Good day, and thank you for standing by. And welcome to the TDS and U.S. Cellular Second Quarter Earnings Results. . I'll go on and hand the call over to Jane McCahon, Senior Vice President, Corporate Relations. Thank you. Please, go ahead..

Pete Sereda, Executive Vice President and Chief Financial Officer; from U.S. Cellular, LT Therivel, President and Chief Executive Officer; Doug Chambers, Executive Vice President and Chief Financial Officer; and from TDS Telecom, Vicki Villacrez, Senior Vice President of Finance and Chief Financial Officer.

This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations websites. Please see the websites for slides referred to on this call, including non-GAAP reconciliations.

We provide guidance for both adjusted operating income before depreciation and amortization, or OIBDA, and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, to highlight the contributions of U.S. Cellular's wireless partnerships. TDS and U.S.

Cellular filed their SEC Forms 8-K, including press releases yesterday and then we filed our 10-Q this morning. As shown on Slide 02, the information set forth in the presentation and discussed during this call contain statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties.

Please review the safe harbor paragraphs in our press releases and the extended version and are included in our SEC filings. In terms of our upcoming IR schedule, Slide 03, the investor relations team is attending the Morgan Stanley Media and Communications Corporate Access Day on August 12th.

And as always, our open door policy can now be in open door phone or video policy, so please reach out to us if you're interested in speaking with us.

Also, we want to call your attention to our recently refreshed and updated Environmental Social and Governance ESG website and additionally in order to advance our ESG strategy, we recently conducted a materiality assessment to help prioritize and score ESG opportunities and risks from the perspective of internal and external shareholders, stakeholders.

When finalized, we'll publish the results on our website. Before turning the call over, I want to remind everyone that due to the SECs and high pollution rules related to auction 110, we will not be responding to any questions related to spectrum auctions. And now, I'll turn the call over to Pete Sereda.

Pete?.

Thanks, Jane, and good morning everyone. Before speaking about the balance sheet and our funding strategies, I wanted to recognize all the actions that both of our business units are taking to lead the higher returns and stronger businesses over the next several years.

Turning to the income statement, I want to call your attention to a couple of unusual items.

First, our effective tax rate was a negative 48.9% during the quarter to primarily to the reduction of certain tax accruals and as part of redeeming some of our high account debt, we recorded an additional $36 million a non-cash interest expense $20 million of which was U.S. Cellular.

And this was to right up on amortized debt issuance cost from prior bond transactions. As we've discussed on past calls, maintaining financial flexibility's one of the pillars of our corporate strategy.

For many years we've worked to retain relatively low-level leverage levels, long-dated maturities, sufficient undrawn revolving credit facilities and significant cash balances, while at the same time making sure we have the financial resources we need to find our businesses.

As you could see on Slide 04, at the end of the second quarter, TDS continues to maintain a solid financial position including ample available funding sources consisting of cash and cash equivalence and available credit facilities which is especially important since U.S. Cellular and TDS Telecom are both currently in investment cycles. With U.S.

Cellular investing in network modernization 5G and Spectrum and TDS Telecom aggressively investing in fiber expansion. We will continue to look for innovative ways to finance these investments for preserving our credit rating. Turning to Slide 05.

I also wanted to call your attention to all the work that has been done to lower the average cost of our financing. As you can see through June 30, we redeemed over $1 billion in debt with a weighted average cost of 7.1% and replaced it with that with an average cost of 4.8%.

This results at a run rate of $25 million in annual coupon savings on the redeemed debt. And then, earlier this week, both TDS and U.S. Cellular announced additional redemptions of high cost senior notes. And this will raise the amount of gain by over $450 million to a total of almost $1.6 billion.

Also earlier this week and shortly after we announced and we were calling the U.S. Cellular notes and planning to fund the transaction by drawing down on our EIP securitization. Moody's a firm TDS's corporate family rating that downgraded the remaining U.S. Cellular senior notes.

The reason for this downgrade reflects the fact that the new EIP debt that will be taken on to fund the redemption, comes ahead of the remaining notes in light of payment. The downgrade is specific just of those notes not to the company in general. Moody's use the recent refinancing steps to lower the cost of the balance sheet as credit positive.

In summary, we believe both business units have a lot of growth opportunities and we're ensuring that we have the financial resources to fund them or the same time we're continuing to lower the average cost to finance them. I will now turn the call over to LT.

LT?.

Thanks, Pete, and good morning everybody. It's been about a year since I joined the company and I continue to be just blown away with the team and the culture of U.S. Cellular. I want to thank all of our stakeholders and that includes everybody on this call for the support we endeavored over the past year. Turn to Page 07.

