美國無線通訊 (USM) 2007 Q4 法說會逐字稿

Good morning, my name is Brooke and I will be your conference operator today. At this time, I would like to welcome everyone to TDS and U.S. Cellular year-end earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there a question-and- answer session. (OPERATOR INSTRUCTIONS). Thank you.

I will now turn the call over to prosecute Mark Steinkrauss, Vice President of Corporate Relations. Thank you, Mr. Steinkrauss, you may begin your conference.

Thank you Brooke and good morning everybody, thanks for joining us again. With me this morning on Ken Meyers, Executive VP and CFO of TDS, Steve Campbell, Executive VP Finance, CFO and Treasurer at U. S. Cellular, Bill Megan, Executive VP and Finance and CFO at TDS Telecom and also joining me are Jack Rooney, CEO - U. S. Cellular and Jay Ellison, Executive VP and Chief Operating Officer at U.S. Cellular.

A replay of this will be available today at 1 p.m. Chicago time and it will run through midnight, Tuesday March 4th. The replay number is, 800-642-1687,pass code 37621356. For international callers the number is 706-645-9291, same pass code. This call is being simultaneously web cast over the Investor Relations Section at both the TDS and U.S. Cellular website. The web cast will be available for the next two weeks after which it will be available on a conference call archive. Please recall archive calls 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 version on our website as well as in our filings with the SEC. Shortly after we released our earnings results on Friday afternoon, TDS and U.S. Cellular filed 8-Ks, the 8- Ks include both press releases we issued on Friday afternoon and some additional information. I encourage you to take a look at these documents. Also on Friday afternoon both companies filed their SEC Form 10-K's for the 2007 calendar year. Both press releases have been posted to the TDS Internet Home page and U.S. Cellular has posted their release to their web site as well.

You will also find posted on our web site additional information, reconciliation of any nonGAAP financial measures that may be used by management when discussing the operating data during today's teleconference as well as the Company's guidance for 2008. All of this information is now included in the separate page entitled "Guidance and Reconciliation" to make it easier to find. The information can also be accessed on the conference call page of the Investor Relation sections of both websites. Please note that the comparisons made by the speakers today in their prepared remarks are fourth quarter year-to-year, unless otherwise indicated. If you have an interest in meeting with us please know that we will be attending the Raymond James 29th Annual Institutional Investor Conference actually tomorrow, in Orlando. And later this week we will be meeting with Investors on Wednesday and Thursday in New York City. So if you would like to get together with us just give me a ring.

Let me call your attention to a line item on pages six and seven of the U.S. Cellular release and pages eight and nine of the TDS release. It's entitled quote," Loss on Asset Disposal - Exchanges." The item is composed principally of three items - - normal gains and losses related to disposal of assets, traded in of older assets, replacement assets and other retirements. Secondly a 20.8 million loss related to the exchange of assets between U.S. Cellular and Sprint recorded and an announced in December and 14.6 million reflecting the results of physical inventory related valuation and reconciliation. There's more information about all of this in the 10-K, you can take a look at it there. All of the items are noncash.

As you know, FCC Auction 73 is still underway. U.S. Cellular is participating in the auction indirectly through its interest in King Street Wireless. As a consequence, we will not entertain any questions of any sort pertaining to the auction. When the auction is complete and information about the results is public we will be pleased to respond to your questions at that time. So thank you for helping us with this. Now I'm going to turn the call over to Ken Meyers.

Thank you Mark. Good morning and thanks for joining us today. I have just a few comments I would like to make before turning the all over to Steve Campbell and Bill Megan who will cover the operating results in detail leaving plenty of time for your questions. The fourth quarter continued to trend seen throughout the year, strong year-over-year growth in wireless revenues, good wire line cost control and substantial increases in operating cash flow. For the full year, TDS produced a 10.6% increase in revenue, a 16% increase in operating cash flow, and a 27.9% increase in operating income. We ended the year with a very strong balance sheet, with nearly 1.2 billion in cash, all of which is in treasuries and virtually unused credit facilities giving us a great deal of financial flexibility. During the last quarter, TDS bought back nearly 594,000 special common shares. Since June, when we initiated our repurchase program we have acquired almost 2.1 million shares. Spending about $127 million under the existing $250 million three-year authorization.

