U.S. Cellular Reports Increases in Service, Data Revenues

2008-08-07 07:04:00

U.S. Cellular Reports Increases in Service, Data Revenues

    Service and data revenues up 9 percent and 45 percent in the quarter

        Note: Comparisons are year over year unless otherwise noted.

                             2Q 2008 Highlights

       - 9.0 percent increase in service revenues, to $987.4 million.

 - 44.7 percent increase in data revenues, to $123.7 million, representing

                     12.5 percent of service revenues.

 - 5.7 percent increase in ARPU (average monthly service revenue per unit),

                                 to $53.27.

   - Retail postpay churn remained flat at 1.4 percent; postpay customers

                 comprised 95 percent of retail customers.

         - 7.4 percent increase in cell sites in service, to 6,596.

  - Repurchased 150,000 common shares for $8.3 million, to offset dilution

                        from employee benefit plans.



    CHICAGO, Aug. 7 /EMWNews/ -- United States Cellular

Corporation (Amex: USM) reported service revenues of $987.4 million for the

second quarter of 2008, a 9.0 percent increase from $906.2 million in the

comparable period one year ago. The company recorded operating income of

$117.9 million, down from $123.5 million in the second quarter of 2007. Net

income and diluted earnings per share were $72.6 million and $0.83,

respectively, for the second quarter of 2008, compared to $147.6 million

and $1.67, respectively, in the comparable period one year ago.*




* In the second quarter of 2007, the company recorded a $131.7 million pre-tax gain on the settlement of the Vodafone Group Plc variable prepaid forward contracts and sale of remaining Vodafone ADRs, and also a $17.8 million pre-tax loss on fair value adjustments to the variable prepaid forward contracts prior to the settlement. "Our continued, solid growth in service and data revenues demonstrates that we're delivering the services and products customers want," said John E. Rooney, U.S. Cellular(R) president and CEO. "These revenue increases have driven a substantial increase in ARPU, with more than 50 percent of our customers using at least one data service. And our low, 1.4 percent churn rate is proof that our customers believe in U.S. Cellular and in the communications experience we provide, even as they may be tightening their budgets in response to the economic slowdown. "Sales of our BlackBerry(R) and Windows(TM) smartphones continue to surpass our expectations, and smartphone customers typically generate considerably higher ARPU than other customers. We consider this a meaningful growth area for U.S. Cellular. To help ensure that our smart phone customers receive a high-quality service experience, U.S. Cellular is expanding its EVDO coverage in select service areas, with the goal of reaching approximately 30 percent of our covered population in 2008, and we plan to continue the expansion in 2009. We also continue to strengthen our overall network with new cell towers in key areas. "While net retail customer additions for the quarter were disappointing, we're taking significant steps to further differentiate our customer satisfaction-based business model in a tough competitive environment. With U.S. Cellular's new Believe in Something Better(SM) branding campaign launched in June, we're showing that we recognize that wireless plays an important role in our customers' lives that goes well beyond just completing calls. Along with the campaign, we have invested in new store environments, and we continue to invest in associate training, so that our associates can deliver the ideal customer experience. We're investing in our business and in our customers for the long term." Guidance Guidance for the year ending Dec. 31, 2008 is as follows. There can be no assurance that final results will not differ materially from this guidance.
U.S. Cellular 2008 guidance as of Aug. 7, 2008 is as follows: Net Retail Customer Additions 175,000 - 225,000 Service Revenues $3.9 - 4.0 billion** Operating Income $385 - 435 million Depreciation, Amortization & Accretion*** Approx. $615 million** Capital Expenditures $525 - 575 million ** Unchanged from guidance issued on May 7, 2008 *** Includes losses on exchanges and disposals of assets The foregoing guidance represents the views of management as of Aug. 7, 2008 and should not be assumed to be accurate as of any other date. U.S. Cellular undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise. Conference call information U.S. Cellular will hold a conference call on Aug. 7, 2008 at 10:00 a.m. Chicago time.
-- Access the live call online at http://www.videonewswire.com/event.asp?id=50620 or on the Conference Calls page of http://www.uscellular.com. -- Access the call by phone at 800/723-6498 (US/Canada) and use conference ID 6948709. Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of http://www.uscellular.com, together with reconciliations to generally accepted accounting principles (GAAP) of any non-GAAP information to be disclosed. The call will be archived on the Conference Calls page of http://www.uscellular.com.

    About U.S. Cellular(R)



    United States Cellular Corporation, the nation's sixth-largest,

full-service wireless carrier, provides a comprehensive range of wireless

products and services, excellent customer support, and a high-quality

network to nearly 6.2 million customers in 26 states. The Chicago-based

company employed 8,400 full-time equivalent associates as of June 30, 2008.

