Array Digital Infrastructure Inc (AD) Q4 2007 Earnings Report, Transcript and Summary

Good morning. My name is Brooke and I will be your conference operator today. At this time, I would like to welcome everyone to the TDS and U.S. Cellular Year-end Earnings Conference Call. [Operator Instructions]. Thank you. I will now turn the call over to Mr. Mark Steinkrauss, Vice President of Corporate Relations. Thank you. Mr. Steinkrauss, you may begin your conference.

Okay. Thank you, Brooke, and good morning everybody. Thanks for joining us again. With me this morning are Ken Meyers, Executive VP and CFO of TDS; Steve Campbell, Executive VP, Finance, CFO and Treasurer at U.S. Cellular; Bill Megan, Executive VP Finance and CFO with TDS Telecom. And also joining me are Jack Rooney, CEO, U.S. Cellular and Jay Ellison, Executive VP and Chief Operating Officer of U.S. Cellular. A replay of this teleconference will be available today at 1:00 PM Chicago time and will run through midnight, Tuesday, March 4. The replay number is 800-642-1687, pass code 3762-1356. For international callers the number is 706-645-9291, same pass code. This call is being simultaneously web cast over the Investor Relations sections of both the TDS and U.S. Cellular websites. The web cast will be available for the next two weeks after which it will be available on the conference call archive. Please recall, archived calls are not updated. We’ll be making some forward-looking statements today, so please review the Safe Harbor paragraphs in our releases and more extended versions on our websites as well as in our filings with the SEC. Shortly after we released our earnings results on Friday afternoon, TDS and U.S. Cellular filed 8-Ks. The 8-Ks include both press releases we issued on Friday afternoon and some additional information. I encourage you to take a look at these documents. Also, on Friday afternoon, both Companies filed their SEC Form 10-Ks for the 2007 calendar year. Both press releases have been posted to the TDS Internet home page and U.S. Cellular has posted their release to their website as well. You will also find posted on our websites, additional information of reconciliation of any non-GAAP financial measures that may be used by management when discussing the operating data during today’s teleconference as well as the Company's guidance for 2008. All of this information is now included in a separate page entitled Guidance and Reconciliation, to make it easier to find. The information can also be accessed on the conference call page of the Investor Relations sections of both websites. Please note that the comparisons made by the speakers today in their prepared remarks are fourth quarter year-to-year unless otherwise indicated. If you have an interest in meeting with us please know that we will be attending the Raymond James 29th Annual Institutional Investment conference, actually tomorrow, in Orlando. And later this week we’ll be meeting with investors on Wednesday and Thursday in New York City. So, if you’d like to get together with us, just give me a ring. Let me call your attention to a line item on pages six and seven of the U.S. Cellular release and pages eight and nine of the TDS release. It’s entitled, quote, ”loss on asset disposal/exchanges.” The item is composed principally of three items. Normal gains and losses related to the disposal of assets, trade in of older assets, replacement assets and other retirements. Secondly, a $20.8 million loss related to the exchange of assets between U.S. Cellular and Sprint recorded and announced in December and $14.6 million reflecting the results of a physical inventory related valuation and reconciliation. There’s more information about all of this in the 10-K and you can take a look at it there. All of the items are non-cash. As you know, FCC Auction 73 is still underway. U.S. Cellular is participating in the auction indirectly through its interest in King Street Wireless. As a consequence, we will not entertain any questions of any sort pertaining to the auction. When the auction is complete and information about the results is public, we will be pleased to respond to your questions at that time. So, thank you for helping our club with this. And now I'm going to turn the call over to Ken Meyers.

