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Text: We hope that you and all your families are doing well.
We provide guidance for both adjusted operating income before depreciation and amortization for OIBDA and adjusted earnings before interest, taxes, depreciation and amortization or EBITDA, to highlight the contributions of UScellular's wireless partnerships.
In terms of our upcoming IR schedule, Slide 3, we're doing the J.P. Morgan Virtual Non-Deal Roadshow on May 11th and on June 16th we are attending a Virtual Investor Corporate Access Event with the New York Stock Exchange.
And as always, our open-door policy remains, an open phone or open video policy, so please reach out to us, if you're interested in taking it up.
It will be this change not only aligns with how we manage the business and evaluate operating performance today, but also enhances the visibility into how TDS Telecom is performing against its strategic objectives.
The change in segments... I'm sorry, The change in... Yeah.
So you still there?
You cut out for a minute.
The combined view better depicts our progress and success, and success in leveraging a single cost base to become the pre-eminent broadband provider in each market in which we operate.
The change in segment reporting has no impact on the net income of TDS Telecom in prior periods.
Also in terms of the results and impacting year-over-year comparisons, I want to remind everyone that we have a higher tax rate in 2021 compared to 2020 due to the income tax benefits of the CARES Act, which provided a one-time rate benefit in 2020 that does not recur in 2021.
Regarding our balance sheet, both TDS and UScellular are taking action to lower interest expense, given the favorable market environment.
In April TDS and UScellular both announced redemptions of select senior notes.
TDS is redeeming $225 million of its 6.875% Senior Notes and $300 million of its 7% Senior Notes and UScellular is redeeming $275 million of its 7.25% Senior Notes for a total of $800 million.
We will continue to look for ways to avail ourselves of other low cost financing vehicles to further lower our interest expense.
As we've discussed on prior calls, maintaining financial flexibility is one of the pillars of our corporate strategy.
Over the years, we have worked to retain relatively low leverage levels, long dated debt maturities, sufficient undrawn revolving credit facilities, and significant cash balances, while at the same time making sure we have the financial resources we need to fund our businesses.
As you see on Slide 4 at the end of the first quarter, TDS continues to have a good financial position, including ample available funding sources consisting of cash and cash equivalents, and available credit facilities.
While we will be using some of our available cash and partially drawing on our TDS revolver to call the notes previously mentioned.
We believe we will have ample remaining cash balances, as well as excellent access to the debt markets if additional capital is required and as further steps to reduce our interest expense are taken.
UScellular and TDS Telecom are currently both in investment cycles.
With UScellular investing in network modernization 5G and spectrum and TDS Telecom aggressively investing in fiber expansion.
In March, TDS issued $420 million in perpetual preferred stock, which will be used primarily for funding fiber deployments and the repayment of debt.
This transaction enabled us to raise significant proceeds while protecting our credit rating.
TDS continues to return value to its shareholders primarily through dividends, both TDS and UScellular each opportunistically purchased a small amount of their shares in the quarter.
TDS purchased $3 million worth and UScellular purchased $2 million worth of shares.
In sum, we are in a financially solid position to take advantage of growth opportunities in each of our businesses.
Flip to slide 6, our strategic imperatives are simple.
It's going to drive growth and improve return on capital over time.
I think we're off to a really good start this year.
I'm going to let Doug cover the operational and financial highlights of the first quarter.
I'm going to provide a few thoughts on strategic priorities.
First, I think on previous calls that one of our areas of opportunity is to enter into strategic partnerships, better leverage the value of our assets and grow the business.
We made progress on this objective in April by signing a Tower MLA or a Master Lease Agreement with DISH Wireless.
We expect this agreement to contribute to our tower revenue growth beginning in 2022.
Any details on the deal have to remain confidential.
So please keep that in mind, if you've got additional questions.
I spoke to you last quarter about some of our new initiatives to drive growth, a regionalized approach to drive market share, plans for our business and Government and Prepaid segments.
We have full steam on even, I'm pleased with our progress.
You see that year-over-year improvement in gross additions and improvements in churn of our postpaid and prepaid.
I'm also excited for the next evolution of our brand journey, our new tag line, America's locally grown wireless.
UScellular has always been known for its outstanding network, branding highlights strong local presence, we have in our markets.
I think this is what sets us apart from our competition.
And it reflects our culture and our values.
We're about competition, the competitive intensity in the wireless industry remains high.
And we intend to respond as appropriate.
Given the total spend on the C-band auction, I'm expecting continued rational pricing and most of the promotional activity will remain related to devices.
And I think that's a world we can live in economically.
A few words on our network addition, network performance continues to be a hallmark of our strategy.
