second quarter and we also.
Speaker Change: In the third quarter, the sale of our Texas cable properties.
Speaker Change: And was there was.
Speaker Change: During two and those are the ones that we expect to close here very very soon in the fourth quarter.
Got it.
LT Therivel: Let me tackle question number two. So let me talk a bit about how we see our current tower portfolio. Job one is to improve co-location rates on the assets we have.
Let me tackle question number two so let me talk a bit about kind of how we see our current tower portfolio job one is to improve co location rates on the assets we have today.
LT Therivel: So one of the Interesting things about our portfolio is that we only really started treating it as a revenue center, as a profit center a few years ago. And that's driven some increase in co-location rates over time. As Doug mentioned, we're in a bit of a slowdown right now in the wireless industry in terms of capital spending. And, you know, we've reduced our capital guidance.
Speaker Change: So one of the <unk>.
Speaker Change: Interesting things about our portfolio.
Speaker Change: Is that we only really started treating it as a revenue center as a profit center few years ago.
Speaker Change: And Thats driven some increase in co location rates over time.
Speaker Change: Doug mentioned, we're in a bit of a slowdown right now.
Speaker Change: Wireless industry in terms of capital spending and we've.
We reduced our capital guidance a lot of our competitors have as well that reflects then in terms of new co location opportunities New amendment opportunities and so on onto our tower business and so we have seen a slower rate.
LT Therivel: https://www.youtube.com or the link in the description below. I think there's opportunity. That tower portfolio is geographically relatively unique. This is a video of a small number of towers that are within a mile, within a mile and a half, within three, five miles of our towers. And so, over time, as carriers densify, we see an opportunity to increase those co-location rates.
Speaker Change: In the last year or two but long run we are still very bullish because our co location rates are considerably below.
Speaker Change: A lot of our competitors, we think theres opportunity.
Speaker Change: At that time.
Speaker Change: Our portfolio is geographically relatively unique and we are a small number of towers that are within a mile of within a mile and a half within 35 miles of our towers and so over time as carriers densify, we see an opportunity to increase of those co location rates.
LT Therivel: And that's job one. A second question, then, when you think about our tower business, and I'm getting to your question of when we look at acquisition opportunities is, you know, is this business, is this a business that operates at scale? And my perspective on the tower business is yes. One of the issues that we've had with the wireless business and no small reason why we pursued the transaction with T-Mobile is because we really struggled. Wireless is a national business. A lot of the spend is national, and we were disadvantaged against the larger. That's not the case in towers.
Speaker Change: And Thats job one.
Speaker Change: A second question and then when you think about our tower business and I am getting to your question of when we look at acquisition opportunities. As this business is this a business that operates at scale.
Speaker Change: And my perspective on the tower business is yes.
Speaker Change: One of the issues that we've had with the wireless business and why we no small reason why we pursued the transaction with T. Mobile is because we really struggled with scale.
Speaker Change: Wireless is a national business a lot of the spend is national and we were disadvantaged against the against the larger players that's not the case in towers towers you can operate.
LT Therivel: Towers you can operate much more locally on a much more granular level. And we do think that we are at a scale where we can operate our tower portfolio efficiently over time. And what that also then means is that if there's an opportunity, we can tuck other towers and other tower portfolios underneath that operating expense. And so, you know, the long answer to your question is yes, but it's yes, but yes, we would look at potential opportunities to expand that portfolio, whether it's organic. building new towers. more inorganic acquiring portfolios. But valuations are pretty rich right You look at the latest transaction between Verizon and Vertical Bridge.
Speaker Change: Much more locally on a much more granular level.
Speaker Change: And we do think that we are at a scale, where we can operate our tower portfolio efficiently over time.
Speaker Change: And what that also means is that if there is an opportunity we can talk other towers and other tower portfolios underneath that operating expense.
Speaker Change: And so.
Speaker Change: The long answer to your question is yes, but its yes, but.
Speaker Change: Yes, we would look at potential opportunities to expand that portfolio, whether it's organic.
Speaker Change: Building.
