Telephone and Data Systems, Inc.

Ladies and gentlemen, thank you for standing by and welcome to TDS and U.S. Cellular Fourth Quarter 2019 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 this session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jane McCann. Please go ahead.

Jane McCann Thank you, Michelle. Good morning, everyone, and thank you for joining us. I want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you will find on the investor relations sections of the TDS and U.S. Cellular websites. With me today in offering prepared comments are, from U.S. Cellular, Ken Myers, President and Chief Executive Officer. Chambers, Senior Vice President and Chief Financial Officer, and from TDS Telecom, Jim Buttman, President and Chief Executive Officer, and Vicki Villacrez, Senior Vice President and Chief Financial Officer. This call is being simultaneously webcast on the TDS 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, 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 versions in our SEC filings. PDF and U.S. Cellular filed their SEC Forms 8K yesterday, including today's press releases. And please note that we will be filing our SEC Forms 10K on Tuesday, February 25th. In terms of our upcoming IR schedule, on slide three, we'll be attending the Raymond James Institutional Investors Conference on March 2nd in Orlando. and the Morgan Stanley Technology, Media and Telecom Conference on March 5th in San Francisco. I will be doing a non-deal roadshow with Strategas Securities in Portland on March 6th. And as you know, we have an open door policy. So if you're coming to Chicago and would like to meet with members of management or the IR team, please let us know and we will try to accommodate you, calendars permitting. Also, I did want to highlight that we have yet again announced an increase in our dividend rate for 2020 this being the 46th consecutive year that we've raised our dividend. And before turning the call over, I want to remind everyone that even though FCC Auction 103 has ended, we are still in the assignment phase and we are unable to respond to any questions related to any FCC auctions. And now I will turn the call over to Ken Myers. Ken? Good morning.

I'll start on slide five. and before talking about 2019 and 2020, I first want to take a step back and look at some of our multi-year investments that have positioned us to better serve our customers into the future. Let's start with spectrum. While I cannot comment on Auction 103, I do want to point to the success we've had in Auctions 101 and 102 where we secured an important spectrum for our 5G plans. In terms of the customer experience, The introduction of unlimited plans has been a game changer for this entire industry. And as much as I still worry about the long-term economics of unlimited plans, customers do love them. They've improved overall satisfaction levels, and the migration to these higher-priced plans has helped drive increases in average revenue per user. To support the increased data usage, we have continued to invest in our network capacity. Other investments we've made include a brand refresh centered on bringing fairness to wireless and designed to broaden our appeal in the marketplace. We have also enhanced our website so that customers have a better and faster online experience, giving us a platform for future growth in this channel. Also, there are very positive developments in our roaming economics. Voice over LTE technology has broken down the old CDMA, GSM-only roaming patterns. And today, we have roaming agreements with all the big four carriers. As a result, we have seen roaming traffic and roaming revenues growing and roaming expenses declining. A very nice combination. We've also invested in our culture. We know it's our frontline associates that deliver the outstanding customer experience U.S. Cellular is known for in the marketplace. who have numerous programs to ensure our exceptionally high levels of engagement remain and our culture continues to thrive. Our associates are our secret sauce and I greatly appreciate all of their efforts. As mentioned earlier, we continue to invest in the network to meet capacity and the ongoing growth in demand and to improve speeds too. We are completing the final stages for our voice over LTE rollout and beginning our multi-year rollout of 5G. Our initial 5G rollout in 2020 will use 600 megahertz spectrum. We're planning to augment it with millimeter wave spectrum to increase speeds and support future use cases. These charts on this page show how, while meeting our customers' ever-increasing demands for data, We have, at the same time, managed the business to drive annual increases in adjusted earnings before taxes and depreciation and amortization. We'll continue to make investments for the long term, including voice over LTE, network monetization, spectrum, and 5G. Turning to 2019, slide six, we worked hard in 2019 to protect our customer base and Smartphone Connections grew by 71,000 during the year. For the full year, handset churn increased slightly from the previous year, but it's still low, indicating strong levels of customer satisfaction, especially in this ultra-competitive market. Another priority was growing revenues. We reported a 2% increase in service revenues for the year, driven by a 2% increase in post-pay average revenue per customer and a 6% increase in prepaid average revenue per customer. Factors that drove this growth include a shift in mix from connected devices to smartphones, customers migrating to higher priced service plans, and increases in the penetration of device protection plans. Also contributing to the growth in service revenues was a 13% increase in roaming revenue. For the third year in a row, we tightly managed costs throughout the company. In fact, for the year, cash operating expenses rose just four-tenths of 1%. Key to this was a company-wide initiative that has provided $500 million of cumulative cost savings over the last three years. And we believe we have more opportunities in 2020. One highlight was our ability to manage network costs, given The impact from increased data usage. To put this in perspective, for the full year, data usage grew 39%, while systems operation expenses were essentially flat. Quite an accomplishment. The combined result of all these actions is that we grew adjusted EBITDA 5% in 2019. Network quality remains core to our customer satisfaction strategy. In 2019, we continue to invest in the network to accommodate increased data usage and to enhance the customer experience. We ended the year with multi-technology available to nearly 70% of our customers. And deployment to the final markets is expected to be largely completed in 2020. And we began to deploy 5G technology in high in Wisconsin. are our first 5G markets with commercial launches planned in the next couple of months. Now I'll turn the call over to Doug Chambers who will take you through the quarterly results.