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

All right. Welcome, everyone. My name is Benjamin Soff. I work at Deutsche Bank on the equity research side. And I'm very pleased to be joined this morning with UScellular and TDS Telecom. So we've got Ted Carlson, CEO and President; Vicki Villacrez, CFO of TDS Telecom; and Doug Chambers, CFO of UScellular. Welcome, guys. Thanks for joining us.

Good morning.

Thank you.

Good morning, guys.

Good morning. So just to kick it off. I guess first question is for Ted. As we reflect back on 2020, how do you say that the company performed during COVID? And what are some of the lessons that you were able to take away? And then as we think about the next 5 years for the company, what gets you the most excited? And what are some of the challenges you're facing?

Well, I think that both parts of our business performed admirably in the COVID environment. And of course, we're still in that COVID environment. We faced dramatic increases in traffic loads on our networks. I think the traffic, if I'm getting it right, Doug can correct me, was up 54% at UScellular and I think up around 50% at TDS Telecom. And those were not anticipated traffic loads. We had anticipated load increases of around 25% of each business unit. But the network performed admirably, and I credit that to our great engineers at both UScellular and TDS Telecom to maintain what is called a 6-month service margin. So that they all are shooting ahead of the duck, so to speak, by 6 months so that we always have enough capacity for unusual events. The other thing that I think were shown by the pandemic, and that is the importance of the services we provide to people's lives. The churn rate at UScellular, that is the number of customers that we lost each month, went down dramatically to the lowest levels that we've ever seen in the history of the company, and we've been in business since 1983. At TDS Telecom, we saw sign-ups for new service and for increases in speeds that were unanticipated. And we saw a lot of interest in our fiber out-of-territory installations because with fiber, people can get a more secure connection, something that isn't subject to congestion in their neighborhood. So we saw the importance of telecommunications in people's lives. And with people having to do home schooling, working from home, having to look for new jobs if they were out of work, all of this depends on communications to keep people connected. So that was really, really, I think, important. But I would say that one of the things we're proudest of for this past year was keeping our people safe. We took extraordinary measures in terms of cleaning, in terms of social distancing. We sent masks out to all of our corporate-level employees, I think, 3 times so that they would have a supply not only for them, but for their families. We wanted to keep everyone as safe as humanly possible. And we -- and I think we were quite effective along those lines, not only our employees, but our customers. We're cleaning the stores, shutting down stores if there was an exposure to someone who had COVID, et cetera. So I'm very proud of the organization, both organizations for 2020. And now we're on to the future. And I guess, the thing that I'm most excited about for the future are the growth opportunity, both at UScellular and at TDS Telecom. At UScellular, we have a relatively new now CEO, LT Therivel. And he is pivoting the organization under his leadership for growth. In the past, we have been -- mainly been over the last 5 years, we have been mainly about improving our margins rather than growing. And now we are pivoting the organization toward growth. And that, to me, that's very, very exciting. And we can talk more about that in a little bit. At TDS Telecom, we are in a growth mode now. And we've created that growth mode over the last, I would say, 3 years by improving our in-territory fibering where we overbuild ourselves. But now, over the last 3 years, launching out-of-territory fiber, and Vicki can talk about that. And that has the prospect of significantly increasing the scope of TDS Telecom business. That is the number of people that we pass with our wired system. So I'm excited about the growth. And now I think I should stop talking so you can hear from the others.

Absolutely. And we're going to touch on a lot of those points. So on the recent earnings call, you guys provided some initial outlook for 2021. So for Vicki and Doug, could you walk us through some of the highlights in terms of what you're expecting this year, both from the TDS and the UScellular side?

Vicki, go ahead, and I'll go after you of that.

