美國無線通訊 (USM) 2008 Q3 法說會逐字稿

Good morning, my name is Adrian, and I will be your conference operator.

At this time, I would like to welcome everyone to the third quarter conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer session.

(OPERATOR INSTRUCTIONS) Thank you, Mr.

Steinkrauss you may begin your call.

Great.

Thank you, Adrian, and good morning everybody.

We know there eight other companies announce today, so we appreciate you're being with us.

With me today are Ken Meyers, Executive Vice President and CFO of TDS; Steve Campbell, Executive VP Finance, CFO and Treasurer at US Cellular; Bill Megan, Executive VP Finance and CFO, TDS Telecom.

Also joining us are Jack Rooney, CEO, US Cellular; and Jay Ellison, Executive VP and COO.

Jay is going to offer a few prepared comments following Ken and we'll also be available for Q&A.

A replay of this teleconference will be available today at 1:00 pm Chicago time, and will run through midnight Thursday, November 6th.

The replay number is 800-642-1687.

The conference ID 71161042.

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

This call is being simultaneously webcast on the Investor Relations sections of both the TDS and US Cellular websites.

The webcast will be available for the next two weeks, after which it will be available in the conference call archives.

Please recall that archived calls are not updated.

Some information during this call and subsequent Q&A period may contain statements about expected future events and financial results that are forward looking and subject to risks and uncertainties.

Please review the Safe Harbor paragraph in our releases and the more extended versions on our websites, as well as in our filings with the SEC.

Shortly after we released our earnings results earlier this morning and before this call, TDS and US Cellular filed 8-Ks.

The 8-Ks include the Press Releases we issued this morning and some additional information.

The TDS 8-K also includes a Press Release issued by TDS this morning, announcing new stock repurchase program, and Ken will touch on this in just a minute.

Both companies plan to file their SEC Forms 10-Q later today.

In addition, TDS will file several other documents with the SEC later today, several of which have to do with TDS dividend reinvestment plans.

Both Press Releases have been posted to the TDS internet home page, and US Cellular has posted their Release to their website as well.

You will also find posted on our websites additional information and 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 the Company's guidance for 2008, the reconciliations of the net income, diluted earnings per share, and operating cash flow.

All of this information is included on a separate page entitled Guidance and Reconciliation to make it easy to find.

The information can also be accessed on the Conference Call page of the Investor Relations sections of both websites.

Please note that the comparisons made by the speakers today in their prepared remarks are third quarter year-over-year compares, unless otherwise indicated.

We have recently added a consolidated statement of cash flow to the Press Release to allow you to access some key information more quickly, and we'll continue to provide this information going forward.

Both Companies have updated their guidance and the details are in the Press Releases and have been posted to our websites.

Steve and Bill will comment on that shortly.

Additionally, on the Summary Operating Data page of the Press Release for US Cellular, we broke out the detail for retail customers.

We made another change or two as well, so please take a look at this and call me later today with any questions you might have.

We will be visiting the following cities and attending several investment conferences.

I'll be in San Francisco, Las Angeles, and San Diego, November 10th through 12th.

Ted Carlson and I will be in Boston on November 17th.

I'll will be in Minneapolis and Detroit November 17th through the 19th.

Ted Carlson and Ken Meyers are presenting at the First Annual [Gambelli] and Company Best Ideas Conference on December 4th in New York City.

I will be in New York City on December 9th and 10th, meeting with investors and TDS and US Cellular are presenting at the 19th Annual Citigroup Entertaining Event, Media, and Telecommunications Conference on January 7th in Arizona.

If you would like to meet with us at any of these events, please let me know and we'll try to accommodate you as best as possible.

With that I'll turn the call over to Ken Meyers.

Thank you, Mark.

Good morning, and thank you for joining us today.

I have a few comments to make before turning the call over to Jay Ellison, Steve Campbell, and Bill Megan, who will covering the operating results.

We'll open call up to questions at the end of the prepared remarks.

Highlights for the quarter including operating revenue for TDS, which were up 6% to $1.3 billion, with most of the increase at US Cellular, operating income, which a was up 13%, due principally to increased revenues at US Cellular, the completion of our 2007 stock repurchase authorization, and the announcement of a follow-on stock repurchase authorization.