Thank you, Mark. Good morning and thanks for joining us today. I have just a few comments I'd like to make before turning the call over to Steve Campbell and Bill Megan, who will cover the operating results in detail, leaving plenty of time for your questions. The fourth quarter continued the trend seen throughout the year. Strong year-over-year growth in wireless revenues, good wireline cost control and substantial increases in operating cash flow. For the full year, TDS produced a 10.6% increase in revenue a 16% increase in operating cash flow and 27.9% increase in operating income. We ended the year with a very strong balance sheet, with nearly $1.2 billion in cash, all of which is in treasuries and virtually unused credit facilities, giving us a great deal of financial flexibility. During the last quarter, TDS bought back nearly 594,000 special common shares. Since June, when we initiated our repurchase program, we have acquired almost 2.1 million shares, spending about $127 million under the existing $250 million three-year authorization. Also, I'm pleased to report that we continue to make progress strengthening our reporting controls and processes. We have now re-mediated two material weaknesses. This work is not over, we still have one more to fix and we will be continuing to refine processes as we go forward. The 10-Ks we filed on Friday have all the relevant details. In summary, 2007 was a very good year with strong growth in key financial metrics and we approach 2008 with the same customer commitment and customer focus that drove those 2007 results. Now let me turn the call over to Steve Campbell, the CFO at U.S. Cellular. Steve?

