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TDS is getting $375 million in debt financing to fund its fiber expansion
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The fresh capital comes as TDS reached more than 100K residential broadband connections in expansion markets in Q1
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The company’s on track to reach 125K new fiber passings in 2024
More money is heading toward TDS Telecom’s fiber expansion. The operator last week announced it’s getting $375 million in debt financing by borrowing funds from Oaktree Capital Management.
The $375 million will be used for “general corporate purposes,” said the press release, including “the advancement of TDS Telecom's fiber build program.” The transaction is structured as a five-year loan, which the company can repay at any time.
TDS has ramped up its fiber builds in its home state of Wisconsin as well as across Idaho, Montana and the Pacific Northwest. The company ended 2023 with all of its expansion markets initially launched.
“Oaktree is excited to partner with TDS to support its critical fiber network investments,” said Milwood Hobbs Jr., Oaktree’s head of sourcing and origination, in a statement. “This capital will help enable TDS to provide reliable high speed broadband capacity to new and often underserved areas.”
The fresh capital came just as TDS reported its first quarter 2024 earnings. The operator reached more than 100,000 residential broadband connections in expansion markets in Q1, said CFO Michelle Brukwicki on Friday’s earnings call.
In its incumbent markets, TDS delivered fiber to 28,000 service addresses in Q1.
Fierce reached out to TDS to get more info on the $375 million financing.
“The proceeds will be used for general corporate purposes, including the advancement of our fiber build program by funding current capital plans. We reaffirmed our 2024 capital expenditure guidance of $310-$340M during our first quarter earnings call and expect to add 125,000 marketable fiber service addresses this year,” Brukwicki said in a statement to Fierce Network.
The year-end target is notably lower than the 200,000 passings goal for 2023. Brukwicki last November said TDS intended to slow its spending for 2024 and focus on “driving broadband penetration and revenues in our new fiber markets.”
There’s also money on the table from the government’s Enhanced Alternative Connect America Model (E-ACAM). TDS will accept $90 million per year in E-ACAM support to build fiber in 24 states.
According to Brukwicki, the E-ACAM funds will bring “a lot more fiber” into TDS’ ILEC footprint over the next few years.
“We are committed to pacing our capital spend this year in line with our profitability. For the next few years, we are balancing the priorities of both our fiber expansion program and the enhanced ACAM program,” she said. “We are carefully planning and engineering both programs to keep them progressing at a pace to meet our build commitments, that's also commensurate with our financing capacity.”
Open access is trending
One interesting question an analyst asked is whether TDS has considered entering the wholesale fiber space to offer broadband access to other ISPs (i.e; creating an open access network).
Open access fiber is picking up, what with AT&T’s Gigapower continuing its expansion and T-Mobile (which just announced it will acquire Lumos) partnering with open access providers to build out its nascent fiber broadband offering.
Is TDS interested in this space? Brukwicki said “we certainly do work with wireless companies” and “if there's a way for us to provide fiber to towers and for things like that, we certainly do that.”
“But in terms of opening it up and being a wholesale provider that's not where we're going [at this point],” she stated. “Our long-term vision is to own our networks and to serve our customers on those networks and we think that we can do a really great job of serving those customers.”
The numbers
TDS’ operating revenue for the quarter was $266 million, up 5% year over year from $253 million. Net income attributable to TDS shareholders was $12 million compared to a net loss of $9 million in the year-ago period.
At press time TDS’ stock (NYSE:TDS) was trading at $15.58, up 8.5% on the day. On the wireless side, we also covered earnings for TDS subsidiary USTelecom, so check that story out.