Sure. Happy to start. Okay. So good morning, everyone. As we look out to 2021, as Ted said, we're really excited about the growth prospects that we have going forward. And our priorities are centered around 3 objectives: one, grow revenue; two, increase our operational effectiveness; and three, improve our customer experience. So on the growth revenue side, it is about expanding fiber into new markets in new territories, as Ted said. In 2021, we're expecting to double the output of new fiber service addresses, with a goal of delivering 150,000 new fiber service addresses this year. So that is twice what we did in 2020. We're investing heavily for growth in the future. Our capital guidance is $450 million. This year, that is up $100 million from next -- from last year. And 90% of that capital spent is focused on broadband investments. We're focused on driving deep broadband penetration, and we are focused on the growth coming out of our out-of-territory adds. And so grow revenue is our top priority. Second, we're focused on operational efficiencies and reducing our costs. Those come -- that's driven from things like reducing our truck rolls, reducing our calls into our call center. We just stood up a supply chain services organization over the last 18 months, and we're rolling out an inventory management system. So we're looking for savings from those investments. We're also setting up a construction light team to help us with our edge out of fiber into new home development in our existing fiber markets. And we're also moving our IT systems to a single stack, which will help reduce our operational costs. On the improving customer experience, there's a number of things here, but just to name a few. Our broadband products, we're really focused on our high-speed broadband offerings, which I'll talk more about. But today, we offer 1 gigabyte broadband services to over half of our footprint. So that is a really great achievement. And with our growth in 2021, that will be even higher. Cloud TV is an investment that is behind us now, and we've rolled it out across our wireline and cable markets. And we're very excited about the growth that we expect from that product in 2021. And of course, with the pandemic, there was an acceleration of adoption of digital services and self-service options, and we continue to make investments in that area. Doug?

Okay. Thanks, Vicki. Yes, thank you. On the UScellular side, 3 priorities I would point to. One is growth, the second one is continuing to invest in our 5G network, and the last one is improving return on capital. Let me talk about growth first, and Ted teed this up. So from a subscriber perspective, our goal, and we're 90% postpaid and 10% prepaid. So on the postpaid side, from a consumer standpoint, we have now regionalized our operations into 6 separate regions. And what that's going to allow us to do is pull pricing and promotion levers by region. We have certain regions where we have higher market share in the 25% to 30% range. We have other regions where we're 10% to 15%. And we have a real opportunity to do things like be more aggressive with pricing promotions and low share markets to gain share. And that's a key part of our strategy going forward because one of our key objectives in 2021 is to grow our market share in both postpaid and prepaid. Another component in postpaid I want to talk about is business and government. That's a channel where we are under-indexed and we have a real opportunity. Shortly after LT's arrival, he hired Kim Kerr, who is a -- our new SVP of Business Sales, and she comes from Sprint and is implementing a lot of new strategies on the business side that we think were really successful, including segmenting our business customers by SMB, public sector and enterprise; setting up new channels, including inside sales, indirect sales; and doing a lot of things to stimulate growth in the business sales area. On prepaid, it's been 10% of our business and typically has not been a focus. And we are starting to focus a lot more in the prepaid area, recognizing we have an opportunity for growth. To give you context, our average market share on the postpaid side is 18%. On the prepaid side, it's 7%. So we have a real opportunity in prepaid to increase that market share. And one of the key things we're doing is implementing a digital life cycle that is much more robust for our customer and making sure that we are in regular contact with that customer in the first 1, 2, 3 months of service to make sure that we're there with the right offers, we're engaging with the customers in making the prepaid experience one that's very sticky from our standpoint and the customer standpoint. The other thing I'll point to on the growth perspective, although it's not contributing a lot in 2021, it's going be really important for learning. We're rolling out our high-speed Internet product over millimeter wave in 3 markets. That's going to help us learn. And I think we'll talk more about that later, but that's an important part of what we're doing in 2021. The other is ARPU expansion with respect to growth. We extended ARPU in 2020. We intend to do so again in 2021. We have 55% of our customers on unlimited plans. We believe we can expand that. Of the customers that are on unlimited, about half of them take our basic plan. We think we can move those customers up the stack as well. Another opportunity, device protection. We're at 47% penetration. That can be moved upward. And we also have -- continue to have about between 300,000, 400,000 feature phones, and we have the opportunity to convert those to smartphones and translate that into higher ARPU. The last thing I'll touch on is the 5G rollout. Working -- actually, I'm going to touch on ROC quickly as well. But the 5G rollout, we're very proud that in this quarter of 2021, first quarter, we're going to have 5G in a portion of all our markets. That's really important from a marketing go-to-market perspective. We are running right with the pack with respect to our competition. We indicated in our earnings call, we have 24% of our cell sites with 5G, and that carries about 50% of our traffic. We're continuing to invest in that in 2021 and are going to make substantial progress on our 5G rollout. So excited about that. Lastly, ROC, I'll touch on this quickly. We have set a key objective to improve return on capital over time. We're currently about 3.5%. And it's really 3 levers. It's growing revenue. I talked about that. It's managing costs. We have a very aggressive cost management program that's focused both on OpEx and CapEx. It's going on its fifth year, and we're doubling down on that and really spending a lot of time with that. And then capital efficiency, I mentioned we're going to continue to invest in 5G. That's critical. At the same time, we're going to find opportunities to do that in an efficient way. And so we're really focused on that as part of our overall cost program.

