Telephone and Data Systems Inc
) reported third quarter 2013 loss of 9 cent per share, wider
than the Zacks Consensus Estimate of 7 cents loss per share and
dropped drastically from earnings per share of 27 cents in the
Revenues dropped 14% year over year to $1,180.98 million in
the reported quarter, and missed our projection of $1,190.0
million. The company reported operating loss of $33.1 million
against operating income of $55.5 million in the year-ago
Revenues from the company's wireless subsidiary
U.S. Cellular Corp.
) declined 17.6% to$939.2 million in the third quarter from
$1,140.4 million in the year-ago quarter.
Retail service ARPU (average revenue per user) was $50.92,
higher than $50.59 in flat with the year-ago quarter. Post-paid
churn remained unchanged from the year-earlier quarter at 1.7%
due to severe competitive pricing.
U.S. Cellular witnessed post-paid subscriber loss of 60,000
compared with a loss of 38,000 in the year-ago quarter. Prepaid
customer losses totaled 11,000 versus the addition of 57,000
customers in the prior-year quarter. The company exited the
quarter with a retail customer base of 4,875,000 compared with
5,808,000, a year ago.
Revenue from the wireline segment dropped 1% year over year to
$181.8 million. Revenues from Cable were $14.4 million and HMS
revenues came in at $38.7 million.
At the end of the quarter, the company had 599,900 wireline
residential customers, 372,400 wireline commercial customers and
146,900 cable connections, bringing the total subscriber base to
Telephone and Data Systems exited the quarter with cash and
cash equivalents of $711.1 million compared with $740.5 million
at the end of fiscal 2012. Long-term debt was $1,721.1 million
compared with $1,721.6 million at year-end 2012.
For fiscal 2013, Telephone and Data Systems expects total
operating revenue of $4,555-$4,645 million. Of this, U.S.
Cellular revenues are expected at $3,590-$3,640 million and TDS
Telecom revenues at $920-$960 million.
Adjusted income before income taxes is expected in the range
of $830-$960 million from U.S. Cellular, $230-$260 million from
TDS Telecom and $600-$700 million from the company.
Capital expenditure will be approximately $735 million for
U.S. Cellular and $165 million for TDS Telecom, netting $910
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 the 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
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