Array Digital Infrastructure, Inc. (AD) Earnings Call Transcript & Summary

Well, thanks, and good afternoon, and welcome back to Citi's Global TMT West Conference. For those of you I haven't had an opportunity to meet, I'm Mike Rollins, and I cover the Communications Services and Infrastructure Sectors for Citi Research. We do have disclosures on the conference and registration site. I'd like to welcome the team from U.S. Cellular and TDS. Joining us today, we have Laurent Therivel or how he likes to be referred to as LT, President and CEO of U.S. Cellular; Vicki Villacrez, CFO of TDS Telecom; and Jane McCahon, SVP of Corporate Relations. Thank you all for joining today.

Thanks for having us, Mike. We appreciate it.

Well, glad we have this virtual environment to connect on TDS and U.S. Cellular. And maybe the first place to start is just on the strategic and operating priorities. And LT, we could start with you on U.S. Cellular and then move over to Vicki in terms of TDS telecom.

Yes. Sure, Mike. Thank you, and thanks to everybody that's decided to dial in and chat with us and appreciate your interest, and thanks for the forum. When I talk about operational and strategic priorities, I'm happy to get into kind of some of the investment side. But I do think it's worthwhile just to take a quick step back. My first operational priority is keeping our customers and our employees safe. And usually, I wouldn't have to talk about that. I mean, usually, that's a bit of a -- it's a bit of a given -- I mean, given certainly the pandemic, and particularly given the events of yesterday, it's a priority for us. And it takes up a lot of time, and it takes up a lot of effort. And it's really unfortunate that that's something that we're having to spend as much time on as we do. And so I mean, we have folks in our stores and folks out in our network that are out in the community, and there's people hurt. And I just -- it's an absolute travesty what happened yesterday, and it's the shame. And it's the shame that we're having to kind of deal with, let's call it, the operational fallout of that. And certainly, a priority for next year is how do we keep our teams safe, how do we keep our customers safe. If I take a step back and think strategically, I imagine most people dialing in are somewhat familiar with our company, but just as a quick reminder. We focus on more of the underserved areas in the U.S. And so we're certainly more than just a rural provider. But our large cities that we cover are the Milwaukees and the Knoxvilles and the Tulsas have evolved. And then we also focus on more rural areas. And so from a strategic perspective, our goal is to provide fantastic connectivity to the communities that we serve, and we plan to continue to do that. And Mike, I imagine, we can maybe get into this in the Q&A, but I think one of the interesting things about -- that we've observed in the pandemic is the importance of connectivity, right? How critical it is? Providing that to our communities, providing that to our customers and doing it with excellence is a key priority for us. And you see how important it is with the digital divide, and let's call it, the homework divide doing that with quality is a key priority for us. And I think it's going to be interesting to see if a priority for the administration is helping us do that job. I expect it will be. And so I expect there probably will be some emphasis more broadly on broadband investment from the new administration. And I expect that to be particularly focused in terms of the digital divide and connecting rural areas and connecting unserved areas, and I think we're well positioned to take advantage of that. From an operational priorities perspective, our top priority for next year is growth. If I could just take a minute. I've been in this chair for 6 months. So I can still get to play the new guy card occasionally. What attracted me to this business was the opportunity for growth. We have, as a business for U.S. Cellular, where we have a fantastic set of assets. And we have a network that is best in class. We won the J.D. Power Award, which is pretty amazing for a company of our size. We have a strong balance sheet. We have a strong spectrum position. We own our own towers or at least the majority of our towers we own ourselves. We have some of the best customer engagement scores in the industry. And so we have a fantastic set of assets that we quite candidly have not been able to translate that into growth in the last couple of years. When you look at what we've done as a company, you have very, very slight customer erosion over time. The team has done a nice job with ARPUs. We've been able to keep revenue stable. They've also done a good job with OpEx discipline. And so we've been able to expand OCF, but you can't cut your way to grow with in the long run. And so what you can expect from us operationally in 2021 is a pivot to growth. And I expect us to be taking share in the market. That's no small task for us, but I fully expect that we can be able to do it. And we can probably get into a little bit more details when we get into the specifics, but you can expect to see that a pivot around the consumer postpaid business. We also under-indexed in B2B. So we -- you can expect to see a little bit more emphasis on the B2B space. We hired Kim Kerr from Sprint, who runs their -- who ran their enterprise and government business, now runs ours, and I expect to grow in B2B. You can expect to see growth in prepaid and you put those things together, and you should see subscriber market share growth. Then over time, we have a long-term priority around expanding return on capital. So you can expect to see healthy return on capital expansion. Some of that is going to be driven by the revenue growth that I talked about. I think we have continued opportunities for OpEx discipline. And then depending on which way the industry goes, and I'm sure we can get into that conversation, I think you have the opportunity for CapEx efficiencies, too. I've talked in previous calls about partnership. And I think that there's partnership opportunities for us to go be smart on infrastructure. Obviously, we're in the quiet period for C-band. So I can't talk specifically about that, but I think everybody on the call can see how expensive that C-band auction is. And so there's going to be opportunities to be smart on the way that we as an industry deploy C-band, deploying a millimeter wave. And I think we have the opportunity to utilize partnerships to be smart in the way we spend our capital. So near-term operational goals with expanding market share and pivoting to growth, longer-term goals around expanding return on capital. And I think we have solid plans in place to keep growing. And with that, let me turn it over to Vicki, and she can talk a little bit about the TDS Telecom side of that.

