Slide 1: First Quarter 2012 Results and Guidance
May 4, 2012 First Quarter 2012 Results and 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: 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 i
Slide 3: Upcoming Investor Events
Upcoming Investor Events 5/9/12 – CTIA Analyst Day, New Orleans, LA 5/15/12 – U.S. Cellular Annual Shareholder Meeting 5/17/12 – Telephone and Data Systems Annual Shareholder Meeting 3
Slide 4: First Quarter Highlights
First Quarter Highlights • Strong consolidated results • Revenues up 4% • Operating income up 5% • Diluted EPS up 23% • Low quarterly effective tax rate • No shares purchased in the quarter 4
Slide 5: Regulatory Developments
Regulatory Developments • USF and Intercarrier Compensation Order • FCC considering many petitions to augment, reinterpret or overturn Order • Spectrum legislation • Enacted in Q1 2012 • FCC to establish rules for bands and incentive auctions • FCC initiated rulemaking on interoperability 5
Slide 6: U.S. Cellular
K US. Cellular
Slide 7: First Quarter Highlights
First Quarter Highlights • Awareness building • Retail gross additions up 7% • Positive prepaid net additions of 4,000 • Walmart prepaid product launching mid-May • Smartphone adoption accelerating • Strong ARPU growth • Postpaid ARPU up 5% • Inbound roaming revenue growth • Excellent device subsidy
Slide 8: Challenges
Challenges • Postpaid churn remains elevated • Continued iPhone impact • 4G devices and promotions • Managing data growth • Continued investment in 3G capacity and 4G deployment • Minimize costs of outbound roaming • Device availability • Complexity issues and delays 8
Slide 9: Current Initiatives – 4G LTE Deployment
Current Initiatives – 4G LTE Deployment • 4G LTE Phase 1 • Covers 25% of total subscribers in Iowa, Maine, North Carolina, Oklahoma, Texas, and Wisconsin • Strong initial sales of 4G LTE devices • 4G LTE Phase 2 on track for completion in 2012 Samsung Galaxy Tab™ 10.1 Samsung Galaxy S® Aviator™ 9
Slide 10: Current Initiatives – Expanded Distribution
Current Initiatives – Expanded Distribution • U.S. Cellular to be U Prepaid carrier in 414 Walmart stores • Launches mid-May • Continue to explore additional distribution opportunities BE WHERE OUR CUSTOMERS WANT TO SHOP 10
Slide 11: Current Initiatives – Pricing Refresh
Current Initiatives – Pricing Refresh • Pricing refresh – May 1, 2012 • Provide more options; ability to monetize data growth • Tiered data – 300 MB, 2GB, 5GB and 10GB • Includes attractive “smartphone starter” package • New SMB pricing • More options for the 2-20 line business customers • Customers
Slide 12: Customer Activity
Customer Activity Q1 ‘12 Q1 ‘11 Retail gross additions 273,000 256,000 Postpaid net additions (losses) (38,000) (22,000) Prepaid net additions (losses) 4,000 (9,000) Retail net additions (losses) (34,000) (31,000) Total customers 5,837,000 6,033,000 12
Slide 13: Postpaid Churn Rate
K US. Cellular Postpaid Churn Rate 2.0% 1.5% 1.0% 0.5% 0.0% Q2 Q3 m2010 m2011 m2012
Slide 14: Smartphone Penetration
K US. Cellular Smartphone Penetration Smartphones Sold Smartphone Customers Postpaid Average Monthly (% of total devices) (% of postpaid base) Revenue Per Customer 60% 40% $54.00 35% 50% $53.50 30% 40% $53.00 25% 30% 50% $52.50 15% $52.00 20% 10% $51.50 10% 5% $51.00 0% 0% $50.50 Ql Q2 3 Q4 al Ql Q2
