U.S. Cellular Reports Second Quarter 2010 Results

Revises 2010 financial guidance.

Note: Comparisons are year over year unless otherwise noted.

2Q 2010 Highlights

* 7,000 retail net additions, reflecting a gain of 29,000 prepaid customers and a loss of 22,000 postpaid customers.
* Service revenues were $972.6 million.
* 33 percent increase in data revenues to $215.3 million, representing 22 percent of total service revenues.
* Retail service ARPU (average revenue per unit) was $46.81 compared to $46.82.
* Retail postpaid churn remained low at 1.4 percent; postpaid customers comprised 94 percent of retail customers.
* Expanded 3G network to cover approximately 98 percent of customers.
* 5 percent increase in cell sites in service to 7,416.
* Repurchased 395,344 common shares for $16.2 million.


As previously announced, U.S. Cellular will hold a teleconference Aug. 5 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Conference Calls page of www.teldta.com or uscellular.com.

United States Cellular Corporation (NYSE: USM) reported service revenues of $972.6 million for the second quarter of 2010, versus $974.3 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $40.8 million and $0.47, respectively, for the second quarter of 2010, compared to $81.8 million and $0.94, respectively, in the comparable period one year ago.

"We faced significant challenges from competition and the economy in the second quarter of 2010," said U.S. Cellular president and CEO Mary N. Dillon, who joined the company June 1. "Consequently, our performance results were mixed. We achieved improvements in retail net additions and customer churn, and data revenues grew by 33 percent. However, total service revenues and operating income were below our expectations. We continue to feel the impact of lower voice revenues, reflecting industry competition as more customers choose value-priced plans, and investments in the major initiatives currently underway that will enable us to build a strong foundation for future growth. As part of these initiatives, we recently implemented new programs that enable associates in our retail stores and customer care centers to better meet our customers' needs by offering more targeted service and product recommendations.

"Going forward, we plan to continue to drive data revenue growth with a strong smartphone portfolio that includes the Android™-powered phones our customers are asking for. We launched the Samsung Acclaim™ in early July, and we plan to offer the much-anticipated HTC Desire™ in August and the Samsung Galaxy S™ later this year. Now that we offer data services to the vast majority of customers across our fast and reliable 3G network, we expect sales of data-optimized devices—which were 24 percent of all devices sold in the quarter—to continue to grow rapidly. And we're excited about giving our customers even more innovative programs like Battery Swap and Overage Protection that show we have our customers' backs.

"I'm honored to be leading a company that is so thoroughly unified around its commitment to ensuring positive experiences for its customers. Although we face a number of challenges, we have a culture of success—the Dynamic Organization—that will enable us to overcome these challenges by leveraging our strengths. U.S. Cellular's customers believe that we offer something better than our competitors, and we intend to prove that they can rely on us for service and communications experiences that are above and beyond what customers have come to expect from a wireless provider."

Guidance

Guidance for the year ending Dec. 31, 2010 as of Aug. 5, 2010 is provided below, compared to previous guidance provided on May 10, 2010. There can be no assurance that final results will not differ materially from this guidance.






Current guidance


Previous guidance




Service revenues


$3,925-$4,000 million


$3,975-$4,075 million




Adjusted OIBDA(1)


$800-$850 million


$850-$950 million




Operating income


$200-$250 million


$250- $350 million




Depreciation, amortization and accretion(2)


Approx. $600 million


Unchanged




Capital expenditures


Approx. $600 million


Unchanged


(1) Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows.

(2) The 2010 estimated results include estimated losses on disposals of assets, but does not include an estimate for losses on impairment of assets, since these cannot be predicted.

The foregoing guidance represents the views of management as of Aug. 5, 2010 and should not be assumed to be accurate as of any other date. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events or otherwise.

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