Thank you for your patience. I would like to welcome everyone to the TDS and U.S. Cellular First Quarter 2023 Operating Results Call. Colleen Thompson, Vice President of Corporate Relations, you may start the conference.

Good morning, and thank you for joining us. We want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find on the Investor Relations sections of the TDS and U.S. Cellular websites. With me today and offering prepared comments are from TDS Vicki Villacrez, Executive Vice President and Chief Financial Officer. From U.S. Cellular, Laurent Therivel, President and Executive Officer; Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer; and from TDS Telecom, Michelle Brukwicki, Senior Vice President of Finance and Chief Financial Officer. This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations websites. Please see the websites for slides referred to on this call, including non-GAAP reconciliations. We provide guidance for both adjusted operating income before depreciation and amortization or OIBDA and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, to highlight the contributions of U.S. Cellular's wireless partnerships. TDS and U.S. Cellular filed their SEC Forms 8-K including the press releases and our 10-Q yesterday. As shown on Slide 2, the information set forth in the presentation and discussed during this call contains statements about expected future financial results that are forward-looking and subject to risks and uncertainties.

A second, Colleen. Operator, could you just do us a favor and make sure all the lines are muted, please.

Okay. I'm going to go back to Slide 2, the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the safe harbor paragraph in our press releases and the extended version included in our SEC filings. In terms of our upcoming IR schedule on Slide 3, on May 23, we will be attending JPMorgan's 51st Annual TMT Conference in Boston. And in late June, we will be virtually attending the New York Stock Exchange Investor Access Conference. And as always, we have an open-door or video call policy, so please reach out if you're interested in speaking with us. I will now turn the call over to Vicki Villacrez. Vicki?

Okay. Thank you, Colleen, and good morning, everyone. Both of our business units reaffirmed their guidance shared with you in February. U.S. Cellular is making significant investments in advancing its network and TDS Telecom is executing its strategy to deploy fiber in approximately 100 new markets. We continue to ensure we have the balance sheet strength to support the investments the enterprise needs and are managing within our planned levels of leverage for 2023. We ended the quarter with approximately $1.1 billion in available sources of liquidity, including cash, revolver and asset securitization facility to choose from to help fund our investments as needed, and we continue to have access to the debt capital markets. And now I'll turn over the call to LT to update you on U.S. Cellular's results. LT?

Thanks, Vicki. Good morning, everybody. I hope everyone is doing well. If we turn to Slide 6. Our top priority continues to be improving customer results. And although we still have plenty of work to do, I'm pleased with the progress that I've seen. As you can see on Slide 8, we've driven both improved postpaid gross adds on a year-over-year basis. We've improved postpaid churn on both a year-over-year and sequential basis. And we hope to see those trends continue moving forward. And I want to talk for just a second about the drivers of some of the results that you're seeing. Take you back to mid-'22, we launched several pricing and promotional efforts in order to address subscriber challenges. And specifically, we were looking to address churn reduction. Based on the testing we've done in our regional trials, we knew it would take about 6 to 9 months to see the consumer churn benefit. And we're now starting to see that in the consumer channel. Our voluntary churn improved about 10% year-over-year. At the same time, we also launched our flat rate plans in order to improve the gross ad trajectory. And we continue to see steady adoption of those plans. On average, nearly 27% of our flat rate customers have selected the higher-tier unlimited plans. As a quick reminder, while flat rate pricing generates lower ARPU than our traditional postpaid pricing, customers on those flat rate plans are not eligible for higher levels of device promotional discounts. So those plans have similar economics over their contract terms. I'm pleased with the balance we're striking between subscriber and financial aggressiveness. You'll see postpaid ARPU is also up 2% for the quarter. I also want to take a second and highlight our continued strong momentum in fixed wireless. Gross adds are up 130% year-over-year. We finished the quarter with 87,000 subscribers, and we expect to reach 100,000 subscribers later this year. We expect another solid quarter of year-over-year growth in the second quarter as we did not expand fixed wireless to our entire footprint until June of last year. Additionally, as we start to deploy our mid-band spectrum, that will provide additional growth momentum for fixed wireless in the coming quarters. Our tower business produced another strong quarter of results with revenues growing 11% year-over-year. To further highlight our performance, we've expanded our presentation to include some additional metrics as you see on Slide 11 of the presentation. We also rolled out our master brand campaign in the quarter built for us. That included an initiative called Phones Down for 5. The challenge was based on a simple action: taking a break from your phone for 5 days, 5 hours, or even just 5 minutes in order to reset your relationship with technology. The response to the campaign has been very encouraging, and we believe it's positively affected our Net Promoter Score, which is up significantly in the past few months. On the network side, about 80% of our traffic is carried by sites supporting 5G. We've continued our mid-band deployment, which includes beginning to light up markets with DOD spectrum and further building out C-band so that we'll be ready to light it up in portions of our network when the spectrum clears, which we expect to be in late 2023. As I wrap up my comments, I want to spend just a moment discussing a recent decision we've made as we continue to prioritize our investments and our focus on growing the revenues and the returns of our business. Earlier this week, we announced a reduction in staffing at U.S. Cellular, which spans across numerous areas of operation. While this decision was carefully considered and difficult, this action allows us to sharpen our focus and align effectively, as well as improve our operational efficiency. Doug will provide some additional context in terms of the impact on our financials in the quarter. Consistent with our culture, we’ll care for our team during this transition with empathy and respect, and I want to thank all of our associates for their continued focus and dedication as we focus on serving our customers with excellence. With that, I’m going to hand it over to Doug.

