UScellular Shows Growth Even as Net Adds Drop

UScellular (NYSE: USM) posted declining subscriber counts and reduced service revenues in 1Q23 as the mobile network operator takes steps to stabilize customer additions and reduce churn. Total subscribers at the end of the quarter were 4.2 million, down over two percent year over year from 4.3 million in 1Q22. The company experienced postpaid net losses of 24,000 and another 23,000 net losses in prepaid subscribers. From its Chicago headquarters, UScellular covers an aggregate population of 32.3 million people across the 21 states. At the end of 1Q23, the company served 15 percent of that population.

With fewer subscribers, 1Q23 service revenues declined three percent YoY to $767 million. Adjusted EBITDA for the quarter was $252 million compared to $956 million in 1Q22, a 75 percent YoY decline. Part of the overall decline can be attributed to some population reduction as people moved out of its operating area, and as postpaid and prepaid service plans and prices are being adjusted. Certainly, there is competition from cable companies and other MNOs in the cities in which UScellular operates. The company is reducing operating costs with staff reductions and slower-paced network investments. 

UScellular remains focused on its network modernization and 5G build out plans, however. Capital expenditures were $208 million in 1Q23, up 52 percent over the $137 million spent in 1Q22. At the end of the quarter, the company had 6,950 total cell sites in service. The company maintained its 2023 capex guidance at $600-700 million, down by nine percent at the midpoint from the $717 million invested in 2022. UScellular expects its 2023 capex to be front-end loaded, tapering off in the second half. 

Still, that investment is focused on 5G deployments. The company achieved 5G wide area coverage with low band spectrum and claims that it has 80 percent of mobile traffic on 5G cell sites where they are deployed. Importantly, UScellular has commenced installing cell sites operating on 3.45 GHz mid band spectrum and will launch C-band deployments by the end of the year, once the remaining portion of the C-band spectrum is cleared. 

The company acquired large swaths of mid-band spectrum in its operating footprint, spending $1.2 billion in FCC Auction 107 for C-band licenses, $580 million for 3.45 GHz licenses in Auction 110 and $14 million for CBRS PALs in Auction 105, Inside Towers reported.

Fixed wireless access is a bright spot for the company. Sharing mobile network spectrum, UScellular grew FWA subscribers to 87,000 at the end of the quarter compared to 53,000 in 1Q22. The company initially launched FWA using millimeter wave spectrum predominantly in rural areas. Over the next several years, it expects to use mid-band spectrum for FWA, focusing on rural areas where it can leverage mid-band’s capacity and coverage traits, and where the potential for spectrum contention with mobility service is lessened. Moreover, the company acknowledges that it is not installing FWA in areas where fiber is prevalent since customers tend to opt for fiber.

UScellular’s tower business is holding up, as well. Note that UScellular is the last of the major U.S. MNOs to still own its own towers. At the end of the quarter, the company reported 4,338 owned towers, adding 28 new towers in the past year. Along with the UScellular operating company as the anchor tenant, the tower segment reported 2,420 colocations of other wireless service provider tenants, up eight percent YoY. The tower tenancy ratio of 1.55 was up three percent YoY. Tower rental revenues for the quarter grew to $24.7 million, up 11 percent YoY.

UScellular maintained its financial guidance for 2023, with midpoint service revenues estimated at $3.1 billion and Adjusted EBITDA of $950 million.

By John Celentano, Inside Towers Business Editor

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