Earnings call transcript: TDS Q3 2025 sees revenue shortfall, stock rises

Telephone and Data Systems Inc. (TDS) reported its third-quarter earnings for 2025, revealing a notable shortfall in revenue against forecasts, while earnings per share (EPS) surpassed expectations. Despite the revenue miss, TDS's stock rose nearly 2% in pre-market trading, driven by strategic initiatives and future expansion plans.

Key Takeaways

• TDS reported revenue of $308.52 million, significantly below the forecast of $1.17 billion.
• EPS came in at $0.33, surpassing the forecast of -$0.01.
• The company received a $1.6 billion special dividend from Array.
• A $500 million share repurchase program was initiated.
• TDS's stock increased by 1.99% in pre-market trading.

Company Performance

TDS's performance in Q3 2025 was marked by a decline in total operating revenues by 3% year-over-year. Adjusted EBITDA also decreased by 3%. The company achieved a milestone of 1 million fiber addresses, with plans to expand further. Despite the revenue shortfall, strategic initiatives such as the special dividend from Array and a significant share repurchase program have positioned TDS favorably in the market.

Financial Highlights

• Revenue: $308.52 million, down 3% YoY
• EPS: $0.33, exceeding the forecast of -$0.01
• Special dividend: $1.6 billion from Array
• Share repurchase: $500 million program initiated

Earnings vs. Forecast

TDS's actual EPS of $0.33 was a surprise, significantly outperforming the forecast of -$0.01, marking a surprise of -3273.08%. However, the revenue of $308.52 million fell short of the anticipated $1.17 billion, a 73.63% miss. This divergence highlights a mixed performance, with EPS strength countered by revenue weakness.

Market Reaction

TDS's stock responded positively, rising 1.99% to $38.80 in pre-market trading. This movement reflects investor optimism about the company's strategic initiatives and future growth prospects, despite the revenue shortfall. The stock remains within its 52-week range, with a high of $42.74 and a low of $30.38.

Outlook & Guidance

Looking forward, TDS plans to update its fiber expansion strategy in February, targeting several hundred thousand additional fiber passings. The company is also focusing on spectrum monetization and leasing naked towers. The anticipated closure of a spectrum transaction with AT&T is expected by Q4 2025 or H1 2026, which could further bolster TDS's market position.

Executive Commentary

"We are a fiber-centric company and we love the markets that we're operating in," stated Vicki Villacrez, CFO. Ken Dixon, CEO of TDS Telecom, emphasized, "The EACAM program along with our expansion program gives us tremendous fiber opportunities." Walter Carlson, CEO of TDS, added, "Our objective is to remain in business and be very successful for all of our shareholders."

Risks and Challenges

• Revenue shortfall: Significant miss against forecasts could affect future investor confidence.
• Market competition: Increasing competition in fiber and mobile markets.
• Operational costs: Expanding fiber infrastructure may lead to higher capital expenditures.
• Regulatory changes: Potential impacts from spectrum auctions and regulatory shifts.
• Economic conditions: Broader economic pressures could influence consumer spending.

Q&A

Analysts questioned TDS on several fronts, including fiber market penetration, capital allocation strategies, and potential M&A opportunities. The company's focus on edge-out fiber expansion and tower business margin expansion were also key topics of interest, reflecting the market's interest in TDS's strategic direction and growth potential.

Full transcript - Telephone and Data Systems Inc (TDS) Q3 2025:

Conference Call Operator: Hello and welcome to the TDS and Array Third Quarter 2025 Operating Results Conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star nine to raise your hand and star six to unmute. I would now like to turn the call over to John Toomey. Please go ahead.

Walter Carlson, President and CEO, TDS: Good morning and thank you for joining us today.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: I'm pleased to be here in my.

Walter Carlson, President and CEO, TDS: New role as Treasurer and Vice President of Corporate Relations.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: I've been with TDS for 25 years, serving as Treasurer since 2018 and I.

Walter Carlson, President and CEO, TDS: Look forward to meeting and talking with you.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: You as part of my expanded role. We want to make you aware of the presentation that has been prepared to accompany our comments this morning, which you can find on the Investor Relations sections of the TDS and Array websites. With me today and offering prepared comments are.

Walter Carlson, President and CEO, TDS: From TDS, Walter Carlson, President and CEO.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Vicki Villacrez, Executive Vice President and Chief Financial Officer from TDS Telecom, Ken Dixon, President and CEO, Chris Boffeld, Vice President of Finance, and from Array Digital Infrastructure.

Walter Carlson, President and CEO, TDS: Doug Chambers, Interim President and CEO.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: This call is being simultaneously webcast on the TDS and Array Investor Relations websites. Please see the websites for the slides referred to on this call, including non-GAAP reconciliations. TDS and Array filed their SEC Forms 8-K, including the press releases and our 10-Qs earlier this morning. Finally, as shown on slide 2, the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the safe harbor paragraphs in our press releases and the extended version included in our SEC filings. I will now turn over the call to Walter Carlson.

