Good day. Thank you for standing by. Welcome to TDS and UScellular’s Third Quarter Earnings Results Conference Call. Please be advised that today’s conference is being recorded. I would now like to hand the call over to your speaker today, Ms. Jane McCahon. Please go ahead.

Thank you, and good afternoon, everyone. We hope that you and your families are doing well. As many of you know, the TDS family of companies has a practice of long, orderly succession periods to ensure smooth and seamless transitions and in that spirit, I will be transitioning the Corporate Relations role to Colleen Thompson over the next couple of quarters. Colleen brings significant knowledge of UScellular where she has held leadership positions since 2012. I am excited to have you meet her. And after that transition, I’m remaining with the company in the role of Corporate Secretary for both TDS and UScellular. And as most of you know, we’ve historically held our calls at 9:00 a.m. on Friday, but there’s a calendar conflict this quarter, and we moved our call to accommodate that. But going forward, we do expect to move our call back to Fridays at 9:00 a.m. Central. We know it’s a busy day, so thank you for being so flexible. I want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find on the Investor Relations sections of the TDS and UScellular websites. With me today and offering prepared comments are, from TDS, Pete Sereda, Executive Vice President and Chief Financial Officer; from UScellular, LT Therivel, President and Chief Executive Officer; Doug Chambers, Executive Vice President and Chief Financial Officer; and from TDS Telecom, Vicki Villacrez, Senior Vice President of Finance and Chief Financial Officer. This call is being simultaneously webcast on the TDS and UScellular 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 OIBDA, and adjusted earnings before interest, taxes, depreciation and…

Thanks, Jane, and good afternoon, everyone. Before speaking about the balance sheet, I want to recognize all the actions that both business units are taking to lead to higher returns and stronger businesses over the next several years. As we’ve discussed on past calls, maintaining financial flexibility is one of the pillars of our corporate strategy. Over the years, we’ve worked to retain relatively low leverage levels, long-dated debt maturities, sufficient undrawn revolving credit facilities and term loans, and significant cash balances to make sure we have the financial resources we need to fund our businesses. On Slide five, I want to call your attention to all the work that has been done to raise new capital to fund the growth in our businesses while at the same time, lowering the average cost of our balance sheet. As you can see, we’ve raised $3.4 billion since the beginning of 2020 at an average cost of 4.9%, and redeemed six separate bond series comprising $1.6 billion in debt with a weighted average cost of 7%. The annual run rate savings on this called debt is approximately $33 million. The new capital is a mix of low-cost preferred stock and very long-term retail bonds, along with shorter-term EIP securitization debt and bank term loan debt. This fulfills a commitment we made at the beginning of the year to reduce the average cost of our balance sheet and diversify our funding sources. Going forward, we believe that we will continue to have excellent access to the debt capital markets through a variety of instruments in order to continue to fund our business. Finally, before turning the call over to LT, I want to point out that our income tax rate for the quarter was 29%. This is up significantly from the 2020 level in which we saw significant one-time benefits from the CARES Act, which have not recurred. With that, I will turn the call over to LT. LT?

Everyone, if we turn to Slide seven, I’m really pleased with the progress that we’re making against our strategic priorities. We continue to see positive momentum in those growth areas of our business, and we’re making progress toward our return on capital goals. Later on, I’m going to let Doug cover the operational and the financial highlights of the third quarter but first, I thought I’d provide a few thoughts on some of these strategic priorities. So top of mind for me continues to be the competitive environment. During the third quarter, we saw a continuation of aggressive promotions in the industry for both new and existing customers. They have had an impact on our postpaid subscriber results and on loss on equipment for the quarter. We expect a high level of promotional aggressiveness to continue through the holiday season and beyond. I’m really pleased with the operational pivot that we’ve made toward regionalization. We’ve effectively leveraged that regional strategy to test a variety of different offers and to help us hone in on an approach that properly balances subscriber growth with profitability. We had a variety of offers in the marketplace in conjunction with the iPhone launch, some much more aggressive than others. And I’m pleased that we’re now set up to effectively trial multiple approaches in the marketplace, which are going to help us be much more effective in optimizing our business. I spoke to you last quarter about some of our new initiatives to drive growth in our business and government and our prepaid operations. We reported another strong quarter of results for prepaid and we’re seeing positive momentum in business sales, particularly in the IoT space and the private networking space. We’re also seeing some really terrific traction in our tower business. Applications are up substantially,…

