Telephone and Data Systems (TDS) sale of its OneNeck data center and cloud services assets to US Signal marks another chapter in the independent telco’s move to advance its fiber broadband strategy.
While acquiring OneNeck gives US Signal a more extensive data center and cloud assets footprint, TDS can now focus more on growing its fiber-based broadband network reach.
When it announced the sale of the OneNeck assets, the telco said the proceeds would be used for general corporate purposes, including advancing TDS' fiber program.
www.tdsinc.com
"The sale of OneNeck provides additional capital that can be used to support TDS Telecom's fiber program, which includes investing in communities throughout the US with quality broadband connectivity,” said Vicki Villacrez, EVP and CFO of TDS, upon announcing the deal.
Jeff Heynen, VP at Dell’Oro, said that TDS’s OneNeck and US Cellular sales are clear signs of its move to emphasize its dedication to its fiber broadband business.
“It’s clear TDS is trying to focus its business on growing its fiber footprint,” he said. “Its sale of USCellular to T-Mobile and today’s announcement regarding OneNeck certainly help TDS’ overall cash position, but they also position it to expand its fiber network beyond the ACAM and E-ACAM upgrades to its DSL footprint it has already discussed. They have discussed about 500K homes they plan to overbuild with fiber in their territory.”
Asset maneuvers
TDS’ sale of its OneNeck assets is just one of a few moves the telco appears to be making to sharpen its fiber focus.
Last week, TDS reached a deal to sell its US Cellular wireless business to T-Mobile for $4.4 billion. Under the terms of the agreement, T-Mobile will acquire UScellular's wireless operations and approximately 30% of spectrum assets across several spectrum bands.
Heynen said that TDS’s latest deal represents what will quickly become a trend for telcos to enhance their fiber broadband footprints.
We will continue to see more divestments of non-core assets like this so ISPs can return to focusing on providing connectivity through fiber. Fiber increases the network's value when compared with copper or HFC. Those higher valuations make it easier to access capital for additional builds or M&A activity down the road. Frontier has used this strategy effectively since it emerged from bankruptcy.
However, TDS is not the only telco that has shed other assets from its portfolio.
Fellow independent and fiber-focused telco Shentel reached a deal to sell its wireless business to T-Mobile in early 2021 for $1.95 billion. Later, in March 2024, Shentel sold its tower portfolio for $310 million to telecom asset holder Vertical Bridge.
As of the end of the first quarter, Shentel noted that its total Glo Fiber Markets passings grew year-over-year by 94,509 to 259,567. Shentel's total Cable Markets and Glo Fiber Markets broadband data RGUs as of March 31, 2024, were 155,687, representing 12.2% year-over-year growth.Besides organically growing its Glo Fiber network, the service provider recently completed its acquisition of Horizon Telecom, which enables it to extend its fiber footprint into Ohio.
Growing fiber base
While the US Signal sale will not be finalized until later this year, it comes as TDS continues to grow its fiber business.
TDS continues to progress with its fiber broadband program.
During the first quarter, TDS Telecom reached a critical milestone: exceeding 100,000 residential broadband connections in its expansion markets. TDS ended the quarter with 827,000 marketable fiber service addresses, 49% of which are served by fiber.
www.tdsinc.com
“For the past several years,” said Michelle Brukwicki, TDS Telecom senior vice president of finance and CFO, during its first-quarter earnings call, “we’ve made significant investments in our fiber program, and our financial results are starting to reflect the benefits of those investments. Since starting our fiber program, we just delivered our strongest quarter of revenues and profitability.”
During the first quarter, TDS Telecom reached a critical milestone: exceeding 100,000 residential broadband connections in its expansion markets. TDS ended the quarter with 827,000 marketable fiber service addresses, 49% of which are served by fiber.
Additionally, TDS entered a $375 million unsecured debt facility and borrowed $300 million, which was used to fund the company’s fiber build program.
“The team continues to deliver a steady cadence of marketable fiber service addresses with 28,000 this quarter,” she said. “We’re on track to reach our annual goal of 125,000 marketable fiber service addresses that we shared with you in February. As we deliver these fiber addresses, we also successfully sell them to those addresses. Overall, we are achieving the broadband penetration projected in our business cases. We reached a major milestone in the first quarter: exceeding 100,000 residential broadband connections in our expansion markets.”
According to Brukwicki, TDS ended the quarter with 827,000 marketable fiber service addresses, 49% of which are served by fiber. Additionally, she noted that TDS expects to offer 1 Gbps service to 80% of its footprint, finishing the quarter with 73%.
TDS will also enhance its fiber network build by leveraging E-CAM public funding.
www.delloro.com
“Between those fiber overbuilding projects and the edge-out expansion projects it is pursuing, TDS has over $100M in projects pending for State grants through the E-ACAM process,” said Heynen. “Like Charter with its RDOF builds, TDS sees this as a unique opportunity to expand its addressable subscriber base with a lower cost per. So, the ROI for these builds is quite a bit shorter than if they had to foot the entire bill themselves.”
