U.S. Cellular Reports Fourth Quarter 2011 Results and 2012 Financial Guidance Strong smartphone sales drive higher revenues

CHICAGO, Feb. 24, 2012 /PRNewswire/ --

Note: Comparisons are year over year unless otherwise noted.

Fourth Quarter Highlights

  • Smartphones increased to 52.5 percent of total devices sold from 39.6 percent; smartphone customers increased to 30.5 percent of postpaid customers from 16.7 percent.
  • Postpaid ARPU (average revenue per unit) increased 5 percent to $53.35 from $50.99.
  • Service revenues increased 4 percent to $1,030.0 million.
  • Operating income increased $20.4 million to $16.3 million.
  • Net loss of 13,000 retail customers, reflecting loss of 20,000 postpaid customers and a gain of 7,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
  • Cell sites in service increased 3 percent to 7,882.

As previously announced, U.S. Cellular will hold a teleconference Feb. 24, 2012 at 9:30 a.m. CST.  Listen to the live call via the Conference Calls page of www.teldta.com or www.uscellular.com.

United States Cellular Corporation (NYSE: USM) reported service revenues of $1,030.0 million for the fourth quarter of 2011, versus $991.9 million for the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $2.8 million and $0.03, respectively, for the fourth quarter of 2011, compared to $7.8 million and $0.09, respectively, for the comparable period in 2010.  

The fourth quarter of 2011 was impacted by a $6.1 million adjustment that increased tax expense related to prior periods.  In the fourth quarter of 2010, income tax expense was reduced by favorable settlements of certain state income tax audits.

For the twelve months ended Dec. 31, 2011, U.S. Cellular reported service revenues of $4,053.8 million, compared to $3,913.0 million in 2010.  Net income attributable to U.S. Cellular shareholders for 2011 and related diluted earnings per share were $175.0 million and $2.05, respectively.  In 2010, net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $136.1 million and $1.57, respectively.

"In a competitive environment, U.S. Cellular was able to increase revenues and improve operating income," said Mary N. Dillon, U.S. Cellular president and CEO. "However, we fell short on customer growth, so improving our customer performance is our highest priority in 2012."

"We nearly doubled the number of smartphone customers throughout the year, with the strongest increase in the fourth quarter. More than 30 percent of our postpaid customers now have smartphones, and smartphones were more than half of our total devices sold in the fourth quarter. As a result, we saw dramatic increases in data usage and revenues which, along with growth in inbound roaming revenues, helped us increase average total service revenue per customer by six percent for the year. And while we had an overall customer loss in 2011, we had a solid holiday sales season in terms of net retail customer additions. We also kept churn stable for the year, even as we faced significant competitive pressures, and were able to better control costs by balancing promotions and smartphone subsidies.

"We're bringing even more outstanding experiences to our customers this year, rolling out 4G LTE service and devices to more than half of our subscribers by year end. And we'll introduce more devices throughout the year, to provide a wide range of options to meet all of our customers' needs.

"As I mentioned, our top priority is to achieve positive customer additions in 2012. We're focused on attracting new customers through building awareness, increasing our focus on small-to-medium business customers, and looking to expand our points of distribution. We're also committed to cost-effectively managing the network demands caused by the explosive growth in data use, and improving our profitability through several operational initiatives."

Guidance for year ending Dec. 31, 2012

This guidance represents the views of management as of Feb. 24, 2012, and should not be assumed to be current as of any other date.  There can be no assurance that final results will not differ materially from this guidance.  U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.


2012 


2011 


Estimated Results (1)


Actual Results

Service revenues

$4,050 - $4,150 million


$4,053.8 million

Operating income

$200 - $300 million


$280.8 million

Depreciation, amortization and accretion expenses, and net gain or loss




  on asset disposals and exchanges and loss on impairment of assets (2)

Approx. $600 million


$571.7 million

Adjusted OIBDA (3)

$800 - $900 million


$852.5 million

Capital expenditures

Approx. $850 million


$782.5 million



(1)

These estimates are based on U.S. Cellular's current plans, which include a multi-year deployment of 4G LTE technology which commenced in 2011. New developments or changing conditions (such as customer net growth, customer demand for data services or possible acquisitions, dispositions, or exchanges) could affect U.S. Cellular's plans and, therefore, its 2012 estimated results.

