U.S. Cellular (USM), the wireless subsidiary of Telephone and Data Systems (TDS), has reportedly expanded its 3G wireless broadband coverage with service launches in eastern North Carolina, greater Portland and southern Maine. The sixth largest wireless carrier in the US is deploying its 3G network based on the Evolution Data Optimized (EV-DO) 3G wireless technology.
The company currently has a wireless network that consists of nearly 7,000 cell sites. U.S. Cellular is primarily focused on the post-paid market segment, which is delivering respectable customer growth on a consistent basis.
In order to drive wireless growth, U.S. Cellular is increasingly focused on upgrading its CDMA-based wireless network with EV-DO capabilities. This advancement increases the throughput of data transmissions (by approximately 10 times) on its network comparable to the offerings by other nationwide cellular carriers.
Driven by strong demand of smartphones and associated data services, U.S. Cellular decided to expand the deployment of EV-DO technology and services in additional markets, given the revenue potential that can be tapped through the deployment of advanced features. The company registered a three-fold year-over-year increase in smartphones and premium device sales in 2008, boosted by the EVDO network capability.
During late 2008, the company expanded its EVDO coverage to include Chicago and selected markets in Iowa, Oklahoma and Wisconsin. U.S. Cellular plans to further expand the EVDO service in 2009 covering remaining regions of Iowa, Tennessee and North Carolina, with a target to achieve 75% penetration of the post-paid customer base.
U.S. Cellular plans to upgrade more than 60% of its total cell sites with EV-DO by the end of 2009, a significant increase from approximately 23% coverage achieved in 2008. The cost of deploying this technology has already been included in the 2009 capital expenditure guidance of approximately $575 million.
We believe this technology upgrade initiative is expected to improve ARPU (average revenue per user) and minutes-of-use through roll-out of advanced data services. However, the company’s aggressive 3G roll-out plan during 2009 may strain finances should capital expenditures be required beyond management’s expectations to keep networking technologically competitive.
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