Also I'm pleased to report that we continue to make progress strengthening our reporting controls and processes. We have now remediated two of the remaining three material weaknesses. This work is not over, we still have one more to fix and we will be continuing to refine processes as we go forward. The 10-Ks we filed on Friday have all the relevant detail. In summary, 2007 was a very good year with strong growth in key financial metrics. And we approach 2008 with the same customer commitment and customer focus that drove those 2007 results. Now let me turn the call over to Steve Campbell, the CFO at U.S. Cellular. Steve.

Thank you Ken. And good morning everyone. I'm very pleased to report that U.S. Cellular finished the year 2007 with another quarter of solid results. At December 31st our customers totaled 6.1 million, up 5.3% year-over-year. And our retail customers totaled 5.6 million, up 6.5%. Retail net activations for 2007 were fairly strong, up 12.1% year-over-year, although we did experience some softness in the fourth quarter and achieved less than expected results.

As you probably know, the fourth quarter was a very challenging one for the industry with several competitors in the retail postpay segment, the part of the market where we focus reporting year-over-year declines in net activations. At December 31st postpay customers were approximately 95% of our total retail customers. Postpay net activations for the quarter were 70,000, compared to 94,000 last year. Total retail net activations for the quarter were 64,000, compared to 98,000 last year. The retail postpay churn rate for the quarter was again very solid at 1.5%, in line with the prior year and actually a tick better than the 1.6% reported for the third quarter of 2007. We also achieved nice growth in average monthly revenue per customer. ARPU rose to $52.46 for the quarter up 9% year-over-year. Service revenues for the fourth quarter were 958 million, up 15% from the prior year. The increase in service revenues was driven by growth in the subscriber base as well as by higher ARPU as I just mentioned. Key drivers of our growth in ARPU were the popularity of national wide area family calling plans and higher data revenues. Data revenues for the quarter grew 65% to 108 million and represented just over 11% of service revenues. Other factors included increase in inbound roaming revenues, Universal Service Fund contributions, charged to customers and ETC revenues.

Turning to cost and expenses. The net equipment subsidy for the quarter was 104 million up 28%. Factors in this increase included both modestly higher volume as well as higher net subsidy per unit, reflecting both a shift in mix towards higher-end handsets that enable advanced data services and very aggressive promotions across the industry. We have experienced very solid growth in ARPU this year and in data revenues in particular and the equipment subsidy is the cost of realizing those additional revenues.

System operations expenses for the fourth quarter were 188 million, up 10%. The increase was driven by an 8% increase in the number of cell sites in service, an increase in off-network usage by our customers and a 21% increase in average minutes of use per customers. Factors that help to hold down costs in this category were lower cost per minute of use on our own network and a decrease in outbound roaming cost per minute as we benefited from lower negotiated rates.

Selling, general and administrative for the fourth quarter were 414 million, up 11.6%. Key components of the increase were higher selling expenses associated with the growth in customers and revenues and higher advertising expenses primarily released to media purchases. We mentioned in previous quarters that we expected advertising expenses would trend higher in the second half of the year. Another significant factor was higher G&A expenses related to Universal Service Fund contributions. However, remember that USF contributions are largely offset in revenues.

Operating cash flow for the quarter totaled 253 million, up 21%. The operating cash flow margin was 26.4% of service revenues, up 1.2 percentage points from 2006. Below the line investment and other income for the quarter was 10 million, down from 35 million in 2006. The decline is due primarily to the absence of two items that provided a net benefit to our 2006 results. First item was a gain of 70 million related to the sale of the Company's interest in Midwest Wireless Communications to Alltel. That gain was offset by a loss of 46 million representing the fair value adjustment on derivative instruments. As a reminder U.S. Cellular derivative instruments were settled during the second quarter of 2007.

Equity in earnings of unconsolidated entities for the quarter was approximately $20 million including $17 million from the Company's investment in Los Angeles partnership. And net income for the quarter was $29.2 million or $0.33 per diluted share.