Yes. Thank you. And Michael, thank you for having me. Happy New Year to you. I echo LT's opening comments, and so I won't repeat them. But 2020 certainly was an unprecedented year. And the pandemic, as I have said in the last couple of quarters, really underscored the importance of high-speed broadband service in the home. And for TDS Telecom, I'd say we really like the trajectory that we are on. So when others were raising uncertainty and pulling their guidance, at TDS Telecom, we really stay committed to our strategic priorities, which have positioned us perfectly to serve those broadband needs in the home and to capture that growth. And so as we look at 2021, our priorities really remain intact and focus us to be the dominant broadband provider. And so to that end, we've been making investments to transform our networks and our products and to expand into new markets. And so our growth strategy is really too primed. One, we're building fiber both within our current footprint and deploying fiber in new markets. And this is a multiyear commitment that we've made. And second, we remain active in the cable acquisition space. As you know, we've made some attractive cable acquisitions in the past several years, and our cable acquisitions have been very successful. And we're very happy with the broadband penetration that we've driven there and the value creation. It's our fiber deployment in the new markets that's expanding our total footprint and driving growth. So for example, we grew our wireline service addresses 5% year-over-year at the end of the third quarter. And so we've committed building fiber across several new markets in Wisconsin, where we have several existing ILEC operations and also on the Pacific Northwest. And these are fast-growing markets. So these continue to be our priority and -- into 2021 and into 2022 as well. In our wireline, over 1/3 now of our service addresses are served by fiber, and we have plans in 2021 to continue to drive fiber deeper into our existing ILEC markets. We're also focused on, as a priority, upgrading our copper infrastructure with both federal and state support, and that's to bring the high-speed broadband to most of our rural areas of our markets. And this continues into 2021 with the fifth year of the A-CAM program. And lastly, from a cost perspective, our strategy is to operate lean. And so we're focused on doing everything we can to improve our margins in our core businesses. And as at the same time as we're investing to expand in new markets and geographies.

From both, I think there is a lot to talk about. Maybe I'll give us just a moment to take a pause and introduce our first survey question to our audience today, which is what is the biggest competitive threat to U.S. Cellular? And we gave 3 choices to our audience: T-Mobile, expanding at 600 megahertz footprint into U.S. Cellular's markets; cable MVNOs or updated pricing from AT&T and Verizon. So we'll go to the polls on that. And by the way, for our audience, those responses that you provide are anonymous. We are not tracking individual responses. We're just tallying percentages. But we'll get to that in a few minutes. Before we get there, Vicki, just to finish the conversation on what you're talking about with 5 to 1/3 of the footprint currently going deeper in '21. If you go out 5 years, what would you estimate your fiber coverage, fiber-to-the-prem coverage would be of your LEC footprints?

We really see fiber expansions, Michael, as a significant growth opportunity for us. This year, we're going to deliver 75,000 fiber, I should say, in 2020, we're going to -- we've ended the year delivering 75,000 fiber service addresses. And in 2021, this year, we expect to more than double that. So we are really focused on driving up our metric of the fiber service addresses as a percent of our total footprint, which is now in the mid- to upper 30%. And so as we go out past 5 years, I would really like to see us surpass 50%, maybe we can go higher. It's -- the beauty of this strategy is that we can pace it. We can go as fast as we want to, and we can slow it down if we need to. And I think the opportunity as big as we want it to be, the U.S. has a long way to go before it's fibered up, which translates into a lot of opportunity for us. And so we're bullish. We like that we can pick our markets. We like that we can control the pace at which we expand.

