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Telephone & Data Systems (TDS) Q2 Earnings & Revenues Lag

Zacks

Telephone & Data Systems Inc. TDS reported disappointing financial results in the second quarter of 2017, wherein both the top and bottom line missed the Zacks Consensus Estimate.

GAAP net income in the reported quarter was $10 million or 9 cents per share compared with a net income of $28 million or 25 cents per share in the year-ago quarter. Quarterly earnings per share of 9 cents were well below the Zacks Consensus Estimate of 13 cents.

Revenues were down 4% year over year to $1,247 million in the reported quarter, underperforming the Zacks Consensus Estimate of $1,266.5 million. Operating expenses were $1,219 million, down 2% year over year. The company reported quarterly operating income of $28 million compared with $53 million in the year-ago quarter.

United States Cellular Division


GAAP net income of United States Cellular Corp. USM came in at $12 million or 14 cents per share compared with a net income of $27 million or 32 cents per share in the year-ago quarter. However, quarterly adjusted earnings per share of 17 cents were in line with the Zacks Consensus Estimate.

Quarterly total revenue of $963 million was down 3% year over year outpacing the Zacks Consensus Estimate of $950.6 million. Quarterly Service revenues decreased 4% to $740 million. Revenues from Equipment sales increased 2% to $223 million.

Quarterly postpaid ARPU (average revenue per user) decreased to $44.60 from $45.19 at the end of 2016. Postpaid ARPA (average revenue per account) was $119.73 compared with $120.67 at the end of 2016. Postpaid churn declined to 1.13% from 1.41% recorded at the end of 2016. Prepaid ARPU increased to $33.52 from $33.25 recorded at the end of 2016. Prepaid churn decreased to 4.93% in the reported quarter from 5.44% at 2016-end.

United States Cellular exited the second quarter of 2017 with a subscriber base of 5,023,000 compared with 5,031,000 at the end of 2016. Postpaid subscriber base totaled 4,478,000 compared with 4,482,000 at 2016-end. Meanwhile, prepaid subscriber base totaled 484,000, same year over year. In the reported quarter, United States Cellular gained a net of 23,000 postpaid subscribers compared with a net loss of 2,000 customers in the year-ago quarter. The company gained 3,000 prepaid customers in the same quarter as against 4,000 users in the prior-year quarter.

TDS Division

In the reported quarter, total revenue came in at $281 million, down 6% year over year. Within the segment, revenues from the wireline segment came in at $181 million, up 3% year over year. Cable revenues were $51 million, up 12% year over year while HMS revenues decreased 37% to $51 million.

Telephone & Data Systems currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company is a leading regional wireline voice and video service provider in the U.S. and competes with the likes of CenturyLink Inc. CTL and Frontier Communications Corp. FTR.

Cash Flow

In the second quarter of 2017, Telephone & Data Systems generated $221 million of cash from operations compared with $154 million in the prior-year quarter. Quarterly free cash flow was $106 million compared with $32 million in the year-earlier quarter.

Liquidity

Telephone & Data Systems exited the second quarter of 2017 with cash and cash equivalents of $791 million compared with $900 million at the end of 2016. Total debt was $2,440 million compared with $2,445 million at 2016-end. At the end of the second quarter of 2017, the debt-to-capitalization ratio stood at 0.34, flat with the 2016-end figure.

Subscriber Statistics

As of Jun 30, 2017, Telephone & Data Systems had 581,000 residential wireline connections compared with 590,200 in the year-ago quarter. Of the total, voice connections were 304,600, down 3.9%. Broadband Connections were 230,200, down 0.9%. IPTV connections were 46,200, up 12.1%. Quarterly total residential revenue per connection was $46.39 compared with $43.67 in the year-ago quarter.

The company exited the second quarter of 2017 with 321,200 commercial wireline connections, down 4.1% year over year. Of the total, voice connections were 150,500, down 8.2%. Broadband Connections were 21,000, down 4.1%. ManagedIP connections were 149,700, up 0.5%.

Total cable connections were 297,000, up 3.3% year over year. Of the total, Broadband Connections were 140,300, up 11.6%. Video connections were 97,900, down 4.9%. Voice connections were 58,700, down 0.3%.

Guidance for 2017 (for TDS Division)

For 2017, Telephone & Data Systems projects total operating revenue in the range of $1,200–$1,250 million. Both operating cash flow and adjusted EBITDA are estimated in the band of $300–$340 million while capital expenditure is projected at around $225 million.

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