UScellular mum on potential sale as Q3 postpaid losses grow

Executives with Telephone & Data Systems (TDS), parent company of UScellular, declined to provide any updates on the potential sale of UScellular other than to say that the process was “active and ongoing.”

TDS, which owns 83% of UScellular, announced in August that it was exploring “strategic alternatives” for the wireless company, which has about 4.6 million customers. At the time, TDS said that it had retained Citi as its financial advisor.

Regardless of the status of the sale, UScellular continues to struggle to retain its customer base. In Q3 the company lost 38,000 postpaid phone customers, an increase from the 28,000 postpaid phone customers that it lost in Q2.  The company saw its postpaid average revenue per user increase to $51.11 in Q3, up 2% from $50.64 in Q2. CEO Laurent (L.T.) Therivel attributed this rise in ARPU to the number of customers that are moving to higher priced flat-rate plans. “These plans are designed to compete against cable,” Therivel said, adding that around 40% of postpaid gross adds are on flat-rate plans.

The company also reported an increase in postpaid churn rate from 1.21% in Q2 to 1.3% in Q3.  

Prepaid net adds were flat for the quarter, which was an improvement of the 8,000 net prepaid losses that it reported in Q2.

UScellular reported Q3 service revenues of $762 million, a 2% decrease year-over-year. Capital expenditures in the quarter were $111 million.

Therivel noted that the wireless market remains “fiercely” competitive and said that cable MVNOs now compete for business in 60% of UScellular’s footprint.  In addition, he expects competition to grow as smaller cable companies start to offer MVNO services in UScellular’s footprint too.

Average FWA Usage is 70GB Per Month

Fixed wireless access (FWA) remains a bright spot for UScellular. The company added 10,000 new FWA subscribers in Q3 bringing its total FWA subscriber base to 106,000. Therivel said that the its FWA subscribers are primarily on the low-band spectrum and they average about 70GB per month in usage, which is much lower than other FWA subscribers.  For comparison, T-Mobile recently revealed that its FWA subscribers average about 450GB of data per month and Verizon said its FWA subscribers average about 300GB of data per month.

However, Therival said that the company expects this usage to grow as it launches 5G on its C-band spectrum and customers receive better downlink speeds. He said that by the end of 2024 he expects about 50% of network traffic will be on mid-band spectrum.

However, Therival said that the company isn’t concerned about FWA users taking capacity away from mobile users. “The impact has been negligible so far,” he said, adding that he believes that the addressable market for FWA in UScellular’s territory is about 400,000 households.

The company said it will shutter its CDMA network in 2024 and refarm that spectrum. Currently only about 42,000 customers are still using the CDMA network, Therivel said.

The company’s tower rental revenues grew 7.8% in the quarter to $25.4 million. The company said the number of colocations are up 2% year-over-year.

TDS Mobile is Coming

Interestingly, the company’s wireline sister company, TDS Telecom, said it will launch a wireless MVNO in the coming months. That MVNO, which will be called TDS Mobile, will use UScellular’s network in 40% of its footprint that overlaps but will also be part of the National Content & Technology Cooperative (NCTC) MVNO program, which uses  AT&T to deliver white-label MVNO service to small, independent broadband providers.