Q3 2024 United States Cellular Corp Earnings Call

Okay.

Operator: Thank you for standing by. My name is Mandeep, and I'll be your operator today. At this time, I'd like to welcome everyone to the TDS/U.S. Cellular Third Quarter 2024 Operating Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers summarize, there'll be a question and answer session. If you'd like to ask a question during this time, simply press star one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Colleen Thompson, Vice President, Corporate Relations. You may begin.

Speaker Change: 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.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Speaker Change: After the Speakers' remarks, there'll be a question answer session, if you'd like to ask questions. At this time simply press star one.

Speaker Change: On your telephone keypad, if you'd like to withdraw your question Press Star one again.

Speaker Change: I would now like to turn the call over to Colleen Thompson.

Speaker Change: <unk> President corporate relations you may begin.

Colleen Thompson: Good morning. 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 UScellular websites. With me today and offering prepared comments are from TDS, Vicki Villacrez, Executive Vice President and Chief Financial Officer. From UScellular, L.T. 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 UScellular investor relations websites. Please see the websites for slides referred to on this call, including non-GAAP reconciliations.

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.

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 and from Tds Telecom, Michelle broke Lakey senior Vice President of Finance and Chief financial.

Colleen Thompson: Officer.

Colleen Thompson: This call is being simultaneously webcast on the Tds and U S. Cellular Investor Relations website. Please see the websites for slides referred to on this call, including non-GAAP Reconciliations we provide guidance for both adjusted operating income before depreciation and amortization or OIBDA and adjusted earnings before interest taxes depreciation.

Colleen Thompson: We provide guidance for both adjusted operating income before depreciation and amortization, or OIBDA, and adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, to highlight the contributions of U.S. Cellular's wireless partnerships. 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 filings. With that, I will now turn the call over to Vicki Villacrez. Vicki?

Colleen Thompson: <unk> and amortization or EBITDA to highlight.

Colleen Thompson: The contributions of U S Cellular's wireless partnerships.

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

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

And with that I will now turn the call over to Vicki Bellacruz sticky. Okay. Thank you Colin and good morning, everyone. 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.

Vicki Villacrez: Okay. Thank you, Colleen, and good morning, everyone. Before we begin, I do want to acknowledge the devastating impact of the recent hurricanes and the fires that swept through Ruidoso, New Mexico. Our hearts go out to all who were affected and suffered loss. 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. 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 L.T. will cover in more detail, UScellular 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.

Colleen Thompson: 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.

Colleen Thompson: Thank you.

Colleen Thompson: 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.

Speaker Change: 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.

Speaker Change: Transaction with T. Mobile these transactions really highlights the significant value and demand for these licenses.

Vicki Villacrez: We have looked across our enterprise, entering into several other transactions that will help to focus our resources and further optimize our footprint. First, the sale of our OneNeck IT Solutions closed in early September. The sale of OneNeck 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. Turning to results, I am pleased with our Q3 performance. Both business units are focused on meeting their financial objectives, resulting in UScellular increasing its profitability outlook for adjusted EBITDA and adjusted OIBDA, and TDS Telecom 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.

Speaker Change: We have one.

Speaker Change: Our enterprise entry into several other transactions that will help to focus our resources and further optimize our footprint.

Speaker Change: First the sale of our <unk> solutions closed in early September.

Speaker Change: The sale of <unk> 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.

Speaker Change: 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 OIBDA and Tds Telecom reaffirming its guidance.

Speaker Change: We ended the quarter in a solid cash and liquidity position sequentially each quarter, our debt to EBITDA ratios have improved throughout 2024.

Speaker Change: Both businesses are continuing to generate positive free cash flow, while continuing to invest in their networks. We.

Vicki Villacrez: We are pleased to see the Fed cut interest rates in mid-September, as this drives modestly lower interest costs for us. We'll continue to manage our balance sheet through a combination of primarily long-dated debt maturities issued at historically low interest rates. We'll continue to maintain reasonable leverage and sufficient liquidity, all of which provides flexibility as we go into Q4 and look forward to execute on our operational objectives and longer-term strategic goals. Before turning the call over, we recently announced that Michelle Brukwicki will be leaving TDS 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 endeavors.

Speaker Change: We were 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.

Reasonable leverage and sufficient liquidity all of which provides flexibility as we go into the fourth quarter.

Speaker Change: And look forward to execute on our operational objectives of longer term strategic goals.

Speaker Change: Before turning the call over we recently announced that Michelle Brookwood, he will be leaving T. D. S. In December.

Speaker Change: After 17 years with the enterprise.

Speaker Change: 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, Christopher <unk>, who is currently Tds telecoms, Vice President financial analysis, and strategic planning will be stepping into the role of vice President of finance and CFO at <unk>.

Vicki Villacrez: With Michelle's upcoming departure, Kristina Bothfeld, 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 Kristina will be transitioning over the next month. I'd also like to thank all of our associates for their hard work in these dynamic times. Now, L.T., I'll turn it over to you.

Speaker Change: Yes telecom.

Speaker Change: Michelle and Chris will be transitioning over the next months.

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.

Laurent Therivel: 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. With that, let's pivot to materials. I'm going to take us to page five 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, and we believe we're on track for a mid-2025 closing.

Thanks, Nikki good morning, everyone I wanted to briefly overview sentiments regarding hurricane Helane.

L. T: 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.

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.

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.

L. T: Believe we're on track for a mid 2025 closing.

Laurent Therivel: We remain confident that the transaction with T-Mobile is the best long-term solution for our customers, that it gives them the long-term benefits of greater scale and a more competitive network. The T-Mobile transaction will also provide us with an additional long-term tower tenant and a strengthened tower business. 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. 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.

