Telephone and Data Systems, Inc. Q2 FY2025 earnings call

• Completed the sale of UScellular wireless business and certain spectrum assets to T-Mobile for $4.3 billion, unlocking value for shareholders and strengthening balance sheets. - Array is now an independent tower company named Array Digital Infrastructure with ~4,400 towers. - TDS Telecom welcomed Ken Dixon as new CEO, who is energizing the team. - Optimized capital structure with actions like extending revolvers, amending term loans, and planning debt redemptions. - Array aims to close pending spectrum transactions with AT&T and Verizon, with proceeds to be used for dividends and business growth. - TDS Telecom delivered 27,000 new fiber service addresses, with E-ACAM construction underway and expecting 150,000 fiber addresses by year-end.

TDS Telecom

• Total operating revenues were down 1% in the second quarter compared to prior year. Excluding the impact of divestitures, revenue increased 1%, driven by growth in fiber subscribers and higher residential revenue per connection. Average residential revenue per connection was up 1% year-over-year due primarily to price increases. Overall revenue is down 1% with divested markets accounting for a $4 million decrease in revenues compared to prior year.

Array Digital Infrastructure

• Third-party tower revenues increased by 12% and the number of third-party colocations increased by 6% year-over-year. Distributions from noncontrolling investment interest increased from $58 million to $77 million in the second quarter of 2024 and 2025, respectively.

• Projected revenues for 2025 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. - Array expects additional wind-down costs in 2025-2026 and will provide tower-related financial and operational metrics in Q3 2025.

• Regulatory and other customary approvals needed for spectrum transactions. - Uncertainty in the timing and success of closing pending spectrum transactions with AT&T and Verizon. - Wind-down costs in 2025-2026 may negatively impact profitability and adjusted EBITDA for Array.

Q: Could you give an idea of when you can update on expanding and accelerating the 1.8 million service addresses?

A: Kris Bothfeld said they are sizing opportunities and expect to share more in upcoming quarters, with Ken Dixon bringing momentum. Vicki Villacrez added it's a critical step in capital allocation strategy.

Q: Where do you see leverage at the TDS Telecom side kind of stabilizing at longer term?

A: Vicki Villacrez said TDS Telecom is consolidated, expecting to stay at 1.5x leverage for now and will put a more defined capital allocation strategy in place when spectrum transactions are completed.

Q: On the business side, update on mobile launch?

A: Kristina Bothfeld said TDS Mobile MVNO launched in select markets in Q4 2024 and to all markets across footprint in Q2, with phased approach to ensure customer experience.

Q: What kind of assets are you looking at for M&A at TDS Telecom?

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

Q: Main building blocks of growth strategy for Array's tower business?

A: Douglas Chambers said bringing sales team in-house, strong MLAs with carriers, and T-Mobile new MLA are key, with ground lease optimization and revenue growth as priorities.

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

A: Kristina Bothfeld said executing build plan, sales and marketing to drive revenue and penetration, and business transformation are top priorities, with focus on converting fiber passings to paying customers.