TDS says it will reach 22% of its ILEC addresses with FTTH

TDS Telecom says it’s closing in on wrapping up its fiber to the home build with the intent of reaching more than 20 percent of customer sites in its traditional ILEC territory.

Vicki Villacrez, VP of finance and CFO for TDS, told investors during the telco’s third quarter that the company's FTTH and higher speed copper network expansion is on track and is enhancing the availability of IPTV services.

“Our planned fiber builds are almost complete and will reach approximately 22 percent of our ILEC service addresses,” Villacrez said during the earnings call, according to a Seeking Alpha transcript. “When combined with copper service, our IPTV enabled markets will cover approximately 25 percent of our ILEC service addresses.”

Villacrez added that TDS has “been focusing on further driving IPTV and high speed broadband bundles in these markets.”

“The uptake on IPTV has grown steadily and is now at an average penetration rate of 30 percent of residential service addresses,” Villacrez said. “It is important to remember 97 percent of our IPTV customers subscribe to a triple play bundle, which results in a low churn rate and continues to increase average revenue per connection, now up 3 percent to $44.25 in the quarter.”

Being a traditional ILEC, TDS is also looking at other methods such as bonding to increase broadband bandwidth on its existing copper lines.

Villacrez said TDS is “deploying bonding technology up to approximately 20 percent of our ILEC service addresses to drive higher speeds in our middle tier ILEC copper markets.”

In its harder to reach rural markets, TDS is looking at how to use the FCC’s modified universal service funding mechanism to support further broadband build outs. In August, TDS was offered $82.3 million of support revenue annually for 10 years, which would replace about $50 million of declining annual support.

The FCC noted in its Nov. 2 notice that the total amount of model-based support that carriers accepted for A-CAM funding would exceed the regulator’s overall 10-year budget by over $160 million annually.

Villacrez said that it will provide an update regarding the final outcome of the A-CAM offering and “will incorporate the expected 2017 revenue and capital impact in our guidance that will be shared in February,” adding that “we do not expect a significant impact to our 2016 capital spending.”

During the third quarter, TDS Telecom saw subscriber gains in IPTV and broadband. IPTV connections grew 44 percent as the telco added 13,300 compared to the prior year, and it added 3,000 broadband connections after considering the impact of divestitures.

Within the broadband sector, TDS is seeing more of its broadband customers in its ILEC markets choose higher speeds. Villacrez said 52 percent are “choosing speeds of 10 megabits or greater and 21 percent choosing speeds of 25 megabits or greater, which also contribute to the higher ARPUs we have experienced.”

Total wireline service revenue was $174 million, while wireline cash expenses rose 3 percent as increases in employee-related expenses and IPTV’s programming costs outpaced the reduced costs of provisioning legacy services.

TDS Telecom’s parent company Telephone and Data Systems reported total operating revenues of $1.3 billion for the third quarter of 2016, versus $1.37 billion for the same period one year ago.