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.

If you recall, we began reporting separate wireless and towers segment information last quarter and we plan to continue to provide this detail going forward. After 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 that 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.

Laurent Therivel: Slide six 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, as well as the sale of small portions of our CBRS, C-band, and 700 MHz spectrum to a few other smaller network mobile operators. These license sale transactions are subject to regulatory approval, and they're 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 value. Doug will be providing more details on the expected gain and the tax impacts associated with these license transactions.

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.

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.

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.

Speaker Change: Doug will be providing more details on the expected gain and the tax impacts associated with this license transactions.

Laurent Therivel: Now we continue to work on opportunities for monetization of the remaining spectrum. As this is an ongoing process, I won't be able to share any additional details today. I will provide more updates as they become available. Now let's talk about Q3. The team remains highly focused on balancing improving subscriber momentum with delivering strong operational and financial performance. You can see that in our results. As discussed last Q, 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 continue to see the momentum from these changes in Q3. We improved retail net losses by 20,000 subscribers year over year. In addition, we've been committed to caring for our existing customers. That includes conducting US Days multiple times throughout 2024.

Speaker Change: 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.

Speaker Change: I will provide more updates as they become available.

Speaker Change: Now I'll talk about the quarter the.

Speaker Change: Team remains highly focused on balancing improving subscriber momentum with delivering strong operational and financial performance and you can see that in our results.

Speaker Change: As discussed last quarter earlier this year, we made promotional changes that have improved our subscriber trajectory.

Speaker Change: While executing cost reduction initiatives that have enabled us to maintain strong profitability.

Speaker Change: 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.

Speaker Change: In addition, we've been committed to caring for our existing customers and that includes conducting us days multiple times throughout 2024 and.

Laurent Therivel: As a reminder, US Days are periods where highly attractive promotional offers are made available to our existing customers. We believe this focus on our existing customers through US Days and through other promotional investments has contributed to improved postpaid handset churn for each of the first three quarters of 2024. We plan on continuing to reward our existing customers through US Days and other promotional offers in Q4. 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 gross adds increased, and that allowed us to keep postpaid handset gross adds flat. This is particularly noteworthy in the context of our deal announcement.

Speaker Change: And as a reminder, our stays are periods, where highly attractive promotional offers are made available to our existing customers.

Speaker Change: We believe this focus on our existing customers through stays and through other promotional investments.

Speaker Change: Has contributed to improved postpaid handset churn for each of the first three quarters of 2024.

Speaker Change: Plan on <unk>.

Speaker Change: The board of our existing customers through us days.

Promotional offers in the fourth quarter.

Speaker Change: For the industry as a whole while the pool of available subscribers was down again in the quarter on a year over year basis.

Speaker Change: Our share our share of gross adds increased and that allowed us to keep postpaid handset gross adds were flat.

Speaker Change: This is particularly noteworthy in the context of our deal announced.

Laurent Therivel: 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 experience. We've also seen nice improvement in prepaid due to our competitive pricing and promotional strategies, including our compelling multi-line pricing, which began in May of this year. I'm really pleased with our improved subscriber momentum, particularly given that we've seen no letup in competitive intensity. That's from either the large mobile network operators or the cable wireless players. 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 2 tier plans, compared to 46% a year ago.

Speaker Change: Postpaid handset net losses improved by 10000 year over year due to an improvement in churn.

Speaker Change: <unk>, partially attributable to our focus on rewarding our existing customers with attractive promotions and.

Speaker Change: And continuing to deliver a strong network experience.

Speaker Change: We've also seen nice improvement in prepaid due to our competitive pricing and promotional strategies, including our compelling multi line pricing, which began in may of this year.

Speaker Change: And I'm really pleased with our improved subscriber momentum.

Speaker Change: 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.

Speaker Change: Our postpaid <unk> also increased 2%, partially due to customers realizing the value of our higher tier plans.

Speaker Change: We had 54% of our postpaid handset customers on the top two tier plans compared to 46% a year ago.

Laurent Therivel: 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. I'm really proud of our efforts to balance subscriber growth with financial discipline. That's enabled us to raise our full year profitability guidance this quarter. In terms of network, we currently have over 80% of our data traffic already handled by sites that have been upgraded with low-band 5G, and that provides strong 5G coverage in our footprint. 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 given the cost pressures associated with those continued promotional investments as well as inflation and the ongoing deployment of five G.

Speaker Change: The teams have been doing an excellent job managing cost with expenses down year over year in all major categories.

Speaker Change: 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.

Speaker Change: 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>.

Speaker Change: And that provides a strong five <unk> coverage in our footprint.

Speaker Change: So consistent with our <unk> network investments in 2024.

Speaker Change: <unk> network investments will predominantly be dedicated to the deployment of mid band spectrum, and that's going to enhance <unk> speed and capacity.

Laurent Therivel: We noted previously that we expected capital expenditures for the full year to trend toward the lower end of our guidance range. This quarter, we lowered our capital guidance to reflect that. Before I turn the call over to Doug, I want to congratulate the team for UScellular 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. As all these results demonstrate, we're executing on the strategic initiatives that we laid out for the business earlier this year, and I believe we're well positioned heading into the busy holiday season. I want to thank the team for their hard work, and I'll now turn the call over to Doug.

Speaker Change: And we noted previously that we expected capital expenditures for the full year to trend towards the lower end of our guidance range.

Speaker Change: In this quarter, we lowered our capital guidance to reflect that.

Speaker Change: 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.

Speaker Change: Forcing that our ongoing <unk> network investments are resulting in a strong customer experience.

Speaker Change: 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 and I believe we're well positioned heading into the busy holiday season.