Thank you, Ken and good morning, everyone. I'm very pleased to report that U.S. Cellular finished the year 2007 with another quarter of solid results. At December 31st, our customers totaled 6.1 million, up 5.3% year-over-year. And our retail customers totaled 5.6 million, up 6.5%. Retail net activations for 2007 were fairly strong, up 12.1% year-over-year although we did experience some softness in the fourth quarter and achieved less than expected results. As you probably know, the fourth quarter was a very challenging one for the industry, with several competitors in the retail postpaid segment, the part of the market where we focus, reporting year-over-year declines in net activations. At December 31st, post paid customers were approximately 95% of our total retail customers. Postpaid net activations for the quarter were 70,000 compared to 94,000 last quarter. Total retail net activations for the quarter were 64,000 compared to 98,000 last year. Retail postpaid churn rate for the quarter was again very solid at 1.5%, in line with the prior year, a tick better than the 1.6% reported for the third quarter of 2007. We also achieved nice growth in average monthly revenue per customer. ARPU rose to $52.46 for the quarter up 9% year-over-year. Service revenues for the fourth quarter were $958 million, up 15% from the prior year. The increase in service revenues was driven by growth in the subscriber base as well as by higher ARPU as I just mentioned. Key drivers of our growth in ARPU were the popularity of our national wide area, family calling plans and higher data revenues. Data revenues for the quarter grew 65% to $108 million and represented just over 11% of service revenues. Other factors included increase in inbound roaming revenues, universal service fund contributions charged to customers and ETC revenues. Turning to costs and expenses. A net equipment subsidy for the quarter was $104 million, up 28%. Factors in this increase included both modestly higher volume as well as a higher net subsidy per unit reflecting both the shift in mix towards higher end handsets that enable advanced data services and very aggressive promotions across the industry. We've experienced very solid growth in ARPU this year and in data revenues in particular, and the equipment subsidy as a cost of realizing those additional revenues. System operations expenses for the fourth quarter were $188 million, up 10%. The increase was driven by an 8% increase in the number of cell sites in service and increase in off network usage by our customers and a 21% increase in average minutes of use per customer. Factors that helped to hold down costs in this category were a lower cost per minute of use on our own network and a decrease in outbound roaming costs per minute as we benefited from lower negotiated rates. Selling, general and administrative expenses for the… were $114 million, up 11.6%. Key components of the increase were higher selling expenses associated with the growth in customers and revenues and higher advertising expenses primarily related to media purchases. We've mentioned in previous quarters that we expect that the advertising expenses would trend higher in the second half of the year. Another significant factor was higher G&A expenses related to universal service fund contributions. However, remember that USF contributions are largely offset in revenues. Operating cash flow for the quarter totaled $253 million up 21%. The operating cash flow margin was 26.4% of service revenues up 1.2 percentage points from 2006. Below the line, investment and other income for the quarter was $10 million, down from $35 million in 2006. The decline is due primarily to the absence of two items that provided a net benefit to our 2006 results. The first item was a gain of $70 million related to the sale of the Company’s interest in Midwest Wireless communications to Alltel. That gain was offset by a loss of $46 million representing the fair value adjustment on derivative instruments. As a reminder, U.S. Cellular’s derivative instruments were settled during the second quarter of 2007. Equity and earnings of unconsolidated entities for the quarter was approximately $20 million, including $17 million from the Company's investment in Los Angeles partnership. And net income for the quarter was $29.2 million or $0.33 per diluted share. Next I'd like to make just a few summary comments about our outstanding performance for the full year of 2007. Retail net activations were 333,000, up 12% year-over-year. In the retail postpaid segment, where we focus, net activations were 351,000, up 24%. The retail postpaid churn rate was 1.4% compared to 1.6% in the prior year. ARPU grew 8% to $51.13. Service revenues were approximately $3.7 billion, up 14.5% and data revenues grew to $368 million, an increase of almost 70%. Operating cash flow totaled $1.33 billion, up 19% and the operating cash flow margin was 28.1% of service revenues, up 1.2 percentage points to 26.9% in 2006. U.S. Cellular achieved these strong results in 2007 because we executed well across our entire organization to deliver the very best in customer satisfaction at every customer touch point. Existing and potential customers appreciate the value inherent in our suite of national, wide area and family calling plans that were introduced in the second half of 2006 and continue to purchase and migrate to them faster than we anticipated. At year-end, roughly 60% of our postpaid customers were on these plans. There also was high demand for our expanding suite of Easyedge Data Services, such as My Contacts Backup, Tone Room, and Your Navigator. As I just mentioned, our data revenues were up almost 70% year-over-year. Our handsets provide customers with a wide range of desired style and functionality and have contributed to the significant growth in our data revenues. Over the course of 2007, we introduced 21 new devices including new smart phone offerings such as the Motorola Q and we're excited about the introduction of the BlackBerry Pearl this quarter. We know from our surveys and other customer related research that overall network quality remains the number one criterion that drives customer satisfaction and we're committed to ensuring that our customers have access to a superior network. And our associates are delivering on this commitment. In 2007 we topped the J.D. Power and Associates call quality rankings in the North Central region for the fourth consecutive time, which speaks to the value of the significant investments we make in our network. During 2007, we added 458 new cell sites to the network, which now has almost 6,400 total sites in service. And in another proof point of our strong customer focus, PC Magazine readers voted U.S. Cellular the top contract/postpaid wireless provider in 2007. As I indicated U.S. Cellular is generating strong cash flow from operations. For the year operating cash flow was $1.33 billion. The Company used this strong cash flow to fund capital expenditures of $565 million, repaid notes payable of $35 million and repurchase 1.06 million of its common shares at a final net cost of $83 million. At December 31st, the Company's revolving credit line of $700 million was essentially unused and its cash balance was $205 million. U.S. Cellular did not launch any significant new markets during 2007 and has no current plans to do so in 2008. Instead we expect to remain focused on increasing customers, revenues and profitability in our existing markets. However, we will, of course, continue to consider attractive opportunities to expand and enhance the quality as we did with the acquisition of the Iowa 15 market and the exchange of licenses with Sprint Nextel in 2007. All in all, it was a very strong quarter and full year for U.S. Cellular due to the significant efforts of our 8,400 associates who are dedicated to providing the ideal experience to every… at the time of every content. The final topic that I'd like to cover this morning is our guidance for the full year 2008, which is contained in Friday afternoon’s press release. In summary, for 2008, we expect growth in customers, service revenues and operating cash flow. We intend to continue our focus on improving operating cash flow margin as we did in 2007. However, as you well know, there is significant uncertainty in both the overall economic environment and the wireless industry. Our efforts to grow the business and improve its profitability obviously will be affected by economic and industry developments and by our ability to anticipate and respond effectively. That concludes my prepared remarks this morning. Now I’ll turn the call over to Bill Megan who will discuss the results for TDS Telecom. Bill?

