Slide 1: First Quarter Results
May 2, 2014 First Quarter Results
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, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates, and expectati
Slide 3: TDS first quarter update
TDS first quarter update • TDS share repurchases • Monetization of non-core spectrum • Non-core tower sale 3
Slide 4: U.S. Cellular
K US. Cellular
Slide 5: Q1 2014 update
Q1 2014 update • Drive subscriber growth • Differentiate through refined value proposition • Drive revenue growth through smartphone adoption and data monetization • Focus on equipment subsidies and cost management 5
Slide 6: Drive subscriber growth
Drive subscriber growth • Increase gross additions with high-quality network, strong device portfolio, connected devices, product and pricing improvements • Postpaid gross additions* up 12% • Reduce churn through device portfolio, including Apple devices, membership experience, customer lifecycle ma
Slide 7: Differentiate through refined value proposition
Differentiate through refined value proposition • Best-in-class 4G/LTE network • Launch new products and services that leverage our network • Membership experience • Treat customers like neighbors not numbers • Rewards Program • Create a localized experience for customers • New local advertising 7
Slide 8: Drive revenue growth
Drive revenue growth • Increase smartphone penetration • Postpaid smartphone penetration* increased from 43% to 53% • Launch new products and services that utilize and monetize our data network • Connected devices • Simple Connect Plans (no contract) • Equipment installment plans • Shared Connect Pl
Slide 9: Focus on subsidies and cost management
Focus on subsidies and cost management • Align costs with revenues • Manage subsidies • Offer equipment installment plans • Offer attractive lower-cost devices • Manage growth in data usage • Cost-reduction initiatives 9
Slide 10: Customer results - Core markets
Customer results - Core markets* Q1 ‘14 Q1 ’13 Postpaid gross additions 197,000 176,000 Postpaid churn 2.3% 1.6% Postpaid net (losses) (93,000) (33,000) Prepaid net additions 13,000 31,000 Retail net (losses) (80,000) (2,000) Total retail customers 4,530,000 4,836,000 * Core markets-definition provi
Slide 11: Postpaid churn – Core markets
Postpaid churn – Core markets* Jan-2013 Dec-2013 Apr-2014 * Core markets-definition provided in note at the end of this presentation 11
Slide 12: Smartphone penetration - Core markets
Smartphone penetration - Core markets* * Core markets-definition provided in note at the end of this presentation 12
Slide 13: Postpaid ARPU - Core markets
Postpaid ARPU - Core markets* * Core markets-definition provided in note at the end of this presentation 13
Slide 14: Service revenues - Core markets
Service revenues(1) - Core markets* ($ in millions) Q1 ‘14 Q1 ‘13 Service revenues $853.6 $860.3 Retail service 764.8 765.3 Roaming 50.1 51.7 Other 38.7 43.3 (1)Service revenues for the core markets for Q1 2013 is a non-GAAP financial measure that is defined in the non-GAAP reconciliation at the end
Slide 15: Financial Performance - Core markets
Financial Performance - Core markets* ($ in millions) Q1 ‘14 Q1 ‘13 Service revenues $853.6 $860.3 System operations expense 180.6 184.2 Loss on equipment 198.3 148.7 SG&A expenses 395.6 383.4 Total investment and other income 23.2 23.5 Adjusted income before income taxes (1) $115.3 $173.6 (1) Adjus
Slide 16: Total company financial performance
Total company financial performance ($ in millions) Q1 ‘14 Q1 ‘13 Service revenues $853.6 $996.3 System operations expense 180.6 216.3 Loss on equipment 198.3 156.3 SG&A expenses 395.6 420.1 Operating income 7.8 1.5 Total investment and other income 23.2 16.6 Adjusted income before income taxes (1)
Slide 17: Divestiture impact on Q1 2014 operating income
Divestiture impact on Q1 2014 operating income ($ in millions) Accelerated depreciation, amortization and accretion $13.1 Other costs/(benefits) (7.1) Total reduction to operating income $6.0 17
Slide 18: Total company financial performance (cont.)
