United States Cellular ((USM)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call of United States Cellular presented a balanced sentiment, highlighting significant progress in strategic transactions and fiber expansion, while also addressing challenges in customer retention and competitive pressures. The company showcased achievements in financial flexibility and free cash flow growth, despite facing negative net additions and pricing pressures.
Progress on T-Mobile Transaction
The organization is making significant strides in preparing for a successful mid-2025 closing of its transaction with T-Mobile. This involves extensive work on financial, separation, integration, and transition activities, indicating a robust strategic direction.
Fiber Program Expansion
UScellular’s fiber program has expanded its footprint by over 30% in the last three years, with TDS Telecom delivering 14,000 new fiber service addresses in the quarter. The company remains confident in reaching its goal of 150,000 fiber addresses by the end of the year, highlighting future growth opportunities.
Increase in Free Cash Flow
The company reported a notable increase in free cash flow, generating $79 million in Q1 2025, an $18 million rise compared to the same quarter last year. This growth is attributed to effective cost optimization and stable operating expenses.
Third-Party Tower Revenue Growth
UScellular achieved a 6% increase in third-party tower revenue, driven by new colocations and escalators on renewed leases, reflecting a positive trend in its tower business segment.
Negative Net Adds in Handset Customers
Despite improvements, UScellular faced negative net additions and ongoing losses of handset customers, which continue to pressure service revenues, highlighting a critical area for improvement.
Spectrum Transaction Pricing Adjustment
The company does not expect to receive the majority of the $100 million contingent on certain performance metrics with T-Mobile, likely reducing the purchase price to closer to $4.3 billion, affecting the financial outlook of the transaction.
Lower Fiber Net Adds Due to Seasonality
Fiber net additions were lower than previous quarters due to seasonal impacts, such as cold weather affecting address delivery timing, leading to a slower ramp-up in new subscribers.
Challenge in Competitive Pricing Environment
The industry remains highly competitive, with aggressive device promotions and pricing from competitors challenging UScellular’s ability to maintain high promotional expenses, posing a significant challenge to its market position.
Forward-Looking Guidance
The company anticipates a mid-2025 closing for its transaction with T-Mobile, contingent upon regulatory approval. Financial flexibility has been enhanced by extending bank maturities and amending revolvers. UScellular expects capital expenditures to decline as planned 5G coverage builds are mostly complete, with continued investments in 5G mid-band deployment. The Tower business saw a 6% increase in revenue, and TDS Telecom is focused on delivering 150,000 new fiber addresses in 2025. The company aims for $100 million in annual cost savings by year-end 2028 to offset increased costs from fiber expansion.
In summary, United States Cellular’s earnings call reflected a balanced sentiment with significant progress in strategic initiatives and financial growth, despite challenges in customer retention and competitive pressures. The company’s forward-looking guidance indicates a strong focus on strategic transactions, cost optimization, and infrastructure expansion, setting a positive tone for future developments.