Thank you, Steve. Good morning, everyone. I will begin by discussing Telecom's operating results for the quarter, then update you on several of our operational initiatives and finally provide our guidance. For the quarter, combined ILEC and CLEC revenues declined 3%, while operating cash flow increased by 13%. The percentage decline in revenues was roughly even in both our ILEC and CLEC operation. For the ILEC, the decline was primarily due to lower local service revenues in compensation for network access including compensation from state and national revenue pools, partially offset by growth in data revenues related to DSL and long distance services. For the CLEC, there was a small decline in network access revenues and growth in our commercial segment was offset with attrition in the consumer segment as we had shifted our focus in acquiring new customers to the commercial space in most of our CLEC markets. The improvement in operating cash flow and operating cash flow margin has been driven by cost reduction initiative, including combining the support functions of ILEC and CLEC. As we've integrated those functions, we have been able to lower support headcount by 8% over the past year, also maintaining high levels of customer satisfaction. ILEC access line equivalent, access lines adjusted to reflect voice grade equivalents grew 1%; physical access lines declined by 5%. This is an acceleration for us. For full year 2006 we ran about 3% line loss. As we discussed in our second quarter call in mid 2007, we have seen a pick-up in cable and wireless competition. A portion of the line loss is due to our customers taking DSL service and removing their second line. Line two losses over the past year have been 5,700 of the 31,000 lines lost year-on-year. That transition for our customers to move to high-speed data service is a very good development though it does adversely impact this line metric. The line two losses have been fairly consistent for the past several years and we anticipate it continuing. Now, with respect to our data service, ILEC DSL customers increased by better than 38,000 or 36%. Penetration of our physical lines is now at 24.5%. Many of our DSL customers migrate from dial-up Internet service and that accounts for a good portion of the decline in dial-up service that we have reported. We continue to invest in our network. Capital expenditures were $128 million for the year on a consolidated basis, roughly flat with 2006. With this investment we are enhancing our broadband service. 86% of our ILEC lines are equipped for DSL service, with 71% of our customers taking speeds of greater than 1.5 megabits and 35%, speeds from 3 megabits to 15 megabits service. We have also been developing a fixed wireless capability in several of our CLEC markets. And our newest edition is WiMAX service over 2.5 gigahertz license spectrum in Madison, Wisconsin. We are also continuing to strengthen our relationship with our customers by offering a full array of voice broadband and video services. Our customers have responded favorably to our bundled service offering. Penetration of voice packages to residential customers in our ILEC markets grew to 27.6% during the fourth quarter of 2007. Our Dish Triple Play campaign continues to go well as well and we grew Triple Play subscribers by 6,600 in the quarter. We have implemented additional initiatives to help mitigate churn, including net sales program, using a specialized sales team armed with a variety of tools including discounts, bundles and other promotion. We have also a new mover program targeting referrals from builders, developers, real estate agents and other local contact to encourage new customers moving into our territory to take our service. To summarize the results for 2007, we saw an increasing competitive intensity and that has put pressure on our lines and on our revenues. We are counter-attacking with Triple Play Bundles and promotions and have had success adding data and video customers. We continue to invest in our network and this is driven by our belief that with a competitive network and a robust service offering we can win as customers choose their high-speed data provider. And finally, we have implemented a substantial set of initiatives to control costs as we continue to enhance our network capabilities and our broadband service offering. Looking forward to 2008 our guidance is consolidated telecom revenue of $815 million to $855 million, operating cash flow of $270 million to $300 million and capital expenditures of $130 million to $160 million. And now, I will turn the call back to Mark Steinkrauss.