And moving over to the wireless business for a few minutes. LT, does the change in wireless industry structure impact the way in which U.S. Cellular wants to go-to-market and compete?

I mean by changing industry structure, I'm going to assume you mean Sprint and T-Mobile. Obviously, there are some other changes as well, let me touch on that. I mean I expect that over time, T-Mo will expand their 600 megahertz footprint, right? Right now, I mean, look, we compete with T-Mobile. I expect that over time, they'll expand that network. I feel comfortable about our ability to compete. I think that the competitive dynamic that we're going to have to deal with is not dramatically different from the competitive dynamic that we've been dealing with this year. I do pay a lot of attention, and hopefully, I'm not going to skew the survey that's out there, but I pay a lot of attention to the cable MVNOs. I think that the cable players have had pretty significant -- they pretty significant inroads from a share perspective, we pay a lot of attention to that. I think one of the interesting things will be is can they get over, what I would consider to be a fundamental issue with an MVNO model, which is at some point, you hit a certain scale, we're not owning the assets maps and there's been a lot of players that have tried to enter this space using that kind of model. I think a lot of times, you see relatively near-term success. And in the long run, owning spectrum, owning network tends to matter. So I pay a lot of attention to that, but I also wonder if at some point that, that ceiling is going to be reached. I think DISH and the moves that DISH have made is another interesting industry dynamic that we pay a lot of attention to. I think DISH has gone back and forth a little bit on how much are they going to focus on retail versus how much are they going to focus on wholesale? I think the interesting opportunity for us with those industry dynamics, and I'm not talking now specifically about DISH, I'm talking broadly, is the opportunity for partnerships that we create. Traditionally, we, as a company, have not spent a ton of time, energy and effort on infrastructure partnerships. The U.S. has not done that. You look in Europe, it's all over the place. Well, prior to taking this job with CEO of AT&T Mexico, we signed the largest network sharing deal that's been done in Latin America. And the reason that we did that is because it's going to become increasingly expensive from a capital perspective to invest in this area. And I know we can't talk specifics about C-band, but you can just see that in the overall dollars that have been generated by the C-band auction. And I think that we can be a lot smarter as an industry about the way that we deploy that infrastructure. And I think that is an opportunity that we're looking at now, you could call it maybe part of the competitive environment, that's maybe a little bit different than the past. But hopefully, that gives you a little bit of flavor on how I'm thinking about the moving pieces.

It does. And it kind of walks right into our second survey question. So before we get to that, let's reveal the results of the first question that we asked in terms of what the biggest competitive threat is and see how our audience thinks about it relative to what you just described. It's real time feedback. 83% is T-Mobile with the 600 megahertz footprint, 17% AT&T and Verizon and 0% for cable. So maybe that's an opportunity just to talk about the competitive landscape, and we'll come back to the strategic side of this in a moment. But maybe talk a little bit more about the current competitive environment. So far at the conference, we've heard the carriers talk about a lower switching pool as well. So I'm not sure if you could kind of depict the current environment, especially since 5G iPhones arrived in stores?