For more information about U.S. Cellular, visit http://www.uscellular.com.



    Safe Harbor Statement Under the Private Securities Litigation Reform

Act of 1995: All information set forth in this news release, except

historical and factual information, represents forward-looking statements.

This includes all statements about the company's plans, beliefs, estimates,

and expectations. These statements are based on current estimates,

projections, and assumptions, which involve certain risks and uncertainties

that could cause actual results to differ materially from those in the

forward-looking statements. Important factors that may affect these

forward-looking statements include, but are not limited to: The ability of

the company to successfully manage and grow the operations of more recently

launched markets; changes in the overall economy, competition, the state

and federal telecommunications regulatory environment, and the value of

assets and investments; adverse changes in the ratings afforded our debt

securities by accredited ratings organizations; industry consolidation;

advances in telecommunications technology; uncertainty of access to the

capital markets; risks and uncertainties relating to restatements and

possible future restatements; ability to remediate the material weakness;

pending and future litigation; changes in income tax rates, laws,

regulations or rulings; acquisitions/divestitures of properties and/or

licenses; and changes in customer growth rates, average monthly revenue per

unit, churn rates, roaming revenue and terms, the availability of devices

and the mix of products and services offered by the company. Investors are

encouraged to consider these and other risks and uncertainties that are

discussed in the Form 8-K used by U.S. Cellular to furnish this press

release to the SEC, which are incorporated by reference herein.



    As previously announced, U.S. Cellular(R) will hold a teleconference on

Aug. 7, 2008, at 10:00 a.m. Chicago time. Interested parties may listen to

the call live via the Internet by accessing the Conference Calls page of

http://www.teldta.com or http://www.uscc.com.




