TDS reports fourth quarter 2012 results and 2013 financial guidance

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CHICAGO, Feb. 26, 2013 /PRNewswire/ -- As previously announced, TDS will hold a teleconference Feb. 26, 2013 at 9:30 a.m. CST. Interested parties may listen to the call live by accessing the Investor Relations page of www.teldta.com

Telephone and Data Systems, Inc. (NYSE:TDS) reported operating revenues of $1,346.2 million for the fourth quarter of 2012, an increase of 2 percent from $1,316.7 million in the comparable period one year ago. Net loss attributable to TDS shareholders was $41.8 million, or $0.39 per diluted share, respectively, for the fourth quarter of 2012, compared to$6.2 million and $0.06, respectively, in the comparable period one year ago. 

As previously announced on Nov. 7, 2012, U.S. Cellular reached a definitive agreement to sell its Chicago, St. Louis, central Illinois and three other markets (the "Divestiture Markets") to subsidiaries of Sprint Nextel Corporation (NYSE: S) for $480 million (the "Divestiture Transaction").  The transaction is subject to regulatory approvals and is expected to close in mid-2013.  In the fourth quarter of 2012, TDS' operating income was reduced by $44.5 million due to divestiture-related costs, including a $10.7 million write-down of assets, $12.6 million in employee-related costs, including severance, and $20 million in accelerated depreciation, amortization and accretion. 

The table below provides pro forma performance highlights for U.S. Cellular's Total Consolidated Markets, Divestiture Markets, and Core Markets for the fourth quarter of 2012.  Core Markets are the markets that U.S. Cellular will continue to own upon completion of the Divestiture Transaction. 

U.S. Cellular

 

               

($ in millions except ARPU)

Total Consolidated Markets

 

Divestiture Markets (1)

 

Core Markets (1)

Postpaid gross additions

 

241,000

   

23,000

   

218,000

Postpaid churn

 

1.83%

   

3.35%

   

1.67%

Postpaid net additions (losses)

 

(41,000)

   

(25,000)

   

(16,000)

Prepaid net additions (losses)

 

37,000

   

(1,000)

   

38,000

Service revenues (1)

 

$1,008.9

   

$101.4

   

$907.5

Postpaid ARPU (1)

 

$54.56

   

$60.91

   

$53.92

 

(1)

Total Consolidated Markets amounts represent GAAP financial measures and Divestiture Markets and Core Markets amounts represent non-GAAP financial measures. U.S. Cellular believes that the amounts under Divestiture Markets and Core Markets may be useful to investors and other users of its financial information.

 

The following table highlights the performance of U.S. Cellular's Core Markets and TDS Telecom for the fourth quarter of 2012 and 2011.

U.S. Cellular

           

%

($ in millions except ARPU)

Q4 2012

 

Q4 2011

 

Change

Postpaid gross additions

 

218,000

   

209,000

   

4%

Postpaid churn

 

1.67%

   

1.48%

   

(13%)

Postpaid net additions (losses)

 

(16,000)

   

(2,000)

   

(>100%)

Prepaid net additions

 

38,000

   

6,000

   

>100%

Retail net additions

 

22,000

   

4,000

   

>100%

Service revenues (1)

 

$907.5

   

$917.5

   

(1%)

Postpaid ARPU (1)

 

$53.92

   

$52.62

   

2%

Smartphones sold as % of total devices

 

62.9%

   

52.6%

   

20%

4G/LTE smartphones as % of total smartphones sold

 

74%

   

0%

   

>100%

Capital expenditures (1)

 

$241

   

$253

   

(5%)

Cell sites in service

 

6,292

   

6,154

   

2%

Owned towers

 

3,847

   

3,755

   

2%

                 

TDS Telecom

           

%

 

Q4 2012

 

Q4 2011

 

Change

Operating revenues

 

$221.5

   

$206.8

   

7%

ILEC triple play (voice, data and video) penetration

 

31%

   

29%

   

7%

managedIP (ILEC and CLEC)

 

94,600

   

53,500

   

77%

 

(1)

The Core Markets amounts for Q4 2012 and Q4 2011 represent non-GAAP financial measures. U.S. Cellular believes that the amounts under Core Markets may be useful to investors and other users of its financial information.

 

"U.S. Cellular and TDS Telecom continued to execute on their strategic initiatives, though profitability was impacted by smartphone subsidies, reductions in regulatory support, and investment spending," said LeRoy T. Carlson, Jr., TDS president and CEO.

"U.S. Cellular achieved strong growth in smartphone penetration as more customers had access to 4G LTE speeds and devices. U.S. Cellular's Core Markets also increased net retail customer additions, due to prepaid customer growth.  While revenue from our customers increased, overall service revenues declined due to lower negotiated roaming rates which had a positive effect on roaming expenses. To further differentiate our superior customer experience, U.S. Cellular is working to provide seamless shopping and support across channels, identify more opportunities to expand distribution, and through the implementation of a new billing and operational support system, is also simplifying operations and processes to increase efficiency and reduce complexity and cost.