Walter Carlson, President and CEO, TDS: Thanks John and good morning everyone. We are pleased to report to you on our third quarter performance and the progress we have made on our priorities for 2025. Our priorities for 2025 are set forth on Slide 3. As we reported to you in August, the T-Mobile transaction closed on August 1st. The close of that transaction and the subsequent transition activities have gone well and the successful close has enabled us to continue our progress on all our other priorities. Array Digital Infrastructure has seamlessly transitioned into an independent tower company and has hit the ground running already showing nice growth as Doug Chambers will highlight shortly. Doug has done an excellent job leading Array during this transition. With Array established as a standalone tower company, we are pleased to name Anthony Carlson as the President and CEO to lead the Array team into the future.

Anthony has an outstanding business background and has led significant teams at both UScellular and TDS Telecom for the past six years. We are confident that he will be an excellent leader for Array. Turning to TDS Telecom, the third quarter was Ken Dixon's first full quarter as its CEO. TDS Telecom continues to be laser focused on its fiber transformation. In the quarter, the company achieved an important milestone of 1 million fiber addresses. You'll hear more from Ken and Chris Boffeld on this achievement and TDS Telecom's other accomplishments later in the presentation. TDS has also strengthened its capital structure, having received a $1.6 billion special dividend from Array in August and we expect to receive additional proceeds after the close of the pending spectrum transactions.

The proceeds received to date have enabled the substantial paydown of debt and will support the existing fiber expansion program at TDS Telecom. As we receive the proceeds from the additional spectrum sales, we expect to further expand our fiber program and to use a significant portion to support the new $500 million share repurchase program that the company announced this morning. Vicki Villacrez will provide additional details on our capital allocation program during her remarks. Lastly, we are keenly focused on our culture. Transformational changes are never easy, but TDS has a strong culture and our associates are effectively executing against our objectives through their continued hard work, collaboration, and professionalism. I want to personally thank all of the teams whose efforts have put the enterprise in this strong position heading into 2026. I will now turn the call over to Vicki.

Vicki Villacrez, Executive Vice President and Chief Financial Officer, TDS: Thank you, Walter, and good morning, everyone. At TDS, we are focusing heavily on capital allocation decisions in light of the UScellular transaction to T-Mobile, the debt reduction at TDS and Array, and the anticipated closing of Array's spectrum sales to AT&T and Verizon within the next year. At Array, we anticipate, as we have disclosed previously, that cash received upon closing of the AT&T and Verizon transactions will be used, subject to the determination of the Array Board, primarily to fund ongoing business operations and special dividends. We anticipate the pending AT&T transaction of $1 billion to close either in the fourth quarter of 2025 or the first half of 2026, depending on government approval.

While any decision on dividends will be made by the Array Board, we anticipate that following the closing of the AT&T transaction, the Array Board would declare a special dividend in the amount of approximately $10 per share at TDS. Our capital allocation plan has three priorities. The first is to invest in our fiber business. As Walter highlighted, we continue to believe that our fiber business has numerous opportunities for investments with attractive return profiles. We will use a portion of the anticipated special dividend proceeds to fund both our current fiber program and additional fiber builds that are incremental to our current goals. These additional opportunities are mostly edge out communities adjacent to our markets and could be at least several hundred thousand service addresses or more.

We believe there's an immediate window of opportunity to plant our flag and pursue investments in communities without a fiber provider. We are currently working through the business cases and will update you in February. Our second priority is to achieve inorganic growth through M and A. We intend to be opportunistic and disciplined, only considering those opportunities that are accretive and meet our return objectives. To that end, we would specifically be interested in smaller, highly synergistic, accretive M and A fiber opportunities, particularly adjacent to our existing markets. As we have demonstrated in the past, TDS will remain financially disciplined and business case driven in any M and A pursuits. Clustering to achieve synergies will continue to be an important strategy at TDS Telecom. The company has recently divested ILEC markets that were not a strategic fit to its fiber objectives.

Our third priority is to return capital directly to shareholders. In September, TDS began repurchasing its stock and bought back a little over 1 million shares during the third quarter under its existing stock repurchase authorization. In addition, TDS's board authorized a $500 million increase to our existing share repurchase program, leaving the remaining authorization intact. This authorization reflects the Board's confidence in the company's long term strategy and the belief that repurchasing TDS shares at present valuation is an attractive use of the company's capital. The timing and manner will be determined at the company's discretion and will be dependent on closings of the announced spectrum transactions as well as general business and market conditions. We believe share repurchase is tax efficient for our shareholders while also providing flexibility for the company. To be clear, TDS also expects to retain its current regular quarterly dividend.

All decisions regarding dividends in future quarters, of course, are subject to the determination of our Board. I think these balanced capital allocation priorities will make TDS stronger both operationally as we make investments in our fiber business and by returning capital to our shareholders in a measured way. Thank you. I now will turn the call over to Ken Dixon to discuss his vision for TDS's fiber business.

Ken Dixon, President and CEO, TDS Telecom: Ken, thank you, Vicky. Good morning everyone. My first quarter at TDS Telecom has been fantastic. One highlight of course was achieving 1 million fiber passings. It was a significant milestone for the business and years in the making. I have also enjoyed traveling to our markets and listening to our TDS frontline associates who are executing every day on our fiber build plans and growth strategy. Before we get into the slides, I'd like to take a moment to reaffirm our strategic priorities. These include executing on our build plan, accelerating fiber penetration, advancing our business transformation program, and delivering an excellent customer experience. These pillars are central to our long term growth strategy and will continue to shape our path forward.

