Telephone and Data Systems, Inc. (TDS) Earnings Call Transcript

Ladies and gentlemen, I am Walter Carlson, Chair of TDS, and I will be chairing the meeting. At this time, at this time, I call the meeting to order. I would like to thank everyone present for attending the meeting. And I would also like to welcome everyone listening on the webcast. It is now 9:00 on May 18, 2023. And at this date and time, the polls are open for voting on the matters before this annual meeting as set forth in the notice of annual meeting and proxy statement and on the agenda for the meeting. The rules of conduct that we will follow for this meeting are set forth on the reverse side of the agenda. If you do not have a copy of the agenda and rules of conduct and would like a copy, please raise your hand and one will be brought to you. Does anybody need those forms. Okay. And I would like to take this opportunity to introduce the directors, officers and special guests of TDS who are present. When I call your name, will you please rise. First, I would like to introduce the other directors of TDS who are present: James W. Butman, Director of TDS and President and Chief Executive Officer of TDS Telecommunications LLC. LeRoy T. Carlson, Jr., Director, President and Chief Executive Officer of TDS, and Chair and Director of United States Cellular Corporation and TDS Telecommunications LLC. Dr. Letitia G. Carlson, Director of TDS and physician and clinical professor at George Washington University Medical Center. Prudence E. Carlson, Director of TDS. Clarence A. Davis, Director of TDS and former Chief Executive Officer of Nestor, Inc. Kimberly D. Dixon, Director of TDS and former Executive Vice President and Chief Operating Officer of FedEx Office. Christopher D. O'Leary, Director of TDS and Senior Adviser at Twin Ridge Capital Management. George W. Off, Director of TDS and former Chair and CEO of Checkpoint Systems. Wade Oosterman, Director of TDS and President, Bell Media and Vice Chair of BCE and Bell. Dirk S. Woessner, Director of TDS and former CEO of CompuGroup Medical S.E. & Co. I would also like to take this time to introduce the other officers of the company who are present today: Vicki L. Villacrez, Executive Vice President and Chief Financial Officer. Daniel DeWitt, Senior Vice President, Human Resources. Joseph R. Hanley, Senior Vice President, Strategy and Corporate Development. Jessica L. Bartley. Vice President, IT Security and Chief Security and Privacy Officer. David D. Gillman, Vice President, Tax. Anita J. Kroll, Vice President, Controller and Chief Accounting Officer. Jane W. McCahon, Vice President, Corporate Secretary. I don't see Ilan. So -- but Ilan will be mentioned in absentia, Ilan Pragaspathy, Vice President, Financial Analysis and Strategic Planning, will be here shortly. Laurie A. Ruchti, Vice President and Chief Information Officer. Peter D. Taft, Vice President, Strategy. Colleen Thompson, Vice President, Corporate Relations. And John Kelsh, General Counsel of TDS and UScellular and partner, Sidley Austin LLP. And I know there are other people here from TDS Telecom, and you are very welcome and I'm sorry, we're not going to introduce all of you by name. But you're -- we're delighted that you're here. So I would like now to take this opportunity to introduce Sean Goldfarb and Heather Rabchuk of PricewaterhouseCoopers LLP, the independent registered public accountants of TDS. Mr. Goldfarb, do you wish to make a statement at this time. [indiscernible] Are there any questions for the representatives of PricewaterhouseCoopers? Okay. Hearing none, we will proceed with the matters on the agenda. Ilan, you were introduced already, but welcome. To act as inspectors of election, I have appointed Julie Mathews of Telephone and Data Systems, Inc. and Jeff Seiders of Computershare Investor Services, our independent transfer agent and registrar. Will the holders of any undelivered proxies please hold them up so that they may be picked up by the inspectors of election at this time. Does anybody have a proxy? Because if you're voting by ballot, please raise your hand so that our inspectors of election can deliver one to you. Okay. Being none, we'll proceed. All nominations and proposals by the TDS Board of Directors will be introduced from the chair. Following such business, a proposal by a shareholder will be considered during this meeting as indicated on the agenda. If any shareholder with a proper purpose would like to address the business at hand, I would ask you to raise your hand and address the chair, identifying yourself and disclosing the nature of your business. In addition, shareholders will have an opportunity following the formal part of the meeting and management presentation to ask any questions they may have. In the interest of time, we will dispense with the reading of the notice of the meeting and the affidavit of mailing of the notice. We will also dispense with the reading of the minutes of the Annual Meeting of Shareholders held on May 19, 2022. The Secretary has copies of these documents, if any shareholder would like to examine them after the meeting. The Board of Directors set March 22, 2023, as the record