Regional Density, Network Control Key for TDS, U.S. Cellular
U.S. Cellular and 81% owner TDS are using consolidation strategies like those of the Bells, mixed with rural expansion, to grow out of small service territories despite limited resources, said executives speaking Tues. at the Deutsche Bank Media & Telecom Conference in Santa Clara, Cal. Acknowledging that the regulatory system limits even big independents’ reach, the companies said they've substantially increased profitability by gradually adding adjacent territories and keeping users on their networks more of the time.
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TDS has no plans to expand its CLEC business “in light of the current regulatory environment,” said CFO Sandra Helton. But the company is seeking more market share and cash flow in its service area. U.S. Cellular is the revenue engine, but the carrier also benefits from providing rural broadband services in the upper Midwest, where incumbents aren’t so active. Since the end of Q1 2005, the company’s DSL subscriber lines are up 53% to 75,300 on the ILEC side and 22% to 38,500 lines on the CLEC side. The DSL business, together with limited network upgrades, will allow TDS to deploy triple play options first in large parts of its territory, she said.
TDS wants to snap up the remaining 19% of U.S. Cellular it doesn’t own already, Helton said. A buyout and its timing depend on market conditions and “other factors,” she said. The company could participate in the AWS spectrum auction, she said, but only to strengthen holdings inside its markets or enter adjacent ones.
A wireless carrier like U.S. Cellular can have a successful regional strategy, its CFO, Ken Meyers, said: “People think, ‘Why would I ever want a regional carrier?'” but the company’s current network is showing them. Customers use 95% of their minutes on U.S. Cellular’s network, he said, and large carriers’ need for help covering its territory have paid off in favorable roaming agreements for the other 5%.
The company saw Q1 revenue and profits go way up year- over-year thanks to a better business model, Meyers said. The carrier isn’t “really looking to be the first out with anything, but the best,” he said. U.S. Cellular lets the Bells and others innovate and perfect services, then makes sure its workforce is trained properly, its customer service is top-notch and its network can handle an upgrade before adopting it.
Small upgrades, like FTTP/FTTN and EVDO, are in store, the executives said. But both stressed those technologies’ short reach; soft trial last year and this, with very limited deployments late this year and early next. Myers said the wireless side is more concerned with establishing itself in newer markets than rushing to offer top of the line services that subscribers don’t need. Because they don’t pursue the business segment, the carrier’s CDMA 1x network “is sufficient for consumer demand,” he said.