Greetings, and welcome to the TDS and U.S. Cellular First Quarter 2016 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jane McCahon, Senior Vice President, Corporate Relations at TDS. Thank you, Ms. McCahon. Please begin. Jane W. McCahon: Thank you, Melissa, and good morning, everyone. Thank you for joining us. I want to make you all aware of the presentation we prepared to accompany our comments this morning, which you'll find on the Investor Relations section of the TDS and U.S. Cellular websites. With me today and offering prepared comments are: From U.S. Cellular, Ken Meyers, President Chief Executive Officer; Steve Campbell, Executive Vice President and Chief Financial Officer; and John Gockley, Vice President, Legal and Regulatory Affairs. From TDS Telecom, Vicki Villacrez, Vice President, Finance, and CFO. This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations websites. Please see the websites for slides referred to on this call, including non-GAAP reconciliations. As a reminder, we provide guidance for both operating cash flow and adjusted EBITDA. For TDS Telecom, these are basically the same number. For U.S. Cellular, however, the adjusted EBITDA measure includes imputed interest income from EIP and the significant contributions from our partnership, which we want to continue to highlight for investors. The information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the safe harbor paragraph in our press releases and the extended version in our SEC filings. To update you on capital allocation in the quarter, TDS paid $16 million in dividends and repurchased $2.5 million of its shares, a modest number, although we did not acquire any cable assets in the quarter. As mentioned on the year-end call, U.S. Cellular filed a short-form application for the upcoming auction for 600 megahertz spectrum, known as Auction 1000. As the anti-collusion rules are now in effect, we're prohibited from speaking about it further, so we will not be entertaining any of the questions related to spectrum. Shortly after we released our earnings and before the call, TDS and U.S. Cellular filed their SEC Forms 8-K, including today's press releases, and their Form 10-Qs. Later this month and prior to our annual meeting, we plan to be out on the road in New York and Boston. Our annual meetings are in the week of May 23, and we will be webcasting those for your convenience. Also keep in mind that TDS has an open-door policy. So if you're in the Chicago area and would like to meet with members of management, the IR team will try to accommodate you, calendars permitting. Now I'll turn the call over to Ken Meyers.

Good morning. Turning to Slide 4, I'm pleased with our start for the year. Subscriber growth on data-centric devices showed a nice pickup. Churn remains low, actually improved, and expense control remained tight. Cash flow was down slightly, as anticipated in our original guidance, showing the impact of the pickup in growth year-over-year as well as industry-wide pricing tension. Let's start by reviewing customer growth, our top priority. It was our objective to get the year off to a strong start as those customers we add now contribute to our performance all year long, and we saw some solid performance in the quarter. While handset gross adds were flat year-over-year, smartphone adds increased almost 4%. And connected devices, primarily tablets, were up 21%. Sales of feature phones continue to decline. Smartphones represented 93% of all postpaid handset gross adds this quarter, up 400 basis points from a year ago. Given the implications of the decline in switching activity across the industry, we are working to refine our value proposition and increase awareness of both our network quality, including our 4G coverage, and the availability of Apple and other iconic devices. It is still very encouraging that 21% of our gross adds are previous customers coming back to us. Last quarter, I talked about a few initiatives we had underway to drive customer growth in 2016. Let me expand a little on one in particular. We have intensified our focus on serving the small- and medium-sized business customers, including local and regional government entities. This is an under-penetrated market for us and yet, it is one perfect for us given our local positioning. In the first quarter, we saw gross adds from our SMB segment up 48%. Albeit off a relatively small base, but the point is we are definitely making progress in this area. Also, I'm particularly encouraged by our continuous improvement in churn and especially postpaid churn. Smartphone net adds were just over 20,000 in the quarter compared to about 3,000 a year ago. About 25% of that increase is due to the pickup in gross adds I mentioned earlier, and the other 3/4 of the pickup is due to improved churn. We all know churn is usually an outcome of something gone wrong. So we stay very close to our customers. We're constantly measuring customer engagement and adjusting our business practices and services to better meet their needs. Our survey showed this strategy is working as customer engagement is moving in the right direction, giving new reason for optimism about our ability to drive handset churn even lower in the future. To strengthen alignment around this customer-focused strategy, we've actually made customer engagement a company-wide measurement for success. So in sum, net postpaid customer additions totaled 45,000, up significantly over the 9,000 postpaid net adds generated last year, driven by smartphones and tablets. Our customers' overall satisfaction is largely influenced by our network strategy. Last year, we completed our deployment of 4G/LTE. It now reaches 99% of all of our postpaid customers, providing an excellent network experience in our suburban and rural markets. Additionally, with multiple 4G roaming agreements now in place, our customers can receive better data experiences as they travel too. Finally, our network team is working toward our first commercial deployment of VoLTE, voice over LTE, early next year. Our device portfolio remains very competitive, and we've seen some strong performance from the new Samsung Galaxy S7. Also, we have introduced expanded offerings on equipment installment plans, which have been well-received by our customers, as you can see with the take rate of 69% of postpaid sales to end users in the quarter. Growing our customer base is not enough, however, we must also capture additional revenue growth. The improvement in our smartphone portfolio and our expanded 4G network have steadily increased postpaid smartphone penetration, which now stands at 75% of the postpaid handset base. While notable progress has been made, we still have an opportunity to drive additional revenue by converting more of our feature phone users to smartphone users. Our Shared Connect data plans allow us to capitalize on the increasing data consumption so long as competitive pricing doesn't give away all of that future growth opportunity. Connected devices provide an opportunity to meet expanding customer needs while driving store traffic, increasing data usage and revenue per account. The same time, the more we meet multiple customer needs, the more important our collective services become to our customers and the lower risk we face of customer churn. As I discussed in February, another strategic priority for 2016 is to reduce unit costs. As has been reported by others in the industry, we are seeing our customers holding onto their devices longer, which resulted in a 7.6% upgrade rate for the quarter. While this is low by historic standards, it is a slight increase from the most recent trend, impacted, I believe, by the successful launch of the Galaxy S7 to our customer base, which owned a good number of earlier Samsung models. Improved pricing on subsidized handsets, combined with the EIP higher take rate, resulted in a 41% decline in loss on equipment per unit. Another example of our progress in this area would be an 11% reduction in general and administrative expenses per average customer and a 7% reduction in systems operation expense per average customer. In summary, we're off to a solid start. Not a great start, not yet reaching aspirational levels, but a solid start with improved customer results leading the way. Now let me turn the phone call over to Steve Campbell. Steve?

