United States Cellular ((USM)) has held its Q4 earnings call. Read on for the main highlights of the call.
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United States Cellular’s Earnings Call: Navigating Strategic Moves Amidst Challenges
The recent earnings call for United States Cellular presented a mixed sentiment. The company highlighted notable strategic achievements, particularly in fiber expansion and debt reduction, which are promising for future growth. However, concerns were raised over challenges like the decline in service revenue and postpaid subscriber growth. Moreover, uncertainties about the T-Mobile transaction and future tower co-location add layers of both opportunity and risk for the company’s future.
Debt Reduction and Cash Flow Improvement
United States Cellular Corporation has made significant strides in reducing its debt, having paid down over $200 million. This has led to improved free cash flow and maintained bank leverage ratios below three times in the latter half of the year. These financial improvements provide a stable foundation for further strategic initiatives.
Fiber Expansion and Revenue Growth
TDS Telecom, a subsidiary of United States Cellular, exceeded its fiber service address expansion goals by reaching 129,000 in 2024, surpassing the target of 125,000. This expansion has driven a 6% growth in residential revenues, largely attributed to increased broadband adoption.
Strategic Transactions and Shareholder Value
The company has entered into agreements to sell its wireless business to T-Mobile and engage in various Spectrum transactions. These moves are expected to unlock significant shareholder value, positioning United States Cellular for future growth and profitability.
Tower Business Strength
The tower business is poised for growth with the addition of 2,015 incremental collocations, thanks to a new Master Lease Agreement (MLA) with T-Mobile. This development is expected to enhance the company’s tower business revenue streams.
5G Deployment Success
United States Cellular’s strategic deployment of mid-band 5G has resulted in coverage for close to 50% of data traffic, significantly enhancing the customer 5G experience. The company was ranked first in the north central region according to the JD Power 2025 US wireless network quality performance study.
Decline in Service Revenues
Despite various strategic initiatives, the company experienced a 2% decline in service revenues, primarily due to reductions in the average retail subscriber base. This presents a challenge that the company needs to address to ensure long-term financial health.
Postpaid Subscriber Challenges
The earnings call highlighted ongoing challenges with net retail subscriber additions, which remained negative. The competitive market environment continues to pressure the company’s ability to grow its postpaid subscriber base.
Increased Promotional Expenses
United States Cellular has faced increased losses on equipment sales, driven by higher promotional expenses necessary to maintain competitive acquisition and retention offers.
Video and Voice Revenue Decline
The company is experiencing declines in commercial revenue and residential video and voice connections, which have offset the growth achieved from broadband services.
Uncertainty in Tower Co-location
There remains uncertainty regarding which additional towers T-Mobile will choose to co-locate on, affecting future financial projections and planning.
Guidance and Future Projections
Looking forward to 2025, United States Cellular and TDS have outlined several key metrics and projections. Capital expenditures for 2024 saw a 24% decrease, leading to increased free cash flow, while adjusted EBITDA rose by 7%. The focus for 2025 is on closing the T-Mobile transaction and other spectrum deals, with anticipated proceeds possibly reaching $4.4 billion. TDS Telecom’s 2025 revenue guidance is between $1.03 billion and $1.07 billion, with adjusted EBITDA projected between $320 million to $360 million. Capital expenditures are expected to range from $375 million to $425 million, reflecting continued investments in fiber expansion and the EACAM program.
In summary, United States Cellular’s earnings call reflected a strategic focus on growth and financial stability through debt reduction and fiber expansion, despite facing challenges in service revenue and subscriber growth. As the company navigates these complexities, the outcomes of strategic transactions and market responses will be crucial in shaping its future trajectory.