Thanks, LT. Good afternoon. Let’s start with a review of customer results on Slide eight. Postpaid handset gross additions increased by 3,000 year-over-year, largely due to higher switching activity in combination with our strong promotional activity. Of course, this was against a backdrop of industry-wide promotional aggressiveness on handsets. We saw connected device gross additions decline 26,000 year-over-year. This was driven by lower sales of Internet products such as hotspots and tablets compared to the prior year, when we experienced an increase in demand due to the pandemic. Total smartphone connections increased by 8,000 during the quarter and by 65,000 over the course of the past 12 months. That helps to drive more service revenue given that smartphone ARPU is substantially higher than feature phone ARPU. Moving to Slide nine. I also want to call out the strong trends for prepaid, which were driven by enhancements to our prepaid offerings. We saw prepaid gross additions improve by 9,000 year-over-year. Next, let’s turn to the postpaid churn rate shown on Slide 10. Postpaid handset churn, depicted by the blue bars, was 0.95%, up from 0.88% a year ago. This was driven by voluntary churn, which continues to run higher year-over-year, as a result of increased switching activity and aggressive industry-wide competition. Involuntary churn also increased slightly in the quarter but is still below pre-pandemic levels. Total postpaid churn, combining handsets and connected devices, was 1.15% for the third quarter of 2021, higher than a year ago as we’ve also seen churn increase on connected devices due to certain business and government customers disconnecting devices that were activated during the peak periods of the pandemic in 2020. Now let’s turn to the financial results on Slide 11. Total operating revenues for the third quarter were $1.016 billion, a decrease of $11 million…

All right. Thank you, Doug, and good afternoon, everyone. I’m pleased to report on our results and the progress we are making on our strategic priorities as we move toward the end of the year. TDS Telecom grew its footprint 6% from a year ago, now serving 1.4 million service addresses across its markets. Based on the successes we have experienced to date, we are increasing our fiber deployment program substantially with the announcement of additional new communities in Wisconsin, Idaho and North Carolina and we are entering into the state of Montana. This significantly advances our goal to bring state-of-the-art broadband capability and competition to more growing communities. In addition, we are now capable of delivering two gig internet speeds in our Spokane, Washington and Meridian, Idaho markets. And going forward, we’ll launch two gig products in all of our new fiber expansion markets. Two gigs provides an exceptional customer experience, doubling our previous maximum speed offering and helping to further differentiate us from the cable competition. Also in the quarter, we completed fiber-to-the-home construction in our Southern Wisconsin cluster, where we are seeing total broadband penetration of 38% in this fully launched cluster. In total, during the quarter, we added 20,000 fiber service addresses, surpassing 40% of our wireline service addresses, a key milestone for us. From a financial perspective, overall, we grew our top line 2%, while planned investment spending on new market launches resulted in lower adjusted EBITDA as expected. Turning to Slide 18. We remain committed to the strategic priorities we set out at the beginning of the year. As previously discussed, our primary objective is to generate growth by investing in our high speed broadband services. We have a multifaceted approach to this growth that includes leveraging existing networks and constructing greenfield fiber in…

Thanks, Vicki. Operator, we’re ready to take questions.

. Your first question is from Ric Prentiss with Raymond James. Your line is open.

Thanks. Good afternoon, everyone.

Hey, Ric.

Hey.

