U.S. Cellular’s first quarter was marked by operational discipline as the company navigated an increasingly competitive wireless environment and ongoing preparations for its pending sale to T-Mobile. Despite improvements in postpaid handset performance and a 6% increase in third-party tower revenue, management acknowledged persistent pressure on service revenue and continued net handset subscriber losses. CEO LT Therivel emphasized cost optimization and cash flow preservation efforts, noting, “Our size and lack of scale makes it difficult to sustain this balance of high promotional expense and reduced investments.” Management also cited industry-wide aggressive promotions and price competition as key factors behind the quarter’s underwhelming results.
Is now the time to buy USM? Find out in our full research report (it’s free).
U.S. Cellular (USM) Q1 CY2025 Highlights:
- Revenue: $891 million vs analyst estimates of $919.4 million (6.2% year-on-year decline, 3.1% miss)
- EPS (GAAP): $0.20 vs analyst expectations of $0.34 (40.2% miss)
- Adjusted EBITDA: $254 million vs analyst estimates of $256.6 million (28.5% margin, 1% miss)
- Operating Margin: 4.6%, in line with the same quarter last year
- Market Capitalization: $5.3 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions U.S. Cellular’s Q1 Earnings Call
- Ric Prentiss (Raymond James) asked about the timeline for designated entity spectrum approvals. CFO Doug Chambers responded that timing remains uncertain but progress with regulators has been positive, and the company is optimistic about eventual approval.
- Ric Prentiss (Raymond James) inquired about the sustainability of current free cash flow levels. Chambers cautioned against extrapolating recent figures, noting that capex reductions support free cash flow, but no guidance on run rates is being provided until the transaction closes.
- Sebastiano Pettiat (JPMorgan) questioned why TDS preferred stock would remain outstanding post-transaction. CFO Vicki Villacrez explained these instruments provide stable foundational capital, and the company currently prioritizes debt reduction over redeeming preferred shares.
- Sergey Dluzhevskiy (GAMCO Investors) asked about opportunities to monetize retained spectrum outside the T-Mobile transaction. CEO LT Therivel said the focus is on eventual sale rather than near-term leasing, given the value and long build-out timelines of the spectrum.
- Ric Prentiss (Raymond James) sought clarity on post-transaction leverage targets for the remaining tower company. Chambers indicated a target close to 3x leverage, dependent on the outcome of the debt exchange offer and the amount of debt retained.
Catalysts in Upcoming Quarters
Going forward, our analysts will monitor (1) regulatory progress and the closing of the T-Mobile transaction, including the timing of special dividends and use of proceeds; (2) the performance and growth of the tower segment as it transitions to a standalone business; and (3) the company’s ability to manage costs and optimize its capital structure amid shrinking wireless operations. Execution in these areas will be critical for the future of U.S. Cellular’s remaining assets.
U.S. Cellular currently trades at $62.54, down from $68.66 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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