10-Q: TDS Navigates Strategic Shift Post-Array Wireless Sale

Telephone and Data Systems, Inc. reports Q3 2025 results, highlighting the financial impact of Array's wireless operations divestiture and ongoing strategic realignments.

Summary

• TDS reported a net loss of $73.1 million for Q3 2025, an improvement from a $78.5 million loss in Q3 2024.
• Net income from continuing operations attributable to TDS shareholders was $57.5 million for Q3 2025, a significant improvement from a $83.1 million loss in Q3 2024.
• Net loss from discontinued operations attributable to TDS shareholders was $139.3 million for Q3 2025, compared to a $17.4 million net income in Q3 2024, primarily due to a $272.6 million loss on the sale of wireless operations.
• Total operating revenues decreased by 6% to $308.5 million for Q3 2025, and by 10% to $897.5 million for the nine months ended September 30, 2025, compared to the prior year periods.
• Adjusted EBITDA from continuing operations increased by 53% to $168.7 million for Q3 2025 and by 10% to $385.9 million for the nine months ended September 30, 2025.
• Array completed the sale of its wireless operations and select spectrum assets to T-Mobile on August 1, 2025, for $4,293.8 million, including $2,628.8 million in cash and $1,665.0 million in assumed debt.
• TDS Telecom's total connections decreased by 4% to 1.1 million, primarily due to declines in legacy voice, video, and competitive local exchange carrier (CLEC) connections, partially offset by broadband connection growth.
• TDS Telecom increased its service addresses by 5% from a year ago to 1.8 million and offers 1Gig+ service to 76% of its total footprint as of September 30, 2025.
• Array owns 4,449 towers with a tenancy rate of 1.02 as of September 30, 2025.
• TDS expects a cash income tax liability on the T-Mobile transaction of between $75.0 million and $125.0 million, most of which will be paid during the three months ending December 31, 2025.
• TDS repurchased 1,077,564 Common Shares for $40.7 million at an average cost per share of $37.77 during the nine months ended September 30, 2025.

Sentiment

Score: 6

Explanation: The company is undergoing a significant strategic transformation with the divestiture of its wireless operations. While this resulted in a large one-time loss from discontinued operations, the continuing operations show improved profitability (Adjusted EBITDA and Net Income from continuing operations). TDS Telecom is investing heavily in fiber, and Array's tower business is growing. However, uncertainties remain regarding spectrum monetization, competitive pressures, and the outcome of legal claims (DISH Wireless). The overall sentiment is cautiously optimistic due to the strategic refocusing and improved continuing operations, but tempered by transitional challenges and market risks.

Positives

• Net income from continuing operations attributable to TDS shareholders significantly improved to $57.5 million in Q3 2025 from a loss of $83.1 million in Q3 2024.
• Adjusted EBITDA from continuing operations increased by 53% to $168.7 million in Q3 2025 and by 10% to $385.9 million for the nine months ended September 30, 2025.
• The sale of Array's wireless operations to T-Mobile generated $4,293.8 million in total consideration, including $2,628.8 million in cash proceeds and $1,665.0 million in assumed debt.
• Equity in earnings of unconsolidated entities increased by 61% to $69.8 million in Q3 2025, primarily driven by a $34.1 million gain from Iowa entities' wireless operations sale to T-Mobile.
• Interest and dividend income increased by 97% to $15.7 million in Q3 2025, primarily due to interest earned on the proceeds from the sale of wireless operations to T-Mobile.
• Income tax benefit on continuing operations increased due to favorable reductions to valuation allowances related to deferred tax assets, now likely to be realized by taxable income from the T-Mobile sale and pending license agreements.
• The enactment of H.R.1 (OBBBA) is expected to result in favorable deferral of cash taxes in 2025 and future periods due to 100% bonus depreciation, domestic research cost expensing, and increased business interest expense limitation.
• TDS Telecom increased its service addresses by 5% to 1.8 million and offers 1Gig+ service to 76% of its total footprint.
• Residential broadband connections grew by 2% to 562,400 in Q3 2025.
• Residential fiber net adds increased to 11,200 in Q3 2025 from 10,400 in Q3 2024.
• Array's tower site rental revenues increased by 79% to $45.8 million in Q3 2025, primarily as a result of the Master License Agreement (MLA) with T-Mobile.
• Credit ratings for TDS and Array were updated to BBB(Standard & Poor's) and confirmed Ba1 (Moody's) with stable outlooks, and confirmed BB+ (Fitch) with a stable outlook, post-T-Mobile transaction.
• Free cash flow from continuing operations improved to $(38.7) million for the nine months ended September 30, 2025, from $(124.0) million in the prior year.