We're continuing our network modernization program and our multi-year 5G deployment.
We can deploy 5G over each layer of spectrum, low, mid and millimeter wave.
Our initial deployment for coverage is on cleaning low band spectrum.
We have 5G available to some degree in 18 states today.
We were largely satisfied with our C-Band purchases when combined with our CBRS Holdings, we now have mid-band spectrum in nearly all of our operating footprint.
Also we deployed millimeter wave spectrum in order to offer fixed wireless access in three test markets.
Pilot launch in those markets is expected to occur in the third quarter of this year.
We will formalize and communicate our plans when the results become available.
We're going to be optimistic on the performance capabilities in millimeter wave spectrum.
We recently performed additional millimeter wave spectrum testing, base station and radio enhancement and we achieved a line of sight propagation distances of seven kilometers with average speeds approaching one Gigabit per second.
This exceeds our results from last year where we achieved a distance of five kilometers with average speeds of 100 Megabits per second.
One thing I just want to say we've got talent and we're convinced than ever that attracting and retaining talent is a significant differentiator.
This past year stressed everyone's approach to people, but I'm really pleased with how UScellular has responded.
I do believe that the drivers of talent of yesterday aren't the same as the drivers of tomorrow.
Pay and benefits will continue to be important.
We're going to need to think even harder about work flexibility, a constant learning environment and a invisible focus on diversity, equity and inclusion.
We're nearly complete with a comprehensive strategy to help our team move to a more matrixed work environment, splitting time between home and the office.
Certain associates have been working from home, will start returning to the office in June on a volunteer basis.
They will be returning to a more flexible and smart environment.
I expect this will help us increase engagement.
I also think it's going to help us manage costs.
On the diversity front, we were recently ranked 75th, well above all of our peers by Forbes, as one of America's Best Employers for diversity in 2021.
This award many others like it provide us brand recognition as we compete to attract and retain the very best talent.
And he is going to cover the details of the quarter.
As LT mentioned, we're off to a good start this year.
Let's start with the review of customer results starting on slide 7.
Postpaid handset gross additions increased due to higher switching activity and our ability to capture a larger portion of that switcher group this year versus last year.
The switcher group increase was driven primarily by March activity which was severely depressed last year as a result of the unfolding pandemic, it was bolstered this year by stimulus payments.
Our ability to track switchers increased year-over-year due primarily to the success of our build requirements messaging and make promotional offers.
We saw connected device gross additions decrease by 3,000 year-over-year.
This was driven by lower gross additions of Internet products such as hotspots and routers compared to the prior year when we experienced an increase in demand due to COVID-19.
The decline in hotspots and relative sales was partially offset by an increase in connected watch gross additions.
Wrapping up this slide, total smartphone connections increased by 13,000 during the quarter and a 56,000 over the course of the past 12 months.
That helps to drive more service revenue given that smartphone ARPU is by $20 higher than feature phone ARPU.
Next, I want to comment on the postpaid churn rate shown on slide 8.
Currently churn on both handsets and connected devices continues to run at low levels.
Postpaid handset churn depicted by the blue bars was 0.92% down from 0.95% a year ago.
This was due to lower involuntary churn, which continues to run lower year-over-year as a result of having acquired customers and better credit mix and improved customer payment behavior.
Total postpaid churn combining handsets and connected devices was 1.12% in the first quarter of 2021 also, lower than a year ago.
Now let's turn to the financial results on slide 9.
Total operating revenues for the first quarter were $1.023 billion, an increase of $60 million or 6% year-over-year.
Retail service revenues increased by $40 million to $685 million, the increase is primarily due to a higher average revenue per user, which I will discuss in a moment as well as an increase in average postpaid subscribers.
Inbound roaming revenue was $28 million that was a decrease of $9 million year-over-year driven by the decrease in data volume.
Whatever factors contributed to this data volume decrease is the merger of Sprint and T-Mobile, and the migration of Sprint roaming traffic to T-Mobile's network.
Other service revenues were $58 million, an increase of $4 million year-over-year, including a 9% increase in tower rental revenues.
Finally, equipment sales revenues increased by $51 million year-over-year due to an increase in units sold, an increase in sales of higher-priced units as well as an increase in accessory sales as a result of higher volume.
Now a few more comments on postpaid revenue shown on slide 10.
Average revenue per user or connection was $87.65 for the first quarter, up $0.42 or approximately 1% year-over-year.
On a per account basis average revenue grew by $2.33 or 2% year-over-year.
The increases were driven primarily by an increase in regulatory recovery revenues, feasible plan and product offering mix and an increase in device protection revenues.
Turning to slide 11 as we continue our multi-year network modernization and 5G rollout, control of our towers remains very important.
