U.S. Cellular(USM) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 2% decline in service revenues, driven by a decrease in the average subscriber base, partially offset by an increase in postpaid ARPU by 2% [32][25] - Adjusted operating income before depreciation and amortization (OIBDA) improved by 1%, while adjusted EBITDA, which includes earnings from equity method investments, increased by 3% [33] - Free cash flow for the year-to-date through September 30th was $331 million, a$94 million increase over the prior year, allowing for debt repayment of $163 million in the first nine months of 2024 [37] Business Line Data and Key Metrics Changes - UScellular improved retail net losses by 20,000 subscribers year-over-year, with postpaid handset net losses improving by 10,000 due to reduced churn [21][23] - TDS Telecom's fiber broadband strategy contributed to a 2$1 billion, highlighting the demand for these licenses [17][19] - The strategic focus includes optimizing resources and divesting non-strategic assets, such as the sale of OneNeck IT solutions and certain TDS Telecom assets [8][9] - Future 5G network investments will predominantly be dedicated to deploying mid-band spectrum to enhance speed and capacity [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term benefits of the T-Mobile transaction, which is expected to close in mid-2025, providing greater scale and a competitive network [15] - The company remains optimistic about its operational objectives and long-term strategic goals, especially with improved profitability and cash flow [11][10] - Management acknowledged the challenges posed by recent natural disasters but emphasized the team's efforts to support affected communities [6][14] Other Important Information - The company announced the upcoming departure of CFO Michelle Brukwicki, with Kris Bothfeld set to take over the role [12][13] - The company is managing its balance sheet through long-dated debt maturities issued at historically low interest rates, maintaining reasonable leverage and sufficient liquidity [11] Q&A Session Summary Question: Clarification on T-Mobile and Verizon Spectrum Sales - Management confirmed that the cash tax estimates for the spectrum sales are net of NOLs and interest carry forwards, with TDS having more attributes than UScellular [56] Question: Impact of T-Mobile Deal on Spectrum Availability - It was clarified that the T-Mobile deal may close, but regulatory approval for the Verizon Spectrum deal may not be immediate [58] Question: Long-term Wireless Strategy and AI Impact - Management noted that while there hasn't been a super cycle in device upgrades, AI is expected to enhance operational efficiency and customer experience in care centers [64][66] Question: Update on ILEC and Cable Divestitures - Management confirmed that the divestitures mentioned are consistent with previous disclosures, including small Virginia ILECs and Texas cable properties [69] Question: Future of Tower Portfolio and Co-location Rates - Management expressed optimism about increasing co-location rates and the potential for future acquisitions, while being cautious about current valuations in the market [75][76] Question: MVNO Launch and Future Agreements - The MVNO is being launched through NCTC partnerships, and management is open to exploring agreements with scaled wireless operators in the future [79] Question: Broadband Customer Acquisition Strategies - Management highlighted the importance of enhancing door-to-door sales efforts to improve broadband penetration in new markets [100]