Core Points - United States Cellular Corporation (UScellular) announced the appointment of Doug Chambers as interim President and CEO of the post-closing entity, Array Digital Infrastructure, Inc. [1][2][7] - The sale of UScellular's wireless operations to T-Mobile US, Inc. is expected to close on August 1, 2025, subject to closing conditions [1][2] - The company will change its ticker symbol on the NYSE to "AD" from "USM" following the name change [3] - A special cash dividend in the range of $22.50 - $23.75 per Common Share and Series A Common Share is expected to be approved by the board after the sale closes [4] Company Developments - Doug Chambers has been with the TDS family of companies since 2007 and has served as Executive Vice President, CFO, and Treasurer of UScellular for the past six years [2] - The new company, Array Digital Infrastructure, Inc., will focus on overseeing operations related to its portfolio of 4,400 owned towers and retained wireless spectrum [1][2] - The headquarters of Array Digital Infrastructure, Inc. will remain in Chicago, IL [3] Financial Information - UScellular had approximately 4.4 million retail connections across 21 states as of March 31, 2025 [5] - Telephone and Data Systems, Inc. owned about 83 percent of UScellular at the end of the first quarter of 2025 [5]

Regulatory Approval - The Federal Communications Commission (FCC) cleared T-Mobile US Inc's acquisition of a significant portion of US Cellular Corp's wireless business [1] - The acquisition also includes some of US Cellular Corp's network infrastructure [1]

Core Viewpoint - The Federal Communications Commission has approved the transaction between United States Cellular Corporation and T-Mobile US, Inc., allowing the companies to proceed with the deal upon meeting closing conditions [1]. Company Overview - United States Cellular Corporation provides a wide range of wireless products and services, serving 4.4 million retail connections across 21 states, with a workforce of 4,100 associates as of March 31, 2025 [2]. - Telephone and Data Systems, Inc. operates through UScellular and TDS Telecom, offering wireless, broadband, video, and voice services to approximately 5.5 million connections nationwide, employing around 7,800 associates as of March 31, 2025 [3].

Group 1 - The US Department of Justice Antitrust Division has closed its investigation into the proposed transaction between United States Cellular Corporation and T-Mobile, but the transaction still requires approval from the Federal Communications Commission (FCC) [1] - United States Cellular Corporation serves 4.4 million retail connections across 21 states and had 4,100 employees as of March 31, 2025 [2] - Telephone and Data Systems, Inc. owns approximately 83 percent of United States Cellular Corporation [2] Group 2 - Telephone and Data Systems, Inc. provides services to around 5.5 million connections nationwide through its subsidiaries, including UScellular and TDS Telecom [3] - TDS was founded in 1969 and has approximately 7,800 employees as of March 31, 2025 [3]

Mergers and Acquisitions - The Justice Department will not challenge T-Mobile's $4.4 billion purchase of US Cellular's wireless operations and some spectrum assets [1] Regulatory Approval - The decision comes despite some concerns about the deal [1]

Financial Performance - U.S. Cellular Corporation reported a net income of $18 million or 21 cents per share, compared to $18 million or 20 cents in the prior-year quarter, missing the Zacks Consensus Estimate by 16 cents [2] - The company generated $891 million in operating revenues, down from $950 million in the prior-year quarter, also missing the Zacks Consensus Estimate of $925 million [2] - Service revenues decreased to $741 million from $754 million, while equipment sales fell to $150 million from $196 million in the prior-year quarter [3] Customer Metrics - Fixed wireless customers grew by 21% year over year to 150,000, while total postpaid connections declined to 3,946,000 from 4,051,000 in the year-earlier quarter [3][4] - Handset connections increased to 68,000 from 63,000 in the prior-year quarter, with a churn rate of 1.03%, unchanged from the previous year [4] - Prepaid connections decreased to 431,000 from 436,000 in the year-ago quarter, with a prepaid churn rate increasing to 4.17% from 4.06% [4][5] Revenue Metrics - Postpaid average revenues per account improved to $132.25 from $132 in the year-ago quarter, while postpaid ARPU rose to $52.06 from $51.96 [5] - Prepaid ARPU decreased to $30.76 from $32.25 in the prior-year quarter [5] Operational Efficiency - Adjusted EBITDA for the quarter was $254 million, down from $272 million in the prior-year quarter, while adjusted OIBDA decreased to $215 million from $228 million [6] - Total operating expenses were $850 million, down 5% year over year, with operating income reported at $41 million compared to $51 million in the prior-year quarter [6] Cash Flow and Liquidity - U.S. Cellular generated $160 million of cash from operating activities, down from $203 million in the year-ago quarter [7] - As of March 31, 2025, the company had $182 million in cash and cash equivalents and $2.82 billion in long-term debt [7]

