Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Credit Suisse Media and Telecom Week 2006
35 slides from Telephone And Data Systems's conference presentation, Dec 5, 2006
Slide 1: Credit Suisse Media and Telecom Week
Kenneth R. Meyers Executive Vice President and CFO, U.S. Cellular Mark A. Steinkrauss Vice President – Corporate Relations, TDS Credit Suisse Media and Telecom Week Dec. 5, 2006
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 Majority-Owned or Managed Markets in Operation
° US. Cellular Majority-Owned or Managed Ve connect with you: Markets in Operation \
Slide 4: U.S. Cellular Growth Strategies
U.S. Cellular Growth Strategies • Differentiate with high customer satisfaction: ¾ Quality network ¾ Dedicated people ¾ Wide distribution – focus on exclusive agents ¾ Competitive product offerings • National, wide-area and family plans • Strategically strengthen regional footprint 4
Slide 5: Postpay Focus
Postpay Focus In line with customer satisfaction strategy 95% of total customer base is postpay Postpay Wholesale Prepay 5
Slide 6: New Calling Plans
New Calling Plans • Wide-area and national plans • More value to customers • Increased ARPU • Repositions family plans • Simplicity – one portfolio across all markets 6
Slide 7: Postpay Churn < 2%
Postpay Churn < 2% Eight-year track record… and still strong 2.0% 1.9% 1.9% 1.9% 1.8% 1.8% 1.8% 1.7% 1.7% 1.6% 1.5% 1.5% 1.5% 1.5% 1.5% 1.4% 1.3% 1.2% 1.1% 1.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 (YTD) 7
Slide 8: Third Quarter Operating Data
Third Quarter Operating Data Three months ended Sept. 30 2005 Actual Range of (as restated) Anticipated Results 2006 (preliminary) Operating Revenues $ 796 M $880 to $900 M Operating Income $ 66 M $ 70 to $ 90 M ARPU $46.19 ≈$46.20 Retail net adds 77,000 28,000 Churn - postpay 1.5% 1.6% Cell sites 5
Slide 9: Inbound Roaming Revenues
Inbound Roaming Revenues In Millions % Service Revs. 9 mos. ’06* ≈$118 ≈5% 9 mos. ‘05 $108 5% 2005 $145 5% 2004 $171 6% 2003 $222 9% 2002 $255 12% 2001 $272 15% 2000 $292 18% 1999 $318 21% 9 *Preliminary
Slide 10: Competitive Footprint U.S. Cellular
Competitive Footprint K US. Cellular We connect with you: US. Cellular Footprint {> Carroll Wireless and Cingular Options (Incremental Only)
Slide 11: Barat Wireless and U.S. Cellular with Affiliates
Barat Wireless and U.S. Cellular with Affiliates Auction 66 [| USM with Affiliates Barat Wireless (Incremental) 24.1 Million Incremental Pops Barat Wireless (Overlap)
Slide 12: St. Louis Market
St. Louis Market Strengthened footprint – launched 7/28/05 • Acquired 2.9 million pops in trade with AWE • More than 300 cell sites • Turned on for roaming since Oct. ’04 • Same market launch strategy • Quality, reliable network • Broad distribution • Aggressive advertising and marketing • Focus on
Slide 13: Data – easyedge
Data – easyedgeSM • Full range of data services … BREW based • Phone download services • Picture messaging • Wireless modem • Data roaming • Other offerings • Walkie-talkie or “Push-to-talk” • Blackberry® Smart Phone 13
Slide 14: Data Services Revenues
Data Services Revenues $60 $50 $40 Millions $30 $20 $10 $- Q Q Q Q Q Q Q Q Q Q Q 1' 2' 3' 4' 1' 2' 3' 4' 1' 2' 3' 04 04 04 04 05 05 05 05 06 06 06 * *Preliminary number 14
Slide 15: EVDO Trials
EVDO Trials • 2005: Technical trials • 2006: Market launch in Milwaukee • 2007: Release A 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 services or ap
Slide 16: USM 2006 Outlook
USM 2006 Outlook (Revised Nov. 6, 2006) • Service revenues … Approx. $3.2 B • Net additions … 300,000 to 330,000 • Dep, amort & accretion … ≈$575 M • Operating income … $275 to $325 M • CAPX … $580 to $610 M 16
Slide 17: LA Investment Market
LA Investment Market Investment Income ($ in millions) • U.S Cellular owns 5.5% of Verizon market – 960,000 pops • Acquired through original MSA application and trade 2005* 2004* 2003* Investment income $52.2 $41.8 $29.9 Cash distributions $38.5 $27.5 $29.1 *Available in SEC Form 10K 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
