TDS Telecom says A-CAM, state programs will further its fiber reach

fiber wire
TDS Telecom told investors during its second-quarter earnings call that it's equipping more of its network with fiber where it can make a good business case.

TDS Telecom plans to leverage a host of different government programs like A-CAM and its own capital to expand its fiber network within its existing ILEC territory and other nearby markets.

Vicki Villacrez, SVP of finance and CFO for TDS Telecom, told investors during the company’s second-quarter earnings call that these programs are part of a broader platform it is implementing to equip more of its network with fiber where it can make a good business case.

Villacrez TDS
Vicki Villacrez
“A-CAM along with state broadband programs will enable us to drive fiber even deeper into our network,” Villacrez said during the earnings call, according to a Seeking Alpha transcript. “We will continue to evaluate future opportunities to bring fiber to more service addresses both inside our current footprint, as well as in adjacent areas.”

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By leveraging the fiber the telco has deployed in “select” ILEC markets, the service provider is positioned to respond to its consumer customers' growing TV and broadband service desires. As of the end of the second quarter, the service provider said that its ongoing build-out of fiber has enabled it to reach about 19% of its network route miles with fiber.

The telco’s fiber network investments are also driving positive results in consumer services like IPTV. IPTV connections grew 12% as the telco added 5,000 connections compared to the prior year. Additionally, the service provider is seeing more of its customers opt to purchase higher speeds, including 1 Gbps, in its FTTH-enabled markets.

“We are offering a variety of speeds, up to 1 gig service in all IPTV markets,” Villacrez said. “Residential customers continue to choose higher speeds in our ILEC markets and approximately 22% of our customers are now taking 50 megabit services or greater.”

M&A fuels fiber expansions

But government programs are only one part of TDS Telecom’s fiber expansion toolkit. The service provider is also acquiring regional assets like Sun Prairie, Wisconsin’s fiber network, which already serves 242 residents and 31 businesses.

After purchasing Sun Prairie’s network, TDS said it will invest in that network over the next 12 to 24 months. TDS anticipates building out additional fiber-based connections to the majority of the city, including residential and commercial areas. TDS is also exploring making fiber service available to future business developments within the city to help foster business growth and attract more economic development projects.

“We acquired the fiber assets of this small municipality adjacent to our operations in the Madison area this quarter, as a trial to expand beyond our ILEC footprint and leverage our strong brand reputation and marketing expertise to drive additional growth opportunities,” Villacrez said.

More recently, TDS signed a deal to acquire Crestview Cable Communications. The service provider said that this acquisition ties in well with its plans to invest and further expand its FTTH footprint in key communities such as La Pine as well as enhancing broadband speeds and modernizing its video products in Prineville and across the larger Crestview footprint.

Mixed Q2 results

TDS Telecom's overall results for the second quarter were mixed. While the telco reported strong growth in broadband and IPTV revenues, lower equipment revenue in HMS resulted in total revenues declining 6%.

Total wireline revenues rose 3% to $181 million.

Villacrez said that “wireline cash expenses were relatively flat, as the reduced cost of provisioning our declining voice services was offset by the growth in IPTV content costs.”

Here’s a breakdown of TDS Telecom’s key metrics:

Residential: Residential service revenues were $81 million, up 5% year over year from $77 million in the second quarter of 2016.

Commercial: Commercial revenues, however, declined 6% during the quarter to $50 million.

Wholesale: Wholesale services remained another bright spot, rising 10% year over year to $49 million.

Cable: Fueled by gains in its residential segment, cable revenues were $51 million, up 12% year over year. Within the cable operations, residential revenue was $41 million, while commercial was $9 million.

TDS Telecom’s parent company, Telephone and Data Systems, reported total operating revenues of $1.25 billion, down from $1.29 billion.