Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Deutsche Bank 2007 Media & Telecommunications Conference
33 slides from Telephone And Data Systems's conference presentation, Jun 4, 2007
Slide 1: Deutsche Bank 2007 Media & Telecommunications Conference
Kenneth R. Meyers Executive Vice President – Chief Financial Officer Deutsche Bank 2007 Media & Telecommunications Conference June 4, 2007
Slide 2: 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 a
Slide 3: U.S. Cellular
K US.Cellular Majority-Owned or Managed KR US. Cellular We connect with you: \
Slide 4: Highlights – Q1 2007
Highlights – Q1 2007 Retail net customer additions 146,000 +20% ARPU $48.69 +5% Service Revenues $861 M +12% Operating Income $109 M +55% Net Income $74 M +89% Diluted EPS $0.84 +87% Operating Cash Flow $258 M +22% 4
Slide 5: Highlights – Q1 2007
Highlights – Q1 2007 Data revenues $78 M +71% ETC revenues $22 M +39% Inbound roaming revenues $41 M +17% Equity in earnings of $23 M +19% unconsolidated entities 5
Slide 6: 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 7: Customer Satisfaction
Customer Satisfaction • J.D. Power and Associates – “Highest Call Quality Performance Among Wireless Cell Phone Users in North Central Region” – “Highest Overall Satisfaction Among Wireless Telephone Users in North Central Region in a Tie” 7
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: 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 9
Slide 10: Expanded Product & Service Offerings
Expanded Product & Service Offerings • New handsets meet customer demand • Launched Product (RED)™ MOTORAZR – Worldwide handset debut – Proceeds benefit Global Fund 10
Slide 11: Data Revenues
Data Revenues* Revs (millions) % Service Revs. Q1’07 $ 78 M 9% 2006 $217 M 7 2005 $131 M 5 2004 $ 67 M 3 11 * Revenue split between easyedge and SMS
Slide 12: 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 12
Slide 13: U.S. Cellular Service Footprint
F< US Cellular {> US. Cellular Service Footprint >) Options from AT&T ss Carroll Wireless...Auction 58 (WN) Barat Wireless...Auction 66
Slide 14: EV-DO Trials
EV-DO Trials • 2005: Technical trials • 2006: Market launch in Milwaukee • 2007: Release A general availability • U.S. Cellular wants to ensure that: – Technology is supported by value-added applications customers will want and value – It’s ready to fully support the new technology and any new servi
Slide 15: Stock Repurchases
Stock Repurchases • U.S. Cellular – 500,000 shares authorized – 170,000 shares de minimus authorized – 670,000 shares ASR completed in April 2007 15
Slide 16: Prepaid Forward Contracts
Prepaid Forward Contracts • Hedge investment in Vodafone ADRs (8.9 M shares, 4 contracts) • Mature in May; all with settle by June 1 • In the process of delivering shares to settle the contracts • Selling remaining shares 16
Slide 17: USM 2007 Outlook
USM 2007 Outlook (As of May 15, 2007) Net Retail Customer Additions 375,000 - 425,000 Service Revenues Approx. $3.5 billion Operating Income $375 - $425 million Dep., Amort. & Accretion Approx. $615 million Capital Expenditures $600 - $615 million 17
Slide 18: USM: Excellent Prospects
USM: Excellent Prospects • Proven strategy • Financially strong • Extensive network and distribution • Dedicated people • Positive momentum 18
Slide 19: TDS Telecom
TDS Telecom • 6th largest RLEC founded 1969 ¾ Rural company status ¾ Modern network ¾ Good regulatory relationships ¾ Local presence • 1.2 million access line equivalents • 72% rural…28% suburban • 77% residential... 23% SME 19
Slide 20: 20
20
Slide 21: TDS Telecom: Largest Equivalent Access Line States
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% 21
Slide 22: 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 22
Slide 23: TDS Telecom Strategy
TDS Telecom Strategy • Be the preferred broadband provider • Bundle aggressively • Defend core markets • Drive video and fixed wireless trials 23
Slide 24: DSL
DSL • 160,600 customers (ILEC & CLEC) • 83% of ILEC lines DSL equipped • 73% DSL market share in markets offering DSL • Primarily consumer • Product bundles 24
Slide 25: 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 25
Slide 26: 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 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: 2007 Outlook – TDS Telecom
2007 Outlook – TDS Telecom TDS Telecom: ILEC and CLEC Guidance as of (2) 5/15/2007 Operating Revenues $850 - $900 million Operating Cash Flow(1): $285 - $305 million Operating Income $130 - $150 million Depreciation and amortization $155 million Operating Cash Flow $285 - $305 million Capital Expend
Slide 29: Stock Repurchases
Stock Repurchases • TDS – $250 million of special common shares authorized 29
Slide 30: May 2007 Prepaid Forward Contract Maturities
May 2007 Prepaid Forward Contract Maturities • USM VOD (8.9 M ADR’s, 4 contracts) • TDS VRSN (2.4 M shares,1 contract) • All settled June 1, 2007 30
Slide 31: TDS Financial Objectives
TDS Financial Objectives • 7-10% compound annual revenue growth ¾ Over 5 years ¾ Organic and M&A ¾ Returning at least the cost of capital • Improve return on capital performance. Reach/surpass WACC’s: ¾ USM WACC 8.7 % ¾ ILEC WACC 8% • Target an A-/A3 rating 31
Slide 32: Reconciliation of U.S. Cellular Additional Information
Reconciliation of U.S. Cellular Additional Information Quarter Ended at Mar. 31, 2007 U.S. Cellular Operating cash flow: Operating income as reported $ 108,523 Add: Depreciation, amortization and accretion 149,257 Operating cash flow $ 257,780 Quarter Ended at Mar. 31, 2006 U.S. Cellular Operating c
Slide 33: TDS: Strong Company
TDS: Strong Company • Strong balance sheet • Over $1 Billion in cash • U.S. Cellular in 2006 • Double digit revenue growth • OCF up 24% • Free cash flow positive • Improving margins •TDS Telecom • Free cash flow • Strong DSL growth 33
Telephone and Data Systems — Deutsche Bank 2007 Media & Telecommunications Conference on 6ix