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

Okay. I think we're live from all over the country. I want to welcome everybody. Good afternoon, it's now officially afternoon on all 3 time zones. I'm Ric Previs, Head of Telecom Services Research here at Raymond James. Thank you for joining us. First, I hope everybody and their family are doing well in these difficult times. So glad you could join us virtually. This is the 42nd Annual Raymond James Institutional Conference. My 25th institutional conference at Raymond James, and I think it is my 100th earnings season. So certainly been through quite a few of these. We're really glad we could continue it in the reversal of this year. We're really disappointed that we're not all down in sunny Florida and Orlando. One, because it's sunny Florida, but two because we're in person. So we're really hopeful that next year in 2022, we'll be back to doing this in person. For the investors that are joining in, we do have the ability for you to ask questions. You see the chat button or the raise hand or question mark, you can shoot your questions in that way. You can also e-mail them to me, which we'll set up in advance so people can keep communicative as we go through this. We're very excited to have TDS -- TDS Telecom and U.S. Cellular with us today. And we're going to toss it off to Jane McCahon to tell us who else here, and then we'll get into it.

Thank you so much, Ric. And I must say I was reminiscing a little bit because this conference last year was the last one that we did in person. And we were all called home after that. So I look forward to next year and being with you guys in person. And I am thrilled today, we've got a great group of representatives of the company here. We've got Pete Sereda, who's the Chief Financial Officer of TDS. We've got LT Therivel, the CEO of U.S. Cellular. We've got Doug Chambers, the CFO of U.S. Cellular; and we've got Vicki Villacrez, the CFO of TDS Telecom. So with that, Ric, we'd be glad to answer your questions.

Great. Thanks, Jane. Thanks, everyone, for joining us virtually today in this little boxes, Hollywood Squares up. I'll start with U.S. Cellular, then we'll take it over to TDS Telecom as well. And again, if you have questions, throw it into the chat. So LT, it's -- I think we're right at about 8 months on the job. As you think about that, reflect on what you've learned in those 8 months, but then also, it seems to me in looking at the compensation package, I didn't get all the details. But the compensation package that revenue growth and return on capital are too important triggers for you. First, let's focus on what have you've learned and how are you working those levers?

Sure. So Ric, thanks again for having us. And I'll just echo quickly my thoughts to everybody's dialing in. Thanks for joining, and I hope everyone is staying safe and healthy. Ric, when I evaluated the opportunity to join, when I looked at the company, what I saw was a company that had just a fantastic set of assets, right? So we have fantastic spectrum position. Just as a quick reminder to all the investors, we can't talk about C-band when it comes to that spectrum position. But even setting C-band aside, I felt good about our spectrum position. We have an award-winning network. We recently won the J.D. Power award. We have 5,000 subscribers -- excuse me, 5 million subscribers. We own 60-some-odd percent of our own towers, strong balance sheet. And so we had just a really strong set of assets and we simply hadn't been able to turn them into growth. So when I look at what the last couple of years had looked like, right, you just see sort of very, very slight sub erosion. Team has done a nice job with ARPU, it keeps revenue stable, done a good job with OpEx. So you see some OCF expansion, but we needed to turn it into growth. And that was really the challenge that was put in front of me. And what I'll tell you, Ric, is I'm more convinced now than I was when I joined that we can turn those assets into growth. There's a couple of different levers that we have to pull. I mean, I think the first is we have under-indexed areas of our business. I would point at the B2B space. We have about 7% market share in B2B across our territories. You contrast that with on average 17%, 18% market share broadly across our territories. So literally just getting our B2B share up to where the rest of our market share is would be very helpful. Very similar dynamic in prepaid. So we under-indexed in prepaid. And I think we have a real opportunity to take advantage of that. My prior job was as CEO of AT&T Mexico, and that's an 82% prepaid market. And so I have a real passion for the prepaid space. A third area that I'd point out is, I think we have opportunities in our low share regions to go be a bit more aggressive or just for the broader investors, Ric, I know you're familiar with it. But we have certain geographies in the U.S., in which we have quite high share, Wisconsin and Iowa. We have share in the 20s, 30s. In some areas, we even have a low 40% market share. In other regions, Carolinas, the Northeast, the Pacific Northwest, our share is in the low teens. And so I think we have opportunity to go be a bit more aggressive on a targeted basis. Some of the investments that we're making in digital should give us the ability to take advantage of that. And so I see opportunities for growth in postpaid with our regionalization plan, see opportunities in prepaid, see opportunities in B2B. And finally, I think we have opportunities to monetize our tower portfolio more effectively, right? Traditionally, we've used that tower portfolio almost exclusively to support the needs of our network. And I think we have opportunities to treat that a little bit more independently. And I don't mean independently from an independent business unit perspective or necessarily independent reporting perspective. But I mean independently in terms of actively using those assets and trying to get co-locators, trying to grow revenue with those assets. When I put those things together, and I think we have a really attractive revenue opportunity in front of us. You mentioned return on capital, right? My compensation is tied to return on capital and on market share. And I talked about the things that I think can help us grow market share. And I think that we're able to grow that share and grow the top line while keeping our OpEx stable. I still think -- I still see opportunities for OpEx efficiency. So I think we have opportunities to get a bit more efficient from an OpEx perspective. But then I also think from a CapEx perspective, we have opportunities to get more efficient from a CapEx perspective. We finalized our VoLTE build out last year that's enabling us to bring CapEx down considerably this year. If you put all those things together, I think we have opportunity for market share in the near-term. And I -- my goal is to double rock in the long term. So I think we have real opportunities to go drive that growth.