As noted in our Release, the Company bought back nearly 807,000 special common shares for $30 million in the quarter, under the TDS 2007 stock repurchase authorization.

In October, the Company finished that program.

I should note that the original authorization covered a three-year period, and the Company completed the program in under a year and a half.

As you saw earlier today, the TDS Board of Directors has now authorized an additional $250 million stock repurchase authorization.

This time, allowing the purchase of either TDS common or TDS special common shares, depending upon market conditions.

Additionally, US Cellular continues to purchase shares under its de minimis program, purchasing 150,000 shares in the third quarter.

Going back to the income statement, TDS booked a $31.7 million pretax gain, a portion of which is recorded at the US Cellular level, resulting from the Company's ownership of Rural Cellular.

Now that the Rural Cellular acquisition has been completed, TDS has no derivative securities or marketable equity securities of other companies on its balance sheet.

For the quarter, the effective tax rate was 33.2%, lower primarily due to a one-time state benefit.

For the year, we expect the effective tax rate for both Companies to be in the mid-30s.

Looking at the balance sheet of TDS, it's financial strength is evident.

TDS ended the quarter with all of its lines of credit essentially unused, all of TDS's long-term debt is fixed rate with no interest rate risk, and termed out about 30 years.

The Company has no unfunded pension liability since it has a defined contribution plan, and the Company has over $1 billion in cash invested primarily in US Treasury securities.

TDS business units produced solid third quarter financial results and continued to generate free cash flow.

Those results, coupled with TDS' already strong balance sheet, provide TDS with the final resources and flexibility demanded in these changing economic times.

Now let me turn the phone call over to Jay Ellison.

Thanks, Ken and good morning everyone.

I'm going to begin with some general comments about our overall business results and plans, and then Steve will cover our financial results.

As you will hear this morning we found the third quarter to be challenging, as we faced difficult economic conditions and intense industry competition.

Despite these challenges, we delivered pretty solid results overall for the quarter.

We ended the quarter with almost $6.2 million total customers, up 2% from the prior year.

And in our key retail post paid segment, we added 12,000 net customers during the quarter.

The retail post pay churn was about 1.6% for the quarter, about the same level as in the prior year.

We are reporting year-over-year growth in both service revenues at 6%, and ARPU at 4%.

In fact, this is the 12th consecutive quarter in which we're reporting year-over-year growth in ARPU.

Both of these positive trends in service revenues and ARPU reflect outstanding growth in our data revenues.

And consistent with the growth in service revenue, we are reporting an increase in operating cash flow of almost 9% on a year-over-year basis.

On the other hand, our subscriber growth for the quarter was disappointing.

As I already mentioned, in the post paid segment, which has been our primary area of focus and represents approximately 95% of our total retail customer base, we added 12,000 customers on a net basis; however, in the prepaid segment, we lost 15,000 customers, and a number of factors effected those results.

First we experienced decreased traffic in our retail stores, leading to a 13% decline year-over-year on gross retail additions.

We are attributing this somewhat to the effect of the weak economy, as well as a strong customer appeal of certain hand sets, which our competitors are able to offer on an exclusive basis.

Second, we do acknowledge that our prepaid product offering is not as robust as that offered by some of our competitors, particularly in the area of data services.

We are working to fix that, and expect to offer new data services to the prepaid customers in 2009.

Another factor contributing to our weak sales in the prepaid segment was increased competition from unlimited providers, such as Leap, which launched service in our Oklahoma City and St.

Louis markets during the second quarter.

In response to this competition, and the expectation of Leap's expansion into some of our other markets, for example Milwaukee and Chicago, we have been trialing a new prepaid product that provides unlimited usage and long distance for $65.00 per month, and also offers a roaming option to subscribers willing to place a deposit.

In this tough competitive and uncertain economic environment, we believe that it's important to continue to invest in our business and customers for the long-term.

One of the significant steps that we're taking to further differentiate our customer satisfaction-based business model is our new Believe in Something Better branding campaign, that was launched in late June.

With this campaign, we introduced new branding positioning that communicates our belief that wireless plays an important part in our customers' lives, and goes well beyond just completing the telephone call.

We believe that we're more than just a Phone Company.

We're the Company that is bringing humanity to an industry that has often devoid of it.

Thus far, the response to the campaign and our new print, radio and TV advertising has been overwhelmingly positive.

