Telephone and Data Systems, Inc. · NYSE:TDS
Telephone and Data Systems — Investor Presentation (February 2020)
37 slides from Telephone and Data Systems's investor presentation, February 2020
Slide 1: TDS Mission - February 2020
TDS’ mission is to provide outstanding communications services to our customers and meet the needs of our shareholders, our people, and our communities February 2020
Slide 2: Safe Harbor Statement
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 (the "company"), except historical and factual information, represents for
Slide 3: Enterprise Overview
Enterprise Overview 3
Slide 4: Diversified Communications Company
Diversified Communications Company diversified communications NYSE:TDS (82% owned) (wholly owned) (wholly owned) wireless broadband, video, and voice hosted & managed services NYSE: USM 4
Slide 5: Business Operations
Business Operations @ DS headquarters, Chicago, IL Mi US. Cellular operations B® Wireline operations BB Cable operations @ HMS operations
Slide 6: Enterprise Strategy
Enterprise Strategy To provide outstanding communications services to our customers and meet the needs of our shareholders, our people, and our communities Maintain strong balance Controlled company with Employ a conservative Capital allocation strategy sheet with ample liquidity focus on long‐term
Slide 7: Liquidity
Liquidity $1,751 as of Sept 30, 2019 ($ in millions) $200 Cash and cash equivalents Available credit facilities $853 * As of Sept. 30, 2019, there was no EIP Securitization * $698 outstanding borrowing Potential Sources 5.5% Non‐ 4,123 ownership strategic owned in Verizon’s spectrum towers LA wirele
Slide 8: Long-term Debt Obligations – 9/30/2019
Long-term Debt Obligations – 9/30/2019 $700 7.25% ‐ USM – Retail (UZC) due 2064 7.25% ‐ USM – Retail (UZB) due 2063 $600 5.875% ‐ TDS – Retail (TDA) due 2061 6.95% ‐ USM – Retail (UZA) due 2060 7.00% ‐ TDS – Retail (TDJ) due 2060 $500 6.875% ‐ TDS – Retail (TDE) due 2059 6.625% ‐ TDS – Retail (TDI)
Slide 9: U.S. Cellular
K US. Cellular
Slide 10: Operations Overview
Operations Overview VALUE PROPOSITION Strives to provide exceptional wireless services which enhance consumer’s lives, increase the competitiveness of local businesses, and improve the efficiency of government operations in mid‐ sized and rural markets Outstanding Award‐ Customer Winning Service Net
Slide 11: Strategic Priorities
Strategic Priorities Capture New & Maintain Attract New Strengthen Invest in the Emerging Expense Customers Subscriber Base Future Revenue Streams Discipline 11
Slide 12: Attract New Customers
Attract New Customers STIMULATE GROSS ADDITIONS ● Offer disciplined economical promotions using trailing Year‐to‐date update: ATTRACT NEW • Plans in place to improve gross service credits to offset monthly payments so long as CUSTOMERS additions they stay with U.S. Cellular resulting in lower risk o
Slide 13: Attract New Customers
Attract New Customers EVOLVE PRICING STRATEGIES AND PROMOTIONAL PLANS THAT TAKE A MORE TARGETED APPROACH TO MEET THE SPECIFIC NEEDS OF CUSTOMERS ATTRACT NEW CUSTOMERS STRENGTHEN SUBSCRIBER BASE CAPTURE NEW & EMERGING REVENUE STREAMS MAINTAIN EXPENSE DISCIPLINE INVEST IN THE FUTURE 13
Slide 14: Strengthen Subscriber Base
Strengthen Subscriber Base Year–to‐date update: • Postpaid handset churn remains low at 1.02% • Total Plans with Payback penetration up to 15% of postpaid connections at Q3 • Feature phones continuing to migrate to Smartphones (422,000 feature phones ATTRACT NEW CUSTOMERS remaining at Q3) ENHANCE CU
Slide 15: Capture New & Emerging Revenue Streams
Capture New & Emerging Revenue Streams EXPAND CURRENT REVENUE STREAMS Year‐to‐date update: ● Promote sales of high margin accessories • Device protection up to 48% of postpaid subscribers at Q3 ● Some trailing credit promotions eligibility ATTRACT NEW • Service revenues up 2% CUSTOMERS stipulates th
Slide 16: Maintain Expense Discipline
Maintain Expense Discipline ENTERPRISE‐WIDE COST SAVINGS INITIATIVE Year‐to‐date update: ● Continuous cost cutting efforts resulted in • Data usage up 36% while Systems operations ATTRACT NEW expense was held flat CUSTOMERS approximately $200 million in savings in 2017 and 2018 • Selling, general an
Slide 17: Invest in the Future
Invest in the Future Year‐to‐date update: • VoLTE reaches 67% of our subscribers ATTRACT NEW • Continuing investment in speed and capacity CUSTOMERS • Ready network for 5G STRENGTHEN SUBSCRIBER ADVANCE THE NETWORK TO MEET EVOLVING BASE NEEDS CAPTURE ● Manage network capacity given customers’ NEW & c
Slide 18: Invest in the Future: 5G Technology
Invest in the Future: 5G Technology 5G will deliver significant improvements in speed and spectral efficiency ATTRACT NEW INITIATE MULTI‐YEAR CAPEX PROJECT CUSTOMERS Modernize the network using various Enable support for future 5G spectrum bands and technologies to bring LTE advanced features to inc
Slide 19: Invest in the Future: Spectrum Needs
