• Free Cash Flow: $79 million in Q1 2025, an $18 million increase year-over-year.
• Postpaid Handset Results: Year-over-year improvements noted.
• Third-Party Tower Revenues: Increased by 6% in the quarter.
• Capital Expenditures: Declined as 5G coverage builds are largely completed.
• Debt Repayment: Approximately $1.2 billion of TDS's outstanding bank debt expected to be repaid.
• Fiber Service Addresses: Delivered 14,000 new fiber service addresses in the quarter.
• Residential Broadband Net Additions: 2,800 in Q1 2025, with 8,300 from fiber markets.
• Operating Revenues: Down 3% in the quarter compared to prior year.
• Cash Expenses: Increased by 6% or $11 million in the quarter.
• Adjusted EBITDA: Under pressure due to various factors including increased expenses.
• Capital Expenditures (Fiber): More than 80% of full-year CapEx dedicated to fiber.

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

Release Date: May 02, 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) is making progress on its 2025 priorities, including the anticipated mid-2025 closing of the transaction with T-Mobile, which is expected to enhance competitive choices and connectivity for customers.
• The company has extended near-term bank maturities and amended revolvers to ensure financial flexibility and liquidity in anticipation of the T-Mobile and UScellular transactions.
• TDS has achieved a 30% expansion in its fiber program footprint over the last three years, with further growth opportunities identified.
• UScellular reported a 6% increase in third-party tower revenues due to new co-locations and escalators on renewed leases, indicating strong demand in the tower business.
• The company generated $79 million in free cash flow in the first quarter of 2025, an $18 million increase over the same quarter last year, driven by cost optimization and reduced capital expenditures.

Negative Points

• The ongoing loss of handset customers continues to pressure service revenues, despite improvements in year-over-year handset losses.
• The competitive environment remains challenging, with aggressive promotions from competitors, including multi-year price locks and contract buyouts.
• TDS's first-quarter results were impacted by prior year divestitures, leading to a decrease in operating revenues.
• The company faces uncertainties related to regulatory approvals for the T-Mobile transaction and spectrum transactions with Verizon and AT&T.
• Cash expenses increased by 6% in the quarter, partly due to non-cash adjustments to stock-based compensation and investments in sales and marketing.

Q & A Highlights

Q: Do you expect the designated entity spectrum approval to be on a similar timeline to the whole merger approval? A: Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer, stated that the timing is uncertain and dependent on FCC approval, which is beyond their control. However, they are optimistic about closing the designated entities eventually.

Q: How should we think about the run rate of free cash flow until the transaction closes? A: Doug Chambers mentioned that while capital expenditures are down in 2025, they are not providing specific guidance on free cash flow at transaction close. However, they anticipate an excess amount of cash that will be part of the distribution if a special dividend is declared.

Q: What are your thoughts on the debt exchange offer and its impact on the purchase price? A: Doug Chambers explained that the outcome is uncertain and depends on the holders. They expect a lot of the debt to convert, especially portions held by institutional investors, due to the credit rating differential between UScellular and T-Mobile.

Q: Can you provide more details on the $100 million cost savings program by 2028? A: Kris Bothfeld, Vice President of Finance and Chief Financial Officer, stated that they expect to see some savings by the end of this year, with a ramp to $100 million by 2028. The savings will be both on the OpEx and CapEx side, and they may reinvest some of those proceeds.

Q: Why does UScellular need to remain a public entity post-transaction? A: Vicki Villacrez, Chief Financial Officer, Executive Vice President, Director, explained that the incremental cost to operate as a public company is minimal. The focus is on efficient capital use and tax flow structures, and TDS will continue to evaluate the situation.

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