TDS Q1 2025 slides: Revenue declines amid progress on $6.4B strategic transactions

Introduction & Market Context

Telephone and Data Systems Inc (NYSE:TDS) released its first quarter 2025 results on May 2, revealing revenue declines across its business segments while making progress on major strategic transactions worth over $6.4 billion. The company’s presentation highlighted advances in its pending sale of UScellular’s wireless operations to T-Mobile and separate spectrum sales to Verizon (NYSE:VZ) and AT&T (NYSE:T), all expected to close in mid-2025.

TDS shares closed at $37.64 on May 1, 2025, but were trading down 2.76% in pre-market activity following the earnings release, suggesting investor concerns about the quarterly performance despite the strategic transformation underway.

Quarterly Performance Highlights

UScellular, TDS’s wireless subsidiary, reported declining financial metrics across most categories. Total (EPA:TTEF) operating revenues decreased 6% year-over-year to $891 million, with service revenues down 2% and equipment sales dropping significantly by 24%.

As shown in the following comprehensive financial overview:

The company’s profitability also faced pressure, with Adjusted EBITDA declining 7% to $254 million. However, capital expenditures decreased dramatically by 60% to $53 million, likely reflecting the pending sale of wireless operations.

TDS Telecom (BCBA:TECO2m), the company’s wireline segment, similarly experienced financial headwinds with total operating revenues decreasing 3% to $257 million and a substantial 20% drop in Adjusted EBITDA to $76 million.

Despite these challenges, TDS Telecom maintained its 2025 guidance, projecting total operating revenues between $1,030-$1,070 million and Adjusted EBITDA of $320-$360 million.

Strategic Initiatives

The most significant development highlighted in the presentation is the ongoing $4.4 billion sale of UScellular’s wireless operations and select spectrum assets to T-Mobile. The transaction includes up to $100 million tied to satisfaction of certain financial and operational metrics and $400 million for designated entity spectrum licenses.

The presentation detailed various factors affecting net proceeds, including debt repayment, employee obligations, and taxes:

Additionally, UScellular is selling spectrum to Verizon for $1 billion and to AT&T for $1.018 billion, bringing the total value of strategic transactions to approximately $6.4 billion.

Management indicated they are making "solid progress towards closing the proposed T-Mobile transaction" which is expected in mid-2025, while also "taking steps to optimize capital structure post-close and defining the anticipated use of proceeds."

Wireless and Tower Business Performance

UScellular’s subscriber metrics showed continued challenges in the wireless business. Postpaid handset net losses totaled 38,000 in Q1 2025, while connected devices saw minimal losses of 1,000. On a positive note, fixed wireless subscribers increased from 124,000 to 150,000 year-over-year, and postpaid churn improved slightly from 1.03% to 1.01%.

The following chart illustrates these wireless operating metrics:

The tower business remained a bright spot, with third-party tower revenues growing 6% year-over-year. UScellular reported 4,413 owned towers with a tenancy rate of 1.56, generating significant revenue from major carriers.

The company highlighted that it continues to "aggressively market our towers" as part of its post-transaction strategy, which will also include "opportunistic monetization of remaining spectrum" and "identification of towers that T-Mobile intends to collocate on."

Fiber Deployment Progress

TDS Telecom continued its fiber expansion strategy despite financial headwinds. The company deployed 14,000 new marketable fiber addresses in Q1, putting it on track to meet its 150,000 annual goal. Residential broadband connections grew with 2,800 net additions, with 8,300 coming from fiber markets (offset by losses in other segments).

The following chart shows how fiber is driving broadband connection growth:

TDS Telecom is making progress toward its long-term fiber program goals, aiming to reach 1.8 million marketable fiber service addresses and have 80% of service addresses served by fiber. Currently, the company has reached 942,000 addresses with 52% served by fiber.

The fiber expansion is enabling faster broadband speeds, with the percentage of residential connections at 1Gig+ speeds increasing from 17% in Q1 2024 to 24% in Q1 2025.

Forward-Looking Statements

Looking ahead, TDS is focused on successfully closing its strategic transactions while continuing to invest in fiber deployment. The company maintained its 2025 guidance for TDS Telecom, suggesting confidence in its ability to navigate current challenges.

For the post-transaction landscape, management outlined several factors that will shape the company’s direction, including optimizing capital structure, monetizing remaining spectrum assets, and potentially decommissioning select towers with no colocators.

The company’s Business Transformation program at TDS Telecom has identified $100 million of annual cost savings by year-end 2028, which could help offset current profitability challenges.

While the quarterly financial results show pressure across multiple metrics, the pending strategic transactions represent a significant transformation that could reshape TDS’s business model and balance sheet in the coming years.

Full presentation:

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