During the recent Citi Global TMT Conference, TDS Telecom CFO and senior vice president of finance Michelle Brukwicki, said the organization is in the middle of transforming into a fiber-based company.
“We started on this journey, in earnest, a couple of years ago,” she said, “and we are in the middle of it, and this is what’s going to take us into the next several years as we keep going down this path.”
Brukwicki explained that the transformation involves upgrading the legacy networks and installing 100% fiber in new builds.
“We believe fiber is the winning technology out there,” she said, “and so we started with upgrading ourselves, our copper facilities to fiber, probably about ten to twelve years ago, and we’ve been doing that constantly over that time period.”
Brukwicki said TDS Telecom has taken its model of building and running fiber networks outside of its existing geographies and is moving into new territories; she reported that the company is the fiber overbuilder in about 100 new communities.
“We have worked for the last couple of years to get those communities to some stage of initially launching,” she said, “getting the fiber built to a point where we can initially launch and start serving some customers. And these are going to be multi-year builds, so that’s what’s going to take us into the next few years.”
Breaking down the markets
Brukwicki said there are different ways to analyze TDS Telecom’s service address: by the technology used or by market type. She reported that when broken down by technology, about half of the company’s 1.7 million service addresses are fiber, about a quarter are copper, and about a quarter are DOCSIS 3.1 on its hybrid fiber coax (HFC) networks.
When looking at service addresses by market type, about 800,000 service addresses are in the ILEC markets, about 500,000 are in the cable markets, and about 400,000 are in its expansion markets, which are 100% fiber.
“The ILEC market is about 44% fibered-up today, and that will just keep growing,” said Brukwicki, “especially with E-ACAM over the next few years. Having that governmental program to help us get fiber even deeper into rural America where it would be uneconomical to do it on our own, that’s going to be a really nice path forward for those ILEC markets.”
She reported that the 500,000 service addresses in its cable markets are primarily DOCSIS 3.1.
“We’re about 17% fiber in our cable addresses,” she said. “We will never probably overbuild all of our cable addresses with fiber, but any new addresses, any growth, we certainly will, and we will do cable selectively as a potentially competitive response to other actions.”
Focus on fiber sales
Brukwicki explained that TDS Telecom ramped up capital spending in 2022 and 2023 to reach new markets and increase service addresses but is now slowing down spending and shifting focus to selling into the new addresses.
“Last year, in 2023, we exceeded our service addresses delivered,” she said. “We were shooting for about 200,000, and we ended up with about 217,000 marketable fiber addresses added last year.”
Brukwicki also reported that broadband net adds are coming in slower than the company had expected, but she pointed out reasons for the shortfall:
“In our expansion markets, we realize that in a few of our areas we needed more door-to-door staffing people—that’s a good news story because we can fix that, and we’ve got that all rolling forward,” she said.
She said that permitting delays are also affecting when broadband net adds are being recorded, but the issue is a matter of timing and will be worked through.
Brukwicki also reported that there are threats in the company’s legacy cable markets, like ILECs upgrading to fiber or fiber overbuilders creeping in. TDS Telecom’s response to threats in legacy markets will likely come down to the specific market.
“We’re not going to just go in and overbuild ourselves with fiber everywhere as a competitive response,” said Brukwicki. “Sometimes that might make sense in cable, but not always, so that’s where you look then for retention offers, maybe some marketing campaigns, speed upgrades, things like that in order to compete and defend your market share in those markets.”
Despite underwhelming net adds, Brukwicki reported that the company is performing well in terms of profitability.
“In our expansion markets, we’re finding that we’re operating those networks even more efficiently than we had assumed in our business cases,” she said, “and that’s adding to our profitability. And our entire organization is really motivated to be as efficient as we possibly can: we are watching our hiring, we’re watching our T&E, we’re streamlining processes.”
Preparing for future growth
Brukwicki reported that TDS Telecom chose areas of high, long-term growth when selecting its expansion markets.
“We go into an area, and there’s usually a cluster of markets,” she said. “Maybe you have a core market that you start with, and then there are other surrounding communities, and they’re high growth areas. And so these markets that we’re going into should be able to continue showing growth for us for many years to come.”
Brukwicki also said that TDS knows that endless organic growth will not be possible, and the company is prepared to shift its focus toward acquisitions down the line.
“We realize that not everybody who is investing in fiber maybe has the same objective and same strategy,” she said. “So, there may be builders and network owners who want to get out and turn it over to a long-term operator.”
She said it doesn’t make sense to keep adding new communities to TDS’s funnel if the communities are already being fibered up by other companies.
“The organic growth path will probably slow down here pretty soon in the next few years,” she said, “but at that point, perhaps there will be acquisition opportunities that we would definitely want to be ready for because we are a long-term operator: we build the networks, we want to own the customers, we want to serve the customers.”
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Hayden Beeson
Hayden Beeson is a writer and editor with over seven years of experience in a variety of industries. Prior to joining Lightwave and Broadband Technology Report, he was the associate editor of Architectural SSL and LEDs Magazine.