Speaker Change: New towers.
Speaker Change: Inorganic acquiring portfolios.
Speaker Change: But valuations are pretty rich right now you look at you look at the latest transaction between Verizon and vertical bridge.
LT Therivel: Chantel sold their towers, and these are some pretty rich valuations, and so we'll be thoughtful as we approach these opportunities. I think it's a business that we're long-term bullish on. We'll look for opportunities to grow, but we'll look for opportunities to grow in a way that makes sense. where we're not having to spend too much to acquire assets.
Speaker Change: Shantou sold their towers and these are some pretty rich valuations and so we'll be thoughtful as we approach these opportunities and I think we it's a business that we're long term bullish on we'll look for opportunities to grow, but we will look for opportunities to grow in a way that makes sense and where we're not having to spend too much to acquire.
Speaker Change: Our assets. So hopefully that gives you a sense about how we're thinking about it.
LT Therivel: Hopefully that gives you a sense of that.
Sebastiano Petti: No, that's super helpful. We appreciate that.
Speaker Change: That's super helpful. I appreciate that and then I guess, one more question back from Tds I know last quarter you announced.
Sebastiano Petti: And then I guess one more question back to TDS. I know, you know, last quarter, you announced, you know, an MD&O agreement. As you're thinking about this space, obviously tons of focus on convergence, tons of focus on fiber assets and where perhaps that could go over time. Given the company's, given TDS's fiber efforts, fiber roadmap and targets longer term, I guess number one, obviously not to...
Speaker Change: No it <unk>.
Speaker Change: Agreement.
Speaker Change: Launch of in EMEA.
Speaker Change: Thinking about the space obviously it comes with focus on convergence tends to focus on fiber assets and where perhaps that could go over time and given the company's argument Tds is fiber efforts.
Speaker Change: Our road map and targets longer term.
Speaker Change: That's number one obviously not to.
Sebastiano Petti: Maybe that makes sense to continue to operate on a stand-alone basis, but would you entertain, you know, unique, perhaps, agreements with scaled wireless operators? There are some, you know, regional ILEC assets. I think Windstream and AT&T, for example, have an agreement, but is that within, perhaps, the longer-term roadmap, perhaps, although you have stood up the MV&O? I mean, I guess the better way to ask the question is the fact that you stood up the MV&O now preclude you from, perhaps, entering into, you know, agreements with, perhaps, scaled national wireless operators to, you know, combine your efforts for a converged bundle offer?
Maybe that makes sense to continue to operate on a standalone basis, but I mean would you entertain.
Speaker Change: Unique perhaps agreements with <unk>.
Speaker Change: Scaled wireless operators there are some regional ILEC assets.
Speaker Change: I think Windstream and AT&T for example have an agreement, but does that within perhaps the longer term roadmap, perhaps although you have stood up <unk> and then I guess the bad.
Speaker Change: The way to ask the question is the fact that you stood at the MBA now preclude you from perhaps entering into agreements with perhaps scaled national wireless operators.
Speaker Change: Combine Europe, Pittsburgh converged bundle offer.
Sebastiano Petti: Thanks.
Michelle Brukwicki: Hi, Sebastiano. So yeah, let me talk a little bit about our MV&O. We are in the process of getting that all rolled out. And as we've mentioned in the past, we are launching our MV&O through our participation in the NCTC. So we're part of that industry cooperative. And they have partnered with, you know, very strong partners that are coming together and integrating and offering that MV&O opportunity to companies that participate in NCTC like us. And so we are taking advantage of that. And the wireless partner that NCTC, you know, is working with is a national 5G player.
Speaker Change: Hi, especially mono so yeah, let me talk a little bit about our <unk>.
We are in the process of getting that all rolled out and as we've mentioned in the past we are launching and D&O.
Speaker Change: Through our participation in the CTC.
Speaker Change: So we're part of that industry.
Speaker Change: Yes cooperative and they have partnered with.
Speaker Change: Very strong partners that are coming together and integrating an offering that <unk> opportunity to companies that participate in mtc like us and so we are taking advantage of that and the wireless partner that NTT C is working with is a national <unk> player. So.