Great. You guys touched on a lot of good topics there. I think we'll start to dig in a little bit. So just starting with 5G. Maybe for Ted, with the U.S. market transitioning to the next evolution of communication with 5G, how are you guys thinking about investing across the business to take advantage of this opportunity and to make sure you're positioned to succeed?

Well, thank you for the great question. That's one of the, if I can call it one of the unknowns as to what will 5G bring us in terms of societal transformation over the next 10 years. I am not personally a futurist, but I do know that every 10 years, there's been a dramatic improvement in the way people are able to communicate with each other. And I think 5G will bring us a lot of new ways to communicate and communicate better with each other. Now having said that, the first goal is to get everyone into a 5G experience. And to Doug's point, we're getting 5G into every one of our markets by the end of the first quarter, which is a great thing. Now we need to get 5G handsets into everyone's hands because there are a lot of people out there who do not have a 5G handset. In other words, it won't light up even though we have a network that is 5G capable. And of course, our initial rollout because we are focused on small towns and rural America, to a large degree, has been to cover the territory, so to speak. So we've rolled out 5G on our low-band frequency, on 600-megahertz frequency, where we have green spectrum for the most part, that is we rolled it out on 600 for the most part. But in the future, to Doug's point, we're going to be doing some testing this year. We are doing testing this year on rolling it out with millimeter wave. And we've -- our engineers have worked with Qualcomm, and we're now able to fit millimeter wave signals to travel effectively over 3 miles from the macro cell tower. And that's a huge improvement over the several hundreds of meters transmission that millimeter wave was originally thought to be capable of. So we expect, over time, based on our testing of these markets, and testing has to come first before really big rollouts occur because we want to have a business model that people are willing to pay for. We don't want to just roll things out and then find out that our business model is not effective. So we're creating a business model now to be able to implement millimeter wave on an effective basis. And then, of course, there's the mid-band and the most recently concluded auction, although I can't talk about it because technically, it still isn't absolutely concluded and won't be for a few more days. But the point is that UScellular looks to implement 5G into -- over time, into all of its spectrum. And it's starting with the part of the spectrum where most -- where the most of its customers can experience some 5G services. Now what do I think 5G is going to bring? I think 5G is going to bring, my personal guess is, and I do believe we'll get to the autonomous car, and that will depend on 5G. And I think that drones will be a significant user of 5G because they have to work. They can't fall down. But I also think that with the movie studios now having broken, you want to call it their dependence on a few studios and the dramatic, what you're seeing with Netflix and so on and Amazon creating new sources of content, you're going to see the same thing with AR/VR content. And as more AR/VR gets into people [ then, none -- in the future, it's okay ], but so be it. I think that the young people will drive that, they are going to want that AR/VR experience. And the studios, those newly independent studios are going to create that content that young people are going to want to buy and pay for. And that AR/VR experience is going to depend on 5G. I think that's going to be a huge driver. Now I think from a cost standpoint, I see estimates that millimeter wave implementing 5G can bring down the cost of a bit by a factor of 10x, okay? And if our traffic keeps growing 30%, 40% a year, which many people think it will, we're going to need that 10x reduction in cost. So there are some of the opportunities that I see in 5G.

Sounds great. And then those are all sort of new use cases. But maybe for Doug, as we think about monetizing 5G near term from a sort of consumer standpoint, can you talk about how you think about that strategy? And then, secondly, as you roll out fixed wireless, can you talk about maybe the types of markets that you're targeting with that, be it urban, suburban, rural or some kind of mix of those?

