It’s an interesting time to be the CFO of a telephone and cable services company. The field features fast-changing preferences for accessing and consuming data and content, which in large part is driven by the industry’s equally dynamic technology developments.
Other challenges are not so new: the industry is both highly capital-intensive and highly regulated.
For Vicki Villacrez, the finance chief at TDS Telecom, there is an additional layer of complexity.
The company grew over decades through the acquisition of small phone and cable companies across the United States. As such, Madison, Wisconsin-based TDS Telecom mostly serves rural areas, as well as some suburban ones, and operates in 31 states. The company along with sister entity U.S. Cellular are subsidiaries of Telephone and Data Systems Inc. The parent has about $5 billion in annual revenue, compared with $350 million when Villacrez joined the company 29 years ago.
Taken together, the challenges have required TDS Telecom to reinvent itself in recent years.
“The wire-line phone operators have been in secular decline for a number of years,” notes Villacrez. “As consumers started to find less utility in their wired phones and have ‘cut the cord,’ so to speak, we’ve had to move into adjacent growth areas.” (Fortunately for the parent company, much of the traditional phone services business has shifted to wireless service operated by U.S. Cellular.)
Biggest among TDS Telecom’s growth strategies is a push to bring broadband services to its rural customers by installing fiber-optic cable in place of copper wire. “We’re fibering up our existing markets and expanding into new geographies with fiber,” the CFO says.
Another type of cord-cutting is the current trend of consumers, especially young ones, canceling their cable TV service and instead streaming video content to their wireless mobile devices.
But that’s not an issue for TDS Telecom, according to Villacrez.
“We’re not seeing cord-cutting on the broadband side,” she says. “That’s a trend in the more urban areas, but we’re seeing pent-up demand. In fact, a lot of people in our markets are offloading data usage from their cell phones to wired broadband.”
Currently, there’s at least 10 times more broadband usage on the company’s wired home network than on its customers’ cell phones, and that ramp-up is increasing by 45% year over year, Villacrez says.
She adds that the company is, though, sensitive to the fact that many cable TV customers have grown disenchanted with being effectively forced to buy access to dozens or hundreds of channels that they don’t want, in order to get the fewer ones they do want.
“We understand that not all of our customers want to have all the channels that our content providers require,” says Villacrez. “As part of our negotiations with those providers, we’ve been able to offer skinny packages to a limited number of customers. We call them our Freedom or Light packages. Customers get fewer channels and can use streaming broadband services as a complement.”
The company also provides an internet protocol television (IPTV) service, called TDS TV, that allows customers to view network TV programming on any device through the internet rather than a cable TV hookup. Under development is a cloud-based TV platform that will be called TDS TV Plus.
Discipline and Compliance
Meanwhile, the capital-intensive nature of the business requires the company to take a long-term look at its investments. For example, some markets still have legacy copper lines, and depending on competitive and other factors in those markets, TDS Telecom may choose to increase broadband speeds by upgrading the existing infrastructure.
“There has to be good discipline around business and financial planning,” Villacrez says. “I have to be able to see far out what the returns are going to look like and ensure we’ll be able to get them.”
As to regulation, the company has significant compliance demands. But its relationship with regulators has a positive side as well. It receives funding and support from the Federal Communications Commission to bring broadband services to areas that are unserved or underserved. “I couldn’t make the economics work without that support,” the CFO notes.
Villacrez, for her part, has an undergraduate accounting degree, a CPA designation, and an MBA degree. But she’s not the typical CFO who came to the position through the controllership organization.
Instead, she spent many years in internal audit, which she insists is a strong training ground for a future CFO, even though a majority of CFOs don’t have experience in that area.
“Internal audit is a project environment where you look at all aspects of the company,” she says. “So you have an enterprise focus. You also have a governance focus. You learn communications skills, and you learn from often being in tense situations.”
That, plus roles she’s played in strategic and financial planning, enable the strategic role she now plays. “I’m not a traditional CFO, but I think I’m what a lot of CEOs are looking for. It’s really given me an edge.”