Great. And when you think about aggressive regionally, how much of it also is a perception problem versus reality as far as network versus pricing?

I mean, I think it's a substantive perception problem, right? We have an award-winning network, right? We recently won the J.D. Power award, and we don't get credit for that in the marketplace, right? We're currently priced a little bit below AT&T and Verizon on average. We provide a fantastic customer experience, both from a network perspective and also our customer NPS scores are among the highest in the industry. And so I think we -- I joke that when I joined the company, people said that we were the best kept secret in wireless. And that sounds great unless you're in the marketing team, and then you don't want to be the best kept secret wireless. And I think we have the opportunity to tell our story a bit more loudly. And you'll see that from us, right? You can expect to see us be a little bit more loud in the marketplace. I think we can provide a fantastic experience for customers. We can do that without getting what I would call dramatically promotionally aggressive. We can be aggressive on a targeted basis. But I think it's a perception issue. And I would much rather be in the position of having a great set of assets, having a great product and needing to learn how to shout louder about it than to be shouting loudly about a mediocre product. And so I'm proud of what we have in the marketplace, and I think we have a real opportunity to tell people more about.

What's the success factor and success criteria to take the B2B up? And what's the opportunity in government as well?

So the success factor for B2B in the near-term is just distribution. We have not invested in distribution in that space. We do not have a targeted sales force of any kind of scale. We've not traditionally used indirect distribution. So your master agent, your VARs were changing that, right? So we hired Kim Kerr from Sprint, she used to run the enterprise and government space for them, and she's been very aggressive in expanding distribution. A lot of this is just blocking and tackling. This is not -- I think if you're trying to get to 30% share, 40% market share, yes, you need to think differently about the product that you're putting out there. When you have 7% share and you're trying to get to 15% share, it's about execution. And I think the distribution execution will be the key area of opportunity for us in the next year or 2. And I think it's eminently doable. On the government space, right, we -- you have to be on certain government contracts. We are getting on these contracts. I actually think in the near-term, that government space is going to have considerable growth, and I think it's because there's going to be an infusion of investment on the -- from the government perspective period. So I expect, for example, E-rate to get significantly expanded. Lifeline is a little bit different. It's a government program, obviously, targeted at consumers, but I expect to see significant investment in E-rate and Lifeline. You have to be able to take advantage of those dollars, and we're positioning to do so.

Help us understand size of that market, how big is that addressable market? You only have high single-digit in as far as B2B. How big of an impact can it be up to the top line of subscribers?

