Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the TDS and U.S. Cellular First Quarter Earnings Results Conference Call. Today's conference is being recorded. [Operator Instructions] Colleen Thompson, Vice President of Corporate Relations, you may begin your conference.

Good morning, and thank you for joining us. We want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find on the Investor Relations section of the TDS and U.S. Cellular websites. With me today and offering prepared comments are from TDS, Pete Sereda, Executive Vice President and Chief Financial Officer; Vicki Villacrez, incoming Executive Vice President and Chief Financial Officer; from U.S. Cellular, LT Therivel, President and Chief Executive Officer; Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer; and from TDS Telecom, Michelle Brukwicki, Senior Vice President of Finance and Chief Financial Officer. This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations website. Please see the websites for slides referred to on this call, including non-GAAP reconciliations. We provide guidance for both adjusted operating income before depreciation and amortization, or OIBDA, and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, to highlight the contributions of U.S. Cellular's wireless partnerships. We filed the majority of our documents with the SEC after market close yesterday, but due to issues with EDGAR, they are not yet appearing on the SEC's website. All but the TDS 10-Q are on our websites this morning. As shown on Slide 2, 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 paragraphs in our press releases and the extended version in our SEC filings. In terms of our upcoming IR schedule on Slide 3, on May 23, we are attending JPMorgan's 50th Technology, Media and Communications Conference in Boston. And on June 2, we are doing a non-deal roadshow in New York with Citi. And as always, our open door policy can now be in open door, phone or video policy so please reach out if you're interested in speaking with us. Turning to Slide 4, we continue to make progress on our environmental, social and governance or ESG program. And as you can see on the slide, we have had a number of initiatives that illustrate our commitment. I will now turn the call over to Pete Sereda. Pete?

Good morning. I'm confident that when I retire at the end of this month, TDS will be in good hands with Vicki Villacrez as CFO. Vicki has over 30 years of experience with the TDS enterprise, and she and I has spent the last 6 months working closely together to ensure a smooth transition. In her 10 years as CFO of TDS Telecom, she was a key leader and business driver, and she deserves much of the credit for the creation and execution of the fiber transformation that is underway as well as the general financial success of the company. We are very lucky to have someone with her level of ability. She's a very talented leader and will do an outstanding job as CFO of TDS. And with that, I will turn the call over to Vicki. Vicki?

Thank you, Pete, and good morning, everyone. As I step into this role, I am fortunate to be the CFO at a company with such a strong financial foundation and exceptional talent. Going forward, we will continue to ensure that we maintain this position so that each of our businesses can take advantage of their growth opportunities to enhance their competitive positions and ultimately improve long-term returns. We expect to also continue to return value to shareholders, primarily through cash dividends, which have increased every year for the past 48 years. In addition, we repurchased a modest amount of stock this quarter and may continue to do so opportunistically and again, at a modest level, depending on market conditions. Both of our businesses are focused on executing on their strategic priorities and meeting the financial expectations that we guided to at the beginning of the year. U.S. Cellular is continuing to make improvements in its high-performing network, and TDS Telecom is seeing good success in its fiber expansion program. Inflation and supply chain are 2 areas we are watching closely. We've developed strategies to mitigate any impacts, and overall, I believe the organization is managing well. At the same time, we are working to ensure that we'll be a key player in the Infrastructure Investment and Jobs Act, or IIJA, program at both businesses. We also strongly advocate the extension of the FCC's A-CAM program, which we currently participate in today. Each business unit will touch on their specific areas of focus on these topics this morning. And now I'll turn the call over to LT.