Group 1 - United States Cellular Corporation (NYSE: USM) reported Q1 2025 results on May 2, leading to a stock drop of over 8% post-earnings [1] - The market reaction indicates a negative sentiment towards the company's performance, which may reflect underlying issues in its business model or competitive positioning [1] Group 2 - The analysis emphasizes the importance of business analysis, fundamental analysis, valuation, and long-term growth in sectors such as AI, fintech, finance, and tech [1] - The focus is on understanding publicly traded companies through their business models, earnings performance, and competitive positioning [1]

Financial Data and Key Metrics Changes - The company reported a year-over-year increase in free cash flow of $79 million for Q1 2025, an increase of $18 million compared to the same quarter last year [14] - Total operating revenues decreased by 3% compared to the prior year, impacted by divestitures and declines in commercial and wholesale revenue [47] - Cash expenses increased by 6% or $11 million in the quarter compared to the prior year, with part of the increase attributed to stock-based compensation adjustments [47] Business Line Data and Key Metrics Changes - The company saw a 6% increase in third-party tower revenues due to new co-locations and escalators on renewed leases [13] - Fiber service addresses grew by 6% year-over-year, with 14,000 new addresses delivered in the quarter [19][36] - Residential broadband net additions were 2,800, with 8,300 coming from fiber markets, lower than prior quarters due to timing of service address delivery [37][40] Market Data and Key Metrics Changes - The company continues to face competitive pressures in the wireless market, with aggressive promotions from competitors impacting service revenues [15] - The fiber strategy is expected to drive growth, with a target of achieving 40% average penetration in steady state within five years after launch [41] Company Strategy and Development Direction - The company is focused on completing the transaction with T-Mobile, which is expected to close in mid-2025, and is preparing for a smooth transition [9][10] - Post-transaction, the company plans to declare a special dividend to shareholders, with proceeds expected to be used to repay outstanding bank debt [11][19] - The company is also investing in its fiber program, aiming to expand its footprint and improve operational efficiency [39][100] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainties in the broader economy and markets but remains optimistic about the long-term potential of the tower business [13][18] - The company expects to continue facing competitive pressures but believes the T-Mobile transaction will provide better competitive choices and connectivity experiences for customers [16][17] - Management is confident in achieving $100 million in annual cost savings by 2028 through transformation efforts [39][78] Other Important Information - The company does not plan to redeem its Series UU and Series BV preferred stock, viewing them as foundational capital for future operations [11][73] - The company is actively evaluating its portfolio for potential divestitures, particularly in copper markets without an economic path to fiber [99] Q&A Session Summary Question: Timing of designated entity spectrum approval - The timing is uncertain and dependent on regulatory approval by the FCC, but there is optimism for a positive outcome [58] Question: Free cash flow run rate - The reported free cash flow of $79 million is not necessarily a run rate, but capital expenditures are expected to be down in 2025, which is positive for free cash flow [60][61] Question: Debt exchange offer impact - The debt exchange offer will be launched about 50 days before the anticipated close, and the amount of debt exchanged will impact the purchase price [62][111] Question: Fiber net adds and sales efforts - Fiber net adds were lower due to timing of address delivery, but as construction ramps up, net adds are expected to improve [66] Question: Rationale for remaining a public entity - The incremental cost to operate as a public company is minimal, and there are no immediate incentives to collapse the structure [107][108]