Yes. So if I add the prepaid space to it -- just to make the numbers easy, right? If I add prepaid, if I add business, and if I add government together, that currently makes up about 25% of our revenue. And so if you're able to drive some meaningful share improvement across 25% of your revenue, you can have a lot of numbers from the top line, and you can do that, and this is the nice part, right? We have the network in place, doesn't require incremental network investment. We have the stores in place. We have the care in place. And so it doesn't require adding a whole lot of OpEx in order to go take advantage of those revenue streams. You have to add a little bit of targeted distribution. You have to get on some government contracts. For prepaid, you have to improve your life cycle management capability, right? So once you get prepaid customers, you can't drop them out the bottom end as soon as you get them, right? You have to do a good job investing in a digital capability to keep them and to grow that ARPU over time. Those are all very manageable investments when you look at the price to be had in terms of total percentage of revenue. So I think it's subs to interpret.

And when we think about competition, it seems like it is your top competitors, my understanding, AT&T second, not a surprise there. T-Mobile, just at third in there, but you might actually be above them. What happens with the T-Mobile and Sprint coming together, them bring more low-band spectrum to work. How are you envisioning the market share playing out in the competitive dynamics with the T-Mobile?

So T-Mobile is present in our markets. I expect them to expand their presence over time. You mentioned their spectrum holdings. I mean they have the opportunity to grow into that spectrum and deploy it. When I look at the areas that we are strong, that is not the area that is the top priority for T-Mobile and Sprint to deploy in the near-term. And so I think we have a healthy amount of runway to go execute the plan. I certainly do not dismiss T-Mobile as a competitor. They're a great competitor. But where we compete against them, we win. I mean, we have been winning. So in the third quarter and the fourth quarter, we saw a really attractive market share and win share improvements. We have a message in the marketplace right now around middle requirements, and it's resonating with customers. And so where we match up with them, I think we're doing well. I do expect them to expand over time, but it's not the top priority. And so I also think we have a fair amount of runway.

Great. 5G, you're not going to talk spectrum, but 5G is as we think about investors, they're looking at the money that's been spent in the C-band by everybody in that auction. And look at the CapEx that has to come behind it. They're all trying to figure out where is the return on capital. That's where your compensation criteria is. What do you see as the top business models that are going to drive revenues and returns from deploying 5G?

So I think about it, Ric, in terms of near-term, midterm and long-term, right? So if I start with the near-term, in the near-term, you're going to see 2 business models to monetize 5G. The first is on the cost side of the equation. 5G enables us to move 0s and 1s from point A to point B a lot cheaper than 4G dose. And so it actually creates significant efficiencies as you deploy 5G on your network. Helps create a far more efficient cost base. That in place, you can expect to see it monetize in the short-term is in high-speed Internet to the home. And so I think we have pockets of opportunity across our footprint, where cable has not expanded their plant, right? Or if they have expanded their plant, they haven't fully modernized it. There's also a fair amount of dissatisfaction with them as a provider. And so I think we have the opportunity to go bring high-speed Internet to the home in a compelling way in certain areas of the geography. If I fast forward long-term, right, you're 7 years, you're 8 years out, the truly game-changing technologies that companies are talking about, autonomous car, AR, VR, that will not be enabled without macro ubiquitously available 5G. And so exactly how will that be monetized, I think that still needs to play itself out. When I look at those technologies and I look at the investment that we're making, and a lot of that investment is there to support those technologies in the future, right? Our industry has traditionally been one of, if you build it, they will come, and we built it and they have come every time. I think in the midterm, you're going to see a lot more B2B kinds of applications. And these will come across the spectrum, the connected factory, connected health care, et cetera. One space that I'm particularly interested in is the drone space, right? If you think about drones and you think about all the applications that drones can enable. If you're going to get information live from a drone, and it goes beyond any kind of very, very near line of sight, you need 5G capabilities in order to get that back and in order to make that application work. And that's an example that can't be supported by Wi-Fi, and that can't be supported by fiber. You truly need 5G to make it work. And so I think that there's going to be some monetization opportunities in places like drones that will make those substantive investments worth.

Great. I think I already trademark, you can drop a call, but you can't drop a drone. So your network better be good.

I like that. And you're right.

When we think about fixed wireless access, help us understand the study that you have to do? What's the addressable market? What are customers wanting? I know there's a lot of price elasticity that fits into it, too. You have price, you have speed and you have experience problem.