Michelle Brukwicki: So we do have that available to us through the NCTC MV&O arrangement. And we're in the process of getting that launched right now. We've been doing associate trials over the last couple months, and we're now in customer trials. And as soon as you know, we are comfortable with how those trials are going, then we will go to a full commercial launch, and eventually get that launched across our entire footprint. So that's how we're thinking about the MV&O. And we're very excited to get that launched in a bigger way, hopefully coming up very soon. Thank you again.
Speaker Change: We do have that available to us through the end CTC and D&O arrangement.
Speaker Change: And we're in the process of getting that launch right now we have been doing associate trials over the last couple of months and we're now in customer trials and as soon as we are comfortable with how those trials are going then we will go to a full commercial launch and eventually get that launched across our entire footprint.
Speaker Change: So that's how we're thinking about the <unk> and we're very excited to get that launched in a bigger way hopefully coming up very soon.
Speaker Change: Thank you again.
Sergey Dluzhevskiy: Our next question comes from Sergey Dluzhevskiy.
Speaker Change: And our next question comes from.
Speaker Change: Hi.
Jeff Zaske: Jeff Zaske with Gamco Investors. Please go ahead. Good morning, guys. Thank you for taking the questions.
Speaker Change: Yes, yes.
Speaker Change: Gamco investors. Please go ahead.
Good morning, guys.
Speaker Change: Good morning.
Speaker Change: Thank you for taking the questions.
Jeff Zaske: My first question is for LT on the power business. So, I understand that the industry is in a slower capex cycle and that impacts new customer additions and amendments. But to the degree, I guess, looking at the thing that you can control, I guess, what is working well to the degree that things are moving along and what still needs to be improved in order for you to increase your collocation ratio? And also, maybe your thoughts on what kind of third-party collocation ratio is realistic for your company on a medium-term trajectory? Yeah, thanks, Sergey. So, I mean, a few thoughts on You know, the slowdown and then, you know, why I do believe over time that we're going to see a pivot to that.
Speaker Change: My first question is for LTE.
Speaker Change: On the power business so.
Speaker Change: I understand that.
Speaker Change: Understood.
Speaker Change: And the slower Capex cycle ends up in rates.
New customer additions.
Speaker Change: The amendments but to the degree.
Speaker Change: I guess looking at the things that you can control.
Speaker Change: What is working well.
Speaker Change: To give you that things are moving along and what still needs to be improved in order for you to.
Speaker Change: <unk> Colocation ratio and also maybe.
Speaker Change: Your thoughts on what kind of third party Colocation ratio is realistic for your company on a medium term.
Speaker Change: Sorry about that.
Speaker Change: Yeah. Thanks, Derrick so.
Speaker Change: A few thoughts on.
Speaker Change: The slowdown and then why I do believe over time that we're going to see a pivot to that.
LT Therivel: You know, so I referenced the, I referenced the slowdown in capital spending. It's this is one area where it's helpful to be running a wireless business at the same time that you're running a tower business because you kind of get visibility into exactly what's driving the trend. And for us, right, what's driving the trends is we've completed our coverage, not completed, but we're well down the path of our coverage bill, most of our investments going into capacity. And the next big round of investment is going to be triggered by one of two things. and any densification or new spectrum that needs to be brought to bear in order to enable the...
Speaker Change: So I referenced the I referenced the slowdown in capital spending.
Speaker Change: This is one area, where it's helpful to be running a wireless business at the same time that youre running a tower business, because you kind of get visibility into exactly what's driving the trends.
Speaker Change: For us right whats driving the trends in as we've completed our coverage are completed but we.
Speaker Change: We're well down the path of our coverage build most of our investments going into going into capacity.
Speaker Change: <unk>.
Speaker Change: And the next big round of investment.
Speaker Change: Is going to be triggered by one of two things right. The first will be <unk>.
Speaker Change: And any densification or new spectrum that needs to be brought to bear in order to enable the <unk> build.