Our strategic priorities remain simple, were designed to drive growth and improve return on capital over time. In about halfway through the year when making really good progress towards these priorities, me and Doug cover the operational on the financial highlights of the second quarter.

And I'd like to provide a couple of thoughts on these strategic priorities. In top of mind for me right now is the competitive environment. We've seen some really aggressive promotions out there for about new and existing customers and as Doug will touch on, it had an impact on our postpaid subscriber results for the quarter.

We are maintaining our focus on profitable growth. We are leveraging our regionally focused strategy to test different offers to help us hone in on the right balance between subscriber growth and profitability.

I've talked about this in prior calls but I believe one of the benefits of having noncontiguous regions, the ability to test different approaches to see what resonates with our customers. And you see this and how we're approaching the marketplace right now.

We got some very aggressive offers to drive switching in certain markets with more upgrade focused offers and others. And we'll continue to work these trials so that we have the right approach when we get to the main selling season later this year.

I spoke to you last quarter about some of our new initiatives to drive growth in our business and government and prepaid segments. We made some changes to our prepaid offerings which led to really strong prepaid results this quarter. Business in government segments a longer term effort but I'm beginning to see some encouraging side.

I feel confident in our ability to drive growth there particularly in the IoT and the private networking space. So, few words on our network division. Network performance is a hallmark of our value proposition. We're continuing our network monetization program and our multi-year 5G deployment.

Since already of our traffic is now carried by sites that have 5G deployed and this helps maintain our network leadership and it also brings down our costs. We continue to be optimistic on the use of millimeter wave spectrum for fixed wireless access. We're continuing two tracks of work, one on technology and one on market demand.

The technology testing frankly is exceeding our expectations. We've been working with our partners on extending millimeter wave businesses and most recently we achieved another world record using our 5G millimeter wave spectrum achieving near gigabit speeds over a distance of 10 kilometers.

As milestone, it could potentially bring extended range 5G service with massive capacity and low latency at even more of our footprint, I think overall whole areas. On the market demand side, we're continuing on our 5G millimeter wave high-speed internet trials, we've seen some early encouraging results.

It's very clear that customers in our areas are looking for alternatives to the current providers in the marketplace. Turning briefly on Washington, I'm encouraged by the recent progress made on bipartisan infrastructure legislation and I've joined other companies in the business roundtable and encouraging passage of the proposal.

I'm encouraged that the proposed legislations sets aside funds for both infrastructure and affordability, both of those are going to be critical on bridging the digital divide. I believe it's a bit more specific, I'm particularly encouraged that the requirements for infrastructure funding don’t require symmetric speeds.

That would have been a disaster for efficient funding of rural broadband. Asymmetric requirements allow any network technology to compete for funding, that includes wireless. So, if you're funding those wireless buildouts helps both fixed and mobile use cases.

And hopefully and I'm hopeful that this infrastructure legislation can be an example of avoiding partisan politics and putting America and Americans first. Following the rollout of the vaccine, I've recently had more opportunities to get out in the field, the stores, talk to customers and talked to associates in person.

Hopefully we'll continue to see progress on the vaccines so we can maintain the positive momentum over the past few months. Our field teams in the stores and the network and they're doing just a tremendous job keeping our customers connected in some really challenging circumstances.

The proportion of our workforce that have been working remotely, we just announced our return to office approach. We'll be focusing on purposeful interactions instead of requiring a certain number of days in the office.

We hope this will strike the right balance between in-person time for culture reinforcement while also acknowledging the productivity and coordination lessons learnt from the pandemic. And personally, I'm just looking forward to meeting more members of my team for the very first time in person.

So, with that Doug, I'm going to turn it over to you to cover the details of the quarter..

Thanks LT, good morning. Let's start with the review of customer results on Slide 08. Postpaid handset gross additions increased by 16,000 year-over-year due to higher switching activity which was depressed last year as a result of the unfolding pandemic.

Our ability to track switchers remain flat year-over-year due to aggressive industrywide promotional activity on handsets. We say connected device gross additions decline by 4000 year-over-year.

This was driven by lower gross additions of internet products such as hotspots and tablets compared to the prior year when we experienced an increase in demand due to COVID-19. The declines in hotspot and tablet sales were partially offset by an increase in connected watch gross additions.

Total smartphone connections increased by 15,000 during the quarter and by 60,000 over the course of the past 12 months. That helps to drive more service revenue, given that smartphone ARPU is about $20 higher than feature phone ARPU.