Thanks, Vicki. Good morning, everybody. As you can see on Slide 7, our mission remains consistent: just keep customers connected and the people in the places that matter most to them. And on that slide, you can see some of the strategic priorities that support our mission. Let me turn to Slide 8. On this slide, you can see the strategies that we've developed to drive revenue growth and increase return on capital over time, and let me start with postpaid. I'm not satisfied with our subscriber results in the first quarter. We continually try to optimize financial outcomes with subscriber outcomes. And the environment over the past 4 months -- over the past 2 years, really, has been extremely competitive. And although we've regionally tested aggressive offers in the marketplace, particularly from an acquisition standpoint, we've also tried to be disciplined from a financial perspective, and you see that in our strong adjusted operating income performance for the quarter. I'm sure when we get to the Q&A section, there may be some questions around AT&T's recent price move. Although I certainly don't have insight into all the drivers of the decision, we operate in a highly capital-intensive industry. And although the industry is somewhat insulated from inflationary effects and our industry generally fares well in challenging economic conditions, we're all experiencing increasing labor costs and increasing costs across our supply chain. That being said, we view this as an opportunity. We're committed to caring for our customers during tough economic times, and we'll be committing to our customers that we will not raise prices on their existing rate plans through at least the end of 2023. We're highly focused on improving churn. This commitment is 1 component, just 1 component of our plan to do this. Let me come back to the theme of balance. We have challenging subscriber results to better drive positive ARPU results, and we certainly did. As Doug will touch on in a moment, our postpaid ARPU was up 4% year-over-year, and you can see the impact on our service revenues. Very encouraged by our ability to grow postpaid ARPU over time. We've grown this metric by 2% over each of the last 2 years, and you've seen strong growth in the first quarter of 2022. And this ARPU growth is despite the headwind of a highly promotional environment, and that includes providing monthly credits associated with device discounts, and this had a negative impact on postpaid ARPU. Let's switch to prepaid. Though the top line prepaid results don't look tremendous, but I'm actually quite pleased with the performance of that business from a relative basis. Our prepaid results were impacted by a lower switching pool in the first quarter across the entire industry. Our share of gross adds in that switching pool continues to perform quite well. We continue to see positive momentum in the growth investment areas of our business. We had another strong quarter of high-speed Internet results. Gross adds up 27% year-over-year, most of those on our low-band product, while we continue to expand our 5G millimeter wave footprint. We now have 5G millimeter wave fixed wireless access service available in 10 cities. We do plan to offer this service in dozens of more cities throughout the year. Our tower business produced double-digit revenue growth. The momentum there continues to build. And we're seeing continued positive growth in the B2B space. We signed our first private networking deal recently, and we continue to see really positive deal momentum in the IoT space as well. We're also beginning to see positive results from our investments in digital, digital capabilities to provide a better life cycle management, targeting, messaging. For example, we've seen significantly higher mobile app traffic and mobile app transactions, and this substantially improves the customer experience as measured by App Scores. This has resulted in a 45% year-over-year increase in app sessions at the end of the quarter. This improves our customer experience, deepens our engagement. It also helps us manage costs over the long term. Turning to the network. We continue our network modernization program and multiyear 5G deployment. The majority of our traffic is carried by sites that have 5G deployed. And equally important, we're getting 5G devices in our customers' hands. So far, 34% of our subscribers have 5G-capable devices. Vicki mentioned the IIJA. We continue to meet with key stakeholders that maximize our opportunity for wireless under that program. Let's put some context around this. In terms of dollars, the IIJA will allocate nearly $43 billion of broadband funding to individual states. And the specific allocations are still being worked out, but we believe as much as $8 billion explored areas where we operate our network. We know that fixed wireless is a compelling solution for broadband to the home and the business where it's uneconomical to put fiber. You've seen speeds of nearly 1 gig over 7 kilometers in our technical trials. And our product is marketed at 300 megs. That's a tremendous improvement in speeds and capacity for rural America. Additionally, the investments we make in wireless broadband provides the additional benefit of improving our wireless mobile network coverage. And clearly, any infrastructure investments to towers also help us drive greater levels of tower revenue. So to summarize, I'm pleased with the financial outcomes in the first quarter. We continue to see positive momentum in growth investment areas of the business. Although subscriber results were challenged, particularly in postpaid, we continue to try to strike the right balance between financial outcomes and subscriber outcomes. So I'll now turn the call over to Doug, who's going to take you through the financial results. Doug?