To capitalize on the growth in demand for data products and services, we continue to expand our Smartphone and related offerings.

During the third quarter, we introduced the HTC Touch Windows Mobile device, our first all-touch Smartphone.

In addition, we launched several new product enhancements including US Cellular's Search and Info, a new application within our EasyEdge suite of products, that gives customers the ability to easily search for ring tone, wall papers, games, and other and applications.

Beginning October 1, we introduced new service plans that offer free incoming text and picture messaging.

We also are introducing new EasyEdge plans, which will include e-mail, a mobile browser, and we have just launched the Samsung Dell, a premium mobile touch screen device.

The Dell's device, together with our premium mobile internet plan, offers customers the perfect package for a rich, multimedia experience, including a full HTML browser, an e-mail client, and Your Navigator, US Cellular's Navigation Services Application.

To help ensure our data customers receive a high quality data experience, we've expanded our EVDO coverage to include Chicago, and selected markets in Iowa, Oklahoma and Wisconsin.

By the end of 2008, our EVDO coverage will reach 30% of our covered population, and we continue to plan for future expansion in 2009.

This expanded EVDO capability is important, because it will allow us to offer our customers an enhanced data experience, as well as new products and services not previously available from US Cellular.

We also continue to strengthen the overall network, with new cell sites and towers in key areas.

At quarter end, cell sites in service totaled 6,716 up 7% year-over-year.

We did not launch any new markets during the third quarter, and don't have any plans along these lines at present.

For the next few quarters, we intend to focus on increasing total customers, revenues, and profitability in our existing market, and of course, we continue our relentless focus on customer satisfaction, including a commitment to ensure that our customers have access to a high-quality network.

I am pleased to report that during September, 2008, we received our sixth consecutive JD Power & Associates Award for highest call quality in the north central region.

Now I will turn the call over to Steve for a discussion of our financial results.

Thank you, Jay and good morning everyone.

Overall, US Cellular is reporting solid financial results for the third quarter.

Service revenues of $1.014 billion increased 6% year-over-year, driven primarily by customer growth and demand for our data products and services.

ARPU of $54.59 was up 4% year-over-year.

We continue to see growth in our data revenues, which were up 35%, to $130 million.

Data now represents about 13% of our total service revenue, up from 10% a year ago, and still has room to grow.

During the quarter, we received ETC funding of $38 million.

As you know, on July 1st, the FCC published its order, adopting an interim cap on the Federal Universal Service Fund High Cost Program.

In recent months, the FCC has been considering other changes in the Universal Service Fund under the heading of Long-term Reform, which could reduce the amount of support that wireless carriers such as US Cellular would be eligible to receive.

An FCC vote on proposed changes, originally scheduled for yesterday, has been postponed to December 18th.

As a result, at this time we don't know the impact of any changes that ultimately might be adopted, and the level of ETC funding that we'll receive in the future remains uncertain.

However, we don't expect a significant change over the balance of this year.

Our net loss on equipment for the quarter was $103 million, up 3%.

Factors include a higher net subsidy per unit, reflecting hand sets with expanded capabilities, including Smartphones and aggressive promotions across the industry.

We've experienced solid growth in service revenues, and data revenues in particular, and the equipment subsidy is the cost of getting those additional revenues.

We expect the expanded capabilities of the hand sets that we offer to continue to drive additional growth in data revenues.

System operations expenses for the quarter were $197 million, up 6.5%.

The increase here reflected an increased number of cell sites in service, higher total minutes of use, and higher expenses incurred when our customers roamed onto other carriers' network.

Selling, general and administrative expenses were $442 million, up 5.6%.

In this category, advertising expenses increased about $12 million, or 19%, primarily due to media purchases and TV production expenses, both in connection with the launch of our new Believe in Something Better branding campaign, and as we seek to retain our share of voice in this heavily-advertised industry environment.

Operating income for the quarter was $120 million, up 19% from $101 million in the prior year.

Operating cash flow was $272 million, up 9% compared to the prior year.

Operating cash flow margin was 26.9%, up 0.6 of a point.

Investments and other income totaled $20.8 million, up from $7.7 million in the prior year.

During the current year quarter, we recognized a gain of $16.4 million, related to the disposition of our interest in World Cellular Corporation, which was acquired by Verizon Wireless.