Additionally, I want to call it our strong prepaid results which are driven by changes to our prepaid offerings, our prepaid base increased a 11,000 due to an increase in gross additions combined with a decrease in defections. Next, I'd like to comment on the postpaid churn rate shown on Slide 09.

Postpaid handset churn detected by the blue bars is 0.88% up from 0.71% a year ago. This is driven by voluntary churn which continues to run at higher year-over-year as a result of increased switching activity and aggressive industrywide competition.

Total postpaid churn combining handsets and connected devices is 1.11% to the second quarter of 2021, higher than a year-ago as we've also seen churn increase on connected devices due to certain business in government customers disconnecting devices that were activated during the peak periods of the pandemic in 2020.

Now let's turn to the financial results on Slide 10. Total operating revenues for the second quarter were $1.014 billion, an increase of $41 million or 4% year-over-year.

Retail service revenues increased by $28 million to $686 million and increase was primarily due to a higher average revenue per user which I will discuss in a moment as well as an increase in average postpaid subscribers.

Inbound roaming revenue was $28 million that was a decrease of $13 million year-over-year driven by a decrease in data volume and rates. And other factors contributing to this data volume decrease is the merger of Sprint and T-Mobile and the migration of Sprint roaming traffic to T-Mobile's network.

Other service revenues were $60 million, an increase of $6 million year-over-year including a 6% increase in tower rental revenues. Finally, equipment sales revenues increased by $20 million year-over-year due to an increase in units sold and an increase in accessory sales as a result of higher volume.

Partially offset by a decrease in the average revenue per unit in large part as a result of an increase in promotional activity. We engaged in aggressive promotional activity during the second quarter of 2021 to remain competitive with the industry particularly for switchers.

A portion of the resulting promotional costs, we do see equipment sales revenues and increased loss of equipment which represents equipment sales revenues, less cost of equipment sold.

In addition, loss of equipment in the second quarter of 2020 was mitigated by the impacts of the pandemic, specifically lower growth surge and less aggressive promotional activity.

As a result of the combined impact of these factors, loss on equipment increased $20 million year-over-year from a positive margin of $2 million in 2020 to a loss on equipment of $18 million in 2021. This change in loss on equipment was the primary driver of our decline in profitability year-over-year.

We expect the aggressive promotional environment to persist for the remainder of 2021 and our full-year guidance reflects the corresponding financial impact. Now, a few more comments about postpaid revenue shown on Slide 11. Average revenue per user or connection is $47.74 to the second quarter, up a $1.50 or approximately 3% year-over-year.

At a per count basis, average revenue grew by 4.55 or 4% year-over year.

The increases were driven primarily by favorable plan and product offering mix, an increase in regulatory recovery revenues, an increase in device protection revenues, behind an increase in overage and other fees which were waived in the prior year to assist customers during the COVID-19 pandemic. Turning to Slide 12.

As we continue our multi-year network modernization and 5G rollout, control of our towers remains critical. By owning our towers, we ensure we maintain the operational possibility to add new equipment and make other changes to cell sites without incurring additional costs, which is very important particularly given our current technology evolution.

As you can see on this slide, with the assistance of our third-party marketing agreement, we have seen steady growth in tower rental revenues. As I mentioned, second quarter tower rental revenues increased by 6% year-over-year. We will continue to focus on growing revenues from these strategic assets. Moving to Slide 13.

I want to comment on adjusted operating income before depreciation, the amortization, and accretion and gains and losses. Keeping simple, I'll refer to this measure as adjusted operating income. As shown at the bottom of this slide, adjusted operating income was $218 million, a decrease of 7% year-over-year.

As I commented earlier, total operating revenues were $1.014 billion, a 4% increase year-over-year. Total cash expenses were $796 million, increase in $58 million or 8% year-over-year. Total system operations expense increased 4% year-over-year.

And excluding roaming expense, system operations expense increased by 7% due to a higher circuit cost and cell site rent and maintenance expense. Roaming expense decreased $3 million or 7% year-over-year resulting from lower voice roaming while higher day usage was largely offset by lower rates.

Cost of equipment sold increased $40 million or 19% year-over-year due to an increase in units sold, we had an increase in accessory sales as a result of higher volume.

Selling, general and administrative expenses increased a $11 million or a 3% year-over-year, driven primarily by costs associated with supporting enterprise projects, building system upgrades and federal universals. Turning to Slide 14. I'll touch on adjusted EBITDA which starts with from our equity method investments along with interest and dividend.

Adjusted EBITDA for the quarter was $267 million, a decrease of $13 million or 5% year-over-year. Equity in earnings of unconsolidated entities increased by $3 million or 7%. Next, I want to cover a guidance for the full-year 2021. For comparison, we're showing our 2020 actual results.