Yes. I mean right. So the testing that Ted was talking about is really monetizing 5G through a fixed wireless product. The 3 test markets that we have lined up are cities between 30,000 and 70,000 people. So you're sort of akin to suburban markets as you think about them kind of mid-sized cities. And there's a lot we can learn, as Ted mentioned. I mean we want to see how this investment, what kind of return we get on it, but more importantly, how we're able to operate? What's the customer take rate? What marketing tactics work? What's the profile of the customer that takes the service? How do our back-end systems work for things like address locator, of service availability, how does the network operate? Ted mentioned we've had very impressive propagation from a tower and a test environment. How is it going to work in our test cities as far as propagation getting through barriers, installation of the CP equipment. So just really, it's all the things you do when you operate a fixed wireless business. We want -- it's to me a great opportunity to learn in 2021, get better and then help inform our future rollout of fixed wireless.

Great. And then maybe let's jump to the broadband side. So for Vicki, working and learning from home has highlighted the importance of high-quality broadband this year, and the business did quite well in 2020. So from your perspective, how sustainable is this strength as we head into 2021? And to what extent was some of this business a pull forward of demand? Or was it incremental as more people connected and took higher speeds than before?

Yes. Thank you, Ben, for that question. We saw many tailwinds coming out of the pandemic. And as I look forward, we think those tailwinds are really going to help us out in our business. And I think they -- these tailwinds signaled more growth for our business. What are they? One, it's broadband acceleration, as you mentioned; two, its adoption of digital experience, self-service environment; three, it's population migration from urban cities into high recreation areas; and four, it's further investment into more tools that make this type of environment effective going forward. So let me just touch on the broadband acceleration for a moment because driving broadband penetration is our priority. You are seeing way more connected devices in the home today. If you think about your own household, if you think about the single-family homes that we are targeting, most of our markets have a very large presence of single-family homes. You're seeing more and more connected devices in the home, and that trend is only increasing. At the end of 2020, we saw our customers using an average of up to 450 gigs per user per month. That's tremendous usage. And as you heard Ted say, that's only increasing. We've seen that clip at a double-digit rate, 35%, 40% to 50% year-over-year. And so you'll continue to see higher adoption as we go forward. In my earlier comments, I mentioned that we offer 1 gig broadband service to over 50% of our combined wireline and cable footprint today. It's 54% to be exact. And we're looking to move that up to north of 60% by the end of 2021. And we're -- so what we're seeing as we look at our new customers, that our new broadband customers in our fiber markets, 20% of those customers are now taking 1 gig services. So 20% of our new flow share. And so that's -- all those signals is the broadband acceleration. And yes, we saw strong acceleration growth that beat our targets second quarter, third quarter and fourth quarter of last year. So I do think that growth curve is coming sooner than we anticipated, which why it's so important, as Ted was talking about, for us to continue to be bullish on our fiber expansion into new markets and planting that flag in the markets that we've selected to compete in. And I announced new markets in the fourth quarter, and I indicated that we're going to be planting some more flags in some new markets, and you can expect those announcements throughout 2021. From a self-service perspective, just a data point. It's really great. More of our consumers are using self-service. 40% of our presales in our new fiber markets are now coming from our web channels. This is a lower-cost sales, and it's the experience that customers are looking at. We expect, as we invest more into our web experience, that, that number will go up. And the markets that we're growing into and expanding into, that migration, we are seeing tremendous growth in these markets that are well above the national average. Our wireline footprint grew 7% last year, and that was with expansion into new markets. But our cable business, just on an organic basis, grew 3% year-over-year. So this is new household growth that we're seeing in these markets. And then again, the increase in investment in tools and innovation to work in a remote work-from-home environment, a virtual environment, opens up the opportunity for larger talent recruitment and remote services. So for example, I had 2 doctor visits that were completely done in a virtual environment over the last year, and that had never happened before. And I think it's things like that, that are going to stick for us and for the consumer going forward.

Got it. Super helpful. So just to maybe dig in, in a couple of those areas, how should we think about competition across your broadband footprint? And how does TDS think about winning share over time? And then you talked a little bit about the speeds you offer. As adoption increases, how should we think about what that means for ARPU for the business?