Thanks, LT. Good morning. Let's start with a review of customer results on Slide 9. Postpaid handset gross additions decreased by 13,000 largely due to continued aggression in a competitive environment. Postpaid handset net additions were down 33,000, driven by the lower gross additions and an increase in churn, which I will discuss in a moment. We saw connected device gross additions decline by 4,000, driven by lower tablet additions, due in part to global supply constraints. This was partially offset by an increase in fixed wireless additions. Overall, we continue to see solid growth in fixed wireless as unlimited plans are now available in the majority of our network. Next, let's turn to the postpaid churn rate shown on Slide 10. Postpaid handset churn increased from the prior year, driven by higher voluntary churn as a result of increased switching activity and continued aggressive industry-wide competition. Involuntary churn also increased, attributable to changes in consumer payment behavior as we experienced very low involuntary churn rates in 2021 due to the various impacts of the pandemic. Total postpaid churn, combining handsets and connected devices, increased due to higher handset churn in certain business and government customers disconnecting connected devices that were activated for various reasons associated with the pandemic over the past 2 years. Moving to Slide 11. Prepaid gross additions declined 7,000, largely driven by a lower prepaid gross add pool in 2022. Net additions decreased by 18,000, driven by lower gross additions and higher churn, which was also lower last year due to the effects of the pandemic. Now let's turn to the financial results, starting on Slide 12. Total operating revenues for the first quarter declined 1% from the prior year. Retail service revenues improved by 3% due primarily to a higher average revenue per user, which I will discuss in a moment. Inbound roaming revenue declined 27% due to lower data volume and lower rates. One of the factors contributing to this data volume decrease is the merger of Sprint and T-Mobile and the continued migration of Sprint roaming traffic to T-Mobile's network. Other service revenues were up 8% due to both higher tower rental revenues and miscellaneous/other service revenues. Finally, equipment sales revenues decreased by 12% due to a decrease in units sold as well as a decrease in average revenue per unit, which was driven by an increase in the value of promotional offers as a result of the competitive environment. Turning to Slide 13. Average revenue per user and average revenue per account were up 4%. The increases were driven by favorable plan and product operating mix and increase in cost recovery surcharges and an increase in device protection revenues. These were partially offset by an increase in promotional costs. Currently, 33% of our handset customers are on our 2 highest tiers of unlimited plans, and we are focused on continuing to grow this number to further improve ARPU and to provide our customers with the enhanced value of these plans. As you can see on Slide 14, we continue to see steady growth in tower rental revenues, which increased by 10% from the prior year, driven by an increase in our tower tenancy rate. Our overall financial results for the quarter are shown on Slide 15. For this discussion, I will refer to adjusted operating income before depreciation and amortization and accretion and gains and losses as adjusted operating income. As I commented earlier, total operating revenues declined 1% while total cash expenses were essentially flat. Cost of equipment sold decreased 6%, driven by a decrease in units sold. Selling, general and administrative expenses increased 6%, driven by an increase in bad debt expense due to an increase in write-offs related to involuntary actions which have increased from very low levels experienced throughout the pandemic to historical pre-pandemic levels. Total system operations expense was essentially flat. Excluding loss on equipment, which reflects the impact of the highly promotional environment and bad debt expense, which is returning to pre-pandemic levels, other cash expenses were essentially flat year-over-year and is a result of our operating expense discipline and the execution of our multiyear cost optimization program, which continues to yield strong results. Adjusted operating income declined 6%, and adjusted EBITDA, which incorporates the earnings from our equity investments, along with interest and dividend income, decreased 4%. Capital expenditures have increased 10%, mainly driven by the timing of expenditures in 2022 relative to the prior year. Turning to Slide 16, I will cover our guidance for the full year 2022. Our guidance range for total service revenues, adjusted operating income and adjusted EBITDA remain unchanged. This reflects our estimates for low single-digit growth in retail service revenue, continued decline in high-margin roaming revenue and the expectation of a continued highly competitive and promotionally-focused environment. For capital expenditures, we are also maintaining our guidance range as our investments in 5G and network modernization and initial preparation for our mid-band spectrum deployments remain on track. I will now turn the call over to Michelle Brukwicki. Michelle?