LT Therivel: But the second, interestingly enough, is going to be driven, I believe, by a paucity of spectra. There's not really a roadmap for carriers. to get access to new spectrum anytime in the near future. Absent, of course, some spectrum that we're marketing, so we do, we're kind of bullish on that part, that piece of the equation, but broadly, right, if you're a, if you're a carrier, the most obvious way to get access to spectrum is. via a spectrum option. The FCC doesn't have spectrum auction authority right now. There's a notional roadmap that the NDIA has put forward, and I commend them for doing it, that identifies bans for analysis.
Speaker Change: But the second interestingly enough is going to be driven I believe.
Speaker Change: <unk> spectrum, alright, there is not really a roadmap for carriers.
Speaker Change: Get access to new spectrum anytime in the near future.
Speaker Change: Absent of course, some spectrum that we're marketing.
Speaker Change: So we do we're kind of bullish on that part that that piece of the equation.
Speaker Change: But broadly right if you're if you're a carrier.
The most obvious way to get access to spectrum is.
Speaker Change: The spectrum auction.
Speaker Change: The FCC doesn't have spectrum auction authority right now.
Speaker Change: There is a notional roadmap that the NTIA has put forward and I commend them for doing it.
Speaker Change: That identifies bands for analysis.
LT Therivel: But we've been analyzing bans as a country for a long time, and we haven't been able to take action. We haven't taken action in granting the FCC spectrum authority back, which I've said publicly I think is preposterous. And so right now, there's no roadmap for new spectrum to come to bear from the government. In the private market, I think there was some speculation that DISH might be in the market selling some Spectrum, but I think the recent announcements, both in terms of their access to liquidity as well as the extension that they received from the FCC, means their Spectrum is not going to be in the market.
Speaker Change: We've been analyzing fans of the country for a long time.
Speaker Change: And we haven't been able to take action.
Speaker Change: We haven't taken action in granting the FCC spectrum authority back in so.
Speaker Change: Which I've said publicly I think is preposterous.
So right now Theres no roadmap for new spectrum to come to bear from the government.
Speaker Change: And the private market I think there was some speculation that dish.
Speaker Change: Might be in the market selling some spectrum, but I think the recent the recent announcements.
Speaker Change: In terms of their access to liquidity as well as the extension that they received from the SEC by <unk>.
Speaker Change: <unk> spectrum is not going to be on the market. So you don't see carriers with access to spectrum and.
LT Therivel: So you don't see carriers with access to spectrum. And if you don't have access to new spectrum, how do you satisfy increases in capacity? because whether we bring new spectrum to bear as an industry or not. Users are still going to use between 20% to 25% more data every single year. That has not slowed. And so the only way that you support that is with diversification. And so over time, you're going to see more. I do think more of that will focus on small cells, on C-RAN, it's going to be more in urban environments. But even in suburban and towards rural, you're going to have that same capacity problem and so carriers are going to need to densify and so they're going to need to get access to new towers and towers that are in places where they haven't been before.
Speaker Change: And if you don't have access to new spectrum, how do you satisfy increases in capacity.
Speaker Change: Hey, guys.
Speaker Change: Are we bringing new spectrum to bear as an industry or not.
Speaker Change: Users are still going to use between $20 to 25% more data every single year that has not slowed and so the only way that you support that is with Densification.
Speaker Change: So over time youre going to see more.
Speaker Change: Builds I do think more.
Speaker Change: More of that will focus on small cells on C ran it's going to be more in urban environments, but even in sub urban and towards rural Youre going to have that same capacity problem in silk carriers are going to need to densify.
Speaker Change: And so they're going to need to get access to new towers in towers that are in places where they haven't been before and.
LT Therivel: And I do think that's going to drive attractive usage of our towers and demand for our towers. And so I'm coming back around to your question of what do I think we're doing well, what I think we're doing well right now is Establishing agreements and establishing relationships with the carriers where I do believe we are a power provider of choice. for carriers. I've been in the business for a long time and there is usually a bit of a contentious relationship between tower providers and carriers and we've worked hard to ensure that that is not. And so we have good agreements in place, whether the MLA with T-Mobile or similar agreements with Verizon or AT&T, I think we're well positioned as a business to support that growth when it comes.
