US Cellular 2015 Annual Report Download - page 23

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30MAR201620541628
Service revenues consist of:
ᔢCharges for access, airtime, roaming, recovery of regulatory
costs and value added services, including data products
and services (‘‘retail service’’)
ᔢCharges to other wireless carriers whose customers use
U.S. Cellular’s wireless systems when roaming
ᔢAmounts received from the Federal USF
ᔢTower rental revenues
Equipment revenues consist of:
ᔢSales of wireless devices and related accessories to new
and existing customers, agents, and third-party distributors
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2013 2014 2015
Equipment
Other
Service
Inbound
Roaming
Retail
Service
Key components of changes in the statement of operations line items were as follows:
2015-2014 Commentary
Total operating revenues
Service revenues decreased as a result of (i) a decrease in retail service revenues driven by industry-wide price
competition, including discounts on shared data plans provided to customers on equipment installment plans and those
providing their own device at the time of activation or renewal; and (ii) reductions in inbound roaming revenue driven by
lower roaming rates. Such reductions were partially offset by an increase in the average customer base, continued
adoption of shared data plans, and the $58.2 million of revenue recognized in 2015 from unredeemed rewards points
upon termination of U.S. Cellular’s rewards program.
Revenue representing amounts received from the Federal USF for the year ended December 31, 2015 was $92.1 million,
which remained flat year over year. Pursuant to the FCC’s Reform Order (‘‘Reform Order’’), U.S. Cellular’s current Federal
USF support is being phased down at the rate of 20% per year beginning July 1, 2012. The Phase II Mobility Fund was
not operational as of July 2014 and, therefore, as provided by the Reform Order, the phase down was suspended at
60% of the baseline amount. U.S. Cellular will continue to receive USF support at the 60% level until the FCC takes
further action. At this time, U.S. Cellular cannot predict what changes that the FCC might make to the USF high cost
support program and, accordingly, cannot predict whether such changes will have a material adverse effect on U.S.
Cellular’s business, financial condition or results of operations.
Equipment sales revenues increased due primarily to an increase in average revenue per device sold driven by sales
under equipment installment plans, a mix shift to smartphones and connected devices and an increase in accessory
sales, partially offset by a decrease in the number of devices sold. Equipment installment plan sales contributed
$350.7 million and $190.4 million in 2015 and 2014, respectively.
System operations expenses
Maintenance, utility and cell site expenses increased $13.3 million, or 4%, reflecting higher support costs and utility
usage for the expanded 4G LTE network and the completion of certain tower maintenance and repair projects.
Expenses incurred when U.S. Cellular’s customers used other carriers’ networks while roaming increased $19.4 million,
or 11%, driven primarily by an increase in data roaming usage, partially offset by lower rates and voice volume.
15
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total Operating Revenues
(Dollars in millions)