The total service revenues, our guidance range of $3.05 billion to $3.15 billion remains unchanged. For adjusted operating income and adjusted EBITDA, we're maintaining our guidance ranges of $850 million to $950 million in an $1.025 billion to $1.125 billion respectively.

As mentioned earlier, this reflects our expectation of a continued highly competitive environment for the remainder of the year. For capital expenditures, we are also maintaining our guidance range of $775 million to $875 million and we have provided a breakdown by major category. I will now turn the call over to Vicki Villacrez.

Vicki?.

Okay, thank you Doug. And good morning, everyone. I am pleased with our financial results for the second quarter and through the first half of the year. And we are tracking to our guidance expectations. We continue to see strong broadband growth that has accelerated since the start of the pandemic.

We grew residential broadband revenues 16% in total in the quarter driving total residential revenue growth of 10%. Overall, we grew our topline 5% while planned investment standing on new market launches caused our adjusted EBITDA to be lower than prior year.

Also, notable during the quarter was strong average residential revenue for connection growth of 7%, on price increases and product mix, as customers take higher speeds. We continue to experience strong tailwinds which are driving increased broadband adoption.

For example, work-at-home environment continue, bipartisan support for broadband is driving more federal and state opportunities. And population migration and on most attractive markets is driving strong household growth. During the quarter, we grew our total footprint 6% which increased strong organic household growth across our market.

Turning to the Slide 17. We remain committed to the strategic priorities we've been focused on for several years. As previously discussed, our primary objective is to generate growth by investing in our high-speed broadband services.

We have a multi-faceted approach in this growth that includes leveraging existing networks and constructing Greenfield fiber in targeted locations. We are very pleased that where we've invested in fiber in our incumbent market, we have achieved superior market share, even our expansion markets we are seeing strong customer preregistrations.

In addition, we continue to drive faster speeds in our more role incumbent market but building to meet our A-CAM obligation and utilizing state broadband ground. On Slide 18, total residential connections increased 2% due to residential broadband growth in new and existing markets partially offset by a decrease in voice and video connection.

Total telecom broadband residential connections grew 7% in the quarter as we continue to fortify our network with fiber and expand into new market. We are on-track in our network instruction under the A-CAM program, also helping to drive growth in our incumbent market.

Overall, higher value product mix and price increases drove a 7% increase in average residential revenue per connection. On Slide 19, you can see the broadband connection growth across all markets. Our focus on broadband connection growth and fast reliable service has generated a 16% increase in total residential broadband revenue.

We are offering up to 1Gig broadband speeds to 56% of our total footprint, including both our fiber and DOCSIS 3.1 market. A 1Gig product is an important tool that allows us to defend market and to win customers in new markets. In areas where we offer 1Gig service, we are now seeing 21% of our new customers taking this superior product.

Turning to Slide 20. We have augmented our success growing broadband with our TDS TV offering. Our next generation video platform enhances the customer viewing experience and a bundle these products help us to increase our broadband market share and reduce churn. Video, residential video connections were nearly flat.

Wireline growth have 6% driven by our expansion market nearly offset losses in the cable market. Video continue to remain important to our customers. For example, we are experiencing a 40% video attachment rate to every broadband connection in our wireline markets where we offer IPTV services.

And that's across half our wireline also from nearly half our wireline footprint. Our strategy is to increase vide connections through the offering of our cloud based TDS TV+ product. The rollout of this product currently covered 60% of our total operation including our cable market. Moving to Slide 21.

We continue to be very bullish on our fiber strategy and how it will transform TDS Telecom in a very meaningful way over the next several years. Given the attractiveness of this opportunity and the heightened level of participation by other overbuilders, our sense of urgency has increased.

We therefore are upsizing the number of expansion markets we expect to build over the next several years as well as increasing our fiber builds within our existing footprint. For competitive reasons, we are not specifically naming the market or the number of service addresses yet and any additional spending this year is well within our guidance.

We plan to announce these additional markets after we signed construction agreements and launch our pre-marketing and sales effort publicly. Fiber is the most economical long-term solution to deliver the best broadband experience. We continue to refine our market selection criteria and are highly confident in this process. Now let's turn to Slide 22.

This shows the progress we are making this year on a multi-year fiber footprint expansion. This includes fiber into incumbent market and also expansion into new markets. As a result of this strategy, 39% of our wireline service, this is are now served by fiber. This is up from 33% a year ago.