Sure. So let me talk a little bit about maybe the holiday because I mean that's the holiday promotional environment to get very tactical and then kind of how I see that bleeding out in the next year. It was interesting. I think our level of promotional aggressiveness in the holiday, obviously, any time you're putting a free phone out there, it's going -- you're going to look at that and say, "wow, they're being pretty aggressive. I think that being said, our level of aggressiveness is not necessarily different than what we've done in prior holiday periods. I think it's similar for most of the industry with the notable exception of AT&T's upgrade, right? So I think that was something that was quite different about this past holiday selling season. Without getting into too much detail, I think I feel very good about how we were positioned competitively throughout the holiday. We had a message out there around no requirements that resonated well in the marketplace, both our current customers and interested customers, it seemed to resonate well with them. And I'm very comfortable with how we were positioned in the holidays and the level of promotional aggressiveness that the industry showed. Now there's an interesting question there around the switching pool and a lot of the individual investor conversations, people have been interested in. What does this say about a device super cycle or the lack thereof? And I think that there's some interesting dynamics in play there that are worth on pack. There's a -- there's this first question of, well, will it still be a super cycle for Apple even though we've seen depressed retail sales? For us, retail traffic was down about 28% over the holiday selling season. I think if I looked at the numbers for retail as a whole retail traffic, and I don't mean telecom retail. I mean as a whole, it was down in the mid- to high 30s. So we performed a little bit better, but still a challenge from a retail environment. You make up for some of that, obviously, with digital. You make up for some of that in lower turn. I fully expect that Apple -- well, let me take a step back, Apple puts a fantastic product out there. They have a loyal legion of fans. And I fully expect that the demand for that phone will be similar to demand for previous ones, it will simply be stretched over a slightly longer period of time and a lot of that is due to the pandemic and the retail traffic that, that generates. But I mean, I think there's an interesting caveat to that that's probably worth talking about a little bit and that is when you take a look at the announcement that Apple put forward. The primary innovation that was part of this new iPhone is 5G. They talk a lot about 5G. We talk a lot about 5G. And right now, there isn't that killer use case out there that customers look at and they say, "my god, I have to have 5G so that I can do X. That's very different from what it was with LTE. So when you think about LTE and the device cycles that were enabled with LTE, what you saw is there was a very specific use case, and that was a mobile video. We were architecting our networks to support mobile video. When customers came into our stores, we were showing them the fantastic mobile video experience that you could have. And so customers would say, "wow, that's really different, and I've got to have that. It's not the case right now. I feel extremely confident that the 5G use cases will emerge. We're investing behind it. We're being smart with that investment. We can probably talk about that later on if you want. But there isn't that mobile video use case that you look at and you say, "Boy, I got to have that and I got to have it now. And so I do think that, that probably is driving a little bit of that stretched demand as well and that's a dynamic. Now how much of that -- how much of the slowness is retail stretch because of the pandemic, and that will come around in the next quarter or 2 versus how much of that is -- look, I know 5G is interesting, and I know it's going to provide a very differentiated experience, but I kind of want to wait and see how it affects me before I go spend my limited pocketbook to go do it, I now must chose the consumer. I think it remains to be seen. And I think it's worth paying attention to.

Very interesting. Let's introduce our next survey question. And then we'll continue a little more on the wireless side. So what has the greatest potential to drive value for TDS and U.S. Cellular shareholders: improvement in wireless operations, asset monetization, TDS fiber investments to offset legacy declines, partner with at least one national carrier to improve marketing opportunities and scale for U.S. Cellular or potential sale of 1 or both firms. So we'll see what our audience thinks about that question. So LT, you talked about investing to grow while we are talking about the focus on growth, but I should ask, does that mean investing in growth? And what does that mean in terms of the opportunities for U.S. Cellular, not just to grow the top line, but to improve margins?

