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U.S. Cellular Reports Strong Second Quarter 2007 Results; Adjusts Guidance Upward

CHICAGO, Aug. 7 /PRNewswire-FirstCall/ -- United States Cellular Corporation (Amex: USM) reported service revenues of $906.2 million for the second quarter of 2007, up 14.5 percent from $791.7 million for the comparable period one year ago. The company recorded operating income of $123.5 million, up 56.5 percent from $78.9 million for the second quarter of 2006. Net income and diluted earnings per share were $147.6 million and $1.67, respectively, compared to net income and diluted earnings per share of $50.1 million and $0.57, respectively, for the comparable period one year ago.

Second Quarter Highlights

  • The total number of customers increased 5.4 percent year over year to 6,010,000. The number of retail customers increased 6.8 percent to 5,448,000.
  • Average monthly revenue per unit (ARPU) increased 8.3 percent to $50.42.
  • Data revenues grew 77.2 percent to $85.4 million, 9.4 percent of service revenues.
  • Operating income grew 56.5 percent to $123.5 million.
  • Cash flows from operating activities were $181.1 million for the quarter and $436.1 million for the first six months.

"U.S. Cellular is driven to provide the very best in customer satisfaction," said John E. Rooney, president and chief executive officer. "We continue to differentiate ourselves from the competition by providing an exceptional quality customer experience each and every time with an emphasis on the postpay customer. In the quarter, total customers surpassed 6 million and 95 percent were postpay.

"U.S. Cellular had a very strong second quarter financially," said Rooney. "Service revenues grew an impressive 14.5 percent driven by growth in the subscriber base and higher average revenue per customer. Our ARPU grew again for the sixth consecutive quarter to $50.42, and an increase of 8 percent over the second quarter a year ago. Data revenues were up 77 percent in the quarter to over $85 million, representing 9 percent of service revenues. Coupled with the strong revenue growth was a sharp improvement in operating margin which expanded significantly from the second quarter a year ago.

"Going forward, we are continuing to concentrate our efforts on growing our existing markets, improving profitability and increasing cash flow. At this time we have no plans to open any significant new markets this year or next," concluded Rooney.

Reseller Customers

Reseller customers historically have been classified as postpay and represented approximately 10% of total postpay customers as of June 30, 2007. In 2007, U.S. Cellular and its third party reseller changed the method of reporting reseller customer disconnects. The change affects the calculation of total postpay churn per month. Under the new method of reporting, the total postpay churn rate including reseller customers was 1.9 percent. The retail postpay churn rate, which excludes reseller customers and thus was not impacted by the change, was 1.4 percent.

Gain on Investments

The forward contracts related to U.S. Cellular's investment in Vodafone American Depository Receipts (ADRs) matured on May 7, 2007. U.S. Cellular delivered the Vodafone ADRs in settlement of the forward contracts and sold the remaining shares. U.S. Cellular recorded a $131.7 million pre-tax gain on the settlement of the forward contracts and sale of the remaining shares.

Share Repurchases

On April 4, 2007, U.S. Cellular entered into an agreement with an investment bank to purchase 670,000 of its common shares through an accelerated share repurchase ("ASR") for approximately $49 million. Also, on July 10, 2007, U.S. Cellular entered into an additional agreement with the same investment bank to purchase 168,000 of its common shares through an ASR for approximately $16 million.

Guidance

Guidance for the year ending Dec. 31, 2007 is as follows. There can be no assurance that final results will not differ materially from this guidance.

    U.S. Cellular 2007 guidance as of Aug. 7, 2007 is as follows:
         Net Retail Customer Additions                      375,000 - 425,000
         Service Revenues                                Approx. $3.6 billion
         Operating Income                                 $395 - $445 million
         Depreciation, Amortization & Accretion          Approx. $615 million
         Capital Expenditures                             $600 - $615 million

As previously announced, U.S. Cellular will hold a teleconference Aug. 7, 2007, at 10:00 a.m. Chicago time. Interested parties may listen to the call live over the Internet by accessing http://www.videonewswire.com/event.asp?id=41601 or the conference call page of the Investor Relations section of http://www.uscc.com. You can also connect to the teleconference by telephone (US/Canada) at (800)706-9695 with a conference ID # 11759028. The conference call will be archived on the conference call section of the U.S. Cellular web site at http://www.uscc.com.

Prior to the start of the call, certain financial and statistical information discussed during the conference call comments will be posted to the web site, together with reconciliations to generally accepted accounting principles (GAAP) of any non-GAAP information to be disclosed. Investors may access this additional information on the conference call page of the Investor Relations section of the U.S. Cellular web site.