Thank you, Ken, and good morning, everyone. I'll begin with a few additional comments on customer results, which are shown on Slide 5 of the presentation. As Ken already mentioned, we grew our customer base during the first quarter with 45,000 postpaid net additions, a significant increase from 9,000 net additions a year ago. The growth was driven by positive results in both gross additions, which increased 8% year-over-year to 215,000, and postpaid churn, which improved again this quarter to 1.28% compared to 1.48% a year ago. Similar to the past few quarters, the growth in postpaid net additions was driven by data-centric devices like smartphones and connected devices. Together, they accounted for 70,000 net additions. Net handset additions were negative 5,000, a significant improvement from negative 31,000 in the prior year, driven by reduced churn. And although total handset net additions were negative 5,000, as Ken discussed earlier, smartphone net additions were positive 20,000, up from only 3,000 a year ago. On top of that, feature phone customers continued to upgrade to smartphones, with the result that total smartphone users increased by 63,000 during the quarter. In the prepaid category, we had 12,000 net additions, the same level as a year ago. As shown on Slide 6, smartphones represented 92% of total handsets sold this quarter, increasing smartphone penetration to 75% of our base of postpaid handset customers, up from 67% a year ago. Based on the levels of smartphone penetration achieved by other carriers, we believe that we still have opportunity to upgrade more of our remaining feature phone customers to smartphones and drive additional data usage revenues. About 7.6% of our postpaid customers upgraded their devices this quarter compared to 6.6% a year ago. This quarter's activity was influenced by the timing of new device launches. Compared to the fourth quarter, which is normally higher due to seasonal activity, this quarter's update -- upgrade rate was down by about 90 basis points. The next slide shows the longer-term trend in our postpaid churn rate, which is at a historically low level. Postpaid churn has steadily decreased from its peak of 2.29% in the first quarter of 2014 to 1.28% for the first quarter of this year. Now let's talk about our financial results. Total operating revenues for the first quarter were $958 million, about the same as last year's $965 million. Service revenues were $760 million, down $68 million or 8% from last year, largely reflecting lower plan pricing due to industry competition and the continued migration to unsubsidized pricing, meaning the plan discounts that accompany equipment installment plan sales and activations of customer-owned equipment. The impact of lower plan pricing was partially offset by the growth in our customer base. Equipment sales revenues grew 45% to $198 million, driven by higher equipment installment plan sales. The percentage of postpaid device sales on installment plans increased to 69% in the first quarter compared to 53% in the fourth quarter and 41% a year ago. We expect the installment plan take rate to continue to increase over the remainder of this year. Postpaid ARPU, shown on the next slide, was $48.13 for the first quarter, down 12% year-over-year due to price competition and the continued migration to unsubsidized pricing. However, this metric excludes equipment installment plan billings to customers. The average billings per user, which includes those billings and provides a better representation of the total amount being collected from customers every month, shows a decrease of 4% year-over-year, which is more indicative of the impacts of price competition and the growth in connected devices, which, on a per device basis, bring lower revenue. The average revenue per account benefits from the increase in connections per account from 2.47 a year ago to 2.62. For the first quarter, it was $125.36, down 7% year-over-year. But when equipment installment plan billings are included, average billings per account actually increased by 1% year-over-year. We expect that there will be continuing downward pressure on service revenues as more of the customer base moves to unsubsidized pricing and that equipment sales revenues will continue to grow up as the take rate for equipment installment plans increases. Another note is that as different equipment installment plan terms are offered, under our accounting practices, the amount of revenue recognized in the period of sale could be affected. Operating cash flow for the quarter, shown next, was in line with our expectations. The success achieved in increasing the level of net additions impacted operating cash flow, as expected, when we discussed our annual guidance with you on the year-end call. Therefore, when looking at operating cash flow and the year-over-year comparison, remember that this year's number includes the cost of the incremental customer growth that we achieved. Retail gross additions increased by 6%, and retail net additions increased from 21,000 to 57,000. Operating cash flow for the quarter was $157 million compared to $167 million a year ago. The decrease was largely due to lower revenues, as I discussed earlier. Total cash expenses were essentially flat year-over-year with an increase in the cost of equipment sold, offset by reductions in other categories. Adjusted EBITDA, shown next, incorporates the earnings from our equity method partnerships along with the interest and dividend income, which consists mainly of imputed interest income from equipment installment plans. Adjusted EBITDA for the quarter was $206 million compared to $209 million a year ago. Earnings from unconsolidated entities were $35 million. This includes $19 million from the L.A. Partnership, which is relatively flat year-over-year. As we expected, the L.A. Partnership did not make a cash distribution in the first quarter. At this time, the amount and timing of future cash distributions are uncertain. Next, I want to cover our guidance for 2016, which is shown on Slide 12 of the presentation. For comparison, we're showing our 2015 results both as reported and excluding the impact of the termination of the rewards program. The current estimates are unchanged from those provided in February. In summary, for total operating revenues, we expect a range of approximately $3.9 billion to $4.1 billion. This reflects our expectation for modest customer growth, additional demand for data and a continued migration to equipment installment plans along with a very competitive pricing environment. For operating cash flow, we expect a range of $525 million to $650 million. We estimate for operating cash flow flows through to the estimated range for adjusted EBITDA, which is $725 million to $850 million. To the extent that we achieved a lower level of customer growth than currently estimated, we would expect results to be in the upper portions of these ranges. On the other hand, to the extent that we are successful on attracting a higher level of customer growth than currently estimated, or if the pricing environment worsens, we would expect results to be in the lower portions of the ranges. Capital expenditures are expected to be about $500 million. This lower level of spending compared to 2015 reflects the completion of our 4G/LTE deployment. On the other hand, it includes spending to meet higher data demand and to prepare for the initial commercial launch of VoLTE. Finally, I want to make just a couple of comments about U.S. Cellular's cash flows and liquidity. Cash flows from operating activities for the first quarter were $163 million, while cash flows used for investing in financing activities totaled $106 million, resulting in a net increase in cash and equivalents of $57 million. As of March 31, cash and equivalents totaled $772 million. In addition to these existing balances, U.S. Cellular had $202 million of unused borrowing capacity under its revolving credit facility. We believe that these resources are sufficient to meet our normal operating investment and other debt service requirements for the remainder of this year. However, these resources may not be adequate to fund all future expenditures that we could potentially elect to make, such as purchases of spectrum licenses in the FCC auctions or other acquisitions, and it may be necessary from time to time to increase the size of the existing revolving credit facility and issue new debt or to obtain other forms of financing in order to fund those expenditures. In that event, accounts receivable under equipment installment plans represent a potential source of financing. At March 31, the balance of those receivables was $391 million. Now John Gockley, the company's Vice President, Legal and Regulatory Affairs, will provide a brief update on some of our activities in that arena. John?