This is driving revenue growth while also expanding the total wireline footprint 8% to 873,000 service addresses. Moving to Slide 23. We have highlighted the total service addresses for the clusters that are in construction and we are actively marketing.

We recently announced our expansion of fiber into Spokane Valley, Washington, adding 33,000 service addresses to our plans in the Spokane cluster. In total, we completed 338,000 fiber service addresses to the second quarter. And are working to build out the footprint 57,000 service addresses by 2024.

Performance of our launched fiber markets continue most cases. Year-to-date, we completed construction of 31,000 fiber addresses adding 18,000 service addresses in the quarter. This progress is slower than planned and is putting pressure on service address delivery on the back half of the year.

The delays we are seeing in construction could impact our ability to deliver our goal of a 150,000 service addresses by the end of the year. But we are confident that we'll still complete a substantial portion of our plan.

We also continue to proactively manage construction and customer equipment inventory demand for we're seeing lengthening lead times with our suppliers. We will continue to update you on our progress throughout the year.

On Slide 24, total revenues increased 5% year-over-year to $252 million largely driven by the strong growth in residential revenues which increased 10% in total. The chart includes residential revenue mix which highlights the increasing contribution of our expansion market.

Incumbent wireline market also showed impressive residential growth of 7% to the increases in broadband connections as well as increases from moving the broadband product mix. Partially offset by a 4% decrease in residential voice connection. Cable residential revenue grew 10% also due to increases in broadband connections as well as product mix.

By CLEC decline, increased 4% to $46 million wholesale revenue decreased 3% to $45 million, again primarily to reductions and special access in the incumbent wireline market. So, let me sum up to combine financial results for the quarter. As shown on Slide 25.

Total revenues increased 5% from the prior year, and growth from our fiber expansion and increases in broadband subscribers exceeded the decline we experienced in our legacy business. And due to both supporting our current growth as well as spending related to future expansion into new market which is not yet reflected in our revenue.

Future market costs includes direct costs such as sales, marketing, real-estate, and technitional cost, necessary to support new market growth. As a result, adjusted EBITDA decreased 7% to $78 million as expected.

Capital expenditures increased 33% from last year to -- we continued to increase our investment in fiber deployments and success base spending for new customer. On Slide 26, we provided our 2021 guidance which is at the beginning of the year.

We expect expenses in capital expenditures to ramp-up in the second half of the year as we continue to execute on our fiber expansion strategy. And we expect to end the year within the guidance range. I want to express my gratitude to all associates for their dedications of the success of TDS Telecom.

Our positive quarterly results are products of your hard work. Thank you. And with that, I'd like to forward -- I look forward to updating you in the third quarter and now I'll turn the call back over to Jane..

Thanks, Vicki. Operator, we're ready for questions at this point..

The first question comes from the line of Rick Prentiss from Raymond James. Your line is now open..

Thanks. Good morning, everyone..

Good morning, Rick..

We'll start on the wireless side. LT, it's been a year as you point out as you've done there. What caused the thought that partnerships could help U.S. Cellular or is kind of service revenue growth in return on capital objectives.

Can you tell me on what kind of partnerships you're seeing out there that might make sense, if you could maybe also point on what are the pros and cons as you look at the AT&T in this year there was announcements from there..

Thanks, Rick. Let me start with partnerships. I think the partnerships' in two ways. Our partnerships to grow revenue and partnerships to manage cost and with a number of those the partnerships. The way to think about these just and it's kind of across the business is a lot of these are small statistics and example.

Right, we've substantively moved or have forward on new stores over to our local dealers. Retail organizations signed on a number of new dealer partners and we're coinvesting with them, so we can grow our footprint, share the cost, share the benefit. And on the business side, we signed a number of partnerships to bring these solutions to bear.

And is one example we announced just yesterday around Geotab. Geotab is a fleet management service, by the way it's one of the best fleet solutions in the business. We're excited to program with them, gives us another product to sell to our business customers and obviously growth in revenue, growth in margin.

On the infrastructure side on the cost side, those partnerships take time. We are in a variety of different discussions. I'll just point briefly at the dish and the way that we signed which I think is a pretty good example of a partnership.

Like, we have -- we took our, we've taken our tower business and I talked about this in previous calls since I won't get into too much detail unless it interests. But it really pivoted our tower business to serve the potential co-location customers. One of those is there. We signed in in LA with them.

I can't get into the details on that but we're bullish about how that is going to help us both the driver revenue but more importantly drive better utilization of our assets. And so, I feel good at about the past that we were in, we've been on with those partnerships, I think there's more to come.

