Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Q4 2010 Earnings Presentation
38 slides from Telephone And Data Systems's earnings presentation, Feb 24, 2011
Slide 1: Fourth Quarter 2010 Results and 2011 Guidance
February 24, 2011 Fourth Quarter 2010 Results and 2011 Guidance
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: Upcoming Conferences
Upcoming Conferences • 3/2/11 - Morgan Stanley Technology, Media & Telecom • 3/7/11 - Credit Suisse Global Media & Communications • 3/22/11 - CTIA • 5/16/11 - J.P. Morgan Global Technology, Media and Telecom 3
Slide 4: TDS
Eat TELEPHONE AND TDS. DATA SYSTEMS”
Slide 5: Fourth Quarter 2010
Fourth Quarter 2010 • Ongoing efforts to reduce interest expense • Issued $225 M of 49-year debt at 6.875% • Redeemed $217.5 M of 7.6% debt • Replaced revolving credit facilities • Extended maturities • Lowered pricing • Evaluation of ways to simplify capital structure • Focus on reducing TDS.S disc
Slide 6: Returning Value to Shareholders
Returning Value to Shareholders TDS Shares Repurchased $0.50 Dividends Per Share (Common/Special Common) $0.45 7 $0.40 6 $0.35 5 $0.30 Millions $0.25 4 $0.20 3 $0.15 $0.10 2 $0.05 1 $0.00 2007 2010 1995* 1998* 2001* 2004* 0 2007 2008 2009 2010 * Retroactively adjusted for the effect of the 2005 stoc
Slide 7: Regulatory Developments
Regulatory Developments • Net neutrality • Ability for “reasonable network management” • Recognition of unique aspects of managing wireless networks • Universal Service Fund and Intercarrier Compensation Reform • FCC recently issued NPRM • Risks and opportunities for both business units • Company wi
Slide 8: U.S. Cellular
K US. Cellular
Slide 9: Customer Activity
Customer Activity Q4 ‘10 Q4 ‘09 Retail gross additions 292,000 354,000 Postpaid net additions (10,000) 26,000 Prepaid net additions (11,000) 13,000 Retail net additions (21,000) 39,000 Total customers 6,072,000 6,141,000 9
Slide 10: Postpaid Churn Rate
Postpaid Churn Rate 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Q1 Q2 Q3 Q4 2009 2010 10
Slide 11: Growing Smartphone Penetration
Growing Smartphone Penetration Smartphones Sold Smartphone % of Customers (% of total devices sold) (% of postpaid base) 45% 18% 40% 16% 35% 14% 30% 12% 25% 10% 20% 8% 15% 6% 10% 4% 5% 2% 0% 0% 4Q '09 1Q '10 2Q '10 3Q '10 4Q '10 4Q '09 1Q '10 2Q '10 3Q '10 4Q '10 11
Slide 12: Financial Performance
Financial Performance ($ in millions) Q4 ‘10 Q4 ‘09 Service revenues $ 991.9 $ 985.4 Roaming revenues 67.5 61.7 ETC 43.5 42.1 System operations 216.3 202.5 Loss on equipment 159.4 137.2 SG&A 474.9 473.1 Adjusted OIBDA (1) $ 141.4 $ 172.5 (1) Adjusted OIBDA is defined as operating income, excluding t
Slide 13: Average Retail Service Revenue Per Customer
Average Retail Service Revenue Per Customer $47.50 $47.40 $47.30 $47.20 $47.10 $47.00 $46.90 $46.80 $46.70 $46.60 $46.50 1Q 2Q 3Q 4Q 2009 2010 13
Slide 14: Financial Performance
Financial Performance ($ in millions, except per share amounts) Q4 ‘10 Q4 ‘09 Equity in earnings of unconsolidated entities $ 22.9 $ 23.6 Total investment and other income (expense) 11.4 5.6 Net income attributable to U.S. Cellular shareholders 6.8 6.6 Diluted earnings per share attributable to U.S.