Thank you, Steve, and good morning. Turning to Slide 13. This is proving to be a very active year on the regulatory front. Despite this being an election year, Chairman of the FCC has made it known that he intends "to run through the finish line." There are a number of proceedings and issues currently in flight, which are of keen interest to us and which show signs of being resolved this year. First, just last week, the FCC announced, at its open meeting, the issuance of a notice of proposed rulemaking proposing a novel approach to the long-standing issue of special access pricing in markets with limited competitive alternatives. The FCC is now proposing to look at the issue on a technologically neutral basis and to examine all providers of both traditional special access circuits and Ethernet facilities and not just incumbent telcos. The text of the NPRM was released earlier this week, and we are still in the process of reviewing it. We fully expect to be actively involved in this proceeding. The issue of special access pricing has been an open issue at the FCC for way too long, and we view the issuance of this NPRM as a positive development to resolving this issue once and for all. Ethernet backhaul still remains a substantial expense to us and will continue to remain so as consumers continue to consume more and more data services. The FCC has also launched a proceeding to address the adoption of privacy rules for data services. This proceeding is a logical outgrowth of the decision to re-regulate broadband access as a Title II common carrier service last year. This is a complicated proceeding with the notice of proposed rulemaking teeing up over 500 questions for comment. We have operated under the existing CPNI rules for many years now, and we are fully committed to protecting the privacy of our customers. We ask only of this proceeding that the commission apply a balanced approach that protects customers without adopting onerous operational requirements which were out of sync with the requirements imposed on other non-common carrier companies who have access, in many cases, to even more customer data than we do. Of course, we, along with the rest of the industry, are waiting with great interest to see what the D.C. Court of Appeals has to say about the FCC's Open Internet rules, which, depending on what the Court does, may have a profound impact on this proceeding. The FCC recently released its lifeline reform order, which will transition the lifeline program from supporting voice communications to supporting broadband access service over multiple years. Our lifeline portfolio is a very small part of our business. And other than some operational issues associated with the transition, we think that this conversion will have very little impact on our business. We're currently exploring whether our lifeline discount applied to data services as contemplated by this order will provide the company with a meaningful opportunity. We are, however, dubious whether the lifeline discount of only $9.25 will have much effect on data service subscribership by low-income Americans. We would have liked to have seen the FCC entertain a higher discount amount, given that the goal of the program is to drive broadband access subscribership by the most economically challenged Americans higher. Lastly is the issue of the future of the Universal Service high-cost program for wireless broadband deployment in rural, unserved and underserved areas of this country. This remains an important issue for the company and for our customers living in rural America. This past February, our Chairman, Ted Carlson, testified before the Senate Commerce Committee about the continuing need for government support for wireless broadband deployment in rural regions and the need for better and more accurate data so that informed decisions could be made about where to deploy facilities and about how much support is necessary to bridge this digital divide. Our Chairman also made note of the profound effect that 5G networks are likely to have on broadband access, and he suggested that funding decisions concerning USF needed to take into account the cost and complexity of bringing 5G networks to rural America. We think his message was very well received. In fact, recently, through the leadership of Senator Joe Manchin, the Senate Commerce Committee approved an amendment to the FCC Reauthorization Bill, instructing the FCC to conduct a feasibility study into ways to gather better and more accurate data about the state of wireless broadband deployment in rural America. We think this proposed law has merit and clearly signals to the FCC a concern overreaching an important USF decisions based on incomplete data. We intend to continue to work with Congress and regulators in the design and implementation of a Universal Service program that will meet our national goals to provide broadband access to rural and to urban Americans alike. Vicki?