Equity and earnings of unconsolidated entities was $22.3 million, including $15.3 million related to our interests in the Los Angeles partnership.

Net income for the quarter was $90 million, or $1.02 per diluted share.

As Ken mentioned earlier, our balance sheet is very sound.

At September 30th, the cash balance was $178 million, and there are no outstanding borrowings under the revolving credit facility.

Currently, we have borrowing capacity of $700 million under that facility.

As I already mentioned, the Company generated operating cash flow of $272 million during the quarter.

We used some of this cash to fund capital expenditures of $146 million, including expenditures related to the EVDO deployment in selected markets.

In addition, we repurchased 150,000 of our common shares at a cost of about $9 million.

Finally, our updated guidance for expected full year 2008 results is contained in today's Press Release.

Given our year-to-date results in the uncertain, economic, and competitive outlook, we're lowering our guidance for retail net additions.

Also, we're tightening the range a bit on our guidance for service revenues, and confirming our previous guidance for depreciation, operating income, and capital expenditures.

Our goal is to continue to drive the growth in revenues, operating income, and cash flow, while not compromising our customer satisfaction strategy and our relative competitive position in the market.

That concludes my prepared remarks, so now I'll turn the call over to Bill Megan for a discussion of the TDS Telecom results.

Bill.

Thank you, Steve.

Good morning, everyone.

Results in TDS Telecom continue the trend we've seen in recent quarters.

We've had strong increases in DSL subscribers and data revenues, and we have successfully managed expenses to hold operating cash flow steady despite a slowing economy and ongoing competition.

For the quarter, TDS Telecom's combined ILEC and CLEC revenues declined 4%; however, operating cash flow held constant at $75 million, with cash flow margin improving to 36%.

Cable competition and wireless substitution continue to impact access find and minutes of use losses.

ILEC physical access lines declined 5.3% year-over-year, excluding the effect of acquisitions.

Again, a strong positive in the quarter was the increase in ILEC data revenues, which grew 23%.

Our promotional campaigns for DSL added 6,900 net subscribers sequentially, and 34,000 year-on-year, excluding acquisitions.

Gross ads remain strong at 15,900 for the quarter.

A greater percentage of our customers are using higher speed service, which has contributed to a residential DSL ARPU increase of 8% to $35.00.

We also had continued success in selling our Triple Play, adding 5,900 net subscribers in the quarter, and we now have 54,600 total.

We have a very strong partner in Dish Network for the video component, and our experience has been that Triple Play customers have significantly lower churn.

Over the past year, we've introduced a series of promotions in key markets including free service for a limited period, a gift card to be used as the customer wishes, a guaranteed lower price for a more extended period, and so forth.

These present different value propositions and have kept the program fresh, and customers have responded favorably.

In our commercial customer segment we are introducing services to help them transition from traditional circuit switch to IP-based offerings.

We have rolled out to all of our CLEC markets and several of our ILEC markets a hosted IP service that provides a single converged voice and data communications service, supporting capabilities, such as advanced call routing to eliminate busy signals, one number capability, and a very user-friendly call management feature.

The service offers dynamic allocation of bandwidth, so when voice traffic decreases, data speeds burst to take advantage of unused bandwidth.

Because we host the service, customers benefit by not having to make a large upfront investment in a PBX or other system, and to get the increased reliability of our network so our customers can always stay connected with their customers.

There is a continued ability for us to add services for future growth potential, and we plan to introduce the service to number of new markets late this year and in 2009.

In our CLEC segment, the current revenue decline reflects our decision to improve profitability by focusing our marketing and sales efforts on small and medium businesses, and limiting our investment in acquiring residential customers.

The number of residential customers in our CLEC markets have decreased by some 20%, while business customers have declined slightly, which has driven overall ARPU up 2%.

We continue to be vigilant about managing our costs.

We reduced cash expenses for our combined operations by 7%, and we're able to improve cash flow 1% over last year.

Implementing process improvements has permitted us to lower average headcount by 6%, while still maintaining high customer satisfaction ratings.

We continue to invest in our network; capital expenditures were $38 million for the quarter on a consolidated basis.

We will continue to evolve our network and put the necessary infrastructure in place to offer broadband speeds that are very competitive.

90% of our ILEC lines are equipped for DSL service, with 85% of our customers taking speeds of 1.5 megabit or greater, and 49% at speeds from three to six megabits.