Thanks, Doug, and good morning, everyone. We are pleased with our results at TDS Telecom for the first quarter. We are tracking to our financial guidance expectations and had strong growth in our fiber program. As planned, we added 22,000 marketable fiber service addresses to our footprint and continue to execute on our fiber strategy. Since February, we announced our expansion into 4 new markets in Montana and several communities in Wisconsin. We also completed fiber construction in our central Wisconsin cluster and are pleased with our results to date. We remain committed to the same strategic pillars we have focused on for several years. Our primary strategic objective is to provide growth and improve returns by investing in our flagship product, high-speed broadband. We are directing our investments to expand our fiber footprint in new and existing markets and to enhance our product offerings, and these investments are driving revenue growth. At the FCC's upcoming meeting in May, an extension of the A-CAM program will be considered, which we aggressively advocated for and fully support. We anticipate an extension program would provide additional years of revenue support in exchange for deploying higher speed -- higher broadband speeds. Extending the current federal A-CAM program, along with the IIJA broadband funding, would provide even more opportunities for TDS Telecom to help bridge the digital divide in our most rural areas. Turning to Slide 19. We highlight the achievements we've made for this quarter. As mentioned, we announced 4 new fiber markets in Montana, Great Falls, Butte, Missoula and Helena. We also announced 2 new markets in Wisconsin: Janesville and Brookfield, and we expanded our western Wisconsin cluster by 2 additional communities. Beginning in 2022, we are now measuring fiber service addresses in our cable markets as we are deploying fiber in opportunistic areas such as greenfield development. We deployed 22,000 marketable fiber service addresses in the quarter and are working hard to reach our target of 160,000 for the year. Seasonality will impact the quarterly cadence of fiber service address delivery, starting slowly in the first quarter and steadily building throughout the year. 33% of our total footprint is now served by fiber, and this metric, as I mentioned, now includes fiber in our cable markets. As a reminder, as reported in February, we expect to serve approximately 60% of our total footprint with fiber by 2026. As we look to deliver our service address goals for the rest of the year, we continue to manage a variety of industry-wide headwinds, including inflation, supply chain and contractor performance challenges. We are working to mitigate these headwinds and are pleased to have a robust pipeline of markets to help us pivot if necessary. In line with our growth objectives, service addresses grew 7% year-over-year. In the first quarter, we completed the network upgrade to DOCSIS 3.1 in our continuum market and increased our availability of 1-gig speeds to 62% of our total service addresses, up from 55% a year ago. We also continue to see positive trends in our broadband penetration rates for markets that have been fully launched for more than 12 months, and we still anticipate 40% to 50% consumer penetration in a steady state. On Slide 20, you can see the broadband connection growth across all markets. Total broadband residential connections grew 6% in the quarter as we continue to fortify our networks with fiber and expand into new markets. We are on track in our network construction under the A-CAM program, also helping to drive growth in our incumbent market. Shown on the graph on the right, we continue to see demand for greater broadband speeds, with 67% of our customers taking 100 megabits per second or greater, up from 62% a year ago. Our 1-gig product, along with our 2-gig product in certain markets, are important tools that will allow us to defend and win new customers. In areas where we offer 1-gig service, we are seeing 21% of our new customers taking this superior product compared with 17% a year ago. Our focus on fast reliable service has generated a 10% increase in total residential broadband revenue. On Slide 21, total operating revenues increased 1% year-over-year, largely driven by growth in residential revenues, which increased 4% across all markets. As shown in the chart on the left, expansion market revenues have increased year-over-year, following the timing of service address delivery. Residential wireline incumbent market revenue was flat year-over-year due to growth in broadband connections, offset by a decline in video and voice connections. Cable residential revenues grew 3% due to an increase in broadband connections. Commercial revenues decreased 6% in the quarter, primarily driven by lower CLEC connections, and wholesale revenues decreased 2%. Overall product mix changes drove a 2% increase in average residential revenue per connection. Let me sum up the combined financial results for the quarter as shown on Slide 22. As we just mentioned, revenue increased 1% from the prior year as growth from our fiber expansions and increases in broadband subscribers exceeded the declines we experienced in our legacy business. Cash expenses were flat year-over-year, with increases to support current and future growth offset by savings in our platform costs. As a result, adjusted EBITDA improved 3%. Capital expenditures increased 50% from last year as we continue to increase our investment in fiber deployment and focus on broadband growth. Moving to Slide 23. We have presented guidance, which is unchanged from what we shared in February. We continue to progress on our fiber deployments in new markets which, as a reminder, will put pressure on adjusted EBITDA during the year as reflected in our guidance. I want to thank all our team members for their continued dedication to our ambitious growth agenda. We have had a successful start to the year and look forward to updating you on the second quarter. Now I will turn the call back over to Colleen.

Okay. David, we are now ready for questions.

[Operator Instructions] We'll take our first question from Simon Flannery with Morgan Stanley.

So LT, just coming back to the wireless competitive environment. The churn was up quite a bit, as you noted on the competition. Is this T-Mobile's rural build? Is this cable getting more aggressive? What are you seeing in the marketplace? And then on the involuntary, Verizon had talked about a softening in store traffic. What are you seeing on the macro? Is this just that last year was very low and that this is more normal? Or are you sensing some slowdown in the consumer behavior that some others are talking about?

