Telephone and Data Systems, Inc. (
Morgan Stanley Technology, Media & Telecom Conference
February 28, 2012 5:45 PM ET
Dave Wittwer – CEO
Steve Campbell – CFO, US Cellular
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Good afternoon everybody. It's my great pleasure to welcome TDS and US Cellular here today. On my left we have Dave Wittwer, CEO of TDS; we have Steve Campbell, the CFO of US Cellular and Jane McCahon, Head of Investor Relations. Thank you for being here today.
Before we get started just want to please note that all-important disclosures including personal holding disclosures and Morgan Stanley disclosure appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures. So if we can start off and maybe this one for both Dave and Steve, 2012 priorities (inaudible) prior to hosting there is a lot of initiative you have that side and then obviously on the wireless side you've been looking at LTE rollout, you have some heavy investment there. So if we could just hit some of the key points and then we'll take it from there.
From a TDS teleconference perspective, couple of key strategic imperatives. One is enabling the network for IPTV. We have plans in 2012 to get about 19 markets that will represent about a third of our residential customers. We think IPTV is important because of the broadband share that it brings with it; it’s a full share that it brings with it as well as the revenue growth.
Secondly as to execute on our hosted and managed service, expansion strategy, we think that's a great place to be in. We've made three acquisitions to date relatively modest but we continue to expect, continue to add and we like the growth characteristics, we like the synergies of the business and then lastly is to continue to manage the regulatory environment we exist even though new legislation has been passed, the challenge now is how it ultimately gets implemented and continue to shape that policy. So those would be the three primary initiatives.
So for US Cellular I will build on what Dave said I think, certainly the regulatory area is an important influence on our business and so it's something that we'll need to continue to monitor it as well as advocate on issues that are of importance to the company. One of the impediments that we'll have to grow this year of course is that we're expecting a step down receipts from the universal service funds. There as you probably know the USF reform order creates a couple of new funds that represent potential sources of revenue to US cellular but at this point they are still a lot of work to be done by the SEC, its defining the rules and the regulations surrounding those funds. So to what extent we would be able to get receipts to offset the decline and USF running is I think something unknown at this point, it's something that we'll certainly be pursuing this year.
But in terms of the base business, I would say there are a couple of strategic imperatives for US cellular this coming year and the first clearly has to be getting the company growing again in terms of subscriber growth. That is probably the number one challenge in area focus for the company. We'll be addressing that in a number of ways. One is through enhanced marketing and advertising and making sure that we are really delivering the message to both existing and potential customers and the unique value that US Cellular offers through its network. Its belief plans and other unique features.
A second major focus Simon referred to it as your LTE deployment. So we began fielding the LTE network in 2011 and our Wave 1 launch as far as the network has actually been ready in December and is up and running and will be introducing our first LTE capable devices or smartphones and a tablet in the March April timeframe. So we'll be launching services that time.
2012 will also be a big year as far as the Wave II deployment. We'll be following the network and launching additional devices over the course of this year such that by the end of the year we expect to have about 50 to 55% of our subscribers covered with LTE service and that initiative will obviously continue on into 2013.
Beyond LTE, the company has a couple of other major initiatives underway that we refer to as our other enablement initiatives and the biggest there is as we disclosed in the past a new billing and operational support system that we're investing this year. So that will be another area of focus for us.
So Dave if we can come back to IPTV, your first and sort of focused area. Can you talk about the architecture of the plant that you and sort of Steve you are building to and how do you balance the economics. There is obviously revenues but there is content tasks when you get churn reduction from what you're sort of seeing what you're modeling so far. How is that all looking?
Sure. So, we started this about three years ago on a couple of markets in Tennessee over a fiber to the home network, a complete overbuild. And what we experienced when we looked at the original plans we've been able to achieve about 30% market share. In about two and a half year period. The majority of that market share came from the cable competitor rather than coming from the satellite TV provider which is good for us. So we're very encouraged by that kind of market share improvement. We did that without any significant promotional dollars in terms of significant front end loads. We found that the HD penetration was higher than we had originally contemplated and the DVR penetration was higher than we had originally contemplated. We've been in this business before.