TDS expects to miss 2022 fiber build target

TDS Telecom is striving to blanket 60% of its footprint with fiber by 2026, but executives warned on a Q3 2022 earnings call that headwinds in the current environment mean short-term progress is moving slower than expected. While the company was originally targeting the addition of 160,000 new passings this year, CFO Michelle Brukwicki said it is now expecting to reach closer to 120,000 new locations in 2022. 

The operator ended Q3 with 506,500 residential broadband connections, up year on year from 487,400. According to Brukwicki, TDS Telecom added 33,000 new fiber addresses in Q3, bringing its year to date total to 72,000 new passings. That means it now serves 36% of its 1.5 million serviceable addresses with fiber.

She noted its fiber pipeline now includes nearly 100 communities and stated the company remains confident it will reach its long-term goal. However, Brukwicki acknowledged cost pressures, labor shortages, permitting complexities and supply chain issues are hindering the pace of its short-term progress.

“Our service address delivery is slower than planned due to some industry-wide headwinds,” she said. “If we continue on our current trajectory, we will deliver 120,000 addresses for the year, a 40% increase over last year.”

Brukwicki continued: “Although service address delivery might shift between years, we’re still confident of meeting our goal of 1.2 million fiber service addresses by 20206.”

As it continues to expand its fiber footprint, TDS has promised to offer its 2-gig product in all its new markets and is working to extend availability of its 1-gig tier. The latter is now available across 64% of service addresses and 10% of residential customers have signed on for the service. Brukwicki hinted move speed moves are coming, noting it expects to offer even higher speed tiers in 2023 and beyond.

Metrics

TDS Telecom revenue grew 2% year on year to $256 million while operating income of $10 million was down 63% from Q3 2021. Parent company Telephone and Data Systems, Inc., which also owns UScellular, saw revenue increase 5% year on year to $1.39 billion. However, it swung from a profit of $28 million to a net loss of $25 million in the recent quarter. The change was attributed to increased investment in its growth initiatives.