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Telephone and Data Systems, Inc. Quarterly Report on Form 10-Q

Press release·05/02/2025 12:39:58

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Telephone and Data Systems, Inc. (TDS) filed its quarterly report on Form 10-Q for the period ended March 31, 2025. The company reported a net loss of $[insert amount] for the quarter, compared to a net loss of $[insert amount] for the same period last year. Revenue decreased by [insert percentage] to $[insert amount], primarily due to a decline in wireline services revenue. The company’s operating expenses increased by [insert percentage] to $[insert amount], driven by higher costs associated with its wireless business. As of March 31, 2025, TDS had cash and cash equivalents of $[insert amount] and a debt-to-equity ratio of [insert ratio]. The company’s common shares outstanding as of March 31, 2025, were 107 million, and its Series A common shares outstanding were 7 million.

Executive Overview

Telephone and Data Systems, Inc. (TDS) is a diversified telecommunications company that provides high-quality communications services to approximately 5.5 million connections nationwide. TDS operates through its 83%-owned subsidiary United States Cellular Corporation (UScellular), which provides wireless services and leases tower space, and its wholly-owned subsidiary TDS Telecommunications LLC (TDS Telecom), which provides broadband, video, voice and wireless services.

TDS’ mission is to provide outstanding communications services and meet the needs of its shareholders, associates, and communities. Its long-term strategy has been to reinvest in its businesses to strengthen their competitive positions and financial performance, while also returning value to shareholders.

In 2023, TDS and UScellular announced they would explore strategic alternatives for UScellular. In 2024, UScellular signed agreements to sell its wireless operations and spectrum assets to T-Mobile, Verizon, and AT&T for a total of $6.4 billion. These transactions are expected to close in mid-2025, subject to regulatory approvals. TDS expects to focus its strategic efforts on its remaining businesses after the UScellular sale.

Financial Performance

For the first quarter of 2025, TDS reported:

Total operating revenues of $1,154 million, down 9% from $1,262 million in Q1 2024
Operating income of $35 million, down 49% from $67 million in Q1 2024
Adjusted EBITDA of $333 million, down 9% from $366 million in Q1 2024
Capital expenditures of $112 million, down 49% from $219 million in Q1 2024

The decrease in revenues and profitability was primarily driven by lower wireless service and equipment sales at UScellular, partially offset by lower operating expenses. UScellular’s operating income declined 19% to $41 million, while TDS Telecom’s operating income was flat at $0 million.

Table 1. TDS Consolidated Financial Results

Metric	Q1 2025	Q1 2024	Change
Operating Revenues	$1,154 million	$1,262 million	-9%
Operating Income	$35 million	$67 million	-49%
Adjusted EBITDA	$333 million	$366 million	-9%
Capital Expenditures	$112 million	$219 million	-49%

UScellular Operations

UScellular serves 4.4 million retail wireless connections, including 3.9 million postpaid and 0.4 million prepaid. It operates in 21 states and owns 4,413 towers.

For the first quarter of 2025, UScellular reported:

Total operating revenues of $891 million, down 6% from $950 million in Q1 2024
Wireless service revenues of $714 million, down 2% from $729 million in Q1 2024
Equipment sales revenues of $150 million, down 24% from $196 million in Q1 2024
Operating income of $41 million, down 19% from $51 million in Q1 2024
Adjusted EBITDA of $254 million, down 7% from $272 million in Q1 2024

The decline in revenues was driven by lower postpaid and prepaid connections, as well as lower equipment sales. Operating expenses decreased 5%, but not enough to offset the revenue decline.

UScellular continues to invest in 5G network deployment, focusing on mid-band spectrum to enhance speed and capacity. Capital expenditures decreased 60% to $53 million as the 5G rollout progressed.

TDS Telecom Operations

TDS Telecom serves 1.1 million connections in 31 states, offering broadband, video, voice, and wireless services. As of March 31, 2025, it had:

555,800 broadband connections, up 1% from a year ago
118,700 video connections, down 8% from a year ago
256,900 voice connections, down 8% from a year ago

For the first quarter of 2025, TDS Telecom reported:

Total operating revenues of $257 million, down 3% from $266 million in Q1 2024
Operating income of $0 million, down from $27 million in Q1 2024
Adjusted EBITDA of $76 million, down 20% from $95 million in Q1 2024

The revenue decline was driven by lower residential, commercial, and wholesale revenues, partially offset by growth in the expansion fiber markets. Operating expenses increased 7%, leading to the decline in profitability.

TDS Telecom continues to focus on fiber deployment, with 74% of its footprint now capable of 1Gig+ speeds. Capital expenditures decreased 32% to $59 million as the company reprioritized and slowed the pace of fiber builds.

Liquidity and Capital Resources

TDS operates capital-intensive businesses and requires substantial funding for capital expenditures, investments, and other obligations. As of March 31, 2025, TDS had:

$474 million in available undrawn borrowing capacity from its revolving credit agreements
$783 million in outstanding borrowings under its unsecured term loan agreements
$300 million in outstanding borrowings under its secured term loan agreement

TDS expects to finance its 2025 capital expenditures of $375-$425 million for TDS Telecom and $53 million for UScellular using cash flows from operations, existing cash balances, and additional debt financing.

The company may need to delay or reduce certain investments, dividends, or asset sales to meet its cash flow needs. TDS Telecom has also considered slowing the pace of fiber deployments and reducing planned capital expenditures if it is unable to access capital on acceptable terms.

Outlook and Risks

The announced transactions to sell UScellular’s wireless operations and spectrum assets are expected to have a significant impact on TDS’ financial statements, including triggering or accelerating the recognition of various cash and non-cash obligations. TDS expects to focus its strategic efforts on its remaining businesses after the UScellular sale closes.

Key risks facing TDS include:

Uncertainty around the ability to close the announced transactions with T-Mobile, Verizon, and AT&T
Potential for substantial costs and changes to UScellular’s remaining business if the transactions are consummated
Intense competition, lack of scale, and structural disadvantages in the wireless industry
Difficulties in attracting and retaining talent, as well as deploying new technologies
Uncertainty around future cash flows, liquidity, and access to capital
Regulatory changes and legal/policy proceedings

Overall, TDS faces a period of significant transition as it works to close the UScellular sale and refocus its strategy on its remaining businesses. The company’s ability to effectively manage the operational and financial impacts of these changes will be critical to its future success.