You kind of quickly triangulated toward the pressure from the subscriber results. I'll answer the churn question to put a tiny bit of context around. The gross add side of the equation actually is still relatively strong. We've seen the switcher pool in our footprint is down almost 7% year-over-year. I expect a lot of that is because people are spending their tax refunds on things other than mobile devices. And so when I adjust for that, our new account gross adds are down 2% from last year. Overall share of gross adds is actually up from '19 and '20. And so the gross add side of the equation, while we clearly need to continue to focus on it and need to drive good performance there, it's actually quite good. The challenge is on [ add lines ] and we've got some plans in place to address that, and then on churn, as you correctly identified. When I look at the competitive environment that you asked about, what we're seeing in the footprint is not particularly different from what you see nationally. You see T-Mobile continue to grow but not, in any way, incrementally in our footprint than what you see nationally. Same with cable, except we're actually a little bit more insulated from cable than overall national trends. Cable is really present, about 50% of our footprint. And so although we do continue to see them present in our marketplace, we think we're a little bit more insulated, given the rural nature of our footprint. So what else are we seeing? It's really been a very aggressive upgrade environment. Particularly from AT&T. Verizon has matched that. And so we really have to focus on 2 things. One is [ add lines ] and the other 1 is we've got to continue to focus on churn with our customers. And you'll notice I talked about the announcement we're going to be putting out there about not raising prices on any of our customers, postpaid or prepaid, until at least the end of 2023. And we think it's the right thing to do. I think customers are looking for certainty. And given the position of telecom and the overall in economic conditions, right, telecom. There is a recession, we enter it late and we exit early so I think we're relatively insulated. That being said, if we do see really high levels of inflation, we do have the flexibility to raise prices, if we need to, on new customers, or we can always require new rate plans, if you want to qualify for device promotions. So we still have flexibility to adjust, if we need to, but we think it's the right thing for customers. And we think it will be very attractive for bringing down churn. We also have a couple of other plans that we're going to be rolling out later in the quarter to address the churn problem. So I'm optimistic in our ability to address churn while we continue to improve gross adds. Doug, let me turn it to you to answer the invol questions.

Yes. Sure, Simon. The reason on the invol side is what you cited. During the heart of the pandemic in 2021, we experienced somewhat of a low watermark for bad debt expenses, $56 million for the entire year. Consumer savings rates were high. There was government stimulus. Consumers are paying their bills and that manifests itself in really favorable bad dept expense. What we've seen in the first quarter is bad debt expense really returned to pre-pandemic levels. We plan for this to speak in our guidance, nothing unusual. We're just not experiencing that same sort of benefit that we did during the pandemic.

Okay, great. And store traffic any sense of the consumer slowing down or the industry slowing down after a strong year?

No. I mean, our store traffic is down slightly year-over-year but nothing concerning.

Next, we'll go to Sergey Dluzhevskiy with GAMCO Investors.

My first question is on kind of your go-to-market strategy, LT. So obviously, you have a differentiated regional approach and you're trying different things in different markets. You have various clusters that are noncontiguous, so you can do that. Maybe if you could reflect, since you implemented this approach, what have been the results so far. What has worked on that front? What could be improved? And how do you make this approach more effective to maximize potential gross add and share gain opportunity going forward?

Sergey, the regional approach you've talked to, I'm very pleased with, and let me put it in context. It is not easy to pivot to create -- not only creating regions and putting the processes and the structures in place to use those regions as test beds but then executing on that. And over the last 12 months, we've executed over 40 discrete pricing and promotional and marketing mix trials across our regions. One of the -- I hate doing this on calls like this but I can't give details on the specific plan we're going to be rolling out. But later in the quarter, we're going to be doing a relatively substantial move that was educated by the regional trial. Another example I'll give is the ARPU increase we've seen, so we've seen very attractive ARPU performance. I'd contrast that with some of our competitors. And we've been able to do that because of lessons learned from individual or regional trials. We haven't had to require specific plan upsell to get the ARPU growth that we've seen. We've done it with sales. We've done it with strong execution, and we've done that because we're able to trial different approaches, as you mentioned, different go-to-market in our individual regions. And so very pleased with what we've seen so far and you can expect to see it continue. At times, we will roll out national programs like the 1 I just talked about around the rate plan guarantee. But at the same time, we continue to test, whether it's individual device promotions. We vary our prepaid rate plans fairly substantively region to region to make sure we strike the right approach. We vary our distribution approach fairly significantly. So we're really trying to test and learn, and it's helped us optimize and will continue to help us optimize. So I'm very pleased with how it's proceeding.