Next I'd like to make just a few summary comments about our outstanding performance for the full year 2007. Retail net activations were 333,000, up 12% year-over-year. In the retail postpay segment where we focus, net activations were 351,000, up 24%. The retail postpay churn rate was 1.4% compared to 1.6% in the prior year. ARPU grew 8% to $51.13. Service revenues were approximately 3.7 billion, up 14.5%. And data revenues grew to 368 million, an increase of almost 70%. Operating cash flow totaled $1.33 billion, up 19%. The operating cash flow margin was 28.1% of service revenues, up 1.2 percentage points from 26.9% in 2006.

U.S. Cellular achieved these strong results in 2007 because we executed well across our entire organization to deliver the very best in customer satisfaction at every customer touch point. Existing and potential customers appreciate the value inherent in our suite of National Wide Area and Family Calling plans that were introduced in the second half of 2006, and continue to purchase and migrate to them faster than we anticipated. At year-end, roughly 60% of our postpay customers were on these plans. There also was high demand for our expanding suite of Easy Edge Data Services such as, My Contact Backup, Tone Room and Your Navigator. As I just mentioned, our data revenues were up almost 70% year-over- year.

Our handsets provide customers with a wide range of desired style and functionality and have contributed to the significant growth in our data revenues. Over the course of 2007 we introduced 21 new devices, including new Smart Phone offerings such as the Motorola Q and we're excited about the introduction of the Blackberry Pearl this quarter. We know from our surveys and other customer related research that overall network quality remains the number one criterion that drives customer satisfaction. We're committed to insuring that our customers have access to a superior network. And our associates are delivering on this committment, in 2007 we topped the J.D. Power and Associates call quality rankings in the North Central Region for the fourth consecutive time, which speaks to the value of the significant investments we make in our network. During 2007, we added 458 new cell sites to the network, which now almost 6400 total sites in service. And in another proof point of our strong customer focus, PC Magazine readers voted U.S. Cellular the top-contract post pay wireless provider in 2007.

As I indicated U.S. Cellular is generating strong cash flow from operations. For the year operating cash flow was $1.33 billion. The Company used this strong cash flow to fund capital expenditures of 565 million, repay notes payable of $35 million net, and repurchase 1.6 million of its common shares at a final net cost of $83 million. At December 31st the Company's revolving credit line of 700 million was essentially unused and its cash balance was $205 million.

U.S. Cellular did not launch any significant new markets during 2007, and has no current plans to do so in 2008. Instead, we expect to remain focused on increasing customers, revenues and profitability in our existing markets. However, we will of course continue to consider attractive opportunities to expand and enhance the quality of our footprint as we did with the acquisition of the Iowa 15 market and the exchange of licenses with Sprint Nextel in 2007. All in all it was a very strong quarter and full year for U.S. Cellular due to the significant efforts of our 8400 associates who are dedicated to providing the ideal experience to every customer at the time of every contact.

The final topic that I'd like to cover this morning is our guidance for the full year 2008, which is contained in Friday afternoon's press release. In summary, for 2008 we expect growth in customers, service revenues and operating cash flow. We intend to continue our focus on improving operating cash flow margin as we did in 2007. However, as you well know there is significant uncertainty in both the overall economic environment and the wireless industry. Our efforts to grow the business and improve its profitability obviously will be affected by economic and industry developments and by our ability to anticipate and respond effectively. That concludes my prepared remarks this morning, now I'll turn the call over to Bill Megan who will discuss the results for TDS Telecom. Bill.

Thank you Steve. Good morning everyone. I will begin by discussing Telecom's operating results for the quarter, then update you on several of our operational initiatives and finally provide our guidance for 2008. For the quarter, combined ILEC and CLEC revenues declined 3% , while operating cash flow increased by 13%. The percentage decline in revenues was roughly even in both our ILEC and CLEC operations. For the the ILEC, the decline was primarily due to lower local service revenues and compensation for network access including compensation from state and national revenue pools. Partially offset by growth in data revenues related to DSL and long distance services.