We continue to look for good ways to share investment, share revenue growth, share margin expansion. And I think we have a lot of opportunity to do so. When we pivot to the AT&T's dish deal, you asked about that. It's been a lot written about that deal, I think my take on it is twofold.

The first, DISH has announced they're going to build a national network and got relatively aggressive buildout targets if they have to share. And so, it's pretty logical for them to try to find a partner and in order to supplement and build out and to provide them coverage for their subs.

And so, from a DISH perspective, it's entirely logical to do it. From AT&T perspective, obviously I don’t know the details of the deal but from an AT&T shoes I would say okay. It's not me, it's going to be someone else. And so, makes sense for AT&T to do it. I think both sides create opportunity for us, right.

We have coverage where AT&T does not, that provides us an opportunity to work with DISH. And on the flip side, and DISH builds out their network, I think they're going to have to pass either we can take advantage of and bring our cost and bring our capital build out down.

And so, I think it's a logical deal when I think it creates opportunities on both sides for U.S. Cellular..

Makes sense. Also you touched on a couple of times, fixed wireless access. It seems like your try on it now, when do you move when we talk about the technical side and market demand side. When do we think you could move from trialing to actually launching and what sort of addressable market is there out there and why would somebody choose U.S.

Cellular?.

So, we haven’t announced a launch date from a broader for activation perspective but certainly if the trials go as we're seeing them go so far, I expect this to be a product that we have in the market certainly by next year generating some meaningful opportunity for us.

Your question of where is the market opportunity is exactly the thing that we're trialing. Because there is a bull case and a bear case to this. The bear case is substantive fiber expansion.

So, moving from what is currently at best fiber inside of municipalities and that starts to move out coupled with satellite moves from being a truly ultra-rural solution and a promise, which is what it is now, to a meaningful product that delivers meaningful speeds and meaningful capacities to consumers.

In that world, the opportunity for fixed wireless is I still think it's meaningful but it's not a large. There's an alternate path forward which is fiber does not expand probably from municipalities. Satellite remains what it is today, ultra-rural and that creates a lot of opportunity for us.

And what I'll tell you is the initial market trials are indicating that. I can't get any details but the take rates that we've had just on our pilot programs are higher than I expected.

What that tells me is that customers are eager for an alternative to cable and are eager for an alternative to the other solution throughout there from the rural perspective. And so, I think that wireless broadly can provide a really compelling alternative for home connectivity in much as rural areas to call it suburban areas.

And why should they pick U.S. Cellular is an alternative for that? Well, I'd argue that our technical trials and where we're setting world records in terms of the speed that we have. I don’t think there's anyone better than we are in terms of providing connectivity for rural America.

And so, I think we'll be in the driver seat when it comes to offering that solution to our customers once we're finished with the technical trials which have more to do with productization by the way. So, for example, how to think about changing an external antenna on the home getting the signal inside the home, getting it propagated and so on.

Then those are the technology works. Technology works, their trials are proving that out. So, I'm optimistic about it. Timing TBD but current course and speed I certainly think it'll be in the market in a compelling way, at least starting next year..

Great. Thanks guys, so well..

Thank you..

Your next question comes from the line of Simon Flannery from Morgan Stanley. Your line is now open..

Great, thank you very much. LT, you were talking about the roaming and the impact of the Sprint merger. I think that moved to 80% of the traffic on to the T-Mobile network. Is it fair to think that we're kind of crossing here and that you can grow that business as we go forward and perhaps the opportunity with DISH as well.

Any color on where roaming goes from here would be great. And then, on the LA partnerships or and the other wireless investments.

Any color on the outlook for distributions over the next couple of years, does have better communications on what to expect given proceed and auctions and the spending there?.

Yes, thanks Simon. Good morning. So, on the roaming with the Sprint merger, yes you've seen our inbound roaming revenues decline. Large part of that is that we're using with T-Mobile migrating I guess this bring traffic over to their network. Know that Sprint represents right now about 15% of our roaming in our roaming revenue.

So, there's not a lot more there to lose but that will be going away over time. And we do project decline in roaming revenue for the remainder of 2021 and going forward. That said, there are opportunities out there and you mentioned one is Fun Center and DISH and that's something that we'll be exploring for sure.

But that's a trajectory of roaming revenues. Moving on to the LA partnership and distributions. I have a solution in the first half of the U.S but 70% of the what it was last year and that was primarily due to operational reasons within the partnership.

And our expectation for future distributions in the second half, we expected distribution that is close to what we received in 2020. And going forward, we have no visibility beyond that, I mean we expect the current trend to continue. We have no knowledge of any unique arrangement with respect to spectrum or other assets that could change that.