Great. My next question is on your fixed wireless strategy. You're out in 10 markets and you said that you're going to be out with fixed wireless and millimeter wave in dozens more markets throughout the year. At a high level, could you talk a little bit about your approach to fixed wireless in 2022? What kind of speeds do you expect to comfortably market in your fixed wireless footprint? And how quickly do you expect to scale this wireless offering? Maybe what kind of markets you're prioritizing in your fixed wireless build?

So the -- let me start with low-band because we've actually driven substantive increases in gross adds year-over-year, 24% increase in gross adds year-over-year and that's also gone down to the net adds, and we've done most of that with our low-band product. That low-band product performs very well in rural areas, primarily where your best competition is DSL or satellite. But what we see is customers like the product, they like the experience, they're sticking with it. And we can learn a lot of operational lessons from that low-band build-out. We're now north of 60,000 customers on that product. And we can apply that to, first, our millimeter wave buildout. And then as we bring our mid-band spectrum online, C-band 3.45, we're also planning -- we also plan on using that spectrum to support fixed wireless. And so we mentioned we've rolled it out now we rolled that millimeter wave product out to 10 cities. We're marketing speeds of 300 megabits. We believe that's relatively conservative in terms of the actual experience we can provide. I mentioned our technical trials are almost 1 gig over 7 kilometers. Of course, that's sunny day, no rain, no wind. So we try to be a bit more conservative in what we actually put out there in the market. But we're offering a very high-quality product at 300 megs. And we'll continue to offer that product as we roll out mid-band. And so you can sort of think about our go-to-market strategy for mid-band and millimeter wave in 2 categories. The first category is areas where it is economically attractive on a stand-alone basis. I'll explain what I mean by that. But we have -- there are plenty of places in the U.S. in our network footprint where we can put millimeter wave on a tower, we can put C-band 3.45 as it becomes available. And we can serve homes and businesses in that area, and we will be able to provide a really good product at a really. The interesting opportunity, I think you mentioned the IIJA. Right now, it costs us, back of the envelope, between $500,000 and $600,000 to put a tower in rural America, wide range, by the way, around that cost estimate but let's call it $500,000 to $600,000. We need a density of a couple of hundred customers who are in a 5-kilometer radius of that tower in order to make money on the fixed wireless product alone. If with the IIJA, we can take that cost from $500,000 to $200,000 or to $100,000 or make it free. Now all of a sudden, we can profitably roll out that product in much lower density areas, which is what states want us to do. When you look at the IIJA, it's focused on unserved and underserved areas. Those areas are unserved and underserved for a reason. It's very costly to support and there's very low customer densities. Those aren't great areas for fiber. They are great areas for fixed wireless. And so we're very optimistic about our ability to participate in those plans on a state-by-state level. And the beautiful thing about it, and this is what's very compelling to the governors and the broadband commissions that I've spoken with is that when we make that investment, and assuming that those towers are subsidized in part by IIJA dollars to the states, the combination of those dollars helps fund fixed wireless to homes and to businesses, but it also dramatically improves the 5G mobile experience in that area that will help our mobile business. And because we're the fifth largest tower company in the country, we can then also market those towers to other carriers and that helps us fulfill location revenue. So there's really a 3-part benefit if we're able to get some of those funds. That's why we're spending as much time on it as possible. So I'm very optimistic about that business, Sergey.

Great. And my last question is for Doug on the guidance and cost savings opportunities. So I think the midpoint of your EBITDA guidance implies about 200 basis points, a little less, of margin pressure compared to actual 2021 results. And I guess my question is, what are some of the things that you are doing to take costs out of the business right now to mitigate some of those pressures? And maybe over a longer -- maybe a 2- to 3-year horizon, what are some of the cost-cutting efficiency initiatives that you are pursuing and how meaningful they could be over time? What are some of the larger buckets of those cost-efficiency opportunities?