For the CLEC there was a small decline in network access revenues and growth in our commercial segment was offset with attrition in the consumer segment as we have shifted our focus in acquiring new customers to the commercial space in most of our CLEC markets. The improvement in operating cash flow and operating cash flow margin has been driven by cost reduction initiatives including combining the support functions of ILEC and CLEC. As we have integrated those function we have been able to lower support head count by 8% over the past year while still maintaining high levels of customer satisfaction. ILEC access line equivalents, access lines adjusted to reflect voice grade equivalents grew 1%. Physical access lines declined by 5%. This is an acceleration for us, for full year 2006 we ran about 3% line loss. As we discussed in our second quarter call in mid-2007, we have seen a pick up in cable and wireless competition. A portion of the line loss is due to our customers taking DSL service and removing their second line. Line two losses over the past year have been 5700 of the 31,000 lines loss year-on-year. That transition for our customers to move to high speed data service is a very good development, though it does adversely impact this line metric. Line two losses have been fairly consistent for the past several years and we anticipate it continuing.

Now with respect to our data service, ILEC DSL customers increased by better than 38,000 or 36%, penetration of our physical lines is now at 24.5%. Many of our DSL customers migrate from dial-up internet service and that accounts for a good portion of the decline in dial-up service that we have reported. We continue to invest in our network. Capital expenditures were 128 million for the year on a consolidated basis, roughly flat with 2006. With this investment we are enhancing our Broadband service, 86% of our ILEC lines are equipped for DSL service with 71% of our customers taking speeds of greater than 1.5 megabit and 35 percentage speeds from 3 to 15 megabit service. We have also been developing a fixed wireless capability in several of our CLEC markets. Our newest addition is YMAC Service over 2.5 gigahertz license spectrum in [Madison], Wisconsin. We are also continuing with steps to strengthen our relationship with our customers by offering a full array of voice Broadband and video services. Our customers have responded favorably to our bundled service offering. Penetration of voice packages to residential customers in our ILEC markets grew to 27.6% during the fourth quarter of 2007. Our Dish triple-play campaign continues to go well as well and we grew triple play subscribers by 6600 in the quarter.

We have implemented additional initiatives to help mitigate churn, including the saves program using a specialized sales team armed with a variety of tools including discounts, bundles and other promotions. We have also a new mover program, targeting referrals from builders, developers, real estate agents, other local contacts to encourage new customers moving into our territory to take our service.

To summarize results for 2007 we saw an increase in competitive intensity and that has put pressure on our lines and on our revenues. We are counter attacking with triple play bundles and promotions and have had success adding data and video customers. We continue to invest in our network and this is driven by our belief that with a competitive network and robust service offering we can win as customers choose our high speed data provider. Finally we have implemented a substantial set of initiatives to control cost as we continue to enhance our network capabilities and our Broadband service offerings.

Looking forward to 2008, our guidance is consolidated telecom revenues of 815 to 855 million, operating cash flow of 270 to 300 million and capital expenditures of 130 to 160 million. Now I will turn the call back to Mark Steinkrauss.

Great, thank you Bill. Brook, we can move to our questions-and-answers, please.

(OPERATOR INSTRUCTIONS). We will pause for just a moment to compile the Q&A roster. Your first question comes from Simon Flannery.

Okay, thank you. Good morning. Just as a point of curiosity, first of all, maybe you could talk about what happened last week with the delay to the results and if there is anything we need to know about that? More particularly, on the wireless outlook for 2008, I think during your comments, you made some comments about Q4 being tough, talked about the rising equipment subsidies, talked about heavy advertising required by you and seeing that your competitors, we have had significant pricing actions by some players in the first quarter, the economy's got worse and yet your guidance, your outlook is reasonable constructive. Can you just contrast what really despite all of the headwinds that were are seeing, what sort of turns things around from the momentum slow down that you saw in the fourth quarter and delivers on the '08 guidance, thanks.

Hi Simon, this is Ken, I'll take the first part of the question.

Thanks.

What happened last week was we thought we were close, we had one thing we had to check and given our philosophy of it's going to be right we decided to take the time to check something out Friday, didn't have any substantial effect on any of the numbers you saw. We actually wound up moving something on the balance sheet, about $20 million, that's all it was. But it's one of those cases where we're going to be safe, we will take our time and get it done, get it done the right way.

Sure.

In terms of the business going forward, let me let Steve Campbell talk about that a little bit.

