Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Gabelli & Company, Inc. Inaugural Best Ideas Conference 2008
33 slides from Telephone And Data Systems's conference presentation, Dec 4, 2008
Slide 1: Gabelli & Company, Inc. Inaugural Best Ideas Conference
Gabelli & Company, Inc. Inaugural Best Ideas Conference LeRoy T. Carlson, Jr. President and Chief Executive Officer Kenneth R. Meyers Executive Vice President and Chief Financial Officer December 4, 2008
Slide 2: Kenneth R. Meyers, Executive Vice President and Chief Financial Officer
Kenneth R. Meyers Executive Vice President and Chief Financial Officer
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,
Slide 4: Strong Company
Strong Company • A Fortune 500 company listed on the NYSE • Diversified telecommunications company with 7.4 million customers in 36 states – U.S. Cellular (81% owned) – TDS Telecom (100% owned) • Strong balance sheet…investment grade • 34 years of consecutive dividend increases
Slide 5: U.S. Cellular and TDS Telecom footprint
FRusCellular gw” us. cellular GE TDs Telecom - ILEC MO tps Telecom - CLEC
Slide 6: U.S. Cellular
U.S. Cellular • 6th largest wireless provider .. 6.2 M customers • 45.5 M operating pops; 82.9 M total pops • Focused on exceptional customer experience • Low churn rate • Broad distribution… ~1,600 points of presence • CDMA 1X (2.5G) ￫ EVDO Rev. A (3G) ￫ LTE 4G – 6,700 cell sites (~3,800 owned towe
Slide 7: TDS Telecom
TDS Telecom • Broadband company • ILEC 81% rural and small town • Modern network • 212,200 DSL lines (ILEC and CLEC) – 30% ILEC penetration • CLEC - Natural extension of ILEC business –Focused on the small and medium business market –Driving high-speed data vigorously
Slide 8: TDS Telecom
TDS Telecom
Slide 9: Why Invest in TDS
Why Invest in TDS • Financially strong – Two subsidiaries that produce significant free cash flow – Investment grade – Solid balance sheet • U.S. Cellular’s positioned for long-term growth in revenue and profitability • TDS Telecom has transformed itself into broadband company
Slide 10: Business Units Positioned Well
Business Units Positioned Well U.S. Cellular • Differentiate with high customer satisfaction • Focus on the postpay customer – 95% of retail base is postpay • Broad array of handsets TDS Telecom • Broadband company • Bundling
Slide 11: Solid 3rd Quarter Results
Solid 3rd Quarter Results U. S Cellular Service revenues $ 1,014 M + 6% Operating income $ 120 M +19% OCF $ 272 M + 9% Data revenues $ 130 M +35% ARPU $ 54.59 + 4%
Slide 12: Solid 3rd Quarter Results (Cont'd)
Solid 3rd Quarter Results (Cont’d) 3Q, ’08 3Q, ’07 Postpay retail net adds 12,000 73,000 Prepay Retail net adds (15,000) (21,000) Churn – retail postpay 1.6% 1.6% ETC Funds $38 M $27 M Inbound Roaming $69 M $61 M Los Angeles minority income $15.3 M $17.9 M
Slide 13: Strong Data Revenue Growth
Strong Data Revenue Growth $368 13% 13% 12% 10% $217 $131 7% $124 $130 $116 $68 5% 3% 2004 2005 2006 2007 Q1 '08 Q2 '08 Q3 '08 Years Quarters Dollars in millions
Slide 14: ARPU Growing Nicely
ARPU Growing Nicely $56.00 $54.59 $54.00 $53.27 $52.24 $52.00 $51.13 $50.00 $48.00 $47.23 $46.00 $45.24 $44.00 2005 2006 2007 1 Q '08 2 Q '08 3 Q '08
Slide 15: CAPX as a Percent of Revenues
CAPX as a Percent of Revenues 30% 28% 26% 24% 24% 22% 23% 20% 18% 19% 16% 17% 14% 14% 12% 10% 2003 2004 2005 2006 2007
Slide 16: TDS Telecom Highlights
TDS Telecom Highlights 3Q, ’08 Operating revenues $ 206.0 M -4.0% Operating income 35.9 M - .5% OCF 75.0 M + .7% Equiv. access lines 1,176,300 -3.0%
Slide 17: TDS Strength
TDS Strength • $1 billion dollars in cash (treasuries) • Significant cash flow generation • Lines of credit unused • Long-term debt is fixed rate and termed- out • No unfunded pensions
Slide 18: LeRoy T. Carlson, Jr.
