Array Digital Infrastructure, Inc. Q2 FY2025 earnings call

• Closed the sale of UScellular wireless business and certain spectrum assets to T-Mobile, unlocking significant value and strengthening balance sheets. - Ken Dixon joined TDS Telecom as CEO, bringing energy and momentum. - Vicki highlighted steps to strengthen capital structure, including extending revolvers, amending term loans, and planning debt redemptions to reduce interest costs. - Array has 3 components: fifth largest U.S. tower business, noncontrolling investment interest, and retained spectrum. - Key priorities for Array include closing pending spectrum transactions and opportunistically monetizing remaining spectrum, with ground lease optimization and revenue growth as tower business priorities. - TDS Telecom delivered 27,000 new fiber service addresses, with E-ACAM construction underway and a goal of 150,000 fiber addresses for the year.

TDS Telecom: Delivered 27,000 new fiber service addresses in the quarter, with a goal of 150,000 for the year. E-ACAM construction kicked off and is underway in multiple states, with E-ACAM expected to contribute ~300,000 additional addresses to the fiber footprint over several years. Total operating revenues were down 1% year-over-year, but excluding divestitures, revenue increased 1% due to growth in fiber subscribers and higher residential revenue per connection. Cash expenses increased 1% year-over-year, and capital expenditures were higher due to spending on the E-ACAM program. Array Digital Infrastructure: Closed the sale of UScellular wireless business and certain spectrum assets to T-Mobile, which unlocked significant value. Array has ~4,400 owned towers, a noncontrolling investment interest, and retained spectrum. They aim to close pending spectrum transactions with AT&T and Verizon and continue monetizing remaining spectrum. Third-party tower revenues increased 12% year-over-year, and third-party colocations increased 6% year-over-year. Distributions from noncontrolling investment interest increased from $58 million to $77 million between Q2 2024 and 2025.

• Projected revenues to be in the range of $1.03 billion to $1.05 billion. - Adjusted EBITDA expected to be $320 million to $350 million. - Adjusted OIBDA expected to be $310 million to $340 million. - CapEx guidance remains unchanged. - Expect to share more on fiber expansion opportunities in upcoming quarters, including cohort penetration reporting.

• Regulatory approvals are needed for spectrum sales, which could impact the timing and proceeds of those transactions. - Competition in the telecom and tower industries could affect market share and pricing. - Labor and material shortages could impact construction timelines and costs for fiber expansion and tower operations.

Q: When can we expect an update on expanding and accelerating the 1.8 million service addresses?

A: Kris Bothfeld said they are sizing opportunities for Edge-Outs in their footprint and expect to share more in upcoming quarters but are not ready to disclose exact details yet. Vicki added it's a critical step in capital allocation strategy with Ken Dixon on board.

Q: How should we think about the trajectory of overall fiber broadband additions for the year?

A: Kristina Bothfeld said they expect year-over-year improvement in fiber net additions as address delivery ramps up in the second half of the year, with aggressive presales models and additional tactics to increase penetration in launched areas.

Q: Update on mobile launch (TDS Mobile)?

A: Kristina Bothfeld said TDS Mobile launched in select markets in Q4 2024 and was fully launched across all markets in Q2, with a phased approach to work out kinks and expects growth in the future.

Q: Pricing strategy for gig product?

A: Kristina Bothfeld said entry-level pricing is aggressive to match competitors, typically with a $20 step-up in price after 2 years to full retail rack rate, but they are testing different pricing strategies.

Q: M&A opportunities at TDS Telecom?

A: Walter Carlson said they are at the beginning of considering M&A opportunities, focused on fiber opportunities that are synergistic with existing properties and footprint, leveraging proceeds from T-Mobile and expected spectrum transactions.

Q: Growth strategy for Array's tower business?

A: Douglas Chambers said key priorities include closing T-Mobile MLA implementation, ground lease optimization, and continued revenue growth through new colocations, with strong MLAs with all 3 carriers and a focus on maximizing value from remaining spectrum.

Q: Operational and strategic priorities for TDS Telecom beyond fiber expansion?

A: Kristina Bothfeld mentioned executing the build plan, executing sales and marketing to improve conversion of fiber passings to paying customers, and business transformation to streamline operations and enhance customer experience.

Q: Fit of TDS Telecom and Array under the same holding company and shareholder value?

A: Walter Carlson said the tower business and fiber business are in the same industry, with the tower business providing financial power to enhance execution and unlock value for shareholders, and synergies exist between the two businesses' thinking processes.