That said, 5.5% partner in that partnership and we don’t control that distribution. So, if Verizon decides to change the path of that distribution, then they will have to live with that. But right now no significant changes that we are aware of..

Okay, thank you. And on the roaming, what are we seeing on the volume side there, if just with COVID and reopening and so forth.

Is that sort of back to normal levels or is there still some benefit of would people to business travel returns or whatever?.

Yes. There's two sides to that. Inbound roaming, our volumes are going down and that's associated with what I just talked about. And some other carriers reducing their volumes such as 3G traffic and other traffic. And outbound side, it's a totally different story. Our usage in the outbound side increased to 100% Q2-over-Q2 and year-over-year.

And by the way, while that occurred, our expense went down 7% it was because we negotiated very favorable rates on those outbound roaming agreement. So, we're managing that aspect of that quite well and yes they're going different directions..

Okay. Alright, thank you..

Your next question comes from the line of Philip Cusick from JPMorgan. Your line is now open. Hi. This is Amir Razban for Phil Cusick. Thank you for your time. Just one for me.

Is USM registered for any upcoming auction?.

So we filed an application for the upcoming DoD auction. That’s the answer..

Thank you..

Your next question comes from the line of Sergey Dluzhevskiy from GAMCO Investors. Your line is now open..

Good morning guys..

Good morning, Sergey..

Thanks for taking the questions. It’s -- so my first question is for LT. So LT, you mentioned in your prepared remarks, business and government segment a little bit. But could you kind of expand on the opportunities that you see in that market? Obviously, increasing penetration there is one of your priorities.

What is the size of the business and government market in your service territories? What is your share now and where would you like to be in a few years? I guess what would you consider a success kind of on a three-year horizon?.

Sure, Sergey. So from a business and government perspective, right, we don’t disclose the segment independently. But get back of the envelope, you can think of our share as being approximately half of our postpaid consumer share. And so there’s a lot of opportunity.

The -- were getting a bit more granular on where that opportunity lies, I would point at a few places. The first is just simple blocking and tackling on the small business customers that walk into our stores. Were making growing small business a priority for our stores, and were starting to see some benefits there.

We’re also seeing that in terms of adding products to the mix for our stores. So for example, the Geotab partnership that provides fleet management services.

Fleet management is the bread and butter of small business sales from going through retail because you have folks that want lawn services, you have folks that have seven trucks, eight trucks, and that difficult to cover with a large enterprise sales force. It is perfect for our stores, and we started to put some of those measures in place.

More broadly, however, were putting a concerted effort behind building distribution in the business and government space. And so I mentioned Kim Kerr joined our team last year. She’s been expanding her channels, expanding her distribution, and were starting to see some benefits there. And so were starting to see some larger IoT deals.

We’re seeing some larger private networking deals. So this is a situation where I think we have a fantastic asset, which is an industry-leading network in the markets in which we operate. And we haven’t put strong business distribution behind that in the past, and we expect to now.

And so it didn’t require like development of a lot of brand new capabilities. We don’t have to spend a ton of capital in order to support this channel. This is about building distribution and getting share similar, at the very least, to where our postpaid consumer share is and that creates meaningful growth.

So hopefully, that addresses what you’re looking?.

Yes. Great. Thank you. Maybe one question on the competitive front. So T-Mobile, obviously, has been highlighting suburban and rural markets as a growth opportunity for them. They’re trying to double their market share over the next four to five years.

What have you guys seen from T-Mobile when you compare it to front in the second quarter in your markets? And how do you plan to mitigate some of the impact that you may see from -- or maybe already are seeing from their network builds, distribution expansion and in general, the marketing question?.

Sergey, so Ill address your T-Mo question. I think there’s two fundamental things that are happening on the competitive front, right? The first is we’ve seen much more aggressive upgrade offers across the industry. AT&T started this up about, by now, almost 12 months ago, and Verizon has been on-and-off in matching them.

I think question one is, how do we think about those upgrade offers? And is that a logical thing for the industry to be doing? And what -- the way I’m thinking about this right now is that in the near term, so for a short period of time, it’s actually relatively logical for the industry to be as aggressive as we’ve been.

If you think about customers that are out of contracts, right, those are up about 15% since -- for the industry, since COVID. Same thing with average holding period of devices, up 15%. And so you’ve got a lot of people that are out of contract they’ve had their devices for much longer.

If I couple that with the fact that 5G availability, the currency of choice right now for people making switching decisions, pretty logical for carriers to be working hard to get 5G devices in the hands of consumers given the better network experience, bring churn down. And so I’m not surprised that were seeing more aggressive offers.