Turning to Slide 6, we delivered 42,000 fiber addresses in the quarter, which puts us just over halfway to our goal of 150,000 service addresses for the full year. Consistent with historical trends, we expect to have our strongest address delivery here in the fourth quarter. We generated 11,200 residential fiber net adds in the quarter, contributing to a 19% growth in residential fiber connections since last year. Fiber net adds have improved sequentially every quarter this year. On the sales and build front, we recognize that performance isn't where we want it to be. We are taking actions to change this trajectory. Since the end of the second quarter, we have nearly doubled the number of construction crews we have across our markets and are continuing to increase crew counts through the end of the year.

We are focused on executing our build plan so we have a large funnel of addresses to sell into and increasing penetration rates in our existing launched fiber areas. Lastly, our enhanced EACAM builds are very well underway which will help bring fiber to the most rural markets in our footprint over the next several years. On the next slide, I want to share a little bit more about EACAM which will be absolutely a transformative program to our network, our business, and our customers. First, this program enables us to replace a substantial portion of legacy copper infrastructure. This will add approximately 300,000 new fiber addresses, which includes EACAM addresses as well as addresses that will be picked up along the route. This directly supports our long-term goal of reducing copper to less than 5% of our total network footprint.

This will greatly improve network reliability and the customer experience. As construction activity ramps up, we expect to see strong copper to fiber conversions as well as new customer growth throughout our rural footprint. Second, the program delivers over $1.2 billion in regulatory revenue support over a 15 year period, providing a funding stream that supports this continued investment in fiber. Third, these markets are uniquely positioned for success with no gig capable competitors. We anticipate penetration rates between 65-75% which translates into very attractive returns. In short, EACAM is an outstanding program strategically, operationally, and financially. It allows us to bring world class fiber services to communities that were previously cost prohibitive while delivering meaningful value to both our customers and to our business. Before turning over the call, I want to say how much I've enjoyed my first quarter here.

We have a lot of work to do, but I'm excited about the direction we're heading and the opportunities ahead as we transform TDS Telecom into a fiber centric company. I'll now let Chris Boffeld take us through the quarter results. Chris, thanks Ken.

Chris Boffeld, Vice President of Finance, TDS Telecom: Turning to slide 8, you can see our progress towards the long term fiber goals we shared earlier this year. We are targeting 1.8 million marketable fiber service addresses and we crossed the 1 million fiber address mark this quarter across our entire footprint. Our goal is to have 80% of total addresses served by fiber compared to 55% today. We expect this percentage to grow as our EACAM deployments ramp and finally, we expect to offer speeds of 1 gig or higher to at least 95% of our footprint. We finished the quarter with 76% of our footprint at gig speeds. As a reminder, we will use a combination of fiber and coax technologies to reach this target. Turning to slide 9, the graph on the left shows the most recent five quarters of fiber service address delivery. Address delivery typically increases throughout the year given seasonality impacts.

As Ken said, we are behind schedule for the year and we are working to get our build plan back on track and are expecting the fourth quarter to be the strongest of the year. The graph on the right shows the significant growth in our fiber footprint nearly doubling over the last three years. Turning to Slide 10, the graph on the left shows the last five quarters of residential fiber net additions. We delivered 11,200 this quarter, up 8% year over year. We have seen year over year and sequential improvement in residential fiber net adds this quarter and we expect to see improvement in fiber net adds in the fourth quarter. The graph on the right highlights our residential fiber connection growth. Connections have nearly doubled over the last three years driven by our expansion efforts and copper to fiber conversions.

As we continue to invest in fiber, we expect broadband connection growth to continue. Broadband penetration remains a key metric for our fiber program, with our expansion markets hitting 20-25% penetration on average within the first 12 months of launch and approximately 40% in steady state by year four to five. On slide 11, average residential revenue per connection was up slightly year over year, consistent with industry trends. Fewer broadband customers are bundling with our video product, which dilutes this metric. As we shared earlier this year, we anticipate more modest growth in residential revenue per connection as we focus on driving penetration. The chart on the right shows our revenue comparison year over year. As a reminder, divested markets accounted for a $6 million decrease in revenues compared to the prior year. Now let's talk about revenues on slide 12.

Total operating revenues were down 3% in the quarter compared to prior year. Excluding the impact of divestitures, revenues were down 1%, driven by continued declines in our legacy cable and copper markets, partially offset by growth from our fiber investments. Adjusted EBITDA is down 3% year over year, which is pressured by the divestitures and legacy revenue stream declines offset in part by disciplined cost control. A key priority for the company is to drive business transformation and we are starting to see benefits from these efforts to improve our cost structure. Capital expenditures are up compared to the same period last year due to spending on the EACAM program as well as higher expansion address delivery. We expect both capex and service address delivery to continue to increase in the fourth quarter as we accelerate construction to meet our full year address target.