First question I’ve got is on the guidance. Obviously, a lot of the ranges tightened across UScellular and TDS. And Doug, you called out how we did not tighten the UScellular OIBDA line. Just want to understand a little bit about what it would take in the competitive environment responses to head toward the midpoint or maybe the low end or the high end of this type of guidance if you think about how it compares to last year.

Yes. Hello, Ric. Thanks for the question. So -- and you hit on it, it’s really the promotional -- the level of promotional activity that’s going to dictate where we end up in the guidance. So to the extent that we are very successful with customer acquisition, have a lot of promotional takes, we’re going to be to the lower end of the guidance and to the extent that we don’t quite meet our goals, might be the higher end of the guidance. As you know, when we -- for our promotions, most of them are administered through trailing credits, about half of that promotion expense hits loss in equipment in the quarter that we mentioned, the promotion. The rest is amortized to service revenue over the life of the contract. So that’s really the main thing that we have in play that could flex in the range is the level of promotional activity and the takes that we have from our customers.

And as you think about last year, Christmas, obviously, holiday season was still COVID affected. How are you thinking about this year the fourth quarter versus what we might have seen last year fourth quarter, the competitive activity and your success?

We’re hoping this quarter will be a bit more robust. We’re expecting a higher switcher pool this year, and that’s going to help on the customer acquisition side. We’re expecting to do fairly well on churn as well. So I think we’re going to have a little bit better fourth quarter, as far as opportunity, this quarter than we did last year.

Okay. And final question is you guys have talked a little bit about fixed wireless access. We’ve seen Verizon talk about it on their call; T-Mobile talked about it on their call. Can you walk us through a little bit? It sounds like yours might be a little more tied to local, state or federal support levels, but help us understand how you’re at least getting the possibility of fixed wireless access as you may understand the trial phase.

Yes, Rick, this is LT. So I think that there’s one fundamental difference between what Verizon is doing and what we’re doing is that we’re running our fixed wireless access trials and the commercialization off of macro cellular. Verizon is primarily doing it off of small cells. So if you think about where small cells reach, you’re generally going to be deploying those in more dense environments. In our case, right, we’re trying to reach more rural areas where, frankly, I think that there’s a greater level of opportunity vis-a-vis the other competitors. We’ve seen terrific results from our technical trials. And so we’ve pivoted this now to commercial trials and testing customer demand. So far, we’re very encouraged. Candidly, it’s still very small volume trials. So we’ve got to work through operationalization, think things like how to -- can we get to a self-install, how do we manage distribution sort of from a door-to-door and a digital perspective, we’ve got to develop that. So there’s a fair amount of work then from an operational perspective. It has to go into operationalizing this technology, but we’re very excited about the speeds that we were able to realize, and not just realize in the lab but actually realize in real-world environments. Now you mentioned the government subsidies. Certainly, those will come into play, in the sense that it costs anywhere between two to three times as much to connect the rural subscriber, it also connects between 1.5 to two times as much to build a tower in rural America. And so it is an expensive proposition to reach everyone with this technology. We’re excited. We think in the near term, we’ve got a pretty good momentum behind the business. Certainly, ‘22 will be a year of kind of testing and scaling. And I think there’s a lot of upside. I think there will be a lot more upside that could come with the government infrastructure bill in order to really, really utilize this technology to reach all the corners of America, all the un- and underserved areas. That’s going to require subsidies. It’s going to require subsidies behind infrastructure, and it’s going to require subsidies behind affordability. So I’ve been spending a fair bit of time talking to folks in D.C. about that. I’m cautiously optimistic that we’re going to get that across the goal line. But we don’t require those subsidies to turn this into a profitable product. You can expect to see us scaling that kind of throughout 2022 and we’ll certainly give updates as we do.

Great. Thanks.

Your next question is from Simon Flannery of Morgan Stanley. Your line is open.

Great. Thank you. If I could stay on that last theme, LT. Maybe you can just give us your latest thoughts on how 5G is going to play out for your consumer and enterprise customers. What is the revenue, the ARPU opportunity there? And related, maybe update us on your rollout we did see the news out of the FAA and FCC today on C-band. I know it doesn’t directly affect you immediately, but I didn’t know if you had any color on how that’s going to be resolved.