Thanks, LT. Good morning. Let's start with a review of our customer results on Slide 8. Postpaid handset net losses improved by 11,000 on a year-over-year basis, primarily due to lower voluntary defections as voluntary churn improved both year-over-year and sequentially due in large part to the increase in the percentage of customers in contract as a result of our attractive upgrade offers in the second half of 2022 and first quarter of 2023. We saw connected device gross and net additions increase by 9,000 on a year-over-year basis, driven by fixed wireless customer growth. As LT mentioned, we continue to see strong momentum in fixed wireless with a base of customers up 63% from the prior year and up 11% from the end of 2022. Moving to Slide 9, prepaid gross additions declined by 12,000 and net prepaid additions decreased by 5,000. In terms of gross additions, the overall pool of available customers declined, and we believe the year-over-year decrease in income tax refunds contributed to this. Additionally, given the relative pricing parity between our flat rate postpaid offering and our prepaid plans, we are seeing our customers choosing to take our flat rate postpaid offer instead of prepaid, and that's a good trend as our flat rate plans provide better economics. Lastly, we saw a decline in our prepaid churn rate. Now let's turn to the financial results starting on Slide 10. Total operating revenues for the first quarter decreased 2% from the prior year, with service revenue declining 3%. The primary drivers of lower service revenue are declines in the average postpaid subscriber base and roaming revenue. You will note that the decline in roaming revenue is due to decreasing reciprocal roaming rates with our carrier partners, and this roaming revenue decline is more than offset by the decline we see in our off-net rolling expense. Therefore, the overall decrease in roaming rates is accretive to our profitability. On the positive side, LT mentioned the increase in postpaid ARPU, and this increase, along with the increase in our ARPA was driven primarily by favorable plan and product offering mix as a result of customer adoption of our higher-value, higher-tier plans, and an increase in device protection revenues. These increases were partially offset by an increase in promotional costs. We continue to see growth in our highest tiers of unlimited plans, and 42% of our postpaid handset customers are on these higher-tier plans at the end of the quarter. Equipment revenues decreased by 2% due primarily to a decline in volume, partially offset by an increase in the average revenue per device. These same dynamics played out on the cost of equipment sold side, resulting in loss on equipment being flat year-over-year. Next, let's turn to our quarterly financial results shown on Slide 12. For this discussion, I will refer to adjusted operating income before depreciation and amortization as adjusted operating income. As I noted, total operating revenues declined 2% year-over-year while total cash expenses increased 2%. Cash operating expenses in the first quarter of 2023 include $10 million of severance and related costs attributable to our reduction in staffing previously mentioned by LT. This reduction will become effective in the second quarter, and both the severance impact and the 2023 in-year savings impact are incorporated in our guidance. This action is in addition to our ongoing cost optimization program as we continue to effectively manage costs amid our ongoing 5G deployment and inflationary pressures. This program has delivered outstanding results concerning controlling our cash expenses. Specifically, from 2017 through 2022, excluding the impacts of loss on equipment and bad debt expense, which have been influenced by the aggressive promotional environment and payment behavior during the pandemic, we have held cash expenses essentially flat and expect to do the same in 2023. Selling, General and Administrative expenses were also impacted by an increase in advertising expenses in the first quarter related to timing, primarily media costs associated with the launch of our new master brand campaign, which LT highlighted in his opening remarks. Capital expenditures have increased 52%, driven by timing of expenditures. As our guidance indicates, we expect our full year 2023 capital expenditures to be less than the prior year as we invest in our multiyear 5G mid-band deployment while prudently managing our free cash flow. As shown on Slide 13, our 2023 financial guidance remains unchanged from the guidance we issued in February of this year as we remain on track to our financial plan. I will now turn the call over to Michelle Brukwicki. Michelle?

