Telephone and Data Systems Inc.
) has reported first quarter earnings per share of 48 cents,
surpassing the Zacks Consensus Estimate of 35 cents. Results also
improved 23% year over year from 39 cents per share earned in the
year-ago quarter driven by growing demand for data services.
Revenues increased 4% year over year to $1,305.8 million in the
reported quarter, surpassing the Zacks Consensus Estimate of $1,304
million. Adjusted OIBDA improved to $289 million from $281 million
in the year-ago quarter.
Revenues from the company's wireless subsidiary
U.S. Cellular Corp.
) upped 3.3% year over year to $1,092.1 million in the first
quarter. Service revenues grew 4% year over year to $1,023.8
million on account of higher inbound roaming and retail service
revenues along with higher smartphone sales that drove data
Total retail service ARPU (average revenue per user) improved to
$50.52 from $47.65 in the year-ago quarter on the back of strong
adoption of smartphones and data plans. Post-paid ARPU increased to
$54.00 from $51.21 in the year-ago quarter while churn rates
deteriorated to 1.6% from 1.4% in first quarter 2011 due to severe
U.S. Cellular lost 34,000 net retail customers in the reported
quarter, bringing the total subscriber base to nearly 5.8 million
(including 5.6 million retail customers). Retail customer losses
were 38,000 in the post-paid while prepaid business registered an
addition of 4,000 customers.
TDS Telecom (Wireline)
Revenue from the wireline segment grew a modest 3% year over
year to $204.1 million.
In the reported quarter, incumbent local exchange carriers
(ILEC) high-speed data customer base (residential and commercial)
grew 2.7% year over year to 237,700. However, ILEC physical access
lines (residential and commercial) slid 5% year over year to
The competitive local exchange carrier (CLEC) high-speed data
customer base (residential and commercial) and CLEC physical access
lines (residential and commercial) declined to a respective 23,800
and 180,700 from 29,900 and 210,300 in the year-ago quarter.
Telephone and Data Systems exited the first quarter with $639
million of cash and cash equivalents compared with $606.4 million
at the end of fiscal 2011. Long-term debt increased to $1,529.98
million from $1,529.85 million at year-end 2011. Free cash flow was
$39.6 million, down from $175.1 million in the year-ago
The company did not change its previous guidance for fiscal
2012. For the wireless segment, Telephone and Data Systems Service
expects service revenue in the range of $4,050-$4,150 million and
operating income in the range of $200-$300 million. Adjusted OIBDA
is estimated in the range of $800-$900 million. The company's
capital expenditure is expected to be approximately $850
For the wireline segment, the company expects total revenue of
$810-$840 million, adjusted OIBDA of $245-$275 million and
operating income of $55-$85 million. Depreciation, amortization and
accretion as well as capital expenditures are estimated to be
approximately $190 million and $150-$180 million, respectively.
Telephone and Data Systems continues to benefit from its several
growth initiatives like 3G network expansion, increasing handset
offerings, adoption of the Long-Term Evolution (LTE) technology in
the wireless business, and aggressive deployment of Triple-Play
bundled wireline services. Additionally, the company's expansion of
IPTV services in new markets is also expected to aid revenue going
However, fierce competition 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 revenue growth.
We are currently maintaining our long-term Neutral rating on
Telephone and Data Systems supported by a Zacks #3 (Hold) Rank.
TELEPHONE &DATA (TDS): Free Stock Analysis
US CELLULAR (USM): Free Stock Analysis Report
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