Over 80% of our 2025 capital expenditures will be focused on fiber. Slide 13 shows our 2025 guidance which remains unchanged from last quarter. In closing, Ken and I want to thank the entire TDS Telecom team. We have significant opportunities and transformation ahead of us and it would not be possible without the hard work and dedication of our associates. I will now turn the call over to Doug.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: Thanks, Chris. Good morning. The third quarter was momentous as we closed the sale of our wireless operations and returned significant value to shareholders in the form of a special dividend. We also launched our operations as an independent tower company, and the team has done an outstanding job of executing a seamless transition and delivering strong results, which were bolstered by the new T-Mobile MLA that commenced on August 1. In addition, we continue to make progress on our process to opportunistically monetize our spectrum as we entered into additional agreements to sell spectrum. As a reminder, Array's business has three significant value retained: wireless spectrum, tower operations, and non-controlling investment interests. Further, our strategic imperatives included on Slide 17 continue to be focused on fully optimizing our tower operations and monetizing our spectrum.

I will discuss these value drivers and progress on our strategic imperatives as I walk through our third quarter results from a financial reporting standpoint given the divestiture of our wireless business in the third quarter. Results from wireless operations including the book loss on sale of such operations are presented as discontinued operations in our financial statements. This discussion is solely focused on our continuing operations and therefore excludes wireless operations results and the related book loss on sale. Further, now that we are an independent tower company, we have adjusted our reporting to include relevant tower company financial measures including adjusted free cash flow which is similar to the adjusted funds from operations or AFFO measure reported by other tower companies and also includes the cash flows from our non controlling investment interests which are a significant portion of Array's total cash flows.

Starting with an update on our spectrum monetization process as shown in slide 18, we have made substantial progress and to date have reached agreements to monetize 70% of our spectrum holdings in conjunction with the sale of our wireless operations. On August 1, we conveyed 30% of our spectrum to T-Mobile. In addition, as previously announced, we signed agreements to sell spectrum to Verizon and AT&T in separate transactions in exchange for $1 billion on each transaction. In August and October of 2025, we signed additional agreements with T-Mobile to sell spectrum for total gross proceeds of $178 million. This primarily includes the sale of 700 MHz A Block and the exercise of approximately 80% of T-Mobile's call option on the 600 MHz spectrum. The pending spectrum transactions are subject to regulatory approval and closing conditions.

As it relates to expected close dates on the pending spectrum transactions, we expect the timing of regulatory approval to be impacted by the ongoing federal government shutdown. Given this, as mentioned by Vicki, we expect the pending AT&T transaction to close in either the fourth quarter of 2025 or the first half of 2026 and the remaining transactions to close in 2026. Our remaining spectrum principally consists of C-band spectrum and we continue to believe that this is attractive beachfront spectrum for 5G and there is an existing ecosystem so carriers are easily able to put this spectrum to use and although there are build out requirements for this spectrum, the first one does not apply until 2029, so there's plenty of time to monetize this spectrum.

Turning to slide 21, the T-Mobile MLA significantly increases our revenue and we are focused on partnering with T-Mobile to ensure the integration process is well executed. Growing colocation revenue outside of the T-Mobile MLA also remains a priority and both revenue growth and new colocation application volume remains strong. Overall site rental revenue excluding non-cash amortization components grew 68% on a year-over-year basis in the third quarter of 2025 and excluding the impact of T-Mobile revenue on interim sites grew 46%. This reflects both the significant impact of the MLA with T-Mobile as well as strong revenue growth from other tenants.

Further, our decision to insource our sales and intake operations at the beginning of 2025 has helped enhance our sales results as new colocation applications excluding T-Mobile applications which are subject to the MLA have increased 125% on a year to date basis through September 30, 2025 relative to 2024. Related to site rental revenues, we received a letter dated September 2025 from DISH Wireless whereby DISH asserts its master lease agreement with Array has been impacted by unforeseeable actions by the FCC and therefore DISH believes it is relieved of its obligations under the MLA and despite this, DISH plans to continue to operate certain sites for a period of time. Array believes DISH's assertions are completely without merit and DISH's obligations under the MLA remain intact. Array plans to enforce DISH's performance and payment obligations under the MLA.

Array expects to recognize approximately $7 million of site rental revenue from the DISH MLA in 2025, and DISH has obligations at similar levels from 2026 through 2031 with a declining revenue commitment in 2032-2035. Slide 22 summarizes Array's financial results in the third quarter of 2025. We estimate approximately 40% of selling, general, and administrative or SG&A expenses include costs to support the following activities: wireless operations prior to divestiture and that are not reflected as discontinued operations, wireless operations wind down costs incurred after the August 1 close date, administrative expenses associated with managing spectrum assets, and expenses associated with the ongoing Strategic Alternatives Review.

We expect legacy wireless operations wind down expenses to persist into the first half of 2026 at levels similar to the third quarter of 2025, and while some wind down expenses will remain after that time, we expect such expenses to begin declining in the second half of 2026. Turning to slide 24, T-Mobile has until January 2028 to finalize their selection of 2,015 committed sites under the new MLA. Based on these final selections, Array expects to have between 800-1,800 tenantless or naked towers. We are aggressively continuing our efforts to lease these naked towers and will also plan on working with our ground lessors to rationalize ground rents based on the economics associated with naked towers over time.

