Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Shareholder Meeting (July 2007)
46 slides from Telephone And Data Systems's shareholder meeting presentation, Jul 26, 2007
Slide 1: 2007 Annual Meeting of Shareholders
2007 Annual Meeting of Shareholders July 26, 2007 1
Slide 2: LeRoy T. Carlson, Jr., President and CEO
LeRoy T. Carlson, Jr. President and CEO Telephone and Data Systems, Inc. 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 news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates a
Slide 4: TDS in 2006
TDS in 2006 • Focus on core business strategies • Strong year with significant achievements • Improving TDS’ financial strength • Building Shareholder value 4
Slide 5: Customer Satisfaction
Customer Satisfaction • Offer broad and competitive services and products • Drive for high customer satisfaction each and every time • Test new offerings to ensure quality experience • Maintain high-quality network, sales distribution and customer service 5
Slide 6: Customer Satisfaction
Customer Satisfaction • J.D. Power and Associates – “Highest Call Quality Performance Among Wireless Cell Phone Users in North Central Region” • 2006 volumes 1 and 2 • 2007 volume 1 – “Highest Overall Satisfaction Among Wireless Telephone Users in North Central Region in a Tie” – TDS Telecom #1 in 2
Slide 7: U.S. Cellular Growth Strategies
U.S. Cellular Growth Strategies • Differentiate with high customer satisfaction: ¾ Quality network ¾ Broad distribution ¾ Dedicated people ¾ Competitive product offerings • National, wide-area and family plans with focus on post pay • Competitive data offerings • Strategically strengthen competitive
Slide 8: Postpay Churn < 2%
Postpay Churn < 2% 10- year track record… and still strong 2.0% 1.9% 1.9% 1.9% 1.9% 1.8% 1.8% 1.7% 1.8% 1.7% 1.6% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.4% 1.3% 1.2% 1.1% 1.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Q1'07 8
Slide 9: Post Pay Focus ≈94% of Retail Customers
Post Pay Focus ≈94% of Retail Customers Retail Prepay Wholesale 6% 10% Retail Post pay 84% Total Customers 9
Slide 10: New Calling Plans
New Calling Plans • Wide area and national plans • More value to customers • Increased ARPU • Repositions family plans • Simplicity – one portfolio of plans across all markets 10
Slide 11: Expanded Product & Service Offerings
Expanded Product & Service Offerings • New handsets meet customer demand • Launched Product (RED)™ MOTORAZR – Worldwide handset debut – Proceeds benefit Global Fund 11
Slide 12: Data Services Drive Growth
Data Services Drive Growth • New BlackBerry® service offerings – Wireless e-mail access – Internet browsing • Data Services – easyedgeSM from U.S. Cellular – Ringtones – Text Messaging – NEW: My Contacts Backup 12
Slide 13: Data Services Drive Growth
Data Services Drive Growth ($ in millions) $250 $217 $200 $150 $131 $100 $78 $68 $50 $0 2004 2005 2006 Q1, 2007 13
Slide 14: Growing Strategically
Growing Strategically U.S. Cellular® Properties Heartland Markets (Kansas/Nebraska) Tennessee RSA #3 14
Slide 15: Growing Strategically
Growing Strategically U.S. Cellular® Properties FCC Auction 58 (Carroll Wireless) FCC Auction 66 (Barat Wireless) 15
Slide 16: EVDO Trials
EVDO Trials • 2005: Technical trials • 2006: Market launch in Milwaukee • 2007: Release A general availability • U.S. Cellular wants to ensure that: ¾Technology is supported by value-added applications customers will want and value ¾It’s ready to fully support the new technology and any new services
Slide 17: USM: Excellent Prospects