I want to thank the team for their hard work and I will now turn the call over to Doug.

Douglas Chambers: Thanks, L.T. Good morning. Before discussing quarterly results, I want to provide some additional details on the proposed license sales transaction that L.T. previously highlighted and some broader impacts to our license portfolio. Subject to closing the pending T-Mobile transaction and regulatory approvals of the license transactions, we expect proceeds of just over $0.0 billion on the license sale transactions announced in October and highlighted on slide six. 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. Further, we expect total cash taxes related to these recently announced spectrum transactions to be in the range of $200 to $250 million for UScellular and $150 to $200 million for TDS.

Thanks, <unk> good morning, before discussing quarterly results I want to provide some additional details on the proposed license sales transaction.

Speaker Change: <unk> previously highlighted.

Speaker Change: And some broader impacts to our licensed portfolio.

Speaker Change: Subject to closing the pending T mobile transaction and regulatory approvals of the license transactions, we expect proceeds.

Speaker Change: Just over $1 billion on the license sale transactions announced in October and highlighted on slide six.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: 150 to 200 million for Tds. This.

Douglas Chambers: 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 UScellular 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, UScellular 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.

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.

Speaker Change: 100, $150 million to $250 million for Tds.

Speaker Change: 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.

Speaker Change: As a result of this review our millimeter wave licenses in the 28 37, and 39 gigahertz bands were identified as a separate unit of accounting.

Douglas Chambers: Due in part to industry-wide challenges related to operationalizing this millimeter wave spectrum, UScellular estimated the fair value of these licenses to be less than their corresponding carrying value. This was the primary driver of UScellular recording a loss on impairment of licenses of $136 million or $102 million net of tax in Q3 2024. 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. 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 postpaid ARPU, as L.T. discussed previously.

Speaker Change: 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.

Speaker Change: Or 102 million net of tax in the third quarter of 2024.

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.

Speaker Change: Now, let's review the financial results starting on slide 10.

LTE: Service revenues declined 2% driven by declines in the average subscriber base, partially offset by a higher postpaid ARPA as LTE discussed previously.

Douglas Chambers: System operations expense decreased 2% as cost optimization actions, including the shutdown of our CDMA network in Q1 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. 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%. Slides 11 and 12 present the separate results for the wireless and tower segments.

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.

LTE: 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>.

LTE: <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%.

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.

Douglas Chambers: Tower revenue from third parties increased 1% in Q3 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 experienced 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. Further, the pending transaction with T-Mobile, which is subject to regulatory approval, and their commitment to lease 2,015 incremental towers for an initial term of 15 years is expected to significantly increase third-party tower revenues. Briefly on free cash flow.

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>.

Speaker Change: 15 years is expected to significantly increase third party tower revenues.

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.

Douglas Chambers: On a year-to-date basis through 30 September 2024, 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 ratios. Our 2024 financial guidance 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 to $550 to 600 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.

Speaker Change: Our 2024 financial guidance 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 three <unk> billion and.

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.

Douglas Chambers: 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. I will now turn the call over to Michelle Brukwicki.

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: Thank you, Doug, and good morning, everyone. Let's turn to slide 15 for our Q3 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. We also grew total residential broadband connections 4% year over year. Our fiber strategy is extremely important. Fiber in our expansion in incumbent markets is providing growth, helping to overcome industry-wide competitive pressures facing our copper and cable markets.

Michele Buck: Thank you, Doug and good morning, everyone.

Michele Buck: Let's turn to slide 15 for our third quarter highlights.

Speaker Change: This quarter, we reached an important milestone in that 50% of our service addresses are now served by fiber.

Speaker Change: We continue to grow our footprint expanding service addresses 9% year over year.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: We also grew total residential broadband connections, 4% year over year.

Speaker Change: 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 markets.

Michelle Brukwicki: 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. We ended the quarter with 50%. 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 speeds. These goals do not include fiber deployments that will be completed through the E-ACAM program. Therefore, these goals will increase once we add in E-ACAM fiber addresses. We're working closely with the FCC to finalize our precise service address obligations.

Speaker Change: Moving to slide 16, you can see where we are on our longer term scorecard.

Speaker Change: We are targeting $1 2 million marketable fiber service addresses we ended the quarter with 886000.

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

Speaker Change: We are also targeting 60% of our total service addresses to be served by fiber we ended the quarter with 50%.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: We're working closely with the FTC to finalize our precise service address obligations. Our original offer required building to approximately 270000 addresses.

Michelle Brukwicki: 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. 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.

We expect the final obligation to be lower.

Speaker Change: We will provide updated goals when we have more certainty on the final address reconciliation.

Speaker Change: On Slide 17, you can see we are growing our footprint with a 9% increase in total service addresses year over year.

Speaker Change: 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. We.

Speaker Change: 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.

Michelle Brukwicki: Turning to slide 18, we had 2,700 residential broadband net adds in the quarter, which contributed to 4% growth in residential broadband connections year over year. 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 adds in our expansion markets. While this is providing growth, the pace of net adds 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.

Speaker Change: 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.

Speaker Change: As we deliver new fiber service addresses our teams, our marketing and selling into those addresses.

Speaker Change: This quarter, we added 7600 residential broadband net adds in our expansion markets.

Speaker Change: While this is providing growth the pace of net adds has been slower than expected.

Speaker Change: We remain focused on driving our penetrations in our new expansion market.

Speaker Change: Specifically, we have been working to increase the number of door to door sales reps, including augmenting our internal staff with external resources.

Speaker Change: Leading indicators are showing improvement in our sales.