Yes. So if I look at the opportunities for growth, there's a couple of things that I'd point out. And the interesting thing is that we can execute on all of these without having to go deviate from our traditional capital spend. Let me talk a little bit about consumer postpaid. We have an interesting dynamic where we have a very different picture across our markets. In Wisconsin and Iowa, we have a very high share of consumer postpaid. In some regions, our share is in the 30s, even in the low 40s. For the rest of our regions, think Pacific Northwest, Northeast, Carolinas, Missouri, Oklahoma, we have very low share. We're in teens. And so we have an interesting opportunity that provides us, which is that we can afford to take different actions in different regions that our competitors might have a harder time dealing, simply because of the nature of their contiguous footprint and because they have -- in most of their markets, they have an established base that they have to protect. I certainly have that in Iowa and Wisconsin, I don't have that in the lower share markets. And so I think we have the opportunity to go get aggressive in some of these lower share markets without the commensurate sacrifice of ARPU that you would have with your established base. So I think that gives us one area for growth. I mentioned B2B. Our market share is between 5% and 7%, depending on how you measure it. I don't know what it should be. It's more than that. And so I think we have a significant opportunity in B2B, and that doesn't necessarily have to mean consultative solutions in areas where you have to invest way ahead of time. A lot of this is simply being -- is simply executing on distribution and putting the right sales force in place to go take what is already a great network and have businesses come to approximately the same share as we have with consumers. We don't have to over index on business, prepaid to start. And so we under index in prepaid. And I love the prepaid business. Coming from Mexico was a 80% prepaid business, and it's -- if you can crack the code on analytics and using data to address your customer base, you have significant opportunities to go improve life cycle management that then enables you to go get more aggressive on acquisition. And so we have opportunities to grow in each of those areas. As a fourth area I haven't talked about yet, and it could be a significant area of growth for us, but it remains to be seen and that's millimeter wave enabled high-speed Internet to the home. I think there's an interesting open question, and that is we currently have a millimeter wave -- not millimeter wave, we have a high-speed Internet to the home product out there in the marketplace, it's doing quite well. But it's in really rural areas. And it's LTE enabled, and we're competing with satellite. And when you're competing with satellite in really rural areas, you can provide a fairly competitive product, and you can do quite well, but the overall customer base that you can go address is quite small. I think there's an interesting question of as you deploy millimeter wave and as you get into the fringes of cable's footprint and then more deep into the fringes, when you start getting to where they've upgraded their plant, how does millimeter wave enable high-speed Internet compete in situations like that? I'm cautiously optimistic, and I'm cautiously optimistic for 2 reasons. One, the technology works. We just recently ran a trial with Qualcomm and with Ericsson, where we're doing 100 megabits per second at 5 kilometers. And that's some pretty fantastic performance, and it's a pretty fantastic product you can offer to customers with a millimeter wave-enabled product. The second, we have really good customer engagement. And I can't say the same thing always with my competitors in cables. And so what we're going to be testing is just how much do customers -- how much elasticity of demand is there for that product? I think the good news is that we can have our capital investment in millimeter wave match the demand. And so this isn't one of those situations where you have to spend a ton of capital upfront and then cross your fingers and hope that the demand materializes, that's a fourth area of growth. I mean I put those things together, I think we have some meaningful growth opportunities on top of our existing capital base. I think we can maintain capital spend at a relatively stable level depending on what happens with infrastructure partnerships, you might even have the opportunity to be more efficient. I think we have continued opportunities for OpEx efficiencies. And so I really see some meaningful OCF expansion. And over time, that translates into meaningful rock growth as well. So hopefully, that gives you -- I hope that's a helpful idea of how I'm thinking about it.

It is. And as you described the opportunities, you're describing the opportunities as a communications provider to the markets that you serve and you mentioned you have this great customer engagement. So could there be a fifth option on top of the first 4, which is to reach out to Vicki and TDS Telecom crew that you have and ask them to help you build fiber-to-the-home to some of the markets that you serve, where there might be the edge-out opportunity in some of the communities that are either underserved or the returns could be quite good and also bring a fiber strategy into the U.S. Cellular business, which is ultimately just providing communications to people, homes and businesses?

I mean I certainly think there's a blended approach that we can go take. I think, Vicki, when she talks about the growth opportunities for her business, I think they have a ton of runway on the fiber side. And so I think no question, there's a robust demand for having fiber. I think in the areas where we do have footprint overlap, there's an opportunity to supplement, right, a fiber expansion that TDS Telecom is doing and supplement it, let's call it, on the edges with new lift. That's -- there's not a ton of footprint overlap today. It doesn't mean there can't be tomorrow. So I mean, I think that the opportunity is there. I also think for what it's worth that we both have plenty to keep us busy from an expansion perspective and from a rock expansion perspective as is. But no question. I mean I definitely think that there's that blended opportunity for bringing a holistic broadband offer to the marketplace, some of which you support with fiber, some of which you support with millimeter wave. Just a question is where do you have overlap and what's the best way to expand here?

And Vicki, when you look at the opportunity for edge-out that you were describing earlier, is there a variable in the equation for markets that you identify that, "Hey, U.S. Cellular actually serves this market we know who the customers could be, and that creates a better business case for the edge out?

Well, absolutely. I mean as we look at our strategy and as we look at our opportunities across the U.S., we're looking for markets that meet our criteria. And some of the U.S. Cellular markets are -- fit that, and that certainly would be advantageous. But the U.S. has a long way to go before it's fibered up. And the opportunities are out there, and we're looking at them from a clustering standpoint, we're looking at them from a growth standpoint, we're looking at markets that have high growth in single family homes, homes that are wanting -- families that are wanting to buy superior broadband services and video and voice bundles. I mean that continues to remain very important to our strategy. And as I look at the investments we've been making, both in cable and both in fiber, we are creating value. And our performance has been -- I just can't say how pleased I am with our performance. The top -- in the third quarter, we grew both top line and bottom line. And that top line growth is really coming from these investments that we're making. Let me just talk for a minute about the success that we're seeing in our fiber markets, our new markets. We're expanding fiber into new geographies. So we're expanding our footprint. And last year, by the third quarter, we had grown our footprint by 5% in the wireline markets. We're seeing take rates that are ranging from 30% to 50% broadband penetration, and these are meeting our thresholds for our build. So it's encouraging us to do more. Our bundling rates, we're seeing 40% to 50% video attachment rates and even 25% voice attachment rates. So that is really driving attractive IRRs. We do analysis by market. And I also look at the returns on a cluster basis. Clustering is a key part of our strategy, market selection is a key part of our strategy. And so where we can cluster and we can makes sense of sharing resources, and that could be across U.S. Cellular as well, transport, warehouses, real estate, door-to-door sales teams, field service technicians, those are our opportunities.

