Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Shareholder Meeting (September 2006)
39 slides from Telephone And Data Systems's shareholder meeting presentation, Sep 12, 2006
Slide 1: 2006 Annual Meeting of Shareholders
2006 Annual Meeting of Shareholders September 12, 2006
Slide 2: LeRoy T. Carlson, Jr., President and CEO
LeRoy T. Carlson, Jr. President and CEO Telephone and Data Systems, Inc.
Slide 3: 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 4: TDS in 2005
TDS in 2005 • Solid year with significant achievements • Improving competitive positions • Sustaining TDS’ financial strength 4
Slide 5: Customer Satisfaction
Customer Satisfaction • Providing valuable services and products to customers • Testing new offerings to ensure quality customer experience • Maintaining high-quality network, sales distribution and customer service 5
Slide 6: Independent Surveys
Independent Surveys • U.S. Cellular: “Highest Call Quality Performance Among Wireless Cell Phone Users In North Central region” in J.D. Power and Associates’ 2006 Wireless Call Quality Performance Studysm – Volumes 1 & 2 • U.S. Cellular: “Highest Overall Satisfaction Among Wireless Telephone Users i
Slide 7: Strategic Objectives
Strategic Objectives • Differentiate through customer satisfaction • Strengthen footprint opportunistically • Compete aggressively at local level • Improve profitability and provide returns 7
Slide 8: St. Louis
St. Louis Launched July 2005 • 300 cell sites • Consistent market launch strategy • Great network…"drive tested" • Broad distribution • Aggressive advertising and marketing • Focus on customer satisfaction • >80% of adds are postpay 8
Slide 9: Postpay Focus
Postpay Focus In line with customer satisfaction strategy 84% of total customers are retail postpay Post Pay Wholesale Pre Pay 9
Slide 10: Strengthening the Footprint
Strengthening the Footprint • Property exchange with Alltel – 12/05 • 15 RSAs in Kansas and Nebraska • 54,000 net customers • 1.4 million population • Tennessee RSA 3 – 4/06 • Addition to Knoxville service area • Auction 58 • 16 spectrum licenses acquired by partner • Auction 66 • Participating with
Slide 11: New Services and Phones
New Services and Phones Thoroughly testing new offerings ensures exceptional customer experience • In 2005: – BlackBerry® Wireless Solution – Motorola® RAZR with Bluetooth® capability – New line Samsung® handsets – “Push-to-Talk” service 11
Slide 12: Data Services Revenues
Data Services Revenues $50 $45 $40 $35 Millions $30 $25 $20 $15 $10 $5 $- Q Q Q Q Q Q Q Q Q Q 1' 2' 3' 4' 1' 2' 3' 4' 1' 2' 04 04 04 04 05 05 05 05 06 06 12
Slide 13: EVDO
EVDO Bringing broadband speed to wireless phones • Technical trial of Release 0 completed • Marketing trial in Milwaukee – What services will be offered? – How much value does EVDO provide to customers? – Do the potential returns justify large investment? 13
Slide 14: Looking Forward
Looking Forward • Enhance competitive position – Excellent customer service – Quality networks – Broad distribution • Offer new wide area and national calling plans – Local and regional consumers – Small/mid-size businesses • Provide new services and devices • Maintain focus on postpay customers 14
Slide 15: Strategic Objectives
Strategic Objectives • Sustain market leadership through customer loyalty, quality networks and customer service • Position for long-term revenue growth • Meet financial objectives through new services and productivity improvements 15
Slide 16: Broadband Growth
Broadband Growth Becoming the preferred broadband provider 140000 120000 100000 80000 Total DSL 60000 Subscribers* 40000 20000 0 2004 2005 1st half 2006 16 *ILEC and CLEC combined DSL Subscribers
Slide 17: Technology Trials
Technology Trials • Fiber to the Premise (FTTP) – Will enable triple-play on TDS Telecom network – Complete fiber build-out of new subdivision ≈3,000 homes – Likely to be used in “greenfield” markets • Fiber to the Node, ADSL, VDSL and MPEG4 – Under consideration for “brownfield” markets 17
Slide 18: Leadership and Organization Changes
Leadership and Organization Changes • Jim Barr to step down at end of 2006 – 16 years of leadership – Guiding organization through transition • David A. Wittwer to be president and CEO – Current COO – 20 years of experience with TDS Telecom • TDS Telecom streamlining organization – Combining ILEC an
Slide 19: Looking Forward
Looking Forward • Broadband provider of choice – Valuable services and faster speeds • CLEC trialing fixed wireless – Voice and high speed data offerings • Increasing CLEC’s penetration of SME market • Regulatory focus on state and federal – Intercarrier compensation, USF, access to RBOC unbundled e
Slide 20: TDS Appreciates Your Support
TDS Appreciates Your Support • Associates and employees – U.S. Cellular – TDS Telecom and TDS Metrocom – TDS Corporate • U.S. Cellular and TDS Telecom customers • Shareholders and suppliers of debt capital • Your continued support makes TDS the strong company it is today – and tomorrow 20
Slide 21: Sandra L. Helton, Executive Vice President and CFO
Sandra L. Helton Executive Vice President and CFO Telephone and Data Systems, Inc.
