Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Q4 2012 Earnings Presentation
37 slides from Telephone And Data Systems's earnings presentation, Feb 26, 2013
Slide 1: Fourth Quarter 2012 Results, 2013 Guidance
February 26, 2013 Fourth Quarter 2012 Results 2013 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 in
Slide 3: Upcoming conferences
Upcoming conferences 2/27/13 – Morgan Stanley, Technology, Media & Telecom Conference, San Francisco 3/4/13 – Deutsche Bank, Media, Internet & Telecom Conference, Palm Beach 3
Slide 4: New developments
New developments • Adjusted income before income taxes as measure of profitability • Baja Broadband 4
Slide 5: TDS 2013 priorities
TDS 2013 priorities • Cost savings initiatives across the enterprise • Monetize non-strategic assets in the Divestiture Markets • Selective acquisitions • Continue to identify opportunities to create shareholder value 5
Slide 6: U.S. Cellular
K US. Cellular
Slide 7: Accomplishments in 2012
Accomplishments in 2012 • Maintained best‐in‐class customer satisfaction ¾ Consumer Reports ¾ Forrester Research Customer Experience Index • Positioned to compete more effectively by divesting underperforming markets • Strong customer acquisition through improved marketing and sales execution • Expa
Slide 8: Strategy to compete in 2013
Strategy to compete in 2013 • Accelerate customer growth ¾ Target key postpaid customer segments ¾ Offer unique and rewarding customer experiences ¾ Increase competiveness of devices, plans and services ¾ Enhance effectiveness of sales and service channels ¾ Expand and optimize distribution ¾ Expand
Slide 9: Differentiate with exceptional customer experience
Differentiate with exceptional customer experience • Deliver rewarding customer experiences that encourage loyalty and advocacy • Drive revenue by enhancing channel effectiveness—retail, online, telesales, agent • Enhance the effectiveness and impact of our rewards program • Provide seamless custome
Slide 10: Drive smartphone penetration, ARPU
Drive smartphone penetration, ARPU • Expand 4G LTE access to 87% of customers in 2013 • Encourage migration with 11 4G LTE devices • Competitive device portfolio 9 Leading Android® devices 9 Launching Windows® 8 LTE device 9 Hotspots 9 Samsung Galaxy Note TM 10.1 tablet 10
Slide 11: Focus on improving profitability
Focus on improving profitability • Balance 4G LTE equipment subsidies and customer migration goals • Effectively manage network traffic and capacity and encourage customer data management • Improve operational efficiency and effectiveness with new billing and operational support system • Reduce oper
Slide 12: Recap of 2013 strategic priorities
Recap of 2013 strategic priorities • Accelerate growth through outstanding customer experiences, effective targeting, channel enhancements, 4G LTE expansion, optimized distribution • Improve profitability through effective LOE and data traffic/capacity management, operational efficiencies, company‐
Slide 13: Core markets - Increased gross and net retail additions
Core markets ‐ Increased gross and net retail additions Q4 ‘12 Q4 ‘11 Postpaid gross additions 218,000 209,000 Postpaid churn 1.67% 1.48% Postpaid net losses (16,000) (2,000) Prepaid net additions 38,000 6,000 Retail net additions 22,000 4,000 Total retail customers 5,013,000 4,979,000 13
Slide 14: Core markets - Continued growth in smartphone penetration
Core markets ‐ Continued growth in smartphone penetration 14
Slide 15: Core markets - Financial performance
Core markets ‐ Financial performance ($ in millions) Q4 ‘12 Q4 ‘11 Service revenues $907.5 $917.5 Retail Service 790.5 774.7 Roaming 72.4 90.4 Other 44.6 52.4 15
Slide 16: Total markets - Financial performance
Total markets –Financial performance ($ in millions) Q4 ‘12 Q4 ‘11 System operations expense $221.2 $242.1 Loss on equipment 202.9 158.5 SG&A expenses 449.1 467.3 Adjusted OIBDA (1) $135.7 $162.2 (1) Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization a
Slide 17: Impact of divestiture on Q4 operating income
Impact of divestiture on Q4 operating income (in millions) Accelerated depreciation, amortization and accretion $20.1 Employee related costs , including severance 12.6 Non‐cash charges for the write‐off and write‐down of 10.7 property Contract termination and transaction costs 1.1 Total impact to op
Slide 18: Impact of key regulatory changes for 2012
Impact of key regulatory changes for 2012 USF ‐ High cost support phase down Service revenues ($15.5 million) Reduction in intercarrier System operations expense $4.3 million compensation 18
Slide 19: Total company financial performance
Total company financial performance ($ in millions, except per share amounts) Q4 ‘12 Q4 ‘11 Total investment and other income $ 12.8 $ 2.9 Net income (loss) attributable to U.S. Cellular shareholders (39.6) 2.8 Diluted earnings per share attributable to ($0.47) $0.03 U.S. Cellular shareholders Cash
Slide 20: 2013 guidance
