TDS Reports First-Quarter 2007 Operating Results
CHICAGO, June 19 /PRNewswire-FirstCall/ — Telephone and Data Systems, Inc. reported operating revenues of $1,156.6 million for the first quarter of 2007, up 9 percent from $1,059.1 million for the comparable period one year ago. The company recorded operating income of $142.8 million during the quarter compared to $107.2 million the prior year. Net income and diluted earnings per share were $219.3 million and $1.85, respectively, compared to net income and diluted earnings per share of $35.9 million and $0.31, respectively, for the comparable period one year ago.
Highlights
TDS expects to file its Form 10-K for the year ended Dec. 31, 2006 and its Form 10-Q for the quarter ended March 31, 2007 with the Securities and Exchange Commission (SEC) later today. With these filings, TDS will be current with all of its filings with the SEC.
— The total number of U.S. Cellular customers increased 6 percent year over year to 5,973,000. The number of retail customers increased 7 percent to 5,377,000. — U.S. Cellular average monthly revenue per unit (ARPU) increased 5 percent to $48.69. — U.S. Cellular service revenues grew 12 percent to $860.6 million. — U.S. Cellular data revenues grew 71 percent to $77.6 million, 9 percent of service revenues. — TDS Telecom equivalent access lines (ILEC and CLEC) increased 2 percent to 1,219,600. — TDS Telecom digital subscriber line customers (ILEC and CLEC) increased 41 percent to 160,600.
A company spokesman noted U.S. Cellular had an excellent first quarter with 12 percent revenue growth, strong retail net additions, a 5.5 percent improvement in ARPU and continued low postpay churn of 1.5 percent. U.S. Cellular reported full first quarter operating results on May 15, 2007.
Additionally, the spokesman noted that digital subscriber line customers, at TDS Telecom, were up 41 percent. Growing digital subscriber lines supports TDS Telecom’s objective of positioning itself as the preferred broadband provider in its markets. TDS Telecom has been aggressively bundling DSL with other popular service offerings such as satellite television and long distance services, an effective tactic for building and maintaining a long customer relationship.
Guidance for the year ended Dec. 31, 2007 is as follows. There can be no assurance that final results will not differ materially from this guidance.
U.S. Cellular 2007 guidance as of June 19, 2007 is as follows: Net Retail Customer Additions 375,000 – 425,000 Service Revenues Approx. $3.5 billion Operating Income $375 – $425 million Depreciation, Amortization & Accretion Approx. $615 million Capital Expenditures $600 – $615 million TDS Telecom (ILEC and CLEC) operations 2007 guidance as of June 19, 2007 is as follows: Operating Revenues $850 – $900 million Operating Income $130 – $150 million Depreciation and Amortization $155 million Capital Expenditures $110 – $130 million About TDS
TDS is a diversified telecommunications corporation founded in 1969. Through its business units, U.S. Cellular and TDS Telecom, TDS operates primarily by providing wireless, local telephone and broadband services. As of March 31, 2007, the company employed 11,600 people and served 7.2 million customers/units in 36 states.
About U.S. Cellular
As of March 31, 2007, U.S. Cellular Corporation, the nation’s sixth-largest wireless service carrier, employed 8,000 associates and provided wireless service to 6 million customers in 26 states. The Chicago-based company operates on a customer satisfaction strategy, meeting customer needs by providing a comprehensive range of wireless products and services, superior customer support, and a high-quality network.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates and expectations. These statements are based on current estimates, projections and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: The ability of U.S. Cellular to successfully manage and grow the operations of the Chicago MTA and newly launched markets; changes in the overall economy; changes in competition in the markets in which U.S. Cellular and TDS Telecom operate; changes due to industry consolidation; advances in telecommunications technology, including Voice over Internet Protocol; changes to access and pricing of unbundled network elements; changes in the state and federal telecommunications regulatory environment; changes in the value of assets; changes in the value of investments, including variable prepaid forward contracts; an adverse change in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; uncertainty of access to the capital markets; risks and uncertainties relating to restatements and possible future restatements; ability to remediate material weaknesses; pending and future litigation; acquisitions/ divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming rates and the mix of products and services offered in U.S. Cellular and TDS Telecom markets. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by TDS to furnish this press release to the SEC, which are incorporated by reference herein.
