WEBVTT - UScellular's Plan to Bridge the Digital Divide

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Tim

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<v Speaker 1>Stenebeck on Bloomberg Radio.

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<v Speaker 2>Let's talk utility, is Matt. When I think of utilities,

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<v Speaker 2>or when I think most people, they think of water,

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<v Speaker 2>you know, electricity that you know, the bills you pay

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<v Speaker 2>every month. I wan't go throw a broadband in there.

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<v Speaker 2>I mean, when you put it on the to do

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<v Speaker 2>list of utilities, you got to pay every month. Broadbands

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<v Speaker 2>right up there. Yeah, when the power goes out, what's

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<v Speaker 2>the biggest concern you have, I can't charge my phone

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<v Speaker 2>exactly so, and if people are all huddled in the

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<v Speaker 2>Starbucks and things like that. But a lot of the country,

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<v Speaker 2>some of the country is still not served by really

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<v Speaker 2>good broadband. There's a company out there that's trying to

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<v Speaker 2>fix that. US Cellular, and we have the president's CEO

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<v Speaker 2>of laurent uh their re All, who goes by the

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<v Speaker 2>nickname of LT. We're gonna go that makes things out

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<v Speaker 2>like that, Yeah, that makes it. He's here in New

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<v Speaker 2>York Giants country here we like the LT. He's a

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<v Speaker 2>president CEO of US Cellular. It joins us on Zoom

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<v Speaker 2>from Chicago.

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<v Speaker 1>And a Bob Mold fan apparently really, I'm a huge

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<v Speaker 1>fan of Bob Mould. I mean, I loved Who's Kerdo

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<v Speaker 1>when I was a kid. But when I lived in

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<v Speaker 1>Berlin a couple of years ago, I was so happy

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<v Speaker 1>to learn that he lived there too, and I got

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<v Speaker 1>to drop in on a couple of very small shows.

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<v Speaker 1>I'm talking like forty fifty people.

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<v Speaker 2>You got to tell me who was Bob Holt?

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<v Speaker 1>He was the lead singer of whosker Do and now

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<v Speaker 1>he has a great solo career.

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<v Speaker 2>No no idea, Okay, no idea?

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<v Speaker 1>What eltea?

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<v Speaker 2>We're going to move on from that. LT, so talk

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<v Speaker 2>to us about kind of where we are in the

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<v Speaker 2>deployment of decent quality broadband across this country. Where are

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<v Speaker 2>we today and where do you guys need to take it?

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<v Speaker 3>Maybe so you reference to the concept of a utility,

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<v Speaker 3>and one of the things that the pandemic in particularly

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<v Speaker 3>really laid bare was just how critical broadband and broadband

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<v Speaker 3>connectivity is.

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<v Speaker 4>The numbers can be debated, but generally you.

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<v Speaker 3>Can think of over ten million Americans as not having

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<v Speaker 3>access to high speed, high quality broadband. That definition is

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<v Speaker 3>you can think of it as there's two definitions. The

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<v Speaker 3>government uses unserved and underserved Americans. Underserved is below under

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<v Speaker 3>getting access to one hundred megabet connection unserved as you've

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<v Speaker 3>got less than twenty five megabits. The key number is

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<v Speaker 3>you've got at least ten million Americans who don't have access.

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<v Speaker 4>And I have twin daughters. We went through the pandemic.

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<v Speaker 3>With them doing school from home, and I can't imagine

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<v Speaker 3>how difficult it would have been for them to thrive

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<v Speaker 3>and survive without high quality broadband.

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<v Speaker 4>And so it's a national issue. It's also a very

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<v Speaker 4>personal issue for our business.

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<v Speaker 3>So our business, we're a wireless company, we focus primarily

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<v Speaker 3>on rural America. We're the fourth largest wireless business in

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<v Speaker 3>the United States, four billion dollar revenue, five million subscribers.

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<v Speaker 3>We connect our customers throughout the US, but our focus

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<v Speaker 3>is somewhat more on rural America. The largest city is

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<v Speaker 3>that our network covers, or cities like Milwaukee or Tulsa,

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<v Speaker 3>and so mostly we focus on covering people who sometimes

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<v Speaker 3>don't have access to the atts and the verieton.