Speaker Change: And I do think thats going to drive attractive attractive usage of our towers and demand for our towers until I am coming back around to your question of what do I think we're doing well, but I think we're doing well right now is.
Speaker Change: Establishing agreements and establishing relationships with <unk>.
Speaker Change: Carriers, where I do believe we are a tower provider of choice.
Speaker Change: For carriers.
Speaker Change: I've been in the business for a long time and there is usually a bit of a contentious contentious relationship between tower providers and carriers.
Speaker Change: And we've worked hard to ensure that that is not the case.
Speaker Change: And so we have good agreements in place whether there whether the MLA with T mobile or similar agreements with Verizon or AT&T.
Speaker Change: I think we're well positioned as a business to.
Speaker Change: To support that growth when it comes.
LT Therivel: The other thing I'm pleased about is we are working on buying background. So a not insignificant expense in the tower business over time is landlords, landlords, people who actually own the land, increasing the rates on their ground leases. And so we've had a robust program in place, and we're actually putting that program a bit more on steroids going into next year to try to buy back some of these ground leases and get those expenses into a more manageable situation in the future. And so I think we're turning this business into an attractive profit center. I think we're well positioned to take advantage of that growth in the future.
Speaker Change: The thing I'm pleased about is we are working on buying back ground leases.
Speaker Change: So not insignificant expense in the tower business over time.
As landlords land Laurence people, who are actually on the land increasing the rates on their ground leases and so we've had a robust program in place and were actually putting that program a bit more on steroids going into next year.
Speaker Change: To try to buy back some of these ground leases and get those get those expenses.
Speaker Change: For a more manageable situation in the future and so I think we're turning this business into an attractive profit center I think we're well positioned to take advantage of that growth in the future. The interesting challenge for us over the next year or surrogate is going to be.
LT Therivel: And the interesting challenge for us over the next year, Sergey, is going to be we have to turn that into a truly independent company, right? We need to be in a position when the T-Mobile deal closes where that tower business can completely stand on its own. It certainly is already standing on its own operationally. From an overhead perspective, from a systems perspective, and so on, that's going to require some work in the next six or so months, six, nine months between now and close. And that's where another portion of our So, sorry for the lengthy diatribe there, but hopefully that gives you a sense about how we're thinking macro about towers, but also micro, where we see the...
Speaker Change: To turn that into.
Speaker Change: A truly independent company, we need to be in a position when the T mobile deal closes where that tower business can completely stand on its own.
Speaker Change: Certainly as already standing on its own operationally, but from an overhead perspective from a systems perspective, and so on that's going to require some work in the next six six or so months six to nine months between now and close and Thats, where another portion of our operational focus will be so sorry for the lengthy diatribe there, but hopefully that gives you a sense about how we're thinking.
Speaker Change: Macro about towers, but also micro where we see the opportunity.
Sergey Dluzhevskiy: Got it. Thank you.
Speaker Change: Got it thank you.
Sergey Dluzhevskiy: My second question is in regards to wireless partnerships. So, Verizon has been buying in minority stakes in their partnerships over the past few years. Obviously, one of the larger transactions there was spent out of their communications. But US dollar obviously has an even larger minority interest in terms of size in the LA market.
My.
Speaker Change: Second question is in regards to wireless partnerships so horizon.
Speaker Change: Buying in minority Stakes in partnerships.
Over the past few years harvest of items in the larger transactions that was consolidated communications.
Speaker Change: Ill or others.
Larger.
Speaker Change: Minority interests in terms of size.
LT Therivel: So, if you could maybe share with us your latest thinking on the partnership interest and what could move you closer to monetizing those assets. Well, we've had a couple of things on our plate over the last couple quarters when it comes to strategic deals and monetizing assets. Certainly getting those deals done, not just getting them structured, but also getting them over the goal line remains our focus. We're pleased with those partners. from what we did with the wireless business, what we're doing with Spectrum, how we established the tower business. You know, there aren't any sacred cows, and we did take a really comprehensive look, short-term and long-term, about what we wanted the enterprise to look like, and we'll continue to do that moving forward.
