U.S. Cellular Reports Third Quarter 2010 Results

CHICAGO, Nov. 4, 2010 /PRNewswire-FirstCall/ --

Note: Comparisons are year over year unless otherwise noted.

3Q 2010 Highlights

  • Service revenues were $983.5 million.
  • 31 percent increase in data revenues to $228.9 million, representing 23 percent of total service revenues compared to 18 percent in 2009.
  • Retail service ARPU (average revenue per unit) increased to $47.12 from $46.97.
  • 10 percent increase in diluted earnings per share attributable to U.S. Cellular shareholders.
  • A net loss of 25,000 retail postpaid customers and no change in prepaid customers.
  • Retail postpaid churn improved to 1.6 percent from 1.7 percent; postpaid customers comprised 94 percent of retail customers.
  • 5 percent increase in cell sites in service to 7,524.
  • Repurchased 446,668 common shares for $19.1 million.

As previously announced, U.S. Cellular will hold a teleconference Nov. 4, 2010 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Conference Calls page of www.teldta.com or uscellular.com.

United States Cellular Corporation (NYSE: USM) reported service revenues of $983.5 million for the third quarter of 2010, versus $983.9 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $37.4 million and $0.43, respectively, for the third quarter of 2010, compared to $34.3 million and $0.39, respectively, in the comparable period one year ago.  

"Our third quarter results reflect a strong increase in data revenues driven by higher levels of smartphone penetration.  We also experienced renewed growth in roaming revenues and maintained our focus on cost control," said Mary N. Dillon, U.S. Cellular president and CEO. "These results were obtained while our organization was also focused on the execution of the October 1st launch of The Belief Project(SM), our set of industry-first programs, including One and Done Contracts and the Belief Rewards loyalty program.

"Since the launch, we've seen higher-than-expected levels of customer migration to the new, bundled Belief Plans, and we're confident that as customers experience all the benefits that are built into these plans, they will not only stay with us longer, but choose higher-value plans with additional features. As we build awareness in the wireless marketplace, we expect to see more customers switch from other carriers that don't offer the same level of value, rewards and overall customer satisfaction. And, in conjunction with the launch of the Belief Project, we upgraded our web site to make it easier for new and existing customers to select the best plans and products for them and manage their accounts online, which should stimulate sales and reduce selling costs over time.

"We've also bolstered our smartphone lineup significantly over the past few months with three new Android™-powered phones, including the popular Samsung Acclaim™, HTC Desire™ and Samsung Mesmerize™, a Galaxy S™ smartphone. We believe that this strong combination of popular phones, value-packed plans and exclusive services will help us stand out among wireless carriers and improve our growth and profitability over time."

Guidance

Guidance for the year ending Dec. 31, 2010 as of Nov. 4, 2010 is provided below, compared to the previous guidance provided on Aug. 5, 2010. There can be no assurance that final results will not differ materially from this guidance.




Current guidance

Previous guidance


Service revenues

$3,925-$3,975 million

$3,925-$4,000 million


Adjusted OIBDA(1)

$800-$850 million

Unchanged


Operating income(2)

$200-$250 million

Unchanged


Depreciation, amortization and accretion(2)

Approx. $600 million

Unchanged


Capital expenditures

Approx. $600 million

Unchanged


(1) Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (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.

(2) The 2010 estimated results include estimated losses on disposals of assets, but does not include an estimate for losses on impairment of assets, since these cannot be predicted.



The 2010 benefits and expenses associated with the Belief Project were incorporated into U.S. Cellular's 2010 financial guidance from the beginning of the year.

The foregoing guidance represents the views of management as of Nov. 4, 2010 and should not be assumed to be accurate as of any other date. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events or otherwise.

Conference call information

U.S. Cellular will hold a conference call on Nov. 4, 2010 at 9:30 a.m. CDT.


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 sixth-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to approximately 6.1 million customers in 26 states. The Chicago-based company employed approximately 8,800 full-time equivalent associates as of September 30, 2010. At the end of the quarter, Telephone and Data Systems, Inc. owned 83% of U.S. Cellular.

Visit uscellular.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

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 manage and grow its markets; the economy; competition; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded our debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by the company; and the ability to obtain or maintain roaming arrangements with other carriers. 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.


United States Cellular Corporation

Summary Operating Data





















Quarter Ended


9/30/2010


6/30/2010


3/31/2010


12/31/2009


9/30/2009


Total population


















Consolidated markets (1)



90,468,000



90,468,000



90,468,000



89,712,000



85,118,000



Consolidated operating markets (1)



46,546,000



46,546,000



46,546,000



46,306,000



46,306,000


Market penetration at end of period


















Consolidated markets (2)



6.7%



6.8%



6.8%



6.8%



7.2%



Consolidated operating markets (2)



13.1%



13.2%



13.2%



13.3%



13.2%


All customers


















Total at end of period



6,103,000



6,144,000



6,147,000



6,141,000



6,131,000



Gross additions



338,000



349,000



358,000



399,000



386,000



Net additions (losses)



(41,000)



(3,000)



6,000



10,000



(24,000)


Retail customers


















Total at end of period



5,750,000



5,775,000



5,768,000



5,744,000



5,705,000



Gross additions



301,000



307,000



305,000



354,000



351,000



Net retail additions (losses) (3)



(25,000)



7,000



24,000



39,000



(6,000)




