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Telephone & Data Systems (TDS) Q3 Earnings and Revenues Lag

Telephone & Data Systems Inc. TDS reported disappointing financial results in the third quarter of 2017, wherein both the top and the bottom line missed the Zacks Consensus Estimate.

GAAP net loss in the reported quarter was $181 million or a loss of $1.64 per share against net income of $13 million or 12 cents per share in the year-ago quarter. Quarterly adjusted earnings per share of 8 cents were well below the Zacks Consensus Estimate of 17 cents.

Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise

 

Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise | Telephone and Data Systems, Inc. Quote

Revenues declined 5% year over year to $1,251 million in the reported quarter, underperforming the Zacks Consensus Estimate of $1,275 million. Operating expenses were $1,483 million, reflecting an increase of 16% year over year. The company reported quarterly operating loss of $360 million against an operating income of $22 million in the year-ago quarter.

United States Cellular Division

GAAP net loss of United States Cellular Corp. USM 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, quarterly adjusted earnings per share of 11 cents were well above the Zacks Consensus Estimate of a penny per share.

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 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.

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.

TDS Division

In the reported quarter, total revenues came in at $285 million, reflecting a decline of 1% year over year. Within the segment, revenues from the wireline segment came in at $179 million, up 2% year over year. Cable revenues were $52 million, reflecting an increase of 12% year over year while HMS revenues decreased 18% to $56 million.

Telephone & Data Systems currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company is a leading regional wireline voice and video service provider in the U.S. and competes with the likes of CenturyLink Inc. CTL and Frontier Communications Corp. FTR.

Cash Flow

In the second quarter of 2017, Telephone & Data Systems generated $263 million of cash from operations compared with $238 million in the prior-year quarter. Quarterly free cash flow was $107 million compared with $93 million in the year-earlier quarter.

Liquidity

Telephone & Data Systems exited the third quarter of 2017 with cash and short-term investment of $884 million compared with $900 million at the end of 2016. Total debt was $2,463 million compared with $2,445 million at the end of 2016. At the end of the third quarter of 2017, the debt-to-capitalization ratio was 0.35 compared with 0.34 at the end of 2016.

Subscriber Statistics

At the end of the third quarter of 2017, Telephone & Data Systems had 575,300 residential wireline connections compared with 590,900 in the year-ago quarter. Of the total, voice connections were 298,200, decreasing 5.2% year over year. Broadband Connections were 229,900, down 0.9% year over year. IPTV connections were 47,200, up 8.3% year over year. Quarterly total residential revenues per connection were $46.07 compared with $44.25 in the year-ago quarter.

The company exited the third quarter of 2017 with 315,300 commercial wireline connections, down 5.6% year over year. Of the total, voice connections were 146,900, down 8.7% year over year.  Broadband Connections were 20,900, declining 3.7% year over year. ManagedIP connections were 147,600, down 2.6% year over year.

Total cable connections were 300,600, up 3.3% year over year. Of the total, Broadband Connections were 143,800, up 10.4% year over year. Video connections were 97,900, down 3.2% year over year. Voice connections were 58,900, down 1.5% year over year.

Guidance for 2017 (for TDS Division)

For 2017, Telephone & Data Systems projects total operating revenues in the range of $1,125 – $1,150 million. Adjusted EBITDA and adjusted OIBDA are expected in the band of $300 – $340 million while capital expenditure is projected at around $225 million.

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Telephone and Data Systems, Inc. (TDS): Free Stock Analysis Report
 
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United States Cellular Corporation (USM): Free Stock Analysis Report
 
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