• Capital Expenditures: Down 24% for the full year on a consolidated level.
• Free Cash Flow: Increased in 2024; $280 million, an $88 million increase over 2023.
• Adjusted EBITDA: Up 7% for the full year on a consolidated basis; 23% increase year over year for TDS Telecom.
• Debt Reduction: UScellular paid down over $200 million in debt.
• Postpaid Handset Gross Additions: Increased year over year by 16%.
• Postpaid Handset Churn: Decreased by 14 basis points.
• Service Revenues: Declined 2% in the fourth quarter.
• Adjusted Operating Income Before Depreciation and Amortization: Declined 14% in the fourth quarter.
• Adjusted EBITDA (UScellular): Declined 11% in the fourth quarter.
• Residential Revenue Growth (TDS Telecom): Increased 6% in 2024.
• Fiber Service Addresses: Increased by 129,000 in 2024.
• Average Residential Revenue per Connection: Up 5% year over year.
• Total Operating Revenues (TDS Telecom): Increased 1% in the fourth quarter and 3% for the full year.
• Cash Expenses: Decreased 4% for the full year.
• Capital Expenditures (TDS Telecom): $324 million in 2024.
• 2025 Revenue Guidance (TDS Telecom): $1.03 billion to $1.07 billion.
• 2025 Adjusted EBITDA Guidance (TDS Telecom): $320 million to $360 million.
• 2025 Capital Expenditures Guidance (TDS Telecom): $375 million to $425 million.

• Warning! GuruFocus has detected 11 Warning Signs with TDS.

Release Date: February 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Telephone and Data Systems Inc (NYSE:TDS) achieved a 7% increase in adjusted EBITDA for the full year on a consolidated basis.
• The company successfully reduced capital expenditures by 24% for the full year, contributing to an increase in free cash flow in 2024.
• TDS Telecom expanded its fiber footprint by nearly 30% over the past three years, with plans to further increase fiber service addresses.
• UScellular improved subscriber results and executed strategic transactions, including a significant agreement to sell its wireless business to T-Mobile.
• TDS strengthened its balance sheet by paying down over $200 million in debt and improved bank leverage ratios, operating below 3 times in the second half of the year.

Negative Points

• Despite improvements, net retail subscriber additions at UScellular were still negative, highlighting ongoing challenges in a competitive environment.
• Service revenues declined by 2% in the fourth quarter, primarily due to declines in the average retail subscriber base.
• Loss on equipment sales increased by $13 million in the fourth quarter, driven by increased promotional expenses.
• TDS Telecom faced declining commercial revenue and accelerated declines in residential video and voice connections.
• The company anticipates significant cash obligations related to employee liabilities and income tax obligations from pending transactions.

Q & A Highlights

Q: Why was now the right time for Walter Carlson to take on the role of CEO, and what changes can be expected with him at the helm? A: Walter Carlson explained that the TDS Board had been engaged in succession planning for several years, and with the transformative sale of wireless operations and spectrum to T-Mobile, it was deemed the right time for a leadership change. He emphasized continuity in mission and business focus, particularly on the fiber and tower businesses, as the company exits wireless operations.

Q: Will UScellular move to AFFO reporting and consider a REIT structure for its tower business? A: Doug Chambers confirmed plans to provide AFFO reporting post the T-Mobile transaction, highlighting the need to show significant GAAP adjustments in revenue. However, LT Therivel clarified that while AFFO reporting is planned, structuring the tower business as a REIT is not currently on the roadmap due to organizational constraints.

Q: What is the timeline and rationale behind TDS Telecom's increased fiber service address target? A: Kris Bothfeld explained that the new target of 1.8 million fiber service addresses reflects the completion of two major programs: the E-ACAM program and ongoing fiber expansion. The timeline for these builds varies, with some completing in 2-3 years, and the overall goal is to be achieved over the next five years, depending on financial capacity and construction schedules.

Q: How does TDS plan to manage the increased costs associated with sales and marketing investments in 2025? A: Kris Bothfeld noted that while 2025 will see increased costs due to investments in sales, marketing, and internal construction crews, these are aimed at driving future growth. The focus is on improving customer penetration and cost efficiencies, with the expectation of future margin improvements and growth beyond 2025.

Q: How does UScellular plan to monetize its remaining spectrum, particularly C-Band, and how do potential FCC changes impact this? A: LT Therivel stated that while FCC spectrum cap changes could influence potential buyers, they are not a primary factor in UScellular's monetization strategy. The focus is on obtaining good value for the spectrum, with past sales exceeding book and market values. The company remains opportunistic, waiting for fair offers rather than relying on regulatory changes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.