USM: Excellent Prospects • Proven strategy • Financially strong • Broad and competitive service/product offerings • Extensive network and distribution • Dedicated people • Positive momentum 17
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Slide 19: TDS Telecom
TDS Telecom Largest Equivalent Access Line States 12/31/06 % of total Wisconsin 391,200 32% Michigan 152,500 13% Minnesota 118,900 10% Tennessee 116,500 10% Georgia 61,400 5% New Hampshire 41,600 3% Indiana 37,800 3% 76% 19
Slide 20: Growth in Equivalent Access Lines
Growth in Equivalent Access Lines 1,300,000 1,200,000 1,100,000 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 2002 2003 2004 2005 2006 1 Q '07 20
Slide 21: TDS Telecom Strategy
TDS Telecom Strategy • Be the preferred broadband provider • Bundle aggressively • Defend core markets • Drive video and fixed wireless trials 21
Slide 22: Broadband is Key to the Service Bundle
Broadband is Key to the Service Bundle Goal to be preferred broadband provider • Have long been the preferred voice provider • Investing in network to increase speeds and remain competitive • Have expanded high-speed data offerings to ensure that we supply the broadband pipe into the home • CAPX rel
Slide 23: DSL
DSL • 160,600 customers (ILEC & CLEC) • 83% of ILEC lines DSL equipped • 70+% DSL market share in markets offering DSL • Primarily consumer • Product bundles 23
Slide 24: Growth in DSL
Growth in DSL 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2002 2003 2004 2005 2006 1 Q '07 24
Slide 25: Fiber to the Premises
Fiber to the Premises • Deploy fiber into new subdivisions -“greenfields” • Two Tennessee video trials ¾ Greenfield ¾ Fiber overbuild – “brownfield” • Evaluating copper technologies ¾ ADSL2+ ¾ VDSL 25
Slide 26: Broadband TV
Broadband TV • Demand for bandwidth • Transitioning from linear to broadband tv • Use satellite for bundles 26
Slide 27: Fixed Wireless - CLEC
Fixed Wireless - CLEC • Commercial service in Fox Valley • Trial in Madison • Eliminates “last mile” loop from RBOC • Trialing high-speed data & VOIP 27
Slide 28: TDS: Excellent Prospects
TDS: Excellent Prospects • Full-service provider with established wireless and wireline operations • Strong business units ¾ Well positioned in existing markets ¾ Proven business strategies focused on customer satisfaction, network quality and competitive product offerings ¾ Experienced management t
Slide 29: Kenneth R. Meyers, Executive Vice President and CFO
Kenneth R. Meyers Executive Vice President and CFO Telephone and Data Systems, Inc. 29
Slide 30: Five-Year Track Record
Five-Year Track Record Year Ended December 31 $4,000 $3,500 $3,000 $2,500 $ in millions $2,000 $1,500 $1,000 $500 $- 2002 2003 2004 2005 2006 Operating Revenues Operating Cash Flow 12/31/06 5-year CAGR revenue 11.0% 5-year CAGR OCF 5.4% 30
Slide 31: Consolidated Year End Results
Consolidated Year End Results 2006 2005 (as restated) Customers 7,028,500 6,665,900 + 5.4% Revenues $4,365 M $3,953 M + 10.4% Operating Cash Flow $1,150 M $1,017 M + 13.1% Operating income $ 413 M $ 381 M + 8.4% 31
Slide 32: Consolidated Q1 '07 Results
Consolidated Q1 ‘07 Results Q1‘07 Q1‘06 (as restated) Revenues $1,157 M $1,059 M 9.2% Operating income $ 143 M $ 107 M 33.2% OCF $ 334 M $ 290 M 15.2% 32
Slide 33: Q1'07 Highlights
Q1‘07 Highlights Q1’07 Service revenues $ 860.6 M +11.9% Operating income $ 108.5 M +55 OCF $ 257.8 M +22 Net income $ 74.4 M +89 EPS $ .84 +87 ARPU $ 48.69 +5.5 Data revenues $ 78.0 M +71 Retail net adds 146,000 +20 Churn--postpay 1.5 % UNC Cell sites 6,004 +566 sites 33
Slide 34: Q1 '07 Highlights