Great. Thank you, Bill. Brooke, we can move to our questions-and-answers, please? Question and Answer

[Operator Instructions]. Your first question comes from Simon Flannery

Okay. Thank you. Good morning. Just have a point of curiosity, first of all maybe you could just talk about what happened last week with the delay to the results and just if there’s any… anything we need to know about that? More particularly on the wireless outlook for 2008 I think during your comments, you made some comments about Q4 being tough, talked about the rising equipment subsidies, talked about the heavy advertising required by you and seen at your competitors. We've had some significant pricing actions by some players in the first quarter, the economy's got worse. And yet your guidance, your outlook is reasonably constructive. Can you just contrast what really… despite all of the headwinds that we're seeing, what sort of turns things around from the momentum slowdown that you saw in the fourth quarter and then delivers on the ‘08 guidance? Thanks.

Hi, Simon. This is Ken. I’ll take the first of the question.

Thanks.

And what happened last week was we thought we were close, we had one thing we had to check. And given our philosophy of, it's going to be right, we decided to take the time to check something out. Finding it didn't have any substantial effect on any of the numbers that you saw, we actually wound up moving something on the balance sheet, about $20 million. And that's all it was. But, it’s one of those cases where we're going to be safe and we will take our time and we will get it done and get it done the right way. In terms of the kind of business going forward, let me get Steve Campbell talk about that a little bit.

Yes. Simon, I think the first thing that I would say is in response to your question about the headwinds, and how do we think we are going to deliver on this guidance, and what's the turnaround, you're right. Early in the quarter, we came out with a release and we had indicated that we'd seen some softness in Q4. And frankly that continued into the early part of this year. But, we have seen a nice pick up in business during the month of February. So, some softness there. We’d still like to see it better, but we have seen an improving trend. The other thing I would say about the guidance is, as always there is a range of outcomes there. There is growth in revenues and I don't want the lose sight of the fact that there is growth in operating cash flow in that plan. We think it's a balanced plan though. We think that at the midpoint, the guidance is, in terms of margin, a little above where we're at this year. It has growth, but we think it's a balanced plan. Something that we’ll continue to look at as things unfold here this year. We are still early in the year. But you are right, there is some uncertainty, something to be monitored.

Do you see any big impact from the actions by Verizon, Sprint and others?

I'll let Jay. Jay, can you comment on that.

Jay Ellison is on the call. So, we'll let him take that question.

Yes. Excuse me. Simon, we've also introduced the $99, excuse me, unlimited rate plan in the marketplace. Quite frankly, the way we’ve evaluated and looking at it, albeit it's only been out there 10 days or so, I think there is a small portion of the customer base that finds that very attractive. I think there is probably some that love the simplification of it. And I think when you look at it across our scope of customers, it's a good offering for some of the higher users. There’s some folks that actually want some simplification in their rate plans. Beyond that, I really don't see it as a major force this year, or at least from what we've seen from the current announcements from everybody out there, kind of going to a $99 or $89 unlimited rate plan at this point. As Steve earlier mentioned about introducing the portfolio, rate plans which are wildly successful in the company. And we continue to offer those. And we are looking down towards the back half of the year, any tweaking we need to do at our rate plans, and we always are paying very close attention to that. That’s kind of how we see to roll out of those plans. We respond to those as well, I think within 48 hours.

Great. Thank you.

Your next question comes from David Janazzo.

Good morning. You had mentioned no significant market expansion in 2008. What are the considerations for beyond this year? John E. "Jack" Rooney - President and Chief Executive Officer, U.S. Cellular: It’s Jack Rooney. We obviously are conscious of looking at the opportunities that are out there. But right now, we don't see any reason for us to be opening up new markets. We still are concentrating on the chunk that we chewed off last couples of years. And we are trying to continue to focus on bringing the cash flows and the operating results for those markets up to the level of our older markets.

Thank you.

