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United States Cellular (USM) Q3 Earnings Top, Revenues Lag

Zacks

United States Cellular Corp. USM, a subsidiary of Telephone & Data Systems Inc. TDS, posted mixed financial results in the third quarter of 2017. While the bottom line surpassed the Zacks Consensus Estimate, the top line missed.

GAAP net loss came in at $299 million or a loss of $3.51 per share against net income of $17 million or 20 cents per share in the year-ago quarter. However, adjusted earnings per share of 11 cents were well above the Zacks Consensus Estimate of a penny per share.

United States Cellular Corporation Price, Consensus and EPS Surprise


United States Cellular Corporation Price, Consensus and EPS Surprise | United States Cellular Corporation Quote

Quarterly total revenues of $963 million declined 6% year over year. Also, it missed the Zacks Consensus Estimate of $976.5 million. Quarterly Service revenues decreased 6% to $737 million. Revenues from Equipment sales decreased 5% to $226 million.

Quarterly operating expenses increased 32% to $1,323 million. Operating loss was $360 million against operating income of $22 million in the prior-year quarter. Total cell sites in service were 6,436 compared with 6,374 at the end of 2016. Total company-owned towers were 4,051 compared with 4,015 at the end of 2016.

Cash Flow

In the third quarter of 2017, cash from operations came in at $174 million compared with $155 million in the prior-year quarter. Quarterly free cash flow was $78 million compared with $53 million in the year-ago quarter.

Liquidity

United States Cellular exited the third quarter of 2017 with cash and short-term investment of $548 million compared with $586 million at the end of 2016. Total debt was $1,644 million compared with $1,629 million at the end of 2016. The debt-to-capitalization ratio at the end of third-quarter 2017 was 0.32 compared with 0.31 at the end of 2016.

ARPU & Churn

Quarterly postpaid ARPU (average revenue per user) decreased to $43.41 from $45.19 at the end of 2016. Postpaid ARPA (average revenue per account) was $116.36 compared with $120.67 at the end of 2016. Postpaid churn declined to 1.16% from 1.41% registered at the end of 2016. Prepaid ARPU decreased to $33.12 from $33.25 registered at the end of 2016. Prepaid churn decreased to 4.75% in the reported quarter from 5.44% at 2016-end.

Subscriber Statistics

United States Cellular exited the third quarter of 2017 with a subscriber base of 5,089,000 compared with 5,031,000 at the end of 2016. Postpaid subscriber base totaled 4,513,000 compared with 4,482,000 at the end of 2016. Prepaid subscriber base totaled 515,000, compared with 484,000 at the end of 2016. In the reported quarter, United States Cellular gained a net of 35,000 postpaid subscribers compared with a net loss of 6,000 customers in the year-ago quarter. The company gained 31,000 prepaid customers in the same quarter compared with 67,000 users in the prior-year quarter.

Guidance for 2017

United States Cellular expects total operating revenues in the band of $3,850-$3,950 million. Adjusted EBITDA is projected at $740-$840 million while capital expenditure is estimated at around $500 million. The company projects adjusted OIBDA in the range of $600-$700 million.

Recent Development

United States Cellular currently holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In May 2017, the company submitted an application to the Federal Communications Commission (FCC) for a six-month special temporary authority (STA) to conduct trial runs in the 3.5 GHz band in some areas of Maine and North Carolina. Major U.S. telecom operators are currently exploring ways to commercialize usage of 3.5 GHz unlicensed wireless spectrum. Verizon Communications Inc. VZ is planning to deploy small cells, both low power and high power, using the 3.5 GHz band. Meanwhile, in March 2017, the FCC awarded AT&T Inc. T a license to test a 3.5GHz network.

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