Thanks, John, and good morning, everyone. TDS Telecom's overall results for the first quarter were in line with our expectations. First, wireline revenues declined 2%, which was primarily due to the impacts of the divestitures we completed last year. Adjusting for these effects, wireline revenues were nearly even with last year. Second, cable revenues grew at a 3% rate, reflecting growth in both residential and commercial broadband revenues. And third, HMS revenues grew 5% due primarily to increased equipment sales, but also include growth in reoccurring service revenues. Cash expenses increased modestly across all 3 segments as we continue to position for growth. As a result, adjusted EBITDA on a consolidated basis declined 4% year-over-year to $76 million. Beginning with wireline on Slide 16. Our investments in our networks and efforts to make higher speed options available to customers continue to drive growth in IPTV connections. We also continue to see increases in the take rate on 10 megabits and higher broadband products. In the first quarter, we rolled out one new IPTV market. We've now launched TDS TV in 28 markets and enabled 174,000 service addresses for IPTV service. We are completing our planned fiber builds to reach approximately 21% of our ILEC service addresses. And when combined with copper service, our IPTV-enabled markets cover approximately 25% of our service addresses. For the remainder of the year, we will focus on driving IPTV and high-speed broadband bundles in these markets. To further strengthen our broadband offerings, we are deploying bonding technology to an additional 1/3 of our ILEC service addresses to drive higher fees in our middle-tier ILEC copper markets. In our remaining markets, we are evaluating the FCC's modified Universal Service Funding mechanism to support broadband build-out. Under this modified USF mechanism announced March 30, the FCC is providing rate of return carriers with 2 paths to receive funds. The first path includes a voluntary model-based approach, which we could elect on a state-by-state level and includes a fixed amount of support for a 10-year period in exchange for meeting defined build-out obligations for broadband services. The second path is based on existing rate of return mechanisms, from which we receive support today, but will carry substantial modifications going forward, including a reduction in the allowed rate of return, the elimination of support in competitive areas and defined build-out obligations. In general, we are pleased with many aspects of the order and are carefully evaluating our options under the 2 paths. Now looking at the metrics on the bottom of the slide. IPTV connections grew 50%, adding 12,800 subscribers compared to the prior year. And we added 2,800 broadband connections, excluding divestitures. We are offering a variety of speeds, up to 1-gigabit service, in all IPTV markets. The uptake in IPTV has grown steadily and is now at an average penetration rate of 28%. It is important to remember, 97% of our IPTV customers take all 3 services, which results in a low churn rate and drove an increase in average revenue per connection up to $43.28 in the quarter. Reflecting both our fiber and bonded copper deployments, residential broadband customers are continuing to choose higher speeds in our ILEC markets with 49% choosing speeds of 10 megabits or greater and 18% choosing speeds of 25 megabits or greater, which also contributes to the higher ARPU. Looking at Slide 17. Wireline results were mildly impacted by ILEC divestitures. While I'm going to give you the actual results as presented, on a same-store basis, we were a bit stronger. Residential revenues increased 2% as growth in broadband and IPTV more than offset the decline in our legacy voice services. The year-over-year decrease in ILEC residential voice connections has held at about 3% over the past 7 quarters, excluding divestitures. Commercial revenues decreased 4%, and high-margin wholesale revenues decreased 5% this quarter. On a combined basis, total wireline revenues declined 2% to $173 million. Wireline cash expenses increased 2% as increases in employee-related expenses and IPTV content costs outpaced the reduced cost of provisioning legacy services. As a result, wireline adjusted EBITDA decreased $5 million or 8%. Slide 18, cable connections growth. Total cable connections grew 5% to 284,000. On the residential side, connections increased, driven by 8% growth in broadband and a 23% growth in voice. This growth more than offset the continued declines in video connections. The residential broadband subscriber growth drove a 200 basis point increase in broadband penetration. While total commercial connections were flat, broadband connections grew 14%. On Slide 19, you can see total revenues increased for cable 3% to $45 million. Residential revenues increased 1%, as higher promotional offerings offset the connections growth. Commercial revenues increased 10%, primarily as a result of price increases for video. Cash expenses increased 6% as higher programming costs and property taxes were offset by cost synergies achieved from the acquisition synergies we're seeing. As a result, cable-adjusted EBITDA remained relatively flat. Turning to the HMS segment and speaking to both Slides 20 and 21. The HMS business remains focused on growing reoccurring service revenues. Our hosting service revenues grew 2% for the quarter. Last year, we invested in building data center space, and we are focused on selling across our portfolio services, which will utilize available data center capacity and increase revenues without requiring significant capital investment in 2016. Equipment sales improved $2 million due to the higher spending by existing customers. Cash expenses were up 2% compared to the same period in the prior year, which mainly reflects higher cost of goods sold to support equipment sales. Other operating expenses were down as reductions in employee expense has had a meaningful impact. This resulted in adjusted EBITDA increasing by $2 million. We have provided our guidance for 2016 on Slide 22, which is unchanged from the guidance we shared in February. I will remind you that these numbers do not include considerations for the impacts of the FCC-USF reform order. Overall, we're pleased with the results of the Telecom's first quarter and will continue to update you on our successful execution of our strategic priorities throughout the year. Now I'll turn the call back over to Jane. Jane W. McCahon: Thanks, Vicki. And operator, we're ready to take questions. Let folks know we have other people in the room. Kevin Hess, Telecom's EVP responsible for government regulatory affairs; Doug Shuma, Corporate SVP of Finance; and others are in the room with us. So Melissa, we'll take our first question.