Thanks. Let's see what our audience thinks about driving value for shareholders. So 50% sale of one or both firms, 25% asset monetization, 25% fiber. I want to talk about -- well actually, let me ask LT, first any reaction to the slide? And then I have a follow-up on one of these items.

No, I'm not surprised. I mean I think that this is consistent with questions that we've received from the investment community in the past. I mean I suppose the one thing I would point out is this question about improvement in wireless operations. When you do a -- if you do a sum of the parts analysis of U.S. Cellular and of TDS, I mean you don't have to be a brilliant quant analyst to see that the overall operations of the wireless business are significantly undervalued. And so then you asked the question, well, why is that? Is it because we have not been sellers in the past? Is it because of statements we've made about not selling the tower portfolio? Or is it because we still have to show that we can drive growth on these assets? My bet is it's probably some combination of all 3. I do, however, feel pretty confident that if once we demonstrate that we can drive growth on those wireless assets that there's a considerable amount of value in that portfolio that gets unlocked. Even if you look at it and you say, well, they're not going to sell -- they're not willing to sell X, they're not willing to sell Y. So that very probably is going to be your follow-on question.

A part of it. Sure. So -- because I'm curious -- well, there's a couple of ways to take this. We could start here in term possible asset monetization. And so how do you look at the potential and opportunity to monetize towers, for example, given where some portfolios have recently traded and the use of that strategy by all of the national carriers? And are there other things that are just underappreciated under the hood that you think is important to highlight?

Yes. So let's talk about the towers a little bit. I mean I think you make a good point about -- if you're going to take a strategy that is different from all of your other competitors, you better be confident it's the right one. And we've done a great deal of work here, and I am. I think that owning the preponderance of our tower portfolio does a couple of things for us. The first is, is it gives us a level of operational flexibility that's meaningful. When you think about 5G and 5G deployments, there's going to be a lot of touching of towers that's going to occur. And if I have to mother may I, every time that I want to go improve my -- go improve my network, that's going to get very, very expensive from an OpEx perspective. There's a reason why those towers are valued the way that they are, right? And it's because of the belief on what's going to have to occur in terms of touching the network and improving the network. The other thing though that you have to believe is that we can operate those towers in a more effective way and treat them as a piece of real estate and not just treat it as an enabler to our operating business. And we're going to do that. I hired Austin Summerford from AT&T, he's one of the sharpest business executives I've ever worked with. And he doesn't have a huge portfolio inside of U.S. Cellular, a big piece of it is towers. And the reason is because I think we need to focus on how do we continue to drive incremental monetization, incremental cash flows from those towers. When you look at it, you don't need a whole lot more colocators on our towers in order to drive really attractive cash flows. These are cash flows, and this is another reason why the tower portfolios and the tower companies are being valued the way that they are. You apply a very different kind of discount rate to tower cash flows than you do to other cash flows because once you get a tenant, it's really hard to leave. And so I think we have a real opportunity to go drive differential levels of operational execution on those towers, and I think that will also drive meaningful cash flow improvement. Now we've received a lot of questions from various investors around thinking about securitizing this tower portfolio. So not a sale. Okay, LT, we heard you. You've been loud and clear about a sale. How do you think about other ways to securitize those towers? And it's something we look at a lot. So we pay a lot of attention to that asset. How do we think about using that asset intelligently? Right now, we operate in a world a fairly cheap debt. And in a world of a fairly cheap debt, I'd rather go raise debt, but I necessarily would do a complex securitization or spin or something else for the tower portfolio. But it doesn't mean that we don't continue to evaluate it. It's not off the table. We pay a lot of attention to it. We think through it on a quarterly basis. I think it adds a lot of value to our business operationally. I think it adds a lot of value to the firm just as a standalone asset. And so we like our position in towers and we're going to keep it.