Speaker Change: By market. So if you could.
Speaker Change: Can you share with us you'll.
Speaker Change: Your latest thinking on the partnership and what could move you closer to monetize those assets.
Yeah.
Speaker Change: Well, we've had a couple of things on our plate.
Speaker Change: Over the last couple of quarters, when it comes to strategic deals and monetizing assets.
Speaker Change: Certainly getting those deals done not just getting them structure, but also getting them over the goal line remains our focus.
Speaker Change: We're pleased with those partnerships to generate attractive cash flow.
Speaker Change: That cash flow has helped our wireless business.
Speaker Change: It helps us continue to pay down debt and so we're.
Speaker Change: We're not in any hurry to change direction with those partnerships.
Speaker Change: That being said right we're.
Speaker Change: There is part of this strategic review that we mentioned I mean, we took a really comprehensive view across the business.
Speaker Change: As you can see.
Speaker Change: From what we did with the wireless business, what we're doing with spectrum, how we established the tower business.
Speaker Change: Aren't any sacred cows, and we did take a really comprehensive look short term and long term about what we wanted the enterprise to look like and we'll continue to do that moving forward and so if there is an opportunity.
LT Therivel: And so, if there's an opportunity for a really good deal to monetize those partnerships, we'd certainly be open to it, but we're not in any hurry. I think it's – we're happy with how they're performing, we're happy with the relationship that we have within those partnerships, they're attractive financially, and at least right now we've got plenty on our plate in terms of getting our wireless – plus getting a lot of incremental spectrum monetization.
Speaker Change: For a really good deal to monetize those partnerships, we'd certainly be open to it but we're not in any hurry.
Speaker Change: I think it's where we're happy with how Theyre performing.
Speaker Change: We're happy with the relationship that we have within those partnerships.
Speaker Change: They're attractive financially and at least right now we got plenty on our plate in terms of getting our wireless offer wired wireless.
Speaker Change: Plummeting lot of incremental spectrum monetize as well.
Sergey Dluzhevskiy: Got it.
Speaker Change: Got it.
Michelle Brukwicki: And my next question is for Michelle on GDS Telecom side. You provided big distribution for your residential Boston customer base. In the slide deck, I think about 20% are on gig plus, 10% on 600 meg and so on. How does the distribution differ for incoming customers? So this is your entire base, but how would it look for your incoming customers, maybe for the last quarter or year?
Speaker Change: And my.
My next question is for Michelle.
Speaker Change: On slide.
Speaker Change: Neutralize a good distribution.
Speaker Change: Our residential broadband customer base.
Speaker Change: In the slide deck, I think about 20% on plus.
Yes.
Speaker Change: 10% on 600, Meg and so on how does the distribution before incoming customers. So this is your entire base, but how would it look for your incoming customers maybe for the last quarter or year to date.
Michelle Brukwicki: Yeah, hi, Sergey. Yeah, so for our incoming customers, I would say, I think we're at about 20 20% is on gig service today for our whole base. But for incoming customers, we're at about 40% coming in on gig service. So that's why you continue to see quarter over quarter, we keep moving our customers up that stack of speeds. And, you know, and that's also helping drive a bit of our ARPU increase. And of course, improving, you know, the customer experience and meeting the customer demand for for broadband usage.
Yes, Hi, Sergey.
Sergey: Yes, so for our incoming customers I would say.
Sergey: I think we're at about 2020% is on gig service today for our whole base.
Sergey: But for incoming customers were at about 40% coming in on gig service. So that's why you continue to see quarter over quarter, we keep moving our customers up that stack of speeds.
Sergey: And that's also helping drive a bit of <unk> increase.
Sergey: And of course, improving the customer experience and meeting the customer demand for broadband usage.
Michelle Brukwicki: Got it, great.