Slide 15: 2010 Accomplishments
2010 Accomplishments • Successful CEO transition • Launch of The Belief ProjectSM • Device portfolio strengthened with Android® lineup • Third-party validation: • Customer satisfaction • Network quality 15
Slide 16: Economic Outlook / Competitive Landscape
Economic Outlook / Competitive Landscape • No meaningful economic recovery built into outlook – job growth will be key • Competition intense as available pool of “switchers” continues to shrink • Challenges include pricing, device availability/subsidies and 4G “noise” 16
Slide 17: Strategy to Compete
Strategy to Compete • Strong customer-focused culture • The Belief ProjectSM evolves; execution is critical • Drives results over time: 9 Customer acquisition growth 9 ARPU growth 9 Lower postpaid churn 17
Slide 18: Device Lineup for 2011
Device Lineup for 2011 • Data penetration • Attractive/competitive smartphone lineup • Plan to introduce • 24 devices • 13 smartphones 9 Android® 9 BlackBerry® 9 Windows®7 18
Slide 19: Keys to Improving Profitability
Keys to Improving Profitability • Accelerating top-line growth • Roaming revenues • Managing equipment subsidies • Controlling expenses • Project to reduce spending; increase efficiencies • Continue spend on enablement initiatives 19
Slide 20: Network Evolution
Network Evolution • Priority for 2011 – prepare for flexibility to roll out LTE at desired pace • Complete all technical specifications • Select vendors • Necessary infrastructure prep • Device development 20
Slide 21: 2011 Guidance – as of 2/24/11
2011 Guidance – as of 2/24/11 Service revenues $4,000 - $4,100 million Adjusted OIBDA (1) $775 - $875 million Operating income $185 - $285 million Depreciation, amortization and accretion expenses, and losses on asset disposals and impairment of assets (2) Approx. $590 million Capital expenditures A
Slide 22: 2011 Strategic Priorities
2011 Strategic Priorities • Accelerate growth • Build subscriber base • Continue to migrate customers to The Belief ProjectSM; increase ARPU • Control/reduce costs • Improve profitability • Progress on enablement initiatives • Network evolution to LTE (4G) 22
Slide 23: TDS Telecom
Slide 24: TDS Telecom Revenues
TDS Telecom Revenues ($ in millions) Q4 ‘10 Q4 ‘09 Change ILEC $ 155.6 $ 151.5 2.7 % CLEC 45.9 48.9 (6.3) % Total * $ 199.1 $ 198.0 0.5 % * Reflects intercompany eliminations 24
Slide 25: ILEC Data Revenues
ILEC Data Revenues $ 35 30 25 Millions 20 15 10 5 0 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 25
Slide 26: Customer Activity: Voice
Customer Activity: Voice 180 900 160 800 700 140 Thousands 600 120 Thousands 500 100 400 80 300 60 200 40 100 20 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 '09 '09 '09 '09 '10 '10 '10 '10 '09 '09 '09 '09 '10 '10 '10 '10 Access Lines Access Line Equivalents Star Packages 26
Slide 27: Penetration of Bundled Plans
Penetration of Bundled Plans 70% 60% 50% 40% 30% 20% 10% 0% 4Q '08 1Q '09 2Q '09 3Q '09 4Q '09 1Q '10 2Q '10 3Q '10 4Q '10 Double‐Play Triple‐Play 27
Slide 28: managedIP Growth
managedIP Growth Number of Stations 30,000 25,000 20,000 15,000 10,000 5,000 0 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 28
Slide 29: Financial Performance
Financial Performance ($ in millions) Q4 ‘10 Q4 ‘09 Change Revenues $ 199.1 $ 198.0 0.5 % Expenses 130.0 129.6 0.3 % Adjusted OIBDA (1) $ 69.1 $ 68.5 0.9 % (1) Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or lo
Slide 30: Capital Expenditures
Capital Expenditures $ 180 160 140 120 Millions 100 80 60 40 20 0 2006 2007 2008 2009 2010 30
Slide 31: Hosted and Managed Services
Hosted and Managed Services • Extension of current commercial offerings • Leverages trusted reputation • Platform for growth • VISI – acquired March 2010 for $18 M 9 Managed hosting, collocation and cloud computing • TEAM Technologies – acquired December 2010 for $48 M 9 Data center, disaster recove
Slide 32: 2010 Accomplishments
2010 Accomplishments • Increased broadband penetration and speeds; more bundled customers • Awarded $136 million in Federal Broadband Stimulus projects • Expanded hosted and managed services offerings with two acquisitions • Improved operating and financial performance 32
Slide 33: Economic Outlook / Competitive Landscape
Economic Outlook / Competitive Landscape • Looking for a modest recovery • CLEC markets may be slower to improve • Unemployment still a concern for consumers • Cable competition continues to expand • We are taking leading share • Covers more than two-thirds of ILEC households • Wireless substitution
Slide 34: 2011 Strategy: Consumer
2011 Strategy: Consumer • Industry leading data penetration • Continue to push higher speeds • Bundle to further reduce churn • Prepare for IPTV launch 34
Slide 35: 2011 Strategy: Commercial
2011 Strategy: Commercial • Lead with flagship offering, managedIP • Broaden offering with new products and services and bundle them effectively • Build and integrate hosted and managed services business 35
Slide 36: Federal Broadband Stimulus Funding
Federal Broadband Stimulus Funding Applications Total Federal TDS Approved Projects Grants Telecom Approved Funding Round 1 2 $12.5 M $12.5 M --- Round 2 42 $123.5 M $92.6 M $30.9 M 44 $136.0 M $105.1 M $30.9 M 36
Slide 37: 2011 Guidance (ILEC/CLEC) – 2/24/11
2011 Guidance (ILEC/CLEC) – 2/24/11 Operating revenues $780 - $810 million Adjusted OIBDA (1) $260 - $290 million Depreciation, amortization and accretion expenses, and losses on asset disposals and impairment of assets (2) Approx. $185 million Operating income $75 - $105 million Capital expenditure
Slide 38: Fourth Quarter 2010 Results and 2011 Guidance
February 24, 2011 Fourth Quarter 2010 Results and 2011 Guidance
Telephone and Data Systems — Q4 2010 Earnings Presentation on 6ix