UNITED STATES CELLULAR CORPORATION SUMMARY OPERATING DATA Quarter Ended 6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007 Total Population: Consolidated markets (1) 82,875,000 82,846,000 82,371,000 81,841,000 81,581,000 Consolidated operating markets (1) 45,493,000 45,262,000 44,955,000 44,955,000 44,955,000 All customers: Customer units (2) 6,194,000 6,175,000 6,102,000 6,058,000 6,010,000 Gross customer unit additions 365,000 409,000 436,000 447,000 418,000 Net customer unit additions 16,000 74,000 44,000 48,000 37,000 Market penetration at end of period: Consolidated markets (3) 7.5% 7.5% 7.4% 7.4% 7.4% Consolidated operating markets (3) 13.6% 13.6% 13.6% 13.5% 13.4% Retail customers: Customer units (2) 5,677,000 5,640,000 5,564,000 5,500,000 5,448,000 Gross customer unit additions 318,000 360,000 367,000 374,000 347,000 Net customer unit additions 34,000 85,000 64,000 52,000 71,000 Cell sites in service 6,596 6,452 6,383 6,255 6,140 Average monthly revenue per unit (4) $ 53.27 $ 52.24 $ 52.57 $ 52.73 $ 50.42 Retail service revenue per unit (4) $ 45.62 $ 45.30 $ 45.45 $ 45.02 $ 43.87 Inbound roaming revenue per unit (4) $ 3.40 $ 2.94 $ 3.09 $ 3.36 $ 2.68 Long-distance / other revenue per unit (4) $ 4.25 $ 4.00 $ 4.03 $ 4.35 $ 3.87 Minutes of use (MOU) (5) 1,012 951 908 888 858 Retail postpay churn rate per month (6) 1.4% 1.4% 1.5% 1.6% 1.4% Construction Expenditures (000s) $ 137,800 $ 111,700 $ 188,100 $ 130,600 $ 137,100 (1) "Total population of consolidated markets" and "Total population of consolidated operating markets" are used only for the purposes of calculating market penetration of consolidated markets and consolidated operating markets, respectively, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets). (2) All customer units and Retail customer units as of June 30, 2008 include one time adjustments, resulting from a review of U.S. Cellular's customer reporting procedures. (3) Calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas. (4) Per unit revenue measurements are derived from Service Revenues as reported in Financial Highlights for each respective quarter as follows: Service Revenues per Financial Highlights $ 987,352 $ 962,094 $ 957,896 $ 954,540 $ 906,218 Components: Retail service revenue during quarter 845,564 834,213 828,169 814,948 788,535 Inbound roaming revenue during quarter 63,033 54,089 56,358 60,843 48,084 Long-distance/other revenue during quarter 78,755 73,792 73,369 78,749 69,599 Divided by average customers during quarter (000s) 6,178 6,139 6,074 6,034 5,991 Divided by three months in each quarter 3 3 3 3 3 Average monthly revenue per unit $ 53.27 $ 52.24 $ 52.57 $ 52.73 $ 50.42 Retail service revenue per unit $ 45.62 $ 45.30 $ 45.45 $ 45.02 $ 43.87 Inbound roaming revenue per unit $ 3.40 $ 2.94 $ 3.09 $ 3.36 $ 2.68 Long-distance/other revenue per unit $ 4.25 $ 4.00 $ 4.03 $ 4.35 $ 3.87 (5) Average monthly local minutes of use per customer (without roaming). (6) Retail postpay churn rate per month is calculated by dividing the total monthly retail postpay customer disconnects during the quarter by the average retail postpay customer base for the quarter. UNITED STATES CELLULAR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS HIGHLIGHTS Three Months Ended June 30, (Unaudited, dollars and shares in thousands, except per share amounts) Increase (Decrease) 2008 2007 Amount Percent Operating Revenues Service $987,352 $ 906,218 $ 81,134 9.0% Equipment sales 73,240 65,428 7,812 11.9% Total Operating Revenues 1,060,592 971,646 88,946 9.2% Operating Expenses System operations (excluding Depreciation, amortization and accretion reported below) 196,652 176,409 20,243 11.5% Cost of equipment sold 172,194 148,241 23,953 16.2% Selling, general and administrative 422,367 374,668 47,699 12.7% Depreciation, amortization and accretion 145,258 146,024 (766) (0.5)% Loss on asset disposals, net 6,219 2,832 3,387 N/M Total Operating Expenses 942,690 848,174 94,516 11.1% Operating Income 117,902 123,472 (5,570) (4.5)% Investment and Other Income (Expense) Equity in earnings of unconsolidated entities 22,807 22,980 (173) (0.8)% Interest and dividend income 1,429 2,653 (1,224) (46.1)% Fair value adjustment of derivative instruments --- (17,849) 17,849 N/M Gain on sales of investments --- 131,686 (131,686) N/M Interest expense (20,774) (21,325) 551 2.6% Other, net 600 91 509 N/M 4,062 118,236 (114,174) (96.6)% Income Before Income Taxes and Minority Interest 121,964 241,708 (119,744) (49.5)% Income tax expense 44,016 91,500 (47,484) (51.9)% Income Before Minority Interest 77,948 150,208 (72,260) (48.1)% Minority share of income, net of tax (5,346) (2,637) (2,709) N/M Net Income $ 72,602 $ 147,571 $ (74,969) (50.8)% Basic Weighted Average Common Shares Outstanding 87,571 87,590 (19) (0.0)% Basic Earnings Per Share $ 0.83 $ 1.68 $ (0.85) (50.6)% Diluted Weighted Average Common Shares Outstanding 87,872 88,410 (538) (0.6)% Diluted Earnings Per Share $ 0.83 $ 1.67 $ (0.84) (50.3)% N/M - Percentage change not meaningful UNITED STATES CELLULAR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS HIGHLIGHTS Six Months Ended June 30, (Unaudited, dollars and shares in thousands, except per share amounts) Increase (Decrease) 2008 2007 Amount Percent Operating Revenues Service $1,949,446 $1,766,801 $182,645 10.3% Equipment sales 149,002 139,519 9,483 6.8% Total Operating Revenues 2,098,448 1,906,320 192,128 10.1% Operating Expenses System operations (excluding Depreciation, amortization and accretion