Thank you, Doug, and good morning, everyone. I'm pleased to report on TDS Telecom's first quarter results and confirm that we are on track to meet both our operational and financial goals set out earlier this year. Here are the key messages. First quarter fiber service address delivery and financial results came in as expected, setting the foundation for us to meet our fiber service address target and financial guidance that we set out at the beginning of the year. We delivered 25,000 marketable fiber service addresses during the quarter. Our full year goal is 175,000 addresses, so we will be significantly ramping up deployment as we move out of winter months and construction activity can accelerate. On the financial side, broadband penetration in our new expansion markets continues to grow at the pace expected in our business cases. This is translating into revenue growth. Since we are still in the early phases of market launches in the majority of our markets, we continue to see pressure on adjusted EBITDA. This is a result of incurring start-up costs before the revenues from the markets start coming in. This is all part of our 2023 guidance. As these new markets start generating revenue, which follows our service address delivery, adjusted EBITDA will start to improve in future years. I'll give more detail on our fiber program and financials as we go through the slides, but I wanted everyone to have this context upfront. So let's move to Slide 15. Here, you can see our strategic areas of focus that will help us achieve our goal to be the preferred broadband provider in the markets we serve. Investments in these strategic priorities will drive profitability and improved returns over time, ultimately strengthening TDS Telecom's financial and market position. Moving to Slide 16. Let me update you on our progress towards achieving our longer-term goals. At year-end, I shared three metrics that we will consistently monitor and report on each quarter so you can follow the progress we're making toward these goals. The headline is that based on first quarter results and our expectations for 2023, we remain on track. As previously mentioned, we deployed 25,000 marketable service addresses in the quarter, and we remain confident that we're on track to reach 175,000 by year-end. As a reminder, most of our expansion markets are in the Pacific Northwest in Wisconsin, where weather slows down delivery during winter months. Our expectations are that service addresses will build steadily throughout the year. So let me share where we're at on our fiber program metrics. We're targeting 1.2 million marketable fiber service addresses by 2026. We ended the quarter with 607,000, so we are over the halfway mark. We're also targeting 60% of our total service addresses to be served by fiber by 2026, and we ended the quarter with 40%. This reflects progress in growing fiber through our expansion markets as well as fibering up our incumbent markets. Specifically, by 2026, we plan to serve half of our ILEC addresses with fiber, and at the end of the quarter, 37% of our ILEC was fibered up. Finally, we're expecting to offer speeds of 1 gig or higher to at least 80% of our footprint by 2026. We finished the quarter with 67% at gig speeds. We're pleased with the pace of our fiber builds and our fiber expansion results. We continue to successfully address challenges in getting our builds completed. We've been scaling up our service address deployment since we launched this program and have a repeatable process in place as we expand it. Based on our experience, we still see positive contributions from our market launches starting around the 3-year mark, and we still expect to achieve broadband penetration rates of at least 40% in a steady state. The success we've seen in our early markets validates our business cases and our expectation of low to mid-double-digit returns. On Slide 17, you can see that our fiber program is a multiyear journey. We have about 100 communities that are in various stages of development, with most of these in or about to begin construction. We've seen an 8% growth in total service addresses year-over-year. Successfully ramping up construction this year is key toward hitting our longer-term 2026 goals. We also continue to address the broadband needs in our most rural markets by upgrading our copper networks with support from state broadband grant programs and by