[Operator Instructions] Our first question comes from the line of Ric Prentiss with Raymond James.

I'd like to start with U.S. Cellular. Ken, as we think about this quarter versus last year, last year, the growth was not as significant. So on the short-term basis, EBITDA and operating cash flow did a little better. This quarter, more investment for the long term, you're seeing the growth. So what I'd like trying to kind get at with the question is, as you think about the guidance, what level of gross adds should we be expecting for that to hit the high end or the low end? Because obviously, you've seen 15% growth there -- I think it was 8% growth in gross adds in the quarter was significant compared to last year. I think gross adds over the year were down '15 versus '14.

Yes. Ric, that dynamic is exactly the one that we grappled with as we established guidance for the year. From a strategic standpoint, I want -- it is necessary for us to continue to grow the customer base. That is both by some of the marketing programs like I talked about in the SMB area, it's about driving gross adds and it's also about driving down churn. Most of those on the front-end have costs involved with them. And so when we put together our guidance to you, we talked about how we were going to use promotional activity that, if it was successful, would manifest itself in operating expenses and higher adds. But because it was promotional, it wasn't as successful. You'd have less expense, more cash flow, but not the adds. The first quarter it did what we wanted it to do. We got off to a nice, fast start, and our objective is to continue to build on that. Our objective is to continue to grow the base, which is why the cash flow guidance, as an example, is where we put it for the year. The most successful year will have us growing the base and continuing to invest cash flow and staying within the guidance, which is why we reiterated it -- we are reiterating it today. We aren't changing it. So if the market turns soft, right, we will have less adds, and we'll just see more cash flow coming to the bottom line.

