U.S. Cellular is getting greater value from its tower portfolio as “network guys have done a good job managing backhaul investments,” says U.S. Cellular President/CEO Ken Meyers. He expects to see additional change as more of the company’s traffic moves off of CDMA, he said during a call with analysts following Friday’s 4Q earnings announcement.
Asked by one Wall Street analyst whether the company is considering making changes to its 4,040 owned tower portfolio (such as divesting some of them) to get even more money out of the structures, Meyers said: “Towers are still a major, major underpinning to our network quality” as U.S. Cellular studies how to migrate from LTE to VoLTE in a cost-effective way. “Going from CDMA to LTE we’ve had to install equipment on top of towers.” That means a tower top “is not something we’re willing to rent out. The primary purpose of our towers,” Meyers said “is to maintain network quality.” The company will optimize its towers, but only if that would not “get in the way of our network strategy.”
As an example, Meyers said, say U.S. Cellular’s towers brought in a $60 million revenue stream. If that grew to by another $12 million, “it would cost a lot more than that $12 million on the network side to deliver the quality we need if tower rent takes priority over the network.”
United States Cellular Corporation (NYSE:USM) reported total operating revenues of $991 million for the fourth quarter of 2016, versus $987 million for the same period one year ago. Net loss attributable to U.S. Cellular shareholders and related diluted loss per share were $6 million and $0.07, respectively, for the fourth quarter of 2016, compared to $2 million and $0.02, respectively, in the comparable period one year ago.
U.S. Cellular reported total operating revenues of $3,939 million and $3,997 million for the years ended 2016 and 2015, respectively. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $48 million and $0.56, respectively, for the year ended 2016, compared to $241 million and $2.84, respectively, for the year ended 2015.
For the full year 2016, after adjusting for discrete items, U.S. Cellular generated Operating Cash Flow of $631 million, up two percent from 2015 and Adjusted EBITDA of $829 million, up four percent from 2015. Discrete items include a $58 million revenue benefit in 2015 related to the discontinuation of the loyalty rewards program and 2016 includes a $13 million expense related to the discontinuation of a naming rights agreement. A reconciliation can be found on the Company’s website.
“2016 was a year of continued progress for U.S. Cellular,” said Kenneth R. Meyers, U.S. Cellular President and CEO. “Our local and personal approach to providing an exceptional customer experience continues to stand out, generating consistently low-levels of phone churn each quarter. As some of the most competitive pricing promotions persist across the industry, we have worked to balance growth and profitability, which enabled us to hit our profitability targets, albeit with slower customer growth. Greater smartphone adoption and increased data usage, combined with strong cost management, helped to offset some of the competitive pricing pressures throughout the year.”
U.S. Cellular is working with all of its vendors to sharpen all types of spending, such as ad spend, for example, handset reverse logistics and more “to continue to optimize our distribution,” he said during Friday’s earnings call. The company’s tower revenue is up eight percent year-over-year.
February 27, 2017
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