Speaker Change: 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: 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. Now, moving on to our incumbent ILEC markets. 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 adds in the quarter, which did not fully offset net losses in our copper areas. 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. In our cable markets, consistent with the industry, we experienced net broadband losses, primarily due to LECs upgrading and fiber overbuilders increasing their presence in our markets.

Speaker Change: In addition, these markets are operating efficiently and contributing to both revenue and adjusted EBITDA growth.

Speaker Change: 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.

Now moving onto our incumbent ILEC markets.

Speaker Change: Where we have upgraded our network from copper to fiber, we have been able to effectively defend and compete.

Speaker Change: We had positive fiber broadband net adds in the quarter, which did not fully offset net losses in our copper areas.

Speaker Change: 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.

Speaker Change: 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. Now, a couple more comments on net adds. We continued to see impacts from two discrete items that we also mentioned in Q2. 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 Ruidoso, 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.

Speaker Change: To mitigate these impacts we continue to promote our strong product capable of delivering gig speeds using DOCSIS three one.

We also strategically overbuild, our networks with fiber in certain areas and we put fiber in all new Greenfield builds.

Speaker Change: In addition, we implement strategies to attract and save customers to mitigate market specific competitive challenges.

Now a couple more comments on net adds.

Speaker Change: We continued to see impacts from two discrete items that we also mentioned in the second quarter.

Speaker Change: First we experienced additional ACP disconnects this quarter 600 in ILEC and 500 in cable.

Speaker Change: Second we had an additional 1000 cable net losses this quarter due to the wildfire and Riodosa in new Mexico that occurred in June.

Speaker Change: Now turning to the middle graph average residential revenue per connection increased 5%. This was due primarily to price increases.

Michelle Brukwicki: With increases in broadband connections and revenue per user, we saw 5% growth in residential revenues. 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 CLEC markets. 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%. Capital expenditures were $78 million in the quarter, down 55% from last year, as planned.

Speaker Change: With increases in broadband connections and revenue per user we saw 5% growth in residential revenues.

Speaker Change: Typically expansion markets delivered $29 million of residential revenues in the quarter compared to $20 million a year ago.

Speaker Change: As expected commercial revenues decreased 4% in the quarter as we continued to decommission our CLEC markets.

Speaker Change: Lastly, wholesale revenues decreased 3% as customers migrate to lower cost products.

Speaker Change: On Slide 19, you can see our quarterly performance.

Speaker Change: 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.

Speaker Change: 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%.

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. 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. I believe TDS Telecom has a bright future and is in good hands with Chris Boxell, the CFO. I will now turn the call back over to Colleen. Okay, operator, we are now ready for the first question.

Speaker Change: Slide 20 shows our 2024 guidance, which was which is unchanged from last quarter.

Speaker Change: 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.

As Vicki mentioned this is my last earnings call at Tds.

Speaker Change: It has been my privilege to work with so many talented people during my time here. Thank you all.

Speaker Change: <unk> of what we have accomplished and I believe Tds Telecom has a bright future and is in good hands with Chris box all the CFO.

Speaker Change: I will now turn the call back over to Colleen.

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

Operator: Thank you. Our first question comes from the line of Ric Prentiss with Raymond James. Please go ahead.

Speaker Change: Thank you we will now begin the question and answer session.

Speaker Change: Have dolls and would like to ask a question. Please press star one on your telephone keypad raise your hand and joined the queue if you'd like to withdraw your question simply press Star one again.

Speaker Change: Are called upon Josh your question listening via loud speaker on your device. Please pickup your handset.

Sure that your phone is on mute when asking your question.

Speaker Change: Again.

Speaker Change: Sir wanted to join the queue.

Our first question comes from the line of Ric Prentiss with Raymond James. Please go ahead.

Colleen Thompson: Morning, Ric. Good morning.

Hi, good morning, everybody.

Speaker Change: Good morning, Rick Good morning.

Ric Prentiss: Hey. A couple questions. Thanks for the color on some of the cash taxes impacts. Wanted to probe a little further on the T-Mobile sale and the Verizon spectrum sale. Are they net of NOLs and other tax shields, or is that the gross liabilities that you might be applying more shields to them?

Ric Prentiss: Thanks, a couple of questions. Thanks for the.

Ric Prentiss: Color on some of the tax cash taxes impacts I wanted to probe a little further.

Ric Prentiss: On the T mobile sale in the Verizon spectrum sale are those fully using.

Ric Prentiss: They net of Nols and other tax shield or is that kind of the gross liabilities that you might be applying more.

Ric Prentiss: Two of them.

Douglas Chambers: Yeah, Ric. Doug here. On that question, that is net of what we expect to use for both NOLs and for interest carryforward. That's the reason why the TDS cash taxes are estimated to be lower, because they have more of those attributes, NOLs and interest carryforwards, than UScellular does.

Ric Prentiss: Yes.

Speaker Change: Doug here on that question that is net of what we expect to use for both Nols and for interest carryforward and Thats. The reason why the Tds.

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: Yeah.

Ric Prentiss: Makes sense. On the Verizon spectrum sale, you mentioned that there also will be some fees and other items. For the non-cash tax items, is it probably a couple?

Speaker Change: Makes sense.

Speaker Change: On the Verizon spectrum sale, you mentioned that there'll 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: Okay.

Speaker Change: Okay.

Vicki Villacrez: That's also going to impact the eventual gain that we recognize upon close of that transaction.

Speaker Change: And Thats also going to impact the eventual gain that we recognized.

On close of that transaction.

Ric Prentiss: Okay, that makes sense. The lease before closing does that imply that the T-Mobile deal closes, but then you can't free up the spectrum immediately?

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.

Vicki Villacrez: Well, it implies that the T-Mobile deal may close and we may not have regulatory approval for the Verizon spectrum deal.

