TDS Earnings Call: Progress Amidst Challenges

Telephone & Data Systems Inc. ((TDS)) has held its Q3 earnings call. Read on for the main highlights of the call.

The latest earnings call from Telephone & Data Systems Inc. (TDS) painted a picture of both progress and challenges. The sentiment was largely positive, driven by successful transitions and strategic capital allocations. However, the company faces hurdles with underperformance in fiber build, a dispute with DISH Wireless, and high SG&A expenses at Array.

Successful Transition of Array Digital Infrastructure

Array Digital Infrastructure has successfully transitioned into an independent tower company, marking a significant growth milestone. The appointment of Anthony Carlson as the new President and CEO is expected to steer the company towards further growth and stability.

Fiber Expansion Milestone

TDS Telecom has achieved a significant milestone by reaching 1 million fiber addresses, with a 19% growth in residential fiber connections since last year. This expansion is a key component of TDS’s strategy to enhance its telecommunications infrastructure.

T-Mobile Transaction Benefits

The closure of the T-Mobile transaction resulted in a $1.6 billion special dividend, which has been instrumental in aiding debt reduction and supporting a $500 million share repurchase program. This move underscores TDS’s commitment to strengthening its financial position and returning value to shareholders.

Strong Capital Allocation Strategy

TDS continues to focus on a robust capital allocation strategy, prioritizing investments in fiber, exploring mergers and acquisitions, and returning capital to shareholders through stock repurchases and dividends. This strategy is central to TDS’s long-term growth plans.

Array Spectrum Monetization Progress

Array has made significant progress in monetizing its spectrum holdings, with agreements to sell 70% of its spectrum to Verizon and AT&T for $1 billion each. This monetization is expected to bolster Array’s financial resources significantly.

Fiber Build Underperformance

Despite the achievements, TDS faces challenges with fiber build underperformance. The delivery of fiber addresses has been behind schedule, prompting the company to take corrective actions such as increasing construction crews to meet targets.

DISH Wireless MLA Dispute

Array is currently dealing with a dispute with DISH Wireless over obligations under the master lease agreement. Array is prepared to enforce its rights, indicating a potential legal battle ahead.

Low Operating Revenue

TDS Telecom reported a 3% decline in total operating revenues year-over-year, primarily due to declines in legacy cable and copper markets. This highlights the need for continued investment in newer technologies like fiber.

High SG&A Expenses at Array

Array’s SG&A expenses remain high, driven by costs associated with legacy wireless operations, spectrum management, and strategic reviews. Addressing these expenses is crucial for improving profitability.

Forward-Looking Guidance

Looking ahead, TDS has outlined ambitious plans to expand its fiber infrastructure, targeting 1.8 million marketable fiber service addresses. The company is also focused on strategic capital allocation, including a new $500 million share repurchase program, and expects to generate $2 billion from pending spectrum transactions with AT&T and Verizon.

In summary, the earnings call from Telephone & Data Systems Inc. highlighted a mix of achievements and challenges. While the company is making strides in fiber expansion and capital allocation, it must address operational hurdles and disputes to sustain its growth trajectory. Investors will be keenly watching how TDS navigates these challenges in the coming quarters.