United States Cellular Corporation USM reported strong fourth-quarter 2023 results, with both the bottom line and top line surpassing the respective Zacks Consensus Estimate. A reduction in prepaid and postpaid retail connections led to a revenue decline year over year. However solid momentum in fixed wireless portfolio, growth in tower rental revenues partially supported the top line. Cost optimization strategy improved profitability. Growth in postpaid average revenues per user (ARPU) and steady progress in 5G network deployment are tailwinds.
Net Income
Net income in the quarter was $15 million or 16 cents per share against a loss of $28 million or a loss of 33 cents per share in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate by 16 cents. Lower operating expenses led to a higher net income during the quarter.
Net income in 2023 was $54 million or 63 cents, up from $30 million or 35 cents reported in 2022.
United States Cellular Corporation Price, Consensus and EPS Surprise
United States Cellular Corporation price-consensus-eps-surprise-chart | United States Cellular Corporation Quote
Revenues
The company generated $1 billion in operating revenues compared with $1.04 billion in the prior-year quarter. Net sales were negatively affected by a decline in postpaid and prepaid retail connections. However, the top line beat the Zacks Consensus Estimate by $30 million.
Service revenues decreased to $755 million from $774 million in the prior-year quarter. The figure surpassed the Zacks Consensus Estimate of $753.57 million. Equipment sales registered $245 million in revenues compared with $274 million in the prior-year quarter. Net sales beat the Zack Consensus Estimate of $216.64 million.
In 2023, the company reported total operating revenues of $3.9 billion down from $4.16 billion in 2022.
Fixed wireless customers grew by 46% year over year to 114,000. Tower business witnessed healthy momentum during the quarter and registered revenues of $25.1 million. Management’s effort to diversify its third-party customer base is a positive factor.
Handset connections were 80,000 compared to 105,000 in the year-ago quarter. Handset churn rate was 1.22%, compared to 1.12% a year ago. Connected devices remained stagnant year over year at 49,000 and the churn rate increased to 3.03% from 2.99% a year ago. Total prepaid connections stood at 451,000, down from 493,000 in the year-earlier quarter.
Postpaid average revenues per account improved to $131.63 from $130.97 in the year-ago quarter, with postpaid churn rate of 1.44% and 1.35%, respectively. Postpaid ARPU rose to $51.61 from $50.60 a year ago. Prepaid ARPU was $32.32, down from $33.34 in the prior-year quarter. The prepaid churn rate decreased to 3.87% from 4.11% recorded in the year-ago quarter.
Quarterly Details
Adjusted EBITDA in the quarter stood at $233 million, up from $202 million in the prior-year quarter. The 16% year over year growth was induced by various cost optimization initiatives. Adjusted OIBDA rose 19% year over year to $194 million.
Total operating expenses declined to $979 million, down 9% year over year. Consequently, operating income rose to $21 million against an operating loss of $27 million in the year-ago quarter.
Cash Flow & Liquidity
In the December quarter, U.S. Cellular generated $148 million of cash from operating activities compared with $180 million cash generated in the year-ago quarter. In 2023, the company generated $866 million cash from operations compared to $832 million cash generated in 2022.
As of Dec 31, 2023, the company had $150 million in cash and cash equivalents and $3.04 billion in long-term debt compared to respective figures of $273 million and $3.18 billion in 2022.
Outlook
For 2024, U.S. Cellular anticipated service revenues in the range of $2,950-$3,050 million. Adjusted OIBDA is estimated within the range of $750-$850 million. The company expects adjusted EBITDA guidance at about $920-$1,020 million and capital expenditure is projected in the band of $550-$650 million.
Zacks Rank & Stocks to Consider
United Cellular currently sports a Zacks Rank #3 (Hold).
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