meeting our obligations under the federal A-CAM program. It is our understanding that the FCC is moving toward adopting an extension of the A-CAM program, hopefully, by the third quarter. The A-CAM extension would provide an additional 6 years of support for speeds of 100 down and 20 up. The same speeds as BEAD. For us, this means getting fiber to almost all of our 160,000 A-CAM addresses. We are very enthusiastic about an A-CAM extension because we believe that extending the current federal A-CAM program first and then pursuing BEAD program funding would be the fastest path for TDS Telecom to take fiber deeper into our communities. Our broadband investments are driving positive results. As shown on Slide 18, we experienced a 4% increase year-over-year in total broadband residential connections. Shown on the graph on the right, we see demand for greater broadband speeds with 72% of our customers taking 100 megabits per second or greater, up from 67% a year ago. TDS Telecom can now offer at least 1 gig service to 67% of its footprint. In some markets, we're now even offering 8 gig speeds. In areas where we offer gig-plus service, we're seeing 24% of our new customers taking this product. Finally, our focus on fast reliable service has generated an 8% increase in total residential broadband revenue. On Slides 19 and 20, I'll share some financial highlights, which were in line with our expectations. Total revenues increased 1% for the quarter. This 1% increase comprises an increase in residential revenues, offset by a decrease in commercial and wholesale revenues. Residential revenues across all our markets increased by 4% for the quarter. Average residential revenue per connection was also up by 4% due to price increases and overall product mix, partially offset by promotions. As shown in the chart on the left, expansion market residential revenues were up to $15 million in the quarter. This aligns with our expectations of steady revenue growth following the timing of service address delivery as penetrations in these new markets build. Residential wireline incumbent and cable revenues increased year-over-year due to price increases and growth in broadband connections, partially offset by promotional activity and a decline in video and voice connections. Commercial revenues decreased 7% in the quarter, primarily driven by lower CLEC connections. Lastly, wholesale revenues decreased 4% for the quarter, primarily due to lower special access revenue. Cash expenses increased by 10% in the quarter, mainly due to our growing fiber program. As a reminder, costs to support launching our fiber expansion markets include direct costs such as sales, marketing, real estate and technicians, in addition to shared services. These costs are incurred upfront and prior to generating revenues. As we expected, the increased cash expenses resulted in a decline in adjusted EBITDA of 17% for the quarter. Capital expenditures of $130 million were up from the prior year due to increased investment in fiber deployment. Keep in mind that these investments support our multiyear strategy and our goal of increasing free cash flow and return on capital over the long run. On Slide 21 is our 2023 guidance, which is unchanged, as we are tracking to our plans. We are forecasting total telecom revenues of $1.03 billion to $1.06 billion. This reflects our goal of top-line growth driven by continued improvements in residential revenues across all of our markets, offsetting declines in commercial and wholesale revenues. Adjusted EBITDA is expected to be between $260 million to $290 million in 2023. Adjusted EBITDA reflects our continued fiber expansion, which requires upfront spending. At the end of 2023, almost all of our 100 communities will have been launched. As our market builds mature and we increase our penetration, we expect the pressure on adjusted EBITDA to lessen over time. Capital expenditures are expected to be between $500 million and $550 million in 2023. This reflects increased spending on fiber service delivery, and nearly 90% of our capital spending is allocated to broadband growth. Before turning over the call, I want to thank the team for all their hard work and continued dedication to our mission. It takes alignment across the entire organization to execute on our strategy. Each one of our associates is contributing to TDS Telecom's success. I'll now turn the call back to Colleen.

