Telephone and Data Systems, Inc. · NYSE:TDS
Telephone and Data Systems — Q3 2015 Earnings Presentation
27 slides from Telephone and Data Systems's earnings presentation, Oct 30, 2015
Slide 1: Third Quarter 2015 Results
Third Quarter 2015 Results October 30, 2015
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 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, and expectati
Slide 3: Upcoming conferences
Upcoming conferences • 11/10/15 - 2015 Wells Fargo Technology, Media & Telecom Conference - New York • 1/6/16 - Citi̕s 26th Annual Global Internet, Media and Telecommunications Conference - Las Vegas 3
Slide 4: U.S. Cellular
K US. Cellular
Slide 5: Third quarter highlights
Third quarter highlights • Completion of 4G LTE network, covering 99% of our customer base; 83% of our data traffic is on this network • Service revenue of $58 million from termination of rewards points program • Postpaid churn of 1.41% reflecting improved levels of customer satisfaction; 74% of pos
Slide 6: Customer results
Customer results Q3 ̕15 Q3 ̕14 Postpaid gross additions 200,000 251,000 Postpaid churn 1.41% 1.59% Postpaid net additions 17,000 52,000 Prepaid net additions (losses) 12,000 (2,000) Retail net additions 29,000 50,000 Total retail customers 4,721,000 4,550,000 Basic Connected Phones Smartphones Devic
Slide 7: Postpaid churn rate
Postpaid churn rate 2.50% 2.29% 2.00% 1.91% 1.71% 1.73% 1.59% 1.60% 1.48% 1.50% 1.41% 1.34% 1.00% 0.50% 0.00% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 7
Slide 8: Smartphone sales and penetration
Smartphone sales and penetration Smartphone Sales Smartphone Penetration (% of handsets sold) (% of postpaid handsets) 100% 87% 87% 87% 74% 90% 86% 81% 72% 72% 80% 69% 70% 70% 67% 60% 68% 50% 66% 65% 40% 64% 62% 30% 62% 20% 60% 10% 58% 0% 56% Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q3'14 Q4'14 Q1'15 Q2'15 Q3'
Slide 9: Data usage (In MB)
Data usage (In MB) (In Millions) 20,000 1,550 18,000 1,500 16,000 1,450 14,000 1,400 12,000 1,350 10,000 1,300 8,000 1,250 6,000 1,200 4,000 1,150 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2 '15 Q3'15 Total System Usage (Millions) Ave Usage per Data Subscriber 9
Slide 10: Postpaid revenue
Postpaid revenue % Q3̕15 Q3̕14 Change Change Average Revenue Per User As reported $58.12 $56.37 $1.75 3% Less: Impact of Rewards points expiration (4.48) -- Adjusted 53.64 56.37 (2.73) (5%) Add: EIP billings 5.86 1.24 Adjusted ARPU plus EIP billings $59.50 $57.61 $1.89 3% Average Revenue Per Account
Slide 11: Total operating revenues
Total operating revenues Q3̕15(1) % Change Q3 ̕15 (Excluding (Excluding ($ in millions) (As rewards rewards reported) impact) Q3 ̕14 impact) Service revenues $896 $838 $851 (2%) Retail service 797 739 744 (1%) Roaming 59 59 67 (11%) Tower rentals (2) 13 13 14 (10%) Other 27 27 26 3% Equipment sales
Slide 12: Operating cash flow and income
Operating cash flow and income % Q3̕15 (1) Change ($ in millions) Q3 ̕15 (Excluding (Excludin (As rewards g rewards reported) impact) Q3 ̕14 impact) Total operating revenues $1,069 $1,011 $1,000 1% System operations expense 199 199 199 0% Cost of equipment sold 287 287 308 (7%) SG&A expenses 375 375
Slide 13: Adjusted EBITDA
Adjusted EBITDA Q3̕15 (1) % Change(1) Q3 ̕15 (Excluding (Excluding ($ in millions) (As rewards rewards reported) impact) Q3 ̕14 impact) Operating cash flow(1)(2) $208 $150 $95 58% Equity in earnings of 40 40 36 10% unconsolidated entities Interest and dividend income 9 9 4 >100% Adjusted EBITDA(1) $
Slide 14: 2015 guidance
2015 guidance(1) (as of 10/30/15) 2015 Estimates 2015 Estimates 2014 (in millions) (Current) (Previous) Actual Total operating revenues Approx. $4,000 $4,000 - $4,100 $3,893 Operating cash flow(2) $540 - $620 $440 - $540 $338 Adjusted EBITDA(2) $710 - $790 $600 - $700 $480 Capital expenditures Appro