Slide 15: Financial Performance
Financial Performance ($ in millions) Q1 ‘12 Q1 ‘11 Service revenues $1,023.8 $985.1 Retail Service 888.5 864.6 Roaming 80.1 64.4 ETC 39.7 41.8 System operations expense 233.2 217.6 Loss on equipment 118.7 122.4 SG&A expenses 442.2 442.0 Adjusted OIBDA (1) $ 229.7 $ 203.1 (1) Adjusted OIBDA is defin
Slide 16: Financial Performance – continued
Financial Performance – continued ($ in millions, except per share amounts) Q1 ‘12 Q1 ‘11 Total investment and other income $ 9.4 $ 6.4 Net income attributable to U.S. Cellular shareholders 62.5 35.2 Diluted earnings per share attributable to $0.73 $0.41 U.S. Cellular shareholders Cash flow from ope
Slide 17: 2012 Guidance – as of 5/4/12
2012 Guidance (1) – as of 5/4/12 Service revenues $4.05 ‐ $4.15 billion Operating income $200 ‐ $300 million Depreciation, amortization and accretion expenses, and asset gains and losses (2) Approx. $600 million Adjusted OIBDA (2) (3) $800 ‐ $900 million Capital expenditures $850 million (1) These e
Slide 18: Slide 18
Slide 19: Q1 2012 Highlights
Q1 2012 Highlights • Hosted and Managed Services • Now reported as a separate segment • Contribution from OneNeck acquisition • ILEC • Physical access line losses moderating • Initial launch of IPTV • Continued success in bundling strategy • CLEC • Strong growth in managedIP • Lower operating income
Slide 20: TDS Telecom Revenues
TDS Telecom Revenues ($ in millions) Q1 ‘12 Q1 ‘11 Change ILEC $145.1 $149.6 (3)% CLEC 44.0 45.3 (3)% HMS 17.6 6.2 >100% Total (1) $204.1 $198.9 3% (1) Reflects intercompany eliminations 20
Slide 21: Revenues : Connections
Revenues : Connections a Commercial Residential 40 5 B 4 33 | *#——* -i o—se is a - 620 =~ 36 + G | [ a 2 - 195 & a 610 & 34 | 3 £72 4 & 3 32 4 3 2 - 600 § E 175 8 Bn 4 3 % 30 | 5 E - 590 E 4 iS % 70 4 a g 2 1 | 155 8 2 | g $26 | 3 = 69 580 2 a 5 g 68 - = 24 + 135 § 2 - 570 22 + 67 4 § 20 4 1 + 1 t 1
Slide 22: ILEC Voice Bundles Help to Moderate Line Loss
ILEC Voice Bundles Help to Moderate Line Loss 22
Slide 23: Growth in Broadband and Residential Bundles
Growth in Broadband and Residential Bundles Broadband Penetration 23
Slide 24: managedIP Connections
managedIP Connections 88% increase over last year 24
Slide 25: Financial Performance
Financial Performance ($ in millions) Q1 ‘12 Q1 ‘11 Change Revenues $204.1 $198.9 3% Expenses 143.4 121.8 18% Adjusted OIBDA (1) 60.7 77.1 (21)% (1) Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset
Slide 26: 2012 Guidance – as of 5/4/12
2012 Guidance(1) – as of 5/4/12 Operating revenues $810 ‐ $840 million Operating income $55 ‐ $85 million Depreciation, amortization and accretion expenses, and Approx. $190 million losses on asset disposals and impairment of assets (2) Adjusted OIBDA (3) $245 ‐ $275 million Capital expenditures $15
Slide 27: OIBDA Reconciliation
OIBDA Reconciliation Consolidated Three Months Ended March 31, 2012 U.S. Cellular TDS Telecom (1) All Other (2) Total Operating revenues $ 1,092,121 $ 204,075 $ 9,595 $ 1,305,791 Deduct: U.S. Cellular equipment sales revenue 68,301 Service revenues 1,023,820 Operating income (loss) 85,202 13,092 (4,
Slide 28: First Quarter 2012 Results and Guidance
May 4, 2012 First Quarter 2012 Results and Guidance