Okay. So should we expect gross adds kind of at a similar year-over-year level and thinking that -- if you're successful growing the business, it would be kind of similar to the first quarter in general?

It could be.

Okay, okay. Also you mentioned optimistic handset churn to go even lower. One item -- Sprint, recently, when they reported did start breaking out handset churn from other churn. So hopefully, you can kind of continue to give us maybe that extra data point on what handset churn is. I assume there's not much tablet churn in the current time frame, though.

Not much. But in fact, our handset churn is lower or better than tablet churn. But both of them are important products, and we continue to see very good customer retention across all the product lines. In fact, when we haven't talked about, prepaid actually showed some really nice improvement in churn year-over-year also.

Okay. And then EIP, if I understood Steve's comments right, you expect EIP to actually increase through the remainder of the year. What level of EIP do you think we could reach as we look at customers liking this type of plan?

Boy, we can look at what others have done and see rates meaningfully above where we're running. But understand, our marketing strategy is not to drive EIP for EIP's sake, but rather to make sure that we've got the right products and services in the market for our customers and then make sure that either one of them or all of them, rather, are profitable for the business. So customers that want a subsidized model, we want to make sure that we've got an offering that works for them as well as an EIP offering that works for those that want that. So it's an outcome, it's not a target. So I don't sit there and say, "Gee, we want more or less of this." What we want is the right products in the marketplace for our customers. So could it go higher? It absolutely could. We've -- if it got to 80%, we've seen that in other places, but that's not a target. It's an outcome.

Okay. And final -- it's all one question, I swear. So the other piece of it clearly is upgrades. Industry level upgrades were fairly light this quarter. You touched on the Samsung Galaxy S7 was a bigger exposure to you. But as we think about your guidance and comparing it to the rest of the industry, where are your thoughts as far as what upgrade levels will look like this year?

Let say, if you think about upgrade, right, and this quarter, it was about 7%, 7.6%. And that's lower than the fourth quarter, lower than the third quarter, it's lower than the second quarter of last year. It was above first quarter last year. And when we look at it year-over-year, one of the, I think, drivers to that was the success around the Galaxy 7. If you think about our customer base, we lost customers in the past because we didn't have an iPhone in the portfolio. And as a result, the distribution of our customers, we have a customer base that likes Android and is very, very happy with their -- with the Samsung devices. And given where we've had successful launches in the past, first quarter, the 5, 2 years ago are at the end of their 2-year contract. And now with EIP last year rolling out and having the upgrade 12 months, we had a base that was waiting for this, and we had a very successful roll out. And we're targeting a lower upgrade rate, but again, it's about making sure the programs that we put in place work economically for us. And so we'll see -- I've seen nothing that suggest we're going to be running higher all year, but it was a successful first quarter with the Galaxy product.

Our next question comes from the line of Phil Cusick with JPMorgan Chase.

I guess, first, on the wireline side. Can you talk about the HMS strategy? It seems like the growth isn't really coming through the other way that we'd hoped. How's that strategy coming together?

Sure. This is Vicki. As you think about HMS, HMS is really still a very important part of our growth strategy. And as you know, we've been very focused on integrating our 5 businesses that we acquired and going through and standardizing the processes and systems and trying to drive that reoccurring revenue growth. I think we continue to make progress, but we still have more work to do. And as we see clear progress, we'll begin to set more milestones on around that reoccurring revenue growth. We saw nice growth overall, 5%. But as you know, we want that to be higher.

Okay. And on the cable side, sort of the same question. Should we look for revenue to be growing here? Or is the offsetting of subscribers and ARPU sort of trading off?

As we set our guidance for 2016, we are really focused on looking for mid-single-digit revenue growth. And in the first quarter, I reported 3%. If you adjust for an accounting adjustment, it was really running about 4%. We are running heavy promotions but are driving that really strong growth that you saw in broadband connections, and we'll continue to monitor that growth throughout the year. But yes, we're looking for mid-single-digit growth, which is meeting our expectations.

Okay. One for Ken. I think a lot of people expect -- sort of understand that revenue per user on the postpaid side will come down, but it was pretty violent this quarter. Anything one-time in there that we should be thinking about?

No, nothing violent. I think what you're -- for us, in terms of when we launched the EIP offering, combined with the impact of tablets, when you think about your mix, you get a lot of noise in that. When we look at revenue per account continuing to grow, I think we have a little pricing stuff in the industry too. But it's really right in line where we're kind of expecting it right now, Phil. No one-timers in there.

Okay. So that 48 is the right level and probably down from there as we continue the mix?

