• Adjusted EBITDA Guidance: Increased profitability outlook for adjusted EBITDA to $970 million to $1.045 billion.
• Service Revenues: Declined 2% driven by declines in the average subscriber base.
• System Operations Expense: Decreased 2% due to cost optimization actions.
• Selling, General and Administrative Expenses: Decreased 3%, excluding strategic alternative expenses, decreased 5%.
• Free Cash Flow: Generated $331 million year-to-date, a $94 million increase over the prior year.
• Capital Expenditures Guidance: Lowered to $550 million to $600 million.
• Postpaid ARPU: Increased 2% due to higher tier plan adoption.
• Subscriber Momentum: Improved retail net losses by 20,000 subscribers year over year.
• License Sale Proceeds: Expected proceeds of over $1 billion from spectrum sales.
• Impairment Loss: Recorded a loss on impairment of licenses of $136 million.

• Warning! GuruFocus has detected 10 Warning Signs with USM.

Release Date: November 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• United States Cellular Corp (NYSE:USM) increased its profitability outlook for adjusted EBITDA and adjusted operating income before depreciation and amortization.
• The company successfully monetized portions of its spectrum, securing agreements with multiple carriers for over $1 billion in proceeds.
• USM improved its retail net losses by 20,000 subscribers year over year, indicating better subscriber momentum.
• The company reported a 2% increase in postpaid ARPU, driven by customers opting for higher-tier plans.
• USM's 5G network investments have resulted in over 80% of data traffic being handled by upgraded sites, enhancing customer experience.

Negative Points

• Service revenues declined by 2% due to a decrease in the average subscriber base.
• USM recorded a loss on impairment of licenses amounting to $136 million due to challenges in operationalizing millimeter wave spectrum.
• The wireless industry is experiencing a slowdown in capital expenditures, impacting tower revenue growth rates.
• USM's capital expenditures are trending toward the lower end of guidance, reflecting moderated investment in network infrastructure.
• The company faces competitive pressures from larger mobile network operators and cable wireless players, impacting subscriber growth.

Q & A Highlights

Q: Can you provide more details on the tax impacts related to the T-Mobile and Verizon spectrum sales? A: Douglas Chambers, CFO, explained that the tax impacts are net of expected use of NOLs and interest carryforwards. TDS has more of these attributes, which is why their cash taxes are estimated to be lower than UScellular's.

Q: What are the plans for the proceeds from the Verizon spectrum sale? A: Vicki Villacrez, CFO of TDS, stated that the focus is on closing the transactions first. Once closer to closing, discussions on the use of proceeds will begin, which could include paying down debt, advancing fiber deployment, or returning value to shareholders.

Q: How is AI impacting UScellular's operations and customer experience? A: Laurent Therivel, CEO, noted that AI is improving operational efficiency, particularly in customer care, by providing better prompts and reducing training time. While AI's impact on the consumer side is still developing, it holds long-term promise.

Q: What is the strategy for UScellular's tower business, and are there plans to acquire more towers? A: Laurent Therivel, CEO, emphasized improving colocation rates on existing towers. While open to acquiring more towers, the focus is on strategic growth without overpaying, given current high valuations in the market.

Q: How is TDS Telecom addressing slower-than-expected broadband net additions in expansion markets? A: Michelle Brukwicki, CFO of TDS Telecom, mentioned enhancing door-to-door sales efforts and increasing resources to boost broadband penetration, with positive leading indicators showing improvement.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.