Yes. So I think it's -- the important thing to articulate here is that the high-speed internet case that we're looking at is very different from how we've monetized network like that in the past, right? So we currently sell high-speed internet access over our LTE network. It's a very nice little business for us, but it's quite profitable, but it's quite small. And the reason that it's profitable but small is because it's not purpose built. And what I mean by that is that we build our networks to support the needs of our mobile users. We architect networks for mobility. And then in certain geographies when our engineers climb towers and they go and they modernize their network, they don't monetize a rural site halfway, they go ahead and modernize it. Well, in many cases, then you're sitting on excess capacity and it's excess capacity that will exist for the foreseeable future. If that's the case, you can take that excess capacity and you can plunk it at homes that are in the area, and you can dedicate certain portions of that excess capacity and not worry about affecting your mobile experience. That's how the industry is treated high-speed Internet in the past. What we're looking at now and what our competitors are looking at now from a high-speed Internet perspective and deploying millimeter wave is a very different kind of built. It's actually going to be purpose building and purpose deploying network for the needs of a high-speed Internet access for a home, right, that's going to be leveraging millimeter-wave-enbaled 5G. It's such a very different kind of build. And so the trials, we have 3 trials in the marketplace right now. And they're really looking at 2 different vectors. So the first vector is purely what is the dollars per gig that we can provide that are going to be compelling to households. The second piece that I think is important to me to understand is what's the elasticity of demand among cable company, among cable customers and how eager are they to switch to an alternative? At the end of the day, if you have a shift cable, you're going to be able to probably provide better dollars per gig than I can over spectrum. That doesn't mean you're providing a better customer experience. And so for those cable, those areas that are on the fringes of Cable's footprint, we think we can both provide quite a compelling speed and dollar experience, but also provide a much better customer experience than the current provider does. But we got to test it out because, again, it's -- if we're going to go put capital to work, to take advantage of this opportunity, I want to be really comfortable and I want to be really confident that those customers are going to be there and then we can go monetize it. That's in contrast to how we've done it before. So those are the tests that we have in place. I'm notionally bullish and optimistic, but we're going to let the data guide us on where we actually do spend capital.

Let's -- given high-speed Internet, it sounds like TDS Telecom. Vicki let's turn on a couple to you. The edge-out strategy, the fiber out of footprint as you're targeting. Talk to us a little bit about how that's progressing. Obviously, the guidance suggested growing even more capital added. So walk us through a little bit about what you're seeing there and the success and why you're -- why don't you put even more capital to work?

Yes. Thank you for that, Ric, and good afternoon, everyone. I just stand back, and I'm so proud of where we've been able to come, and I look at the accomplishments we did in 2020. We've taken this business, and we have successfully transformed this business. Voice is now just a very small part of our total business, and we are truly a broadband company. And our fiber deployment strategy is all about that. When I look back at 2020, our performance, we grew top line, 5%. At the same time, we reinvested back into our growth strategies and modestly grew our operating cash flow. So that was just a remarkable result and our broadband connections grew in the high single digit rates. And so one of those drivers, as you said, Ric, one of those drivers behind that is our fiber overbuild strategy and expansion into new markets. So in the fourth quarter, we just announced that we are expanding into a new cluster on the eastern side of Wisconsin, that's adding about another 70,000 locations. It's 6 communities kind of centered in and around Appleton, Wisconsin. And we're also adding -- we announced entering into the city of Boise, Idaho, which is a perfect tuck-in to our existing Meridian, Idaho cluster that we have right now. But if you think about it and you stand back and you look at the wireline footprint, we grew that wireline footprint 7% year-over-year to 845,000 locations today, and 36% are now fibered up. And if you combine that with our cable footprint, think about cable, our cable footprint is 450,000 locations. We grew that year-over-year by 3%, and much of our growth in cable is with fiber-to-the-home. About 90% of our total cable footprint, now we can offer 1 gig broadband speeds. And in our fiber markets in the wireline, 36%, we're offering 1 gig broadband speeds. So combine that in total, right now, today, more than half of our total combined wireline and cable footprint, we now can offer more than 1 gig broadband speeds. And we have plans to grow that and expand into new markets. So really exciting to look back. Where we're going and even more so going forward. So when I think about 2021, our goal is really to double down on the fiber -- the new fiber locations that we added in 2020. We're focused on doubling down on that.

How much more opportunity is there out there to continue to add these type markets that fit your criteria?

