United States Cellular Corp. USM reported strong financial results in the third quarter of 2015. Both the top and the bottom line outpaced the Zacks Consensus Estimate. Backed by the strong results, the company — which is a subsidiary of Telephone and Data Systems Inc. TDS — also raised its fiscal 2015 outlook for adjusted EBITDA and operating cash flow.
In third-quarter 2015, GAAP net income was $63.6 million or 75 cents per share compared to a net loss of $22.2 million or a loss of 26 cents per share in the year-ago quarter. Quarterly adjusted earnings per share of 57 cents were way ahead of the Zacks Consensus Estimate of a loss of a penny.
Third-quarter revenues of $1,069 million were up 6.8% year over year surpassing the Zacks Consensus Estimate of $1,014 million. Quarterly Service revenues increased 5.3% to $896 million. Revenues from Equipment sales were up 15.8% to $173 million.
Smartphone sales retained its strength and represented 72% penetration among postpaid customers, up from 62% recorded in the year-ago quarter. Total cell sites in service were 6,246 compared with 6,209 in the year-ago quarter. Smartphones sold as a percentage of total handsets sold constituted 87% against 81% in the prior-year quarter.
Operating Expenses and Income
In the third quarter of 2015, total operating expenses declined 5.8% to $991.2 million. The company reported operating income of $77.7 million compared to an operating loss of $51.4 million in the prior-year quarter.
Cash Flow
In the third quarter of 2015, United States Cellular generated $131.5 million of cash from operations compared with $117.8 million in the prior-year quarter. Quarterly adjusted free cash flow came in at a negative $11.5 million against a negative $26.7 million in the year-ago quarter.
Liquidity
United States Cellular exited the third quarter with cash and cash equivalents of $596.8 million compared with $211.5 million at the end of 2014. At quarter-end, total debt stood at $1,377.2 million as against $1,151.9 million at the end of 2014. The debt-to-capitalization ratio, at the end of the reported quarter, was 0.28 compared with 0.26 at the end of 2014.
ARPU & Churn
Quarterly postpaid ARPU (average revenue per user) increased to $58.12 from $56.37 in the prior-year quarter. Postpaid ARPA (average revenue per account) was $147 against $132.99 in the year-earlier quarter. Postpaid churn decreased to 1.4% from 1.6% in the third quarter of 2014. Prepaid ARPU increased to $35.64 from $34.40 in the prior-year quarter. Prepaid churn also decreased to 5.2% in the reported quarter from 6.3% a year-ago quarter. Quarterly total billed ARPU was $55.42 compared with $53.24 in the year-ago quarter. Total service revenue ARPU was $62.31 against $60.92 in the year-ago quarter.
Subscriber Statistics
United States Cellular exited the reported quarter with a subscriber base of 4,807,000 compared with 4,674,000 at the end of the year-ago quarter. Postpaid subscriber base was 4,341,000 against 4,200,000 at the end of the prior-year quarter. Meanwhile, prepaid subscriber base totaled 380,000 against 350,000 at the year-ago quarter’s end. In the reported quarter, United States Cellular added a net 17,000 postpaid subscribers compared with 52,000 in the year-ago quarter. The company also gained 12,000 prepaid customers in the same quarter against a net loss of 2,000 in the prior-year quarter.
Guidance
For full year 2015, United States Cellular expects total operating revenue to reach $4 billion. Adjusted EBITDA is expected at $710–$790 million and capital expenditure will be around $600 million. The company projects operating cash flow in the range of $540-$620 million. Meanwhile, the company has duly completed its 4G LTE network rollout during the reported quarter.
Zacks Rank & Stocks to Consider
United States Cellular currently holds a Zacks Rank #2 (Buy). Other well-ranked stocks in the industry are AT&T Inc. T and Sprint Corp S. While AT&T carries a Zacks Rank #1 (Strong Buy), Sprint holds a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment