美國無線通訊 (USM) 2005 Q2 法說會逐字稿

At this time, I would like to welcome everyone to the TDS and second quarter U.S.

Cellular results conference call. [OPERATOR INSTRUCTIONS] Thank you, Mr. Steinkrauss, you may begin your conference.

Thank you, and thank you all for joining us on the call this morning.

With me, Sandy Helton, Executive Vice President and CFO with TDS;

Ken Meyers, Executive Vice President, Finance and CFO at U.S. Cellular;

Jack Rooney, President and CEO at Cellular;

Jay Ellison, Executive VP Operations at Cellular;

Bill Megan, Vice President, Finance, Strategic Planning, and CFO at TDS Telecom; and Dave Wittwer, the President of our ILEC Operations at TDS Telecom.

A replay of this teleconference will be available today at 1:00 p.m.

Chicago time, and run through midnight, Thursday, July 28.

The replay number is 800-642-1687, pass code 7842057.

For international callers the number is 706-645-9291, same pass code.

This call is being simultaneously Webcast on the Investor Relations section of both the TDS website, at www.teldta.com and the U.S.

Cellular website at www.USCellular.com.

The Webcast will be available for the next two weeks after which it will be available in the conference call archives and remember conference call archives are not updated.

We will be making some forward-looking statements today so please review the Safe Harbor paragraphs in our releases and the more extended versions on our websites, as well as our annual reports and all filings with the SEC in this regard.

Both TDS and U.S.

Cellular anticipate filing their SEC Forms 10-Q on or about, Wednesday, August 3.

If you are not getting notification from us regarding teleconferences or if you have changed your email address, please email me or one of my associates on the address on the press release, so we can update our list.

Regarding upcoming company events.

U.S.

Cellular will present at the RBC 2005 North American technology conference in San Francisco on August 3, and will be conducting one-on-ones on the day prior.

On August 8, and 9, TDS will be meeting with investors in Toronto and Montreal and again on September 12, through 14, TDS will be meeting with investors in Pittsburgh and a number of cities in Ohio.

From September 26, through October 5, TDS will be meeting with money managers in Europe and on October 6, we will be doing the same in Boston.

If would you like to join us for any of these visits just let us know.

Additionally, we would always invite you to come and join us at either TDS or U.S. Cellular.

We'd be more than glad to have you do so.

We have an open door policy.

We can arrange meetings with members of our management teams given reasonable lead times and circumstances permitting.

We have wonderful folks at our company who are very knowledgeable about our operations and the industry and the various technologies so please avail yourself of the opportunity.

Shortly after we released our earning results this morning and before this call, both TDS and U.S.

Cellular filed the 8-Ks, the 8-Ks include the earnings releases we issued this morning along with other information and put us in compliance with the new rules as set forth by the SEC.

Both press releases were posted to the TDS Internet home pages this morning shortly after going out over the wire and U.S.

Cellular did the same.

You will also find posted on our website, additional information, and a reconciliation of non-GAAP financial measures that may be used by management when discussing the operating data during today's conference call, as well as any changes to the Company's forward-looking guidance.

All of this information is now included on separate page titles called guidance and reconciliation to make it easier to find.

The information can also be accessed on the conference call page of the investor relations section of both of our websites.

With that, I will turn the call over to Sandy Helton.

Thank you Mark.

Good morning, and thank you for joining us this morning.

I will briefly highlight TDS's consolidated results for the quarter, and then turn the call over to Ken Meyers who will discuss U.S.

Cellular's results.

Following Ken will be Bill Megan, who will highlight TDS Telecom's results, after which we'll take your questions.

TDS consolidated operating revenues grew 3.3% year-over-year in the second quarter, driven primarily by continued customer growth at U.S.

Cellular, as well as ongoing steady performance at TDS Telecom.

Operating cash flow, which excludes depreciation, amortization, and accretion was $275 million, representing a marginal increase over the second quarter of 2004.

Interest and dividend income increased dramatically to $119 million in the quarter, as the result of the $106 million dividend we received from Deutsche Telekom.

And this 106 million does not reflect either the German withholding taxes or U.S. taxes.

TDS's effective tax rate on operations for the quarter was 41.2%, reflecting foreign taxes on the Deutsche Telekom dividend.

We expect the effective tax rate on operations for the full year to be between 40 and 41%.