Invest in the Future: Spectrum Needs ENSURE SPECTRUM INVENTORY IS IN‐LINE WITH NEEDS ● Continue to re‐farm spectrum based on customer usage patterns on the various wireless ATTRACT NEW technologies deployed by U.S. Cellular CUSTOMERS ● Evaluate the need to obtain licenses in future auctions that com
Slide 20: Advantageous Partnership Arrangements
Advantageous Partnership Arrangements • Engaged in various partnerships across the Company's footprint which provides earnings and free cash flows • Included in Equity in Earnings of unconsolidated entities on the Statement of Operations New York 1 New York 2 LA Partnership 5.5% 60.0% 57.1% U.S. Cel
Slide 21: Financial Summary–U.S. Cellular
FINANCIAL SUMMARY–U.S. CELLULAR Nine months ended Sept. 30, 2019 ($ in millions) 2019 2018 % Change Retail service revenue $1,984 $1,960 1% Roaming revenue 132 116 14% Other service 156 148 5% Equipment sales 698 692 1% Total operating revenues $2,970 $2,916 2% System operations expense 568 566 ‐‐ C
Slide 22: 2019 U.S. Cellular Guidance
2019 U.S. CELLULAR GUIDANCE * ($ in millions) 2019 Previous 2019 Current As of Oct. 31, 2019 2018 Actual Estimates Estimates Total operating revenues $3,967 $3,900-$4,100 $3,950-$4,050 Adjusted OIBDA (2) $790 $725-$875 $750-$850 Adjusted EBITDA (2) $963 $900-$1,050 $925-$1,025 Capital expenditures $
Slide 23: TDS Telecom
23
Slide 24: Operations Overview
Operations Overview Strives to provide high‐quality broadband services PROVIDES 1.2 MILLION FEDERAL REGULATORY CONNECTIONS SUPPORT Offer high‐margin Major recipient of broadband service regulatory support for bundles rural customers OPERATES IN 31 STATES Employs a technology strategy based on popula
Slide 25: Strategic Priorities
Strategic Priorities continue to build on the strategic objectives accomplished in 2018 WIRELINE CABLE Execute In & Build to Meet Increase Disciplined Out of Territory Regulatory Broadband Cable Fiber Program Obligations Penetration Acquisitions Implement TDS Cost Cutting TV+ Platform Initiatives 25
Slide 26: Wireline: Execute Fiber Program
Wireline: Execute Fiber Program DEPLOYMENT INITIATIVES service addresses served by fiber 24% 2017 Sun Prairie, WI 2018 Markets 2019 Markets 2020 & Beyond EXECUTE FIBER PROGRAM •Successful •Began building pre‐ •Over $155 million •Continue to analyze in implementation of sold markets with capital expe
Slide 27: Wireline: Meet Commitments Of Regulatory Support Programs
Wireline: Meet Commitments Of Regulatory Support Programs A‐CAM SUPPORT • Focus on meeting increased data speed obligations under the Alternative Connect America Cost EXECUTE FIBER Model (A‐CAM) PROGRAM • Committed to build and maintain broadband services of varying speeds to about 160,000 service a
Slide 28: Cable: Increase Broadband Penetration
Cable: Increase Broadband Penetration ORGANIC GROWTH THROUGH NETWORK ENHANCEMENTS • DOCSIS 3.0 is deployed to the majority of the service addresses which enables EXECUTE FIBER enhanced transmission speeds PROGRAM • Continue efforts to upgrade the network to the latest technology, DOCSIS 3.1, in the
Slide 29: TDS Telecom: Invest in the Future
TDS Telecom: Invest in the Future IMPLEMENT TDS TV+ • To strengthen the Company’s video offering in both its wireline and cable segments, the EXECUTE FIBER Company will introduce a new platform that provides a better user experience and PROGRAM reduce the cost of future set‐top box upgrades and othe
Slide 30: Financial Summary - TDS Telecom
FINANCIAL SUMMARY - TDS TELECOM Nine months ended Sept. 30, 2019 ($ in millions) 2019 2018 % Change Wireline $512 $526 (3%) Cable 184 170 8% Total operating revenues 695 695 -- Adjusted EBITDA(2) 238 236 1% Capital expenditures 193 140 37% (2) - See slide 36 for explanations 30
Slide 31: 2019 TDS Telecom Guidance
2019 TDS TELECOM GUIDANCE * (Wireline and Cable segments) ($ in millions) 2019 Previous 2019 Current As of Oct. 31, 2019 2018 Actual Estimates Estimates Total operating revenues $927 $900-$950 Unchanged Adjusted OIBDA (2) $303 $280-$310 Unchanged Adjusted EBITDA (2) $313 $290-$320 Unchanged Capital
Slide 32: IT Solutions
IT SOLUTIONS a TDS®°Company 32
Slide 33: Focus and Streamline Business
Focus and Streamline Business Effective January 1, 2018, HMS business segment reports into TDS Corporate to pair IT core competencies at corporate level with needs of HMS business Current Focus Concentrate sales efforts towards mid‐ market companies 2018 looking to outsource NET IT functions PROMOTE
Slide 34: Appendix
Appendix 34
Slide 35: Adjusted OIBDA and Adjusted EBITDA Reconciliation
Adjusted OIBDA and Adjusted EBITDA Reconciliation* -- Nine months Ended Sept. 30, 2019 Nine Months Ended Sept. 30, 2018 Total Total U.S. TDS U.S. TDS ($ in millions) Cellular Wireline Cable Telecom TDS (3) Cellular Wireline Cable Telecom TDS (3) Net income (GAAP) $115 N/A N/A $74 $132 $143 N/A N/A $
Slide 36: Adjusted OIBDA and Adjusted EBITDA Reconciliation – 2019 Estimated and 2018
Adjusted OIBDA and Adjusted EBITDA Reconciliation – 2019 Estimated and 2018 Full Year In providing 2019 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 37: Footnotes and 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
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