Telephone and Data Systems, Inc. (TDS)

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Telephone and Data Systems, Inc. (TDS)

Q4 2016 Results Earnings Conference Call

February 24, 2017 10:30 a.m. ET


Jane McCahon - Senior Vice President, Corporate Relations, TDS Telecom

Douglas Shuma - Senior Vice President, Finance and Chief Accounting Officer, TDS

Ken Meyers - President and Chief Executive Officer, U.S. Cellular

Steve Campbell - Executive Vice President and Chief Financial Officer, U.S. Cellular

Vicki Villacrez - Vice President Finance and Chief Financial Officer, TDS Telecom


Ric Prentiss - Raymond James

Simon Flannery - Morgan Stanley

Sergey Dluzhevskiy - Gabelli & Company



Greetings, and welcome to the TDS and U.S. Cellular Fourth Quarter Operating Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Jane McCahon, Senior Vice President, Corporate Relations of TDS. Thank you. Ms. McCahon, you may begin.

Jane McCahon

Thank you, Tim. Good morning, and thanks for joining us. I want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find on the Investor Relations sections of the TDS and U.S. Cellular websites.

With me today and offering prepared comments are from TDS, Doug Shuma, Senior Vice President, Finance and Chief Accounting Officer; from U.S. Cellular, Ken Meyers, President and Chief Executive Officer; and Steve Campbell, Executive Vice President and Chief Financial Officer. And from TDS Telecom, Vicki Villacrez, Vice President Finance and Chief Financial Officer.

This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations websites. Please see the websites for slides referred to on this call, including non-GAAP reconciliations. As a reminder, we provide guidance for both operating cash flow and adjusted EBITDA and for TDS Telecom, these are basically the same number.

For the information set forth in the presentation and discussed during this call, contain statements about expected future events and financial results that are forward looking and subject to risks and uncertainties. Please review the safe-harbor paragraphs in our press releases and the extended version in our SEC filing.

Shortly after we released our earnings and before the call, TDS and U.S. Cellular filed SEC forms 8-K, including today's press release and filed our SEC forms 10-K. Taking a quick look at the upcoming IR schedule, Slide 3. We will be presenting at the Deutsche Bank Conference on March 6 and the Raymond James Conference on March 7, and heading to New York and Boston with Gabelli on March 22 and 23. Please let us know if you would like information about any of these events. And please keep in mind that TDS has an open door policy so if you are in the Chicago area and would like to meet with members of management, the IR team will try to accommodate you, calendars permitting.

As has been our tradition on our year-end call, we would like to take a moment to recap our major accomplishments for the year just completed as well as to set forth our strategic priorities for the coming year. So to begin, I would like to turn the call over to Doug Shuma to talk about TDS Corporate.

Douglas Shuma

Thanks, Jane. Turning to Slide 4. We continue to execute on our strategic priorities and work to understand and capitalize on the many significant changes that occurred last year. During 2016, we saw benefits from prior year investments and work to manage our capital intensity as revenue growth because harder to achieve.

The foundation of U.S. Cellular's value proposition is network quality. They continue to invest in spectrum capacity and new technology such as VoLTE, which will provide a great customer experience as well as opportunities for additional roaming revenue. And speaking of spectrum, I want to remind you about our inability to discuss the ongoing auction for 600 MHz spectrum, known as auction 1000. Although the clock phase has ended, the anti-collusion rule is still in effect and we are prohibited from speaking about it and will not entertain any questions relating to spectrum.

At TDS Telecom, our fiber investments in wireline and network enhancements at cable, are now driving the growth we expect from our broadband strategy. As we think about capital allocation at the TDS level, not much has changed. We did not buy any cable assets for the past two years nor did we repurchase any meaningful amount of TDS shares. We did however, return value to our shareholders in the form of $65 million in dividends and this morning we announced a 5% dividend hike, our 43rd consecutive annual dividend increase.

In 2016, U.S. Cellular repurchased $5 million of its shares. We continue to look for cable acquisitions that meet our criteria and plan to continue to target our 3:1 ratio of investing in the business versus returning value to shareholders for the foreseeable future. We are also assessing the opportunities and risks associated with the change in administration in Washington. As we will cover in greater detail, getting the A-CAM program for TDS Telecom across the finish line was a significant victory. One that provides commitment for ten years of support and helps us provide enhanced broadband services to some of our most remote customers.

Recent comments by FCC Chair Pai seem to support the need for enhanced broadband in rural America and we will work diligently to pursue any opportunities. Of course, any initiatives to relieve regulatory burdens would be welcome by all of our businesses. We will also follow closely any tax reform efforts knowing full well that the devil will always be in the details. And now I will turn the call over to Ken Meyers. Ken?

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