TDS • Diversified telecommunications company with 6.9 million customers in 36 states – U.S. Cellular (81% owned) – wireless – TDS Telecom (100% owned) – wireline – ILEC and CLEC operations • Strong balance sheet • Investment grade • 32 years of consecutive dividend increases 19
Slide 20: 2006 Guidance TDS Consolidated
2006 Guidance TDS Consolidated (as of 11/6/06) Total revenues ≈4.32 billion ** Operating income $405 - $455 million Depreciation & amortization $735 million Operating cash flow * $1,140 - $1,190 million CAPX $705 - $745 million * Operating cash flow, as used above, represents operating income before
Slide 21: TDS Financial Objectives
TDS Financial Objectives 7-10% compound annual revenue growth (organic and M&A) over five years 11.2% CAGR for 5 years ended 2005 Returning at least the cost of capital USM WACC 11-12 % ILEC WACC ≈ 9.5 % Target an A-/A3 rating 21
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Slide 23: TDS Telecom (ILEC & CLEC)
TDS Telecom (ILEC & CLEC) Largest Equivalent Access Line States – 12/31/05 9/30/06 % of total Wisconsin 389,000 32% Michigan 149,000 12% Minnesota 121,000 10% Tennessee 116,000 10% Georgia 60,000 5% New Hampshire 41,000 3% Indiana 37,000 3% 75% 23
Slide 24: TDS Telecom – ILEC
TDS Telecom – ILEC as of 9/30/06 • 7th largest independent • Rural company status • Modern network • Excellent regulatory relationships • Strong local presence 24
Slide 25: TDS Telecom CLEC operations map
MN Braine fi Saint Cloud Mannesoog & en Duluth MEE Collocations ~ CLEC Operations Wi Green Bay j Appleton Oshkosh Fond du Lael MI Madiso' ; Grand Haven J h A Waukest eMlilwauikes rand Rapids FEUER (UT) Racine ansing \ Beloit aKenosha obi * onia “ Rockford | Waukegan a) 5 hoe s Kalamazo Ann \ Vernon
Slide 26: TDS Telecom - CLEC
TDS Telecom - CLEC • Facilities-based in four states …93% on- switch • Selling primarily to SMB • Deep penetration in chosen markets • Provisions principally with AT&T 26
Slide 27: TDS Telecom Strategy
TDS Telecom Strategy • Be the preferred broadband provider • Bundle aggressively • Defend core markets • Video and fixed wireless trials 27
Slide 28: DSL - ILEC
DSL - ILEC • 94,100 customers, +56% year over year • 82% of access lines DSL enabled • 69% market share in DSL markets • Primarily consumer • Product bundles • Offering 4 & 6 MB speeds in select markets 28
Slide 29: Third Quarter Operating Data
Third Quarter Operating Data 9/30/05 9/30/06 ILEC Access line equivalents 734,800 752,100 + 2% DSL 60,300 94,100 + 56% Long distance 316,100 335,100 + 6% CLEC Access line equivalents 445,600 452,900 + 1.6% DSL 34,800 40,900 +17.5% 29
Slide 30: Video Trials - ILEC
Video Trials - ILEC 1. Complete fiber build-out of subdivision ≈4,000 homes 2. Combination fiber & advanced DSL 30
Slide 31: Fixed Wireless Trial - CLEC
Fixed Wireless Trial - CLEC • Market trial in Wisconsin • Eliminates “last mile” loop from RBOC • Un-licensed spectrum • Trialing high-speed data & VOIP 31
Slide 32: 2006 Outlook-TDS Telecom
2006 Outlook-TDS (Effective Nov. 6, 2006) Telecom • ILEC • Operating revenues … $645 to $655 M • Dep, amort & accretion … $135 M • Operating income … ≈$135 M • CAPX … $105 to $115 M* • CLEC • Operating revenues … $230 to $240 M • Dep, amort & accretion … $25 M • Operating income (loss) … ≈$(5) M • C
Slide 33: Financially Strong
Financially Strong 6/30/06 Cash $1,244 M Total Avail. Credit Facilities (TDS & USM) 1,350 M Borrowings (108.9 M) TOTAL $2,485.1 M Dividends (pre-tax) 3Q ’06 VOD Special Distribution: ≈$28.6 M USM; ≈$7.6 M TDS 2Q ’06 DT: $120.3 M TDS 2Q ’06 VOD: $7.4 M USM; $2.0 M TDS ≈2900 company-owned towers 33
Slide 34: Special Common Shares
Special Common Shares • Provides financial and strategic flexibility • May at some point exchange special shares for 19% of USM that TDS does not own • Dependent on market and other conditions 34
Slide 35: TDS: Excellent Prospects
TDS: Excellent Prospects • Full-service provider with strong, 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 man
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