Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Wachovia Securities Media and Communications Conference 2006
28 slides from Telephone And Data Systems's conference presentation, May 24, 2006
Slide 1: Wachovia Securities Media and Communications 2006
Wachovia Securities Media and Communications 2006 Bill Megan -- EVP Finance & CFO May 24, 2006 1
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: 2006 Operations
Slide 4: TDS Telecom - ILEC
TDS Telecom - ILEC ILEC Number Growth Equivalent Access Lines 735,300 .7% Physical Access Lines 635,500 -2.6% DSL Customers 65,500 56.4% Long Distance 321,454 9.0% Long Distance Penetration 50.6% 5.4 bpts Trailing 12 Month Revenue * $ 665.5 1.4% * Operating statistics as of 12-31-05; Revenues are tr
Slide 5: CLEC Operations
CLEC Operations MN pranertii Saint Cloudy mnnearog Rochesterdfl Appleton Oshkosh Fond du Labi Madiso Grand Haven ilwaukee = Janes kA UNS AS 4 SN Rockf MEH Collocations NS j IL Vernon Hil ee “Kenosha q/VVaukegan
Slide 6: TDS Telecom - CLEC
TDS Telecom - CLEC CLEC Number Growth Equivalent Access Lines 448,600 5.1% Percent on Switch 91.1% 3.2 bpts DSL 36,400 25.5% Trailing 12 Month Revenue * $ 238.4 6.6% * Operating statistics as of 12-31-05; Revenues are trailing 12 months as of September 30, 2005, ($ in millions)
Slide 7: Industry challenges continue…
Industry challenges continue… • Disruptive Technologies blurring the lines between wireline, wireless and cable – VoIP – FTTP/FTTN – Fixed Wireless Disruptive Technologies • Regulatory Frameworks under review Market – USF Dynamics Wireline Industry – Intercarrier Compensation – Availability of UNEs
Slide 8: Our strategy
Our strategy • Portfolio approach to markets – Mix of rural, semi-rural, suburban markets – Mitigates risk of regulatory and competitive forces – Regional scale moderates opex and capex • Market fortification – Build and sell Broadband – Slow the loss of voice – Renew focus on commercial segment – L
Slide 9: Portfolio Approach to Markets
Portfolio Approach to Markets • Operate markets across spectrum from suburban to very rural – Urbanized markets have higher competitive intensity, but lower exposure to regulatory change – Rural markets benefit from regional scale by linking to suburban markets Market Segments 70% 60% 50% 40% % of C
Slide 10: Market Fortification
Market Fortification Be the “Preferred Broadband Provider” • Work quality, speed, price to push HSD penetration higher • Expand to additional markets as economics warrant • Tailor approach by market
Slide 11: DSL Customers
Growth in DSL offsets declining physical access lines Growth in ILEC DSL Lines (in thousands) 680 80 Physical access lines DSL Customers 660 60 640 40 620 20 600 0 2002 2003 2004 2005 Physical access lines ILEC DSL Customers
Slide 12: Market Fortification Continued
Market Fortification Continued • Sustain residential voice market – Big minute LD plans – Agency agreement with Dish to keep cable out – Leverage data products for stickiness – Bundle, offering suite of packages at multiple price points • Maximize value of our business customers – Incentives for lon
Slide 13: Bundles and big minute plans drive increased penetration
Bundles and big minute plans drive increased penetration Long Distance Penetration Rate 55% 50% 45% 40% 35% 30% 2003 2004 2005 1Q06
Slide 14: Key regulatory issues
Key regulatory issues • Universal Service Funding – Funding and Distribution mechanisms under separate review • Intercarrier Compensation – Consensus plan crafted under auspices of NARUC will drive intrastate rates down to interstate – Plan includes make-whole provisions for rural ILECs, though CLEC
Slide 15: Key regulatory issues Continued
Key regulatory issues Continued • Impairment tests, regulatory forbearance, and RBOC fiber build outs – Can effectively limit access to UNEs at reasonable prices • Net Neutrality • Broadband Support – USF and state tax credits are viable avenues of support • Video Franchising – Advocating for relief
Slide 16: New products and services
New products and services Six key initiatives underway 1. Hosted IP Telephony • Hosted application rivaling IP PBX feature richness and end user control • Eliminates operational and obsolescence risk tied to owning the system • Solution is end-to-end, driving higher share of wallet 2. Virtual Colloc
Slide 17: New products and services - continued
New products and services Six key initiatives - continued 4. Terrestrial Video • Terrestrial trials in more urbanized markets as we monitor DBS strategies 5. Content • Suite of applications driving content and driving users to our portal 6. Net-genius Service • In-home service integrating home netwo
Slide 18: TDS Telecom Net-genius
TDS Telecom Net-genius sm
Slide 19: 2006 Outlook - 5/10/06
2006 Outlook - 5/10/06 • ILEC – Operating revenues … $660 to $675 M – Dep, amort & accretion … $135 M – Operating income … $145 to $160 M – CAPX … $105 to $125 M * • CLEC – Operating revenues … $230 to $240 M – Dep, amort & accretion … $25 M – Operating income (loss) … $(10) to $(5) M – CAPX … $15 t
Slide 20: Peter L. Sereda, Vice President and Treasurer
Peter L. Sereda Vice President and Treasurer
Slide 21: Credit Strength
Credit Strength Conservative Financing Philosophy • Very Strong Liquidity Position • Minimal Near-Term Maturities • Commitment to investment grade credit ratings
Slide 22: Liquidity Position
Liquidity Position • Bank Credit Facilities -- $1.4 B – USM: $700 M ($625 M undrawn) multi-bank revolver due 2009 – TDS: $600 M ($600 M undrawn) multi-bank revolver due 2009 – TDS: $75 M short term bilateral lines • Cash – $1.2 B (TDS)
Slide 23: Minimal Near-Term Maturities
Minimal Near-Term Maturities Call options on most company debt securities give the company the flexibility to repay or refinance its debt as conditions warrant. $1,100 $1,000 TDS 6.625% Notes $900 TDS 7.6% Notes $800 USM 7.50% Notes USM 6.7% Notes $700 USM 8.75% Senior Notes TDS Purchase Contract $6
Slide 24: Recent Activities
Recent Activities • Deutsche Telekom Dividend Received -- $120 M (gross of all taxes) • RTB Stock Redeemed -- $100 M (gross of all taxes) • MTN’s called -- $35 M (completes $239 M multi-year paydown) • TDS 7% Notes paydown in Aug, 2006 -- $200 M
Slide 25: Debt Credit Ratings
Debt Credit Ratings Investment Grade TDS USM Moody’s Investment Service Baa3 Baa3 Standard & Poor’s A- A- Fitch BBB+ BBB+
Slide 26: TDS Financial Ratios
TDS Financial Ratios * at 9/30/05 Debt to OCF 1.8 x Net Debt** to OCF .75 x Total Debt to Total Capitalization 32.7 % * Debt excludes variable prepaid forward contracts ** Debt net of cash Note: See debt reconciliations in appendix of this presentation.
Slide 27: TDS Financial Reconciliations
TDS Financial Reconciliations As of Sept 30, 2005 Current portion of long-term debt 202,727 Notes payable - Total Long-term debt 3,372,147 Less forward contracts (1,702,800) Total debt 1,872,074 Quarter Ended (Dollars in thousands) 9/30/2005 6/30/05 3/31/05 12/31/04 Total Operating cash flow: Operat
Slide 28: Credit Strength
Credit Strength Conservative Financing Philosophy • Very Strong Liquidity Position • Minimal Near-Term Maturities • Commitment to investment grade credit ratings
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