About U.S. Cellular

As of June 30, 2007, U.S. Cellular Corporation, the nation's sixth-largest network wireless service carrier, employed 8,100 associates and provided wireless service to 6 million customers in 26 states. The Chicago-based company operates on a customer satisfaction strategy, meeting customer needs by providing a comprehensive range of wireless products and services, superior customer support, and a high-quality network.

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 and projections, 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 newly launched markets; changes in competition in the markets in which the company operates; changes in the overall economy; changes due to industry consolidation; advances in telecommunications technology; changes in the telecommunications regulatory environment; changes in the value of assets; changes in the value of investments; an adverse change in the ratings afforded our debt securities by accredited ratings organizations; risks and uncertainties relating to restatements and possible future restatements; pending and future litigation; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming terms and the mix of products and services offered in the company's markets. 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.

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

As previously announced, U.S. Cellular will hold a teleconference Aug. 7, 2007, at 10:00 a.m. Chicago time. Interested parties may listen to the call live over the Internet by accessing the conference call page of the Investor Relations section of http://www.teldta.com or http://www.uscc.com.



                      UNITED STATES CELLULAR CORPORATION
                            SUMMARY OPERATING DATA

    Quarter Ended                           6/30/2007   3/31/2007  12/31/2006

    Consolidated Markets:
       Total population (000s) (1)             81,581      56,048      55,543
       All customers -
          Customer units                    6,010,000   5,973,000   5,815,000
          Gross customer unit activations     418,000     459,000     389,000
          Net customer unit activations        37,000     152,000      86,000
          Market penetration  (1)                 7.4%       10.7%       10.5%
       Retail customers -
          Customer units                    5,448,000   5,377,000   5,225,000
          Gross customer unit activations     347,000     397,000     375,000
          Net customer unit activations        71,000     146,000      98,000

       Cell sites in service                    6,140       6,004       5,925
       Average monthly revenue per unit (2)    $50.42      $48.69      $48.15
          Retail service revenue per unit (2)  $43.87      $42.69      $42.21
          Inbound roaming revenue per unit (2)  $2.68       $2.33       $2.34
          Long-distance/other revenue per
            unit (2)                            $3.87       $3.67       $3.60
      Minutes of use (MOU) (3)                    858         783         749
      Retail postpay churn rate per month (4)     1.4%        1.3%        1.5%
      Capital Expenditures (000s)            $137,100    $109,700    $158,400

    (1) Market penetration is calculated using 2006 Claritas population
        estimates for all periods of 2007 and 2005 Claritas estimates for all
        periods of 2006.  "Total population" represents the total population
        of each of U.S. Cellular's consolidated markets, regardless of whether
        the market has begun marketing operations (without duplication of
        population in overlapping markets).  The population of markets in
        which U.S. Cellular has deferred the transfer of licenses from AT&T
        Wireless Services, Inc. is not included in the total population counts
        for any period.  In the quarter ended 6/30/07, the FCC granted Barat
        Wireless' applications with respect to 17 licenses for which it was
        the winning bidder in Auction 66.

    (2) 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                          $906,218    $860,583    $831,663
        Components:
           Retail service revenue during
            quarter                          $788,535    $754,515    $729,072
           Inbound roaming revenue during
            quarter                           $48,084     $41,268     $40,354
           Long-distance/other revenue
            during quarter                    $69,599     $64,800     $62,237

        Divided by average customers
         during quarter (000s)                  5,991       5,892       5,757
        Divided by three months in each
         quarter                                    3           3           3

        Average monthly revenue per unit       $50.42      $48.69      $48.15
        Retail service revenue per unit        $43.87      $42.69      $42.21
        Inbound roaming revenue per unit        $2.68       $2.33       $2.34
        Long-distance/other revenue per
         unit                                   $3.87       $3.67       $3.60

    (3) Average monthly local minutes of use per customer (without roaming).

    (4) Retail postpay churn rate per month is calculated by dividing the
        average monthly customer disconnects during the quarter by the average
        customer base for the quarter.




                      UNITED STATES CELLULAR CORPORATION
                            SUMMARY OPERATING DATA

    Quarter Ended                                 9/30/2006          6/30/2006

    Consolidated Markets:
       Total population (000s) (1)                   55,543             55,543
       All customers -
          Customer units                          5,729,000          5,704,000
          Gross customer unit activations           365,000            347,000
          Net customer unit activations              25,000             48,000
          Market penetration (1)                      10.3%              10.3%
       Retail customers -
          Customer units                          5,127,000          5,099,000
          Gross customer unit activations           353,000            331,000
          Net customer unit activations              28,000             49,000

