TDS says HMS unit reorganization will give it focus, resources it needs

TDS Telecom
TDS says that its CIO division better understands the needs of its HMS division products and customers. (TDS)

TDS has high hopes that it can apply the same level of success it has seen with growing its telecom and cable-based broadband service segments to its struggling Hosted & Managed Services (HMS).

Under the new structure, which was set up earlier this month, HMS now reports to TDS’ CIO Kurt Thaus. Terry Swanson, president and CEO of OneNeck and the OneNeck organization, now reports to TDS corporate.

“The success Jim Butman and Dave Wittwer had with executing their broadband strategy is something we want everybody’s energy focused on,” said Jane McCahon, SVP of corporate relations for TDS Telecom during the 2018 Global TMT West Conference. “As we looked at HMS and the other talent we had in the company, we saw that with our CIO Kurt Thaus and his organization there’s a lot of synergies with those businesses in terms of understanding the needs of the products and customers.”  

McCahon said that being part of the CIO’s organization, HMS “will get the focus and resources it needs.”

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TDS Telecom's has its work cut out for itself to improve the outlook of the HMS division.

While third-quarter HMS revenues improved, they were still 18% below last year's level. HMS revenue decline was driven by a 30% decline in equipment revenue.

“This decline is concentrated with our largest equipment revenue customers, put together, account for most of the shortfall,” said Vicki Villacrez, VP of finance and CFO of TDS Telecom during the third-quarter earnings call, according to a Seeking Alpha transcript. “We believe some of that shortfall will be made up more likely now in 2018 and expect equipment sales from the remaining customers to be more stable.”

Third-quarter HMS service revenues also declined 2% due to what TDS said was declines in hardware installation service revenues associated with the lower equipment sales. Hosting revenues were flat in the quarter, as customer churn and compression offset revenue growth from new sales.

Despite the near-term struggles HMS has seen in recent quarters, McCahon said that TDS is confident it can grow share with mid-sized business customers.

“We’re still very big believers in this business with businesses outsourcing IT and our focus on serving mid-market customers with more of a local focus,” McCahon said. “We see some pockets of terrific performance.”