date for this shareholders' meeting. The Secretary has a record of shareholders as of that date. By order of the Board of Directors, management of the company distributed a notice of annual meeting and proxy statement on April 5, 2023, to shareholders of TDS, which solicited proxies from the shareholders. The inspectors have tabulated the proxies received before the meeting and advised me of the voting results immediately prior to the commencement of the meeting. Virtually, all votes are received through proxies and the voting results with respect to all matters are generally known before the meeting starts. Accordingly, the inspectors of election have been instructed to advise me prior to the announcement of such results only in the event that there are any changes in outcome considering any votes delivered, changed or revoked after the commencement of this meeting and prior to the closing of polls for voting. Subject to formal certification by the inspectors of election, I have been informed that a majority of the voting power of each requisite voting group of TDS shares issued and outstanding on March 22, 2023, the record date for this annual meeting, is represented at today's meeting. Accordingly, the formal business of the meeting will proceed on the basis that a quorum is present. The only matters which may properly come before the meeting involving a vote of shareholders are those that were set forth in the notice of annual meeting and proxy statement. The 6 proposals in the notice of annual meeting and proxy statement are: number one, election of directors; number two, ratification of auditors; number three, approval of the compensation plan for nonemployee directors; number four, advisory vote on executive compensation; number five, advisory vote on the frequency of holding the advisory vote on executive compensation; and number six, a proposal submitted by a shareholder. The first item of business is the election of directors nominated by the Board of Directors. As indicated in the notice of annual meeting and proxy statement, 4 directors will be elected by the holders of common shares and 8 directors will be elected by the holders of Series A common shares. The Board of Directors has nominated Clarence A. Davis, George W. Off, Wade Oosterman and Dirk S. Woessner, for election of directors by the holders of common shares. The Board of Directors has also nominated James W. Butman, LeRoy T. Carlson, Jr., Letitia G. Carlson, Prudence E. Carlson, Walter C. D. Carlson, Kimberly D. Dixon, Christopher D. O'Leary; and Laurent C. Therivel for election as directors by the holders of Series A common shares. The Board of Directors unanimously recommends a vote for each of the nominees for election of directors. The second item of business is the proposal to ratify the selection of PricewaterhouseCoopers LLP as the company's independent registered public accountants for 2023. This item of business was proposed by the Board of Directors. This proposal will be voted on by the Series A common shares and common shares voting as a group, present in person or represented by proxy at this meeting. The Board of Directors unanimously recommends a vote for this proposal. The third item of business is the proposal to approve the compensation plan for nonemployee directors. This item of business was proposed by the Board of Directors. This proposal will be voted on by the Series A common shares and common shares voting as a group, present in person or represented by proxy at this meeting. The Board of Directors unanimously recommends a vote for this proposal. The fourth item of business is the proposal to approve on an advisory basis the compensation of our named executive officers. This item of business was proposed by the Board of Directors pursuant to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act 2010. This proposal will be voted on by the holders of Series A common shares and common shares voting as one group, present in person or represented by proxy at this meeting. The Board of Directors unanimously recommends a vote for this proposal. The fifth item of business is the proposal to approve on an advisory basis whether to hold future advisory votes on executive compensation according to one of the following frequencies: every year, every 2 years or every 3 years. This item of business was proposed by the Board of Directors pursuant to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This proposal will be voted on by the holders of Series A common shares and common shares voting as 1 group, present in person or represented by proxy at this meeting. The frequency receiving the affirmative vote of a plurality of the votes cast by such persons shall be considered to be the shareholders' recommendation as to the frequency of future say-on-pay votes. The Board of Directors unanimously recommends a vote for every year on this proposal. The last item of business is the proposal submitted by a shareholder. Kenneth Steiner, the shareholder who submitted the proposal, has appointed Charlotte Macwan as his proxy. Consistent with our rules of conduct for the meeting, Charlotte will have up to 3 minutes to present the proposal.