Negatives

• Net loss from discontinued operations attributable to TDS shareholders was $139.3 million in Q3 2025, compared to a net income of $17.4 million in Q3 2024, primarily due to a $272.6 million loss on the sale of wireless operations.
• Total operating revenues decreased by 6% for Q3 2025 and 10% for the nine months ended September 30, 2025.
• TDS Telecom's total operating revenues decreased by 3% for Q3 2025 and 2% for the nine months ended September 30, 2025, due primarily to divestitures and declines in legacy markets.
• TDS Telecom's residential, commercial, and wholesale revenues all decreased for both the three and nine months ended September 30, 2025.
• TDS Telecom's total connections decreased by 4% to 1.1 million, driven by declines in legacy voice, video, and CLEC connections.
• Residential fiber churn rate increased to 1.5% in Q3 2025 from 1.3% in Q3 2024.
• Interest expense increased by 45% to $47.3 million in Q3 2025, primarily due to the write-off of unamortized debt costs for repaid debt facilities and new borrowings.
• TDS incurred $4.1 million and $6.2 million in third-party expenses related to strategic alternatives review for the three and nine months ended September 30, 2025, respectively.
• Array recognized a $47.7 million impairment loss on retained high-band wireless spectrum licenses in Q3 2025 due to suppressed pricing and decreased demand.
• Array expects T-Mobile to cancel interim leases on approximately 1,800 towers prior to the full 30-month duration, which will lead to a corresponding decline in revenue.
• Array expects legacy wireless operations winddown expenses to persist at third quarter of 2025 levels into the first half of 2026.
• Site rental revenues from Echostar Communications (DISH Wireless) could be negatively impacted in future periods due to a claim that its obligations under its Master Lease Agreement with Array are excused.

