Telephone and Data Systems (TDS) Citi's 2024 Global TMT Conference summary

Strategic and operating priorities

• Transforming into a fiber-based company, expanding beyond legacy copper and cable markets to new territories, especially in the Pacific Northwest and Wisconsin.

• Multi-year fiber buildouts in about 100 new communities, with ongoing upgrades in legacy markets supported by the Enhanced ACAM program.

• Targeting 2.2 million service addresses in the next few years, with a growing share being fiber-enabled and nearly all able to offer gigabit speeds.

• Focused on organic growth through edge-outs and new market entries, with potential for future inorganic growth via acquisitions.

• Emphasizing operational efficiency, disciplined capital allocation, and leveraging government programs for rural fiber expansion.

Investment and performance updates

• Capital spending peaked in 2022-2023 to launch new markets, with 217,000 new marketable fiber addresses added in 2023, exceeding targets.

• 2024 capital spend is reduced to align with leverage targets and focus on selling into newly launched addresses.

• Broadband and video net adds are slower than expected due to staffing and permitting delays, and increased competition in legacy cable markets.

• Profitability is outperforming expectations, with operational efficiencies in new markets and cost controls leading to raised Adjusted EBITDA guidance.

Market and technology strategy

• About half of 1.7 million service addresses are fiber, a quarter copper, and a quarter DOCSIS 3.1; expansion markets are 100% fiber.

• Enhanced ACAM program will further fiber penetration in ILEC markets, with government support making rural builds economical.

• Fixed wireless is a threat mainly in non-fiber ILEC areas, but less so in fiber and cable markets due to higher data demands.

• Minimum target for broadband penetration in new fiber markets is 40% by year four or five, with ARPU and build cost also key to IRR.