Speaker Change: Well it implies that the T mobile deal May close and we may not yet.

Speaker Change: Not have regulatory approval for.

Speaker Change: For the Verizon spectrum deal.

Ric Prentiss: Okay. I would assume there's got to be some integration time for T-Mobile to migrate the customers off of the UScellular network over to the T-Mobile network. Is that like a year's timeframe or something?

Speaker Change: Okay.

There's got to be some integration time for T mobile to kind of migrate the customers off of the USA network over to the T. Mobile network is that like a year's time frame or something could correct. There is a spectrum lease for up to a year. After the close of the T mobile deal where T mobile.

Vicki Villacrez: That's 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: Yes.

Speaker Change: Most of our spectrum for that period of time.

Ric Prentiss: Makes sense. Okay. When you think about the spectrum sale to Verizon and the gain that would imply, obviously philosophical, assuming things go through, what would the use of proceeds would be? Is that like a special dividend thought? If it is a special dividend thought, what are the thoughts of TDS? Is that to reduce leverage? Is that to start applying more CapEx? Just philosophically, I know we've got a lot of bridges to still cross.

Speaker Change: Makes sense, Okay, and then when you think about the spectrum sales of Verizon in the game with that one.

Speaker Change: Imply.

Speaker Change: 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 thought 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.

Vicki Villacrez: Yeah. Good morning, Ric. 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. 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 UScellular board of directors.

Speaker Change: Yes.

Speaker Change: Good morning, Rick.

Speaker Change: Obviously first and foremost right now we're focused on getting these transactions closed and.

Speaker Change: 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.

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.

Vicki Villacrez: 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 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 Telecom 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. TDS may look at returning value to shareholders. More to come. It's early, again, our focus is on getting to close.

Speaker Change: If there is a special dividend and Tds has got its share it would be an opportunity.

Speaker Change: For Tds.

Speaker Change: To do a number of things that would include paying down the potential to pay down debt.

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.

Speaker Change: Marta comments early again, our focus is is is on getting to close.

Ric Prentiss: Makes sense. 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?" 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, what it could help you do, but also what it might do as far as on the handset side?

Speaker Change: Makes sense.

Speaker Change: They are more long term question.

Speaker Change: For LTE on the on the wireless side.

Speaker Change: A lot of people beginning of the year, we're worried would there be quote 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.

Laurent Therivel: Yeah, hi Ric. I guess I'll give you two viewpoints on it. Let me start with the handset side. The jury's still completely out, right? We, like every other operator, actually saw a decline in upgrade rates. People are hanging on to their devices for longer. 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 become unveiled. I just think it's too early to tell. We certainly have not seen a super cycle to date. I think it's too early, right? A lot of the AI capabilities can now be delivered via software upgrade.

Speaker Change: Yes, good morning, I guess I'll give you two viewpoints on it let me start with the handset side.

Speaker Change: Curious 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 become unveiled and I. Just think it's too early to tell but we certainly have not seen a super cycle to date.

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.

Vicki Villacrez: It's not going to require those customers who have already purchased the new device to go get a new one.

Speaker Change: It's not going to acquire those customers who have already purchased the new device to go get a new one.

Laurent Therivel: We'll see. I played around with some of the capabilities. They're pretty interesting, and I think they'll mature over time. I think from a, let's call it a consumer-facing standpoint, AI truly changing the customer experience, it hasn't yet, but it may. I think it displays a lot of promise. Where we are seeing impact is on the cost side of our operations. 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 interact with the customer. Here's how you do it more effectively, more efficiently.

So we'll see.

Speaker Change: Alright.

Speaker Change: I played around with some of the capabilities.

Speaker Change: Pretty interesting and I think that those and I think bill mature over time, and so I think from a.

Speaker Change: Let's call it a consumer facing standpoint.

AI truly changing the customer experience it hasnt yet but.

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.

Speaker Change: 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 Andrew customer hears that you could do it more effectively more efficiently.

Laurent Therivel: 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. That can help us with attrition, it can help us with 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 experience. From a cost perspective, I do think we are already seeing a fair amount of benefit. 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. Consumer side, jury's still out. I'm long-term bullish. Near-term operational efficiency, we're already seeing the benefits of it.

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.

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: Similar 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.

Near term operational efficiency were already seeing the benefits of it.

Ric Prentiss: Great. Thanks, everybody.

Speaker Change: Great. Thanks, everybody.

Colleen Thompson: You bet.

Colleen Thompson: Thanks, Ric. Operator, next question.

Speaker Change: You bet. Thanks, Eric Operator next question.

Operator: Our next question comes from the line of Sebastiano Petti with J.P. Morgan. Please go ahead.

Speaker Change: Our next question comes from the line of Sebastian Kathy with JP Morgan. Please go ahead.

Sebastiano Petti: Hi, thank you for taking the question. Just a quick clarification, housekeeping here. In the TDS press release, I think you called out disagreements to sell ILEC and cable properties. Is that above and beyond what you've kind of already identified, or is there anything else perhaps in process there? In addition, I guess, L.T., thinking about the RemainCo tower portfolio pro forma for all the different transactions out there. As you think about it, do you see UScellular as a net acquirer perhaps of towers or the tower portfolio expanding over time as that perhaps comes to the operating business? Or is it more about increasing tenancies, preparing the business for further densification of some of the tower deals you see plus the wireless ecosystem from there?

Sebastian Kathy: Hi, Thank you for taking the question just a quick clarification.

Sebastian Kathy: Housekeeping here in terms of the GDS press release, I think you called out.

Sebastian Kathy: 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 perhaps in process there.