Good morning. Shareholders request that the Board of Directors take steps to ensure that all of the company's outstanding stocks has an equal 1 vote per share in each voting situation. This would encompass all practicable steps, including encouragement and negotiation with current and future shareholders who have more than 1 vote per share, to request that they relinquish for the common good of all shareholders any pre-existing rights, if necessary. This proposal is important because certain shares have supersized voting power with 10 votes per share compared to the 1 vote per share for other shareholders. This proposal would even allow 7 years to transition to equal voting rights for each shareholder. With certain stocks having 10x more voting power, TDS takes shareholder money but does not give shareholders in return an equal voice in the company's management. Without an equal voice, shareholders cannot hold management accountable. Even though the Carlson family controls more than 51% of the voting power of TDS, this proposal receives ascending shareholder approval from 29% up to 36% support over 7 years. These 7-year yearly votes each represent majority votes from the non-insider TDS shares. Corporate governance advocates as well as many investors and index managers have pushed back on TDS type dual-class structures. There should be urgency in adopting this proposal says TDS stock is down sharply from $59 in 2007. Please vote yes, equal voting rights for each shareholder for Proposal 6.

Thank you, Ms. Macwan. For the reasons set forth in the notice of annual meeting, the TDS and proxy statement, the TDS Board of Directors recommends a vote against the shareholder proposal that has just been presented. To be approved, the shareholder proposal would require the affirmative vote of a majority of the votes that could be cast by the holders of Series A common shares and common shares of TDS voting as a group. In the election of 4 directors, the holders of common shares are entitled to 1 vote for each common share registered in their names. In matters other than the election of directors, the holders of common shares are entitled to [ 0.53-7-404 ] votes for each common share registered in their names at this meeting. The holders of Series A common shares are entitled to 10 votes for each Series A common share registered in their names. The Series A common shares vote with respect to all matters, except the election of the 4 directors elected solely by the holders of common shares. If you have not yet completed delivery of your proxies or ballots, please do so now since we will be closing the polls for voting at this time. It is now 9:16 on May 18, 2023, and the polls are closed for voting. Since the inspector of election has not informed me of any changes in outcome on any of the proposals, we will proceed with the announcement of the voting results at this time. With respect to the election of the directors, each of them received a plurality of the votes of the class of stock voting for such director. Accordingly, each of such persons has been elected as a Director of Telephone and Data Systems, Inc. for a term expiring of the 2024 Annual Meeting of Shareholders or until his or her successor shall have been elected and qualified. The proposal to ratify the selection of PricewaterhouseCoopers LLP as independent registered public accountants for 2023, has received the affirmative vote of holders of a substantial majority of the combined voting power of the Series A common shares and common shares. This proposal is therefore also approved. The proposal to approve the TDS compensation plan for nonemployee directors has received the affirmative vote holders of a substantial majority of the combined voting power of the Series A common shares and common shares. This proposal is therefore also approved. The proposal to approve on an advisory basis, the compensation of our named executive officers has received the affirmative vote of holders of a substantial majority of the combined voting power of the Series A common shares and common shares. This proposal is therefore also approved. With respect to the proposal to approve on an advisory basis, the frequency of future advisory votes on executive compensation every year has received a substantial majority of the votes exceeding the requisite vote of a plurality of the votes of the combined voting power of the Series A common shares and common shares. Accordingly, the shareholders will be considered to have recommended that the advisory vote on executive compensation should be held every year. The shareholder proposal did not receive the affirmative vote of a majority of the votes that could be cast by the holders of Series A common shares and common shares of TDS voting as a group, present in person or represented by proxy and entitled to vote with respect to such matter at this annual meeting. Accordingly, the shareholder proposal has not been approved. The inspectors of election will tally any additional votes received after the commencement of this meeting and prior to the closing of the polls and furnish a written report of the final vote count with respect to the matters voted on today, which will be included in the minutes of the meeting. These voting results will be reported on a Form 8-K that will be filed within 4 business days of today. Since there is no further business to come before this meeting, the meeting is adjourned. At this time, LeRoy T. Carlson Jr., will make a brief presentation. Ted?