Based on the results of these efforts and the projected future lease potential of each tower, we will assess the economics of each naked tower and evaluate alternatives including potential decommissioning. Slide 25 summarizes the result of non-controlling investment interests. As noted, historically, greater than 80% of our investment income and related distributions are attributable to four wireless operating entities operated and managed by Verizon and AT&T. Investment income and distributions for the nine months ended September 30, 2025 were impacted by several events, including the following two items. First, we own non-controlling interest in three additional entities that had wireless operations and have tower operations in the state of Iowa. These three entities sold their wireless operations to T-Mobile in three separate transactions on August 1, 2025, the same date that Array sold its wireless operations to T-Mobile.

As a result of these three separate transactions, Array recognized $34 million of equity income and received $42 million of distributions in the third quarter of 2025. Second, in the first half of 2025, Array received distributions from Verizon managed entities of $25 million related to proceeds from Verizon's prepaid tower lease transaction with Vertical Bridge. I want to thank the entire Array and TDS teams who have worked tirelessly to close the sale of our wireless operations and stand up an independent tower company. It has been a transformational and highly successful quarter. I also want to thank the Array Board for their trust in me to lead Array for the past several months. It has been an absolute pleasure to lead our outstanding Array team. Lastly, I am pleased to turn the reins over to Anthony.

I had the pleasure of working alongside Anthony while we were both members of the U.S. Cellular Leadership Team and have great confidence in Anthony as both an outstanding strategic thinker and leader and combined with the existing Array team, I am confident that Array has a very bright future. I will now turn the call back to Walter.

Walter Carlson, President and CEO, TDS: Thank you, Doug. As you can see, TDS is in a vital period of transformative change. The successful close of the T-Mobile transaction has unlocked tremendous value, enabling us to expand and deepen our Fiber program, stand up a strong and growing tower business, and strengthen our capital structure. We are making good progress, but there is much more to do. Let me again thank all of the outstanding associates across the TDS enterprise for the fine work you do every day to serve our customers and advance our business. Operator, please now open the line for questions.

Conference Call Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star 9 on your telephone keypad to raise your hand and star 6 to unmute yourself when it is your turn to speak. Please stand by while we compile the Q and A roster. Your first question comes from the line of Rick Prentice with Raymond James and Associates. Please go ahead.

Chris Boffeld, Vice President of Finance, TDS Telecom: Thanks.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Good morning, everybody.

Vicki Villacrez, Executive Vice President and Chief Financial Officer, TDS: Good morning, Rick.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Hey, a lot of moving pieces, but a lot of interesting things going on here. First, Doug, have enjoyed working with you. Good luck in the future. I appreciate the adjusted free cash flow similar to AFFO calculation that, you know, we've been asking for. Thanks for that again. Thanks for working with you.

Ken Dixon, President and CEO, TDS Telecom: Thanks, Rick.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: I appreciate it.

Yeah.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Vicki, I think one of the more interesting things is obviously we're looking for an update in February on the fiber plan you mentioned. Several hundred thousand or more might be added, so that helps us frame it a little bit. One of the other things we're interested in is can you give us some cohort analysis or something to take a look at how the older markets of fiber, say 1, 2, 3, 4 years ago are doing? Because it's kind of blurred, right? You guys are spending CapEx, you're spending OpEx and trying to understand the progress towards those penetration rates. Any thoughts on when you give that update in February, can we start getting some, maybe some cohort analysis or some thoughts on how the prior markets are doing?

Vicki Villacrez, Executive Vice President and Chief Financial Officer, TDS: Yeah. Thank you. Rick. Two piece parts to your question. Let me take the first one and then address the several hundred thousand fiber opportunity. First of all, we are a fiber-centric company and we love the markets that we're operating in and we see a lot of opportunity. I'm going to have Ken talk about some of that opportunity here as he's joined the company. We are currently right now in the process of evaluating our business cases and our engineering designs as we evaluate those opportunities. We do see several hundred thousand or more. We'll come back and update investors in February on what that looks like from a capital allocation perspective. Second, on the cohort penetration, we've heard you loud and clear for sure.

You know, to be honest, we did go back and we looked at what the industry is reporting and we did not find a lot. You know, there seems to be little reporting out there and quite frankly it was not enough information really to set a clear industry standard for us. With that said, with Ken just coming on board, we are internally aligning as a team as we are ramping up our fiber builds in a number of markets, evaluating our edge out opportunities. We are aligning on what the appropriate succession measures are going to look like.

Ken Dixon, President and CEO, TDS Telecom: Good morning. As Vicki said, I'm very bullish on the markets that we selected, I think they're fantastic. The EACAM program along with our expansion program gives us tremendous fiber opportunities going forward especially to convert our copper to fiber transition. Great programs all along. As Vicki said, when we look at these expansion markets as we've been first to fiber and have planted our flag, we look around and we see adjacent neighborhoods, adjacent communities that candidly do not have a fiber provider and we can continue to be first to fiber. We're evaluating all those markets now, but we do see several hundred thousand as an opportunity.

