TDS 1Q Net Down 14%, US Cellular Sees Net Customer Losses

Telephone & Data Systems Inc.'s (TDS) first-quarter profit dropped 14% as rising costs outpaced revenue gains, while its U.S. Cellular Corp.'s (USM) profit also declined on net customer losses.

U.S. Cellular--which accounts for the bulk of TDS's revenue--has been losing postpaid subscribers due to increasing competition in a wireless industry nearly saturated with cellphones. Big carriers have continued to add customers on the strength of marquee handsets.

TDS reported a profit of $41.6 million, or 40 cents a share, down from $48.4 million, or 45 cents a share, a year earlier. Revenue rose 3% to $1.26 billion.

Analysts polled by Thomson Reuters most recently forecast a 40-cent profit on $1.24 billion in revenue.

Operating expenses were up 4.6%.

Physical access lines slid 5.5% from a year earlier and 1.3% from the prior quarter.

Meanwhile, U.S. Cellular posted a profit of $34.1 million, or 40 cents a share, down from $47.4 million, or 54 cents a share, a year earlier. Revenue increased 3.2% to $1.06 billion.

Wall Street had forecast earnings of 41 cents on $1.05 billion in revenue.

Operating costs climbed 5.7% to $1 billion.

The carrier, which operates in 26 states, said it lost a net 39,000 customers during the period, compared with a prior-year gain of 6,000. It ended the period with about 6 million customers, down 1.9% from a year earlier.

Total average revenue per user increased 3.6% and postpaid churn--or turnover rate--dipped to 1.37% from 1.41%.

About 43% of devices sold were smartphones, up from 17% a year earlier.

TDS shares closed Thursday at $33.14 while U.S. Cellular finished at $48.50. Neither was active premarket.

-By Matt Jarzemsky, Dow Jones Newswires; 212-416-2240; [e-mail]