What’s going on with UScellular and its subscriber losses? It’s been losing customers left and right for multiple quarters now, most recently reporting 44,000 customers that jumped ship in the first quarter of 2022.
According to UScellular President and CEO Laurent “LT” Therivel, it’s been a rough couple of years, and when it comes to making a choice between subscriber aggressiveness and financial aggressiveness, it boils down to a balancing job – and one that UScellular has managed to do quite well.
Promotions in the U.S. have been going full bore the past two years, particularly when it comes to offers for phone upgrades, with AT&T offering the same deals to new and existing customers and Verizon "pulsing" in and out.
“It doesn’t make sense for us as a smaller player – when you’ve got AT&T and Verizon and T-Mobile being hyper aggressive – for us to ‘out aggressive’ them from a subscriber acquisition perspective or from a retention perspective,” Therivel told Fierce on Tuesday during an interview that covered a range of topics, from subscriber losses to fixed wireless access (FWA) opportunities.
Instead, Chicago-based UScellular is focused on the financial side, which is evident in ARPU, service revenue and operating cash flow, he said. One aspect to AT&T’s price increase that was announced last week: “I think it gives us the opportunity to go on offense a little bit,” he said.
UScellular’s share of gross adds is down slightly from 2021 but up compared with 2019 and 2020 for the first quarter, which isn’t bad in the face of an aggressive promotional environment, according to Therivel.
“The real opportunity for us is churn,” he said. It’s got a series of moves teed up in the next couple of months that are going to be specifically addressing churn. The first salvo: On Friday, UScellular said it’s not going to raise prices for existing customers through 2023.
Whether it’s inflation or the threat of a recession, it’s a challenging environment for customers, Therivel noted. Telecom operators tend to enter recessions late and exit early. “I’m not going to say we’re recession-proof, but we’re certainly recession resilient, and we see an opportunity to take some of that ARPU strength that we have and financial strength” and invest that into customer retention, he said.
Changing tides of competition
UScellular operates in 21 states and in a lot of those states, it only operates in parts of the state. For example, it operates in a sliver of northern California. If you see a UScelluar store, it probably means it owns network licenses there.
Historically, UScellular’s primary competition has been Verizon. But cable companies are making more inroads into wireless, mainly as MVNOs, and Dish Network is preparing to enter the space as a fourth U.S. carrier.
For UScellular, the trends seen nationally over the past few quarters have been more muted, according to LT. It sees cable in about 50% of its footprint, so while cable has made inroads into wireless, it’s more prevalent on a national scale than in the markets where UScellular competes with its own network.
T-Mobile certainly has placed a much larger marketing blitz behind its portion of rural America, going as far as to claim roaming partners aren’t going to be necessary if it keeps up its aggressive build.
“We’re certainly seeing a lot more marketing from T-Mobile and we did in the first quarter see a slightly higher share of gross adds from T-Mobile than we’ve seen in past quarters,” Therivel said. In past quarters, T-Mobile’s share has pretty much been the same as it’s always been. “We generally have not seen meaningful progress from T-Mobile in the areas in which we compete.”
To be sure, T-Mobile is a strong marketing machine. “They do a good job getting their message out there,” he said, noting that it will be interesting to see if they’re able to back it up with network execution and hang onto the customers that they acquire.
5G footprint & FWA opportunity
UScellular has 5G operating on towers that carry over 50% of its traffic. 5G devices are in the hands of about 35% of its customers. It started with towers that carry the largest amount of traffic and it’s staying on track in terms of upgrades.
Customers are interested in 5G, which generally offers a better speed and latency experience, but in terms of really offering something above and beyond 4G LTE in the consumer space, 5G so far falls short in that department.
Customers are coming in because they want a faster experience but there’s no one “thing” that they need to do with 5G. In the LTE world, mobile video served that purpose. In 5G, the world is still waiting.
The one exception is fixed wireless to the home, he said. UScellular has about 60,000 FWA customers in total, with the vast majority on its low-band offering, and it’s mostly LTE.
As it rolls out millimeter wave for FWA, which it recently launched in 10 cities, and it brings C-band and 3.45 GHz online, it will be able to substantially expand where it can offer Home Internet+, offering 300 Mbps to the home. Currently, it’s offering that in areas where there’s DSL or satellite but really no alternative for fast broadband.
That’s a 5G consumer use case that is exciting, but that’s different than the business side, according to Therivel.
The other appealing thing about FWA is the ability to take advantage of infrastructure funding. It costs about $600,000 to put up a tower in rural America. Right now, the mmWave and mid-band deployments are being done on existing towers.
But it has the opportunity to put new towers in place – UScellular owns its towers and is the fifth largest tower company in the U.S. – and it plans on expanding its tower portfolio. To do that, it has to reach a lot of households in order for the economics of that new tower to pencil out.
If it uses infrastructure funding to put up that tower, it can then afford to put towers in places that weren’t economical in the past and offer service to households that didn’t have it before, he explained.
It’s a topic he planned to discuss at the CTIA 5G Summit in Washington, D.C., on Tuesday.
“The fixed wireless business – the reason I’m talking about it so much – is not because of 60,000 customers on an LTE-based product,” he said. “It’s because we know how to sell this. We know customers want it” and the combination of mid-band and mmWave spectrum coming online and infrastructure funding makes it attractive, he said.
The main source of government funding is the Infrastructure Investment and Jobs Act (IIJA). He expects rules around those funds will come out in the next month or two, and funds will get distributed to the states. It’s unknown how much, but at least $8 billion is expected to go toward areas where UScellular has a footprint, so it’s a big opportunity.
Some of that will get invested in fiber, “as it should,” he said, but a lot of it should go to covering areas that aren’t reached with fiber, either due to economics or time.
Fiber vs. wireless
If someone can get fiber to the home in an economical way, Therivel is all for that.
But he has no interest in using FWA to compete with fiber. “There’s a lot of places where fiber’s not going to reach,” he said. UScellular wants its FWA to be in places where it can serve as many customers as possible, so if it’s hilly or difficult terrain, mid-band spectrum will provide the better solution.
There are many places in Nebraska, Iowa and Wisconsin where there’s a nice combination of demographics where it doesn’t make sense to serve those households with fiber, but the topography lends itself to mmWave and it can serve those customers with a really good product, he said.
“The millimeter wave frankly is a bridge to mid-band,” he said. The company has spent more than $2 billion on CBRS, C-band and 3.45 GHz mid-band spectrum – a lot of money for a company its size.
“In the long run, you take C-band and you take the 3.45, that will be a more cost-effective way to serve most of our customers with fixed wireless, so I sort of see millimeter wave as that bridge” between the low-band spectrum and the mid-band spectrum that will serve a lot more people.
UScellular’s C-band licenses get cleared at the end of 2023. In the second half of this year, it will start putting in radios that can carry C-band, but won’t light them up until the spectrum is cleared. It hasn’t yet announced deployment plans for the 3.45 GHz spectrum, but it’s likely to get rolled out toward the back end of this year and in 2023.