Slide 15: TDS Telecom
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Slide 16: 2015 strategic priorities
2015 strategic priorities • Wireline • Continue targeted fiber deployment; increase broadband and IPTV penetration in existing markets • Cable • Increase residential and commercial broadband customer connections and ARPUs • Leverage wireline capabilities to create additional synergies • Continue to
Slide 17: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) Q3 ̕15 Q3 ̕14 % Change Wireline $175 $178 (2%) Cable 44 29 54% HMS 82 68 21% Total operating revenues(1) 299 273 10% Expenses(1)(2) 224 199 12% Adjusted EBITDA(3) $76 $75 2% (1) Reflects intercompany eliminations. (2) Represents cost of products and
Slide 18: Wireline operating performance
Wireline operating performance ($ in millions) Q3 ̕15 Q3 ̕14 % Change Residential $76 $74 2% Commercial 55 57 (4%) Wholesale 44 47 (5%) Total service revenues 175 178 (2%) Expenses(1) 114 112 2% Adjusted EBITDA(2) $61 $67 (9%) (1) Represents cost of products and services and selling, general and adm
Slide 19: Broadband speeds, IPTV and managedIP contributing revenue growth
Broadband speeds, IPTV and managedIP contributing revenue growth ILEC Residential Customers by Broadband Speeds managedIP Connections 160,000 9/30/15 9/30/14 140,000 > 5 Mb 85% 82% 120,000 > 10 Mb 45% 39% 100,000 80,000 > 25 Mb 14% 9% 60,000 40,000 IPTV Connections 20,000 0 9/30/15 9/30/14 Q3'13 Q4'
Slide 20: Cable snapshot
Cable snapshot Connections Operating Performance % 9/30/15 9/30/14 ($ in millions) Q3 ̕15 Q3 ̕14 Change Video 108,300 109,100 Total operating revenues $44 $29 54% Broadband 114,600 106,400 Expenses(1) 34 23 50% Voice 54,000 41,800 Adjusted EBITDA(2) $10 $6 68% Total cable 276,900 257,300 connections
Slide 21: Hosted and Managed Services operating performance
Hosted and Managed Services operating performance ($ in millions) Q3 ̕15 Q3 ̕14 % Change Service revenues $30 $28 9% Equipment revenues 51 40 29% Total operating revenues 82 68 21% Expenses(1) 77 66 16% Adjusted EBITDA(2) $5 $1 >100% (1) Represents cost of products and services and selling, general
Slide 22: 2015 TDS Telecom guidance
2015 TDS Telecom guidance(1) Unchanged from previous estimates (as of 10/30/15) 2015 Estimates 2014 Actual (Current) ($ in millions) Total operating revenues $1,130 - $1,180 $1,088 Operating cash flow(2) $280 - $310 $296 Adjusted EBITDA(2) $280 - $310 $298 Capital expenditures Approx. $220 $208 (1)
Slide 23: Appendix
Appendix 23
Slide 24: Operating Cash Flow and Adjusted EBITDA Reconciliation – Q3 2015 and Q3 2014 Actual Results
Operating Cash Flow and Adjusted EBITDA Reconciliation – Q3 2015 and Q3 2014 Actual Results Actual Results Three months ended Sept. 30, 2015 Three months ended Sept. 30, 2014 Total Total U.S. TDS U.S. TDS Cellular Wireline Cable HMS Telecom TDS (2) Cellular Wireline Cable HMS Telecom TDS (2) (Dollar
Slide 25: Operating Cash Flow and Adjusted EBITDA Reconciliation
Operating Cash Flow and Adjusted EBITDA Reconciliation Actual Results Year ended 2015 Estimated Results (1) December 31, 2014 TDS U.S. Cellular Telecom TDS U.S. Cellular TDS Telecom TDS (2) (Dollars in millions) Net income (loss) (GAAP) N/A N/A N/A ($47) ($24) ($147) Add back: Income tax expense (be
Slide 26: Reconciliation footnotes and definitions
(1) In providing 2015 Estimated Results, TDS has not completed the above reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, the company is unable to provide such guidance. (2) The
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