AD

Business Context and Reporting Period

Company: Array Digital Infrastructure, Inc. (formerly United States Cellular Corporation)

Reporting Period: Quarter ended September 30, 2025 (Q3 2025)

Business Overview: Array operates as a digital infrastructure company leasing tower space and holding wireless spectrum licenses. As of September 30, 2025, it owns 4,449 towers in 19 U.S. states. The company is an 82.0% owned subsidiary of Telephone and Data Systems, Inc. (TDS).

Strategic Transformation: On August 1, 2025, Array sold its wireless operations and select spectrum assets to T-Mobile US, Inc. for total consideration of $4.29 billion (including $2.63 billion cash and $1.67 billion debt assumption). These operations are now reported as discontinued operations. The company is transitioning to a pure-play tower and spectrum asset holding business.

Key Financial Metrics

Note: Net income for Q3 2025 includes a loss of $147.3 million from discontinued operations. Net income for the nine months ended Sept 30, 2025 includes a loss of $117.0 million from discontinued operations.

Material Changes vs. Prior Period

• Revenue Growth: Continuing operating revenues increased 83% in Q3 2025 and 34% in the nine-month period, driven primarily by the Master License Agreement (MLA) with T-Mobile, which added lease revenue from approximately 2,015 towers.
• Discontinued Operations: The sale of wireless operations to T-Mobile resulted in a significant loss on sale of $239.3 million recorded in Q3 2025, offset by a gain on sale of $34.1 million from equity method investments in unconsolidated entities.
• Debt Reduction: Total long-term debt decreased significantly due to the repayment of $713.3 million in term loans and the exchange of $1.68 billion of senior notes for T-Mobile debt. Array retained $363.9 million in senior notes.
• Impairment Charges: Loss on impairment of licenses decreased 65% year-over-year to $47.7 million in Q3 2025, compared to $136.2 million in Q3 2024, related to high-band spectrum assets.
• Dividends: A special dividend of $23.00 per share was declared and paid in August 2025, totaling approximately $1.99 billion.

Guidance, Outlook, and Risks

Outlook and Guidance:

• Spectrum Monetization: Array expects substantial proceeds from pending spectrum license sales to Verizon ($1.0 billion), AT&T ($1.02 billion), and T-Mobile ($85.0 million). Closing dates are estimated for late 2025 through 2026, subject to regulatory approval.
• Dividends: Management expects to declare additional special dividends upon the closure of pending spectrum transactions.
• Wind-down Costs: Legacy wireless operations wind-down expenses are expected to persist at Q3 2025 levels into the first half of 2026 before declining in the second half of 2026.
• Tax Liability: Array expects a cash income tax liability of $250.0 million to $300.0 million related to the T-Mobile transaction, payable primarily by year-end 2025.

Key Risks and Contingencies:

• Regulatory Approval: Pending spectrum sales are subject to FCC approval. The ongoing U.S. federal government shutdown may impact the timing of these approvals.
• Tenant Concentration: Array is now substantially dependent on T-Mobile for tower revenue following the MLA. Loss of this tenant would have a material adverse effect.
• Spectrum Monetization: Inability to monetize remaining spectrum assets or meet FCC build-out requirements could lead to license forfeiture or continued impairment charges.
• Legal Proceedings: Ongoing litigation regarding FCC auction bid credits (Advantage Spectrum case) was remanded for further proceedings; a stockholder derivative lawsuit remains pending.

Investor Verification Checklist

• Spectrum Sale Timelines: Verify the status of regulatory approvals for the Verizon, AT&T, and T-Mobile spectrum transactions, specifically regarding the impact of the federal government shutdown.
• T-Mobile MLA Terms: Confirm the specific revenue recognition schedule for the interim leases (up to 30 months) and the risk of early cancellation by T-Mobile.
• Tax Liability Payment: Monitor cash flow statements for the expected $250M-$300M tax payment related to the T-Mobile divestiture in Q4 2025.
• Debt Covenants: Review compliance with the new Consolidated Leverage Ratio (max 3.50:1) and Interest Coverage Ratio (min 3.00:1) post-divestiture.
• Decommissioning Costs: Assess the $65.8 million liability recorded for decommissioning costs and potential future obligations for towers not retained by T-Mobile.