Slide 1: Second Quarter 2020 Results COVID-19 Update
Second Quarter 2020 Results COVID-19 Update August 7, 2020
Slide 2: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 All information set forth in this presentation about Telephone and Data Systems, Inc., including its subsidiaries U.S. Cellular and TDS Telecom, except historical and factual information, represents forward-looking stat
Slide 3: COVID-19 related safe harbor statement
COVID-19 related safe harbor statement The impact of the COVID-19 pandemic on TDS' business is uncertain, but depending on its duration and severity it could have a material adverse effect on TDS' business, financial condition or results of operations. The impact of the recent global spread of COVID
Slide 4: Upcoming investor relations calendar
Upcoming investor relations calendar • 8/13/20 - Morgan Stanley Annual Media & Communications Corporate Access Day (Virtual) - From management - Jane McCahon and Julie Mathews • 8/20/20 - Morgan Stanley Non-Deal Roadshow (Virtual) - From management - Ted Carlson, Doug Chambers, Vicki Villacrez, and
Slide 5: Our balance sheet is strong
Our balance sheet is strong • Continue to maintain a strong balance sheet with ample liquidity • Employ a conservative financing strategy with long-dated repayment obligations Available Sources Potential Sources Long-term debt obligations June 30, 2020 June 30, 20201 ($ in millions) 700 Bank Financi
Slide 6: Seamless CEO Transition
Seamless CEO Transition Thank you, Ken Welcome, LT Kenneth R. Meyers Laurent C. Therivel "LT" June 2013 - June 2020 (as of July 1, 2020) 6
Slide 7: U.S. Cellular 5G Update
U.S. Cellular 5G Update 5G Status Highlights: • Announced Phase 2 of multi-year 5G network expansion • Deploying on 600 MHz spectrum • Phase 2 will activate 11 states including CA, ME, MD, NH, NC, OK, OR, TX, VA, WA, and WV • Working with 3 equipment and software vendors – Ericsson, Nokia and Samsun
Slide 8: Keeping people connected
Keeping people connected Our Company is open and working through this crisis. Economic activity and re-openings have occurred generally as we expected. More than ever, consumers and businesses appreciate how essential wireless service is to how they work and stay connected! • Associates – work-at-ho
Slide 9: U.S. Cellular - Q2
U.S. Cellular - Q2 Executing on 2020 strategic priorities COVID-19 impacts: • Subscriber results – benefiting from low churn and increased demand for connected devices • ARPU growth – ARPU grew 1% despite waiving overage and late fees • Expenses – lower Selling, General and Administrative • Network
Slide 10: Postpaid connections
Postpaid connections Gross Additions Net Additions Smartphone Connections (in thousands) (in thousands) (in thousands) 3,500 175 15 10 150 40 39 9 3,470 5 125 35 2 3 0 42 (2) 44 100 -5 (11) 3,440 (14) 3,483 75 -10 (17) (20) 3,468 3,472 124 130 -15 50 102 90 3,410 3,441 85 (15) -20 3,419 25 (6) -25 0
Slide 11: Postpaid churn rate
Postpaid churn rate 1.60% 1.38% 1.38% 1.40% 1.23% 1.21% 1.20% 1.11% 1.09% 0.97% 0.95% 1.00% 0.89% 0.80% 0.71% 0.60% 0.40% 0.20% 0.00% Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Handsets Total Postpaid 11
Slide 12: Total operating revenues
Total operating revenues ($ in millions) $1,031 $1,052 $973 $963 $973 $900 $257 $289 $216 $201 $220 $51 $57 $55 $54 $54 $44 $54 $42 $37 $41 $600 $662 $663 $666 $671 $658 $300 $0 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Retail service Roaming Other service Equipment sales 12
Slide 13: Postpaid revenue
Postpaid revenue Average Revenue Per User (ARPU) Average Revenue Per Account (ARPA) $125 $48 $120 $46 $115 $44 $47.23 $122.92 $46.57 $120.99 $120.70 $46.16 $46.24 $110 $119.46 $119.87 $45.90 $42 $105 $40 $100 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 13
Slide 14: Adjusted OIBDA
Adjusted OIBDA ($ in millions) Q2'20 Q2'19 % Change Total operating revenues $ 973 $ 973 – System operations expense 197 193 2 % Cost of equipment sold 218 224 (3)% SG&A expenses 323 344 (6)% Total cash expenses (1) 738 761 (3)% Adjusted OIBDA (2) $ 235 $ 212 11 % (1), (2) - See slide 30 for explana
Slide 15: Adjusted EBITDA
Adjusted EBITDA ($ in millions) Q2'20 Q2'19 % Change Adjusted OIBDA (2) $ 235 $ 212 11 % Equity in earnings of unconsolidated entities 44 40 8 % Interest and dividend income 1 5 (79)% Adjusted EBITDA (2) $ 280 $ 257 9 % (2) - See slide 30 for explanation 15