Total company financial performance (cont.) ($ in millions, except per share amounts) Q1 ‘14 Q1 ‘13 Net income attributable to U.S. Cellular $19.5 $4.9 shareholders Diluted earnings per share attributable to $0.23 $0.06 U.S. Cellular shareholders Cash flows from operating activities 63.5 223.6 Less:
Slide 19: Slide 19
Slide 20: Q1 2014 update
Q1 2014 update • Wireline • Deploy fiber where economically justified • Expanded IPTV into two additional markets • Cable • Improve customer penetration in Baja markets • Grew broadband connections • Meaningful synergies identified • Acquisition of BendBroadband • HMS • Drive growth in recurring rev
Slide 21: BendBroadband key facts
BendBroadband key facts Company Facts Terms of Acquisition • Operates 3 businesses in Bend, OR • $261 million in cash • Cable operations • Expect to close in third • Tier III data center quarter • Broadcasting and advertising operations • Annual revenues of $70m in 2013 • Cable operations • 79,000 h
Slide 22: BendBroadband acquisition supports profitable growth
BendBroadband acquisition supports profitable growth Strategy Own the best pipe in the market to drive profitable broadband, video, and commercial growth in midsize and rural markets Why BendBroadband? How we create value? • Attractive demographics • Continue to grow market share • Above average hou
Slide 23: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) Q1 ‘14 Q1 ‘13 Change Wireline $177.5 $181.6 (2%) Cable 22.5 --- N/M HMS 63.1 35.6 77% Total operating revenues(1) 262.4 217.1 21% Expenses(1)(2) 190.3 159.5 19% Adjusted income before income $72.6 $57.6 26% taxes(3) (1) Reflects intercompany eliminat
Slide 24: Wireline operating performance
Wireline operating performance ($ in millions) Q1 ’14 Q1 ’13 Change Residential $72.5 $73.0 (1%) Commercial 58.0 57.1 1% Wholesale 46.4 50.5 (8%) Total service revenues 176.9 180.7 (2%) Total operating revenues 177.5 181.6 (2%) Expenses(1) 111.4 124.8 (11%) Adjusted income before income taxes(2) $66
Slide 25: Broadband speeds, IPTV driving wireline residential revenue growth
Broadband speeds, IPTV driving wireline residential revenue growth ILEC Residential Customers Wireline Residential Average by Broadband Speeds Revenue Per Connection 3/31/14 3/31/13 3/31/14 3/31/13 > 5 Mb 79% 73% $40.79 $39.99 > 10 Mb 36% 29% 25
Slide 26: Wireline managedIP connections increased 27%
Wireline managedIP connections increased 27% 26
Slide 27: Cable operating performance
Cable operating performance (as of 3/31/14) Connections Q1 ‘14 Video 68,700 Operating revenues $22.5 Broadband 63,000 Expenses(1) 17.3 Voice 17,700 Total cable connections 149,400 Adjusted income before income $5.1 taxes(2) Industry (as of 3/31/14) Penetration Baja Penetration Video 41% 31% Broadban
Slide 28: Hosted and Managed Services operating performance
Hosted and Managed Services operating performance ($ in millions) Q1 ’14 Q1 ’13 Change Service revenues $27.4 $22.0 24% Equipment revenues 35.7 13.6 N/M Total operating revenues 63.1 35.6 77% Expenses(1) 62.2 34.7 79% Adjusted income before $1.0 $0.7 41% income taxes(2) (1) Represents cost of produc
Slide 29: 2014 TDS Telecom guidance
2014 TDS Telecom guidance(1) (as of 5/2/14) 2014 Estimates 2014 Estimates (Current) (Previous) ($ in millions) Operating revenues $1,050 - $1,100 Unchanged Adjusted income before $250 - $280 Unchanged income taxes (2) Capital expenditures Approx. $200 Unchanged (1) 2014 guidance will be updated for
Slide 30: Appendix
Appendix 30
Slide 31: Q1 2013 core market service revenues
Q1 2013 core market* service revenues(1) Core Divestiture NY1 & ($ in millions) Markets* Markets NY2 Consolidated Service $860.3 $95.2 $40.8 $996.3 revenues Retail 765.3 89.8 28.8 883.9 Service Roaming 51.7 4.8 9.4 65.9 Other 43.3 0.6 2.6 46.5 1) Core market service revenues for 2013, adjusted to ex
Slide 32: Adjusted income before income taxes reconciliation (actual results)
Adjusted income before income taxes reconciliation (actual results) Three Months Ended 3/31/14 Three Months Ended 3/31/13 ($ in millions) U.S. Cellular TDS U.S. Cellular TDS Consolidated Telecom Consolidated Telecom (1) Wireline Cable HMS Total TDS (2) (1) Wireline Cable HMS Total TDS (2) Income bef
Slide 33: Core markets adjusted income before income taxes reconciliation
Core markets* adjusted income before income taxes reconciliation Core markets Core markets ($ in millions) Three months ended 3/3/14 Three months ended 3/31/13 Income before income taxes 31.0 31.8 Depreciation, amortization and accretion 167.8 131.1 expense (3) (Gain) loss on sale of business and ot
Slide 34: Notes on U.S. Cellular Consolidated, Core Markets and Divestiture Markets
(1) The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets. The amounts for Core Markets and Divestiture Markets represent non-GAAP financial measures. TDS believes that the amounts for the Core Markets an
Slide 35: Ea TELEPHONE AND
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