TDS
Telephone And Data Systems Inc
TMT, Event Driven/Special Sit
04/24/2017
Presented
| Date | 04/19/2017 |
| Price | $27.05 |
| Market Cap | $2.98B |
| Ent Value | $5.33B |
| P/E Ratio | 69.52x |
| Book Value | $37.67 |
| Div Yield | 0.02% |
| Shares O/S | 110.00M |
| Ave Daily Vol | 723,232 |
| Short Int | 1.49% |
Current
| Price | $24.74 |
| Market Cap | $2.80B |
| Telephone & Data Systems, Inc. operates as a diversified telecommunications company, which provides wireline and cable broadband, video and voice services. The company operates its business through following segments: U.S. Cellular, Wireline, Cable, and Hosted & Managed Services. The U.S. Cellular segment provides wireless telecommunications services to the customers. The wireline segment is to focus on broadband offerings and be the preferred communications solutions provider in its markets for both residential and commercial customers by developing and delivering high-quality broadband, video and voice products and services that meet or exceed customers needs, and to outperform the competition by delivering superior customer service. The Cable segment is to expand broadband offerings while leveraging the company's existing processes, procedures, shared support teams, commercial expertise, and customer service focus. The Hosted and Managed Services segment aims to grow recurring revenues from mid-market businesses by leveraging core competencies in network management, information technology, customer service and reliability to take advantage of the growing information technology outsourcing marketplace. Telephone & Data Systems was founded by LeRoy T. Carlson in 1968 and is headquartered in Chicago, IL. |
Publicly traded companies mentioned herein: AT&T Inc (T), Sprint Corp (S), Telephone and Data Systems Inc (TDS), T-Mobile US Inc (TMUS), United States Cellular Corporation (USM), Verizon Communications Inc (VZ)
Highlights
The presenter is long shares of Telephone and Data Systems (TDS) and United States Cellular (USM) at $27 and $37, respectively. He briefly explained the history of the companies (TDS owns ~84% of USM, and ~95% of the voting rights), and how they became established players in the Chicago market. TDS shares recently pulled-back to the mid-$20s from the low-$30s due to the market’s perception that the management team is not willing to sell the business (the M&A premium came out of the stock). However, he disagrees with this perception and said he thinks management “has a good poker face”. For example, TDS unexpectedly sold Aerial to Voicestream in the late ‘90s. Without a path to a mid-20%s EBITDA margin, and with another competitor coming into the market (T-Mobile), they will have to explore options. At $27, the risk/ reward is favorable as downside should be limited due to the value of the spectrum and tower assets, as well as a 5x EV/ EBITDA multiple on TDS’s 2017 estimates. On the upside, the stock should be worth at least $55 (assuming USM is worth $70+).
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