Slide 16: 2020 guidance
2020 guidance * ($ in millions) 2020 Previous 2020 Current As of August 7, 2020 2019 Actual Estimates Estimates Service revenues $3,035 $3,000-$3,100 Unchanged Adjusted OIBDA (2) $832 $725-$850 Unchanged Adjusted EBITDA (2) $1,015 $900-$1,025 Unchanged Capital expenditures $710 $850-$950 Unchanged 2
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Slide 18: Keeping our customers connected
Keeping our customers connected We are very pleased with the first half of the year and our ability to quickly respond to the pandemic. • The crisis continues to reaffirm the importance of high-speed internet, and how critical not only our investments have been, but also our advocacy on behalf of ru
Slide 19: Wireline and cable strategy
Wireline and cable strategy Wireline and cable strategic priorities remain intact. Target new markets where our formula wins: • Attractive demographics and competitive landscape • Target build cost per household passed • Hyper-localized marketing and sales 19
Slide 20: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) Q2'20 Q2'19 % Change Wireline $ 169 $ 172 (2)% Cable 71 62 16 % Total operating revenues * 241 233 3 % Cash expenses (1) 158 155 2 % Adjusted EBITDA (2) 83 82 2 % Capital expenditures $ 75 $ 70 7 % * Includes intercompany eliminations (1), (2) - See
Slide 21: Wireline highlights and trends
Wireline highlights and trends • Growth in residential video and broadband driving an increase in residential revenue per connection • Demand for higher speeds is strong • Growth from fiber investments and A-CAM support helps to offset legacy revenue declines Residential Revenue Per Connection Resid
Slide 22: Fiber highlights and trends
Fiber highlights and trends • Fiber-to-the-Home to 265,000 or 33% of Wireline Service Addresses (SA)* • Total Wireline SAs increased 3% to 810,000 with expansion into new markets • Construction Watch Points: ◦ Municipalities slowing permitting processes ◦ Electric utilities slowing pole preparation
Slide 23: Wireline operating performance
Wireline operating performance ($ in millions) Q2'20 Q2'19 % Change Residential $ 85 $ 81 6 % Commercial 38 42 (10)% Wholesale 46 49 (6)% Total operating revenues 169 172 (2)% Cash expenses (1) 111 114 (2)% Adjusted EBITDA (2) 59 62 (4)% Capital expenditures $ 58 $ 55 6 % (1), (2) - See slide 30 for
Slide 24: Cable highlights and trends
Cable highlights and trends • Cable connections grew 12% due to an increase in broadband connections and the acquisition of Continuum ◦ Continuum added 15,800 broadband connections; 9,400 video connections; 5,800 voice connections • Revenues increased 16%; Adjusted EBITDA increased 20% Connections R
Slide 25: Cable operating performance
Cable operating performance ($ in millions) Q2'20 Q2'19 % Change Residential $ 60 $ 51 19% Commercial 11 11 3% Total operating revenues 71 62 16% Cash expenses (1) 47 42 13% Adjusted EBITDA (2) 24 20 20% Capital expenditures $ 17 $ 15 9% (1), (2) - See slide 30 for explanations 25
Slide 26: 2020 TDS Telecom guidance
2020 TDS Telecom guidance* ($ in millions) 2020 Previous 2020 Current As of August 7, 2020 2019 Actual Estimates Estimates Total operating revenues $930 $950-$1,000 Unchanged Adjusted OIBDA (2) $300 $280-$310 Unchanged Adjusted EBITDA (2) $313 $290-$320 Unchanged Capital expenditures $316 $300-$350
Slide 27: Appendix
Appendix 27
Slide 28: Adjusted OIBDA and Adjusted EBITDA Reconciliation
Adjusted OIBDA and Adjusted EBITDA Reconciliation Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 Total Total U.S. TDS U.S. TDS ($ in millions) Cellular Wireline Cable Telecom TDS (3) Cellular Wireline Cable Telecom TDS (3) Net income (GAAP) $69 N/A N/A $28 $78 $32 N/A N/A $25 $39
Slide 29: Adjusted OIBDA and Adjusted EBITDA Reconciliation – 2020 Estimated and 2019 Full Year
Adjusted OIBDA and Adjusted EBITDA Reconciliation – 2020 Estimated and 2019 Full Year In providing 2020 estimated results, TDS has not completed the below reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reason
Slide 30: Footnotes and non-GAAP definitions
1) Total cash expenses represent total operating expenses as shown in the Consolidated Statement of Operations Highlights in the TDS and U.S. Cellular SEC Forms 8-K, less depreciation, amortization and accretion and gain/losses. 2) EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income