In key markets, we are launching ten megabit service over copper facilities, and 15 and 25 megabit service where we have fiber facilities.

On October 24th of this year, TDS Telecom entered into an agreement to acquire State Long Distance Company, located in growing Walworth County, Wisconsin.

The company serves 11,600 equivalent access lines, through a high quality network near two of our existing companies.

Subject to regulatory approval, the transaction is expected to close in the fourth quarter of 2008.

And finally, let me note that we have modified our guidance as shown in the Press Release.

We remain firmly within our previous guidance, but have tightened the ranges to reflect Q3 results.

Now I'll turn the call back to Mark Steinkrauss.

Thank you, Bill.

Adrian, we would be glad to go into question and answer period.

(OPERATOR INSTRUCTIONS) Our first question comes from Simon Flannery.

Your line is open.

Thank you very much.

Good morning.

If you could just talk more about the FCC, you cited the December 18th date, but there's a lot of speculation that perhaps, given the change in administration, things will drag on into next year.

Do you have any clarification from your folks in Washington about what the next steps are, and how likely that December 18th date is to hold, and then secondly, you talked about your recent acquisition of the LD company, but can you talk about other opportunities?

We've seen some RLEC consolidation here recently, opportunities perhaps to buy assets in the wireless space as well.

Anything that we might expect over the next couple of quarters?

Thanks.

I'll take the first part of your question, this is Jack Rooney, relative to the FCC.

The FCC postponed the consideration of two or three key docket item relative to Wireless to the December 18th meeting.

We've been basically asking them to clear it from their docket at this point , so that we can all take a good deep breath and approach this thing from a more considered stance.

We think that they have been rushing to judgment on this, and we would like to have it given much more consideration.

Whether that idea prevails or not, we don't know.

They very well could consider any one of a number of plans that are available to them on December 18th.

I think your consideration that they might, with the new administration coming in, back off that, could very well happen.

We just

Thank you.

Bill, do you want to talk about state long distance?

Sure.

If you would just let me follow up on the regulatory, there's been so much up and down in the past month on intercarrier compensation and US [AP] that would impact the wire line as well, and a lot of speculation in the absence of a proposed order to review.

From our prospective, it just stands as a series of question marks about what happens next.

So there's really no action to comment on yet, but we would be more than happy to talk with you when there is action taken.

With respect to acquisitions, state long distance represented is emblematic of our strategy.

We look at opportunities and when the pricing is right, and there's good strategic fit for us, we will pursue them.

In this instance it's nearby two of our existing companies, so we can take advantage of our current deployments there.

It is a very high-quality network.

We believe we can leverage up on that network and get higher penetration, and new sets of services, higher quality service out to the customers, and so we will look at opportunities like that in the future.

In terms of consolidation in the RLEC space I don't have a comment

Anything on the wireless side from an M&A point of view?

The obvious one that's out there, everybody in the industry is probably looking at, what comes out of the of the Verizon Alltel transaction.

We've seen the same public documents everybody else has; we're not going to comment on any specific transaction, but I think as we've said in the past, that there isn't a deal out there that we don't eventually look at, whether or not we can make it work long-term is a separate issue, but we look at most things that come across the table.

The other thing that you can see in the 10-Q, we have made a number of acquisitions of Spectrum specifically, and again we won't and can't comment on specific things, but that's something we would continue to look at as opportunities present themselves.

Great, appreciate it.

Your next question comes from [Phillip Cusack].

Your line is open.

Thanks for the call.

I wonder if you can talk about the foot traffic in the wireless stores, both in terms of Leap coming into your markets and the $65.00 plan.

That seems a little bit high to compete with them, unless it's a much bigger foot print, and then also what you're doing to increase your share gross ads coming through the door?

A couple of thing along those lines.

Relative to the prepaid plan that we launched in Milwaukee and Chicago, and we're moving to try to get that out in our St.

Louis market as well, we've actually seen significant increase in that segment in the two markets that we've launched it in.

So we're kind of excited for the fourth quarter, what we see relative to that, and continue to promote that.

As it relates to the pricing as well, I think we feel that it's a competitive price as well as with the roaming option on it.

We think that it meets the segments and the foot print that we have created for it in those two markets, which is a fairly expansive foot print between the two markets.