Just a couple of follow-ups. One, for the wireless investments that you have, the key one in Los Angeles, about 7, 8 years ago, after the AWS 3 auction happened, there is a suspension of that dividend. Are you able to share with our audience today, is it clear the relationship that, that partnership has with Verizon in terms of how spectrum is treated? And I respect if you're -- given the situation that you're not able to answer that question today.

I can't provide a lot of detail, but I can be very transparent in the sense that we don't make the decisions on that, Verizon does. And so from a -- you can look in the past and get kind of a gauge about how dividends will be treated in different kinds of investment scenarios and so on, but I can't provide any transparency because we're not the decision to...

And then secondly, just in terms of the margin opportunity. So if you kind of roll a year to 2 years from now and you think about improving that trajectory of top line that you're talking about, what is the margin opportunity for U.S. Cellular to improve that over time?

Yes. So I don't want to put a specific number out there, Mike. We haven't done that, and we'll kind of continue to be -- I want to -- I don't want to put a specific target out, but I do think there's 2 opportunities for margin expansion, right? The first is, obviously, on the revenue side. I think we talked about that. There is still room for meaningful OpEx improvement inside of the business, where we've had an ongoing cost program. It's generated over $200 million worth of cost savings for us. And I don't see an end to that, right? So I continue to see meaningful OpEx improvements for the business, and that can contribute to margin expansion as well. So I think that rock doubling that I talked about over time, if you think about return on capital, if I fast forward 4 to 5 years, I want to see a doubling of return on capital. A meaningful part of that is on the revenue side. Obviously, some of it's on capital efficiency, but some of it's also on OpEx. I mean I do think we have a continued opportunity to get more efficient, and we'll keep pushing on that side of the equation too.

Very helpful. In our last few minutes, LT and Vicki, if I could ask each of you, what do you think is underappreciated by investors for the respective businesses for TDS Telecom and for U.S. Cellular? And is there anything else that you want our audience to be mindful of as they look out over the next 12 months? Vicki, we can start with you and then come back to LT.

Yes, absolutely. I mean at TDS Telecom, we're generating over $300 million of EBITDA a year. And we are -- we've successfully turned around the declining trajectory of the business, the secular declines. We've been continuously investing for new growth in our business to drive that top line and bottom line growth, and we just aren't getting credit for that. And we're going to -- we can see our way to attractive returns, and we've got great plans. I mean my plans don't stop at 5 years. My plans are 10 years. And we've got very specific plans on how to get there. We can see the great returns being driven by our fiber deployments, our investments in our cable acquisitions. And we are going to continue to stay focused and hold to these long-term plans of growth for both top line and bottom line.

So Mike, I'll take it at a tiny bit of a different direction. I mean I think I've also -- I've beaten the revenue growth opportunity pretty hard. And so I mean, I certainly think that is undervalued, but I'll point at 2 things. In our industry, people switch for 2 reasons. It's really simple. People switch for price and people switch for network. And there is a complete lack of understanding and appreciation of how quality the network experiences that we provide. And that's on us. I mean there is a marketing and brand role that we have to play there in educating customers. But I would much rather be in a position where I'm winning J.D. Power Awards and I have to go educate the customer about it then where I have a subpar network, and I have to go invest crazy amounts of capital to recruit it. We have a fantastic network. And I don't think it's understood or appreciated. And I think that if we can do a good job from a marketing perspective, we can transition people and we can cause people to switch without necessarily having to get overly aggressive on the promotional side. The other thing I'll point out is a digital opportunity. If you look at the move to digital, the move to digital has been slow in our industry. People still view this as a complex sale and a complex transaction. We have a long-term opportunity around digital, full disclosure, we're doing -- I mean, we've seen meaningful improvements in digital and digital sales. We still have a long way to go on our digital experience. But if we can create a truly meaningful digital experience, and that can drive ARPU expansion and that can drive customer engagement, there's a lot of OpEx savings, there's a lot of churn reduction and there's a lot of ARPU expansion that we can drive without having to pull on kind of some of the more expensive levers that we've had in the past. So in addition to the revenue growth opportunity, I'd point at the current state of network quality and the digital opportunity as 2 meaningful drivers of future returns.

Thank you both for participating. Thank you, LT. Thank you, Vicki. Thank you, Jane. It's great to see all of you, and thanks for our audience today.

Thanks for having us, Mike. Really appreciate it.

Thank you, Mike. Appreciate it.