(2)

2011 Actual Results include gains on asset disposals and exchanges, net of $1.9 million. The 2012 Estimated Results include only Depreciation, amortization and accretion expenses; such estimated results do not include net gains or losses on disposals and exchanges of assets or losses on impairment of assets (since such transactions and their effects cannot be predicted).

(3)

Adjusted OIBDA is defined as operating income excluding the effects of Depreciation, amortization and accretion (OIBDA): the net gain or loss on asset disposals and exchanges (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with cash flows from operating activities, which is a component of the Consolidated Statement of Cash Flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and exchanges (if any) and loss on impairment of assets (if any), in order to show operating results on a more comparable basis from period to period.  TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual and, accordingly, they may be incurred in the future.  TDS believes this measure provides useful information to investors regarding TDS' financial condition and results of operations because it highlights certain key cash and non-cash items and their impacts on cash flows from operating activities.



Conference call information

U.S. Cellular will hold a conference call on Feb. 24, 2012 at 9:30 a.m. CST.


Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of uscellular.com. The call will be archived on the Conference Calls page of uscellular.com

About U.S. Cellular®

United States Cellular Corporation, the nation's seventh-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to 5.9 million customers in 26 states. The Chicago-based company had 8,700 full- and part-time associates as of Dec. 31, 2011. For more information about U.S. Cellular, visit uscellular.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates and expectations. These statements are based on current estimates, projections and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: The ability of the company to successfully grow its markets; changes in the overall economy, competition, the state and federal telecommunications regulatory environment, and the value of assets and investments; adverse changes in the ratings afforded the company's debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; risks and uncertainties relating to possible future restatements; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices and the mix of products and services offered by the company. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by U.S. Cellular to furnish this press release to the SEC, which are incorporated by reference herein.

For more information about U.S. Cellular, visit uscellular.com.


UNITED STATES CELLULAR CORPORATION

SUMMARY OPERATING DATA (UNAUDITED)

















Quarter Ended


12/31/2011



9/30/2011



6/30/2011



3/31/2011



12/31/2010

Total population
















Consolidated markets (1)


91,965,000



91,965,000



91,204,000



91,090,000



90,468,000


Consolidated operating markets (1)


46,888,000



46,888,000



46,888,000



46,774,000



46,546,000

Market penetration at end of period
















Consolidated markets (2)


6.4%



6.5%



6.5%



6.6%



6.7%


Consolidated operating markets (2)


12.6%



12.7%



12.7%



12.9%



13.0%

All customers
















Total at end of period


5,891,000



5,932,000



5,968,000



6,033,000



6,072,000


Gross additions


306,000



299,000



257,000



293,000



327,000


Net additions (losses)


(41,000)



(36,000)



(70,000)



(39,000)



(31,000)


Smartphones sold as a percent of
















     total devices sold (3)


52.5%



39.9%



39.6%



42.5%



39.6%

Retail customers
















Total at end of period


5,608,000



5,621,000



5,644,000



5,698,000



5,729,000


Smartphone penetration (3) (4)


30.5%



26.2%



23.1%



20.3%



16.7%


Gross additions


298,000



284,000



226,000



256,000



292,000


Net retail additions (losses) (5)


(13,000)



(23,000)



(58,000)



(31,000)



(21,000)


     Net postpaid additions (losses)


(20,000)



(34,000)



(41,000)



(22,000)



(10,000)


     Net prepaid additions (losses)


7,000



11,000



(17,000)



(9,000)



(11,000)

Service revenue components (000s)
