Simon, I think the first thing that I would say is in response to your question about the head winds and how do we think we're going to deliver on this guidance and what's the turn around. You're right, early in the quarter we came out with a release and we had indicated that we had seen some softness in Q4. And frankly that continued into the early part of this year. But we have seen a nice pickup in business during the month of February, so some softness there, we would still like to see it better, but we have seen an improving trend. The other thing I would say about the guidance is, as always there's a range of outcomes there. There is growth in revenues, and I don't want to lose site of the fact that there's growth in operating cash flow in that plan. We think it's a balance plan though. We think that at the mid-point the guidance is in terms of margin a little above where we're at this year. It has growth, but we think it's a balanced plan, something that we will continue to look at as things unfold here this year. We're still early in the year. You're right, there's some uncertainty, something to be monitored.

Do you see any big impact from the actions by Verizon, Sprint and others?

I'll let, I'll let Jay comment.

Jay Ellison is on the call, so we will let him take that question.

Yes, excuse me. Simon, we have also introduced a $99, excuse me, unlimited rate plan in the marketplace. Quite frankly the way we evaluate, looking at it, albeit it's only been out there ten days or so, I think as a small portion of the customer base that finds that very attractive. I think there's probably some that love the simplification of it and I think when you look at it across our scope of customers it's a good offering for some of the higher users, some folks that actually want some simplification in their rate plan.

Beyond that I don't see it as a major force this year or at least from what we have seen from the current announcements from everybody out there kind of going to a $99 or $89 unlimited rate plan at this point. As Steve earlier mentioned, about 18 months ago introducing a portfolio rate plans which were wildly successful in the Company and we continue to offer those. We're looking down the towards the back half of the year, any tweaking we need to do to rate plans and we always are paying very close attention to that, and that's how we see the rollout of those plans and we respond to those as well, I think within 48 hours.

Great, thank you.

Your next question comes from the David Janazzo.

Good morning. You had mentioned no significant market expansion in 2008. What are the considerations for beyond this year.

We obviously are looking at the opportunities that are out there. Right now we don't see any reason for us to be opening up new markets. We still are concentrating on the chunk that we chewed off over the last couple years and we're trying to continue to focus on bringing the cash flows and the operating results for those markets up to the level of our older markets.

Thank you.

Your next question comes from Will Power.

Great, thanks. I guess maybe a couple questions. I wonder first if you could address what type of impact you think you are seeing from the economy today versus competitive pressures in the marketplace both perhaps within the wireless business, maybe also within the wire line business? And what are the principle ways you are trying to measure that?

This is Jack Rooney. It's difficult to measure the economic impact on long range basis, we have seen a lot of things happening. Some people are predicting doom and gloom and others are saying things are not as bad as people think they are. (inaudible) I never seen the Federal Reserve react as strongly as they have. They started that stimulus about five or six months ago and guess what, generally is felt in five or six months. We'll see what happens and we are relatively optimistic that we're going to see a fairly significant recovery in the second half of the year and that's the way we're playing the cards.

Okay.

This is Bill Megan, let me comment from the wire line side and see how the dynamics shape up against what you're seeing. I think one way to think about this is that uncertainty in the market, that is uncertainty about how much the economy will slow down, what will happen with inflation is clearly a negative as consumers and commercial customers decide how much they're willing to spend on our services. But in our markets are becoming increasingly competitive. So we will be competing for share of tightening wallet. On the negative side, you would add pressure on housing and credit. However, there are counter bailing forces that will help balance the economy. I think it's important to note those. So for example you see U.S. exports remaining strong and with growth in other areas of the world coupled with the deterioration in the dollar, which we're seeing dramatically here, U.S. manufacturers could do well in international markets. Similarly, you have rising commodity prices. They have helped farm income and many of our markets on the wireline side are more rural and agriculturally based.

So on top of that you would overlay, as Jack said, the positive income of the $168 billion economic stimulus package that will help both consumer commercial segments, especially with bonus depreciation in the Section 179 release. So in some I say there are positive forces that will influence how the economy affects us as well as those negatives. Where the balance ends up, as Jack says, is very difficult to predict. It's not going to be all one way to the downside.

Okay, thanks, that's helpful. Then I had a question on wireless margins. I think this is alluded to the prepared remarks as well. As we look at the wireless business in '08 versus '07, I think the guidance suggests the wireless margins will be pretty flat year-over-year and it sounds like part of that's attributed to the competitive pressures. How do you think about the levers that you maybe have at some point to start to raise those margins, maybe approach a low 30% level if not even a mid-30% level at some point, thanks.

