Telephone and Data Systems Inc.
) reported a fourth quarter 2012 loss of 39 cents per share as
against the Zacks Consensus Estimate of profit of 4 cents. The
result was also much wider compared with loss of 6 cents per
share in the year-ago quarter.
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Revenues increased 2.2% year over year to $1,346.2 million in the
reported quarter, missing our projection of $1,363.0 million.
Adjusted OIBDA was $193.3 million compared with $215.4 million in
the year-ago quarter.
For 2012, the company earned 75 cents per share, on revenue of
U.S. Cellular (Wireless)
Revenues from the company's wireless subsidiary
U.S. Cellular Corp.
) rose 1.4% year over year to $1,115.2 million in the fourth
Total retail service ARPU (average revenue per user) improved to
$50.94 from $49.78 in the year-ago quarter on the back of
successful adoption of smartphones and data plans. Post-paid ARPU
increased 2.2% year over year to $54.56. Churn rates increased to
1.8% from 1.6% in fourth quarter 2011 due to severe competitive
U.S. Cellular witnessed subscriber loss of 4,000 retail customers
compared with 13,000 losses in the year-ago quarter. The company
exited 2012 with a retail customer base of 5,557,000 compared
with 5,608,000 a year ago. Post-paid customer losses totaled
41,000, while prepaid business registered an addition of 37,000
TDS Telecom (Wireline)
Revenue from the wireline segment grew 7.1% year over year to
In the reported quarter, incumbent local exchange carriers (ILEC)
high-speed data customer base (residential and commercial) grew
1.0% year over year to 240,200. However, ILEC physical access
lines (residential and commercial) slid 5.0% year over year to
The competitive local exchange carrier (CLEC) high-speed data
customer base (residential and commercial) declined to 19,400
from 25,600 in the year-ago quarter. CLEC physical access lines
(residential and commercial) declined to 160,100 from 189,100 in
the year-ago quarter.
Telephone and Data Systems exited 2012 with cash and cash
equivalents of $740.5 million compared with $563.3 million at the
end of fiscal 2011. Long-term debt was $1,721.6 million compared
with $1,529.9 million at year-end 2011.
In 2012, capital expenditure was $264.6 million, while free cash
flow was $23.9 million.
For fiscal 2013, Telephone and Data Systems expects total
operating revenue of $4,660-$4,830 million. Of this, U.S.
Cellular revenue is expected in the range of $3,765-$3,885
million and TDS Telecom revenue will be $850-$900 million.
Adjusted income before income taxes is expected in the range of
$780-$900 million for U.S. Cellular, $200-$250 million for TDS
Telecom and $995-$1,145 million for the company.
Capital expenditure will be approximately $600 million for U.S.
Cellular and $155 million for TDS Telecom, netting $765 million.
We expect Telephone and Data Systems to rebound in the coming
months based on its favorable offerings, high sales of
) Android-based smartphones, bundled and unlimited service plans,
the launch of Long Term Evolution services and growing popularity
of the Belief project.
However, fierce competition from major market players such as
) and heavy investment in an uncertain market condition may limit
any upside to the company's earnings. Further, regulatory issues
regarding Universal Service Fund are also likely to weigh on the
company's near-term growth.
Telephone and Data Systems currently holds a Zacks Rank #5