Your next question comes from Will Power. William Power - Robert W. Baird & Co., Inc.: Great, thanks. I guess maybe a couple of questions. I guess, I wonder first if you could address, what type of impact you think you are seeing from the economy today versus competitive pressures in the marketplace, both perhaps within the wireless business and then maybe also within the wireline business? And then, what are the principal ways you are trying to measure that? John E. “Jack” Rooney - President and Chief Executive Officer, U.S. Cellular: Well… and again, this is Jack Rooney. It's difficult to measure the economic impact on a long range basis. I mean we've seen a lot of things happening. Some people are predicting doom and gloom, and others are saying things are about as bad as people think they are. The Fed has put in maximum stimulus. I've never seen the Fed Reserve react as they have. They started that stimulus about five or six months ago. And guess what? That's what generally the impact is felt in five or six months. So, we will see what happens. And we are relatively optimistic that we are going to see a fairly significant recovery in the second half of the year. And that's the way we are playing the cards. William Power - Robert W. Baird & Co., Inc.: Okay…

This is Bill Megan. Let me comment on the wireline side, and see how the dynamics shape up against what you’re seeing. I think one way to think about this is that uncertainly in the market, that is, uncertainty about how much the economy will slow down. What will happen with inflation is clearly a negative as consumers and commercial customers decide how much they're willing to spend on our services. But… and our markets are becoming increasingly competitive. So, we will be competing for share of a tightening wallet. On the negative side, you would add pressure on housing and credit. However, there are countervailing forces that will help balance the economy. And I think it is important to note those. And so for example, you see U.S. exports remaining strong. And with growth in other areas of the world, coupled with the deterioration in the dollar, which were seen dramatic here... dramatically, our U.S. manufacturers could do well in international markets. Similarly, you have rising commodity prices. And they've helped farm income; in many of our markets on the wireline side, they are more rural and the agriculturally based. So on top of that, you would overlay, as Jack just said, the positive impact of the $168 billion economic stimulus package and that's going to help both consumer and commercial segments, especially depreciation in the section 179 release. And so, some might say there are positive forces that will influence how the economy affects us as well as those negatives. And where the balance ends up, as Jack says, is very difficult to predict. But it's not going to be all one way to the downside. William Power - Robert W. Baird & Co., Inc.: Okay, okay, thanks. That's helpful. And then I had a question on wireless margins, and I think this was alluded to in the prepared remarks as well. But as we look at the wireless business in ‘08 versus ‘07, I think the guidance suggests that the wireless margins would be pretty flat year-over-year. And it sounds like at least part of that is attributed to some of that competitive pressures. I mean, what… how do you think about the levers that you maybe have at some point though, to start to raise those margins and maybe approach low 30% levels, if not even a mid 30% level at some point? Thanks.

Well, a couple of comments. Certainly, at the midpoint of the guidance, the margin is very much in line with ’08. As you look upwards in the range, margins could be stronger. When we think about levers we pull, looking at efficiency in costs is something we do on an ongoing basis. Depending on how the year shapes up, there might be things that we could do in terms of discretionary spent. But, I think it's important to remember that we try very hard to balance the efficiency with the effectiveness. Our model is about delivering customer satisfaction. So there is some things we wouldn't do. We wouldn't cut back on costs that are incurred to support the subscriber base in the way they’ve become accustomed. And we wouldn't cut back on the things that are critical to the strategy like the superior network experience. So, it’s something always subject to review, but we try very hard to strike that balance between effectiveness and efficiency, and then delivering that best-in-industry customer experience. William Power - Robert W. Baird & Co., Inc.: Okay, thanks.

[Operator Instructions] Your next question comes from Kevin Roe.

Thanks you. Good morning. A couple of questions. On prepay, that clearly hasn't been focus of the company and I guess you’ve been losing some prepaid customers recently. But, as you well know that's the fast growing segment of the market. What are your plans in ‘08 and beyond to better address that segment as we get more and more penetrated in this U.S. market? And my second question is on EVDO. One of the bright spots in this industry as you well know is selling high speed data cards. Are you feeling a greater pressure to broadly deploy EVDO in order to be active in that space? Thanks.

Why don't we have Jay Ellison take the first part of the question and Steve will take the second part.