Sure. So broadband penetration for us at the end of this year, we expect to be more than 60% market shares across our cable markets. And in our core ILEC business, which has the mix of copper, we're expecting to hold and maintain our 40% -- our 47% market share. But our eye is really on the out-of-territory markets, in the new markets that we're expanding in. And our most mature market as we're growing, our most mature market, which is now in its third year of operation, has over 60% market share. And several younger markets that are just in full operation for the last 12 months, just 1 year, are already at 50% or greater market share. So that is really great accomplishment. In terms of competitive, when you think about our total footprint for a moment, today, 36%, 36% of our wireline footprint is fiber to the home, fiber to the premise. And that is increasing to 47% by the end of this year. And that is because we're going to be delivering on the 150,000 service addresses that I mentioned at the opening of the call. And a significant part of our copper network has been upgraded, and it can serve 25 to 100 megabit speeds. And so we're really -- our goal is to really minimize our exposure to the unupgraded copper portions of our network, in our core ILEC. And there, we are getting support from both the federal and state broadband programs to help bring more competitive broadband speeds to these hard-to-reach high-cost areas. And so these programs are incredibly important to our customers and to help close the digital divide that really got spotlighted during the pandemic. If you think about our cable business, 90% of the cable footprint has now been upgraded with DOCSIS 3.1 and can offer 1 gigabyte broadband services. So combined, we can offer, as I said, 1 gig services to 54% of our total footprint, and we expect to be over 60% by the end of 2021. The overlap that we see with cable that we build -- the overlap that we're seeing with the cable footprint, and we expect to be a strong competitor, we expect to split the market with cable. So cable, when we go in and build fiber, we expect cable to be a strong competitor, and our models assume that. And so we assume we're going to share the market with cable. We're taking share. Just to finish that thought, we're taking share from the incumbent telco, who has not been upgrading in their network. And that leads to market selection and how important market selection is to our fiber strategy.

Got it. Super helpful. And it sounds like a lot of exciting things going on there from the fiber and cable standpoint. Can you talk a little bit about the company's video strategy? I know you mentioned you rolled out your new products before. But how do you think about the shift from traditional video to streaming and making sure that the company can support changing consumer preferences in that space? And what does that mean ultimately for the growth and margins of this business?

So just to level set a little bit. Number one, I think I've said many times, video is an important part of our strategy. And our markets that we are focused on have a large presence of single-family homes. And they value video, okay? These are -- they value video, they value connected devices. And so our broadband packages and bundles with video are very popular. And in fact, 40% of our customers across our wireline footprint, our broadband customers take a video product today. And that's a much higher percentage nearing 50% in our new fiber out-of-territory markets. During the fourth quarter, if you looked at our results during the fourth quarter, we grew our video subscribers 8% across our wireline business. And at the same time, we're expanding our video services across our markets. So we've gone -- we've expanded IPTV services to 55 markets, which is up from 40 last year. So we're driving growth a couple of different ways. On the cable side, video did decline, but our goal with our new TDS TV platform, it's a cloud platform that's feature rich. It integrates streaming video with linear programming. It has a recommendation search engine. It has a voice response system, very, very powerful rich system. It's been providing a great experience, and we're getting good feedback from our customers. We are rolling that out across both wireline, and we have rolled it out across both wireline and our cable markets. And we expect that to help drive significant growth in 2021, and we're targeting about 10% growth with that product on a combined basis. For customers who cut the cord, we're not seeing a lot of that. As I said, we're growing meaningful high digit numbers across our wireline footprint where we serve IPTV. We may -- there may be some cord cutting that we've seen in our cable markets because we've been losing video customers, but many of those customers may be going to satellite. We are hoping to win them back. And for those customers that do cut the cord all together, they're moving to higher stand-alone priced broadband packages. They're consuming more broadband. So they're -- our pricing is such that if you're out of a bundle, you do pay higher for a stand-alone broadband product. And then second, customers are wanting higher speeds because they're doing more streaming. So they're moving up the stack. And in fact, in the last quarter, we saw significant growth in our ARPUs and revenue per connection for both cable and wireline, we're in the mid-single digits. So really meaningful growth on the ARPU side.

Great. And then maybe just jumping back to wireless for a bit. So for Doug, this past holiday season, we noticed that the wireless market sort of seemed to be getting a little bit more competitive, with some of your peers kind of investing more heavily on the customer retention side, especially. How do you view the competitive backdrop in wireless? And can you talk about your competitive positioning and how you differentiate yourself against your larger peers?