       Cell sites in service                          5,726              5,583
       Average monthly revenue per unit (2)          $47.93             $46.54
        Retail service revenue per unit (2)          $41.75             $40.92
        Inbound roaming revenue per unit (2)          $2.55              $2.28
        Long-distance/other revenue per unit (2)      $3.63              $3.34
       Minutes of use (MOU) (3)                         725                719
       Retail postpay churn rate per month (4)         1.7%               1.6%
       Capital Expenditures (000s)                 $152,800           $151,400

    (1) Market penetration is calculated using 2006 Claritas population
        estimates for all periods of 2007 and 2005 Claritas estimates for all
        periods of 2006.  "Total population" represents the total population
        of each of U.S. Cellular's consolidated markets, regardless of whether
        the market has begun marketing operations (without duplication of
        population in overlapping markets).  The population of markets in
        which U.S. Cellular has deferred the transfer of licenses from AT&T
        Wireless Services, Inc. is not included in the total population counts
        for any period.  In the quarter ended 6/30/07, the FCC granted Barat
        Wireless' applications with respect to 17 licenses for which it was
        the winning bidder in Auction 66.
    (2) 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                                $821,820           $791,705
        Components:
           Retail service revenue during
            quarter                                $715,896           $696,079
           Inbound roaming revenue during
            quarter                                 $43,806            $38,745
           Long-distance/other revenue
            during quarter                          $62,118            $56,881

        Divided by average customers
         during quarter (000s)                        5,716              5,670
        Divided by three months in each
         quarter                                          3                  3

        Average monthly revenue per unit             $47.93             $46.54
        Retail service revenue per unit              $41.75             $40.92
        Inbound roaming revenue per unit              $2.55              $2.28
        Long-distance/other revenue per
         unit                                         $3.63              $3.34

    (3) Average monthly local minutes of use per customer (without roaming).

    (4) Retail postpay churn rate per month is calculated by dividing the
        average monthly customer disconnects during the quarter by the average
        customer base for the quarter.




                      UNITED STATES CELLULAR CORPORATION
                             FINANCIAL HIGHLIGHTS
                         Three Months Ended June 30,
         (Unaudited, dollars in thousands, except per share amounts)

                                                                 Increase
                                                                (Decrease)
                                           2007      2006     Amount  Percent
    Operating Revenues
       Service                           $906,218  $791,705  $114,513   14.5%
       Equipment sales                     65,428    54,432    10,996   20.2%
          Total Operating Revenues        971,646   846,137   125,509   14.8%
    Operating Expenses
       System operations (excluding
        depreciation shown below)         176,409   150,555    25,854   17.2%
       Cost of equipment sold             151,015   133,416    17,599   13.2%
       Selling, general and
        administrative                    371,894   342,769    29,125    8.5%
       Depreciation, amortization and
        accretion                         148,856   140,486     8,370    6.0%
          Total Operating Expenses        848,174   767,226    80,948   10.6%

    Operating Income                      123,472    78,911    44,561   56.5%

    Investment and Other Income (Expense)
       Equity in earnings of
        unconsolidated entities            22,980    21,957     1,023    4.7%
       Interest and dividend income         2,653     9,807    (7,154) (72.9%)
       Interest expense                   (21,325)  (23,007)    1,682   (7.3%)
       Fair value adjustment of
        derivative instruments            (17,849)     (922)  (16,927)   N/M
       Gain (loss) on investments         131,686      ---    131,686    N/M
       Other income                            91      (140)      231    N/M
                                          118,236     7,695   110,541    N/M
    Income Before Income Taxes and
     Minority Interest                    241,708    86,606   155,102    N/M
       Income tax expense                  91,500    33,683    57,817    N/M
    Income Before Minority Interest       150,208    52,923    97,285    N/M
       Minority share of income            (2,637)   (2,859)      222   (7.8%)
    Net Income                           $147,571   $50,064   $97,507    N/M

    Basic Weighted Average Common Shares
     Outstanding (000s)                    87,590    87,281       309    0.4%
    Basic Earnings Per Share                $1.68     $0.57     $1.11    N/M

    Diluted Weighted Average Common
     Shares Outstanding (000s)             88,410    88,083       327    0.4%
    Diluted Earnings Per Share              $1.67     $0.57     $1.10    N/M

    N/M - Percentage change not meaningful



                      UNITED STATES CELLULAR CORPORATION
                             FINANCIAL HIGHLIGHTS
                          Six Months Ended June 30,
         (Unaudited, dollars in thousands, except per share amounts)