Well, a couple comments. Certainly at the mid-point of the guidance the margin is very much in line with 08. If you look upwards in the range the margins could be stronger. When we think about levers we pull, looking at efficiency and cost is something we do on an ongoing basis depending on how the year shapes up, there might be things that we do do in terms of discretionary spend, but I think it's important to remember that we try very hard to balance the efficiency with the effectiveness. Our model is about delivering customer satisfaction. So there's some things we wouldn't do. We wouldn't cut back on cost that are incurred to support the subscriber base in a way they have become an accustomed. And we wouldn't cut back on things that are critical to the strategy like the superior network experience. So it's something always subject to review, but we try very hard to strike that balance between effectiveness and efficiency and delivering that best in industry customer experience.

Okay, thanks.

Again, if you would like to ask a question please press star then the number one on your telephone keypad. Your next question comes from Kevin Roe.

Thank you, good morning. A couple questions. On prepay that clearly hasn't been a focus of the company and I guess you have been losing some prepay customers recently, but as you well know that's the fastest growing segment of the market. What are your plans in '08 and beyond to better address that segment as we get more and more penetrated in this U.S. market? My second is on EVDO, one of the bright spots in the industry, as you well know, is selling high speed data cards. Are you feeling a greater pressure to broadly deploy EVDO in order to be active in that space? Thanks.

Why don't we have Jay Ellison take the first part of the question. Steve will take the second part.

So your question around the prepaid what we're doing in that area, your comments about it being a very fast growing segment in the marketplace is one that we have stayed very close to. And so we have a couple things going on in the near-term relative to prepaid. It's very important to us that we have really got our cost structure very much in line with the value of the prepaid customer and we have been working really on that in the last 18 months or so and feel pretty good about where we're getting in that arena. We have a couple trials planned for very early this year on a couple activities in the prepaid arena around pricing and loyalty and a number of things like that that we will be deploying for trial basis and then after we get results rapid deployment across the rest of the enterprise. And then we are in the back half of the year doing some work relative to systemic in our comp system structure ways to align the compensation for our front line associates in accordance with prepaid and we think that will also drive continued growth in that area. So we're really focusing in those three areas around what can we learn, how we can get more loyalty prepay customer, keep what we have got longer, increase some of the revenues from them. Attract, to your point about the growth segments, so some product offerings and then the compensation structure to our sales associates are kind of the three focus areas for the Corporation for the first half of the year that we're going to be putting some strong work around without sacrificing our growth in the postpay arena.

I want to emphasize that we are a postpaid Company. That's what our emphasis and is going to stay. We need to, we don't want to ignore the segment of the business that is the prepaid segment, but at the same time we don't feel that that is the principle line of business we want to get into.

Let me take it then to make a couple comments about EVDO. I think as you know, we launched service in Milwaukee in late 2006 and since then we have been doing a lot of analysis around our EVDO offering. A couple of the things that we have been thinking about is we want to be sure that EVDO base services are services that customers really value and want. And we have used the Milwaukee experience to be sure that we can deliver those services again with the high quality experience that our customers have come to expect. Based on the analysis we think it makes sense to expand our EVDO deployments into other selected markets and we have preliminary plans for that and we will be doing so later this year.

And lastly, your LA partnership, it's a material part of your valuation, but not a lot of details, not a lot of info on how much EBITDA is generated there. How can you guys highlight that, that valuable asset better and are there any plans to potentially monetize that business?

This is Ken Meyers, first of all, I think if you look in our filings you'll see quite a substantial amount of information on that. But more importantly if you look at the financials you will see cash coming out of those. And it's not an EBITDA, it's a free cash flow and it's a rather substantial amount of money that we report. We talked about monetizing as one option, but quite frankly there aren't a lot of vehicles that are very efficient in doing that given the extraordinarily low tax basis the company has in it, the cash flow distribution we get are exactly proportional to our ownership. There's no management fee or anything else off the top, so we are reaping the rewards today of that cash flow stream and have used that both to repurchase shares at U.S. Cellular as well as to reinvest into other parts of our business. So we aren't in any hurry to change or get rid of that cash flow stream.

Ken, what was the EBITDA for that business in 07?