Okay. Operator, we're ready for the first question.

Your first question is from Rick Prentiss of Raymond James.

Can you hear me okay?

Rick, it's a little hard to hear you.

Yes. A couple of questions. Can you hear me better now?

Yes, much better.

Okay. Cool. Yes. First, I want to focus on the balance sheet and capital allocation maybe. Vicki, as you look at investment years at both U.S. Cellular and TDS Telecom, help us understand, you mentioned the level of leverage you want to see in '23. Where is that at? How are you viewing the dividend as far as that capital allocation goes and any consideration of looking at possibly securitizing the tower business, which seems to still be doing very well.

Okay. A couple of questions there. Let me start first with capital allocation strategy. Broadly, as we are looking across our businesses, we've talked significantly about last year for the last couple of years, we are in a heavy investment cycle, both with the 5G modernization and C-band deployment at U.S. Cellular and the expansion of our footprint into approximately 100 new markets at TDS Telecom. But I have to balance the needs and the pacing and the timing of those investments with our leverage and with dividends that we feel are important to our shareholders. So it's a balance. As I look at our leverage, we are working to manage well under our debt covenants with a significant safety net. We're looking to manage within our credit rating requirements. So we're balancing that with the pacing of our investments back into the business. You had a second question on towers. If I think more broadly about our noncore assets and towers, that gives our balance sheet strength. It also contributes strength to the business. We talked a lot about the towers and their importance to U.S. Cellular as a core part of its operation. They give us balance sheet strength. So I will tell you that we have sufficient liquidity for 2023 and sufficient sources, but I would not need to monetize anything on the balance sheet for 2023.

Okay. And the dividend was increased not that long ago, I think, what, 49th year in a row or so, still a strong commitment to paying the dividend.

We have a very strong commitment to paying the dividend. We have a long track record that we're very proud of, and we are focused on modestly increasing it, which we did this year.

Okay. Second question for me. LT, when you joined, you mentioned that there could be opportunities for partnerships in the business to help return on capital. It's been several years. Obviously, it's been a difficult environment out there. But update us as far as what potential partnerships are out there, where you're at as far as maybe bringing them to fruition.

Yes, I remain optimistic about the concept of partnerships and the opportunity for partnerships founded on two concepts. The first concept is that the capital intensity for the industry as a whole is in a challenging place. It's the case for us. It's also the case for our competitors. The second concept that it's founded upon is that it simply does not make sense, in my perspective, if you think about network density and site density required to support 5G, let alone 6G, which is starting to be discussed. Building multiple duplicative networks in rural America, given the capital intensity challenges, does not make sense. We continue to have conversations with players in the industry. Obviously, I can't get into specifics, but I think there's general agreement upon those two founding principles. One interesting example is in our tower business. One interesting thing we can do is we don't just market real estate on the tower, because we're an operator. We also have assets at that tower that other people can use. We can market shelters and generators as well. The interesting one is backhaul. We've had some conversations with people about sharing backhaul. In the past, that concept would have been declined because it means sharing a piece of my network with someone else. However, we're seeing a lot of interest in those backhaul sharing conversations. I believe the momentum behind those partnerships remains reasonable. It's still a good strategic concept. We haven't seen meaningful progress to report on, but the underlying strategic rationale remains strong, and we continue to have those conversations with folks in the industry.

Your next question is from Sergey Dluzhevskiy of Gamco Investors.

My first question is for LT. You mentioned that the promotions and offers that you had in the market in the second half of last year and first quarter of this year are having a positive impact on churn with a 6 to 9 months lag effect as you expected. My question is, as you look at the magnitude of churn improvement, is that what you expected? Is it tracking better or worse compared to your initial expectations based on some of the trials you did in your regional markets before? Additionally, besides getting more customers in contract, which is obviously what you're working on, what additional steps do you see that are working for you or have been working for you recently in terms of improving churn?