This increase from the expectations we mentioned during our first quarter call, due to the increase in foreign taxes related to the Deutsche Telekom dividend.

Moving to the balance sheet, during the quarter we continued debt reduction activities which we have been implementing over the last two years.

At the end of the quarter we used $127 million of cash to repay all long-term debt owed to several government agencies.

This debt which was held at individual local telephone companies within TDS Telecom had a maturity of eight years and weighted average interest rate of approximately 6.2%; however, additional administrative costs associated with this debt caused the effective interest rate to be significantly higher.

At this time, the weighted average maturity of TDS's debt is approximately 28 years and nearly all of our long-term debt will mature after 2031.

In summary, the second quarter was a solid one for TDS.

Our business units continued to deliver on their strategies and we continued to strengthen our overall financial position.

We believe we are in an excellent position to build on the progress we have made so far this year, and look forward to updating you on our results again next quarter.

With that, I will turn the call over to Ken who will discuss U.S.

Cellular's results.

Thank you, Sandy.

Good morning.

Thank you for joining us today.

The second quarter was a very busy one for U.S. Cellular.

In addition to the operating results, which I will review in a moment, we also finished work on SpeedTalk, our push-to-talk product that was launched earlier this month and we completed preparation for our retail launch in St. Louis which officially begins tomorrow.

The St. Louis operation will start with over 50 company and agent locations, selling services on our top-rated network that has almost 300 cell sites in service.

We just completed a third-party test of the St. Louis area and no network was better than ours.

Also, we have put in place well-trained new associates and will support them with experienced team members from other U.S.

Cellular markets, and our marketing team has worked creatively to ensure we build name recognition quickly and consistently with our brand promise around customer satisfaction.

While there are some operating costs related to St. Louis in the second quarter, it is the third and fourth quarter that will carry the bulk of the launch costs.

Turning back to the quarter, the Company produced 94,000 total net adds. 81,000 of which were retail net additions.

This was down on both a sequential and year-over-year basis primarily due to fewer gross customer activations.

As our results in the area of churns stayed very strong.

Post day churn averaged just 1.4% per month, and all in churn averaged just under 1.6%.

Total customers served stood at 5,227,000, up 12% over the last 12 months.

Service revenue of $691.6 million was up 4.4%.

There are a few items that resulted in this lower growth rate.

First we took a one-time adjustment of about $4 million to previously received payments on eligible telecommunications carrier revenue.

One state reported that they paid us too soon for some areas.

Second, inbound or keeper roaming revenue was down about $9.7 million on a year-over-year basis, primarily reflecting late '04 pricing changes.

Additionally as we discussed in Q1 we moved from accruing contract termination fees, to recording them on a cash basis this reduces revenue and bad debt, but has no real effect on operating income.

Offsetting the above was continued growth in revenue from data services.

This revenue stream totaled almost $31 million for the quarter.

It's up 115% on a year-over-year basis and now represents about 4.5% of service revenue.

Systems operations costs grew 2%, to $148 million, driven by a 15% increase in the average minutes of use per customer and an almost 14% increase in the number of cell sites in service.

A positive element holding down the overall growth in this category was the decline in roaming costs related to outbound roaming minutes, as we benefited from lower costs negotiated the same time we negotiated the price for inbound roaming minutes.

System operation expenses also includes costs related to our St. Louis network.

Parts of this network have been up and serving other U.S.

Cellular customers, as they travel to and through St. Louis since late last year, and those costs have been expensed along the way.

Selling, general and administrative costs are up about 5.2% on a year-over-year basis.

A major driver relates to selling expense.

The cost per gross add averaged $460 in the quarter.

In addition to handset pricing, other factors contributing to this increase include costs associated with new products and services, especially in the data area, higher levels of advertising, and some costs related to St. Louis.

The G&A side saw little change because reductions in bad debt primarily driven by the previously mentioned change in accounting for contract termination fees, mostly offset minor increases in other areas.

Operating cash flow totaled $193.5 million, or 28% of service revenue.

The margin is just about flat with last year while the dollar amount is up about 3%.

Please recall that since June 30, last year we have launched three new greenfield markets Oklahoma City, Portland, Maine and Lincoln, Nebraska, each of which are doing well in revenue and customer growth, and tomorrow, we launch our St. Louis operation.