As you can see on the slide with the assistance of our third-party marketing.
We have seen a steady growth in tower rental revenues.
As I mentioned first quarter tower rental revenues increased by 9% year-over-year.
As we told you earlier New Master Lease Agreement we signed with DISH Wireless and we will continue to focus on growing revenues from these strategic assets.
Moving to Slide 12.
I want to comment on adjusted operating income before depreciation, amortization and accretion and gains and losses.
To keep things simple, I'll refer to this measure as adjusted operating income.
As shown at the bottom of the slide, adjusted operating income was $258 million, an increase of 12% year-over-year.
As I commented earlier, total operating revenues were $1.023 billion, a 6% increase year-over-year.
Total cash expenses were $765 million, increasing $33 million or 5% year-over-year.
Total system operations expense increased 3% year-over-year.
Excluding roaming expense, system operations expense increased by 2% due to higher service costs.
Roaming expense increased $1 million or 4% year-over-year resulting from an 80% increase in off-net data volume, that was largely offset by a decrease in rates.
Cost of equipment sold increased $58 million or 26% year-over-year due to an increase in units sold, an increase in sales of higher-priced smartphones, as well as higher accessory sales volume.
Selling, general and administrative expenses decreased $30 million or 9% year-over-year, driven primarily by a decrease in bad debt expense.
Bad debt expense decreased $26 million due to lower write-offs driven by fewer non-paying customers as a result of a better credit mix and improved customer payment behavior.
We also recorded bad debt expense in the first quarter of 2020 related to the FCC's Keep Americans Connected Pledge, which contributed to the year-over-year decrease.
In addition, advertising expense decreased year-over-year.
Turning to Slide 13.
I'll touch on adjusted EBITDA, which starts with adjusted operating income and incorporates the earnings from our equity method investments along with interest and dividend income.
Adjusted EBITDA for the quarter was $302 million, an increase of $21 million or 8% year-over-year.
Equity in earnings of unconsolidated entities decreased by $3 million or 7%.
Next, I want to cover our guidance for the full year 2021.
For comparison, we're showing our 2020 actual results.
Our guidance assumes that COVID-19 does not cause any significant incremental economic consequences that would negatively impact our business.
Total service revenues, we have increased our midpoint by $25 million to a range of $3.05 billion to $3.15 billion.
This increase is driven by an increase in our projections for build revenues and miscellaneous service revenues.
We have raised the midpoint of our adjusted operating income and adjusted EBITDA ranges by $25 million by increasing low end of the ranges, with no change to the high end of the ranges resulting in new ranges of $850 million to $950 million, and $1.025 billion to $1.125 billion respectively.
In addition to the increase in our projections for the service revenues, the updated ranges incorporate favorability in bad debt, and selling and marketing expenses.
This favorability is partially offset by expected increase in loss of equipment for the remainder of the year, compared to our earlier projections.
For capital expenditures, we are maintaining our guidance range of $775 million to $875 million and we have provided a breakdown by major category.
I'm very pleased with our results for the first quarter.
We had strong growth in both Broadband connections and revenue.
Overall, we grew total organic connections for the third consecutive quarter.
We added 13,000 fiber service addresses to our footprint, and continue to execute on our fiber strategy.
Overall, we grew our top line 4%.
We have been on a trajectory to integrate our businesses around the common strategy of providing superior broadband service and complementing that with value-added video and voice service bundling.
Whether it is our markets where we have upgraded copper, or building fiber or provided DOCSIS 3.1 capability, we are striving to increase Internet speed to better serve our customers.
On a combined basis we are able to offer 1 gigabit speed to 55% of our total service addresses.
We remain committed to our strategic priorities, we've been invested in for several years.
Our primary strategic objective is to provide growth by investing in our high-speed broadband services.
We have a multifaceted approach to this growth that includes leveraging our existing networks and constructing greenfield fiber in opportunistic locations.
With support from the FCC's A-CAM program and State Broadband grants, TDS Telecom is also deploying high-speed broadband to customers in rural areas within our incumbent market.
Total telecom broadband residential connections grew 9% in the quarter as we continue to fortify our network with fiber and expand into new markets.
Bolstered by this growth Wireline broadband residential connections grew 10% and Cable increased 8%.
Total broadband penetration continued to increase, up 100 basis points to 38%.
Overall, higher value product mix and price increases drove a 5% increase in average residential revenue per connection.
Cable average residential revenue per connection reflects a higher mix of video connections relative to Wireline.
Our investment in TDS TV Plus and our expansion into new markets will drive video connection growth.
On Slide 18, you can see the broadband connection growth across all markets.