Net postpaid additions (losses)



(25,000)



(22,000)



(9,000)



26,000



8,000




Net prepaid additions (losses)





29,000



33,000



13,000



(14,000)


Service revenues components (000s)


















Voice and other retail service


$

636,912


$

648,565


$

663,759


$

677,107


$

690,576



Data service (6)



228,854



215,271



201,280



189,759



174,286



Total retail service


$

865,766


$

863,836


$

865,039


$

866,866


$

864,862



Inbound roaming



72,901



60,902



51,942



61,728



68,767



Other



44,836



47,838



48,027



56,814



50,289


Total service revenues (000s)


$

983,503


$

972,576


$

965,008


$

985,408


$

983,918






















Divided by average customers (000s)



6,124



6,151



6,137



6,139



6,138



Divided by three months in each quarter



3



3



3



3



3





















Average monthly revenue per unit (4)


$

53.53


$

52.71


$

52.41


$

53.51


$

53.43



Voice and other retail service (4)


$

34.66


$

35.14


$

36.05


$

36.77


$

37.51



Data service (4) (6)


$

12.46


$

11.67


$

10.93


$

10.30


$

9.46



Total retail service (4)


$

47.12


$

46.81


$

46.98


$

47.07


$

46.97





















Inbound roaming (4)


$

3.97


$

3.30


$

2.82


$

3.35


$

3.73



Other (4)


$

2.44


$

2.60


$

2.61


$

3.09


$

2.73


Postpaid churn rate (5)



1.6%



1.4%



1.4%



1.6%



1.7%


Capital expenditures (000s)


$

124,700


$

133,500


$

121,500


$

189,000


$

128,900


Cell sites in service



7,524



7,416



7,310



7,279



7,161



(1) Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets).

(2) 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) Calculated by adding net postpaid additions (losses) and net prepaid additions (losses).

(4) Calculated by dividing the components of service revenues by the average customers and number of months in the quarter.

(5) Calculated by dividing the total postpaid customer disconnects during the quarter by the average postpaid customer base for the quarter.

(6) Effective for the fourth quarter of 2010, revenues from data products and services will no longer be separately disclosed as the determination of such revenues is increasingly dependent on allocations of bundled service prices to multiple bundled elements.




United States Cellular Corporation

Consolidated Statement of Operations Highlights

Three Months Ended September 30,

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































     Increase (Decrease)






2010 



2009 (1)



Amount


Percent


Operating revenues
















Service

$

983,503



$

983,918



$

(415)





Equipment sales


77,278




73,377




3,901



5%




Total operating revenues


1,060,781




1,057,295




3,486




Operating expenses
















System operations (excluding Depreciation,

















amortization and accretion reported below)


218,021




205,611




12,410



6%



Cost of equipment sold


189,291




189,354




(63)





Selling, general and administrative


446,938




454,645




(7,707)



(2%)



Depreciation, amortization and accretion


144,717




146,052




(1,335)



(1%)



Loss on asset disposals, net


1,981




2,085




(104)



(5%)




Total operating expenses


1,000,948




997,747




3,201






















Operating income


59,833




59,548




285






















Investment and other income (expense)
















Equity in earnings of unconsolidated entities


23,971




23,126




845



4%



Interest and dividend income


1,101




1,420




(319)



(22%)



Interest expense


(15,956)




(19,782)




3,826



19%



Other, net


(620)




905




(1,525)



    > (100)%






















Total investment and other income


8,496




5,669




2,827



50%




















Income before income taxes


68,329




65,217




3,112



5%



Income tax expense


25,051




25,279




(228)



(1%)




















Net income


43,278




39,938




3,340



8%



Less: Net income attributable to noncontrolling

















interests, net of tax


(5,920)




(5,606)




(314)



(6%)


Net income attributable to U.S. Cellular shareholders

$

37,358



$

34,332



$

3,026



9%


















Basic weighted average shares outstanding


85,992




86,848




(856)



(1%)


Basic earnings per share attributable to
















U.S. Cellular shareholders

$

0.43



$

0.40



$

0.03



7%




















Diluted weighted average shares outstanding


86,428




87,128




(700)



(1%)


Diluted earnings per share attributable to
















U.S. Cellular shareholders

$

0.43



$

0.39



$

0.04



10%



(1) Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.




United States Cellular Corporation

Consolidated Statement of Operations Highlights

Nine Months Ended September 30,

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































     Increase (Decrease)






2010 



2009 (1)



Amount


Percent


Operating revenues
















Service

$

2,921,087



$

2,941,720



$

(20,633)



(1%)



Equipment sales


193,444




212,062




(18,618)



(9%)





Total operating revenues


3,114,531




3,153,782




(39,251)



(1%)


Operating expenses
















System operations (excluding Depreciation,
















     amortization and accretion reported below)


638,677




600,308




38,369



6%



Cost of equipment sold


512,361




531,110




(18,749)



(4%)



Selling, general and administrative


1,321,720




1,274,261




47,459



4%



Depreciation, amortization and accretion


432,405




422,707




9,698



2%



Loss on asset disposals, net


8,407




8,641




(234)



(3%)





Total operating expenses


2,913,570




2,837,027




76,543



3%




















Operating income


200,961




316,755




(115,794)



(37%)




















Investment and other income (expense)
















Equity in earnings of unconsolidated entities</