Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Kaufman Bros. 12th Annual Investor Conference (September 2009)
44 slides from Telephone And Data Systems's conference presentation, Sep 10, 2009
Slide 1: Kaufman Bros. 12th Annual Investor Conference
Kaufman Bros. 12th Annual Investor Conference The W Hotel, New York September 10, 2009 1
Slide 2: Jane W. McCahon
Jane W. McCahon Vice President Corporate Relations 2
Slide 3: Safe Harbor
Safe Harbor 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 a
Slide 4: Telephone and Data Systems, Inc.
Telephone and Data Systems, Inc. • A Fortune 500® Company (#465) listed on the NYSE (TDS, TDS.S) • Diversified telecommunications company with 7.3 million customers in 36 states … HQ in Chicago – U.S. Cellular (81% owned) – wireless, principally postpaid (NYSE:USM) – TDS Telecom (100% owned) – wirel
Slide 5: Telephone and Data Systems, Inc.
Telephone and Data Systems, Inc. • Compelling value - attractive valuation • High quality, defensible businesses • Proven track record • Free cash flow-positive • Strong balance sheet • Buying back stock What we don’t have • Union representation (less than 1%) • Unfunded pensions…defined contributio
Slide 6: Believe in Something Better
“Believe in Something BetterSM” • 5th largest full-service wireless provider • Differentiating with excellent customer experience • 46 M operating pops; 84 M total pops • Approx. 6.2 M customers in 26 states • Low postpay churn rate…<2% for 12 yrs. • Broad distribution… ~1,500 points of presence • E
Slide 7: Some licenses have not been awarded
* 7 * Some licenses have not been awarded
Slide 8: Growth Strategies
Growth Strategies • Focus on the postpay customer…95% retail postpay • Differentiate with high customer satisfaction: – Quality network – Broad distribution – Excellent customer service • National, wide-area and family plans • Competitive products and data offerings • Strategically strengthen compet
Slide 9: Network Quality
Network Quality Won eight consecutive J.D. Power and Associates Award for Call Quality in the North Central Region Added 447 cell sites to enhance coverage and capacity 9
Slide 10: Excellent Customer Service
Excellent Customer Service • Primary means of differentiation • Significant initiatives under way to enable even higher levels of differentiation • Early proof points – Free incoming calls, texts and pix from anyone! – Battery swap – customers can change out a dead or dying battery free of charge 10
Slide 11: Postpay Churn < 2%
Postpay Churn < 2% 12- year track record… and still strong 2.0% 1.9% 1.9% 1.9% 1.9% 1.8% 1.7% 1.8% 1.8% 1.7% 1.6% 1.6% 1.6% 1.6% 1.6% 1.5% 1.5% 1.5% 1.4% 1.4% 1.3% 1.2% 1.1% 1.0% 97 98 99 00 01 02 03 04 05 06 07 08 '0 9 19 19 19 20 20 20 20 20 20 20 20 20 1H 11
Slide 12: Competitive Calling Plans
Competitive Calling Plans • National, wide area and family plans • Good value to customers • Simplicity of plans across all markets Postpay customer base 6/30/09 42% national plans – yet ~ 95% MOU on-net in Q2 70% family plans Approx.10% business 12
Slide 13: Prepaid Wireless
Prepaid Wireless • Excellent network… 8 J.D. Power awards • 15 day test guarantee • Unlimited plans • Developing a more robust prepaid product 13
Slide 14: Strong Handset Lineup
Strong Handset Lineup LG TritanTM Samsung Two StepTM (red, blue or pink) Samsung GlossTM 14
Slide 15: Upcoming Handsets
Upcoming Handsets Launching 12 new devices in second half 2009 • Samsung Trill – stylish music slider, sound technology by Bang & Olufsen ICEpower® • Motorola Quantico – first full military spec handset, submerge 30 mins. • Motorola Crush – touch for the masses, 2.8” touch display, 2 MP camera Smart
Slide 16: Growing Demand for Smartphones and premium touch screen phones
Growing Demand for Smartphones and premium touch screen phones ARPU is nearly double with Smartphone customers Offering two of the top mobile platforms: BlackBerry® and Windows Mobile® HTC Touch ProTM—touch screen, QWERTY Blackberry® 8330 Curve BlackBerry® Pearl: ultra thin, sleek design HTC PPC6800