LeRoy T. Carlson, Jr. President and Chief Executive Officer
Slide 19: U.S. Cellular Growth Strategies
U.S. Cellular Growth Strategies • Focus on the postpay customer … 95% • Differentiate with high customer satisfaction: – Quality network – Competitive data and product offerings – Excellent customer service – Broad distribution • National, wide-area and family plans… drive data usage • Strategically
Slide 20: Postpay Churn < 2%
Postpay Churn < 2% 11- year track record… and still strong Flat with Q3 ‘07 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% 1.4%1.4% 1.4% 1.4% 1.3% 1.2% 1.1% 1.0% 9 9 7 9 9 8 9 9 9 00 0 0 0 1 0 0 2 00 3 0 0 4 0 0 5 0 0 6 0 0 7 ' 0 8 ' 0 8 ' 0 8 1
Slide 21: Increased Phone Selection
X= US.Cellular Increased Phone Selection
Slide 22: Growing Demand for Smartphones
Growing Demand for Smartphones ARPU is nearly double with Smartphone customers
Slide 23: Technology Path
Technology Path • Today – 100% CDMA 1X network – 30% covered pops 3G (EVDO Rev. A) • At 12/31/09, 70+% covered pops 3G • Moving to LTE (4G)
Slide 24: Growing Strategically
Growing Strategically U.S. Cellular® Properties FCC Auction 58 (Carroll Wireless) FCC Auction 66 (Barat Wireless) FCC Auction 73 (King St Wireless) New Market FCC Auction 73 (King St Wireless)
Slide 25: TDS Telecom has Transformed into a Broadband Company
TDS Telecom has Transformed into a Broadband Company • Aggressively deploy advanced network • Be the preferred broadband provider in its markets • Provide outstanding customer service • Focus on efficiency, cost control and process improvement • Increased focus on Small/Medium Business market
Slide 26: Bundle Aggressively
Bundle Aggressively Bigger the Bundle the Less the Churn One service churn – voice 1.6% Two services churn – voice + DSL 1.4% Two services churn – voice + DISH 1.0% Three services churn – Triple Play 0.4%
Slide 27: Broadband is Key to the Service Bundle
Broadband is Key to the Service Bundle • Have long been the preferred voice provider • Investing in network to increase speeds – Spending over 50% of 2008 CAPX on broadband – Putting fiber in new subdivisions • Customers taking higher speeds – 49% customers take 3 mbps or higher – 85% customers take
Slide 28: DSL
DSL • 90% of ILEC lines DSL equipped • 212,200 customers (ILEC & CLEC) • ILEC DSL Penetration = 30% • Primarily consumer…good ARPU
Slide 29: Growth in DSL
Growth in DSL 250,000 200,000 150,000 CLEC 100,000 ILEC 50,000 0 2002 2003 2004 2005 2006 2007 1Q 2Q 3Q '08 '08 '08
Slide 30: Why Invest in TDS
Why Invest in TDS • Financially strong – Two subsidiaries that produce significant free cash flow – Investment grade – Strong and solid balance sheet • U.S. Cellular positioned for long-term growth in revenue and profitability • TDS Telecom transformed for long-term growth in broadband and triple pl
Slide 31: (1) Operating Cash Flow
(1) Operating Cash Flow Operating Cash Flow represents operating income before depreciation, amortization and accretion. Operating cash flow is not presented as an alternative measure of operating results or cash flows from operating activities as determined in accordance with accounting principles
Slide 32: Reconciliation of Additional Disclosures - Q3 '08
Reconciliation of Additional Disclosures - 3 Q ‘08 TDS Telecom (1) Quarter Ended Sept. 30, 2008 U.S. Cellular ILEC CLEC All Other Total Operating cash flow: Operating income (loss) as reported 119,957 31,794 4,067 (3,679) 152,139 Add: Depreciation, amortization and accretion 145,434 33,469 5,567 3,5
Slide 33: Why Invest in TDS
Why Invest in TDS • Financially strong – Two subsidiaries that produce significant free cash flow – Investment grade – Strong and solid balance sheet • U.S. Cellular positioned for long-term growth in revenue and profitability • TDS Telecom transformed for long-term growth in broadband and triple pl
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