Sebastian Kathy: In addition.

L. T: L T.

L. T: Thinking about the remain co tower portfolio pro forma for all the different transactions.

L. T: Out there I mean, as you think about it.

Do you see U S. San Jose net acquirer, perhaps of towers or the tower portfolio expanding over time as that perhaps some of the operating business or is it more about increasing tenancies preparing the business.

For further densification and some of the hotel, whether you'll see across the wireless ecosystem from there.

Laurent Therivel: Thanks, Sebastiano. Michelle, do you want to tackle the first one?

Thanks, Jonathan.

L. T: Heart attack.

L. T: I want to talk about first of all.

Michelle Brukwicki: 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 small Virginia ILECs that we are divesting, and we announced that in Q2. We also announced in Q3 the sale of our Texas cable properties. Those are what I was referring to, and those are the ones that we expect to close here very soon in Q4.

Yes, Hi, Sasha.

L. T: Yes.

Divestitures that Vicki mentioned, the nonstrategic ILEC in cable divestitures are the same ones that we have disclosed over the last few months.

L. T: We had a couple of small Virginia ILEC that we are divesting, we announced that in the second quarter and we also announced in the third quarter the sale of our Texas cable properties.

Speaker Change: And was there a buzz.

Speaker Change: During two and those are the ones that we expect to close here very very soon in the fourth quarter.

Speaker Change: Got it.

Laurent Therivel: Let me tackle question number two. Let me talk just a bit about how we see our current tower portfolio. Job one is to improve co-location rates on the assets we have today. 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. 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. We've 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 into our tower business. We have seen a slower rate of growth in the last year or two.

Speaker Change: 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.

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 a few years ago.

Speaker Change: And that's driven some increase in colocation rates over time.

Speaker Change: Doug mentioned, we're in a bit of a slowdown right now and the wireless industry.

Speaker Change: In terms of capital spending.

Speaker Change: We've.

Speaker Change: 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 of growth in the last year or two but long run we are still very bullish because our colocation rates are considerably.

Laurent Therivel: Long run, we're still very bullish because our co-location rates are considerably below a lot of our competitors. We think there's opportunity. That tower portfolio is geographically relatively unique. We have a small number of towers that are within a mile, within a mile and a half, within three, five miles of our towers. Over time, as carriers densify, we see an opportunity to increase those co-location rates, and that's job one. A second question then when you think about our tower business, and I'm getting to your question of would we look at acquisition opportunities is this a business that operates at scale? 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 to scale.

Speaker Change: Hello.

A lot of our competitors, we think there is opportunity.

Speaker Change: That.

Speaker Change: Tower portfolio is geographically relatively unique.

Speaker Change: 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.

Speaker Change: That's job one.

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.

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 wireless is a national business a lot of the spend is national and we were disadvantaged against the against the larger players.

Laurent Therivel: Wireless is a national business. A lot of the spend is national, and we were disadvantaged against the larger players. That's not the case in towers. Towers, you can operate much more locally on a much more granular level. We do think that we are at a scale where we can operate our tower portfolio efficiently over time. 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. The long answer to your question is yes, but it's yes, but

Speaker Change: Not the case in towers towers, you can operate.

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.

Laurent Therivel: Yes, we would look at potential opportunities to expand that portfolio, whether it's organic, building new towers, or inorganic, acquiring portfolios. Valuations are pretty rich right now. You look at the latest transaction between Verizon and Vertical Bridge. Shentel sold their towers, and these are some pretty rich valuations. 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 and where we're not having to spend too much to acquire assets. Hopefully, that gives you a sense about how we're thinking about it.

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.

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.

Speaker Change: <unk> assets. So hopefully that gives you a sense about how we're thinking about it.

Sebastiano Petti: No, that's super helpful. We appreciate that. I guess one more question back to TDS. I know last quarter you announced an MVNO agreement or launch of an MVNO. As you're thinking about the space, obviously tons of focus on convergence, tons of focus on fiber assets and where perhaps that could go over time and given TDS's fiber efforts, fiber roadmap, and targets longer term. I guess number one, maybe that makes sense to continue to operate on a standalone basis, but would you entertain unique perhaps agreements with scaled wireless operators? There are some 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 split up the MVNO, maybe that's a better way to ask the question.

Speaker Change: That's super helpful. I appreciate that and then I guess, one more question back from Tds I know.

Speaker Change: I know last quarter you announced.

Speaker Change: No it <unk>.

Speaker Change: Agreement.

Speaker Change: Launch of in EMEA.

Speaker Change: As you're thinking about the space obviously it comes with focus on convergence plans focus on fiber assets and where perhaps that could go over time and given the company's given Tds is fiber efforts fiber road maps and targets longer term.

Speaker Change: Obviously not.

Speaker Change: Maybe that makes sense to continue to operate on a standalone basis, but I mean would you entertain.

Speaker Change: Unique perhaps agreements with scaled wireless operators there are some regional ILEC assets.

Speaker Change: Windstream and AT&T for example have an agreement but is that within perhaps the longer term roadmap, perhaps although you have stood up <unk> and then I guess.

Speaker Change: The better 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.

Sebastiano Petti: Is the fact that you split up the MVNO now preclude you from perhaps entering into agreements with perhaps scaled national wireless operators to combine your efforts for a converged bundle offer? Thank you.

Speaker Change: Combined Europe, Pittsburgh converged bundle offer.