I don’t have any color. If I did, I’d -- well, I don’t is the simple answer. I mean I think as we think about the impact of that ruling, our C-band spectrum, which would be what is affected, we’re not going to be firing that spectrum up until 2023, late 2023. And I have a lot of confidence that situation will get resolved by that point, and so I don’t think that it necessarily affects our rollout one bit. In terms of 5G deployment, I’ll let Mike talk just a little bit about some of the specifics behind where we’re at but we continue to move forward well in our modernization plan. I’ll let him cover the details. And then what I’ll do is I’ll come back and talk briefly about monetization. But Mike, maybe you could just share a little bit more about how we’re doing from a deployment perspective.

Sure. Thanks, LT. Good evening, Simon. --

How are you?

Good. As we shared before, the program is a multiphase program, and we’re well into Phase three. So we’ve got about 35% of our sites upgraded and right on track with what we committed to do. And we’re seeing nice traffic on the sites that have been upgraded and customers are experiencing a better throughput on the network, so we’re happy with the deployment and the progress, and full steam ahead.

And let me just talk -- let me come back to monetization just a little bit. So I mean on the consumer side, we don’t see an opportunity to, let’s call it, incrementally monetize 5G via price plan premiums. Where I do see an opportunity to monetize it is via new products and services and I think fixed wireless is a great example. So the speeds that I was quoting and the deployment that I’m quoting is based on millimeter wave, but you could certainly expect to see us to use C-band to serve those customers as well. And I think that will be an attractive source of revenue and profitability for us. And obviously, I think providing a great 5G experience is going to be key to driving market share. And if I think about our 5G availability, we feel very good about our availability vis-a-vis our competitors. We provide a really high-quality network experience, which is core to our value proposition. I think 5G will be a key part of providing a quality network. It’s always been a differentiation point for us. And I think you can expect that it will be that in the future as well.

Great. And just a follow-up on the competitive environment. What are you seeing from T-Mobile? They have just rolled out new retail partnerships with Walmart and Target, and have been very focused on the rural and smaller markets recently. So are you seeing a major change there or is it fairly incremental?

We are not seeing a major change there. I think thus far, we continue to compete well with T-Mobile. I think from a distribution perspective, I think they’re trying to find a way to create distribution without necessarily having to build it themselves, and that’s a difficult value proposition. We feel good about our network of distribution, company-owned stores, dealer stores plus some of those same partnerships that you’re talking about. We have good distribution coverage in rural America that supplements the strong network. And so thus far, at least, we haven’t seen a meaningful increase in win share or in subscriber effect from what T-Mobile has been doing.

Great. All right. Thanks, LT.

Thank you.

Your next question is from Sergey Dluzhevskiy of GAMCO Investors. Your line is open.

Good evening, guys. Thank you for taking the questions. My first question is for LT. I think you guys, as part of your growth initiatives, are trying to expand digital capabilities, focusing on customer life cycle. Could you talk a little bit about your efforts there and where you are now and where would you like to be in a few years? And how those expanded digital capabilities should help you both on the cost side and potentially on the revenue side?

Certainly, Sergey. Good to hear from you. So digital, if you think about digital pre-pandemic, digital was like a nice to have, right. It was an accompaniment to your physical store footprint. That’s not the case anymore. Digital and a strong digital presence is absolutely a requirement. If you don’t have a positive and constructive digital experience for your customers, you’re quickly going to become irrelevant. I think the good news is that we’ve invested significantly in our digital experience, and we’re seeing it in the numbers. So we crossed over an average of four in the App Store and our app. We’ve seen similar increases on the Android side from our app. And so customers are enjoying the new capabilities we’re providing, much more user-friendly experience, and you’re seeing that just in terms of customer engagement. Obviously, the other places that you have to invest, and we’re doing both, one is on the website. So you have to be able to create a positive exploration experience for your customers. We’ve invested there and we’re seeing higher customer experience scores. And you have to provide digital platforms for your partners to interact with you. And so we’ve pivoted a fair amount of investment toward digital. We’re seeing the improvements in terms of customer engagement. And I expect, in the long run, that’s going to manifest itself in two areas. I think in the truly long run, you’re going to see gross adds via digital and people will explore, purchase, get the product, fire it up, do all their service via digital. I think we’re a long way away from that being the majority of the transactions in the industry. I think brick-and-mortar will still matter. But I do think that digital will play a role and a greater role on…