2013 guidance (1) (as of 02/26/13) Core Markets (2) Divested Markets Total Company (2)(3) (2)(3) Service revenues $3,600 ‐ $3,700 M $165 ‐ $185 M $3,765 ‐ $3,885 M Adjusted income before income taxes (4) $765 ‐ $865 M $15 ‐ $35 M $780 ‐ $900 M Capital expenditures Approx. $600 M ‐‐‐ Approx. $600 M (
Slide 21: Slide 21
Slide 22: Accomplishments in 2012
Accomplishments in 2012 Added residential broadband, video customers • Attracted broadband customers with competitive speeds • Offered TDS TV® in 10 markets at year end • Increased retention with double‐ and triple‐play bundles Increased commercial revenues • Strong sales of managedIP products • Rev
Slide 23: Strategy to compete in 2013
Strategy to compete in 2013 Residential • Attract and retain customers with broadband, video, bundling • Target new customer segments, enable higher‐margin services • Cost‐effectively enhance network to support TDS TV® expansion, faster broadband speeds Commercial • Attract businesses with enhanced
Slide 24: Baja acquisition supports profitable growth
Baja acquisition supports profitable growth Strategy Drive profitable broadband, video and voice growth in new midsize and rural markets. Why cable? Why Baja Broadband? • Natural extension to existing • Attractive competitive landscape and businesses market demographics • ARPU growth potential in bu
Slide 25: Baja Broadband key facts
Baja Broadband key facts Company Facts Terms of Acquisition • Southwest market concentration • $267.5 million in cash (CO, NM, TX, UT) • Expect to close in third • Subscribers: 74k video, 56k quarter broadband, 15k voice • 212,000 homes passed • 96% of network is 750/860 MHz & DOCSIS 3.0 active • An
Slide 26: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) Q4 ‘12 Q4 ‘11 Change ILEC $145.2 $147.6 (2%) CLEC 42.6 44.4 (4%) HMS 36.1 17.3 >100% Total operating revenues(1) 221.5 206.8 7% Cash expenses 165.6 144.7 14% Adjusted OIBDA (2) $55.9 $62.0 (10%) (1) Reflects intercompany eliminations (2) Adjusted OIB
Slide 27: 2012 Net Impact of FCC Order and other changes in wholesale revenues on Adjusted OIBDA
2012 Net Impact of FCC Order and other changes in wholesale revenues on Adjusted OIBDA (in millions) 1Q 12 2Q 12 3Q 12 4Q 12 Total ILEC Impact of FCC Order ($1.6) ($1.5) ($0.4) ($1.1) ($4.5) Other wholesale (1.4) (3.3) (4.7) (0.4) (9.9) CLEC Impact of FCC Order (0.2) (0.1) (0.3) (0.5) (1.1) Other wh
Slide 28: ILEC/CLEC operating performance
ILEC/CLEC operating performance (in millions) 4Q’12 4Q’11 Change Residential $ 73.6 $ 74.7 (1%) Commercial 59.6 58.6 2% Wholesale 54.8 58.8 (7%) Total operating revenues 187.9 192.0 (2%) Cash expenses 132.6 131.5 1% Adjusted OIBDA (1) $55.3 $60.5 (9%) (1) Adjusted OIBDA is defined as operating incom
Slide 29: Growth in broadband speeds and penetration
Growth in broadband speeds and penetration Speeds Penetration > 5 Mbps 71% > 10 Mbps 26% > 25 Mbps 3% 29
Slide 30: Bundling reduces residential churn
Bundling reduces residential churn Churn Bundle Q4’12 Q4’11 Single Play 2.02% 2.08% Double Play 1.40% 1.50% Broadband Double Play 1.30% 1.22% Video Triple Play 0.65% 0.59% Customers with more than one service are less likely to churn 30
Slide 31: ILEC and CLEC managedIP connections increase 77%
ILEC and CLEC managedIP connections increase 77% 31
Slide 32: Hosted & managed services operating performance
Hosted & managed services operating performance (in millions) 4Q’12 4Q’11 Change Operating revenues $36.1 $17.3 >100% Cash expenses 35.5 15.7 >100% Adjusted OIBDA (1) $0.6 $1.5 (59%) (1) Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion
Slide 33: 2013 guidance
2013 guidance (1)(2) (as of 02/26/13) 2013 Estimate Adjusted operating revenues (3) $850 ‐ $900 million Adjusted income before income taxes (4) $220 ‐ $250 million Capital expenditures Approx. $155 million (1) These estimates are based on TDS’ current plans which include a multi‐year deployment of I
Slide 34: Adjusted OIBDA reconciliation
Adjusted OIBDA reconciliation Consolidated Three Months Ended December 31, 2012 U.S. Cellular TDS Telecom (1) All Other (2) Total Operating revenues $ 1,115,206 $ 221,495 $ 9,508 $ 1,346,209 Deduct: U.S. Cellular equipment sales revenue 106,282 Service revenues 1,008,924 Operating income (loss) (60,
Slide 35: Adjusted OIBDA reconciliation - continued
Adjusted OIBDA reconciliation – continued (1) Includes ILEC, CLEC and HMS intercompany eliminations. (2) Consists of Suttle-Straus and Airadigm (as of September 23, 2011), which represents TDS’ Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Tele
Slide 36: TDS Consolidated 2013 Guidance
TDS Consolidated 2013 Guidance 2013 Estimated Results (1) U.S. Cellular (2) TDS Telecom (3) TDS (2)(3)(6) (Dollars in millions) Adjusted operating revenues (4) $3,765-$3,885 $850-$900 $4,660-$4,830 Adjusted income before income taxes (5) $780-$900 $220-$250 $995-$1,145 Capital expenditures Approx. $
Slide 37: TDS Fourth Quarter 2012 Results, 2013 Guidance
February 26, 2013 TDS Fourth Quarter 2012 Results 2013 Guidance
Telephone and Data Systems — Q4 2012 Earnings Presentation on 6ix