United States Cellular ((USM)) has held its Q2 earnings call. Read on for the main highlights of the call.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 55% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The recent earnings call for United States Cellular painted a largely optimistic picture, underscored by several significant achievements. The company successfully completed the sale of its UScellular wireless business to T-Mobile, received a credit rating upgrade, and made notable strides in expanding its fiber business. However, these positives were tempered by ongoing challenges in legacy markets and costs related to operational adjustments.
Successful Sale of UScellular
The highlight of the earnings call was the completion of the $4.3 billion sale of UScellular’s wireless business and certain spectrum assets to T-Mobile. This strategic move unlocked significant value for shareholders and strengthened the balance sheets of both Array and TDS, marking a pivotal moment in the company’s financial strategy.
Special Dividend Declaration
In a move to further enhance shareholder value, Array’s Board declared a special dividend of $23 per share. This decision will allow TDS to receive approximately $1.63 billion, which will be used to reduce debt and achieve annual interest savings of $80 million, showcasing a strong commitment to financial health and shareholder returns.
Credit Rating Upgrade
Reflecting the company’s robust financial position and positive business outlook, S&P upgraded TDS’ credit rating to BBB- from BB. This upgrade underscores the company’s valuable assets and strong balance sheet, providing a solid foundation for future growth.
Fiber Business Expansion
TDS Telecom reported impressive progress in its fiber business, delivering 27,000 new fiber service addresses and targeting 150,000 by 2025. With a 19% growth in total fiber connections, the company is on track to reach 1 million marketable fiber service addresses, highlighting its commitment to expanding its fiber footprint.
Implementation of New Master License Agreement
Array commenced a new Master License Agreement with T-Mobile, which includes 2,015 colocation sites for 15 years. This agreement is expected to significantly bolster tower business revenue and profitability, marking a strategic shift towards strengthening its tower operations.
Legacy Markets Revenue Decline
Despite the positive developments, the company faced a 1% year-over-year revenue decline in legacy markets. This was primarily due to a $4 million decrease from market divestitures and ongoing declines in legacy cable and copper markets, posing a challenge to the company’s traditional revenue streams.
Operational Adjustments and Costs
As Array transitions from a wireless service provider to an independent tower company, it will incur additional wind-down costs through 2026. These costs are expected to negatively impact profitability and adjusted EBITDA, reflecting the financial implications of this strategic shift.
Forward-Looking Guidance
Looking ahead, TDS and Array provided significant updates on their strategic initiatives and financial guidance. The successful closure of the UScellular sale is expected to unlock substantial shareholder value and reduce TDS’s average cost of debt. TDS Telecom aims to achieve 150,000 new fiber service addresses by year-end, while Array focuses on enhancing its tower business with a new master license agreement. The anticipated $2 billion from spectrum sales to AT&T and Verizon is set to further bolster their financial position.
In conclusion, the earnings call for United States Cellular highlighted a positive outlook with strategic achievements and forward-looking initiatives. The successful sale to T-Mobile, credit rating upgrade, and fiber expansion are key takeaways, although challenges in legacy markets and operational costs remain. Overall, the company appears well-positioned for future growth and financial stability.