Chris Boffeld, Vice President of Finance, TDS Telecom: Okay.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: I think one of the other interesting and exciting things actually, Vicki, was the stock buyback program. Historically, TDS, USM, now AD, have not done a lot of buybacks except for really kind of handling stock comp kind of creep. It sounds like this is something, a big change for you guys that you are seeing. You did something in September, you are seeing value in the stock. How should we think about that sizing of the $500 million, the execution of that. Am I right to interpret that this is actually a pretty big change for TDS?

Vicki Villacrez, Executive Vice President and Chief Financial Officer, TDS: Yes. Thanks, Rick. First off, I think that this move and the recent authorization by the board really demonstrates the board's confidence in the company's long-term strategy and belief that, you know, repurchasing its shares is an attractive use of capital. I see it as a really important part of our capital allocation plan, and we are going to balance that with investment back into the business. You know, first and foremost is investing into the business. We see a lot of fiber opportunity. We're in the process of evaluating and quantifying that. I think this is a real balance, and it's going to be something that's balanced with timing and the opportunity and the timing of our builds over time. Execution of it, I would say, certainly to the management's discretion.

The timing and matter first and foremost is dependent on the successful closing of our spectrum transactions. That is a priority. It's a top focus for the leadership team. Of course, we'll execute in a disciplined opportunistic manner as we evaluate the current business environment and the market environment.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Great. Okay. Last one for me, more mundane question back to Doug. Obviously calling out the SG&A at Array, 40% kind of not your tower operating kind of numbers. Can you help us understand how much was that wind down component? So we can understand a little more what run rate going forward might be for the next couple of quarters. I got to admit, I'm just wanting to understand a little bit more about spectrum management. What is that? How long will that go on as you kind of wind down your spectrum position? Because I think there are some spectrum management up in cost of service as well.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: Yeah, thanks, Frank. With respect to the 40%, we're not going to break down those four components individually. What I would say about that though, if you're trying to triangulate to a run rate, is there's that 40%, but in addition there's structural costs that we have being a large wireless company that we also have to work on within the SG&A infrastructure. It's not just that 40%, it goes beyond that. Think about IT platforms that we use to support wireless and the related IT support we add for that. That's an example of additional opportunity that is beyond the 40%. Just keep that in mind as you're thinking about a run rate for SG&A. There's still quite a bit of work for us to do on SG&A. We completely expected the SG&A costs to be high in Q3.

We expect them to be high through the first half of next year. As we indicated, spectrum management costs. I mean, we still hold spectrum, as you know, and so, you know, we incur costs, you know, so we're, you know, we're still fulfilling coverage requirements for a certain spectrum, you know, incurring some cell site rental costs on that. We have legal costs, we have personnel that manage the spectrum. All that is components of cost we're incurring that will ultimately be temporary as we're, you know, of course, in a process of opportunistically monetizing the spectrum. With time those will eventually go away.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Okay, thanks everybody.

Vicki Villacrez, Executive Vice President and Chief Financial Officer, TDS: Thank you, Rick.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Welcome.

Conference Call Operator: Your next question comes from the line of Eric Lubchow with Wells Fargo. A reminder to please press star 6 on your telephone keypad to unmute. Eric, a reminder to unmute yourself locally by pressing star 6 on your telephone keypad.

Walter Carlson, President and CEO, TDS: That.

Conference Call Operator: We will move on to our next question from Vikash Harlalka with New Street Research. Vikash, please go ahead.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Hi, thanks so much for taking my questions. I have a couple of questions on the Array side and then some on the TDS Telecom side. On the Array side, what is the naked tower strategy from a go to market standpoint, but also from a sale or decommissioning standpoint? How long is too long to wait? Do you have exit rights on the land leases? I will ask the TDS questions after this.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: Yeah, good morning, Vikash. With respect to the naked towers in the slide that we included, it at a high level articulates strategy, which obviously we're working hard to lease up all our towers. That continues, and we hope over time that minimizes the naked towers. The other thing we're doing is an initiative, you know, going to our ground lessors, and we obviously can't rationalize the rents we're paying on a lot of our naked towers, and we're going to seek to reduce those rents over time. We also have fairly robust analysis, and we're continuing to refine it on future leasability of the towers. You know, where competitor towers are, using crowdsourced traffic, understanding our view of what the leasability is.

After going through all those steps, you know, and this will be a multi year process and it'll be on a tower by tower basis, we will make decisions as to what to do with each tower, hold, you know, some other strategic option, and then potentially decommission some as well.

And then.

Vikash, I'm sorry, you asked a question. What was your second question?

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: My question was do you have exit rights on the land leases, exit price? I'm sorry, what?

Walter Carlson, President and CEO, TDS: Exit rights?

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Exit rights on the land leases.

Walter Carlson, President and CEO, TDS: Rights.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: Oh yeah, the land, the land commitments. By and large we have some that are extended, but they're fairly minimal. A large portion of our ground leases were able to terminate upon very short notice. Those are not significant commitments overall in our portfolio. There's some, but they're minor.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Got it. I have one sort of financial question on the TDS side and then one strategic question. On your leverage target of 1.5 times for TDS Telecom, it's probably the lowest that I've heard from any of the Wildland operators. One, does it include the impact from the several hundred thousand fiber passings that you're going to announce next year in February? Two, just help us understand like how did you land on this target and I mean why not just lever.