Q1 ‘07 Highlights Operating revenue $ 217.6 M ( .6%) Operating income $ 37.5 M (2.2%) Operating cash flow $ 77.4 M (1.5%) Access line equivalents (thousands) ILEC & CLEC 1,219.6 +2.4% 34
Slide 35: Improved Debt Structure
Improved Debt Structure In first half of 2006: • Repaid $35 million of 10% medium term notes • Retired $200 million of 7% senior bonds For the year 2006: • Total long-term debt, including current portion, decreased $235 M 35
Slide 36: Long Term Debt Repayments
Long Term Debt Repayments Par call feature provides financial flexibility on 65% LTD ($ in Millions) Call options on most company debt securities give the company the flexibility to repay or refinance its debt as conditions warrant. $1,100 TDS 6.625% Notes TDS 7.6% Notes Avg. maturity is 31 $1,000 U
Slide 37: Liquidity
Liquidity 3/31/07 • Cash $1,176 M • Available credit facilities 1,311 M Total: $2,487 M • Q1 cash flow from operations $ 287.1 M + 35% 37
Slide 38: May–Sept 2007 Prepaid Forward Contract Maturities
May–Sept 2007 Prepaid Forward Contract Maturities • In the process of delivering shares to settle the contracts • Selling remaining shares • USM VOD (8.9 M ADRs, 4 contracts) • TDS VRSN (2.4 M shares,1 contract) • TDS DT (45.5 M shares, 5 contracts) 38
Slide 39: Financial Guidance for 2007
Financial Guidance for 2007 6/19/2007 Net retail customer additions 375,000 - 425,000 (2) Service revenues Approx. $3.5 billion (1) (2) Operating cash flow $990 - $1,040 million (2) Operating income $375 - $425 million (2) Depreciation, amortization & accretion Approx. $615 million (2) Operating cas
Slide 40: Financial Guidance for 2007
Financial Guidance for 2007 TDS Telecom: ILEC and CLEC (2) 6/19/2007 Operating revenues $850 - 900 million (1) Operating cash flow 285 - 305 million Operating income 130 - 150 million Depreciation and amortization 155 million Operating cash flow 285 - 305 million Capital expenditures 110 - 130 milli
Slide 41: Stock Repurchases
Stock Repurchases • U.S. Cellular ¾500,000 shares authorized ¾170,000 shares de minimus authorized ¾670,000 shares purchased via ASR completed in April 2007 • TDS ¾$250 million of special common shares authorized 41
Slide 42: Comparative Returns
USM +108% Comparative Returns TDS +102% TDS.S +96% TDS TDS.S USM S&P 500 S&P500 +24% 12/31/05 12/31/05 7/31/06 7/31/06 2/28/07 2/28/07 7/17/07 42
Slide 43: TDS Financial Objectives
TDS Financial Objectives • 7-10% compound annual revenue growth ¾Over 5 years ¾Organic and M&A ¾Returning at least the cost of capital • Improve return on capital performance. Reach WACC’s: ¾USM WACC 8.7 % ¾ILEC WACC 8.0 % • Target an A-/A3 rating 43
Slide 44: TDS: Strong Company
TDS: Strong Company • Strong balance sheet ¾Over $1 billion in cash • U.S. Cellular in 2006 ¾Double digit revenue growth ¾OCF up 24% ¾Free cash flow positive ¾Improving margins •TDS Telecom ¾Free cash flow ¾Strong DSL growth 44
Slide 45: Reconciliation of Additional Disclosures
Reconciliation of Additional Disclosures For the quarter ended March 31, 2007 T D S T e le c o m Q u a rte r E n d e d a t M a r. 3 1 , 2 0 0 7 U .S . C e llu la r IL E C C LE C A ll O th e r T o ta l O p e ra tin g c a s h flo w : O p e ra tin g in c o m e a s re p o rte d $ 1 0 8 ,5 2 3 3 2 ,5 9 0
Slide 46: Reconciliation of Additional Disclosures
Reconciliation of Additional Disclosures 2001 2002 2003 2004 2005 2006 Operating Cash Flow: $434,976 $380,243 ($93,444) $201,253 $380,698 $412,777 Operating Income (as reported) Add: Depr/Amortization 450,374 513,712 600,332 675,093 678,858 737,478 Gains (losses) on sales of assets 1,485 402,436 29,
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