Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Q2 2013 Earnings Presentation
33 slides from Telephone And Data Systems's earnings presentation, Aug 2, 2013
Slide 1: Second Quarter 2013 Results, 2013 Guidance
August 2, 2013 Second Quarter 2013 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 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 expectat
Slide 3: Upcoming conferences
Upcoming conferences • 11/13/13 - Wells Fargo Securities Economics & Research Tech, Media & Telecom Conference. • 12/9/13 - UBS 41st Annual Global Media and Communications Conference • 1/7/14 - Citi’s 24th Annual Global Internet, Media and Telecommunications conference 3
Slide 4: Seamless Transitions
Seamless Transitions • New U.S. Cellular President and CEO Kenneth R. Meyers • Identified through established succession planning process • Significant experience with U.S. Cellular and wireless industry • Strong leadership skills and strategic vision • TDS CFO responsibilities will be fulfilled thr
Slide 5: Capital Allocation
Capital Allocation • $250 million stock repurchase program • Balanced capital allocation strategy • Invest in the business – ¾ of available resources • Return value to shareholders - ¼ of available resources • Will continue to monetize non-strategic assets • Towers • Spectrum 5
Slide 6: Significant items
Significant items Actions 1H 2013 2H 2013 2014 Sprint (Divestiture • Cash/Gain $480 M/$266 M • Accelerated depreciation • Accelerated depreciation transaction) • Accelerated depreciation $88 M $75-90 M $7-12 M • Exit costs • Network decommissioning • Network • Employee costs $3 M costs- reimbursed u
Slide 7: U.S. Cellular
K US. Cellular
Slide 8: Strategic priorities for 2013
Strategic priorities for 2013 • Focus on execution to accelerate growth • Launch of new billing system • Expanded distribution • 4G LTE to reach 87% of customers by year-end • Expanded device line-up • Closing of divestiture transaction 8
Slide 9: Core markets – customer results
Core markets* – customer results Q2 ‘13 Q2 ’12 Postpaid gross additions 165,000 167,000 Postpaid churn 1.6% 1.4% Postpaid net losses (53,000) (30,000) Prepaid net additions 8,000 23,000 Retail net losses (45,000) (7,000) Total retail customers 4,793,000 4,784,000 * Excludes NY1 & NY2 in both periods
Slide 10: Core markets - Continued growth in smartphone penetration
Core markets* - Continued growth in smartphone penetration *Excludes NY1 & NY2 for all periods 10
Slide 11: Core markets – service revenues
Core markets* – service revenues ($ in millions) Q2 ‘13 Q2 ‘12 Service revenues $865.7 $882.0 Retail service 762.5 759.6 Roaming 61.7 73.5 Other 41.5 48.9 *Excludes NY1 & NY2 for both periods 11
Slide 12: Total company – financial performance
Total company – financial performance ($ in millions) Q2 ‘13 Q2 ‘12 Service revenues $911.0 $1,029.7 System operations expense 192.3 243.2 Loss on equipment 132.9 117.0 SG&A expenses 404.1 435.1 Operating income 219.1 84.2 Adjusted income before income taxes (1) $209.5 $257.5 (1) Adjusted income bef
Slide 13: Impact of divestiture on Q2 operating income
Impact of divestiture on Q2 operating income ($ in millions) Gain on sale of business $266 Accelerated depreciation, amortization and accretion (50) Contract termination and transaction costs (16) Total impact to operating income $200 13
Slide 14: Total company financial performance (cont.)
Total company financial performance (cont.) ($ in millions, except per share amounts) Q2 ‘13 Q2 ‘12 Total investment and other income $45.3 $9.7 Net income attributable to U.S. Cellular shareholders 143.4 52.7 Diluted earnings per share attributable to $1.69 $0.62 U.S. Cellular shareholders Cash flo
Slide 15: 2013 guidance
2013 guidance (1) (as of 08/02/13) Core Markets (2) Divestiture Total Company Markets (2)(3) (2)(3) Service revenues $3,475 - $3,575 M $140 M $3,615 - $ 3,715 M Adjusted income before income taxes (4) $560 - $660 M $40 M $600 - $700 M Capital expenditures $730 M $5 M $735 M Footnotes on following pa
Slide 16: 2013 guidance (cont.)