Sure. Yes. I mean fourth quarter was competitive. We're seeing a sustained competitive environment in the first quarter. So -- and certainly, one competitor has an upgrade offer out there. We've looked at that. We can't make those economics work. That's a sort of a challenging offer to sustain over time. So what we -- in the competitive environment, what we feel really great about though is our win share. In the fourth quarter of 2020, we increased our win share sequentially over Q3 and year-over-year from Q4 to Q4. So what we do know is that we're competing very well, pleased with our results, and we're continuing that through the first quarter and feel great about that. As far as how we distinguish ourselves, it starts with the network. We have an award-winning network. We've received many J.D. Power Awards for the highest quality network, and that's the foundation. And then you couple that with very compelling pricing. Our pricing is 10% to 20% below our primary competitors in our markets, which are Verizon and AT&T. We also have outstanding customer service. When you look at our NPS scores and our customer engagement scores, they're very high. We have customers that really like us and stay with us. The other thing we're doing in the market, and this is helping our win share is right now, we have compelling no requirements promotion. So when customers come in to get our offers, they're not required to sign up for a certain rate plan or take device protection. It's a very frictionless transaction with respect to acquiring customers, and that's proven very successful. The area we would like to shore up because we just have a great product and a great experience for our customers is our brand. We're finding that our brand consideration is not as high as we want it to be, and we're working on that in 2021 and doing some refresh of our brand to really tell our story a lot better of the great things we do for customers, our great network. And so look for some new things there in 2021, and the goal is to elevate our brand consideration and do even better on win share.

Got it. And then obviously, wireless is still a business where the retail experience is a big part of sales, and that's a part of the business that was impacted and continues to be impacted by the pandemic. Can you talk a little bit about just sort of the customer traffic trends you're seeing? And when do you think maybe volumes will start to pick back up in earnest?

Yes. Customer traffic during the pandemic, it's been down 25% to 30% on a pretty consistent basis. And so a couple of things with that though, what we're seeing is customers are coming into the store with less people. So we count our traffic based on total bodies in the store. So instead of a family of 4 coming in, maybe just dad and the daughter come in. And so what we're seeing as well is a higher sales conversion rate. So when customers do come in the store, they're transacting business at a higher frequency, and both of those things are intuitive. With the pandemic, you expect both those dynamics to play out, and they are. And I think as far as when things are going to completely turn around as far as traffic levels to normal, I think it corresponds with the vaccine. Once people are vaccinated and people feel comfortable, completely comfortable going out in public, I think you're going to see those traffic levels increase. However, we also are not -- we're very aware of the fact that the transition to digital, there's some permanent behavior changes that have occurred during the pandemic, right? And so curbside service and buy online, pick up in store and all the digital enablement, a lot of that's not going away, and some customers are going to gravitate towards digital even more. And as a result of that, we are really increasing our investment in digital in 2021 to make sure we can offer a great digital experience in addition to a retail experience.

Got it. So next question for Ted. So you guys are uniquely positioned amongst your wireless peers to the extent that you own your portfolio of towers. Can you talk about the strategic value that you derive by keeping these assets under the same roof? And then either for Ted or Doug, can you talk a little bit about the trends you're seeing in the tower leasing business?

Tower business aging, unequal business where the tower company has a significant advantage over the carrier. Because once a carrier goes on a tower, it takes about 15% to 20% of the cost of putting your equipment on the tower just for the engineering and installation. And when you spend that kind of money, you're very reluctant to ever pull your equipment off the tower. And so the power company can continue to increase the rate that it charges for your position on the tower with little threat that you will be able to gracefully move to a different tower. So it's an uneven business relationship. And in uneven business relationships, we have always felt that we should be on the right side of that, if you want to call it that, where we own most of our towers. And we're not subject to that kind of gradual, continual price increase regime. So we own over 60% of our own towers, and we are in the process of working hard, as LT says, to sweat those assets and to get more outside tenants on them. And we're doing a nice job. We can do better because our number of outside tenants is only about 0.4x our number of towers that we own, whereas the -- I think the tower industry average is about 1.3 to 1.4. So there is a huge increase, ramp-up potential for us. Now you asked about the strategic nature. I talked about the financial strategic meter. Our engineers would also say there's a benefit from the standpoint of having our own tower company, so to speak, our own business because it makes it easier for them to work with it. Their time frames are reduced, right, and making changes to where we want to go on the towers. And with all the spectrum that we've acquired over the years and millimeter wave coming, there are a lot of important touching the tower activities that are going to go on in the future. So making it easy for our engineers to put your service is out there on a timely basis, I think would be another strategic advantage for us. But there's a fundamental financial advantage in only our own towers, and there's a really fundamental opportunity strategically because our tower business is a significant asset to grow that tower revenue. And Doug can talk about what some of our ambitions are to grow it. Doug?