That's our position on that at this point.

Relative to what we're doing in foot traffic, obviously as we move in toward the holiday season, we have our plans around holiday promotions, which I clearly won't be discussion today, relative to pricing on hand sets.

We have new hand sets as I mentioned, The Dell, which just launched yesterday in our markets, and is currently aggressively priced.

We'll have additional promotional pricing.

We have planned service promotion offerings relative to a form of credit.

We have increased advertising planned in the holiday period.

We have a number of vehicles that we do during the holiday period, including special offers on Black Friday and through that weekend, free standing inserts in the papers that we advertise in.

We're looking at additional sales incentive for our distribution channels.

So we have multiple programs that are either in place or will be going in place between now and the Black Friday time frame, and then throughout into first of next year to increase that volume.

Okay, but do you think that's any different from what other people are doing, and any different from your normal efforts into the fourth quarter?

Or do you feel your gross ad share is at a fine level already?

I think relative to some of the promotions we may do internally on sales may be different.

I can't speak to what our competitors do, I know where our pricing will be on hand sets, and I think that will be aggressive.

And then additionally, you haven't normally seen a lot of service promotion as we will be doing, so I think we have, as I said, a multi-headed approach, which I think is a little more aggressive than we may have done in past years.

Okay, great, thank you.

Your next question comes from Michael Rollins, your line is open.

Hi, good morning, I just have a couple of questions.

First, I was wondering if you could clarify, within the retail ending subscriber base, could you describe the percent of that that's post paid, versus the percent that's prepaid?

And secondly, as you think about, I guess what's happening in the competitive environment, and it looks like on the surface it's the gross ads that have been hit more than the churn.

Would there be a concern that at some point the competitive market then begins to effect churn as well?

Can you discuss maybe some of the retention initiatives that you're looking at doing?

Thanks.

Relative to the percentage of base, I believe approximately 95% of our customer base are in the post paid arena.

However, back to your other question, we have been relentless on the churn number for the last eight years, as others have tended to follow that as well.

However, we are in the process.

We have programs relative to contacting our customer base at certain points in their life cycle with us, and we're actually in the process of making some fairly significant changes in that program to become much more proactive at different time frames in the customer life cycle, adding additional calls in the customer life cycle, and additionally have some programs that will be introduced next year, that will provide some proactive notification to the customer relative to their plans with U.S.

Cellular.

So to answer your question, we are in the process of changing our customer life cycle contact program with additional calls and more calls.

Because we do feel that churn is clearly one of the areas we want to continue to maintain that level that we reported, and continue our efforts to drive that down.

Thanks very much.

Next question comes from Michael Bowen, your line is open.

Thanks very much for taking the questions.

So gentlemen, I guess one thing with Leap, do you foresee any possibility of a kind a metro-flash type of offering which might, when they come into Chicago, might potentially take any customers from you?

And then secondly, thanks for the tightened up guidance on revenue, and I can understand the math obviously of your net retail customer ads and tightening up the revenue, but am I right to assume basically that in order to get to that revenue you've got to continue to see ARPU trend continue to move up in the fourth quarter and beyond?

And if you agree into that line of thought, can split that out between maybe the increase in revenue from data, versus any other aspects in your ARPU?

Thanks.

So, this is Steve, let me take the second part of that again.

We're definitely expecting continued growth over time in ARPU.

And as we've talked, a part of that, a big part of that in fact, the fuel for that is growth in data and we'd expect that to continue.

Can't give you a breakout of how much ARPU will grow and the split, but suffice it to say from the numbers that we've disclosed, data continues to be a good engine for growth in ARPU overall.

Additionally it kind of ties onto that to Steve's point and gets a little bit to the first part of your question.

As I mentioned in my comments, we find it very important that we get the data product offering on the prepaid platform so that it becomes more robust as competition enters the market or heats up in that arena, and we're in the process of working towards that as well.

As it relates to some of the new entrance into the marketplace, luckily, we have our prepaid unlimited offering out there.

Leap has not entered, Chicago.

We believe it will be sometime next year, and so we are kind of preceeding and trying to aggressively address that segment via the offering, as well as via expanding our prepaid distribution simultaneously, so that we are in the areas.

We continue to grow foot print in the areas where we think those customers reside, and that's another part of the effort to be ahead of it on the prepaid front.