For more information about TDS and its subsidiaries, visit the web sites at:
TDS: http://www.teldta.com/ TDS Telecom: http://www.tdstelecom.com/ USM: http://www.uscellular.com/ TELEPHONE AND DATA SYSTEMS, INC. SUMMARY OPERATING DATA Quarter Ended 3/31/ 12/31/ 9/30/ 6/30/ 3/31/ U.S. Cellular 2007 2006 2006 2006 2006 Consolidated Markets: Total population (000s) (1) 56,048 55,543 55,543 55,543 55,164 All customers – Customer units 5,973,000 5,815,000 5,729,000 5,704,000 5,633,000 Gross customer unit activations 459,000 389,000 365,000 347,000 434,000 Net customer unit activations 152,000 86,000 25,000 48,000 151,000 Market penetration(1) 10.7% 10.5% 10.3% 10.3% 10.2% Retail customers – Customer units 5,377,000 5,225,000 5,127,000 5,099,000 5,029,000 Gross customer unit activations 397,000 375,000 353,000 331,000 380,000 Net customer unit activations 146,000 98,000 28,000 49,000 122,000 Cell sites in service 6,004 5,925 5,726 5,583 5,438 Average monthly revenue per unit (2) $48.69 $48.15 $47.93 $46.54 $46.17 Retail service revenue per unit (2) $42.69 $42.21 $41.75 $40.92 $40.77 Inbound roaming revenue per unit (2) $2.33 $2.34 $2.55 $2.28 $2.12 Long-distance/ other revenue per unit (2) $3.67 $3.60 $3.63 $3.34 $3.28 Minutes of use (MOU) (3) 783 749 725 719 658 Postpay churn rate per month (4) 1.5% 1.5% 1.6% 1.5% 1.5% Marketing cost per gross customer unit addition (5) $426 $511 $496 $503 $412 Construction Expenditures (000s) $109,700 $158,400 $152,800 $151,400 $117,200 (1) Market penetration is calculated using 2006 Claritas population estimates for all periods of 2007 and 2005 Claritas estimates for all periods of 2006. “Total population” represents the total population of each of U.S. Cellular’s consolidated markets, regardless of whether the market has begun marketing operations (without duplication of population in overlapping markets). The population of markets in which U.S. Cellular has deferred the transfer of licenses from AT&T Wireless Services, Inc. are not included in the total population counts for any period. (2) Per unit revenue measurements are derived from Service Revenues as reported in Financial Highlights for each respective quarter as follows: Service Revenues per Financial Highlights $860,583 $831,663 $821,820 $791,705 $769,222 Components: Retail service revenue during quarter $754,515 $729,072 $715,896 $696,079 $679,256 Inbound roaming revenue during quarter $41,268 $40,354 $43,806 $38,745 $35,344 Long-distance/ other revenue during quarter $64,800 $62,237 $62,118 $56,881 $54,622 Divided by average customers during quarter (000s) 5,892 5,757 5,716 5,670 5,554 Divided by three months in each quarter 3 3 3 3 3 Average monthly revenue per unit $48.69 $48.15 $47.93 $46.54 $46.17 Retail service revenue per unit $42.69 $42.21 $41.75 $40.92 $40.77 Inbound roaming revenue per unit $2.33 $2.34 $2.55 $2.28 $2.12 Long-distance/ other revenue per unit $3.67 $3.60 $3.63 $3.34 $3.28 (3) Average monthly local minutes of use per customer (without roaming). (4) Postpay churn rate per month is calculated by dividing the average monthly postpay customer disconnects during the quarter by the average postpay customer base for the quarter. (5) This measurement is not calculable using information from the financial statements as reported. The details of this calculation and a reconciliation to line items reported in Financial Highlights for each respective quarter are shown on U.S. Cellular’s web site, along with additional information related to U.S. Cellular’s first quarter results, at http://www.uscellular.com/. TELEPHONE AND DATA SYSTEMS, INC. SUMMARY OPERATING DATA Quarter Ended 3/31/ 12/31/ 9/30/ 6/30/ 3/31/ TDS Telecom 2007 2006 2006 2006 2006 ILEC: Access line equivalents (1) 763,400 757,300 752,100 747,500 742,300 Access lines 610,300 616,500 622,700 628,600 632,100 Dial-up Internet service accounts 71,100 77,100 82,200 86,800 90,800 Digital Subscriber Lines (DSL) customers 118,000 105,100 94,100 84,000 75,300 Long Distance customers 343,800 340,000 335,100 331,300 327,100 Construction Expenditures (000s) $16,100 $39,400 $27,000 $29,700 $17,100 CLEC: Access line equivalents (1) 456,200 