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<v Speaker 2>So what's the technology, lt what's the tech technology? When

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<v Speaker 2>I got to rule America, I'm talking rural America, and

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<v Speaker 2>you know, the phone companies or the cable companies aren't

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<v Speaker 2>going to string wires up, they're not going to dig

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<v Speaker 2>up the ground. What's the technology? Can you explain to

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<v Speaker 2>technology that gets broadband to those parts of the country.

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<v Speaker 3>So generally you would have access through one of three things.

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<v Speaker 3>Currently you would have access if you have a phone

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<v Speaker 3>company DSL, which obviously is a very low quality kind

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<v Speaker 3>of signal. Maybe you could have access to satellite, which

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<v Speaker 3>has a lot of challenges in and of itself. We've

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<v Speaker 3>been rolling out of technology called fixed wireless Access. We're

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<v Speaker 3>very excited about it. It uses the existing mobile infrastructure,

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<v Speaker 3>so think things like mobile towers, and what we use

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<v Speaker 3>is the radios on those towers that currently serve mobile

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<v Speaker 3>phones in the area. We dedicate a portion of that

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<v Speaker 3>radio capacity to serving homes and to serving businesses, and

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<v Speaker 3>so we're connecting people that without us would not be connected.

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<v Speaker 3>We've seen a ton of uptake of the technology, so

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<v Speaker 3>we've doubled our subscriber base on this over eighteen months.

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<v Speaker 3>We're about to cross one hundred thousand subscribers. It's a

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<v Speaker 3>great way to connect rural America. It's not isolated to

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<v Speaker 3>rural Some of our competitors are also pushing it in

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<v Speaker 3>urban markets. It's a really interesting way to connect homes

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<v Speaker 3>and businesses that maybe in the past wouldn't have had accidents.

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<v Speaker 1>Yeah, I was actually last week I was talking with

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<v Speaker 1>John Scully about this, and he's the CEO of AT

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<v Speaker 1>and T, and I think for a while they weren't

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<v Speaker 1>to end of the technology. Now they're fully behind it.

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<v Speaker 1>So what's your competition, like, I mean, do they go

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<v Speaker 1>out to those places as well or is it sort

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<v Speaker 1>of two small potatoes to them to try and connect

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<v Speaker 1>these people. What's it like fighting against a giant like telephone.

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<v Speaker 3>Well, you know, it's interesting that you mentioned it right now.

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<v Speaker 3>Our competition isn't there we're worried about with this technology,

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<v Speaker 3>with the fixed wireless technology is connecting people that without

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<v Speaker 3>it aren't connected. And so we actually don't compete too

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<v Speaker 3>much against the Atts and the rises and the T

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<v Speaker 3>mobiles in the space. We're all trying to figure out

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<v Speaker 3>how to bring these types of connections to the home

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<v Speaker 3>into the business in a way that's economical. The challenge

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<v Speaker 3>that I face and John Stankey from AT and T

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<v Speaker 3>faces it, as does Verizon, as does T Mobile. What

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<v Speaker 3>we face is the challenge of how to connect people economically,

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<v Speaker 3>we want.

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<v Speaker 4>To connect these folks. These are not people that either.

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<v Speaker 3>We, the wireless carriers or our wireline competitors want to

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<v Speaker 3>leave behind the challenges. It's really difficult, it's really expensive

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<v Speaker 3>to connect these folks. And in DC there's a program

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<v Speaker 3>Bad the Bad Program and portion of the Infrastructure Investment

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<v Speaker 3>in Jobs Act. It's taking forty six billion dollars and

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<v Speaker 3>it's putting it towards connecting unconnected Americans, which is fantastic.

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<v Speaker 3>The challenge is that there's also a vision in DC

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<v Speaker 3>of let's connect everyone with fiber. And that sounds great

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<v Speaker 3>when you're sitting in an office building in DC. When

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<v Speaker 3>you spend time in rural America the way I do,

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<v Speaker 3>and you pass through farmhouses in Iowa or ranches in Wyoming,

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<v Speaker 3>it's very difficult to connect.

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<v Speaker 4>Those homes those businesses with fiber.

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<v Speaker 3>And that's where our technology comes in, and we think

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<v Speaker 3>we have a way to combine fiber and fixed wireless

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<v Speaker 3>and the forty six billion dollars that's coming from the

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<v Speaker 3>government and to truly connect every single American.