Slide 17: Strong Data Revenue Growth
Strong Data Revenue Growth (Dollars in millions) 170 18% 16% 150 14% 130 12% 110 10% 1 Q '08 2 Q '08 3 Q '08 4 Q '08 1 Q '09 2 Q '09 Data revenues Percent of Service Revs. 17
Slide 18: Technology
Technology • “Smart Follower” strategy • CDMA 1XRTT → EV-DO Rev. A → LTE • Expect >70% of customers covered by EV-DO by year-end 2009 • Understanding LTE capabilities and our requirements – Field trials 2009/2010 18
Slide 19: Spectrum Owned or Potentially Available by Lease
Spectrum Owned or Potentially Available by Lease* 19 * Excluding Auctions 73 and 78, for which licenses have not yet been awarded
Slide 20: Initiatives: 2009 & Beyond
Initiatives: 2009 & Beyond • Develop deeper and more customized relationships: – New customer relationship management system – New electronic data warehouse • Drive online sales and support: – Enhance uscellular.com • Provide faster service and access to products: – Unified billing and operational s
Slide 21: Financial Highlights
Financial Highlights (millions) Six months ended June 30, 2009 2008 % Change Service Revenues $1,956.6 $1,949.4 --- Total Revenues 2,095.3 2,098.4 --- Operating Income 255.7 236.9 +8% Depr., Amort. & 276.3 287.8 (4%) Accretion Operating Cash Flow * 536.2 534.5 --- CAPX 228.9 249.5 (8%) 21 * Reconcil
Slide 22: 2009 Guidance as of Aug. 6, 2009
2009 Guidance as of Aug. 6, 2009 Net Retail Customer Additions (1) --- Service Revenues $3,900 - $3,950 million Operating Income (2) $300 – 375 million Depr., Amort. & Accretion (2) Approx. $600 million Operating Cash Flow (3) $900 - $975 million Capital Expenditures Approx. $575 million (1) U.S. Ce
Slide 23: Julie D. Mathews
Julie D. Mathews Manager, Investor Relations 23
Slide 24: TDS Telecom
TDS Telecom® • 8th largest local exchange company • 1.1 million equivalent access lines, rural and small town • ILEC primarily residential (76%)… and primarily rural/small town (82%) • CLEC primarily consumer (small/medium business) (77%) 24
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Slide 26: Strategy
Strategy • Be the preferred broadband provider in its markets …aggressively deploy advanced network • Bundle aggressively – the bigger the bundle, the lower the churn • Provide outstanding customer satisfaction • Increased focus on small-medium business market • Focus on efficiency, cost control and
Slide 27: Initiatives
Initiatives • Grow high-speed data customers/revenue and triple play customers • Expand 10-gigabit speed regional fiber transport network – provides more capacity, lower costs, and enhanced reliability through multiple routes – allows company to roll out new services quickly • Aggressively market ma
Slide 28: Growth in HSD Customers
Growth in HSD Customers 200,000 180,000 160,000 140,000 120,000 100,000 ILEC 80,000 60,000 40,000 20,000 0 2002 2003 2004 2005 2006 2007 2008 1H '09 36% penetration at 6/30/09 28
Slide 29: Bundling Reduces Churn
Bundling Reduces Churn Voice churn 1.8% Voice + HSD churn 1.5% Voice + DISH churn 0.8% Triple play churn 0.5% 29
Slide 30: managedIP
managedIP • Full integration of voice and data • Rich call management features • Reliability… carrier-grade failover capability • No upfront CAPX… pay as you go…scalable • No obsolescence • Well-received by small/medium businesses 30
Slide 31: Clustered Acquisitions
Clustered Acquisitions Price Equiv. DSL Access Lines 7/27/09 Union Telephone Co. (New --- 8,500 1,900 Hampshire) 11/30/08 State Long Distance Co. $27 M 11,500 2,200 (Wisconsin) 5/31/08 Mosinee Tel Co. $17.4 M 5,800 1,200 (Wisconsin) 2/13/08 West Point Tel. Co. $6.8 M * 1,100 300 (Indiana) * Includes
Slide 32: Financial Highlights