Any time you start a greenfield operation, it produces negative cash flow for a period of time as you invest in growing your customer base, which in turn holds down overall cash flow margins.

Flow to line investment income declined about 12%, representing the effect of last year's disposition of some investment interest to Alltel.

The increase in interest and dividend income distributing increase in the Vodafone dividend on our 10.2 million shares.

For the quarter the Company produced $37.9 million of net income or $0.44 per share.

For the second half of the year, the St. Louis launch will obviously have an impact.

The greater the success we have in the market the greater the effect on subgrowth and operating cash flow.

However at this time we have tried to build that into our full-year targets.

As such we are staying with our full year guidance of 475,000 to 525,000 net retail customer additions and operating cash flow of 710 to $715 million.

We are slightly revising our service revenue guidance from the previous approximately $2.9 billion to approximately $2.8 billion for the year.

Finally, we are lowering the top end of our capital spending guidance and tightening the range.

The previous guidance on capital spending was 570 to $610 million our new range is 575 to $595 million.

The second half is shaping up to be an exciting period for U.S.

Cellular with the St. Louis launch and the rollout of new services including SpeedTalk to all of our markets.

Looking beyond the second half, our current plans are to continue to focus on excellent execution in St. Louis and last year's launch markets before we launch any other new market.

As such, we do not expect to build out or launch service in any other new markets until these operations are well established which we are currently anticipating will take us through the end of next year.

Thanks again for your time today.

Now let me turn the call over to Bill Megan at TDS Telecom.

Bill?

Thank you, Ken, and good morning, everyone.

TDS Telecom has reported operating results for the quarter as well.

Quarter to quarter combined ILEC and CLEC revenues rose just less than 1%, while operating cash flows declined by 5.6% compared to the second quarter a year ago.

I will walk through the ILEC and CLEC results separately.

ILEC revenues increased modestly at 0.7%, compared to the second quarter of 2004.

The increase is due primarily to continued growth in DSL and long distance sales offset by typical access line losses.

Operating cash flows decreased 4.5% in the quarter due mainly to increased costs associated with the growth in DSL and increases in costs of goods sold.

Access line equivalent, those access lines adjusted to reflect voice-grade equivalent grew 1.2% from the second quarter a year ago, and physical access lines declined by 14,600 or 2.2% from the second quarter a year ago.

Reductions in residential second lines accounted for 49% of the year-over-year decline, decreasing by 7,200 compared to the second quarter of 2004, and driven in great part by conversion to DSL.

Telecom ended with quarter with 42,500 second lines in service and that represents less than 7% of our total physical access lines.

DSL customers increased 72% to 54,200, and this is important to us, as we drive to be the preferred broadband provider in our market.

Our share of the high-speed data markets in which we compete continues to be higher than the cable providers, at 61% and that's based on a third-party survey of our customers.

Many of our DSL customers migrate from dial up Internet service and that accounts for a portion of the 16% decline in dial up service that we have reported.

We continued to invest in our network to offer broadband service.

At June 30, about two-thirds of our physical lines were equipped for DSL service and we've invested to enable higher speed services as well.

A year ago, less than 1% of our residential high-speed data customers had 1.5 megabit service, now more than 1/3 are at 1.5 megabit.

And we are adding 3.0 megabit service to our standard product set for residential and business customers in our DSL markets this year and we'll have 4 megabit and 6 megabit service available for residential customers in selected markets.

Long distance lines increased 10% in the quarter to a penetration of 48%, access minutes of use reflecting utilization of our wireline network increased 1.9% year-over-year.

Cash expenses rose 5.8% and this is driven primarily by increases in the cost of providing DSL services and increases in costs of goods sold.

As we noted last quarter we expect to see these costs moderate as we implement new long distance networking arrangements, and the new interstate tariff for provisioning DSL, both of which help lower our cost of goods sold.

Turning to the CLEC side, equivalent of access lines rose by 47,300, or 12%.

Revenues increased by $729,000, while operating cash flow declined by 1.2 million.

Revenue and operating cash flow did not keep growth -- did not keep pace with customer growth, primarily because of pressure on access rates, which has a marked effect on revenues and operating cash flow, as well as higher costs for unbundled network elements.