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<v Speaker 4>That's not been something that's been.

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<v Speaker 3>Possible in the past, and now it can be a

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<v Speaker 3>reality because of the combination of the technology that we're

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<v Speaker 3>bringing to the table as well as the funding with

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<v Speaker 3>the government's offer.

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<v Speaker 2>But that's not cheap lt. I'm looking at the FA

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<v Speaker 2>function the Bloomberg terminal, which has financial analysis, and I

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<v Speaker 2>see capex of you know, six hundred and fifty seven

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<v Speaker 2>hundred million dollars a year. You've got you know, four

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<v Speaker 2>billion dollars of kind of net debt on the balance sheet,

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<v Speaker 2>you know, less than a billion dollars of ebitita. So

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<v Speaker 2>how do you finance this going forty I don't have

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<v Speaker 2>you free cash flow positive here. I'm not sure, but

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<v Speaker 2>you're right about it. So how are you going to

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<v Speaker 2>finance a continued growth here?

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<v Speaker 3>So that's really where the government infrastructure comes in. It

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<v Speaker 3>costs between six hundred and fifty thousand to a million

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<v Speaker 3>dollars to put a cell tower in rural America. In

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<v Speaker 3>order to break even on that cell tower, I have

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<v Speaker 3>to have between two to three hundred fixed wireless customers

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<v Speaker 3>within seven kilometers of that tower.

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<v Speaker 4>That math doesn't work right now.

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<v Speaker 3>If you've got two hundred and fifty to three hundred

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<v Speaker 3>customers in a fairly dense area, we'll have them connected.

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<v Speaker 3>The challenge is people who are more sparse, and so

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<v Speaker 3>we're working with states to take these infrastructure dollars and

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<v Speaker 3>help us bring the cost that we have to bear

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<v Speaker 3>of that tower from between six hundred and fifty two

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<v Speaker 3>a million. If I can bring that cost down to

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<v Speaker 3>two hundred down to one hundred, all of a sudden,

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<v Speaker 3>I can connect a lot more Americans, and I can

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<v Speaker 3>with simply the dollars on.

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<v Speaker 4>Our balance sheet.

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<v Speaker 3>The other benefit that comes along with it, by the way,

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<v Speaker 3>is that when we put that tower in rural America

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<v Speaker 3>and I send my engineers up to connect homes and

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<v Speaker 3>businesses with fixed wireless, we don't just do it with

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<v Speaker 3>fixed wireless. We're also putting our five G mobile spectrum

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<v Speaker 3>and mobile radios up on top of that tower. So

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<v Speaker 3>now we're connecting that whole area with mobile five G.

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<v Speaker 3>People want to be connected on their mobile phones the

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<v Speaker 3>same way we want to be connected in their homes

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<v Speaker 3>and their businesses.

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<v Speaker 4>And we can do both.

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<v Speaker 1>What's the next what's the next thing LT after five G?

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<v Speaker 1>I mean, I assume it's going to be called six G.

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<v Speaker 1>But is there something that's going to be more connective

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<v Speaker 1>and more easy and easy, easier to deal with the.

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<v Speaker 3>Path for our industry has always been you put more

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<v Speaker 3>capacity out there for people to use, more capabilities out

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<v Speaker 3>there for people to use, and they will find a

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<v Speaker 3>way to use it. And so both we and our

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<v Speaker 3>competitors and other folks in the industry, we're starting to

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<v Speaker 3>think about sixty. The more important thing, I think is

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<v Speaker 3>the capabilities that we're going to provide higher speeds, the

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<v Speaker 3>ability to connect millions and billions of devices to our network,

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<v Speaker 3>so truly allowing this network of sensors to take and

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<v Speaker 3>finally bringing latency them. And so if you think about

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<v Speaker 3>things like drones right now, running a drone outside of

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<v Speaker 3>line of sight is very difficult.

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<v Speaker 4>Connectivity.

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<v Speaker 2>We can do that, all right, LT, thank you so

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<v Speaker 2>much for joining us.

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<v Speaker 4>LT.

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<v Speaker 2>Theravoll, President, CEO of US, leader joining us on Zoom

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<v Speaker 2>from Chicago,