Telephone and Data Systems, Inc.

Good morning. My name is Adam, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the TDS and U.S. Cellular First Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad, and if you would like to withdraw your question, just press the pound key. Thank you. Jane McCann, you may begin your conference.

Thank you, Adam. Good morning, everyone. Thanks for joining us. As you noticed, we released our results and posted all of our documents to the IR section of our website yesterday after the close to give you a little more time to digest. So let us know if you found that helpful. With me today and offering prepared comments are, from U.S. Cellular, Ken Myers, President and Chief Executive Officer, Campbell, Executive Vice President and Chief Financial Officer, and from TDS Telecom, Vicki Villacrez, Senior Vice President of Finance and the Chief Financial Officer. This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations websites. Please see those websites for slides referred to on this call, including non-GAAP reconciliations. We provide guidance for both adjusted operating income before depreciation and amortization, or OIDDA, and adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, to highlight the contributions of U.S. Cellular's wireless partnerships. As shown on slide two, the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the Safe Harbor paragraphs in our press releases and the extended version in our SEC filings. TDS and U.S. Cellular filed their SEC Forms 8K yesterday after the close, including its press releases, in addition to our SEC Forms 10Q. On the accounting side of the house, we adopted ASC 842 for leases on January 1, 2019 using a modified retrospective method. This new accounting standard led to the balance sheet being grossed up by about $1 billion with no impact to the income statement. Also, now that we have been selling equipment installment plans since 2014 and penetration is up to 74% of the postpaid base, We no longer find that ABPU and ABPA are as meaningful and will no longer be providing those. We will continue to provide ARPU and ARPA. Before turning the call over, I do want to remind everyone that the anti-collusion rules are still in effect and we are unable to respond to any questions related to FCC auctions. And now, I'll turn the call over to Ken Myers. Ken?

Thanks, Jane. Good morning, and thanks for your interest today. Overall, I'm generally pleased with how the first quarter has turned out. Service revenues and cash flow, better known as adjusted operating income before depreciation and amortization, are actually above our targets. Subscriber activity is a bit better than last year, but still not at the levels I'd like to see, and equipment revenues are lower than expected, consistent with industry trends and that shortfall has minimal bottom line impact. Steve will go into detail on all these in a bit. Finally, our network modernization plans are on target, albeit we are in one of the less busy quarters from a network build standpoint. Speaking of the network, I'm very proud of the job our team has done to ensure the communities and customers impacted by late winter storms and flooding have had access to vital wireless services when they were most needed. Thank you, team. Now, looking back at the priorities we set for the year, strengthening and growing our customer base continues to be our top priority. We continue to strengthen our base through initiatives aimed at improving their roaming experiences, continuing to roll out Voice over LTE, and through unique value offerings like our unlimited plans with payback. As evidence of our success, we need to look no further than churn, which remains low, and the recent growth in average revenue per user. In terms of growing our customer base, as most of you know, the first quarter tends to be a seasonally slower quarter, and our plans are built reflecting that reality. In the first quarter, we did a little bit better than last year in terms of gross and net ads, We are targeting to grow handset subscribers for the year, though we expect connected devices to continue to show the effect of penny tablets churning off. Our prepaid product line has suffered from the loss of some suppliers of lower-priced phones and gaps in the product set. Both of these issues should be behind us by the end of the current quarter, and as such, I expect a stronger second half for that product. which is in line with our full year expectations. Service revenue, especially average revenue per user, is one of the highlights of the quarter, reflecting both the success from a sales point of our total plans and the success in helping customers understand the value and importance of services like device protection, especially in a time of increasing device cost and complexity. Roaming also contributed to the year-over-year growth in service revenues. And now in the third year of our cost reduction efforts, the organization remains focused and continues to deliver. Just as one example, despite data usage increasing 37%, systems operation expense was actually down 1%. We continue to identify and work on cost savings opportunities across the company. The company's focus on these first three strategic imperatives produced strong financial results for the quarter with a $17 million increase in service revenues and a 6% or almost $13 million increase in operating cash flow. Again, adjusted operating income before depreciation and amortization. Turning to the network, we continue to believe that network performance is a key driver of our customer satisfaction, and we are investing on many fronts. First, we're investing to meet the increased amount of data usage on our network. At the end of March, 67% of our post-pay customer base was on total plans and 30% on unlimited plans. We expect data usage to continue to drive capital investment for increased capacity. Second, we are on track to roll out Voice over LTE to our New England and Mid-Atlantic markets later this year. And third, we are executing on our network modernization program, which will enable our first 5G commercial launches in 2020. We believe the investments we are making now to ready our networks for 5G will also provide benefits such as increased speed and capacity. Our first 5G market will be using our 600 megahertz spectrum with the expectation that we will augment that in the future with mid and high band spectrum. And last, to grow our business, we are expanding our footprint and edging out into northern Wisconsin and Sioux City later this year. As you can see, our network engineers are managing a number of concurrent projects that are all very important to the organization. And even with spending $102 million in the first quarter, many of these projects will be implemented in the second and so we expect our spend to ramp up throughout the year. Now with that, let me turn the call over to Steve Campbell. Steve?