2013 guidance (cont.) (1) These estimates are based on U.S. Cellular’s current plans, which include an expansion of the multi-year deployment of 4G LTE technology ; such expansion includes deployment on 700 MHz in additional markets as well as deployment on the 850 MHz band to provide additional cap
Slide 17: Slide 17
Slide 18: Q2 update
Q2 update • TDS TV® – early results and expansion plans • Excellent progress on broadband stimulus projects • Hosted and Managed Services Platform • Full suite of products and services with an end-to-end solution to support middle market’s IT needs 18
Slide 19: Baja acquisition supports profitable growth
Baja acquisition supports profitable growth Why cable? Why Baja Broadband? • Natural extension to existing • Attractive competitive landscape and businesses market demographics • ARPU growth potential in bundling, • Strong potential to increase penetration high-margin data, add-on services vs. natio
Slide 20: Baja revenue opportunities
Baja revenue opportunities • Consumer • Leverage marketing, product development and management • Improve video penetration from 33% to industry levels • Grow High Speed Data (HSD) • Market add-on services: Security Suite, On-Line backup, Remote Hands • Commercial • Leverage expertise, knowledge, pro
Slide 21: Baja operational synergies
Baja operational synergies • SG&A savings • Utilize TDS Telecom platform for delivering voice; reducing cost of goods sold • Connect market to TDS 10 Gig network to leverage TDS Internet connectivity- improving reliability and redundancy • Leverage TDS systems and transactional processes, like secur
Slide 22: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) Q2 ‘13 Q2 ‘12 Change ILEC $142.5 $144.1 (1%) CLEC 42.1 44.2 (5%) HMS 41.4 22.9 81% Total operating revenues(1) $223.5 $208.5 7% Expenses (2) 163.0 149.0 9% Adjusted income before income taxes(3) $61.6 $60.0 3% (1) Reflects intercompany eliminations.
Slide 23: ILEC/CLEC operating performance
ILEC/CLEC operating performance (in millions) Q2 ’13 Q2 ’12 Change Residential $72.9 $74.4 (2%) Commercial 59.3 59.1 --- Wholesale 52.4 54.7 (4%) Total operating revenues $184.6 $188.3 (2%) Expenses (1) 125.9 129.9 (3%) Adjusted income before income taxes (2) $59.9 $58.9 2% (1) Represents cost of pr
Slide 24: Growth in ILEC broadband speeds and penetration
Growth in ILEC broadband speeds and penetration Speeds Penetration => 5 Mbps 75% => 10 Mbps 31% 24
Slide 25: Bundling reduces residential churn
Bundling reduces residential churn Churn Bundle Q2 ’13 Q2 ’12 Single Play 1.76% 1.72% Double Play 1.38% 1.26% Broadband Double Play 1.07% 0.99% Video Triple Play 0.66% 0.54% Customers with more than one service are less likely to churn 25
Slide 26: ILEC and CLEC managedIP connections increased 50%
ILEC and CLEC managedIP connections increased 50% 26
Slide 27: Hosted and managed services operating performance
Hosted and managed services operating performance (in millions) Q2 ’13 Q2 ’12 $ Change Operating revenues $41.4 $22.9 $18.5 Expenses(1) 39.5 21.7 17.8 Adjusted income before $1.8 $1.1 $ 0.7 income taxes (2) (1) Represents cost of products and services and selling, general and administrative expenses
Slide 28: 2013 TDS Telecom guidance
2013 TDS Telecom guidance (1) (as of 08/02/13) 2013 Estimates Operating revenues $890 - $930 million Adjusted income before income taxes (2) $230 - $260 million Capital expenditures $165 million (1) These estimates are based on TDS’ current plans which include the impacts of the acquisition of Baja
Slide 29: Appendix
Appendix 29
Slide 30: Non-GAAP reconciliations for current 2013 estimated results
Non-GAAP reconciliations for current 2013 estimated results ($ in millions) U.S. Cellular Core U.S. Cellular Divestiture U.S. Cellular markets (3) markets (3) Consolidated (3) TDS Telecom TDS (4) Adjusted operating $3,475-$3,575 $140 $3,615-$3,715 $890-$930 $4,550-$4,690 revenues (1) Adjusted income
Slide 31: Adjusted income before income taxes reconciliation – actual results
Adjusted income before income taxes reconciliation – actual results ($ In millions) Three Months Ended 06/30/13 Three Months Ended 06/30/12 U.S. Cellular TDS TDS TDS U.S. Cellular TDS TDS TDS Consolidated Telecom Telecom Telecom Consolidated Telecom Telecom Telecom TDS (3) ILEC/CLEC HMS Total TDS (4
Slide 32: Non-GAAP measure definitions and footnotes
(1) Adjusted operating revenues is a non-GAAP financial measure defined as Operating revenues excluding U.S. Cellular Equipment sales revenues. U.S. Cellular Equipment sales revenues are excluded from Adjusted operating revenues since U.S. Cellular equipment is generally sold at a net loss, and such
Slide 33: Second Quarter 2013 Results, 2013 Guidance
August 2, 2013 Second Quarter 2013 Results 2013 Guidance
Telephone and Data Systems — Q2 2013 Earnings Presentation on 6ix