Speaker Change: Got it great and my last question.
Michelle Brukwicki: And my last question, going back to some of your comments about things that you are doing to improve broadened net conditions, including, I guess, door-to-door sales force that you have in your markets. Maybe if you could provide more color on that front, and also what are the things that you are pursuing in addition to, I guess, door-to-door sales force that would improve conversion of your patents into paying customers over the next 6 to 12 months? Yeah, so we this is a huge focus of our organization. We've got lots of people working on this and focused on this.
Speaker Change: Going back to some of your comments about.
Speaker Change: Things that you are.
Speaker Change: Doing to improve.
Speaker Change: Brian with net additions, including.
Speaker Change: I guess a door to door sales force.
Speaker Change: What you have in your markets.
Speaker Change: Maybe if you could provide more color on that front and also what are the things that you are pursuing to in addition to I guess door to door sales force.
Speaker Change: <unk> converted into paying customers over the next six to 12 months.
Speaker Change: Yeah. So we this is a huge focus of our organization. We've got lots of people working on this and focused on this so yes.
Michelle Brukwicki: So yeah, you know, last year, we turned up a lot of service addresses, we're turning up a lot this year as well. And so it is, you know, our top priority to sell into those addresses and get our broadband penetration up. And so we did have 7600 broadband net ads this quarter in our expansion markets. And that's fantastic that we're getting that because that's providing the growth in our you know, broadband net ads in total. But it is it is coming in a little bit slower than we had expected. And what we're finding is that we need to enhance our door to door sales representatives and get more people out there selling.
Speaker Change: Last year, we turned up a lot of service addresses were turning up a lot this year as well and so it is our top priority to sell into those addresses and get our broadband penetration and.
Speaker Change: And so we did have 7600 broadband net adds this quarter in our expansion markets and that.
Speaker Change: Fantastic that we're getting that because that is providing the growth and our.
Speaker Change: Broadband net adds in total.
Speaker Change: But it is it is coming in a little bit slower than we had expected and what we're finding is that we need to enhance our door to door sales representatives and get more people out there selling.
Michelle Brukwicki: About half of our sales come from door to door, and we just needed more resources out there. And so we've been working on that for the last few months. And as I mentioned, we're starting to see some really nice leading indicators, telling us that our efforts are working and that we're on the right track, based on what we're seeing so far come through in October. So that's where our focus is right now is on getting those, getting those sales, you know, really, really ramped up and making sure we've got all the resources there that are required to do so.
Speaker Change: About half of our sales come from door to door and we just needed more resources out there and so we've been working on that for the last few months and as I mentioned, we're starting to see some really nice leading indicators.
Speaker Change: Ask that our efforts are working and that we're on the right track based on what we're seeing so far come through an acquisition.
Speaker Change: <unk>.
Speaker Change: Our focus right now is on getting those.
Speaker Change: Getting those sales really really ramped up and making sure. We've got all of the resources there that are required to do so.
Michelle Brukwicki: Got it.
Speaker Change: Got it thank you.
Michelle Brukwicki: Thank you.
Michelle Brukwicki: Thanks, Eric.
Speaker Change: Thanks, Eric.
Speaker Change: Okay.
Colleen Thompson: This concludes today's Q&A session.
Speaker Change: This concludes today's Q&A session I would like to now turn the call back over to Colleen Thompson for closing remarks.
Colleen Thompson: I'd like to now turn the call back over to Colleen Thompson for closing remarks. Okay, thanks everyone for all your time today. Please reach out to Investor Relations with any additional questions and have a great weekend.
Colleen Thompson: Okay. Thanks, everyone for all your time today, please reach out to Investor relations with any additional questions and have a great weekend.
Operator: Operator, we can sign off now. Thank you.
Colleen Thompson: Operator, we can sign off now.
Operator: This concludes today's call. You may now disconnect.
Speaker Change: Thank you.
Speaker Change: This concludes today's call you may now disconnect.
Speaker Change: Okay.
Yeah.
Speaker Change:
Speaker Change: Okay.
Speaker Change: Yeah.