DSL sales continue to grow strongly, 34% year-to-year, high-end data products offering higher speeds allow us to be more competitive with cable providers and provide growth in both consumer and commercial high-speed data.

For both our ILEC and CLEC we continue to emphasize providing our customers with exceptional customer service and access to advanced services.

As we announced earlier this month, DDS outperformed all the major carriers in overall customer satisfaction in the JD Power and Associates 2005 residential all distance, telephone, customer satisfaction study.

For the region that includes Michigan, Wisconsin, Illinois, Ohio, and Indiana.

We also recently announced that TDS has extended its agreement with EchoStar to continue marketing Dish Network ties.

This agreement will allow us to continue to offer very competitive video services to customers throughout all of our markets and bundle it with voice and data services on a single bill to the customer.

Let me update you briefly on several of our new services trial.

With respect to the video trials that we announced earlier this year we expect to begin offering service on a limited basis to customers in the fourth quarter of this year.

Our rollout plans have been delayed by issues that effected the broader industry, including obtaining agreements for content, longer lead times, and the development of advancement set-top boxes and integration of new software that provides encryption and communication among the hardware components used to provision the new services.

Our trial of fixed wireless high-speed data is also continuing.

For the near term we have consolidated our efforts to focus on one full market trial and we'll offer both high-speed data as well as VoiceOver IP.

Let me also update our guidance for the year.

First, with respect to the ILEC, we are lowering our CapEx guidance by 10 million, to a range of 110 million to 120 million.

This anticipated lower spending reflects, in part, deferral of a portion of the investment in our video trials into 2006, but also some permanent cost avoidance.

All other elements of our ILEC guidance remain the same.

With respect to the CLEC, we are lowering our revenue guidance by 5 million to a range of 235 to 245 million.

And we are lowering our CapEx guidance by 5 million to 25 million to 30 million.

The lower revenue estimate reflects competitive pressures, the anticipated lower CapEx, reflects those lower investment in the video trials, as well as permanent cost avoidance.

All other elements of the CLEC guidance remain the same.

All of our guidance is posted on our TDS website.

And now I will turn the call back to Mark Steinkrauss.

Thank you, Bill.

We would take questions at this time.

[OPERATOR INSTRUCTIONS] Your first question comes from Ric Prentiss.

Yes, good morning, everyone.

Question for Ken.

Ken, a couple of questions.

One on the gross add environment, you guys obviously mentioned you had very good churn but fewer gross adds.

Can you share with us a little bit about what you saw in the competitive landscape that would have led to the fewer gross adds?

And second is on USF, you mentioned there was a one-time correction, $4 million, what was the USF in the quarter?

Good morning, Ric.

For the quarter, each eligible telecommunications carrier revenue was about $7.7 million that's up about 24% compared to the first quarter of last year.

Gross adds -- and we saw just lighter gross adds in most carriers of the operation.

They were all down a quarter over quarter sequentially.

I don't know that I can point to any one thing in particular that impacted it.

Are you guys offering family plans in your market?

I know some of the other operators have seen a pretty big success with family plans but that, of course, affects their ARPU as well.

Well, we have actually had family plans in the portfolio, gosh, for over five or six years now.

We aren't always at the same place in terms of the low-end entry price.

Typically, we like to see something in the 15 to $19 range on those.

And depending upon how advertising plays out there may be some of it that's there, but at 9.99 that is not one that in a lot of cases really excites us.

And follow-up on the USF, the 7.7, does that include the effect of the minus $4 million?

That was the net amount for the quarter.

Net.

And final question, I missed what you said about your MOUs.

I was writing down things too fast.

I was simply talking about how minutes of use for our average customer are up on a year-over-year basis, up 15%.

And do you have that number?

I'm actually out traveling today?

I do.

Minutes of use per customer averaged 627 minutes per month.

Great.

Good luck with the St. Louis market launch tomorrow.

Thank you.

Your next question comes from Simon Flannery.

Okay.

Thank you.

Good morning.

Could you comment on where we stand with the potential recombination of TDS and U.S.

Cellular and also any updates on the Washington scene what's the latest on the FCC or others moving forward on USF on intercarrier comps, some of those issues.

Thanks.

Hi, Simon, I will take the first question.

Good morning.

We are continuing to watch the seasoning of the TDS special shares and we're encouraged by the progress since the prices of the special shares and the common shares do come closer together.