Well, if you look at the U.S. today, about 30% of the U.S. is fibered up. That leaves a whole lot of opportunity. And as we look at the market right now, it's a land grab. It's a land grab, and we're in a race to plant our flags in the markets that we are going into. And so part of our guidance that we set for 2021 includes dollars earmarked to do some flag planting. Now obviously, for competitive reasons, we're not announcing where we're going yet. But the markets in Eastern, Wisconsin, just really add to the stronghold that we have in all of Wisconsin with our Southern Wisconsin cluster and our Central Wisconsin cluster. And then we're really excited about our markets in the North Pacific. There's a lot of growth going in that area.

And when LT was talking about how customers feel about their existing incumbent cable provider, what are you finding as far as take rates, how fast and what's the ultimate take rate on the broadband product? I'm here. Everybody else here?

Yes. We're here. I think...

Yes. We're in.

So Ric, maybe another question for either Pete or...

Let's get both. Let's get Pete one.

Yes.

Spectrum, CapEx, fiber build out. A lot of sensing going on at the TDS family of companies. How do you fund that? How do you modulate how much you're willing to put into the gas tank?

Yes. Well, we're -- Ric, you know, we're lucky enough to be in an investment cycle in both of our businesses at the same time. So that's a good news, bad news situation. It stretches the balance sheet, as you know. We did a lot of -- we were very active doing financing last year. We did a couple of large for us, $500 million bond deals at U.S. Cellular to support their growth. We think we're largely done with our financing plans at U.S. Cellular, at least in the short-term. We don't think we have a lot more to do in the near-term. Obviously, there could be more as that business grows. We're focusing on supporting TDS Telecom now and their fiber build out. That's really important to us because, as Vicki was saying, that is a land grab. And once that's gone, it's gone forever. So you have to take advantage of it when you can. So we just did a transaction where we sold some preferred stock at TDS, and I think I've told -- I've talked to you in the past about we're very conservative financially. So this is a challenge for us to stretch our balance sheet as much as we can while being what we consider to be financially responsible. So we did some think of it as mezzanine type financing. It's preferred stock. Relatively inexpensive. We were able to raise $400 million in the retail markets that will support TDS Telecom's growth. We'll probably be doing some additional financing at -- on the TDS side over the course of the next few months, year. And we'll try to do it in ways in which we can avoid breaching the limits that have been set for us by the rating agencies. I think I've talked to you about how we want to maintain our rating. We have a mid-BB rating with Moody's and S&P and Fitch. We'd like to maintain that. We don't want to be downgraded. We've got a little bit of room before we would be downgraded. Room -- when I say room, room under our debt ratios. But we're going to -- we're just going to be careful. We're being very creative on how we do things. I think I've talked to you about we've got an EIP financing in place at U.S. Cellular. That's been there for a while. We've used our friends at CoBank. CoBank is in the farm credit system, and they are very active in the funding space for telecoms. There's a lot of different things that we can look at. So I guess, it's a balance. I guess I'll just leave it at that.

And when you think about the debt ratios, leverage is one of the key ones out there, where do you want to keep leverage at the TDS -- TDS Telecom and USM levels?

Yes. We'd like to keep it below 3.5x. Now when I say that, that's debt to EBITDA. And I don't know if all the folks on the call today are familiar with the way rating agencies calculate that. It's a little different. If you were to just look at a balance sheet and take debt and divide it by EBITDA, you wouldn't get that number. What the rating agencies do is they add in the lease liabilities as well into the numerator. So it's basically debt plus the lease liabilities divided by the EBITDA, and you make an adjustment to the EBITDA as well. So we're sort of in the high 2s right now, and we want to keep that below 3.5, if we can.

Okay. Clearly, 1 of the questions that come up on investor calls, it is, I don't know -- I just prefer this one. People look at the stock price, and think frustration, value but unrecognized, what do you think unlocks the public perception of the value?