Yes. We have a cost optimization program that we're highly focused on. We've been executing it. It's going on our sixth year right now in 2022, and it's really across the business. It's on the engineering side, focused on everything from backhaul with sell-side rent to maintenance agreements and the IT and the mix of labor between contracts and internal and doing things more efficiently as well. Really, even our insurance provider, we changed recently across the business. We're finding cost and revenue opportunities. And you can see the results of that part. When you look at our margins in 2017 as a percentage of service revenues, they were in the 22s, they steadily increased to in excess of 28% in 2020. Now in 2021, a little step backward because of all the dollars we had to invest in promo, but we're still making progress on this cost. And similar way, in 2022, because of the promo expense using that high-margin roaming revenue, which we're mitigating partially with roaming expense savings and the bad debt expense increase that I talked about earlier, we're losing a little bit of margin because those things are all happening very quickly. In the background, we are continuing the pressure on the costs, again, going in the sixth year and we're not stopping it. Last year was the first we started doing zero-based budgeting as part of our process as well. So it's really across the business. And it's been a great success. And like I said, we're keeping the pressure on.

Next, we'll go to Michael Rollins with Citigroup.

Just curious where strategically you're thinking about the U.S. Cellular business in terms of opportunities for partnerships or alliances with other carriers in the category to either bridge scale or expand focus and TAM? Any updates on that front would be great, please.

Mike, the position on this hasn't changed, which is, I'm open for business on that front. My belief is that, and I'll harken back to the conversation that we just had around fixed wireless and IIJA, my belief is that it makes no sense whatsoever to have multiple duplicative 5G networks in rural area 3, 4, 5 , where we're heading towards. Given the capital intensity that's involved, I don't think that makes a lot of sense. And I think there's plenty of opportunities to work together to bring the capital intensity down to make the investments more worthwhile and to deliver a high-quality experience in rural America. So I remain very open for that. We've had multiple conversations. We continue to have multiple conversations. These things do not move quickly. And so I don't want to [indiscernible] anything is imminent. But I think that, that viewpoint is shared across the industry around the capital intensity that's required. I think some of that is probably behind AT&T's most recent pricing move. So I think there's opportunity, and we've been quite clear with that with other folks in the industry.

Just maybe going a level deeper on that for a moment. When you think of the cost versus performance of rural builds for 5G, if you work with another carrier and let's say, double the spectrum that you have access to, would that create a lot more performance where you can make the case that you'd do it cheaper and better? Or does U.S. Cellular, because you've built a large spectrum position over time, is spectrum not the gating factor to drive performance relative to cost for those users?

So I think you have to divide this up, Mike, into now and future. Right now, Spectrum is not the gating factor. Coverage remains the largest concern and that's why I'm so bullish about IIJA and the ability to put more towers in rural America at a lower cost. Possible partnerships give us the ability to deliver that service to deliver that coverage and do it at an even lower cost and to do it at an even lower level of capital intensity, potentially share OpEx. It doesn't make sense for me to climb a tower, AT&T, Verizon, T-Mobile, Dish, all of us climbing the same tower, putting the same equipment in place, spending the same capital dollars and the same OpEx dollars. Now let's fast forward. In an AR/VR world, autonomous vehicles, those drones, those use cases will place a substantive load on speed requirements for the network. In the long run, finding creative ways to aggregate spectrum, a little level deeper, whether it's our [indiscernible] or there's a whole variety of different ways to tackle this problem. I think we fast forward 5 years, fast forward 10 years, the opportunity to aggregate spectrum in a cost-effective way in rural America will also be able to then provide a differentiated service. So near-term cost efficiencies, long-term experience opportunity.

And there are no further questions at this time. I'll now turn the call back over to -- okay. We have a question from -- I apologize. I'll turn it back over to Colleen Thompson for any additional or closing remarks. Actually, we have a question from Rick Prentiss with Raymond James. I apologize.

I apologize for being late. Busy day in earnings again. I wanted to ask the question on partnerships. You guys have talked previously about looking at how you might partner with obviously, adds in the quarter were weak. But any update on partnerships you're working with? Network sharing came up on the DISH call today as far as asking DISH what they'd consider network sharing. What are you thinking about partnerships and network sharing opportunities?

Ric, I just -- we literally just answered that question, so just in the interest of time, if I could maybe kind of -- we can direct you back to the transcript. Short answer, I think there's opportunity. We certainly made that clear. We continue to have discussions. Nothing imminent but I think there's a long-term opportunity to bring costs down, both on the OpEx and the CapEx side via some of those partnerships, and that's indicated in the conversations that we had.

Okay. I'll go to another question. Sorry about that. Fixed wireless access, has that come up?

It did.

And did you talk about gross adds as far as are you reporting them? I think you said in the press release that gross adds were up, but is it something you're reporting, where is it reported? Are they included in the numbers anywhere yet?