But at this stage we have no specific plans for it -- the action to buy in U.S.

Cellular's minority interest.

Bill and Dave, do you want to--?

We'd be happy to.

With respect to USF there really isn't an update now.

There's a lot of legislative conversation.

It is so vital to us and so vital to the communities that we serve that we are playing an integral role.

We are actively participating in forums to discuss the issues, but as of this time, there isn't really an update to provide you on where USF will go.

We are quite optimistic though, that given the importance of USF to the development of rural areas, to the development of this country, that any sort of legislative action or regulatory changes would not negatively impact us.

Okay.

So it sounds like you're -- we won't really see anything before '06 in your view?

I don't really know the timing but given where we are in the year I'm not sure that that's not fair.

Okay.

Thank you.

Your next question comes from Frank Louthan

A couple of things on the wireline side.

Can you walk us through the, again, the line losses were just a little bit above what we were looking for.

And what are you seeing in trends there are you seeing -- and then on the CLEC side can you comment on the pricing in the business market and are you seeing any significant win backs?

And then lastly, if you can comment on your bundles for Dish, are you able to use that as retention or will you be using that more for retention going forward?

Thanks.

First, with respect to line losses in the ILEC, they have run about a negative 0.5% for each of the last two quarters.

The losses have come from a mix of sources including competitive losses.

We do have some seasonal properties, as you know in both the north and southwest, and as we've talked about in past, we believe we've had some success in retaining customers for the longer run by introducing our line retention service for those seasonal customers and that's where a customer pays the smaller monthly fee to maintain their account with us in the off season.

And I will remind you that although the customer pays the fee, we do not include those lines in our line count.

To address wireless competition, we have been introducing targeted LD packages.

We are bundling with local service and with high-speed data and now with the extension, as you just pointed out, Frank, of our agreement with the Dish Network, that will help us mitigate cable competition in that we can now aggressively offer triple play services in an attractive bundle.

All on one bill and to combine that with the third part of your question, our -- we just signed a extension of the agreement with EchoStar and so we are in the process right now of formulating what those bundles are going to look like and what the price points are and how we present that to the customer.

With respect to your second question on the CLEC and pricing pressures, the CLEC has experienced heavy promotional competition, particularly from SBC and that's both - on the resi and the business side.

As you know, SBC has been out with aggressive promoting its high-speed data and has recently come out with a very aggressive promotion combining a bundle with Dish Network products.

So we are seeing very heavy promotional pressures on the CLEC side.

Okay.

Great.

Thank you.

Your next question comes from David Janazzo.

Question for Ken, maybe more on an industry basis.

Over the last few years we see a seasonal pickup in churn in the third quarter.

With the prevalence of two-year contracts over the last couple of years do you think that some of that seasonality will come out?

Or are you expecting similar trends in the third quarter?

Well, David, that's a awfully difficult question to even hypothesize about, because what you are referring to is a couple of years ago, when wireless affordability started rolling out, people went out with some promotional offerings to lock up customer bases.

I don't anticipate a major change right now.

Nothing that I see that indicates that.

Companies are constantly trying to do a better job serving their customer and make sure that they mitigate that risk around churn.

Okay.

And maybe one for Sandy, which probably sounds more like a cooking question, but when do the special shares become seasoned, in your opinion?

What are the criteria for making that determination.

That's good imagery there.

We believe that the economics of the two shares is exactly the same and that we would expect the common and the special common to trade in unison at a certain point.

That's what we're looking for.

Okay.

Thank you.

Your next question comes from Tom Seitz.

Tom Seitz.

Hopefully I will just go ahead and take it.

The -- just to confirm Ken, first, the guidance is unchanged for net adds and operating cash flow and down for sales, and that includes now St. Louis, but it did not before; is that correct?

It does include St. Louis.

It has included St. Louis since about March of this year, when -- end of the year last year, the January conference call we put out guidance that did not include St. Louis.

We updated that in March.

Right.

Okay.

To include St. Louis and it has included St. Louis all the way since then.

Okay.

All right.

Good.

And then I guess the second question I have is for Sandy.

Do you have any shares remaining in your share buyback program?

Or programs, I should say?

We do have some remaining authorizations, and I think the number is something over 800,000 shares.

Right.