Risks

• Substantial changes to Array's remaining business post-T-Mobile transaction could have a material adverse effect on its financial condition and results of operations, including operational, cost, and borrowing disadvantages due to smaller scale.
• Uncertainty regarding the closing of License Purchase Agreements with Verizon, AT&T, and T-Mobile for wireless spectrum licenses, with potential impacts from the ongoing government shutdown on timing.
• Inability to monetize remaining spectrum assets at agreeable prices and ongoing costs to retain spectrum, including FCC build-out requirements, could adversely affect operations.
• Delays or failures in completing significant network construction and systems implementation activities for TDS Telecom's fiber deployment and E-ACAM builds could adversely affect operations.
• Increasing competition in the tower and wireline industries from larger competitors, overbuilders, and alternative technologies could adversely affect revenues, growth, and increase costs.
• Economic and business risks associated with fixed rate annual escalators on Array's colocation revenue contracts, where ground lease escalators could exceed colocation revenue escalators, eroding margins.
• High inflation may increase costs beyond what can be recovered through price increases, adversely affecting financial condition or results of operations.
• A substantial portion of Array's revenues are derived from a small number of tenants concentrated in the wireless industry, and the loss or financial difficulties of such tenants, particularly T-Mobile, poses a significant risk.
• DISH Wireless's claim that its obligations under its Master Lease Agreement with Array are excused could negatively impact Array's site rental revenues.
• TDS's lack of scale relative to larger competitors could hinder its ability to compete successfully, leading to lower profit margins, increased costs, and limited opportunities.
• Inability to protect TDS's real estate rights, particularly for land leases under Array's towers, could lead to non-renewal or less favorable terms, impacting business.
• Adverse impacts from extreme weather events, climate-related events, natural disasters, or structural deficiencies on Array's towers or TDS Telecom's network, potentially causing service interruptions, damage, and increased costs.
• Inability to attract, develop, and retain outstanding talent, including key management personnel, could have an adverse effect on business and operations.
• Changes in various business factors, including consumer preferences, price competition, and cost increases, could have an adverse effect on financial condition.
• Advances or changes in technology, including artificial intelligence, could render existing technologies obsolete, create competitive disadvantages, or increase costs.
• Costs, integration problems, or other factors associated with acquisitions or divestitures and/or expansion of TDS businesses could have adverse effects.
• Difficulties involving third parties (vendors, suppliers, network operators), including supply chain disruptions, financial difficulties, or operational problems, could adversely affect business.
• Failure to maintain flexible and capable telecommunication networks or information technologies, or material disruptions thereof, could have an adverse effect on business.
• Uncertainty in TDS or Array's future cash flow and liquidity, level of indebtedness, or inability to access capital could limit financing, requiring reduction or delay of programs, asset divestitures, or reduction/cessation of share repurchases/dividends.
• Concentration of TDS assets and revenue primarily in the U.S. telecommunications industry represents increased risk due to lack of diversification.
• Significant investments in unconsolidated wireless operating entities that TDS does not control, leading to potential losses in value or cash flows.
• Failure to timely or fully comply with existing or new legislative and/or regulatory requirements could adversely affect business.
• Uncertainty regarding regulatory support (e.g., USF, E-ACAM) and the applicability/amount of surcharges and fees, including the ability to pass them through to customers, could adversely affect financial condition.
• Settlements, judgments, restraints, and costs from pending and future legal and policy proceedings could have an adverse effect.
• Control by the TDS Voting Trust and provisions in the Restated Certificate of Incorporation may discourage or make a change in control more difficult.
• Cyber-attacks or other breaches of network or information technology security could have an adverse effect.
• Disruption in credit or other financial markets, deterioration of U.S. or global economic conditions, or other events could impede access to financing or increase its cost, and result in reduced revenues and cash flows.

Future Outlook

TDS expects to have additional opportunities to invest further in its remaining businesses, improve its liquidity, and return value to its shareholders following the conclusion of the strategic alternatives review process for Array. A cash income tax liability of $75.0 million to $125.0 million on the T-Mobile transaction is expected, mostly payable in Q4 2025. The enactment of H.R.1 (OBBBA) is anticipated to favorably defer cash taxes in 2025 and future periods. TDS Telecom's capital expenditures for the full year 2025 are projected to be between $375 million and $425 million, primarily for fiber deployment, broadband growth, and infrastructure maintenance. Array anticipates T-Mobile will cancel interim leases on approximately 1,800 towers before the full 30-month duration, leading to a corresponding revenue decline. Legacy wireless operations winddown expenses are expected to persist at Q3 2025 levels into the first half of 2026, declining in the second half of 2026. Array expects substantial proceeds from pending spectrum sales to AT&T and Verizon, with special dividends anticipated upon closure of these transactions, and may declare regular cash dividends thereafter. Future TDS common shareholder dividends are uncertain, dependent on the strategic review, reinvestment opportunities, and liquidity needs. Capital expenditures for 2025 are planned to be financed primarily through operating cash flows, dividends, and existing cash balances.