Well, it's a great question. We get it a lot. We get a lot from you. We got a lot from our other friends. I mean, my personal view is -- and I spent a lot of time on these calls, I'm usually the one that feels the questions about sort of restructuring things. What can you do to spin this thing off or split that thing off and do something with the towers and monetize this and that. And that stuff is all good, and I think there's a place for that. I get the question for -- around stock repurchase. So we do have 2 public company stocks that we focus on. And so we talk about the stock repurchase and our dividend, that's something that we're very proud of as their dividend. But I think at the end of the day, when you look past all that stuff, if we perform -- I mean, we hired LT, whatever it was 8 months ago. And if LT manages to do what's written up in his incentive contract, which is to get a return on capital up into the mid, high single digits. And Vicki manages and her team, they managed to do what we've been talking about is build out these markets, and increase our fiber presence in markets that we're not in and really expand our footprint. And as a result, increase our return on capital. I think you will see more than anything else, that will move the stock price. I think as long as right now, it's no surprise. Our return on capital isn't good. And we talk about that in our public filings. We're not satisfied with where our return on capital is and the only way to really long-term improve the business is improve -- increase revenues and reduce expenses. That's what it comes down to. And you can do all the -- moving all the piece parts around that you want. But at the end of the day, it's the performance of the business that's going to drive the stock price, in the long-term. I mean you can do some things and in the short-term, you could give you a bump, maybe or maybe not. But in the long-term, it's really improvement in revenues and improvement in expenses that are going to get you there.

Yes. One of the things we've noted today, EchoStar, a Charlie Ergen company, has a buyback program in place, which is sometimes hard to get Mr. Ergen to do. They executed $100 million worth of buyback between December and mid-February, which, again, it's kind of hard to do. Similar market cap, $2 billion type market cap company, $500 million authorized program, $100 million put to work is obviously a large chunk. Leverage is different there. But also, they announced today, there was significant insider buying. So as we think about the management team, that's put everybody in a box or too much of a spotlight. Any thoughts within the management team, within the ownership structure, sending a signal from a personal side, well, we think our stock price is silly. We've got a plan to fix it, and we'd like to put some of our own money to work that way.

Well, I guess the way I would answer that question is everybody that -- all of the faces that you're looking at today, every one of us owns stock, either in TDS or U.S. Cellular and has significant financial stake in this business. And we're not satisfied with where our stock price is. We don't directly control our stock price, but we're very dissatisfied with where it is. And we'd like it to improve. I mean, personally, we'd like it to improve from our own financial situation. But also for the company because when you look at a company that has a stock that is poorly traded, you're basically landlocked from a capital raising perspective because really all we can do is we can raise more debt or we going to do preferred stock or things like that, but we can't go to the public equity markets and raise capital because why would we sell stock at these prices. And that limits the extent to which we can grow the business. So it's fundamental to us. It's sort of a chain of events. You've got to -- it starts with the performance of the business, get the performance of the business up, which is what we're trying to do, as you see from both sides of the business, that will have a follow-on knock-on effect, give us the ability to invest more in the business, which will feed back into the business and allow us to create more value. But it all starts with the fundamental performance of the business.

And as we think about it -- you're right, as we think about fundamental performance, how long do you think it takes to demonstrate to the market publicly. You guys get to see every day, every week, every month the required numbers. They don't get it as often. How long do you think it will take to get that execution to demonstrate?

Well, I guess I'll just -- I don't recall the exact details. Just going back to -- we've been spending a lot of time talking about LT's incentive. It's not 10 years, right? It's 3 or 4 years. We would like to have our returns on capital up. It's not going to happen in 1 year, but it's certainly not 10 years. It's somewhere in between those levels. And if you -- and then if you look at what we're doing at TDS Telecom, with this methodical build-out of out-of-territory, we call them out-of-territory markets, fiber-to-the-home markets. Vicki mentioned, this year, we're going to double the number of service addresses that we deliver compared to last year. And you're going to start to see in 2 or 3 years, significant EBITDA coming out of these new markets. That's something you have to wait 10 years to see.

Yes. I mean, I just would like to jump in here. I mean, today, we generate over $300 million on adjusted EBITDA, and I think that's overlooked. And we're taking that money and we're investing it back into fiber. And I see 2021 is a very pivotal year for us. Right now, I know our guidance for adjusted EBITDA was flat to slightly down. That's evident of our reinvestment back into these growth initiatives. And if we execute on 2021, and I know we will, that's our real pivotal year to setting us up for that, not only the top line, but also the strong EBITDA growth going forward. And so 2021 execution is pivotal.

Like, you all riled up. It's good to see some energy, good to see some excitement, good to see some motivation and commitment to what's been a pressuring stock for people on the other end of this call, they can't see right now. Vicki, let me ask, when you talk about the take rates, give us the shot. When you do these agile markets, what numbers are you seeing as far as broadband take rates, how quick and ultimate? And then what kind of attach rates?