                                                                 Increase
                                                                (Decrease)
                                         2007        2006      Amount  Percent
    Operating Revenues
       Service                        $1,766,801  $1,560,927  $205,874   13.2%
       Equipment sales                   139,519     121,586    17,933   14.7%
          Total Operating Revenues     1,906,320   1,682,513   223,807   13.3%
    Operating Expenses
      System operations (excluding
       depreciation shown below)        343,693     303,873    39,820   13.1%
      Cost of equipment sold            305,694     276,732    28,962   10.5%
      Selling, general and
       administrative                   726,825     670,473    56,352    8.4%
      Depreciation, amortization and
       accretion                        298,113     282,511    15,602    5.5%
          Total Operating Expenses    1,674,325   1,533,589   140,736    9.2%

    Operating Income                    231,995     148,924    83,071   55.8%

    Investment and Other Income
     (Expense)
      Equity in earnings of
       unconsolidated entities           46,078      41,440     4,638   11.2%
      Interest and dividend income        5,203      10,395    (5,192) (49.9%)
      Interest expense                  (45,009)    (46,215)    1,206   (2.6%)
      Fair value adjustment of
       derivative instruments            (5,388)      3,893    (9,281)   N/M
      Gain (loss) on investments        131,686        ---    131,686    N/M
      Other income                         (494)         62      (556)   N/M
                                        132,076       9,575   122,501    N/M
    Income Before Income Taxes and
     Minority Interest                  364,071     158,499   205,572    N/M
       Income tax expense               135,388      62,393    72,995    N/M
    Income Before Minority Interest     228,683      96,106   132,577    N/M
     Minority share of income            (6,711)     (6,596)     (115)   1.7%
    Net Income                         $221,972     $89,510  $132,462    N/M

    Basic Weighted Average Common
     Shares Outstanding (000s)           87,735      87,247       488    0.6%
    Basic Earnings Per Share              $2.53       $1.03     $1.50    N/M

    Diluted Weighted Average Common
     Shares Outstanding (000s)           88,615      87,994       621    0.7%
    Diluted Earnings Per Share            $2.50       $1.02     $1.48    N/M

    N/M - Percentage change not meaningful



                      UNITED STATES CELLULAR CORPORATION
                    CONSOLIDATED BALANCE SHEET HIGHLIGHTS
                      (Unaudited, dollars in thousands)


    ASSETS


                                                  June 30,        December 31,
                                                   2007              2006
    Current Assets
       Cash and cash equivalents              $    146,082        $    32,912
       Marketable equity securities                  ---              249,039
       Accounts receivable from customers
        and other                                  409,771            407,438
       Inventory                                   118,072            117,189
       Prepaid expenses                             46,277             34,955
       Other current assets                         19,816             13,385

                                                   740,018            854,918

    Investments
       Licenses                                  1,500,092          1,494,327
       Goodwill                                    491,316            485,452
       Customer lists                               21,381             26,196
       Marketable equity securities                 16,248              4,873
       Investments in unconsolidated entities      155,514            150,325
       Notes and interest receivable--long-term      4,482              4,541

                                                 2,189,033          2,165,714

    Property, Plant and Equipment
       In service and under construction         5,313,726          5,120,994
       Less accumulated depreciation             2,715,722          2,492,146

                                                 2,598,004          2,628,848

    Other Assets and Deferred Charges               30,356             31,136


    Total Assets                                $5,557,411         $5,680,616



    LIABILITIES AND SHAREHOLDERS' EQUITY

                                                  June 30,        December 31,
                                                    2007             2006
    Current Liabilities
       Current portion of Long-term Debt      $      ---             $159,856
       Derivative Liability                          ---               88,840
       Notes payable                                 ---               35,000
       Accounts payable
          Affiliates                                10,038             13,568
          Trade                                    237,522            241,303
      Customer deposits and deferred revenues      141,116            123,344
      Accrued taxes                                 70,492             26,913
      Accrued compensation                          38,635             47,842
      Deferred Taxes                                 ---               26,326
      Other current liabilities                      90,632            93,718

                                                    588,435           856,710

    Long-term Debt                                1,002,066         1,001,839


    Deferred Liabilities and Credits                795,983           792,088


    Minority Interest                                39,518            36,700


    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                    1,313,041         1,290,829
    Treasury Shares                                 (21,609)         (14,462)
    Accumulated other comprehensive income           10,082            80,382
    Retained earnings                             1,741,843         1,548,478
                                                  3,131,409         2,993,279


    Total Liabilities and Shareholders' Equity   $5,557,411        $5,680,616

SOURCE United States Cellular Corporation

CONTACT: Mark A. Steinkrauss, Vice President of Corporate Relations,
+1-312-592-5384, mark.steinkrauss@teldta.com or Julie D. Mathews, Manager of
Investor Relations, +1-312-592-5341, julie.mathews@teldta.com, both for United
States Cellular Corporation
Web site: http://www.teldta.com