Management Comments

• TDS plans to build shareholder value by continuing to execute on its strategies to build strong, competitive businesses providing high-quality, data-focused services and products.
• Following the conclusion of the strategic alternatives review process for Array, TDS will focus its strategic efforts on its remaining businesses.
• TDS also expects to have additional opportunities to invest further in its remaining businesses, improve its liquidity and return value to its shareholders.
• TDS Telecom strives to provide high-quality broadband services in its markets with the ability to provide value-added bundling with video, voice and wireless service options. TDS Telecom focuses on driving growth by investing in fiber deployment.
• Array seeks to grow tower revenue primarily through increasing colocations on existing towers and amendments to existing colocations.
• Array seeks to provide unique tower locations, attractive terms and streamlined implementation to wireless network operators, internet service providers, government and public safety agencies, broadcast and media companies, and other businesses.
• TDS believes that existing cash and investment balances, distributions from unconsolidated entities, expected cash flows from operating activities, expected and potential dispositions, dividends and funds available under its financing agreements will provide sufficient liquidity for TDS to meet its day-to-day operating needs and debt service requirements.
• TDS and Array believe they were in compliance as of September 30, 2025 with all such financial covenants.
• TDS intends to contest plaintiffs' claims vigorously on the merits regarding legal proceedings.

Industry Context

The telecommunications industry is undergoing significant technological shifts and evolving customer expectations, marked by continuous improvements in digital technology and accelerated development cycles for new services. Competition in the wireline sector is intensifying due to the widespread deployment of broadband, mobile virtual network operator (MVNO) plans, and advanced video services. Increased overbuilding activities, fueled by venture capital, private equity, and government funding, further challenge incumbent carriers. High-speed wireless networks pose a competitive threat to traditional wireline and cable broadband connections. The growing trend of fixed-mobile bundled services places smaller operators like TDS at a disadvantage against larger, more resource-rich competitors. The tower industry remains highly competitive, with Array facing larger public and private tower companies. Industry-wide challenges in operationalizing high-band spectrum have led to suppressed pricing and reduced demand, impacting Array's spectrum asset valuations. The U.S. Supreme Court's recent ruling on the Federal Universal Service Fund program provides crucial clarity and predictability for funding mechanisms like E-ACAM.

Comparison to Industry Standards

• The filing does not provide specific comparisons to industry benchmarks or comparable companies/projects.
• TDS acknowledges its lack of scale relative to larger competitors, which may have greater financial and other resources, potentially hindering its ability to compete successfully.
• Array competes with public and private tower companies, private equity sponsored tower companies, and owners of non-communications sites, many of whom are larger, have greater financial resources, more advantageous tower locations, greater capacity, and more scale nationwide.
• TDS is at a competitive disadvantage compared to larger competitors, including cable companies, national wireless carriers, and other potential large new entrants, in adapting to the trend of fixed-mobile bundled services due to greater financial and other resources of these larger entities.

Corporate Governance

Legal Proceedings

• DOJ False Claims Act Inquiry (FCC Wireless Spectrum License Auctions): Investigation into Array's participation in wireless spectrum license auctions. District Court for D.C. dismissed cases for Advantage and King Street in March 2023. D.C. Circuit affirmed King Street dismissal in April 2025, but plaintiffs filed a petition for certiorari with the U.S. Supreme Court on September 5, 2025. D.C. Circuit reversed dismissal for Advantage case on September 26, 2025, and remanded it. TDS and Array believe claims are without merit.
• Putative Stockholder Class Action (U.S. District Court for Northern District of Illinois): Filed May 2, 2023, alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934. A settlement in principle was reached on February 28, 2025, and the court approved the settlement and dismissed the lawsuit with prejudice on September 4, 2025.
• Stockholder Derivative Lawsuit (Circuit Court of Cook County, Illinois, Chancery Division): Filed January 31, 2025, alleging breach of fiduciary duty. A motion to dismiss was filed by defendants on July 23, 2025. A hearing was held on October 6, 2025, with a status conference set for January 23, 2026. TDS is unable to determine material impact but intends to contest vigorously.

Related Party Transactions

• Array, an 82.0%-owned subsidiary of TDS, sold its wireless operations to T-Mobile, which included a debt exchange offer where Array's debt could be exchanged for T-Mobile's debt.
• Array's noncontrolling entities managed by Array (equity method investments) sold their wireless operations to T-Mobile, resulting in Array realizing $34.1 million in income and receiving a $42.5 million distribution.
• TDS, as an 82.0% equity owner of Array, received its pro-rata share of Array's special dividend of $23.00 per share paid on August 19, 2025.