Retail service

$

882,091


$

871,199


$

868,630


$

864,602


$

864,905


Inbound roaming


93,353



107,810



82,760



64,386



67,545


Other


54,601



57,600



50,640



56,125



59,464

Total service revenues (000s)

$

1,030,045


$

1,036,609


$

1,002,030


$

985,113


$

991,914

Total ARPU (6)


58.13


$

58.09


$

55.69


$

54.29


$

54.37

Billed ARPU (7)


49.78


$

48.82


$

48.27


$

47.65


$

47.41

Postpaid ARPU (8)

$

53.35


$

52.41


$

51.84


$

51.21


$

50.99

Postpaid churn rate (9)


1.6%



1.5%



1.4%



1.4%



1.5%

Capital expenditures (000s)

$

276,400


$

248,000


$

162,100


$

95,900


$

203,400

Cell sites in service


7,882



7,828



7,770



7,663



7,645




(1)

Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (2) below.

(2)

Market Penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas®.

(3)

Smartphones represent wireless devices which run on an Android™, BlackBerry®, or Windows Mobile® operating system, excluding tablets.

(4)

Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(5)

Includes net postpaid additions (losses) and net prepaid additions (losses).

(6)

Total ARPU - Average monthly service revenue per customer includes retail service, inbound roaming and other service revenues and is calculated by dividing total service revenues by the number of months in the period and by the average total customers during the period.

(7)

Billed ARPU - Average monthly billed revenue per customer is calculated by dividing total retail service revenues by the number of months in the period and by the average total customers during the period. Retail service revenues include revenues attributable to postpaid, prepaid and reseller customers.

(8)

Postpaid ARPU - Average monthly revenue per postpaid customer is calculated by dividing total retail service revenues from postpaid customers by the number of months in the period and by the average postpaid customers during the period.

(9)

Represents the percentage of the postpaid customer base that disconnects service each month. This amount represents the average postpaid churn rate for each respective quarterly period.






UNITED STATES CELLULAR CORPORATION



CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS



Three Months Ended December 31,



(Unaudited, dollars and shares in thousands, except per share amounts)




























Increase (Decrease)




2011 


2010 


Amount


Percent

Operating revenues















Service

$

1,030,045



$

991,914



$

38,131



4%


Equipment sales


69,588




71,236




(1,648)



(2%)



Total operating revenues


1,099,633




1,063,150




36,483



3%

















Operating expenses















System operations (excluding Depreciation, amortization
















and accretion reported below)


242,123




216,254




25,869



12%


Cost of equipment sold


225,835




230,620




(4,785)



(2%)


Selling, general and administrative (1)(2)


469,515




474,904




(5,389)



(1%)


Depreciation, amortization and accretion


141,976




143,124




(1,148)



(1%)


Loss on asset disposals, net


3,868




2,310




1,558



67%



Total operating expenses


1,083,317




1,067,212




16,105



2%

















Operating income (loss)


16,316




(4,062)




20,378



>100

















Investment and other income (expense)















Equity in earnings of unconsolidated entities


18,277




22,900




(4,623)



(20%)


Interest and dividend income


929




824




105



13%


Loss on investment


(2,000)







(2,000)



N/M


Interest expense (1)


(13,709)




(12,637)




(1,072)



(8%)


Other, net


(631)




285




(916)



>100



Total investment and other income (expense)


2,866




11,372




(8,506)



(75%)

















Income before income taxes


19,182




7,310




11,872



>100


Income tax expense (benefit) (2)


11,307




(6,698)




18,005



>100

















Net income


7,875




14,008




(6,133)



(44%)


Less:  Net income attributable to noncontrolling interests,
















net of tax


(5,074)




(6,226)




1,152



19%

Net income attributable to U.S. Cellular shareholders

$

2,801



$

7,782



$

(4,981)



(64%)
















Basic weighted average shares outstanding


84,559




85,668




(1,109)



(1%)

