• Adjusted EBITDA: Notable year-over-year improvements.

• ARPU: Increased by 3%.

• Postpaid churn: Decreased by 5 basis points year-over-year.

• Postpaid handset gross adds: Faced challenges, down 16% year-over-year.

• Prepaid net losses: Improved year-over-year.

• Fixed wireless subscribers: Grown by 42% compared to the prior year.

• Operating revenues: Decreased by 4%.

• Service revenues: Declined by 2%.

• Equipment sales: Declined by 10%.

• Adjusted operating income: Increased by 11%.

• Adjusted EBITDA: Increased by 8%.

• Cost optimization: Continues to deliver strong results.

• Capital expenditures: Expected to be less than 2023.

• Warning! GuruFocus has detected 6 Warning Signs with TDS.

Release Date: May 03, 2024

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

Positive Points

• Telephone and Data Systems Inc reported notable year-over-year improvements in adjusted EBITDA, achieving profitability targets.

• TDS Telecom is experiencing strong growth from its multiyear fiber investments, contributing to both top and bottom-line growth.

• UScellular demonstrated solid ARPU growth and effective expense discipline, enhancing bottom-line results.

• The company successfully entered into a $375 million unsecured debt facility to support general corporate purposes and advance TDS Telecom's fiber build program.

• Telephone and Data Systems Inc is maintaining a focus on cost management, which includes a combination of long-dated debt maturities and reasonable leverage, providing financial flexibility.

Negative Points

• Postpaid handset gross adds continue to be a challenge, with a significant year-over-year decline in the total pool of available subscribers.

• The competitive environment remains intense, particularly with cable wireless competitors who are making aggressive moves on pricing and promotions.

• The Affordable Connectivity Program, which helped bridge the digital divide, was not renewed, posing challenges for customer affordability.

• UScellular's total operating revenues for the quarter decreased by 4%, driven by declines in service revenues and equipment sales.

• The wireless industry's moderation in capital expenditures is impacting growth rates in the Tower business, potentially affecting long-term revenue opportunities.

Q & A Highlights

Q: Rick Prentiss asked about the potential for segment reporting around towers and the implications of creating an anchor contract between the Tower company and their wireless business. A: Laurent C. Therivel, President and CEO of UScellular, noted the company is considering providing more detailed financials on towers in future quarters. He emphasized the importance of being deliberate and disciplined in sharing financial details and mentioned the long-term bullish outlook for towers due to network densification and low colocation rates.

Q: Rick Prentiss inquired about the recent debt borrowing and its implications on the Tower segment. A: Vicki L. Villacrez, CFO of TDS, clarified that the borrowing was for general corporate purposes, primarily to advance the fiber program. She highlighted the borrowing's minimal impact on the weighted average cost of debt and its role in providing flexibility for ongoing investments.

Q: Michael Rollins asked about the potential and timing to turn around the gross add trajectory for phone subscriptions and the consideration of shifting from a retail to a wholesale business model in fiber strategy. A: Laurent C. Therivel discussed strategies to improve churn and gross adds, emphasizing promotional strategies and investments in enterprise solutions. Michelle M. Brukwicki, CFO of TDS Telecom, stated that their focus remains on owning and serving customers on their networks rather than shifting to a wholesale model.

Q: Sergey Dluzhevskiy queried about strategies to improve UScellular's competitive position against cable companies and the primary objectives for the Tower business. A: Laurent C. Therivel highlighted the importance of competitive pricing, quality network investments, and focusing on existing customer bases to compete with cable. For the Tower business, the short-term goal is to grow revenue through colocations, while long-term objectives include leveraging tower locations for network densification.

Q: Sergey Dluzhevskiy also asked about the approach to handling overbuilding in TDS Telecom's ILEC markets and prioritizing fiber build considering competitive dynamics. A: Michelle M. Brukwicki explained that TDS Telecom has been preemptively investing in fiber in their ILEC markets and plans to continue with significant investments through the enhanced A-CAM program to strengthen their competitive position.

Q: Rick Prentiss questioned the pacing of EBITDA growth for TDS Telecom given strong Q1 results and asked about expected costs in the upcoming quarters. A: Michelle M. Brukwicki affirmed the guidance range for adjusted EBITDA, attributing strong Q1 results to revenue growth and diligent cost management. She noted that while they are managing costs effectively, some expenses are timed throughout the year, which might affect EBITDA pacing.

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

This article first appeared on GuruFocus.