UScelllar signed a Master Lease Agreement (MLA) with Dish Network in April, according to UScellular President and CEO Laurent Therivel, who revealed little else about the deal during the company’s earnings call on Friday.
Therivel said the company expects the agreement to contribute to its tower revenue growth beginning in 2022, but didn’t say how many towers are involved. “Any details on the deal have to remain confidential,” he said.
It’s the type of deal of which the regional operator would like to do more. One of the things UScellular has been looking at is how it can become a more attractive partner for those who are interested in getting access to its towers.
It’s no secret that its co-location rate has been lower than the industry average and “we’ve got to fix that,” Therivel said.
In the past, one of the things it did was reserve a significant amount of data center space or overall tower space for a potential network expansion. It's still doing that, but brought down the amount of reserved space a little bit in order to make more capacity available to its partners, he said.
“Another thing we did is we said, look, we've got assets at those towers in the form of generators and shelters and backhaul, and we're willing to share that with our partners if the economics make sense,” he said. “So we've taken those actions. I think the Dish deal is the first example of those actions bearing fruit and I expect to see more. So hopefully, that gives you some flavor about how we're doing from a growth perspective. I'm encouraged. I expect to see those efforts continue to bear fruit, certainly throughout the rest of this year and particularly going into next.”
Asked about supply chain issues, Therivel said UScellular is paying attention to two big drivers. LG, which announced it’s quitting the handset business, is the one of them. “We are well prepared for that,” he said.
Most of its LG handset sales are on the prepaid side of the house, and “we’ve got a fairly robust device ecosystem.”
On the chipset side of the business: "Thus far, I’m not seeing effects on our business… If there are impacts, we think we can manage it. But that [chipset] one I’m paying a lot more attention to. I’m not sure if I would use the word ‘skittish,’ but concerned, certainly."
Therivel said UScellular is “largely satisfied” with its $1.3 billion C-band purchases when combined with Citizens Broadband Radio Service (CBRS) holdings, with mid-band spectrum now in nearly all of its operating footprint. It’s also deployed millimeter wave spectrum in order to offer fixed wireless access (FWA) in three test markets and pilot launches in those markets are expected to occur in the third quarter of this year.
Analysts at Raymond James & Associates said in a May 10 report that all in all, they’re encouraged that UScellular is upgrading its markets to 5G early and honing in on important under-indexed markets, such as slower-moving business and government.
They do not expect an outright sale of UScellular towers, which is a question that has come up repeatedly in the past. Operationally, its 4,300 tower portfolio produced $20.3 million in third-party revenue in the first quarter of 2021, wrote analyst Ric Prentiss.
“Importantly, USM announced it has had signed a Master Lease Agreement (MLA) with Dish in April, and as Dish ramps the deployment of its greenfield nationwide 5G network in 2H21/2022, USM should see some upside. Moreover, USM under new (as of July 2020) CEO Laurent Therivel (LT) has focused on ‘sweating’ the tower assets, including more aggressive marketing, faster application cycle times, and sharing backhaul/generators/shelters at tower sites with tenants,” Prentiss said.
With just 1.45 tenants per tower including UScellular as the anchor tenant, which compares to the industry average of 2-3 times that, “we think the towers can drive growth at high incremental margins,” he said.
Here are some other metrics from the first quarter of 2021:
- UScellular reported a subscriber net loss of 6,000. Included in the loss are 9,000 feature phones but 6,000 smartphones additions. Connected devices decreased by 3,000, reflecting things like routers and hot spots that were in high demand at the onset of Covid last year.
- Churn on handsets was 0.92%, down from 0.95% a year ago. For the first quarter 2021, UScellular had a total churn rate of 1.12%, which was better than a year ago.
- The carrier lost 3,000 prepaid customers in Q1, ending the period with 496,000 prepaid users.
- UScellular revenue was in line with expectations, at $771 million versus the Street expectation of $770 million. Total postpaid APRU was $47.65.