I don't have the K in front of me, but I think you will see that there's a substantial information on that in there. In fact, there's just to clarify in fact there's full financial statements on the LA partnership in the 10-K filing. And, as Ken said in our MD&A there's quite a bit of information about both our share earnings and our share of cash distribution.

It might be helpful to break that out when you do your quarterly release for the Street, just so the Street gets it hit over the head that they actually can see that.

Well, Kevin, it's Mark. There is an appendix to the K so you have to scroll through the whole thing to make sure you see it. As you know we do all it out in every investor presentation we make, but your point is well taken, we will see if we can't give it a little more highlight in the future.

Thanks.

Our share earnings for the quarter was $17 million.

Okay.

Brooke, we're ready for the next question.

Your next question comes from the line of Stephen Mead.

Yes, hi. Just reading at the CapEx number in 2008, can you just talk about it general terms what you're spending money on relative to 2007 as far as infrastructure or upgrade from technology? The other thing is you mentioned you're not entering any new markets, is any of your CapEx spend done in sort of anticipation or preparation for new markets.

So looking into 08, in terms of where the spending is going predominantly it goes into the network as it did in 2007. There is also capital as there is every year for new retail store builds and remodels. No significant shift in terms of proportions, network is the predominant part and as I said there's some for stores. The other thing in 2008, I mentioned a couple minutes ago that we have some plans related to EVDO deployment so we do have a modest amount of spending in the plan related to EVDO deployments. But there are no plans or no spending specifically ear marked for preparation for further expansion.

Follow up, just on the revenue progression in terms of ARPU progression, guidance for 2008 what are you seeing for the different components of service revenue or as the base, waste business versus data versus the pricing impacts and stuff?

Well, typically we don't and we won't provide guidance an ARPU growth. I think it's safe to say we would expect an increase in data revenues again in 2008, although, given the kind of growth we had this year at 70% I don't think we would expect that to continue.

What are you seeing in terms of data and the mix of phones that you're selling and then also the handset subsidy side of the equation as you go into 2008?

I think similar trend as we saw in 2007. We have seen a move up in terms of to the higher end of handsets. As we have said today and in our other calls, the result of that, those higher end handsets drive higher revenue, but they also come with a cost in the form of a higher subsidy. We don't expect that trend to be significantly different going forward.

But I mean how does that affect your thinking in terms of how much money you want to put into the subsidy side versus the other parts of the equation in terms of retention of customers and the churn issues and sort of creating as you look at sort of what value you're creating in terms of new customers?

You're asking a very complex question. And I think we answered that question earlier. Primary concern in this business is retention of our customers. And we're not going to do anything that's going to influence our customers to find greener pastures. So we will be competitive in the handset subsidy market and in the technology that's deployed so our customers have a full service offering. And we don't see any reason to change that. I mean, our cash flows are rising rapidly, our profits are doing well, this has been a very successful strategy for us and we see no reason to change that.

That's fine, thanks.

Okay.

Your next question comes from Robert [Fifthman]

Good morning. Ken your Standard and Poor's rating appears meaningfully below what your balance sheet and performance suggests. And I think when they lowered you it was mainly due to accounting issues, which seem to be cleared up. Could you talk about any update that you have had with them, they have indicated that you probably would move up at least two notches and has anything changed with the stock lagging, do you still have the same commitment to investment ratings today that you had a year ago?

Morning Bob. I didn't hear the second part of your question, would you repeat that before I answer.

Sure. I said would the stock lagging have you made any changes to your commitment to investment grade ratings?

Oh, okay. Second part first, no, we haven't. It is still a core part of our whole strategic platform is to maintain the investment grade rating of the Company. And I think today's credit markets are great example why we think that is absolutely imperative. That is we aren't smart enough to know what tomorrow's going to bring, we want as much financial flexibility as we can have. In terms of the agencies I haven't spoken with them since we have an announced our earnings release, typical schedule is I wind up talking to them over the next couple of days. I agree with you that the financial results of the company continue to be strong, the balance sheet is almost (inaudible) , and the Company has made substantial progress issues. So I'm hopeful we will see some action there, but I don't have any news to share at this time.

Thank you so much.

At this time there are no further questions. Do you have any closing remarks.

No, Brooke. If there are no more questions we're ready to finish up the call.

Thank you. This concludes today's conference call. You may now disconnect.