So when we go into these markets, we have a great strategy, sales and marketing strategy. We presell on the front end, and we are tracking our presell neighborhood by neighborhood. At launch, we're seeing anywhere between 30% and 35%. Now that's at launch. Now let me just take our southern Wisconsin cluster, which is largely our first overbuild cluster that's largely completed. In that cluster is our trial market, which is in its third year of operations. We're seeing 51% broadband penetration. That translates into a pretty nice superior market share. Our second most mature market in that cluster is reporting 43% broadband penetration in just 12 months. And there are several other markets that make up that cluster, and they're ranging anywhere right now between 36% and 43% in 12 months or less. So really strong take rates. I have no concerns from the sales and marketing perspective. Additionally, we're seeing bundles. Now I think I've reported, on average, across our entire wireline, we have a video attachment rate of about 40%. When I'm looking at the bundle take rates, just in this cluster alone, they range by market between 45% and 58%. So really strong attachment rates of either -- largely a video product. So our customers are telling us they value video. But I really think what makes the strategy work so well is our market selection, is where -- on the front end, a lot of discipline, due diligence work on selecting the right markets to go into where we have pent-up demand for superior services.

Great. So here we are, March of '21, up in the Hollywood Square boxes. Next year, we're in Orlando, sunny Florida for the 43rd Annual Raymond James Conference. Pete, let's start with you first. What are you going to look back on and say, well, we executed this and man we're so glad. One year later, Ric, you asked us what we're going to be excited about. What are we going to think you're going to be excited about in March of '22?

Well, hopefully, we won't just be talking about the balance sheet because that's the thing that the people are least interested on this call. We'll be talking about the accomplishments that we've had at TDS Telecom and building on our markets. We'll be talking about the success that we've had in business and government and in prepaid and our regionalization strategy, the success that we've had in our -- at U.S. Cellular, the success that we've had with our fixed wireless trials. And hopefully, we'll be further along and potentially launching new business cases. So LT will be -- have finished this first full year in the business, and we'll really see how -- what a great job he has done. I mean it's been fantastic so far. There's a new energy at U.S. Cellular and it's really exciting to see. So I think there's just a lot of things inside the business that are going to be very exciting for us.

LT, March of '22, you're in Orlando, were you going to be sitting on the stool saying, Ric, here's the thing we did in that last year, you asked me what was I going to be excited about, and boom! we did this?

Yes. So that I'm not duplicative and it's been -- I need to have these calls more often. It is much nicer to me on these calls than just sort of in the general course of business. But look, I think from our operation -- from an execution perspective, I mean, the first -- the main thing I'd point out is an improvement in the top line from a subscriber perspective, right, whether that -- whether you want to talk about net adds, whether you want to talk about market share, that's the curve that we have to bend, and I fully expect that we will. I would point it at 2 other interesting things, Ric, that I think are going to manifest themselves. And it's not just for U.S. Cellular, I think it's for the industry as a whole. I think that how well we are able to help influence the amount of government investment that's going to be going into the connectivity sector, it's going to be critical. And so it's -- there's going to be a lot of money spent on connecting Americans. And I think we have a real opportunity to take advantage of that. And I hope that, that's one of the things that I'm talking about is the fact that we were able to take advantage of that, to help connect more people from U.S. Cellular and to help Vicki connect and Jim connect more people from a TDS Telecom perspective. And then the final thing, I think, that we'll be talking a lot about is probably the C-band auction, and how 5G use cases are starting to emerge. I think that, that technology will have been in market for long enough that I think we'll start to see some of these use cases emerge. We'll start to see some clarity, not just on the cost side of the equation, which I'm very confident about, but also on the revenue side of the equation. And so hopefully, those are the 3 things that at least we're spending some time talking about.

Great. Well, we've reached our allotted time. I appreciate everyone's time today on this side of the Hollywood Squares, on the other side of the Hollywood Squares. Really looking forward to being in Orlando next year, March of 2022, everybody's staying well. Thanks to the team at TDS -- TDS Telecom and USM for joining us today. Stay well, everybody.

Thank you so much, Ric.

Thanks, everyone.