Slide 1: Fourth Quarter 2011 Results and 2012 Guidance
February 24, 2012 Fourth Quarter 2011 Results and 2012 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 Conferences
Upcoming Conferences 2/28/12 ‐ Morgan Stanley Technology, Media & Telecom Conference, San Francisco, CA 3/7/12 ‐ Raymond James 33rd Annual Institutional Investors Conference, Orlando, FL 5/9/12 – CTIA Analyst Day, New Orleans, LA 3
Slide 4: Financially Strong
Financially Strong • For the year 2011: • Revenues up 4% • Operating income up 22% • Net income available to common up 38% • Strong balance sheet • Unusual fourth quarter tax items 4
Slide 5: Share Consolidation Update
Share Consolidation Update • Shareholder approval on January 13, 2012 • Effected January 24, 2012 at 5:01 EST • Reclassified each Common Share as 1.087 Common Shares • Reclassified each Series A Common Share as 1.087 Series A Common Shares • Reclassified each Special Common Share as a Common Share •
Slide 6: Regulatory Developments
Regulatory Developments • USF and Intercarrier Compensation Order • Mobility Fund Phase I support • Spectrum legislation • Competitive issues • Device interoperability 6
Slide 7: U.S. Cellular
K US. Cellular
Slide 8: Customer Activity
Customer Activity Q4 ‘11 Q4 ‘10 Retail gross additions 298,000 292,000 Postpaid net additions (losses) (20,000) (10,000) Prepaid net additions 7,000 (11,000) Retail net additions (losses) (13,000) (21,000) Total customers 5,891,000 6,072,000 8
Slide 9: Postpaid Churn Rate
K US. Cellular Postpaid Churn Rate 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Q2 Q3 m2009 62010 =wm2011 ae 9
Slide 10: Smartphone Penetration
K US. Cellular Smartphone Penetration Smartphones Sold Smartphone Customers Postpaid Average Monthly (% of total devices) (% of postpaid base) Revenue Per Customer 60% 35% $53.50 $53.25 50% 30% $53.00 56% $52.75 40% $52.50 20% $52.25 30% $52.00 15% $51.75 20% $51.50 Bie $51.25 10% 5% $51.00 $50.75 0
Slide 11: Financial Performance
Financial Performance ($ in millions) Q4 ‘11 Q4 ‘10 Service revenues $1,030.0 $991.9 Retail Service 882.1 864.9 Roaming 93.4 67.5 ETC 39.9 43.5 System operations expense 242.1 216.3 Loss on equipment 156.2 159.4 SG&A expenses 469.5 474.9 Adjusted OIBDA (1) 162.2 141.4 (1) Adjusted OIBDA is defined a
Slide 12: Financial Performance – continued
Financial Performance – continued ($ in millions, except per share amounts) Q4 ‘11 Q4 ‘10 Total investment and other income $ 2.9 $ 11.4 Net income attributable to U.S. Cellular shareholders 2.8 7.8 Diluted earnings per share attributable to $0.03 $0.09 U.S. Cellular shareholders Cash flow from oper
Slide 13: 2011 Accomplishments
2011 Accomplishments • Continued to garner third‐party validation of our best‐in‐industry customer experiences (J.D. Power, Consumer Reports) • Drove smartphone penetration to 30%, leading to 6% increase in ARPU • Device portfolio broadened and strengthened • Controlled costs and managed LOE to driv
Slide 14: Economic Outlook / Competitive Landscape
Economic Outlook / Competitive Landscape • No meaningful economic recovery built into outlook – job growth will be key • Competition intense as available pool of “switchers” continues to shrink • Challenges include managing network capacity, expanding 4G network and device portfolio 14
Slide 15: Strategy to Compete
Strategy to Compete • Strong customer‐focused culture • Building switcher awareness and consideration • Ignite the customer experience through compelling, differentiated offers to target segments • Optimizing distribution • Extend best 3G network into rapidly‐expanding 4G network 15
Slide 16: Device Lineup for 2012
Device Lineup for 2012 • Offer a wide array of competitive 3G/4G smartphones and devices • Plan to introduce: • 20 devices • 13‐15 smartphones 9 Android® 9 BlackBerry® 9 Windows®7 • 6‐8 4G devices 16
Slide 17: Network Evolution – 2012 Priorities
Network Evolution – 2012 Priorities • Cover 54% of customers by year‐end • Commercial launch of Wave 1 markets and devices • Wave 2 market build‐out • Continue to support 3G data growth • Expansion of 4G LTE device portfolio 17
