TDS Telecom raises annual fiber service address goal
MADISON, Wisconsin - TDS Telecommunications LLC (TDS Telecom) shared several positive developments during the third quarter operating conference call with its parent company Telephone and Data Systems, Inc. (NYSE: TDS). After delivering 61,000 addresses in the quarter, the Madison, Wisconsin-based company is raising its 2023 fiber service address goal to 200,000, up from 175,000, and plans to have all fiber expansion markets launched this year. These markets are primarily in Wisconsin and the Pacific Northwest. A few recently announced markets include Missoula, Butte, Helena and Great Falls, Montana; Twin Falls and Caldwell, Idaho; and Fond du Lac and Sheboygan, Wisconsin.
“Given where we are in the year and the strong momentum we’ve had, we are raising our 2023 goal,” said Senior Vice President of Finance and CFO Michelle Brukwicki. “We are really proud that we have developed a strong competency in managing builds and navigating challenges.”
Brukwicki also highlighted the election of the federal Enhanced A-CAM broadband support program, which the company expects will provide it with about $1.3B in revenue over the next 15 years in exchange for delivering increased speeds of 100/20 Mbps to about 270,000 locations in 24 states.
“We anticipate this program will help to accelerate the delivery of higher-speed broadband to various rural, high-cost areas that we serve,” said Brukwicki. “This is a fantastic outcome for TDS Telecom and our customers.”
TDS Telecom remains on track to reach its 2026 fiber program goals, recognizing the number of service addresses may fluctuate from year to year to be commensurate with financial capacity. The company is targeting 1.2 million marketable fiber service addresses by 2026; it ended the quarter with 709,000. It is also targeting 60% of total service addresses to be served with fiber by 2026; it ended the quarter with 44%. And the company plans to offer speeds of 1 Gig or higher to at least 80% of its footprint by 2026; it finished the quarter with 69% at Gig speeds.
The company’s investments are driving the expansion of its footprint. TDS Telecom saw an 11% growth year over year in total service addresses. The demand for higher broadband speeds continues to increase with 75% of customers taking 100 Mbps or greater, up from 69% a year ago. TDS Telecom continues to increase the availability of Gig+ speeds and offers 8 Gig in certain markets. The company is seeing growth in customer take rates on higher speeds with 14% of its customer base on 1 Gig or higher.
Year over year, TDS Telecom saw a 10% increase in total residential broadband revenues and a 5% increase in residential broadband connections for the quarter. Average residential revenue per connection was up 3% for the same period due to price increases and product mix, partially offset by promotions.
TDS Telecom had another quarter of 4% growth in residential revenues, with expansion market residential revenues increasing to $20M in the quarter. Operating revenues were flat as growth in residential revenues was largely offset by the decline in commercial and wholesale revenues.
Due to the pull-forward of service addresses into 2023, next year TDS Telecom plans to slow its spending and focus on driving broadband penetration and revenues in new fiber markets. The company expects 2024 service addresses to be closer to what was delivered in 2022.
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: intense competition; the ability to attract people of outstanding talent throughout all levels of the organization; TDS Telecom's smaller scale relative to larger competitors; changes in demand, consumer preferences and perceptions, price competition, or churn rates; advances in technology; impacts of costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties and/or expansion of TDS Telecom’s businesses; the ability of the company to successfully construct and manage its networks; difficulties involving third parties with which TDS Telecom does business; uncertainties in TDS Telecom’s future cash flows and liquidity and access to the capital markets; the effect on TDS Telecom's business if the collateral securing the secured term loan of TDS Telecom’s parent, Telephone and Data Systems, Inc., is foreclosed upon; conditions in the U.S. telecommunications industry; the value of assets and investments; the state and federal regulatory environment; pending and future litigation; cyber-attacks or other breaches of network or information technology security; indirect control by the TDS Voting Trust; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; and the impact, duration and severity of public health emergencies. Investors are encouraged to consider these and other risks and uncertainties that are more fully described under “Risk Factors” in the most recent filing of Telephone and Data Systems, Inc.’s Form 10-K, as updated by any Telephone and Data Systems, Inc.’s Form 10-Q filed subsequent to such Form 10-K.