Thank you, Walter, and good morning to all of you, and thank you from myself for joining us today. My comments today include forward-looking information, and therefore, I ask that you review this safe harbor statement. You can find the slides for this presentation on our Investor Relations website along with related SEC filings, which include a description of important factors that may cause our actual results to differ from forward-looking statements. At TDS, our mission is to provide outstanding communication services to our customers and to meet the needs of our shareholders, our associates and our communities. In pursuing this mission, we are investing in the TDS family of businesses to bring our customers high-quality wireless and broadband services that will position the company for long-term sustainability and growth. The wireless industry remains as competitive as ever. And in 2022, our subscriber results were challenged by extensive competition. In 2023, we continue to prioritize our efforts to stabilize our customer base. Despite the competitive wireless environment, UScellular had one of the highest average revenue per user or ARPU growth rates in the industry last year. A notable achievement and evidence of how much our customers value the services and products we provide. We also made significant progress on our multiyear network modernization program and nationwide rollout of 5G, which is now available on towers that carry 80% of our traffic. UScellular's focus remains -- I've got to get a drink of water here. UScellular's focus remains on connecting our customers to what matters most to them. We are concentrating on generating momentum in several areas of the business through effective pricing strategies, a strong value proposition and targeted customer life cycle management, we will look to improve momentum in our postpaid and prepaid businesses. To improve return on capital, we will maintain financial discipline while focusing on revenue growth. We have a multiyear cost optimization program in place to seek and realize efficiencies in both operating costs and capital expenditures. That program has provided numerous efficiency improvements over time, and we expect that to continue. UScellular's investments in 5G will continue in 2023. As we will further modernize and enhance our outstanding network, we will focus on the build-out of mid-band spectrum and plan to roll out mid-band service in targeted areas throughout 2023. And then across our footprint in 2024 when the C-band spectrum is cleared. As part of our ongoing government advocacy activities, we are advocating for funding opportunities through the Infrastructure Investment and Jobs Act, otherwise known as the IIJA. Now in 2022, TDS Telecom continued its transformation into a premier broadband provider. Making significant progress in upgrading speeds and deploying fiber technology in our incumbent and expansion markets. In addition, TDS Telecom expanded product offerings by delivering up to 8 gigabit broadband speed in its most recent expansion markets. We also launched service in new markets such as Billings, Montana as well as Janesville, Green Bay, Eau Claire and Chippewa Falls in Wisconsin. In 2023, TDS Telecom will continue to execute on our broadband growth strategy and passionately pursue our goal of reaching 1.2 million fiber service addresses passed by 2026. We will work to improve customer experiences, leverage federal and state broadband funding opportunities and complement our robust product offerings, which include high-speed broadband, best-in-class WiFi and enhanced TDS TV+ video services. I'd like to thank each of our shareholders, our debt holders and our associates for your support, which enables TDS to continue to serve our customers and provide them with high-quality and essential communication services at this time of their ever increasing needs for such services. Now I'll ask if there are any questions from our shareholders. If not, I will turn the floor back over to Walter.

Well, thank you, everybody, in the room here for attending, and thank you to everyone on the webcast for joining us. We look forward to speaking with you again next year around this time and to another successful year. Thank you, everybody.