Yes. I mean just for context. So in 2020, year-over-year, we grew the revenue in our towers by 14%. So that's a really nice growth rate. We compared it to the tower industry in general and the big 3 tower companies. That rate is going to be mid- to high single-digit percentages in 2021. So still really nice growth, a little bit tempered from what we saw in 2020. I'll also add, the tower business, it's a great business on a stand-alone basis. But when you're running a wireless operating business alongside of it, it's a really great business because all of that revenue we get from towers, almost all of it drop straight to the bottom line because we use those towers in our operating business anyway. So it's a really great business. And as Ted mentioned, we are very focused on growing tower revenues even more so than we have been in the past. Austin Summerford has been hired as a Vice President to, among other things, run our tower business. We're investing more resources in it. And we're really focused on growing those revenues more than we have in the past because it is a real opportunity for us for high growth.

Great. And then next question also for Ted. What's the appetite for M&A across the business right now? What kind of assets might you be interested in, in particular? And can you talk a little bit about the opportunities and valuations you're seeing out in the market today?

Well, that's a wonderful question. Let me preface it by saying that TDS started with 1 small telephone company in Wisconsin, which had probably 2,000 customers. So TDS, to a large degree, was built by M&A over many, many years, both on the wireline side and on the wireless side, more recently, on the cable side, not so much on the fiber out-of-territory side because those are organic growth opportunities. But we have been built by M&A. So we are an M&A-rich company, so to speak, in terms of desire to do M&A, but we also have to be practical, right, in terms of what we will pay in a given business environment. Now on the wireless side, Doug can speak more of this. We certainly are interested in looking at smaller wireless operators and considering whether they might fit our footprint. But as I said, they need to fit our footprint, picking up a small wireless operator that would not be contiguous to our current footprint would be a challenge from a marketing and cost standpoint. Now whether any of those will be available, we don't know. But we are interested in exploring that because we do deliver on the customer experience. And when you deliver on the customer experience, you have a good chance of retaining the customers that the small wireless company operator has when it's acquired. And of course, the customer list, so to speak, is a large part of the potential value of an acquisition. Now over on the telecom side, we have been acquiring our cable companies, and we've built a nice cable operation, as Vicki pointed out. It's doing very, very well, growing wonderfully organically. We've been very selective about the cable companies we've bought, buying those in growing territories. The most recent one is in suburban Charlotte, it's got inherent growth to it. But what we've seen there is with the low interest rates and people, other people, many people, seeing that the cable industry is a growth industry inherently because of its superiority over the traditional legs, which haven't fibered up, those multiples have risen. And I think the most recent transaction in the marketplace was at a headline multiple of 24x. Well, I can tell you that 24x trailing EBITDA, is not something that is easy to overcome for us from synergies. So in this environment of low interest rates and many people competing for a limited supply, it's going to be a challenge. Doesn't mean we won't be there to look at those acquisitions of cable companies, but it's just very challenging in today's environment with multiples like the one I just spoke with.

Makes sense. And we've got just another minute or 2 here. So last question for me. The digital divide is a topic that you guys have discussed. I think Vicki mentioned it earlier. How do you think about this issue today? And is there anything that you hope to see from the new administration in terms of finding different ways to fix some of these issues?

Doug, you want to talk about that? I know LT is excited about it.

Yes. We're very excited about that opportunity. As you know, our footprint is largely suburban and rural. So we really have an opportunity to help bridge the digital divide in those rural areas. And we're already doing that. We can do more of it, and we're really working. We're excited about a lot of the things that are going on, even the 5G fund is on the horizon. There's some funding in the legislation passed late last year as well as the $1.9 trillion stimulus, it's pending. There's more funding. And we're working closely with the FCC and members of Congress in order to advocate for that because what wireless can really do in rural areas is provide outstanding coverage. And in some of the more sparsely populated areas, that's what's really needed in order to bridge that divide. And we're certainly very active in working with both the federal government, the FCC and state governments and agencies to advocate for funding to help bridge the digital divide. So it's an area that we're very focused on.

Great. Well, I have really enjoyed our time here, and it's been a great discussion. Thank you all for joining us, and we hope to see you again next year.

Thank you.

Look forward it. Thank you.