So your question around the prepaid and what we are doing that area. Your comments about it being a very fast growing segment in the marketplace, is one that we have stayed very close to. And so, we have a couple of things going on in the near-term relative to prepaid. It's very important to us that we’ve really got our cost structure very much aligned with the value of the prepaid customer, and we have been working really on that in the last 18 months or so, and feel pretty good about where we are getting on that arena. We have a couple of trials planned for very early this year on a couple of activities in the prepaid arena around pricing and loyalty and a number of things like that that we'll be deploying for trial basis, and then after we get results, rapid deployment across the rest of the enterprise. And then we are, in the back half of the year doing some work relative to systemic… in our comp system structure, a way to really align the compensation for our frontline associates in accordance to the prepaid, and we think that will also drive continued growth in that area. So, we are really focusing in those three areas around what can we learn and how we can get more loyal prepaid customer and keep who we got longer, and increase some of the revenues from them; attract, to your point about the growth segments, there were some product offerings; and then the compensation structure to our sales associates are kind of the three focus areas of operation for the first half of the year that we're going to be putting some strong work around, without sacrificing our growth in the postpaid arena. John E. “Jack” Rooney - President and Chief Executive Officer, U.S. Cellular: Yes, I want to emphasize that we are a postpaid company, and that's where our emphasis is and is going to stay. We need to... we don't want to ignore the segment of the business that is the prepaid segment. But at the same time, we don't feel that that is the principal line of business we want to get into.

Let me start to take it then to make a couple of comments about EVDO. I think as you know, we launched service in Milwaukee in late 2006, and since then we have been doing a lot of analysis around our EVDO offering. A couple of the things that we've been thinking about as we want to be sure that EVDO-based services are services that customers really value and want, and we have used the Milwaukee experience to be sure that we can deliver those services, again with the high quality experience that our customers have come to expect. Based on the analysis, we think it makes sense to expand our EVDO deployments into other selected markets, and we have preliminary plans for that, and we'll be doing so later this year.

And lastly, your LA partnership. It's a material part of your valuation, but not a lot of details, not a lot of info on how much EBITDA is generated there. And how can you guys highlight that valuable asset better? And are there any plans to potentially monetize that business?

Okay, this is Ken Meyers. First of all, I think if you look in our filings, you’ll see quite a substantial amount of information on that. But more importantly, if you look at the financials, you'll see cash coming out of those, and it's not an EBITDA flow, right, it's a free cash flow. And it’s a rather substantial amount of money that I reported. And we've talked about monetizing as one option. But quite frankly, there aren't a lot of vehicles that are very efficient in doing that, given the extraordinarily low tax basis that company has in it. The cash flow distribution we get are exactly proportional to our ownership. There's no management fee or anything else off the top. So, we are reaping the rewards today of that cash flow stream, and we’ve used that both to repurchase shares at U.S. Cellular as well as to reinvest it into other parts of our business. So, we aren't in any hurry to change or get rid of that cash flow stream.

Ken, what was the EBITDA for business in ‘07?

I don't have the K in front of me, but I think that you will see very substantial information on that in them.

In fact there is... just to clarify there is... in fact there is full financial statements on the ‘08 partnership in the 10-K filing, and as Ken said in our MD&A, there is quite bit of information about both our share of earnings and our share of cash distributions from the partnerships.

It might be helpful to break that out when you do your quarterly release for the Street, just so the Street gets a head over the head that they actually can see that?

Well, Kevin. It's Mark. There is an appendix to the K, so you have to scroll through the whole thing to make sure you see it. And as you know, we do call it out in every investor presentation we make. So… but your point is well taken, and we'll see if we can give it a little bit more highlight in the future.

Thanks.

Our share of earnings for the quarter was $70 million.

Okay.

Brooke, we're ready for the next question.

Your next question comes from the line of Stephen Mead.

