Telephone and Data Systems, Inc. Q3 FY2025 earnings call

• TDS Telecom: Priorities for 2025 include investing in fiber (using special dividend proceeds for current and incremental fiber builds), inorganic growth via M&A (opportunistic and disciplined, interested in smaller, synergistic accretive fiber M&A), and returning capital to shareholders (board authorized $500M share repurchase program). Achieved 1 million fiber addresses; E-ACAM program to replace copper, deliver $1.2B regulatory revenue over 15 years, and improve network reliability in rural markets.
• Array Digital Infrastructure: Successfully transitioned to independent tower company. Spectrum monetization progress with 70% of spectrum holdings agreed to be monetized; adjusted financial reporting to include tower company measures; impact of T-Mobile MLA on revenue, with site rental revenue growth and DISH's MLA assertion being a factor.

TDS Telecom

• Achieved 1 million fiber addresses in the third quarter. Total operating revenues down 3% Y/Y compared to prior year; excluding divestitures, down 1%. Adjusted EBITDA down 3% Y/Y, pressured by divestitures and legacy revenue declines but offset by cost control. Capital expenditures up due to E-ACAM program and expansion address delivery; over 80% of 2025 CapEx focused on fiber.

Array Digital Infrastructure

• Transitioned to independent tower company. Spectrum monetization progress: 70% of spectrum holdings agreed to be monetized. Results focus on continuing operations, excluding wireless operations results. Site rental revenue from DISH MLA expected; adjusted free cash flow (similar to AFFO) considered, including cash flows from noncontrolling investment interest.

• TDS Telecom: Capital allocation plan includes investing in fiber (updating on edge-out communities in February), inorganic growth via M&A (opportunistic and disciplined), and share repurchase (timing dependent on spectrum transactions).
• Array Digital Infrastructure: Anticipate special dividend from AT&T transaction; spectrum transactions subject to regulatory approval, with AT&T transaction expected to close in Q4 2025 or H1 2026; remaining spectrum monetization plans with build-out requirements not immediate.

• Regulatory risks for spectrum transactions, including impact of federal government shutdown on approval timing.
• DISH's assertion of relief from MLA obligations, which Array disputes.
• Execution risks with fiber build plan execution and tower company operational challenges, including SG&A costs and tower decommissioning decisions.

Q: Could you provide cohort analysis on fiber market penetration?

A: Vicki mentioned they're aligning on appropriate success measures and will update in February.

Q: How should we think about the sizing and execution of the $500M stock buyback program?

A: Vicki stated it's balanced with business investment, timing dependent on spectrum transactions closing, and executed in a disciplined manner.

Q: What's the naked tower strategy and exit rights on land leases?

A: Douglas discussed leasing naked towers, rationalizing ground rents, and most ground leases allow short notice termination.

Q: How does the leverage target of 1.5x for TDS Telecom work?

A: Vicki explained current leverage is 1.4x, intended to stay under, with cash used for fiber builds and tax obligations in mind.

Q: Role of M&A in tower business strategy?

A: Douglas stated M&A isn't a current strategic focus, with operational execution being sole focus for now.

Q: Color on edge-out opportunities and M&A at TDS Telecom?

A: Kenneth discussed edge-outs in adjacent rural markets, with M&A considered for accretive, synergistic opportunities adjacent to existing markets