Financial Data and Key Metrics Changes - Total operating revenues decreased by 3% year over year, impacted by divestitures and declines in commercial and wholesale revenue, as well as decreases in residential video and voice connections [44] - Free cash flow for Q1 2025 was $79 million, an increase of $18 million compared to the same quarter last year [13][19] - Cash expenses increased by 6% or $11 million compared to the prior year, with $4 million of this increase attributed to a cumulative non-cash adjustment to stock-based compensation [44] Business Line Data and Key Metrics Changes - Postpaid handset results showed year-over-year improvements, while third-party tower revenues increased by 6% due to new co-locations and escalators on renewed leases [12] - Fiber service addresses grew by 6% year over year, with 14,000 new addresses delivered in the quarter [33][42] - Residential broadband net additions were 2,800, with 8,300 coming from fiber markets, lower than prior quarters due to timing of service address delivery [34][38] Market Data and Key Metrics Changes - The company continues to face aggressive promotional competition in the wireless industry, with competitors offering multi-year price locks and aggressive pricing [14] - Demand for higher broadband speeds remains strong, with 82% of residential broadband customers taking 100 megabits or higher and 24% taking one gig or higher at the end of the quarter [42] Company Strategy and Development Direction - The company is focused on completing the proposed transaction with T-Mobile, which is expected to close in mid-2025, and is preparing for a smooth transition [9][16] - A special dividend to shareholders is anticipated following the closing of the T-Mobile transaction, with proceeds expected to be used to repay outstanding bank debt [10][18] - The fiber program has expanded the company's footprint by over 30% in the last three years, with further growth opportunities identified [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainties in the broader economy and markets but remains optimistic about the long-term potential of the tower business and fiber expansion [7][12] - The company is focused on cost optimization and expects capital expenditures to decline in 2025 as planned 5G coverage builds are largely completed [13][46] - Management expressed confidence in achieving $100 million in annual cost savings by the end of 2028 through transformation efforts [35][72] Other Important Information - The company does not plan to redeem Series UU and Series BV preferred stock, viewing them as foundational capital for future operations [10][68] - The expected cash income tax obligations related to the T-Mobile transaction are estimated to be between $225 million and $325 million [28][30] Q&A Session Summary Question: Timeline for designated entity spectrum approval - The timing is uncertain and dependent on regulatory approval by the FCC, but there is optimism for a positive outcome [52][54] Question: Free cash flow run rate - The $79 million in free cash flow is not necessarily a run rate, but capital expenditures are expected to be down in 2025, which is positive for free cash flow [55] Question: Debt exchange offer impact - The debt exchange offer will be launched about 50 days before the anticipated close, and the amount of debt exchanged will impact transaction proceeds [56][110] Question: Fiber net adds and sales efforts - Fiber net additions were lower due to timing of address delivery, but management expects improvements as construction activity ramps up [60][62] Question: Divestiture strategy and criteria - The company is focused on divesting non-core assets, particularly isolated copper markets without an economic path to fiber, ensuring that net proceeds exceed the present value of cash flows from continued operations [95][96]

Core Viewpoint - U.S. Cellular reported quarterly earnings of $0.21 per share, missing the Zacks Consensus Estimate of $0.37 per share, representing an earnings surprise of -43.24% [1] - The company posted revenues of $891 million for the quarter, missing the Zacks Consensus Estimate by 3.72% and down from $950 million a year ago [2] Financial Performance - Over the last four quarters, U.S. Cellular has surpassed consensus EPS estimates three times [2] - The company had a previous quarter surprise of 150%, with actual earnings of $0.05 against an expected loss of $0.10 [1] - The current consensus EPS estimate for the upcoming quarter is $0.39 on revenues of $912.36 million, and for the current fiscal year, it is $1.16 on revenues of $3.69 billion [7] Stock Performance - U.S. Cellular shares have increased by approximately 9.8% since the beginning of the year, contrasting with the S&P 500's decline of -4.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Outlook - The Wireless National industry, to which U.S. Cellular belongs, is currently ranked in the top 38% of over 250 Zacks industries, suggesting a favorable outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5]