And then if I could, I'm curious, your commentary about the foot traffic in the stores, number one, how are you actually measuring that?

And number two, is that slowing sequentially, or year-over-year, or both?

Well, one of the ways we've measure the foot traffic, a couple of ways, we know what our overall transactions are in our store.

With our business model, our leadership model, we are very close to the frontline the way we have designed the organization.

So clearly, store managers talking to their leadership, which is out in the field, is pretty indicative of what the traffic looks like, and as well, as I mentioned earlier, the gross sales is an indicator of what is going on out there as well.

And I'm sorry, what was the second part?

I was just curious when the you're seeing foot traffic slowing year-over-year, or sequentially, or both?

Probably year-over-year.

Okay, thank you very much.

In fact, I know it's not a tight one for one but directionally, our gross ads were actually up a tad from what they were in the second quarter.

Jay had mentioned year-over-year as the bigger decline we saw, to the extent that gross ads reflect the overall level of traffic.

We actually saw a slight uptick in Q3 from Q2.

Just let me add something.

Your earlier question on data.

I'll just mention that our data ARPU for the third quarter was $7.00, right around $7.00, and that's up about 30% year-on-year, so you can get an idea on the trend there.

Your next question comes from Tom [Seats], your line is open.

Thanks for taking the questions.

First one just a point of clarification, the small telecom lobbying organization [Pasco], supported the recent SEC order.

I believe you guys are the largest member.

Does that mean that TDS Corporate supported the proposal,,l or was that just TDS Telecom?

And then secondly, you're sitting on a pretty large portfolio of attractive unbuilt spectrum.

Competition seems to be getting more acute, not less.

So can you talk about your plans for what you're going to do with that?

And sort of work in with that what are the most pressing buildout requirements from the SEC that are going to force your hand one way or the other?

Thanks.

Bill, do you want to take the first part of that question from Tom?

Yeah, I would be happy to.

Our participation with [Pasco] represents the wire line, Tom, so it is TDS Telecom's advocacy for the proposals that were reported to be on the table.

Okay, so TDS Telecom supported the proposal?

Yeah.

Great.

On the spectrum, Tom the Company has been purchasing Spectrum primarily on top of where it already operates, and if you look at the AWS auction or some of the recent sub-100 transactions we've about be doing, we've about be getting capacity that would allow us to better manage future technology changes, by having some clean Spectrum to play with, and any buildout requirements related to that are well in the future.

There's nothing large that is staring us right in the face right now.

Okay, great, thanks a lot.

Your next question comes from Kevin Roe, your line is open.

Thank you, good morning.

A couple of questions for Jay.

First on store traffic, can you comment on how that trended during the quarter on a monthly basis?

Did things get worse as the quarter progressed, and did that continue into October?

And second question on the unlimited, Jay, can you talk about cannibalization risk, to some of your existing plans out there from this unlimited offering.

The reason I ask is just looking at some of your wide area plans, you have two thousand, three thousand, five thousand minute wide coverage plans that start at $80.00 and go up to $150.00.

I would think there may be some sub segment of those customers that may switch down to the cheaper plan with unlimited.

Thank you?

Let me work a little bit backwards here.

On the cannibalization of the plans that you were describing, I think the one unlimited plan that I mentioned was relative to prepaid, and as it relates to that plan, we have seen some of our prepaid customer base move onto that plan, but we also feel by offering that plan, we're going to be able to keep that customer satisfied and keep that customer longer on the prepaid product line.

If you're referencing the general unlimited plan that we launched much earlier this year, we haven't seen a tremendous amount of cannibalization.

Actually when we take a look at it, we've seen more of our customers moving up into that plan than moving down.

So, that was on the post paid side of it.

On the traffic question, really, we pretty much saw that kind of consistent throughout that third quarter, again going into fourth quarter with the anticipation of holiday.

We expect to see our retail traffic clearly picking up.

We already start to see some that.

Thank you.

The next question comes from Jonathan Atkin, your line is open.

My question was asked already.

Thanks very much.

At this time I'm showing no further questions in queue.

Adrian, if we don't have anybody else waiting with questions, we can finish up the call, and everybody on the call we're available the rest of the afternoon, so if you have any questions just give me a ring.

Adrian, back to you.

Thank you.

This conclude's today's conference call.

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