Yes. Hi. Just looking at the CapEx number in 2008, can you just talk about in just general terms, what you're spending money on relative to 2007, as far as infrastructure or upgrades from technology? The other thing is, you mentioned that you're not entering any new markets. But is any of your CapEx spend done in sort of anticipation or preparation for the new markets?

So, looking into 2008 in terms of where the spending is going, predominantly it goes into the network as it did in 2007. There is also capital, as there is every year for new retail store builds and remodels. No significant shifts in terms of proportions. Network is the predominant part. And as I said there is some for stores. The other thing in 2008, I mentioned a couple of minutes ago that we have some plans related to EVDO deployment. So we do have a modest amount of spending in the plan related to EVDO deployments. John E. “Jack” Rooney - President and Chief Executive Officer, U.S. Cellular: But there are no plans or no spending specifically earmarked for preparation for further expansion.

Right. And a follow-up, just on the revenue progression in terms of ARPU progression guidance for 2008, what are you seeing for the different components of service revenue, as far as the base sort of voice business versus data, versus the pricing impacts and stuff?

Well, typically we don't and we won't provide guidance on ARPU growth. I think it's safe to say that we would expect an increase in data revenues again in 2008, although given the kind of growth we have this year at 70%, I don't think we would expect that to continue.

But what are you seeing in terms of data and the mix of phones that you're selling and then also the handset subsidy side of the equation, as you go into 2008?

I think it’s similar trend, as we saw in 2007. We've seen a move up in terms of the… to the higher end of handsets. And as we've said today and then in our other calls, the results of that, those higher end handsets drive higher revenue, but they also come with a cost, in the form of a higher subsidy. We don't expect that trend to be significantly different, going forward.

I mean, but how does that affect your thinking in terms of how much money you want to put into the subsidy side versus the other parts of the equation in terms of retention of customers and the churn issues and sort of creating, as you look at sort of what value you are creating in terms of new customers? John E. “Jack” Rooney - President and Chief Executive Officer, U.S. Cellular: You're asking a very complex question, and I think we answered that question earlier. A primary concern in this business is retention of our customers. And we are not going to do anything that's going to influence our customers to find greener pastures. So, we will be competitive in the handset subsidy market and in the technology that’s deployed so our customers have a full service offering. And we don't see any reason to change that. I mean, our cash flows are rising rapidly, our profits are doing well. This has been a very successful strategy for us, and we see no reason to change that.

Well, that's fine. Thanks. John E. “Jack” Rooney - President and Chief Executive Officer, U.S. Cellular: Okay.

Your next question comes from Robert Siffman [ph].

Good morning. Your... Ken, your Standard and Poor's rating appears meaningfully below what your balance sheet and performance suggests. And I think when they lowered you, it was mainly due to accounting issues, which seem to be cleared up. Could you talk about any update that you've had with them? They have indicated that you probably would move up at least two notches. And has anything changed… with the stock lagging, do you still have the same commitment to investment grade ratings today that you had a year ago?

Good morning, Bob. I didn't hear the second part of your question. Would you repeat that before I answer?

Sure. I said, with the stock lagging, have you made any changes to your commitment to investment grade ratings?

Okay. So, I'll start with the second part first. No, we haven't. It is still a core part of our platform, of our whole strategic platform is to maintain the investment grade rating of the company. And I think today's credit markets are a great example of why we think that it is absolutely in imperative. And that is, we aren't smart enough to know what tomorrow is going to bring. We want as much of a financial flexibility as we can have. In terms of the agencies, I haven't spoken with them, since we’ve announced our earnings, maybe. A typical schedule is I wind up taking to them over the next couple of days. I agree with you that the financial results of the company continue to be strong. The balance sheet is almost pristine. And the company has made substantial progress on the accounting issues. So, I am hopeful we’ll see some action there but I don't have any news to share at this time.

Thank you so much.

At this time, there are no further questions. Do you have any closing remarks?

No, Brooke. If there are no more questions we are ready to finish up the call.

Thank you. This concludes today's conference call. You may now disconnect.