Slide 1: First Quarter 2011 Results and 2011 Guidance
May 6, 2011 First Quarter 2011 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 • 5/16/11 – J.P. Morgan Global Technology, Technology, Media and Telecom (Boston) • 5/24/11 – Barclays Capital 2011 Global Communications, Media and Technology (New York) • 6/8/11 – Raymond James Spring Investor Conference (Boston) 3
Slide 4: First Quarter 2011
First Quarter 2011 • Ongoing efforts to reduce interest expense • Issued $300 M of 49‐year debt at 7% • Redeemed $282.5 M of 7.6% debt on May 2, 2011 • Stock repurchases • TDS Special common – 407,281 shares for $11.6 M • U.S. Cellular common – 357,021 shares for $17.4 M • Bonus depreciation • Indus
Slide 5: Regulatory Developments
Regulatory Developments • Data Roaming Order • Spectrum availability • Universal Service Fund / Intercarrier Compensation 5
Slide 6: U.S. Cellular
K US. Cellular
Slide 7: Q1 2011 Highlights
Q1 2011 Highlights • Smartphone growth driving ARPU growth • Belief Plan customers of more than 1.8 million • Postpaid churn keeps improving 7
Slide 8: Attracting New Customers
Attracting New Customers • New advertising campaign • Added smartphones and wireless modems to prepaid offering • Launching 8 new smartphones over next 2 quarters • Appointed Chief Strategy and Brand Officer and hired EVP Sales and Customer Service and VP Marketing 8
Slide 9: Explosive Industry Growth in Data Usage
Explosive Industry Growth in Data Usage The FCC forecasts that overall mobile data traffic in 2014 will be 35 times what it was in 2009 9
Slide 10: U.S. Cellular Data Growth and Smartphone Penetration
U.S. Cellular Data Growth and Smartphone Penetration Data Usage Growth 2010 Actual; Revised 2011 Forecast Usage Actual Months 10
Slide 11: Managing the Data User Experience
Managing the Data User Experience • Add EvDO capacity • Move forward with LTE deployment • Competitive “table stakes” • Cost savings from sooner LTE data off‐load (vs. adding EvDO capacity) are significant • LTE capital expenditures in 2011 viewed as a “pull‐forward” from future years 11
Slide 12: LTE Deployment Plan for 2011
LTE Deployment Plan for 2011 • First roll out planned for 24 markets by November 2011 • Covers 25‐30% of total subs • Approximately 1,250 cell sites • All using 700 MHz spectrum • Target a full suite of devices at roll‐out 12
Slide 13: Customer Activity
Customer Activity Q1 ‘11 Q1 ‘10 Retail gross additions 256,000 305,000 Postpaid net additions (losses) (22,000) (9,000) Prepaid net additions (losses) (9,000) 33,000 Retail net additions (losses) (31,000) 24,000 Total customers 6,033,000 6,147,000 13
Slide 14: 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 2011 14
Slide 15: Growing Smartphone Penetration
Growing Smartphone Penetration 15
Slide 16: Financial Performance
Financial Performance ($ in millions) Q1 ‘11 Q1 ‘10 Service revenues $ 985.1 $ 965.0 Roaming 64.4 51.9 ETC 41.8 34.8 System operations expense 217.6 207.1 Loss on equipment 122.4 102.3 SG&A expenses 442.0 429.6 Adjusted OIBDA (1) $ 203.1 $ 226.0 (1) Adjusted OIBDA is defined as operating income excl
Slide 17: Postpaid Average Monthly Revenue Per Customer
Postpaid Average Monthly Revenue Per Customer 17
Slide 18: Financial Performance - continued
Financial Performance - continued ($ in millions, except per share amounts Q1 ‘11 Q1 ‘10 Total investment and other income (expense) $ 6.4 $ 9.1 Net income attributable to U.S. Cellular shareholders 34.1 47.4 Diluted earnings per share attributable to 0.40 0.54 U.S. Cellular shareholders Cash flow f
Slide 19: 2011 Guidance – as of 5/6/11