And you’re seeing them from us, too, right? We have taken this regional approach, but in certain regions, some of the most aggressive offers in the marketplace. The benefit that were seeing there is ARPU and ARPU expansion. And I think that been underestimated in the way that people are thinking about the financial impact for the industry.

So just to put a little bit of numbers behind it, we have -- and for our higher-rate price plans, we generally have been about in the mid-20 percentile of the customers that select those higher-rate price plans. That’s up to the mid-40s. And so there’s ARPU expansion, and that ARPU expansion is the gift that keeps on giving.

And that creates attractive, long-term economics once we get through what, I believe, is relatively near term promotional aggressiveness. And then we talked about this in our guidance. We have -- we’ve maintained the guidance even though there’s been a really aggressive promotional environment.

Now the second thing, as you mentioned, is T-Mo, right? And so T-Mo has made a lot of noise about their expansion into rural areas. So we have not seen it. We track market share. Market shares remain generally constant for T-Mobile. We track the components of market share, win share and loss share. I haven’t seen those move either.

Sergey, the way I think about this is what we do is hard, putting in networks monetizing networks, its difficult. Different people have said, "Oh, we can do that, too." I think of Google Fi as a good example. And it’s much harder than people think. And it’s even harder in rural America than it is in urban. And I’m not taking T-Mobile lightly.

They’re a well-run company. They’re a formidable competitor. But so far, what we’re seeing is more marketing than it actually is network deployment and customer action..

Got it. Great. Maybe couple of questions for Vicki.

So on the fiber build front, I guess looking at your most mature markets as well as some of the new builds that you’re doing in Idaho and Washington, what are some of the lessons learned, what are some of the learnings that might be impacting how you guys are approaching future builds and how you’re tweaking some of your plans? I guess what worked for you guys so far and what didn’t work and you adjusted?.

Thank you, Sergey, and good morning. Thank you for the questions. The success that we are seeing in our new fiber markets really continues to meet or exceed our expectations. These are the ones where we have the construction completed and we are watching our results. And this is what’s really increasing our sense of urgency to accelerate our programs.

Right now, let me just share with you some of the successes were seeing with our new out-of-territory markets. For example, nearly half of our broadband connection growth in the quarter was due to our out-of-territory market, reporting twice the number of connections as compared to last year.

And our broadband penetration rates, although vary across our markets due to the different timing in the market launching, they’re averaging about 32% as of the end of the second quarter. And this is still early for many of our completed markets.

I also wanted to note that voice and video connections are also growing across our expansion markets, with video attachment rate at 41%. And contribution margins, as I’m watching the financials on these markets, although early, are north of 50% in the market that has completed construction more than 12 months ago.

So that some of the successes were having. In terms of the construction period, we are having some delays and there are some lessons learned there. The pace of construction and the challenges we encounter are very different across each of our markets.

Sometimes its permitting challenges, sometimes were hitting rocks as were doing largely varied builds, but were getting smarter, and so are the cities that want this. These are huge, significant projects that is really about the future economic prosperity of these communities.

So city leaders that are keeping the end game in focus are working with us more and more to ensure success during the construction period. I think that a real key learning for both us, our contractors and our city leaders as we continue to work forward..

Great. And my last question is about video. So you mentioned that 41% attachment rate. I guess, it’s obviously an important element of your strategy, but some of your peers deemphasized TV offerings and basically direct consumers to streaming and virtual MVPD options, like YouTube TV.

So what are the reasons why your video strategy makes sense for you in your markets? What is different in your markets that maybe some of your peers are not seeing?.

Yes. Well, the video attachment rate of 40%, on average, across our wireline market is our customers telling us how important video is to the overall service offering. For 40% video attachment to every single broadband connection, that a really strong rate.

And our video product is profitable, and it’s a state-of-the-art platform that bundled with broadband really offers a superior experience for our customers.

And as you know, in our markets, we have markets that really have a high percentage of single-family homes and single-family homes buy these entertainment packages and they buy up the stack, higher speeds and higher video programming.

And what’s really important from an economic perspective is that as you look -- as you know, bundling is an important part of our strategy.

And so as I look at the economics, the customer lifetime value of a customer who take not only data, but also take video with data, so they have a bundled product, the value increases significantly as we watch -- as we see lower churn on these products. So very important to our overall strategy..

Great. Makes sense. Thank you..

Speakers, I’m seeing no further questions in the queue. Please continue..

Great. Well, we’d like to thank everybody for joining us today and look forward to our future conversations. Have a great weekend..

This concludes today’s conference call. Thank you for participating. You may now disconnect..