456,200 452,900 450,900 449,200 Dial-up Internet service accounts 10,200 10,200 11,000 11,800 13,500 Percent of access lines on- switch 94.4% 93.0% 92.6% 92.2% 91.7% Digital Subscriber Lines (DSL) customers 42,600 42,100 41,000 39,900 38,500 Construction Expenditures (000s) $2,500 $5,700 $4,500 $4,400 $2,700 (1) Access line equivalents are derived by converting high capacity data lines to the estimated capacity of one switched access line. TELEPHONE AND DATA SYSTEMS, INC. FINANCIAL HIGHLIGHTS Three Months Ended March 31, (Unaudited, dollars in thousands, except per share amounts) Increase (Decrease) 2007 2006 Amount Percent Operating Revenues U.S. Cellular $934,674 $836,376 $98,298 11.8% TDS Telecom 217,622 219,009 (1,387) (0.6%) All Other (1) 4,261 3,692 569 15.4% 1,156,557 1,059,077 97,480 9.2% Operating Expenses U.S. Cellular Expenses excluding depreciation, amortization and accretion 676,894 624,338 52,556 8.4% Depreciation, amortization and accretion 149,257 142,025 7,232 5.1% 826,151 766,363 59,788 7.8% TDS Telecom Expenses excluding depreciation and amortization 140,196 140,404 (208) (0.1%) Depreciation and amortization 39,905 40,230 (325) (0.8%) 180,101 180,634 (533) (0.3%) All Other (1) Expenses excluding depreciation and amortization 5,360 4,185 1,175 28.1% Depreciation and amortization 2,148 711 1,437 N/M 7,508 4,896 2,612 53.3% Total Operating Expenses 1,013,760 951,893 61,867 6.5% Operating Income (Loss) U.S. Cellular 108,523 70,013 38,510 55.0% TDS Telecom 37,521 38,375 (854) (2.2%) All Other (1) (3,247) (1,204) (2,043) N/M 142,797 107,184 35,613 33.2% Investment and Other Income (Expense) Equity in earnings of unconsolidated entities 23,696 19,805 3,891 19.6% Interest and dividend income 16,196 11,483 4,713 41.0% Fair value adjustment of derivative instruments 255,870 30 255,840 N/M Interest (expense) (57,801) (58,532) 731 1.2% Other income (expense) (2,224) (927) (1,297) N/M 235,737 (28,141) 263,878 N/M Income (Loss) Before Income Taxes and Minority Interest 378,534 79,043 299,491 N/M Income tax expense 141,238 32,342 108,896 N/M Income (Loss) Before Minority Interest 237,296 46,701 190,595 N/M Minority share of income (17,971) (10,704) (7,267) (67.9%) Net Income (Loss) 219,325 35,997 183,328 N/M Preferred dividend requirement (13) (51) 38 N/M Net Income (Loss) Available to Common $219,312 $35,946 $183,366 N/M Basic Weighted Average Common Shares Outstanding (000s) 116,837 115,741 1,096 0.9% Basic Earnings (Loss) Per Share $1.88 $0.31 $1.57 N/M Diluted Weighted Average Common Shares Outstanding (000s) 118,383 116,327 2,056 1.8% Diluted Earnings (Loss) Per Share $1.85 $0.31 $1.54 N/M (1) Consists of Suttle Straus printing and distribution operations and intercompany eliminations. N/M – Percentage change not meaningful TDS AND DATA SYSTEMS, INC. CONSOLIDATED BALANCE SHEET HIGHLIGHTS (Unaudited, dollars in thousands) ASSETS March 31, December 31, 2007 2006 Current Assets Cash and cash equivalents $1,176,403 $1,013,325 Marketable equity securities 1,611,464 1,205,344 Accounts receivable from customers and other 487,749 520,167 Materials and supplies, at average cost 113,477 128,981 Other current assets 75,008 105,267 3,464,101 2,973,084 Investments Licenses 1,528,307 1,520,407 Goodwill 653,671 647,853 Customer lists 23,983 26,196 Marketable equity securities 933,791 1,585,286 Investments in unconsolidated entities 218,874 197,636 Other investments 10,928 11,073 3,369,554 3,988,451 Property, Plant and Equipment, net U.S. Cellular 2,599,842 2,628,848 TDS Telecom 900,075 920,350 Other 32,389 32,188 3,532,306 3,581,386 Other Assets and Deferred Charges 53,978 56,593 Total Assets $10,419,939 $10,599,514 LIABILITIES AND STOCKHOLDERS’ EQUITY March 31, December 31, 2007 2006 Current Liabilities Current portion of long-term debt $1,082,594 $741,325 Derivative Liability 358,193 359,970 Notes payable 60,000 35,000 Accounts payable 267,883 294,932 Customer deposits and deferred revenues 153,979 141,164 Accrued taxes 46,937 38,324 Accrued compensation 48,951 72,804 Deferred taxes 345,548 236,397 Other current liabilities 157,842 164,815 2,521,927 2,084,731 Deferred Liabilities and Credits Net