Stakeholder Impact

• Shareholders: Experienced a net loss for Q3 and 9 months 2025, but continuing operations show improvement. Received a special dividend from Array. Future dividends are uncertain. Stock price volatility is a risk. Existing corporate governance provisions may deter change in control.
• Employees: Reduction of headcount related to the sale of wireless operations. Employee compensation and severance obligations were triggered by the T-Mobile transaction. Risk of inability to attract and retain outstanding talent.
• Customers: TDS Telecom focuses on providing high-quality broadband services and expanding fiber deployment. The T-Mobile Short-Term Spectrum Manager Lease Agreement aims to provide continued, uninterrupted service. Risk of service interruptions due to network issues or natural disasters. Competitive pressures and technological changes impact service offerings and pricing.
• Creditors: Significant debt repayments and exchanges occurred as part of the T-Mobile transaction, reducing overall long-term debt. Array entered into a new term loan agreement. Compliance with debt covenants is required. Credit rating updates reflect changes in financial health.
• Suppliers/Vendors: Dependence on vendors for equipment, services, and content. Risk of supply chain disruptions, product availability shortages, or financial difficulties of key suppliers.

Next Steps

• Array to work toward closing the Verizon, AT&T, and T-Mobile spectrum transactions signed during 2024 and 2025.
• Array to seek to opportunistically monetize its remaining spectrum assets not subject to executed agreements.
• TDS Telecom to continue exploring opportunities to transform its business operations given the change in scale of the overall TDS organization.
• TDS to focus strategic efforts on its remaining businesses.
• TDS expects to have additional opportunities to invest further in its remaining businesses, improve liquidity, and return value to shareholders.
• TDS Telecom expects capital expenditures for full year 2025 to be between $375 million and $425 million, primarily for fiber deployment, broadband growth, and infrastructure maintenance.
• Array expects legacy wireless operations winddown expenses to persist into the first half of 2026 and begin declining in the second half of 2026.
• Array expects its Board of Directors to declare special dividends upon closure of pending spectrum sales to AT&T and Verizon.
• The Array Board of Directors may declare regular cash dividends after the close of these transactions.
• TDS Board of Directors to consider future cash dividends based on strategic review, reinvestment opportunities, and liquidity needs.
• TDS to finance 2025 capital expenditures primarily using cash flows from operating activities, dividends, and existing cash balances.
• A status conference on the stockholder derivative lawsuit motion to dismiss is set for January 23, 2026.

Key Dates

Recommendation

TDS is in a significant transitional phase, having divested its wireless operations and refocusing on its core telecom and tower businesses. While the continuing operations show promising improvements in Adjusted EBITDA and net income, the overall consolidated results are still impacted by the one-time loss from the divestiture and ongoing wind-down costs. The company has strengthened its liquidity and reduced debt, which is positive. However, uncertainties remain regarding the monetization of retained spectrum, the long-term revenue stability from T-Mobile's interim tower leases, and the outcome of legal disputes (DISH Wireless). The substantial capital expenditures for fiber deployment in TDS Telecom are a long-term growth driver but also a significant investment. Given the mixed financial signals, the strategic repositioning, and the remaining uncertainties, a 'Hold' recommendation is appropriate for investors to observe the successful execution of the remaining strategic alternatives and the stabilization of the new business structure before making further investment decisions.

Keywords

Telecommunications, Digital Infrastructure, Wireless Spectrum, Tower Leasing, Broadband, Fiber Deployment, SEC Filing, 10-Q, T-Mobile, Verizon, AT&T, Array Digital Infrastructure, TDS Telecom, Strategic Alternatives Review, Discontinued Operations, Adjusted EBITDA, Capital Expenditures, Debt Exchange, FCC, E-ACAM, Share Repurchase, Dividends, Cybersecurity, Inflation