TDS

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2025, for Telephone & Data Systems, Inc. (TDS). TDS is a diversified telecommunications company operating primarily in the United States through two main segments: Array (wireless services and tower leasing) and TDS Telecom (broadband, video, and voice services). As of June 30, 2025, Array was an 82.5%-owned subsidiary. The filing includes significant subsequent events occurring after the period end, most notably the August 1, 2025, closing of the sale of Array's wireless operations to T-Mobile.

Key Financial Metrics (Six Months Ended June 30, 2025)

Material Changes vs. Prior Period

• Revenue Decline: Total operating revenues decreased 6% year-over-year (YoY) to $2,341 million, driven by a 4% decline in Array revenues and a 2% decline in TDS Telecom revenues.
• Profitability Pressure: Operating income fell 30% YoY to $74 million. Net income attributable to TDS common shareholders was a loss of $16 million, compared to a loss of $3 million in the prior year period.
• Segment Performance:
  • Array Wireless: Revenues declined 4% YoY. Postpaid handset net losses increased due to elevated churn and aggressive industry competition. However, Adjusted EBITDA remained relatively stable at $355 million (down 9% YoY).
  • Array Towers: Revenues increased 6% YoY to $123 million, driven by new colocations and lease escalators. Operating income rose 2% to $42 million.
  • TDS Telecom: Operating income dropped 70% YoY to $14 million, impacted by legacy market declines and divestitures, partially offset by growth in expansion markets.
• Capital Efficiency: Capital expenditures decreased 39% YoY to $282 million, reflecting a strategic reduction in wireless network build-out ahead of the T-Mobile transaction.

Guidance, Outlook, and Subsequent Events

The filing details a transformative period for TDS, with the most critical developments occurring after June 30, 2025:

• T-Mobile Transaction Closed: On August 1, 2025, Array sold its wireless operations to T-Mobile for cash proceeds of $2,629 million. The transaction included a debt exchange of $1,680 million and a Master License Agreement (MLA) for tower space.
• Special Dividend: Array declared a special dividend of $23.00 per share payable in August 2025. TDS, owning 82.5% of Array, will receive its pro-rata share.
• Debt Reduction: Array repaid $863 million in term loans and export credit financing in early August 2025. TDS expects to repay its secured term loan in August 2025.
• Spectrum Sales: Pending sales of spectrum licenses to Verizon ($1,000 million) and AT&T ($1,018 million) remain subject to regulatory approval. These are expected to close in 2025 and 2026, respectively.
• Outlook: TDS expects to focus on its remaining businesses (TDS Telecom and Array Towers), improve liquidity, and return value to shareholders. Management anticipates significant wind-down costs and potential decommissioning expenses for towers following the T-Mobile sale.

Investor Verification Checklist

• Transaction Closing Conditions: Verify the final cash proceeds from the T-Mobile sale and the specific terms of the debt exchange, as final amounts are subject to purchase price adjustments.
• Regulatory Approvals: Monitor the status of regulatory approvals for the pending spectrum sales to Verizon and AT&T, which are critical for future liquidity.
• Wind-Down Costs: Assess the magnitude of exit costs, severance, and potential tower decommissioning expenses that will impact future earnings post-August 2025.
• Dividend Timing: Confirm the receipt of the special dividend from Array and the impact on TDS's cash position.
• Debt Covenants: Review the amended debt covenants triggered by the T-Mobile sale, specifically the shift to net debt leverage ratios and accelerated maturity dates.