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United States Cellular (USM) Q2 Earnings In Line, Sales Top

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United States Cellular Corp. (USM - Free Report) , a subsidiary of Telephone & Data Systems Inc. (TDS - Free Report) , posted mixed financial results in the second quarter of 2017. While the top line surpassed the Zacks Consensus Estimate, the bottom line met the mark.

GAAP net income came in at $12 million or 14 cents per share compared with a net income of $27 million or 32 cents per share in the year-ago quarter. However, quarterly adjusted earnings per share of 17 cents were in line with the Zacks Consensus Estimate.

Quarterly total revenue of $963 million was down 3% year over year outpacing the Zacks Consensus Estimate of $950.6 million. Quarterly Service revenues decreased 4% to $740 million. Revenues from Equipment sales increased 2% to $223 million.

Quarterly operating expenses decreased 1% to $958 million. Operating income was a mere $5 million compared with $30 million in the prior-year quarter. Total cell sites in service were 6,421 compared with 6,415 at the end of 2016. Total company owned towers were 4,044 compared with 4,040 at the end of 2016.

Cash Flow

In the quarter under review, cash from operations came in at $159 million compared with $98 million in the prior-year quarter. Quarterly free cash flow was $92 million compared with $23 million in the year-ago quarter.

Liquidity

United States Cellular exited the second quarter of 2017 with cash and cash equivalents of $472 million compared with $586 million at the end of 2016. Total debt was $1,624 million compared with $1,629 million at the end of 2016. The debt-to-capitalization ratio at the end of second-quarter 2017 was 0.30 compared with 0.31 at 2016-end.

ARPU & Churn

Quarterly postpaid ARPU (average revenue per user) decreased to $44.60 from $45.19 at the end of 2016. Postpaid ARPA (average revenue per account) was $119.73 compared with $120.67 at the end of 2016. Postpaid churn declined to 1.13% from 1.41% recorded at the end of 2016. Prepaid ARPU increased to $33.52 from $33.25 recorded at the end of 2016. Prepaid churn decreased to 4.93% in the reported quarter from 5.44% at 2016-end.

Subscriber Statistics

United States Cellular exited the second quarter of 2017 with a subscriber base of 5,023,000 compared with 5,031,000 at the end of 2016. Postpaid subscriber base totaled 4,478,000 compared with 4,482,000 at 2016-end. Meanwhile, prepaid subscriber base totaled 484,000, flat year over year. In the reported quarter, United States Cellular gained a net of 23,000 postpaid subscribers compared with a net loss of 2,000 customers in the year-ago quarter. The company gained 3,000 prepaid customers in the same quarter as against 4,000 users in the prior-year quarter.

Guidance for 2017

United States Cellular expects total operating revenue in the band of $3,800–$4,000 million. Adjusted EBITDA is projected at $700–$800 million while capital expenditure is estimated at around $500 million. The company projects operating cash flow in the range of $550–$650 million.

United States Cellular Corporation Price, Consensus and EPS Surprise

 

United States Cellular Corporation Price, Consensus and EPS Surprise | United States Cellular Corporation Quote

Recent Development

United States Cellular currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company has submitted an application to the Federal Communications Commission (FCC) for a six-month special temporary authority (STA) to conduct trial runs in the 3.5 GHz band in some areas of Maine and North Carolina. Major U.S. telecom operators are currently exploring ways to commercialize usage of 3.5 GHz unlicensed wireless spectrum.

Verizon Communications Inc. (VZ - Free Report) is planning to deploy small cells – both low power and high power – using the 3.5 GHz band. Meanwhile, in Mar 2017, the FCC awarded AT&T Inc. (T - Free Report) a license to test a 3.5GHz network.

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