No. Ric, at this time, we're not separately reporting fixed wireless. It's included in our postpaid count of adds and so forth and so that's where it is. And currently, substantially all of our fixed wireless access customers are low-band 4G customers.

Right. And so I assume that's in postpaid other, not postpaid [ phone line ].

That's correct. Yes, it's in connected devices.

Okay. And trying to review the transcript as we're talking, too. Did you talk about prepaid churn?

So we did not, so happy to tackle prepaid churn. So if I just kind of take a step back on the prepaid business. At a high level, switching pool down fairly substantively. And so our share of gross adds around that switching pool is still quite strong, so we feel good about how we're positioned in the marketplace. On the churn side, it's important to understand that, and this is the nuance of the prepaid business, is that Q1 churn generally represents Q4 results because the customers don't churn off until 90 days later. And so you usually will see significantly higher levels of prepaid churn in the first quarter. That was no different for us. It's not something that I think is out of line with expectations. We feel good about the offers that we have. We feel good about the customer life cycle management activity that we have. And so I remain generally quite pleased with prepaid.

And as you think about the switching pool down, what would you ascribe that to? Because obviously, it's an industry trend we've seen. Is it pre to post migration? Is it the consumers better or worse off? What do you attribute that to? And so what would it take to turn that around, switcher pool or the activity in the area?

I think it's macroeconomic. If you look at what's going on with inflation and people getting their tax refunds, people are having to spend their tax refunds on things other than mobile phone service. And so I don't think it's necessarily anything specific to the attractiveness of the prepaid business. There probably is slightly higher prepaid to postpaid migrations because of the aggressive upgrade offers that have been in place in the marketplace. So I think that's probably driving some of it. But that would be the 2 key drivers, I think, prepaid to postpaid migrations because of aggressive upgrades, and then just it's tough out there right now for folks.

Okay. And last one for me. On TDS Telecom, the OIBDA in the quarter was better than you were looking for so be on cost of service. Is that something seasonal low, given the winter time frame? Or was it like a slower ramp on the fiber build? Just trying to understand what happened in 1Q. Was that a more trackable number or should we expect some bigger increases?

Ric, thanks for the question. Yes, adjusted EBITDA was up 3% this quarter. But a lot of our fiber deployment, our fiber service addresses are going to come later in the year, so some of our costs are going to be heavier further into the year. And so our guidance is unchanged. We do expect more adjusted EBITDA pressure coming in the future quarters. We do, just like U.S. Cellular, actively manage our costs, and so we are really trying to find opportunities for cost reductions, which we did benefit a little bit from that in the first quarter. But I would say, overall for the year, you should expect heavier adjusted EBITDA pressure towards the latter half.

Makes sense. And one more back to LT on the switcher pool but for postpaid. What are you seeing as far as the upgrade market out there? I don't know if you reported what's your percent was, but how does that look like? It's trending. It used to be iconic devices would spike it a little bit, but that's really kind of [indiscernible]. So what was your upgrade number and where do you see it heading?

Rick, our upgrade number for Q1 of '22 was 5.0%. That's down from 5.6% in the first quarter of 2021.

I'll put a bit of context around it. Look, I think there's a few things happening. I think that the industry-wide, there's been an aggressive push around upgrades and subsidizing upgrades. And it will be interesting to see how, for example, AT&T's price move affects this. We've seen customers hanging on to their devices for much longer. I think their view is that there isn't much differentiation anymore. And so we're seeing people hang on to those devices for longer. I think that affects it. And so finally, we have -- we believe we have an opportunity to really dig in and invest now on the churn side. We tried over the last couple of quarters and we think we've done a really good job of it, to strike a balance between subscriber results and financial results. And when the industry has extremely aggressive upgrade offers out there, we've tried to make sure that we're driving positive ARPU and we're driving positive OCF, and we think we've done that. We think we have an opportunity now to go invest substantively in churn and to bring churn down and to further improve that upgrade rate. And that's what underpins the price protection guarantees that I talked about earlier on the call. And so we think there's an opportunity to really dig into that now and go on offense in that area. And so we're excited about that.

And there are no further questions at this time. I'll now turn the call back over to Colleen Thompson for any additional or closing remarks.

Okay. Thanks, everyone, for your time today. Again, please feel free to reach out to IR if you have any additional questions. Have a great weekend.

This concludes today's conference call. You may now disconnect.