So having bought any shares in the last couple of quarters, can you use those for, the S shares, if you -- if you feel like that's trading below where it ought to?

Do you know if the authorization allows to you buy S shares.

We have no authorization right now to buy S shares.

Okay.

Thank you very much.

Your next question comes from Kevin Roe.

Thanks.

Ken, ARPU has been under pressure for a few quarters.

Do you expect that trend to continue in the second half?

When do you -- when are you hoping for some ARPU sequential stability?

Secondly on prepaid TalkTracker, your new prepaid plan, how is that impacting gross adds and also forward ARPU and can you give us a sense of what prepaid accounts for of your total base?

Good morning, Kevin.

Good morning.

Prepaid at the end of the quarter is about 5% of our total base, question one.

Question two,with respect to ARPU, not a major difference.

It's a little bit lower and it's got lower incremental marketing costs associated with the prepaid product, but the ARPU is not dramatically different.

If we look at ARPU, there's a few factors when you think about the -- you think about it on a sequential basis as you just said.

On a sequential basis, it is up first quarter to second quarter.

That reflects the pickup or I will call the seasonality around roaming.

It also has, with respect to the sequential, it's got the $4 million loss on the ETC line in there also.

You are going to continue to have the effects of different products entering your revenue stream at different times.

We just launched SpeedTalk that we're very optimistic about.

We have other products and services that we continue to push out.

We expect to have Smart Phones out later this year.

All of those are positives around ARPU.

You also will have market launches with St. Louis being one, that on the front end, clearly, has promotional pricing.

So at this point in time, I don't think that anything changes the trend dramatically over the next couple of quarters.

Thanks, Ken.

Your next question comes from Dale Cusick.

Hi, this is Richard Chu.

I have two quick questions.

One, in your handset subsidy it seemed like that number was reduced but the overall cost for the handset was going up.

I was wondering if there was a mix change in the type of handsets people are buying or is the more times data-enabled handsets.

And the second question was in regard to roaming strength, I guess the number is much smaller because of the divested properties but on a sequential basis it was up over 15% and I was wondering if -- what beyond seasonal first quarter, second quarter roaming might have driven that?

With respect to the roaming question, it's primarily just the typical first quarter, second quarter, change in minutes of use on the network.

The first quarter winter months, less auto travel, we see this pretty regularly.

There isn't any other major change underneath that right now.

With respect to handset costs, you've got two different dimensions to the equation.

One is the cost for any given handset that continues to decline, but the models that are being used and the functionality in those models continues to increase, more color streams, more camera phones, more data-enabled phones.

So there -- I guess wasn't any change in terms of the policy for the handset subsidy in increasing that -- or, I mean, decreasing it?

We are constantly changing promotions in the marketplace at any different time.

Equipment is clearly the biggest leverage.

I wouldn't say there was a change in policy during the quarter.

Okay.

Thank you.

Your next question comes from Chuck Thomas.

Hi, a couple of questions.

First, a clarifying question, what was the total USF in the quarter?

Do you mean ETC funds received by U.S. Cellular?

No, for funds received for TDS.

Bill?

Total USF for the quarter, federal USF was about 21.3 million.

Thank you.

And then turning over to U.S.

Cellular, looking at retail ARPUs, they are down a little bit.

Can you give some color on ARPUs say in rural markets or ex-suburban markets where you have been in place a little bit longer, versus larger markets or newer markets some color on the different retail ARPUs in your different geographic categories?

Well, minutes ARPU in different parts of the country do vary.

I don't know that it's as much an urban, suburban, or rural issue as much as there is similarity in geographic areas.

Part of that is due to travel times.

Part of that is due to competitive pressures.

But we do see variability around minutes of use and around average revenue per customer in different geographies.

So that's -- the swing is not based on -- it's more regionally based not on the type of market?

It is regionally based.

It is also influenced by the length of time in a market.

You have two almost what I will call differing effects in your brand new markets, you clearly have promotional pricing, which is lower.

And some of our oldest markets where you have got very high penetration, your new customer to the -- to the segment is a customer that doesn't quite use it as much.

So some of the incremental customers in some of the older more, mature markets will have a dilutive effect.

And then one last on -- on U.S.

Cellular, if you look at -- you mentioned nothing after St. Louis, Oklahoma, a couple other cities what about expansions within existing markets?