Great. And another question on the wholesale front, kind of if you could share your thoughts on wholesale opportunities for UScellular. For example, DISH recently signed a new MVNO agreement with AT&T and they’re going to become their primary MVNO partner. But I know that in many of your markets, your coverage is probably much better than what AT&T or T-Mobile coverage is. So do you see an opportunity to do a wholesale deal with DISH? And more broadly, what other wholesale opportunities do you see down the road?

So I mean I won’t comment on any specific opportunities, but to say that we are, call it, open for business on wholesale, I agree with you. I think that the investment that we’ve made from a coverage perspective and network experience perspective positions us very well for those kinds of deals. I think that we can offer a very high-quality experience to a potential MVNO partner or a wholesale partner. We’re certainly open to those discussions. It falls perfectly in line with some of the partnership conversations that we’ve had on previous calls. I do think it can be an area of growth for us. The obvious trade-off is you have to be smart about the competitive implications of opening up your high-quality network to a competitor. And so we always try to balance that. You try to make the economic equation work. It’s certainly something that we’re open to discussing. We’ve had conversations about it in the past. I’m sure we’ll have more in the future, and it’s something we’ll keep looking at.

Great. And my last question is for Vicki on the TDS Telecom side. So you guys lowered CapEx for various reasons that you described for 2021. But you -- and now the number of pacings that you’re going to do this year is going to be lower than, I think, 150,000 that you were targeting before. But as you look out in 2022 and assuming that we move past some of the supply chain issues, what is the annual pace of build that you would be targeting over the next few years? How much higher could you go over 150,000 level based on your current strategy and your current capital allocation?

Sure. Good evening, Sergey. Thank you for that question. First off, let me just say that a few quarters of slower than desired construction is not deterring us at all from this market expansion program. As you know, this is a very long multiyear program and investment for the future. And so the market -- the new market announcements we’ve made to substantially expand this program, I think, underscores our confidence in what we’re doing. The impact for 2022 could really translate into more service addresses delivered in the first quarter of next year and that would have a delay of revenues coming into the financials. But I expect that we’ll continue to see top line growth, as we’ve seen all year, and that will go into next year. And of course, I can provide more specifics on our guidance in February. But from a capital perspective, we lowered our guidance on the capital. We don’t count our fiber service addresses delivered until it’s ready to market. So construction can be a lot farther along, but a number of things have to happen before we can market the new fiber households. So for example, the contractor has to complete the entire construction end-to-end and light the fiber up all the way to the premise before turning it over to TDS. And then we have to inspect it for quality and then get that new location into our system. So we have a lot of construction to complete along the way, which is really in our accounting for capital spending. But I think that the announcement of these new markets and the increase in -- the substantial increase in our program, I am signaling that we will have increased capital spending going into 2022. And as you think about it longer term, I expect that we’ll have elevated levels of capital spending taking us through 2022, 2023 and into 2024. And then we’ll start to see the completion of these markets coming down, starting to come down at the end of 2024 and then getting more largely completed in 2025 and 2026. So, really excited about planting the flags now and taking advantage of this opportunity that’s in front of us.

Great. Thank you.

With no further questions, I would like to hand the call back to Jane.

Thank you very much, and we really appreciate you joining us on a Thursday afternoon, and please get in touch with us with any additional questions or comments. Have a great night.

This concludes today’s conference. Thank you for participating. You may now disconnect.