reported below) 387,668 343,693 43,975 12.8% Cost of equipment sold 346,231 298,985 47,246 15.8% Selling, general and administrative 830,001 733,534 96,467 13.2% Depreciation, amortization and accretion 287,788 291,976 (4,188) (1.4)% Loss on asset disposals, net 9,892 6,137 3,755 61.2% Total Operating Expenses 1,861,580 1,674,325 187,255 11.2% Operating Income 236,868 231,995 4,873 2.1% Investment and Other Income (Expense) Equity in earnings of unconsolidated entities 44,042 46,078 (2,036) (4.4)% Interest and dividend income 3,334 5,203 (1,869) (35.9)% Fair value adjustment of derivative instruments --- (5,388) 5,388 N/M Gain on sale of investments --- 131,686 (131,686) N/M Interest expense (40,889) (45,009) 4,120 9.2% Other, net 718 (494) 1,212 N/M 7,205 132,076 (124,871) (94.5)% Income Before Income Taxes and Minority Interest 244,073 364,071 (119,998) (33.0)% Income tax expense 91,556 135,388 (43,832) (32.4)% Income Before Minority Interest 152,517 228,683 (76,166) (33.3)% Minority share of income, net (9,358) (6,711) (2,647) (39.4)% Net Income $ 143,159 $ 221,972 $ (78,813) (35.5)% Basic Weighted Average Common Shares Outstanding 87,571 87,735 (164) (0.2)% Basic Earnings Per Share $ 1.63 $ 2.53 $ (0.90) (35.6)% Diluted Weighted Average Common Shares Outstanding 87,963 88,615 (652) (0.7)% Diluted Earnings Per Share $ 1.63 $ 2.50 $ (0.87) (34.8)% N/M - Percentage change not meaningful UNITED STATES CELLULAR CORPORATION CONSOLIDATED BALANCE SHEET HIGHLIGHTS (Unaudited, dollars in thousands) ASSETS June 30, December 31, 2008 2007 Current Assets Cash and cash equivalents $ 101,155 $ 204,533 Marketable equity securities 16,508 16,352 Accounts receivable from customers and other 442,415 435,497 Inventory 120,817 100,990 Prepaid expenses 51,923 41,588 Other current assets 42,448 34,793 775,266 833,753 Investments Licenses 1,792,728 1,482,446 Goodwill 493,918 491,316 Customer lists 12,451 15,375 Investments in unconsolidated entities 157,162 157,693 Notes and interest receivable--long-term 4,359 4,422 2,460,618 2,151,252 Property, Plant and Equipment In service and under construction 5,612,054 5,409,115 Less accumulated depreciation 3,045,114 2,814,019 2,566,940 2,595,096 Other Assets and Deferred Charges 29,728 31,773 Total Assets $ 5,832,552 $ 5,611,874 UNITED STATES CELLULAR CORPORATION CONSOLIDATED BALANCE SHEET HIGHLIGHTS (Unaudited, dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY June 30, December 31, 2008 2007 Current Liabilities Notes payable $ 50,000 $ --- Accounts payable Affiliated 8,690 8,519 Trade 256,196 252,272 Customer deposits and deferred revenues 153,860 143,445 Accrued taxes 42,969 43,105 Accrued compensation 36,680 59,224 Other current liabilities 97,220 97,678 645,615 604,243 Long-Term Debt 1,007,054 1,002,293 Deferred Liabilities and Credits 799,597 765,786 Minority Interest 48,391 43,396 Common Shareholders' Equity Common Shares, par value $1 per share 55,046 55,046 Series A Common Shares, par value $1 per share 33,006 33,006 Additional paid-in capital 1,329,212 1,316,042 Treasury Shares (45,414) (41,094) Accumulated other comprehensive income 10,233 10,134 Retained earnings 1,949,812 1,823,022 3,331,895 3,196,156 Total Liabilities and Shareholders' Equity $ 5,832,552 $ 5,611,874 UNITED STATES CELLULAR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, (Unaudited, dollars in thousands) 2008 2007 Cash Flows from Operating Activities Net income $ 143,159 $ 221,972 Add (deduct) adjustments to reconcile net income to net cash flows from operating activities: Depreciation, amortization and accretion 287,788 291,976 Bad debts expense 32,426 23,870 Stock-based compensation expense 6,481 8,177 Deferred income taxes, net 27,231 5,002 Equity in earnings of unconsolidated entities (44,042) (46,078) Distributions from unconsolidated entities 45,569 43,169 Minority share of income 9,358 6,711 Unrealized fair value adjustment of derivative instruments --- 5,388 Gain on sale of investments --- (131,686) Loss on asset disposals, net 9,892 6,137 Noncash interest expense 886 890 Excess tax benefit from stock awards (896) (9,679) Other operating activities --- (5,000) Changes in assets and liabilities from operations: Change in accounts receivable (50,059) (30,103) Change in inventory (19,816) (770) Change in accounts payable - trade 2,838 (3,781) Change in accounts payable - affiliate 171 (3,530) Change in customer deposits and deferred revenues 10,406 17,606 Change in accrued taxes 1,471 60,418 Change in accrued interest 455 (742) Change in other assets and liabilities (36,486) (19,510) 426,832 440,437 Cash Flows from Investing Activities Additions to property, plant and equipment (249,500) (246,790) Proceeds from sale of investments --- 4,301 Cash received from divestitures 6,838 4,277 Cash paid for acquisitions (312,615) (18,283) Other investing activities (1,215) (156) (556,492) (256,651) Cash Flows from Financing Activities Issuance of notes payable 100,000 25,000 Repayment of notes payable (50,000) (60,000) Common shares reissued, net of tax payments (1,878) 9,223 Common shares repurchased (14,516) (49,057) Excess tax benefit from exercise of stock awards 896 9,679 Capital distributions to minority partners (6,022) (5,461) Other financing activities (2,198) --- 26,282 (70,616) Net Increase (Decrease) in Cash and Cash Equivalents (103,378) 113,170 Cash and Cash Equivalents Beginning of period 204,533 32,912 End of period $ 101,155 $ 146,082

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