Basic earnings per share attributable to















U.S. Cellular shareholders

$

0.03



$

0.09



$

(0.06)



(67%)

















Diluted weighted average shares outstanding


85,005




86,190




(1,185)



(1%)

Diluted earnings per share attributable to















U.S. Cellular shareholders

$

0.03



$

0.09



$

(0.06)



(67%)




(1)

During the quarter ended December 31, 2010, U.S. Cellular recorded adjustments to reduce its liability for transactional taxes in the amount of $5.8 million.  Of this amount, $2.7 million and $3.1 million reduced Selling, general and administration expenses and Interest expense, respectively, in the quarter ended December 31, 2010.  These transactional taxes related to periods from 2002 through the first quarter of 2010.  This adjustment reflects a change in U.S. Cellular's estimate of its liability for transactional taxes and interest and the actual amounts due and settled with the taxing authorities of taxes and interest.  

(2)

During the quarter ended December 31, 2011, U.S. Cellular recorded an immaterial adjustment to correct its liabilities and prepaid expense related to property taxes for errors occurring primarily prior to 2009. This adjustment reduced Selling, general and administrative expenses by $5.4 million in the quarter.  U.S. Cellular also recorded an immaterial adjustment to correct its deferred tax balances related to a difference in the tax basis in certain partnerships for errors occurring prior to 2009. This adjustment increased Income tax expense by $6.1 million in the quarter. U.S. Cellular also recorded other immaterial adjustments to correct errors in prior periods which, together with the foregoing adjustments, reduced Net income attributable to U.S. Cellular shareholders by a net of $6.4 million. The correction of such errors in the fourth quarter of 2011 did not have a material effect on any prior periods, the full year ended December 31, 2011, or the trend in earnings.



N/M – Percentage change not meaningful  


UNITED STATES CELLULAR CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS

Twelve Months Ended December 31,

(Unaudited, dollars and shares in thousands, except per share amounts)























     Increase (Decrease)




2011 


2010 


Amount


Percent

Operating revenues












Service

$

4,053,797


$

3,913,001


$

140,796


4%


Equipment sales


289,549



264,680



24,869


9%



Total operating revenues


4,343,346



4,177,681



165,665


4%














Operating expenses












System operations (excluding Depreciation, amortization










9%



and accretion reported below)


929,379



854,931



74,448




Cost of equipment sold


782,300



742,981



39,319


5%


Selling, general and administrative


1,779,203



1,796,624



(17,421)


(1%)


Depreciation, amortization and accretion


573,557



570,955



2,602



(Gain) loss on asset disposals and exchanges, net


(1,873)



10,717



(12,590)


>100



Total operating expenses


4,062,566



3,976,208



86,358


2%














Operating income


280,780



201,473



79,307


39%














Investment and other income (expense)












Equity in earnings of unconsolidated entities


83,566



97,318



(13,752)


(14%)


Interest and dividend income


3,395



3,808



(413)


(11%)


Gain on investment


11,373





11,373


N/M


Interest expense


(65,614)



(61,555)



(4,059)


(7%)


Other, net


(678)



72



(750)


>100



Total investment and other income (expense)


32,042



39,643



(7,601)


(19%)














Income before income taxes


312,822



241,116



71,706


30%


Income tax expense


114,078



81,958



32,120


39%














Net income


198,744



159,158



39,586


25%


Less: Net income attributable to noncontrolling interests,













net of tax


(23,703)



(23,084)



(619)


(3%)

Net income attributable to U.S. Cellular shareholders

$

175,041


$

136,074


$

38,967


29%













Basic weighted average shares outstanding


84,877



86,128



(1,251)


(1%)

Basic earnings per share attributable to












U.S. Cellular shareholders

$

2.06


$

1.58


$

0.48


30%














Diluted weighted average shares outstanding


85,335



86,518



(1,183)


(1%)

Diluted earnings per share attributable to












U.S. Cellular shareholders

$

2.05


$

1.57


$

0.48


31%