Michelle Brukwicki: Hi, Sebastiano. Yeah, let me talk a little bit about our MVNO. We are in the process of getting that all rolled out, and as we've mentioned in the past, we are launching our MVNO through our participation in the NCPC. We're part of that industry cooperative, and they have partnered with very strong partners that are coming together and integrating and offering that MVNO opportunity to companies that participate in NCPC like us. We are taking advantage of that. The wireless partner that NCPC is working with is a national 5G player. We do have that available to us through the NCPC MVNO arrangement. We're in the process of getting that launched right now. We've been doing associate trials over the last couple of months, and we're now in customer trials.

Hi, especially now.

Speaker Change: Yeah, Let me talk a little bit about <unk>.

Speaker Change: Or 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.

So we're part of that industry.

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> players.

Speaker Change: We do have that available to us through the CTC and BMO 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.

Michelle Brukwicki: 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. That's how we're thinking about the MVNO, and we're very excited to get that launched in a bigger way, hopefully coming up very soon.

Speaker Change: 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.

Sebastiano Petti: Thank you again.

Speaker Change: Thank you again.

Operator: Our next question comes from Sergey Dluzhevskiy with GAMCO Investors. Please go ahead.

Speaker Change: Our next question comes from.

Yes, yes.

Speaker Change: Gamco investors. Please go ahead.

Sergey Dluzhevskiy: Good morning, guys.

Speaker Change: Good morning, guys.

Colleen Thompson: Good morning.

Speaker Change: Good morning.

Sergey Dluzhevskiy: Thanks for taking the questions. My first question is for L.T. on the tower business. I understand that obviously the industry is in a slower CapEx cycle, and that impacts new customer additions and amendments. I guess looking at the things 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 colocation ratio? Also maybe your thoughts on what kind of third-party colocation ratio is realistic for your company on a medium-term trajectory.

Speaker Change: Thank you for taking the questions.

Speaker Change: My first question is for LTE.

Speaker Change: On the power business so.

I understand that.

Speaker Change: Understood.

Speaker Change: And this lower capex cycle and that impacts you got.

Some of the additional sand.

Speaker Change: 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 oil company on a medium term.

Sorry victory.

Laurent Therivel: Yeah, thanks, Sergey. A few thoughts on the slowdown then why I do believe over time that we're going to see a pivot to that. I referenced the slowdown in capital spending. This is one area where it's helpful to be running a wireless business at the same time as you're running a tower business because you kind of get visibility into exactly what's driving the trends. For us, what's driving the trends is we've completed our coverage. Not completed, but we're well down the path of our coverage build, most of our investments going into capacity. The next big round of investment is going to be triggered by one of two things. The first will be 6G and any densification or new spectrum that needs to be brought to bear in order to enable the 6G build.

Speaker Change: Yeah. Thanks, Derrick so.

Speaker Change: A few thoughts on <unk>.

Speaker Change: The slowdown and then why I do believe over time that we're going to see a pivot to that.

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 as we've completed our coverage are completed, but we're well down the path of our coverage build most of our investments going into going into capacity.

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.

Michelle Brukwicki: The second, interestingly enough, is going to be driven, I believe, by a paucity of spectrum. 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. We're kind of bullish on that piece of the equation. Broadly, if you're a carrier, the most obvious way to get access to spectrum is via spectrum auction. The FCC doesn't have spectrum auction authority right now. There's a notional roadmap that the NTIA has put forward, and I commend them for doing it. That identifies bands for analysis

But the second interestingly enough is going to be driven I believe.

Speaker Change: Paucity of 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.

But broadly right if you're if you're a carrier.

Speaker Change: The most obvious way to get access to spectrum is.

Speaker Change: <unk> 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 that.

Speaker Change: That identifies bands for analysis.

Laurent Therivel: We've been analyzing bands of the 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. 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. 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 Dish spectrum's not going to be on the market. You don't see carriers with access to spectrum. If you don't have access to new spectrum, how do you satisfy increases in capacity?

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: Haven't taken action in granting the FCC spectrum authority back in so.

Speaker Change: Which I've said publicly I think is preposterous.

Speaker Change: And 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: <unk> be in the market selling some spectrum, but I think the recent the recent announcements.

Speaker Change: Both in terms of their access to liquidity as well as the extension that they received from the FCC.

Speaker Change: Your spectrum is not going to be on the market. 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.

Laurent Therivel: 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. The only way that you support that is with densification. Over time, you're going to see more builds. I do think more of that will focus on small cells, on C-RAN. It's going to be more in urban environments. Even in suburban and towards rural, you're going to have that same capacity problem. Carriers are going to need to densify. They're going to need to get access to new towers and towers that are in places where they haven't been before. I do think that's going to drive attractive usage of our towers and demand for our towers.

Speaker Change: Hey, guys.

Speaker Change: We bring new spectrum to bear as an industry. We're 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 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 and so 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.

Speaker Change: And I do think thats going to drive attractive attractive usage of our towers and demand for our towers until I'm 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.

Laurent Therivel: 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 tower 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. We've worked hard to ensure that that is not the case. We have good agreements in place, whether they're 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. The other thing I'm pleased about is we are working on buying back ground leases.

Speaker Change: Establishing agreements and establishing relationships with.

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.

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.

Speaker Change: Other thing I'm pleased about is we are working on buying back ground leases.

Laurent Therivel: A not insignificant expense in the tower business over time is landlords, people who actually own the land, increasing the rates on their ground leases. 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. 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, Sergey, is going to be, we have to turn that into 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: So a not insignificant expense in the tower business over time.

Speaker Change: As landlords land Lords people, who 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 in a bit more on steroids going into next year.

Speaker Change: To try to buyback some of these ground leases and get those get those expenses.

Speaker Change: For a more manageable situation in the future and so.

Speaker Change: I think returning 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.

Speaker Change: Have to turn that into.

Speaker Change: 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.

Laurent Therivel: 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 to nine months between now and close. That's where another portion of our operational focus will be. 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 opportunity.

