US Cellular Q2 2011 Result Shows Higher Revenue

Telecommunications service provider Telephone and Data Systems Inc. said Monday that its second-quarter net income grew sharply and U.S. Cellular Corp. earned $91.1 million, or 87 cents per share in the latest quarter. That’s up from $40.3 million or 38 cents per share, in the same period a year earlier and company recorded a pretax gain of $13.4 million in the latest quarter, because U.S. Cellular bought the remaining interest in a wireless business it did not already own………….


2Q 2011 Highlights:

  1. Smartphones sold, as a percent of total devices sold, increased to 39.6 percent from 15.8 percent.
  2. Service revenues were $1,002.0 million, up 3 percent.
  3. Postpaid ARPU (average revenue per unit) increased to $51.84 from $50.55.
  4. Postpaid churn improved to 1.38 percent from 1.43 percent.
  5. Operating income increased 61 percent to $102.4 million.
  6. Net loss of 58,000 retail customers, reflecting loss of 41,000 postpaid customers and 17,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
  7. Cell sites in service increased 5 percent to 7,770, of which 4,400 are owned towers.
  8. Repurchased 918,942 common shares for $45.0 million.


United States Cellular Corporation reported service revenues of $1,002.0 million for the second quarter of 2011, versus $972.6 million in the comparable period one year ago. Net income attributable to U.S. Cellular shareholders and related diluted earnings per share were $73.9 million and $0.87, respectively, for the second quarter of 2011, compared to $40.8 million and $0.47, respectively, in the comparable period one year ago. “We continued to increase postpaid ARPU and maintain a low churn rate,” said Mary N. Dillon, U.S. Cellular president and CEO, “although our subscriber results continue to reflect the intense competitive environment and the weak economy. This remains our greatest challenge. Our new advertising and marketing strategies are starting to increase awareness among potential switchers, and we’re working hard to break through to our target customers and leverage that awareness to improve gross additions. Smartphones sales continued to be strong, and we also saw an increase in sales of data plans for feature phones in the quarter. By balancing device subsidies among a wider range of both feature phones and smartphones, we were able to better control our loss on equipment. Overall, operating margins improved in the quarter due to higher ARPU, increased roaming revenue and good expense control, with fewer gross additions contributing to lower sales and marketing expenses. We now have 2.3 million customers on our Belief Plans and we’re complementing those plans with some very exciting phones and devices. This quarter we added the new HTC 7 Pro with Windows Phone 7, the new Android-powered HTC Merge Global Ready smartphone and the Motorola Xoom tablet. And we have more feature-packed phones, smartphones and tablets on the way. We’re also excited about our coming launch of 4G.”


U.S. Cellular paid $24.6 million in cash to purchase the remaining interest in a wireless business in which it previously held a non-controlling interest. As a result, the company recorded a $13.4 million pre-tax gain on investments. Additionally, U.S. Cellular sold $342 million of 6.95 percent senior notes and redeemed $330 million of its 7.5 percent senior notes. The redemption required U.S. Cellular to write off $8.2 million of previously capitalized debt issuance costs related to the 7.5 percent senior notes. The $8.2 million was recorded in interest expense. Guidance for the year ending Dec. 31, 2011, as of Aug. 8, 2011, is provided below, compared to the previous guidance provided on May 6, 2011. U.S. Cellular undertakes no duty to update such information, whether as a result of new information, future events, or otherwise. There can be no assurance that final results will not differ materially from this guidance.

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