I think that there's still -- from a service revenue standpoint, there still risk is that EIP kind of take rate keeps bouncing around.

Got it. And can you give us an update on your wireless roaming, both inbound and outbound?

Yes. So we're -- so we've got 4G agreements now in place with 3 out of the 4 larger entities. We've got it launched with one of them already and working with others. Roaming revenue itself is -- I call it modest. It's not moving around a lot, down a little bit year-over-year because of the pricing agreements entered into last year, but running cost actually down even more year-over-year. So still continuing to manage that business pretty effectively. And importantly, as I think about it, it's the rollout of voice over LTE that we start to turn on next year, that turns that into a growth opportunity. Because suddenly, we'll be able to serve customers from every carrier versus just the CDMA-based carriers that we serve today.

Our next question comes from the line of Simon Flannery with Morgan Stanley.

Looking at the ARPU on the postpaid side. Obviously, the EIP transition is impacting that. Can you give us a sense of what the sort of average EIP customer is paying in terms of ARPU so we get a sense of how that transition is working? And then any updates on the M&A environment over on the TDS Telecom side?

Simon, this is Ken. I don't have in front of me something that looks at average revenue just on EIP accounts. So we can follow up with you, but I don't have that in the room right now.

Right. Something Verizon had sort of talked about was when they expect service revenue declines to sort of moderate. Is that something you see in the next few quarters here as you maybe get to 50% EIP?

I understand the math in that. I think you've got -- as I said, there's 3 components that are -- as I think about washing through average revenue per unit. One of those components is the EIP mix. One of them is the product mix as between handsets and other connected devices, and then there's just the industry noise around pricing. Yes, as you stabilize the EIP mix, that piece of it will moderate. But you still have an ongoing mix within the industry as more connected devices get added in there or as customers continue to hold units longer and get -- bringing their own equipment and wind up with discount. So there is room around that one metric. But that metric again is an outcome. It's not something that individually gets driven, but rather helps understand what's going on within the business.

From the M&A side, on the telecom side of the house, we continue to evaluate potential cable acquisitions. We continue to stay focused on that. As you know, I can't comment on any specific transaction until a definitive agreement is in place. But we are looking at acquisitions that meet our criteria, which, again, is around looking at our competitive and demographic criteria that we've shared before in the past. And then, again, from an HMS perspective, we are making progress, as I said in my earlier answer. And we have had a strong start to the year in terms of sales, and I really look for that to translate into higher revenue growth in the second half of the year. And as we continue to perform and meet our milestones, we may look at smaller acquisitions in addition to the generation of organic growth in that business, but that would be a longer-term initiative.

Our next question comes from the line of Sergey Dluzhevskiy with Gabelli & Company.

Couple questions, if I could. So first question, kind of a big-picture questions for Jane, Ken, Doug. So U.S. Cellular obviously has been turning around subscriber growth over the last few quarters. But arguably, investors have remained unimpressed, including this morning. So in your opinion, what are investors missing in the investment story for USM and TDS? And what are the main building blocks, in your opinion? Maybe you could reiterate for enhancing shareholder value in the near term and also in the long term?

Sergey, it's Ken. Let me start with that. Up until 2 hours ago, when the markets opened, I felt we are marching right down that path. I looked at what we produced for the quarter, what we produced relative to our own guidance, what we produced relative to consensus, and I'm real happy with where we started. The fact that we've got some part of our base that's looking for something different. I can only deliver on what I've kind of set out as our strategy, and our strategy is to continue to improve our local market position, continue to strengthen the company, grow revenues and grow cash flows. And I don't see anything else on the short-term horizon that's going to either change our strategy or change our trajectory.

Yes, and Sergey, I'll just -- this is Doug. I'll just reiterate what Ken said. We're pleased with the progress that U.S. Cellular has been making. It doesn't come overnight. We're committed to helping them be successful. And at some point, whether the shareholders recognize that or not, we think they will. We don't have any imminent transactions, engineering-type things that would drive any immediate shareholder excitement, if you will. But we're committed to U.S. Cellular.

Okay. And a question -- another question for Ken. This is kind of relates to financial engineering or just looking at the best asset base that you guys have. So obviously, you have a large core tower portfolio, and you have been very clear that you're not interested in monetizing the value of this portfolio, it's core to your business. But could you share your thoughts, as you look at your portfolio now and trends in the industry, what are your thoughts on maximizing the value and contribution from the tower portfolio within the context of U.S. Cellular strategy so that it would be more adequately reflected in your share price?