Speaker Change: Certainly as already standing on its own operationally, but from an overhead perspective from a systems perspective and so on.

Speaker Change: And it requires 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 macro about towers, but also micro where we see the opportunity.

Sergey Dluzhevskiy: Got it. Thank you. My second question is in regards to wireless partnerships. Verizon has been buying in minority stakes in their partnerships over the past few years. Obviously, one of the larger transactions there was with CenturyLink Communications, but UScellular obviously has an even larger minority interest in terms of size in the LA market. If you could maybe share with us your latest thinking on the partnership interest and what could move you closer to monetizing those assets?

Speaker Change: Got it thank you.

Speaker Change: Hi.

Speaker Change: Second question is in regards to our wireless partnerships so horizon.

Speaker Change: Buying in minority Stakes in partnerships.

Speaker Change: Over the past three years saw the slowdown on the larger transactions that was consolidated communications material federal or others.

Speaker Change: Larger.

Speaker Change: Minority interests in terms of size.

Speaker Change: <unk> market. So if you could maybe share with us your.

Speaker Change: Your latest thinking on the partnership from tourists and what could move you closer to monetize those assets.

Laurent Therivel: Well, we've had a couple 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 partnerships. They generate attractive cash flow. That cash flow has helped our wireless business. It helps us continue to pay down debt. We're not in any hurry to change direction with those partnerships. That being said, as part of the strategic review that we mentioned, we took a really comprehensive view across the business. As you can see from what we did with the wireless business, what we're doing with spectrum, how we established the tower business, there aren't any sacred cows.

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 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 will continue to do that moving forward and so if there is an opportunity.

Laurent Therivel: We did take a really comprehensive look, short term and long term, about what we wanted the enterprise to look like. We'll continue to do that moving forward. 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 we're happy with how they're performing. We're happy with the relationship that we have within those partnerships. They're attractive financially. At least right now, we got plenty on our plate in terms of getting our wireless deal with T-Mobile done, plus getting a lot of incremental spectrum monetized as well.

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 is.

Speaker Change: We're we're happy with how they are 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've got plenty on our plate in terms of getting our wireless or wireline.

Speaker Change: Plus hitting a lot of incremental spectrum monetize as well.

Sergey Dluzhevskiy: Got it. My next question is for Michelle on the TDS Telecom side. You provided speed distribution for your residential broadband 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? This is your entire base, but how would it look for your incoming customers, maybe for the last Q or year to date?

Speaker Change: Got it.

Speaker Change: And my next question is for Michelle.

Speaker Change: Telecom side.

Speaker Change: You provided a good distribution.

Speaker Change: Sure.

Speaker Change: <unk> broaden our customer base.

Speaker Change: The slide deck, I think about 20% on gig plus 10.

10% on 600 with Megan so on how does the distribution before for incoming customers. So this is your entire base, but how would it look for you in common customers, maybe for the last quarter or year to date.

Michelle Brukwicki: Yeah. Hi, Sergey. Yeah. For our incoming customers, I would say, I think we're at about 20% is on gig service today for our whole base, but for incoming customers, we're at about 40% coming in on gig service. That's why you continue to see quarter over quarter, we keep moving our customers up that stack of speed. That's also helping drive a bit of our ARPU increase, and of course, improving the customer experience and meeting the customer demand for broadband usage.

Speaker Change: 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.

Sergey Dluzhevskiy: Got it. Great. My last question, going back to some of your comments about things that you are doing to improve broadband net additions, 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 pipelines into paying customers over the next six to 12 months?

Speaker Change: Got it great and my last question.

Speaker Change: Going back to your comments about.

Speaker Change: Things that you are due.

Speaker Change: Doing to improve.

Speaker Change: Brian with net additions, including.

Speaker Change: Hi, guys door to door sales force.

Speaker Change: What 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 to in addition to I guess door to door sales force.

Speaker Change: <unk> converted some of your platforms onto paying customer so as the next steps for bolt ons.

Michelle Brukwicki: Yeah. This is a huge focus of our organization. We've got lots of people working on this and focused on this. Yeah, last year we turned up a lot of service addresses. We're turning up a lot this year as well. It is our top priority to sell into those addresses and get our broadband penetration up. We did have 7,600 broadband net adds this quarter in our expansion markets, and that's fantastic that we're getting that because that's providing the growth in our broadband net adds in total. It is coming in a little bit slower than we had expected. What we're finding is that we need to enhance our door-to-door sales representatives and get more people out there selling. About half of our sales come from door to door, and we just needed more resources out there.

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 that so yes 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 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 thats, providing the growth and our.

Speaker Change: Broadband net adds 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: 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.

Michelle Brukwicki: We've been working on that for the last few months. 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. That's where our focus is right now, is on getting those sales really ramped up and making sure we've got all the resources there that are required to do so.

Speaker Change: <unk> that our efforts are working and that we're on the right track based on what we're seeing so far come through in <unk>.

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.

Sergey Dluzhevskiy: Got it. Thank you.

Speaker Change: Got it thank you.

Colleen Thompson: Thanks, Sergey.

Speaker Change: Thanks, Eric.

Laurent Therivel: Thanks.

Speaker Change: Okay.

Operator: This concludes today's Q&A session. I'd like to now turn the call back over to Colleen Thompson for closing remarks.

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: Okay, thanks everyone for all your time today. Please reach out to investor relations with any additional questions, and have a great weekend. Operator, you can hang up now.

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

Operator, we can write off now.

Operator: Thank you. This concludes today's call. You may now disconnect.

Thank you.

Speaker Change: This concludes today's call you may now disconnect.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Sure.