2011 Guidance – as of 5/6/11 Service revenues $4,000 ‐ $4,100 million Adjusted OIBDA (1)(3) $775 ‐ $875 million Operating income (2)(3) $185 ‐ $285 million Depreciation, amortization and accretion expenses, and losses on asset disposals and impairment of assets (2) Approx. $590 million Capital expen
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Slide 21: TDS Telecom Revenues
TDS Telecom Revenues ($ in millions) Q1 ‘11 Q1 ‘10 Change ILEC $ 155.8 $ 150.2 3.8 % CLEC 45.3 47.7 (5.1) % Total * $ 198.9 $ 195.5 1.7 % * Reflects intercompany eliminations 21
Slide 22: ILEC Data Growth
ILEC Data Growth Revenues Penetration $ Millions 22
Slide 23: Customer Activity: Voice
Customer Activity: Voice nw 200 mo} 7) 5 800 — z 180 3 700 - % 160 £ 600 - = 140 500 {00 120 400 - 100 300 - eC 200 - 60 40 100 - 20 0 ) Q1 Q2 Q3 Q4Q1Q2Q304Q1 Q1 Q2 Q3 A401 Q20304Q1 '09 '09 '09'09 '10 '10'10 '10 '11 '09 '09 '09 '09 '10'10'10 '10 '11 —<Access Lines —Access Line Equivalents ™@ Star Pa
Slide 24: Penetration of Bundled Plans
Penetration of Bundled Plans 24
Slide 25: managedIP Growth
managealP Growth Number of Stations 20 — 10 — al 0 T T T T T T T T Q1 '09 Q2'09 Q3 '09 Q4'09 Q1'10 Q2'10 Q3 '10 Q4'10 Q1 ‘11 Ww wn J ay (ea) 1 25
Slide 26: Financial Performance
Financial Performance ($ in millions) Q1 ‘11 Q1 ‘10 Change Revenues $ 198.9 $195.5 1.7 % Expenses 121.8 125.9 (3.3)% Adjusted OIBDA (1) $ 77.1 $ 69.6 10.8 % (1) Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or l
Slide 27: 2011 Guidance (ILEC/CLEC) – 5/6/11
2011 Guidance (ILEC/CLEC) – 5/6/11 Operating revenues $780 ‐ $810 million Adjusted OIBDA (1) $260 ‐ $290 million Depreciation, amortization and accretion expenses, and Approx. $185 million losses on asset disposals and impairment of assets (2) Operating income (2) $75 ‐ $105 million Capital expendit
Slide 28: TDS Telecom Network Strategy
TDS Telecom Network Strategy • Network transformation to a highly‐reliable, next generation IP‐based network to enable: • Flexibility in product offerings • Ability to economically grow capacity Meet our customers growing customer bandwidth requirements 28
Slide 29: Transformation of the Data Network
Transformation of the Data Network • Core 10 Gig network • Completed at the inter‐ regional level • Eight regional hubs • Carrier hotels in Chicago and New York • Expected to reach 80% of access lines by year‐end • Services enabled for select markets • managedIP • Least Cost Routing • IPTV 29
Slide 30: Transformation of the Middle Mile Access Infrastructure
Transformation of the Middle Mile Access Infrastructure • Conversion into 10G Ethernet‐based transport to enable: • IPTV deployments • Commercial Ethernet‐transport products and on‐net customer builds • Bandwidth growth in DSL services • Cost reductions in provisioning IP‐based services 30
Slide 31: Transformation of the Last Mile Infrastructure
Transformation of the Last Mile Infrastructure • Copper, Fiber and Technology • Super high speed data • IPTV • Broadband Stimulus 31
Slide 32: OIBDA Reconciliation
OIBDA Reconciliation Consolidated Three Months Ended March 31, 2011 U.S. Cellular TDS Telecom (1) All Other (2) Total Operating revenues $ 1,057,092 $ 198,916 $ 2,673 $ 1,258,681 Deduct: U.S. Cellular equipment sales revenue 71,979 Service revenues 985,113 Operating income (loss) 57,043 32,206 (2,08
Slide 33: U.S. Cellular Free Cash Flow Reconciliation
U.S. Cellular Free Cash Flow Reconciliation 2011 2010 Cash flows from operating activities $ 201,822 $ 152,252 Deduct: Capital expenditures 95,933 121,514 Free cash flow $ 105,889 $ 30,738 Free cash flow is defined as cash flows from operating activities minus capital expenditures. Free cash flow is
Slide 34: First Quarter 2011 Results and 2011 Guidance
May 6, 2011 First Quarter 2011 Results and 2011 Guidance