How aggressive would you expect to be in the second half of '05 and into 2006?

I don't see any dramatic change in our -- either competitive posturing or our strategies at this point.

Thank you.

Your next question comes from Will Power.

Yes, this is actually, Sara Litton in for Will.

I think most of my questions have been answered but just maybe another one for Ken.

I know it was obviously a bigger issue last quarter but could you talk a little bit about what you are seeing on the wholesale side of the business?

Obviously the sequential decline in growth, but just what your expectations are for the rest of the year on that front.

Well, with respect to wholesale what we have done is this year is we put out our guidance excluding wholesale, since it is one that you don't directly control as you do the other channels.

This quarter was clearly slower in that channel than, quite frankly about the last year.

And I don't have a good basis to us project the next couple of quarters which is why we have excluded it from our guidance.

That line has disconnected.

Okay.

The next question comes from John Frank.

Thank you for taking my call.

I missed the beginning of the Q&A so I apologize if this has been covered.

But could you please give me an update regarding TDS's plans to take in the remaining USM equity?

Sure.

As we've stated before, that certainly, it's our intent at some point to buy in the minority ownership position, but it's subject to market conditions, among those being the seasoning of the special shares.

And we are seeing nice progress on that front, but there's no way to predict the timing and we have no specific plans at this point.

All right, could you characterize how you view seasoned equity?

Sure.

Fundamentally, the two series of shares, the common and the special common are the same in economics and they are -- pretty equal in liquidity and they are essentially the same characteristic so we would expect them to trade in unison at the point that the seasoning is complete.

Okay.

And secondly, I think you mentioned on the last call that TDS management is somewhat price sensitive and looking at taking the shares in.

Since those comments USM is up 17% and TDS is up 3% or so.

Can you just kind of comment on your thoughts on valuation regarding a potential transaction?

Certainly not comment in specifics, but philosophically, you're right, that TDS is always very cognizant of value and wanting to make sure that any transaction they enter is an appropriate valuation.

And just what we would be looking at as we move forward.

And last comment, assuming the seasoned equity and an appropriate valuation and management size, would you anticipate using a rolling average of several trading?

How large a window would you use in valuing the price that you would give USM holders?

All of that is still to be determined.

Okay.

Thank you.

You have a follow-up question from Ric Prentiss.

Yes, a couple of follow-up questions for Ken, on the Push-to-Talk, your SpeedTalk product.

Can you tell us a little bit about what the pricing is.

And I think -- isn't this where you are using the handset solution from Kodiak?

Yes, this is Jay Ellison.

Our pricing on the SpeedTalk out there is we've bundled it with our local rate plans and it's a $49 price general to marketplace.

The low hold voice minutes, rate of voice minutes there marked-to-market but it's priced about 10 bucks above our entry level $39 rate plan, which averages about 1000 voice minutes and then provides unlimited SpeedTalk capability for our customers.

And we're using the win for it position.

Win for it.

Okay.

And then on retention, how many of your customer base at U.S.

Cellular did you get retention efforts on this quarter, like a percent of base and how much money was it?

I don't have that information in front of me Ric.

I don't think that we have given out retentions by quarter.

Okay.

Other operators, just maybe get a frame of reference, other operators have mentioned 6 to 7% of their base per quarter is upgrading.

Do you -- any reason to expect your experience to be either dramatically higher or lower than that?

I don't have a basis to answer that, as I sit here.

Okay.

Good luck, guys.

[OPERATOR INSTRUCTIONS] Your next question comes from Andrew Cauley.

I was just wondering if you could update us on the EvDO trials, and if that had fed into the change in CapEx guidance at all?

Thanks.

No, the EvDO trials did not have any impact on the change in CapEx.

Our plans for the year were to do a single market trial, technical trial of EvDO.

We are on track to do that this year.

I expect that we would do some marketing trials around that.

Once that network is up in place.

But our current plans are no wide-spread deployment of at least the current version, which is release or revision zero.

We think that the economics are such that we would at least wait until Rev8, which we don't see as available until late next year.

At this time, there are no further questions.

Okay.

I think it's time to conclude the call.

Thank you all for joining us this morning.

I'm available this afternoon, if you have any additional questions.

This concludes today's TDS and second quarter U.S.

Cellular results conference call.

You may now disconnect.