Thank you for the question. I am pleased with the progress we've made on churn. Clearly, still have a lot of room to go. More broadly, as I look at the business trends, we've seen every quarter in 2022 have better net add momentum than the quarter before. In the first quarter of this year, we have better net add results than the first quarter of last year. Q1 is generally going to be down from Q4 for net adds in our industry, as you well know. The momentum in the business, the direction of the business is heading from a net add perspective, I'm pleased with. It's not fast enough. We have to continue to improve the momentum. The net impact of the promotions has been about what we expected. It took a bit longer than we had seen in our test market. The improvements took a few more months to drive the benefits that we hoped to see in terms of churn improvement than we saw in our test markets. However, the overall impact of the improvement is consistent, and we remain optimistic that we can continue to drive those improvements in churn. As long as we can keep people in contracts, our in-contract rate is about 64%. It's as high as it's been in a long time. We'll have to maintain that type of in-contract rate if we want to continue to see positive churn momentum. Some other pieces include being targeted with our upgrade offers. We continue to pulse in and out between mass upgrade offers and targeted upgrade offers. The results we see from those targeted offers are considerably better than our test cohort. I'm optimistic about those results. You don't get the same bang as you do with mass upgrade offers, but you get better value with those targeted upgrade offers. This brings me to the last piece of this equation, the balance between subscriber and economic results that we try to maintain. There’s an easier way to drive churn down, which is to be overly aggressive with upgrade offers and do mass upgrade offers and throw more money at it. We've tried to remain disciplined in this market. It's highly competitive, and in a highly competitive market, we don't want to lead a charge towards lower margins. We’ve tried to be disciplined in the balance between financial results and subscriber results. You've seen that in ARPU and the improvement we've had in ARPU amidst some competitive pressures and rolling out flat rate plans, which generally have a dilutive effect on ARPU. I hope this gives you a sense, Sergey, about how we're thinking about it and some of the levers we are pulling to affect the results we’re seeing. Good momentum; we've got to make sure we keep it going.

Got it. My second question is on the gross add front. Handsets gross adds were up 2% year-over-year, but it was largely driven by, I think, a 5,000 increase in feature phone gross adds. The smartphone gross add down 3%. Maybe a 2-part question. First, what is the reason for the increasing number of feature phones over the past few quarters? Secondly, across different geographies and different markets, what are some common characteristics of markets where you tend to do better in terms of gross adds over the past few quarters? Are there any lessons that can be applied to other underperforming markets?

Yes, Sergey, on the first part of your question regarding the feature phone success, we see customers that have been on our prepaid plans migrating over to our flat rate plan. In the first quarter of this year, 3,500 prepaid customers migrated to our postpaid flat rate plans. That counts as a postpaid gross add, which is why you're seeing that dynamic between feature phones and smartphones in the first quarter.

And Sergey, I'll tackle your second question regarding market characteristics. It won't be surprising, right? Markets with a strong network generally perform better in terms of subscriber performance. When we roll out 5G, we see improvements in customer perception. We not only see improvements in perception, but actual demonstrated improvements in performance. In upgraded networks, we see better subscriber results. As we upgrade our network, that's twofold. The first is modernizing to 5G. As I mentioned earlier, 80% of our traffic rides over a 5G-enabled tower. The key metric we're following is not what's the total percentage of traffic on 5G, but the percentage of traffic riding over a 5G-enabled tower. Upgrading a tower requires upgrading the handset as well. We feel good about our investments and infrastructure. The next pivot in improving our network is with mid-band spectrum that we plan to deploy. As I reported, the C-band spectrum is expected to clear any interference concerns we have with the FAA, allowing us to deploy the spectrum for customer benefits. As we introduce this upgrade, we believe we'll have an even more compelling network offering that will help drive subscriber performance on churn and gross adds.

Your next question is from Tom Lidka of Citadel.

I've been a shareholder for 32 years, and I purchased the stock at $14.34. 32 years later, I've lost half my money. I've listened to this presentation of enthusiastic future results, and they don't seem to come. I'm wondering at some point if it makes sense to put the company up for sale and let these assets be more efficiently run in a larger system because I don't know where we're headed here. The stock is at a 32-year low. I wonder if someone can explain this.

Tom, it's LT. We certainly appreciate your long-term investment and your patience. Questions you’re asking are ones we've evaluated regarding strategic options for the business. We believe in this company and its long-term future. The wireless industry is currently navigating through challenges. Many have invested heavily in 5G infrastructure, yet its use cases are unfolding slower than anticipated. This situation has heightened the capital intensity across the board, including for competitors. That being said, we have a robust portfolio of assets. We have strong spectrum holdings, and we have restructured our debt over the past few years to strengthen our balance sheet, which Vicki previously touched on. We’re in a solid position to seize future growth as the 5G demand emerges. I understand your frustration; it resonates with me as a shareholder as well. We are confident in the strategy laid out, and we are committed to it.

There are no further questions at this time. I will now turn the call over to Colleen Thompson for closing remarks.

Okay. Thanks, everyone, for your time today. Again, please reach out to IR if you have any additional questions. Have a great weekend.

This concludes today's conference call. Thank you for your participation. You may now disconnect.