This quarter, we achieved a major milestone reaching 0.5 million total broadband subscribers.
Residential broadband revenues grew 16% in total in the quarter.
We are offering up to 1 Gigabit broadband speed in both our fiber and DOCSIS 3.1 market.
1 Gigabit product is an important tool that allows us to defend market and win over customers and new markets.
In areas where we offer 1Gig service we are seeing 17% of our new customers taking the superior product.
Now turning to Slide 19, we have augmented our success, growing broadband with our TDS TV Plus offering.
Our next generation video platform enhances the customer viewing experience, and as a bundle these products provided best-in-class customer service, and helped us to increase our broadband market share and reduce churn.
Residential video connections held nearly flat.
Wireline growth of 7%, driven by our expansion markets nearly offset losses in the Cable market.
Video continues to remain important to our customers.
Our strategy is to increase our video connections through the offering of our cloud-based TDS TV Plus product.
This rollout of this product currently covers about 60% of our total operation.
We continue to be bullish on our fiber strategy, which is shown on Slide 20.
Fiber is the most economical long-term solution to deliver the best broadband experience.
Selecting the right markets remains key and we have an attractive funnel of markets identified.
In fact, Idaho Coeur d'Alene, Idaho and Spokane, Washington, half the list of the countries hardest emerging housing market.
This is according to the recent rating by the Wall Street Journal.
Our marketing and sales techniques enable us to effectively market at a neighborhood level.
This gives us tremendous flexibility over timing and execution to consistently target a high broadband take rate.
Our strategy to cluster our markets is critical as it gives us the economies of scale and better returns over time.
Additionally, our strategy capitalizes on strong macroeconomic trends, such as growing work at home environment, strong population migration in our chosen markets, favorable advances in technology and bipartisan support for rural broadband funding.
Slide 21 shows the progress we are making this year on our multi-year fiber footprint expansion, which includes fiber into incumbent markets and also expansion into new markets.
As a result of this strategy over the last several years 321,000 or 38% of our wireline service addresses are now served by fiber, which is up from 32% a year ago.
This is driving revenue growth while also expanding the total wireline footprint 6% to 855,000 service addresses.
Moving on to slide 22, we've highlighted the total service addresses for the clusters that are in construction and we are actively marketing.
We have completed 321,000 fiber service addresses through the first quarter and are working to build out the footprint in these announced markets to 620,000 service addresses by 2024.
We have identified other attractive opportunities where we can be first to market and expect the plants are flagged in these markets in the near future, which will increase these numbers.
We continue to be pleased with overall take rate in the areas we have launched to date.
Our pre-registration rate which syndicate the demand we are trying to satisfy are even higher than our expectations.
And we have a very high conversion rate when construction is completed.
We are scaling up and are expecting our fiber service address delivery to double in 2021 from the prior year.
On slide 23, total revenues increased 4% to $249 million, largely driven by the strong growth in residential revenues, which increased 9% in total.
The chart includes residential revenue mix, which highlights the increasing contribution of our expansion markets.
Incumbent wireline market also showed impressive growth of 6% due to increases in broadband and video connections as well as increases from within the broadband product mix.
This was partially offset by a 2% decrease in residential voice connection.
Cable residential revenues grew 9% due to an 8% increase in broadband connections.
Commercial revenues which continue to be impacted by C like decline, decreased 6% to $47 million in the quarter.
And wholesale revenues decreased 3% to $45 million, primarily due to reductions in special access in the incumbent wireline market.
So let me sum up the combined financial results for the quarter shown on slide 24.
Revenues increased 4% from the prior year as growth from our fiber expansions and increases in cable broadband subscribers exceeded the declines we experienced in our legacy business.
Cash expenses increased 5% due to additional employee and advertising expense related to our expansion market.
We also saw increases in video programing costs and information processing expenses, while we are making IT investments to simplify and consolidate our support system.
Adjusted EBITDA declined 1% to $81 million on lower interest income compared to last year.
Capital expenditures increased 30% from last year to $70 million as we continue to increase our investment in fiber deployment for the success base band for new customer installs.
And finally, moving to slide 25.
We have presented guidance, which is unchanged from what we shared in February.
We have had strong broadband connection growth across all our markets of operation, combined with increased average residential revenue per connection.
We continue the rapid advancement of our fiber deployment in new markets but we have portions of our fiber build that depend on third parties which may impact our ability to stay on a very aggressive service address delivery schedule.
I will continue to update you as we move through the year.
We have had a successful start to the year and look forward to updating you on the second quarte.
And operator, we're ready to take questions.

user
uscellular raises 2021 guidance.
sees tds telecom operating revenue for fy unchanged from before.

assistant