Financial Highlights (millions) Six months ended June 30, 2009 2008 % Change Total Revenues $395.3 $413.5 (4%) Operating Income 44.6 73.0 (39%) Depr., Amort. & 83.5 78.6 6% Accretion Operating Cash Flow* 128.7 151.8 (15%) CAPX 58.3 45.6 28% 32 * Reconciliation on slide 41
Slide 33: TDS Telecom 2009 Guidance as of Aug. 6, 2009
TDS Telecom (ILEC & CLEC) 2009 Guidance as of Aug. 6, 2009 Operating Revenues $775 – 800 million Operating Income (1) $85 – 105 million Depr., Amort. & Accretion (1) Approx. $165 million Operating Cash Flow (3) $250 – 270 million Capital Expenditures Approx. $125 million (1) Includes losses on dispo
Slide 34: TDS Consolidated Financial Highlights
TDS Consolidated Financial Highlights (millions) Six months ended June 30, 2009 2008 % Change Total Revenues $2,499.1 $2,523.5 (1%) Operating Income 290.8 303.4 (4%) Depr., Amort. & Accretion 366.1 374.2 (2%) Operating Cash Flow* 661.8 687.6 (4%) CAPX 287.2 295.1 (3%) 34 * Reconciliation on slide 41
Slide 35: Liquidity
Liquidity June 30, 2009 • Cash $ 664.8 M • Other liquid investments (CD’s) 136.5 • Available credit facilities 696.3 Total: $1,497.6 M • 4,000 owned towers ($8 million 2Q ’09 - tower rental revenue) • Los Angeles minority position…carried at book…generated $66.1 million investment income in 2008 35
Slide 36: Long Term Debt Repayment
Long Term Debt Repayment ($000,000) $1,100 TDS MTNs & Purchase Contract USM Capital Leases $1,000 TDS 6.625% Notes $900 TDS 7.6% Notes USM 7.50% Notes $800 USM 6.7% Notes USM 8.75% Senior Notes $700 USM NY2 Pymts $600 Suttle Press Bank Notes & Other TDS Telecom Gov't & Other* $500 $400 $300 $200 $10
Slide 37: Investment-Grade Credit Ratings
Investment-Grade Credit Ratings TDS USM Outlook Moody’s Baa2 Baa2 Stable Standard & Poor’s BBB- BBB- Positive Fitch BBB+ BBB+ Negative 37
Slide 38: "Simple" Free Cash Flow
“Simple” Free Cash Flow ($000’s) 700,000 638,313 589,790 600,000 443,257 500,000 377,730 400,000 322,230 300,000 217,470 200,000 100,000 - 2004 2005 2006 2007 2008 1 H '09 U.S. Cellular TDS Telecom 38 Reconciliation on slide 42
Slide 39: Stock Repurchases
Stock Repurchases TDS – 11/’08 authorized $250 M TDS/TDS.S - $88 M remaining YTD 2009: 3,188,293 TDS.S shares purchased ($86 M) TDS – 10/’08 completed $250 M of TDS.S 2008: 5,861,822 shares purchased ($199.6 M) 2007: 2,076,979 shares purchased ($126.7 M) U.S. Cellular YTD 2009: 507,000 shares purcha
Slide 40: Investment Highlights
Investment Highlights • Financially strong • Well-positioned in existing markets • Strategies focused on network quality, customer service and competitive service offerings • Experienced management teams • A Fortune 500® company 40
Slide 41: Reconciliation of YTD OCF
Reconciliation of YTD OCF ($000) TDS Telecom (1) Six months ended June 30, 2009 U.S. Cellular ILEC CLEC All Other Total Operating cash flow: Operating income (loss) as reported $255,689 $43,639 $917 ($9,436) $290,809 Add: Depreciation, amortization and accretion 276,265 71,388 12,138 6,324 366,115 L
Slide 42: Reconciliation of "Simple" Free Cash Flow
Reconciliation of “Simple” Free Cash Flow ($000) (as restated) (as restated) U.S. Cellular 2004 2005 2006 2007 2008 1 H '09 Operating Income $162,583 $231,197 $289,896 $396,199 $27,710 $255,689 Loss on impairment of intangibles --- --- --- 24,923 386,653 Loss on asset disposals --- 20,394 19,587 34,
Slide 43: 2008 Payout Ratio Reconciliation
2008 Payout Ratio Reconciliation 2008 Dividends per share $0.41 = 18% Diluted EPS – Operations excluding gains/losses $2.29 Diluted EPS Operations excluding gains/losses $2.29 Effect of gains/losses .31 Loss on impairment of intangibles assets (1.80) Diluted Earnings Per Share, as reported $0.80 43
Slide 44: Investment Highlights
Investment Highlights • Financially strong • Well-positioned in existing markets • Strategies focused on network quality, customer service and competitive service offerings • Experienced management teams • A Fortune 500® company 44
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