Walter Carlson, President and CEO, TDS: More and return more capital to shareholders.

Vicki Villacrez, Executive Vice President and Chief Financial Officer, TDS: Okay, thank you. Yes, let me, let me, this is Vicki. Let me address the leverage target question. First off, let me just say, you know, we're really pleased with where our current leverage is and our balance sheet strength with our preferreds. We think it maximizes our future flexibility and we feel comfortable with where our leverage is at currently. When you think about our leverage at TDS currently as of the end of the quarter, on a gross basis, we're at 1.4 times and we intend to stay under that leverage ratio. Now we've got cash on the balance sheet as we're anticipating the funding, the fiber builds through the rest of the fourth quarter and into 2026 and through 2026. At the same time, we also have tax obligations that will come due with the closing in the sale of the transaction to T-Mobile.

Our leverage targets are intended with the principle that we're going to put our cash to use over time and therefore that that plays into our philosophy on our capital allocation strategy.

Chris Boffeld, Vice President of Finance, TDS Telecom: Vikash, you did ask about, you know, does this include the updated fiber goals? What we publicly stated so far is that we plan to double our fiber addresses from where we ended 2024, from around 900,000 to 1.8 million. We said we will do that over roughly a five year period. What that does not include are the additional edge out opportunities that we have been discussing that we believe are several hundred thousand or more. In February, we will come back and update everyone on our new goals.

Walter Carlson, President and CEO, TDS: Got it.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: That's super helpful. My last question, sort of a strategic question. You obviously gave us some color on potential fiber targets. That's helpful. Just flipping that a little bit.

Walter Carlson, President and CEO, TDS: Would you be open to getting acquired by someone like a Verizon or AT&T? Vikash, this is Walter. Thank you for the question. You know, TDS has been in business for a long time. Our objective is to remain in business and be very successful for all of our shareholders for a long time going forward.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Thank you very much.

Conference Call Operator: Your next question will come from the line of Eric Lubchow with Wells Fargo. Eric, a reminder to press star 6 on your telephone keypad in order to unmute. Eric, are you there?

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Hello? Hi, guys.

Conference Call Operator: Sorry about that. Eric, please press star 6 on your telephone keypad to unmute.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Hi, guys. Let me try that again. Apologize. Just a couple questions for Doug on the tower side. You know, Doug, I know you've talked about getting to a 45-50% margin longer term. Maybe you could just talk about some of the moving parts there between the decommissioning of the towers, the expense rationalization, you know, your ability to bring down ground rents. Like, how should we think about the pacing of that over the next couple years as we kind of think about, you know, the growth not just at.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: The top line, but at the bottom line as well. Thanks, Eric. Good morning. You hit on a lot of them in your question. When we think about increasing margins over time, obviously, you know, growing our colo revenue is a priority and that we are very focused on. I talked about the SG&A expenses. You know, we expected them to be high in Q3. We expect them to be high through the first half next year. Over time, you know, need those to go down obviously as wind down and other costs subside. As well as what I talked about in response to Rick's question, making structural changes as well to some of our SG&A infrastructure. Focused on that ground rents, you know, there are really two components of that. One is I talk about rent rationalization with our ground lessors and that initiative.

We're focused on that. At the end of the day, if towers are uneconomical, making the decision as to potentially decommissioning them to again rationalize ground rents, offsetting that somewhat, I mean, recognize, I think, recognize that the interim revenues on the T-Mobile sites are going to go away over time. T-Mobile has the ability to cancel those on fairly short notice in a 30 month period. Certainly, you know, margins, you know, we're looking to increase over time and we expect that as we launched Array because of all the reasons I just went through that, you know, margins were going to be lower and will increase over time.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Great, appreciate that.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: Maybe just one follow up.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: I know you're looking at potential spectrum monetization and you still have some extended build out timeframes for the C-band, kind of the bulk of your remaining spectrum assets. I guess, given there's an auction plan in the upper C-band in a couple years. How does that kind of influence the.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: Timing of when you may look to.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Monetize that just in terms of the supply spectrum coming to market? Thanks.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: Eric.

All along our objective has been to get the best price. I mean certainly injections of supply, supply may impact that, but the reality is mobile traffic is still increasing at a rate of 30% per year. Our spectrum is available now and can be deployed immediately and the carriers have the ecosystem from an equipment standpoint to do that. We still think our spectrum has a lot of value, notwithstanding the fact that, you know, supply has been dynamic with that and equestar sales and so forth.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Great, thank you.

Walter Carlson, President and CEO, TDS: Welcome.