deferred income tax liability 811,127 950,348 Derivative Liability 142,209 393,776 Other deferred liabilities and credits 389,536 369,045 1,342,872 1,713,169 Long-term Debt 2,283,793 2,620,609 Minority Interest in Subsidiaries 631,372 609,722 Preferred Shares 860 863 Common Stockholders’ Equity Common Shares, $.01 par value 566 566 Special Common Shares, $.01 par value 629 629 Series A Common Shares, $.01 par value 64 64 Capital in excess of par value 1,993,730 1,992,597 Treasury Shares, at cost Common Shares (183,677) (187,103) Special Common Shares (179,118) (187,016) Accumulated other comprehensive income 386,748 522,113 Retained earnings 1,620,173 1,428,570 3,639,115 3,570,420 Total Liabilities and Stockholders’ Equity $10,419,939 $10,599,514 BALANCE SHEET HIGHLIGHTS MARCH 31, 2007 (Unaudited, dollars in thousands) TDS U.S. TDS Corporate Cellular Telecom & Other Cash and cash equivalents $189,856 $371,413 $615,134 Affiliated cash investments — 645,955 — Marketable equity securities 240,792 63,470 1,307,202 Notes receivable–affiliates — — 284,582 $430,648 $1,080,838 $2,206,918 Licenses, goodwill and customer lists $2,017,480 $401,452 $(212,971) Marketable equity securities 4,436 4,177 925,178 Investment in unconsolidated entities 171,040 3,623 49,742 Other investments 4,512 3,040 3,376 $2,197,468 $412,292 $765,325 Property, Plant and Equipment, net $2,599,842 $900,075 $32,389 Notes payable: external $60,000 $— $— cash management — — 645,955 intercompany — 284,582 — $60,000 $284,582 $645,955 Forward contracts: Current portion $159,856 $41,182 $878,589 Non-current portion — — 650,816 Total $159,856 $41,182 $1,529,405 Long-term Debt: Current portion $— $474 $2,493 Non-current portion 1,001,953 3,478 627,546 Total $1,001,953 $3,952 $630,039 Preferred Shares $— $— $860 Construction expenditures: Quarter ended 3/31/07 $109,729 $18,638 $2,599 Intercompany TDS Eliminations Consolidated Cash and cash equivalents $— $1,176,403 Affiliated cash investments (645,955) — Marketable equity securities — 1,611,464 Notes receivable–affiliates (284,582) — $(930,537) $2,787,867 Licenses, goodwill and customer lists $— $2,205,961 Marketable equity securities — 933,791 Investment in unconsolidated entities (5,531) 218,874 Other investments — 10,928 $(5,531) $3,369,554 Property, Plant and Equipment, net $— $3,532,306 Notes payable: external $— $60,000 cash management (645,955) — intercompany (284,582) — $(930,537) $60,000 Forward contracts: Current portion $— $1,079,627 Non-current portion — 650,816 Total $— $1,730,443 Long-term Debt: Current portion $— $2,967 Non-current portion — 1,632,977 Total $— $1,635,944 Preferred Shares $— $860 Construction expenditures: Quarter ended 3/31/07 $130,966 TDS Telecom Highlights Three Months Ended March 31, (Unaudited, dollars in thousands) Increase (Decrease) 2007 2006 Amount Percent Local Telephone Operations Operating Revenues Local service $49,642 $50,552 $(910) (1.8%) Network access and long-distance 85,258 89,257 (3,999) (4.5%) Miscellaneous 22,692 21,217 1,475 7.0% 157,592 161,026 (3,434) (2.1%) Operating Expenses Network operations 49,097 46,079 3,018 6.5% Customer operations 17,233 18,535 (1,302) (7.0%) Corporate expenses 24,626 25,512 (886) (3.5%) Depreciation and amortization 34,046 33,576 470 1.4% 125,002 123,702 1,300 1.1% Operating Income $32,590 $37,324 $(4,734) (12.7%) Competitive Local Exchange Carrier Operations Revenues $61,350 $59,495 $1,855 3.1% Expenses excluding depreciation and amortization 50,560 51,790 (1,230) (2.4%) Depreciation and amortization 5,859 6,654 (795) (11.9%) 56,419 58,444 (2,025) (3.5%) Operating Income $4,931 $1,051 $3,880 N/M Intercompany revenues $(1,320) $(1,512) $192 N/M Intercompany expenses (1,320) (1,512) 192 N/M — — — Total TDS Telecom Operating Income $37,521 $38,375 $(854) (2.2%) N/M – Percentage change not meaningful.
Telephone and Data Systems, Inc.
CONTACT: Mark A. Steinkrauss, Vice President, Corporate Relations,+1-312-592-5384, or mark.steinkrauss@teldta.com, or Julie D. Mathews, Manager,Investor Relations, +1-312-592-5341, or julie.mathews@teldta.com, both ofTelephone and Data Systems, Inc.
Web site: http://www.teldta.com/