For TDS, 2013 was a year of significant strategic action. We divested underperforming wireless markets to focus on stronger markets. We identified cable as an attractive growth area and made our first acquisition, Baja Broadband, to build the business. We united our hosted and managed services businesses under one brand to focus more effectively on attracting mid-market commercial customers. We also took action to return value to TDS and U.S. Cellular shareholders, and to strengthen our financial foundation by monetizing non- strategic assets.
While our financial and operating results continue to reflect the competitive environment and the impact of necessary investments, we believe the actions we’ve taken to better position our businesses will enable us to improve our performance over time. In addition to the initiatives above, we made progress in a number of important areas:
Our strategy is to provide the best customer experiences in the wireless industry, centered around a best-in-class network. A fast and reliable 4G LTE network is the backbone for our competitive data products and services and strong portfolio of Android, Apple, and Windows devices. Our Rewards Program—unique in the wireless industry—creates a membership experience for our customers.
Attracting new customers and reducing churn are our highest priorities. We enhanced our value proposition in 2013 by expanding 4G LTE access to nearly 90 percent of our customers, launching Apple devices to strengthen our portfolio, offering shared data plans, and working to provide a seamless and consistently high-quality experience across our sales and service channels. We introduced customizable plans for small and medium businesses, and expanded our distribution to Sam’s Club and Amazon.
We also converted to a new billing and operational support system—an essential platform for delivering services and products more efficiently. During and following the conversion, many of our customers experienced extended reductions in service levels as we worked through implementation issues, and this led to an increase in postpaid churn. These experiences were below our standards, and we provided additional rewards points to postpaid customers in appreciation for their patience and commitment.
We launched Apple devices for the first time in November of 2013, and reinstituted contracts for postpaid customers, to help reduce postpaid churn over time.
A best-in-class 4G LTE network is the foundation for competitive data offerings and devices that enable us to maximize and monetize the dramatic growth in data use.
By the end of 2013, we offered our strongest-ever portfolio of Android, Apple, and Windows devices, along with attractive shared data plans. Fifty-one percent of postpaid customers were smartphone customers in the fourth quarter, and 80 percent of total devices sold in the quarter were smartphones.
We expanded 4G LTE coverage to nearly 90 percent of customers by year end, and 4G LTE devices were 69 percent of devices sold in the fourth quarter.
Comprehensive 4G LTE coverage provides significant capacity to promote and monetize smartphone adoption and data use in all of our markets.
The recent Federal Communications Commission decision to mandate device interoperability supports our strategy by ensuring that we can continue to offer a greater choice of devices to our customers, and ensure nationwide 4G LTE roaming coverage in the future.
Our strategy is to attract customers by providing high-quality, reliable communications services and products. We expanded our business strategically in 2013 by entering the cable sector through the acquisition of Baja Broadband, opening substantial opportunities to leverage our existing products, services, and infrastructure in new markets. We also positioned our hosted and managed services business to offer comprehensive IT solutions through a unified brand and sales force.
Residential
TDS Telecom is increasing average revenue per residential connection as customers chose faster broadband speeds and higher-tier packages of our IPTV service, TDS TV®.
We continued to increase broadband speeds and expand TDS TV availability in our markets, and we marketed high-speed fiber and TDS TV services in new neighborhoods to build momentum prior to buildouts. By the fourth quarter, TDS TV was available in 11 markets, and 13 percent of residential households were passed by facilities that enable TDS TV.
Broadband and video service bundles are key to our retention strategy, and by the end of 2013, 73 percent of residential customers had double- or triple-play bundles.
We also neared completion of stimulus projects nationwide that will bring broadband access to approximately 27,000 previously underserved households when complete.
Commercial
Our commercial strategy is to be a trusted partner to our business customers, and our reputation for service quality and reliability enabled us to achieve a 35 percent increase in connections for managedIP, a hosted VoIP voice and data solution. This offset a decline in traditional voice services, which resulted in a slight increase in commercial revenues in 2013.
We identified cable broadband as an attractive growth area and entered the sector in 2013 with the acquisition of Baja Broadband, which provides a high-capacity data pipeline to homes and businesses in the southwest U.S.
After the acquisition closed in August, we began leveraging our marketing experience and network capabilities to increase residential and commercial penetration in Baja’s markets. As we execute on our integration and growth strategies, we’re identifying operational and infrastructure synergies to increase efficiency.
We plan to continue to build our cable portfolio with acquisitions that offer significant growth potential in complementary markets.
Our strategy is to sell comprehensive IT solutions to mid-market commercial customers. We strengthened our value proposition in 2013 with the acquisition of solutions provider MSN Communications, and then unified our five hosted and managed services businesses under one brand—OneNeck IT Solutions.
With a comprehensive, unified service portfolio that includes colocation, cloud and hosting solutions, managed services, professional services, ERP application management, and IT hardware, OneNeck is well positioned to be a single, trusted source of end-to-end IT solutions for commercial customers.
Suttle-Straus, a marketing and graphic communications solutions provider, continued to improve its performance in 2013, expanding its commercial client base and enhancing its bundled packages of marketing services, from creative development through print and distribution. Suttle-Straus also improved margins and increased productivity through continuous improvement initiatives.
Airadigm Communications, Inc. offers mobile services to customers in Wisconsin. Airadigm operates independently of U.S. Cellular.
Our strategic imperative is to increase customer and revenue growth in our businesses by leveraging our improved competitive positioning and allocating our resources effectively to support growth initiatives.
Thank you to the employees and associates of the TDS companies for their dedication to providing outstanding services, products, and experiences to our customers.
Thank you also to our shareholders and debt holders for your continuing support of our long-term strategies.