Slide 22: Five-Year Track Record
Five-Year Track Record Year Ended December 31 $4,000 $3,500 $3,000 $2,500 $ in Millions $2,000 $1,500 $1,000 $500 $- 2001 2002 2003 2004 2005 Operating Revenues Operating Cash Flow 12/31/05 5-year CAGR Revenue 11.21% 5-year CAGR OCF 4.71% 22
Slide 23: Consolidated Year End Results
Consolidated Year End Results 2005 2004 (as restated) Revenues $3,960.1 M $3,703.9 M + 7% Operating income $398.0 M $222.0 M* + 79% Diluted EPS $1.91 $0.57 -- OCF 1,030.8 M 999.3 M + 3% *Includes $117 million in non-cash asset impairment charges at TDS Telecom’s CLEC 23
Slide 24: Focus on Profitable Results
Focus on Profitable Results Striving to deploy capital effectively • ILEC 9% ROC in 2005 • U.S. Cellular making progress 24
Slide 25: Consolidated Q1'06 Results
Consolidated Q1‘06 Results Q1‘06 Q1‘05 (as restated) Revenues $1,060.3 M $935.8 M + 13% Operating income $109.1 M $78.8 M + 38% Diluted EPS $0.34 $0.20 + 70% OCF $291.8 M $248.6 M + 17% 25
Slide 26: Q1'06 Highlights
Q1‘06 Highlights Q1’06 Q1’05 (as restated) Service revenues $770.1 M $ 671.6 M +15% Operating income $ 71.7 M $ 39.5 M +81% OCF $213.4 M $ 167.0 M +28% ARPU $46.22 $44.46 + 4% Data revenues $44.0 M $29.0 M +52% Net adds 151,000 182,000 Churn - postpay 1.5% 1.5% MOU 658 584 Cell sites 5,438 4,899 26
Slide 27: Q1'06 Highlights
Q1‘06 Highlights ILEC Q1’06 Q1’05 (as restated) Revenues $161.0 M $161.8 M -- Operating Income $37.4 M $40.6 M -8% Operating Cash Flow $71.0 M $74.8 M -5% CLEC Revenues $59.9 M $59.3 M +1% Operating income (loss) $1.2 M $(1.4)M +181% Operating Cash Flow $7.8 M $5.9 M +33% Access Line Equivalents (th
Slide 28: Q2'06 Anticipated Ranges
Q2’06 Anticipated Ranges TDS: Q2’06 Q2’05 Actual (as restated) Revenues $1,060 to $1,085 M $969.9 M Operating income $ 100 to $130 M $107.3 M U.S. Cellular: Q2’06 Q2’05 Actual (as restated) Revenues $835 to $855 M $742 M Operating income $70 to $90 M $66.9 M 28
Slide 29: Restatement and Remediation
Restatement and Remediation • Restatement completed: 4/26/06 • 2005 Form 10-K completed: 7/28/06 • Q1’06 Form 10-Q completed: 8/25/06 29
Slide 30: Remediation
Remediation • People • Hiring new expertise and training employees • Processes • Improving effectiveness and enabling automation • Systems • Defining and developing a solid infrastructure 30
Slide 31: Improved Debt Structure
Improved Debt Structure In 2005: • Repaid $233 million in RUS debt • Sold $116 million of 6.625% senior bonds In 1st half of 2006: • Repaid $35 million of 10% medium term notes • Retired $200 million of 7% senior bonds 31
Slide 32: Long-term Debt Repayments
Long-term Debt Repayments ($ in Millions) Call options on most company debt securities give the company the flexibility to repay or refinance its debt as conditions warrant. $1,100 TDS 6.625% Notes $1,000 TDS 7.6% Notes Avg. maturity is 31 USM 7.50% Notes years. $900 USM 6.7% Notes USM 8.75% Senior
Slide 33: Liquidity
Liquidity 3/31/06 • Cash $1,077 M • Available credit facilities 1,375 M Total: $2,452 M • 2006 Dividends (estimated pre-tax) DT $120 M TDS Telecom VOD $ 7 M* USM VOD $ 43 M* • Other (estimated pre-tax) RTB stock ≈$101.7 M Midwest Wireless ≈$114 M 33 *Includes special dividend of $29 million for USM
Slide 34: 2006 Guidance
2006 Guidance U.S. Cellular Guidance as of 7/28/2006 Net Retail Customer Additions 370,000 - 400,000 Service Revenues Approx. $3.2 billion Operating Cash Flow (1): $835 - $885 million Operating Income $250 - $300 million Depreciation, Amortization & Accretion $585 million Operating Cash Flow $835 -
Slide 35: 2006 Guidance
2006 Guidance TDS Telecom: ILEC Guidance as of 7/28/2006 Operating Revenues $645 - $655 million (1) Operating Cash Flow : $280 - $290 million Operating Income $145 - $155 million Depreciation and amortization $135 million Operating Cash Flow $280 - $290 million (2) Capital Expenditures $105 - $120 m
Slide 36: TDS: Excellent Prospects
TDS: Excellent Prospects • Full-service provider with established wireless and wireline operations • Strong business units • Well positioned in existing markets • Proven business strategies focused on customer satisfaction, network quality and competitive product offerings • Experienced management t
Slide 37: Reconciliation of Additional Disclosures
Reconciliation of Additional Disclosures For the quarter ended March 31, 2006 TDS Telecom Quarter Ended at March 31, 2006 U.S. Cellular ILEC CLEC All Other (1) Total (Dollars in thousands) Operating cash flow: Operating income (loss) as reported $ 71,721 $ 37,418 $ 1,150 $ (1,204) $ 109,085 Add: Dep
Slide 38: Reconciliation of Additional Disclosures
Reconciliation of Additional Disclosures 2001 2002 2003 2004 2005 Operating cash flow: Operating Income (as reported) 435,277 386,281 261,590 221,999 398,007 Add: Depr/Amortization 450,374 512,931 598,336 670,731 677,443 Gains (losses) on sales of assets 45,908 (10,806) (44,660) Loss on impaired int
Slide 39: 2006 Annual Meeting of Shareholders
2006 Annual Meeting of Shareholders September 12, 2006
Telephone and Data Systems — Shareholder Meeting (September 2006) on 6ix