Sergey, great question. We -- as you so aptly put it, it's a strategic asset. It's important to us. It is critical as we continue to evolve our network, and it's critical, especially given some of the, I'll call it, games. Some of the tower companies are starting to play in terms of trying to extract more value out of their assets from their perspective of being a landlord. And so having a large portion of our towers that we own and not subject to those pressures is important. Secondly, we continue to lease out our asset. I look at it kind of on a same-store basis or a comparable basis. On a year-over-year basis, our tower rentals are up 10%, about 11% year-over-year. And so we will continue to capture as much value as we can in the marketplace off of those assets while retaining the strategic control we need so that we can continue to evolve our networks. It's amazing how we're just finishing out 4G. We're about to embark on voice over LTE, which will require more modifications. And people are already testing 5G, right? Well, that's going to put more strain on those very assets or increase their value even more in the future.

Right. And last question for Doug. I mean, given the volatility in the stock price and also kind of given your outlook maybe for deal environment in the cable space, how should we think about your appetite for buybacks this year and just in general?

Yes, Sergey, I'm going to stick to the old answer to that. We're committed to our investment strategy of -- for every $3 we invest in the business, returning $1 to the shareholders over the long term. And I think you'll see that play out this year as well.

Our next question comes from the line of Jennifer Fritzsche with Wells Fargo.

Two, if I may. I wanted to ask first on VoLTE. Ken, you mentioned next year... It's my understanding that for the CDMA players it's a harder path to VoLTE, which might explain why some of the GSM players are ahead of, like a Verizon? And I'm wondering if you're finding that as well. That might be more technical question. And then secondly, if I could ask about the competitive environment. We are seeing T-Mobile light up a lot of this, A block black spectrum and get into more secondary markets. Are you seeing any impact directly for them? Or is it -- it's really not evidenced in your churn, but I wanted to ask the question. Are you seeing still more either AT&T and Verizon as being the main competitors?

Jennifer, thanks for the questions. First of all, with respect to VoLTE. Yes, it is a pretty well-documented fact that the coverage on the voice side with CDMA is a wonderful, wonderful product. And when you have built your network with that product and you then try to overlay voice over LTE in the same cell sites, there's an initial coverage, what I'll call gap almost. And it's something that we saw in the tests that we ran last year, and it's something that our deployment schedule has been built around in order to eliminate it. And there are various techniques our engineers are using such as moving equipment to the top of the towers, which gets back to having control over those towers, so you can move your equipment when and where you need it. And they're using other engineering tools so that when we do turn on VoLTE, we are able to deliver our customers the same and better services they're getting now. So that's why we haven't been rushing to it. We're going to be very deliberate and proceed with caution like we have in every other technology change in the past. Around your A block question, our primary competitors in our markets are Verizon and AT&T, in that order, and it's based upon which of them has the original cellular license in that market, which allows us, who have one of them, and Verizon or AT&T that had the other, to really, on an economical basis, build out a very vibrant coverage area. The 700s had some of the very similar characteristics. And so we've heard about other carriers starting to build out their 700s and increase their kind of competitive footprint. But particularly to the question you asked about T-Mobile, they're building out, to my understanding, the 700 A block. And we have been successful in most of our markets acquiring that 700 A block. So if we own it, they don't own it. So we're seeing them in a couple of markets, but in the most part, they're building out in markets around us, near us. And now as we get to us turning on VoLTE, looking forward to be able to serve their customers as they roam into our markets.

Our last question comes from the line of Michael Rollins with Citigroup.

Just a couple, if I could. The first is just going back to the topic of ARPU. Can you specifically disclose the performance of phone ARPU in its totality? And maybe just help us a little bit more on the bridge of contributing factors to ARPU performance during the quarter. I know you've given us a lot of commentary on the call to think about, and I just wondered if you could put some more numbers to that. And then secondly, over time, I think the management team has talked about the importance of being able to grow the top line. And is there a time frame over which investors should keep in mind in terms of when you'll be able to answer that question as you get through the EIP migration and continue to contemplate the competitive landscape? Is that a 12-month observation period, 24-month observation period? Any thoughts on that duration over which the answer should become more clear?

Okay, Michael. Couple of things. So one, I will look at -- I don't have any information as I'm sitting here talking to you now that bridges one or the other or talks about one component of the -- our revenue or not. We'll look and see what might be in the corners of all of our other analysis, but I don't have anything that's here right now. On the time frame, no, there isn't a drop date, dead date. I think Doug has talked about how we are committed to this business. We continue to grow the customer base, which is the precursor to growing the revenue. We also talked about the work we're doing around roaming. We've not talked about is work we're doing around advertising. There are many different sticks and logs kind of on the fire that we're all working on to drive revenue, which is the key metric in any long-term sustainable business. But no, I don't have a drop dead date to give you.

Thank you. Ms. McCahon, there are no further questions. I'd like to turn the floor back to you for any final remarks. Jane W. McCahon: Okay. We'd like to thank everybody for joining us this morning. And we're available for questions throughout the day, and we'll, hopefully, see some of you next week. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.