Slide 18: Keys to Improving Profitability
Keys to Improving Profitability • Top‐line growth • Improved subscriber results • ARPU • Roaming revenues • Managing data usage costs; introduce tiered pricing for data • Managing equipment subsidies • Enablement Initiatives to reduce expenses; increase efficiencies 18
Slide 19: 2012 Guidance – as of 2/24/12
2012 Guidance – as of 2/24/12 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 (3) $800 ‐ $900 million Capital expenditures $850 million (1) These estimate
Slide 20: 2012 Strategic Priorities
2012 Strategic Priorities • Accelerate growth • Build subscriber base • Continue to build smartphone penetration; increase ARPU • Optimize distribution • Progress on enablement initiatives • Control/reduce costs • Improve profitability • Network evolution to 4G LTE 20
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Slide 22: Q4 2011 Highlights
Q4 2011 Highlights • ILEC data revenue growth • HMS acquisitions • Customer acquisition and retention programs • Bundling keeps churn low • Promotions • Cost control initiatives 22
Slide 23: TDS Telecom Revenues
TDS Telecom Revenues ($ in millions) Q4 ‘11 Q4 ‘10 Change ILEC $164.9 $155.6 6% CLEC 44.4 45.9 (3%) Total (1) $206.8 $199.1 4% (1) Reflects intercompany eliminations 23
Slide 24: ILEC Data Growth
ILEC Data Growth Data Revenues Penetration of High‐Speed Data $ Millions 24
Slide 25: Customer Activity: Voice
Customer Activity: Voice 200,000 eS cheae Star Packages 300,000 180,000 700,000 160,000 140,000 600,000 120,000 500,000 100,000 400,000 80,000 300,000 60,000 200,000 40,000 100,000 20,000 (© J Se Gen SOL SL EL GL | 0 ‘09 "10 ‘10 "10 "10 ‘11 ‘11 "11 "11 ‘09 '10 10 '10 '10 ‘11 ‘11 ‘11 ‘11 ——Physical A
Slide 26: Penetration of Bundled Plans
Penetration of Bundled Plans (As a percent of ILEC residential customers) 26
Slide 27: managedIP Growth
managedIP Growth Stations 27
Slide 28: Financial Performance
Financial Performance ($ in millions) Q4 ‘11 Q4 ‘10 Change Revenues $206.8 $199.1 4% Expenses 144.7 130.0 11% Adjusted OIBDA (1) 62.0 69.1 (10%) (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 29: 2011 Accomplishments
2011 Accomplishments Residential • Broadband: Increased speeds, penetration • Bundling: Two‐thirds of customers have double or triple play bundle, very low churn • Video: TDS TV to increase retention and revenues, prepared for expansion in 2012 Commercial • TDS managedIP: Grew customer stations 57%;
Slide 30: Economic / Competitive / Regulatory Outlook
Economic / Competitive / Regulatory Outlook • Expect continued price‐consciousness from consumers and businesses • Cable competition requires continually upgraded broadband speeds, price‐competitive service bundles • Recent changes to universal service funding and intercarrier compensation will prov
Slide 31: 2012 Strategy: Consumer
2012 Strategy: Consumer • Broadband: Increase broadband speeds to bring 5 to 25 mbps or faster speeds to more households o Plan to make substantial progress on the 44 broadband stimulus projects in 2012 • Video: Expand TDS TV to 19 markets in 2012 • Bundling: Offer competitively priced broadband, vo
Slide 32: 2012 Strategy: Commercial
2012 Strategy: Commercial • TDS managedIP voice and data communication solution o Continue to expand features and capabilities o Plan for continued aggressive growth in customer stations o Price‐conscious businesses appreciate that no capital investment is required • Hosted and managed services o Co
Slide 33: 2012 Guidance (ILEC/CLEC) – as of 2/24/12
2012 Guidance(1) (ILEC/CLEC) – as of 2/24/12 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 exp
Slide 34: OIBDA Reconciliation
OIBDA Reconciliation Consolidated Three Months Ended December 31, 2011 U.S. Cellular TDS Telecom (1) All Other (2) Total Operating revenues $ 1,099,633 $ 206,770 $ 10,324 $ 1,316,727 Deduct: U.S. Cellular equipment sales revenue 69,588 Service revenues 1,030,045 Operating income (loss) 16,316 15,369
Slide 35: Fourth Quarter 2011 Results and 2012 Guidance
Fourth Quarter 2011 Results and 2012 Guidance