Conference Call Operator: A reminder, if you would like to ask a question, please raise your hand. If you have dialed into today's call, please press Star 9 on your telephone keypad to raise your hand and Star 6 to unmute. Our next question comes from the line of Sergei Ducevsky with Gamco Investors. Please go ahead.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Good morning guys. Thank you for taking the questions. First of all, Doug, it has been a pleasure working with you over the years and good luck with everything going forward.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: Yeah, likewise Sergei. Thank you.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Great. Maybe my first question is for you. You talked a lot about the kind of organic opportunity for the tower business. I guess my question is what role do you expect M&A to play in the tower business strategy? What types of assets could potentially amplify or accelerate your strategy? Also, on the flip side, are there disposal opportunities? Obviously, you're going to look at naked towers, but just looking maybe at clusters of towers. I mean, you have some towers in California, Oregon, Washington that appear to be not as clustered maybe as others. I was wondering if there is monetization opportunity there.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: Yes, Sergey, thanks for the question. With respect to inorganic acquisition and or disposals, that's not a strategic focus right now. We have so much on our plate operationally and really great things on our plate. With integrating the T-Mobile MLA I mentioned you saw our tenant growth on a cash basis. Cash revenue basis for the quarter grew 8% this quarter and our apps are up year to date 125%. Operationally things are going so well and we have so much to execute on. That is our sole focus. Longer term, after a few years, whether we start focusing on inorganic M and A or disposing of towers, that's always something that will be looked at over time. Right now that's not our strategic focus.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Got it. Great. My next question is for.

Ken Dixon, President and CEO, TDS Telecom: Walter.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Or for Ken, kind of also on the M and A side but also related to edge out opportunities that you're considering at TDS Telecom. You mentioned that you see a number of edge outs where you have the ability to be first to fiber, but you're not the only one looking obviously at those spaces. A number of larger companies are looking at remaining white space as well. I understand that you're going to provide more guidance in February, but maybe if you could provide more color on how you think about those opportunities in terms of edge out, what is realistic for the company, the size of TDS Telecom, and in regards to M and A, what would be the primary determining factors for you in choosing to buy something versus doing an organic fiber build?

Walter Carlson, President and CEO, TDS: All right.

Ken Dixon, President and CEO, TDS Telecom: From an edge of perspective, the areas that we're really looking at are the areas that are adjacent to current operations. Think of these as tier 2, tier 3 markets, what we would refer to as, you know, not urban areas, but rural markets where we already operate, already have facilities, already have garages, and candidly already have a brand and customers. We see the opportunity to edge out into additional communities because we've already been first to plant the fiber flag in these rural markets. It's just extending our plant to these additional communities. The advantage that we have is because we were first to fiber, these are opportunities. We already have the transport, we already have our operations there. It's just a natural extension.

Those are when we talk about edge out opportunities, it's expanding and flexing from where we're today already operating in the tier 2, 3, tier 2 and tier 3 markets.

Doug Chambers, Interim President and CEO, Array Digital Infrastructure: Okay, got it.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: In terms of kind of buying something versus building organically, what are the primary determining reasons for it?

Walter Carlson, President and CEO, TDS: Sergei, this is Walter. I think your question is, in addition to the potential edge out opportunities, what sort of possible M and A opportunities? Without getting into specifics, as Vicki described, we are very much focused on those types of ILECs or other owners who are proximate to our existing footprint where we believe in a disciplined way, we could expand our footprint in a clustered basis. We do not know whether that is going to be successful, but there are opportunities there and they are being very closely looked at.

Vicki Villacrez, Executive Vice President and Chief Financial Officer, TDS: Yeah. And Sergei, I would just follow up and say again, with respect to M&A, we're going to be highly disciplined, it'll be accretive to our business and it fits in with the organic cluster strategy that Ken was describing. We've embarked on this fiber strategy out of footprint and our selection of our markets were very centered around where we saw clusters of growth. And whether it's organic or we see a synergistic M&A opportunity, that's how the whole picture will fit together. It's really executing on that strategy going forward.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Right. My last question is for Ken. I think earlier this year TDS Telecom has been making investments in sales and marketing, including door to door Salesforce. I guess with you coming in, what are your thoughts on kind of the level of success, an improvement in gross additions that you could attribute to some of those efforts? What other initiatives as part of your go to market strategy do you expect to improve and contribute to kind of improving your conversion rate of fiber passings into paying customers?

Ken Dixon, President and CEO, TDS Telecom: Yes. Thank you. One of the things that I've noticed is that a lot of our sales activity is based on address delivery. If we have a quarter where we do not deliver the addresses, we see sales suffer. Mission number one is to get our build plan to execute and to deliver service address delivery in the markets that we are building. I will tell you that we have doubled our crew counts in our expansion markets here in the third quarter. We have a record amount of crew counts for 2025 and we actually increased our crew counts here in October of 2025 and that is key to delivering on our targets in the fourth quarter. We will execute on that new open for sale when it comes in.

We also are looking at additional vendors that we've brought on to canvas our different communities and help us with pre sale and also with our door to door efforts. I think that variable cost model will help us with penetration. We are also as part of our transformation efforts, putting a lot of time, effort and energy into our .com business. As you know, website is open 24 hours a day, seven days a week and we think that's a big opportunity for us as well to penetrate some of these new cohorts. We also recognize that we have a lot of ILEC fiber that we can still sell into. A tremendous amount of initiatives in place. I believe we have some nice momentum, but that is a key focus is go to market strategy, executing on the fundamentals and delivering sales and penetration goals.

Various Analysts, Analysts, Raymond James, Wells Fargo, New Street Research, Gamco Investors: Great. Thank you.

Vicki Villacrez, Executive Vice President and Chief Financial Officer, TDS: Thank you, Sergei.

Conference Call Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

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