"TDS Telecom continued to build its residential customer base with TDS TV® and broadband offerings, and further increased momentum in commercial managedIP sales.TDS Telecom is focused on increasing residential TDS TV and broadband penetration in existing markets, and expanding broadband access through stimulus projects in progress nationwide. To grow the commercial customer base, TDS Telecom plans to expand themanagedIP portfolio, and build its hosted and managed services business by providing integrated, end-to-end IT solutions, including ReliaCloudTM, to mid-market customers."

Baja Broadband
In a separate release today, TDS announced an agreement to acquire substantially all of the assets of Baja Broadband, LLC for a purchase price of $267.5 million.   

2013 ESTIMATES

Estimates of full-year 2013 results for U.S. Cellular, TDS Telecom and TDS, are shown below.  Such estimates represent management's view as of the date of filing of TDS' Form 10-K for the year ended December 31, 2012.  Such forward-looking statements should not be assumed to be current as of any future date.  TDS undertakes no duty to update such information whether as a result of new information, future events or otherwise.  There can be no assurance that final results will not differ materially from such estimated results.

TDS has changed the measures which it uses to present estimates of operating results.  TDS now provides estimates for consolidated revenues and capital expenditures.  In addition, TDS previously presented Adjusted OIBDA, defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the loss on impairment of assets; and the net gain or loss on asset disposals and exchanges.  TDS believes Adjusted income before income taxes, as defined below, is a measure which provides a more comprehensive and meaningful view of TDS' recurring results of operations.

     

2013 Estimated Results (1)

               
     

U.S. Cellular (2)

 

TDS Telecom (3)

 

TDS (2)(3)(7)

(Dollars in millions)

           

Adjusted operating revenues (4)

 

$3,765-$3,885

 

 $850-$900

 

$4,660-$4,830

Adjusted income before income taxes (5)

 

$780-$900

 

$220-$250

 

$995-$1,145

Capital expenditures

 

 Approx. $600

 

 Approx. $155

 

 Approx. $765

 

(1)

These estimates are based on TDS' current plans, which include a multi-year deployment of 4G LTE technology which commenced in 2011 at U.S. Cellular and a multi-year deployment of IPTV which commenced in 2011 at TDS Telecom. New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services, costs to deploy, agreements for content or franchises, or possible acquisitions, dispositions or exchanges) could affect TDS' plans and, therefore, its 2013 estimated results.

   

(2)

These estimates also assume the Divestiture Transaction closes July 1, 2013. Actual effects could vary significantly from these estimates as a result of a change in the expected timing of the Divestiture Transaction.

   
 

These estimates reflect U.S. Cellular's consolidated results for 2013. Estimated results reflecting U.S. Cellular's Divestiture Markets and Core Markets are shown in the table below:

 

       

2013 Estimated Results

                 
       

U.S. Cellular Core

Markets (6)

 

U.S. Cellular Divestiture

Markets (6)

 

U.S. Cellular Consolidated (6)

(Dollars in millions)

           

Adjusted operating revenues (4)

 

$3,600-$3,700

 

$165-$185

 

$3,765-$3,885

Adjusted income before income taxes (5)

 

$765-$865

 

$15-$35

 

$780-$900

Capital expenditures

 

Approx. $600

 

--

 

Approx. $600

 

(3)

These estimates do not reflect the effects of the acquisition of Baja Broadband, LLC.

   

(4)

Adjusted operating revenues is a non-GAAP financial measure defined as Operating revenues excluding U.S. Cellular Equipment sales revenues. U.S. Cellular Equipment sales revenues are excluded from Adjusted operating revenues since U.S. Cellular equipment is generally sold at a net loss, and such net loss that results from U.S. Cellular Equipment sales revenues less U.S. Cellular Cost of equipment sold is viewed as a cost of earning service revenues for purposes of assessing business results. For purposes of developing this guidance, TDS does not calculate an estimate of U.S. Cellular Equipment sales revenues. TDS believes this measure provides useful information to investors regarding TDS' results of operations. Adjusted operating revenues is not a measure of financial performance under GAAP and should not be considered as an alternative to Operating revenues as an indicator of the Company's operating performance.

   

(5)

Adjusted income before income taxes is a non-GAAP financial measure defined as income before: Income taxes, Depreciation, amortization and accretion, net Gain or loss on sale of business and other exit costs, and Interest expense. Adjusted income before income taxes is not a measure of financial performance under GAAP and should not be considered as an alternative to Income before income taxes as an indicator of the Company's operating performance or as an alternative to cash flows from operating activities, determined in accordance wit