Telephone and Data Systems, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the TDS and U.S. Cellular Third Quarter Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to turn the conference over to your speaker today, Jane McCann. Thank you. Please go ahead.

Thank you, Jody. Good morning, everyone, and thank you for joining us. With me today and offering prepared comments are from U.S. Cellular, Ken Myers, President and Chief Executive Officer, and Doug Chambers, Senior Vice President and Chief Financial Officer. From TDS Telecom, Vicki Villacrez, Senior Vice President of Finance and Chief Financial Officer. This call is being simultaneously webcast on the PDS and U.S. Cellular Investor Relations websites. Please see the websites for slides referred to on this call, including non-GAAP reconciliations. We provide guidance for both adjusted operating income before depreciation and amortization and adjusted earnings before interest, taxes, depreciation, and amortization to highlight the contributions of U.S. Cellular's wireless partnerships. As shown on slide 2, 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. including its press releases in addition to our SEC Forums 10Q. Taking a quick look at the upcoming IR schedule on slide three, Ted Carlson, Doug Chambers, and I will be out on the road in New York with Citi on November 14th. Doug Chambers and I will be doing one-on-ones at the Wells Fargo TMT Conference in Las Vegas on December 3rd. Ken Myers, Mike Irizarry, and I will be attending the UBS Global TMT Conference on December 11th. and Ken and I will be attending Citi's 2020 TMT West Conference on January 7th. And please keep in mind that TDF has an open door policy. So if you're in the Chicago area and would like to meet with members of management, the IR team will accommodate you, calendars permitting. Before turning the call over, I want to remind everyone that U.S. Cellular is registered to participate in the FCC's Auction 103 and due to the anti-collusion rules, we'll be unable to respond to any questions related to FCC auctions. Now I'd like to turn the call over to Ken Myers.

Thank you, Jane. Good morning and thanks for joining us today. I know the headlines of the quarter look like another quarter of revenue and adjusted EBITDA growth, albeit with a small loss in post-pay handset additions, but in fact it was much, much more than that. In fact, it was a very busy quarter for us. First, the quarter started off rather soft, but we picked up nice momentum throughout the quarter as some of the many initiatives we've been working on were implemented and progress was made on others. Subscriber activity picked up and improved month to month, with positive net post-pay handset additions in September and again in October. As we head into the busy holiday season, I'd like our position in the trends that we've seen. In the quarter, Service revenues grew 2%, driven by positive trends in average revenue per user and roaming revenue. Operating cash flow or operating income before depreciation and amortization grew 6%. One of those major initiatives was the completion of a refreshment of our brand and the launch of a new tagline, Bringing Fairness to Wireless. Our new brand positioning nicely captures all that U.S. cellular technology has stood for for years in a fresher, more modern look designed to broaden our appeal in the marketplace. This Bringing Fairness to Wireless campaign is the umbrella philosophy that covers our approach to public policy, the mindsets of our team of incredibly engaged associates, and our approach to the marketplace. Another significant endeavor was work to deliver new, Web-based technology that powers our online customer activity, including via their mobile devices. This is a major plumbing project that now allows our customers to have a better and faster online experience today and provides the platform for future growth in this channel. Another unexpected effort resulted when competitive pricing changed in the quarter. The team was able to respond very quickly, limiting the competitive impact of the change. I must admit I remain amazed and baffled at the pricing strategies at play in this industry. Our changes lowered pricing on select plans and implemented congestion-based controls instead of hard caps on unlimited plans. As previously discussed, customers are continuing to hold onto their expensive devices longer, holding down equipment sales. Our upgrade rate remained low at 6% in the quarter. Also, device protection revenues grew about 10% year over year, and post-paid subscriber penetration on that product is now at 48%. Driving revenue remains a strategic priority and is key to our ability to improve profitability. At the end of the quarter, 71% of our post-pay customer base is on our new total plans, helping to drive a 2% increase in average revenue per user, also contributing to that ARPU increase for a higher mix of smartphones relative to feature phone and connected devices, and the growth in the device protection revenues that I mentioned. The prepaid segment improved, especially average revenue per user and churn, though prepaid still remains just about 10%, of our business. Roaming was a highlight, with benefits showing on both the revenue side due to traffic growth and the expense side where total cost fell 9%. The organization continues to manage its costs. Again, data usage increased 36% this quarter, while true systems operating expense, excluding the roaming benefit I talked about, increased just 2%. However, we did see higher G&A this quarter as a result of a number of the IT-related projects and higher bad debt expense. Turning to the network, our 5G and network modernization initiatives have been progressing nicely, and we announced that we would launch 5G services in Iowa and Wisconsin during the first quarter of 2020. Also, as we have readied our network for 5G, customers with 4G devices are experiencing better network quality and improved speeds. In addition, we'll continue to roll out Volti technology. We now reach 67% of our subscribers with Volti services in Iowa, Wisconsin, California, Washington, Oregon, New England, and the Mid-Atlantic areas. We will continue to roll out Volti to the remaining markets over the next year or so. Finally, as you may have heard at the CTIA GSMA show in Los Angeles last week, or seen on our recent filings of the FCC, I believe it's critical for the industry to get access to significant amounts of mid-band spectrum quickly. The rest of the world is deploying on mid-band today, and failure or delays in deploying mid-band spectrum in the United States will not only impact our customers to Rome and other countries, but will severely inhibit carriers' ability to deliver meaningful 5G services outside the larger cities. While I recognize solutions are not easy and I applaud the FCC's efforts to navigate the maze of difficult policy and technical issues involved, it is vitally important that we make even more progress in this area quickly. With that, Let me turn the call over now to Doug Chambers, who will update you on the financial results. Doug?