On November 1, 2024, United States Cellular Corp (USM, Financial) released its 8-K filing detailing its third-quarter earnings for 2024. The company reported total operating revenues of $922 million, falling short of the analyst estimate of $925.08 million. The reported net loss attributable to shareholders was $79 million, translating to a loss per share of $0.92, significantly below the estimated earnings per share of $0.14.
Company Overview
United States Cellular Corp (USM, Financial) is a regional wireless carrier serving approximately 4.5 million customers across the Midwest, mid-Atlantic, New England, and the Pacific Northwest. The company operates in predominantly rural areas and smaller cities, with notable exceptions in Milwaukee and Oklahoma City. USM owns a 5.5% stake in Verizon Wireless' Los Angeles operations and holds most of its own towers. The firm is in the process of selling its wireless operations and a portion of its spectrum licenses to T-Mobile, with the transaction expected to close by mid-2025.
Performance and Challenges
USM's third-quarter performance reflects ongoing challenges in the telecommunications sector. The company reported a decline in service revenues to $747 million from $762 million in the same period last year. The net loss was exacerbated by a $136 million impairment charge related to high-band spectrum licenses. Despite these setbacks, USM noted improvements in postpaid handset net losses and a 2% growth in postpaid ARPU. However, the overall decrease in service revenues and the significant impairment charge highlight the financial pressures the company faces.
Financial Achievements and Industry Context
Despite the challenges, USM achieved a 32% increase in fixed wireless customers, reaching 140,000. This growth is crucial as the telecommunications industry increasingly focuses on expanding wireless broadband services. The company's strategic sale of spectrum assets, including a $1 billion transaction with Verizon, is part of its efforts to monetize non-core assets and strengthen its financial position.
Key Financial Metrics
USM's financial statements reveal critical insights into its operational health. The company's EBITDA for the nine months ended September 30, 2024, was $628 million, down from $963 million in the previous year. Adjusted EBITDA, which excludes non-recurring charges, was $810 million. These metrics are vital as they provide a clearer picture of the company's profitability and operational efficiency, excluding one-time expenses.
“Postpaid handset results improved year-over-year due to our promotional and retention actions,” said Laurent C. Therivel, UScellular President and CEO. “While overall postpaid handset net adds remained negative, I am pleased with our improving subscriber trajectory.”
Analysis and Outlook
USM's financial results underscore the challenges of operating in a competitive and rapidly evolving telecommunications market. The company's strategic asset sales and focus on improving operational efficiency are positive steps. However, the significant impairment charge and declining service revenues indicate that USM must continue to adapt to market conditions and consumer demands. The upcoming sale to T-Mobile and other spectrum transactions are pivotal for USM's future financial health and market positioning.
Investors and stakeholders will be closely monitoring USM's ability to execute its strategic initiatives and improve its financial performance in the coming quarters. The company's focus on enhancing its 5G network and monetizing spectrum assets will be critical in navigating the challenges ahead.
Explore the complete 8-K earnings release (here) from United States Cellular Corp for further details.
