10-K: TDS Navigates Wireless Divestiture, Boosts Fiber Investment

Telephone and Data Systems, Inc. (TDS) reports a strategic shift in 2025, divesting its wireless operations and increasing fiber network investments, while facing challenges in legacy services and spectrum monetization.

Summary

• TDS completed the sale of Array's 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 debt assumed.
• TDS Telecom increased its service addresses by 4% to 1.9 million as of December 31, 2025, through footprint expansion, offering 1Gig+ service to 78% of its total footprint.
• Array Digital Infrastructure, Inc. (Array) owns 4,450 towers in 19 states as of December 31, 2025, with a tower tenancy rate of 1.03.
• TDS consolidated net income from continuing operations was $151.1 million in 2025, a significant improvement from a loss of $81.3 million in 2024.
• TDS reported a net loss attributable to common shareholders of $75.5 million in 2025, an improvement from a $96.9 million loss in 2024.
• TDS Telecom's total operating revenues decreased by 2% to $1,038.4 million in 2025, while Array's total operating revenues increased by 58% to $163.0 million, driven by the T-Mobile Master License Agreement.
• TDS Telecom's capital expenditures for 2026 are expected to be between $550 million and $600 million, and Array's capital expenditures for 2026 are expected to be between $25.0 million and $35.0 million.
• TDS repurchased 2,843,427 Common Shares for $108.1 million in 2025 and authorized an additional $500 million stock repurchase program.
• Array declared a special dividend of $23.00 per share on August 1, 2025, and another special dividend of $10.25 per share on January 13, 2026, following asset sales.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, reflecting successful strategic divestitures and a clear focus on future growth areas like fiber and tower infrastructure, despite ongoing challenges in legacy services and some legal uncertainties.

Positives

• Net income from continuing operations significantly improved to $151.1 million in 2025 from a loss of $81.3 million in 2024.
• Adjusted EBITDA from continuing operations increased by 18% to $528.9 million in 2025.
• Array's operating revenues increased by 58% in 2025, primarily due to the T-Mobile Master License Agreement (MLA).
• TDS Telecom expanded its service addresses by 4% and offers 1Gig+ service to 78% of its footprint, demonstrating network investment and growth.
• Successful closing of Array's wireless operations sale to T-Mobile, generating $2,628.8 million in cash proceeds and $1,665.0 million in debt assumption, significantly improving liquidity.
• Array entered into additional spectrum license sale agreements with Verizon ($1,000.0 million) and AT&T ($1,018.0 million), with the AT&T sale closing in January 2026.
• TDS repurchased $108.1 million of its Common Shares in 2025 and authorized an additional $500 million stock repurchase program, signaling confidence and returning value to shareholders.
• Array declared two special dividends totaling $33.25 per share from asset sales, benefiting shareholders.
• Favorable reductions to valuation allowances related to deferred tax assets due to taxable income generated from asset sales.

Negatives

• TDS Telecom's total operating revenues decreased by 2% in 2025, driven by declines in residential, commercial, and wholesale revenues, partially offset by broadband growth.
• TDS Telecom's operating income decreased by 81% to $19.7 million in 2025, indicating pressure on profitability in its core segment.
• Net income (loss) from discontinued operations attributable to TDS shareholders was a loss of $123.6 million in 2025, reflecting the loss on the sale of wireless operations.
• TDS reported a net loss attributable to common shareholders of $75.5 million in 2025.
• TDS Telecom's video connections declined by 8% and voice connections by 12% in 2025 due to rising prices and industry-wide cord-cutting trends.
• DISH Wireless has failed to make certain payments to Array under their contractual commitment, potentially impacting future site rental revenues.
• Array recognized a loss on the T-Mobile wireless operations transaction of $276.5 million in 2025.
• Increased capital expenditures for TDS Telecom (26% increase in 2025) and Array (56% increase in 2025) reflect significant investment needs.
• Interest expense increased in 2025 due to the write-off of unamortized debt costs and new borrowings.

Risks

• Substantial changes to Array's remaining business post-T-Mobile transaction could adversely affect financial condition and results, including operational, cost, and borrowing disadvantages.
• Uncertainty regarding the consummation of spectrum license sales to Verizon and T-Mobile, which are subject to regulatory approval and other conditions, could impact expected funds.
• Inability to monetize remaining spectrum assets and ongoing costs to retain them could adversely affect TDS operations.
• Delays or failures in completing significant network construction and systems implementation activities could adversely affect operations and competitive position.
• Increasing competition in the wireline and tower industries could adversely affect TDS revenues, negatively impact future growth, and increase costs to compete.
• Economic and business risks associated with fixed rate annual escalators on Array's colocation revenue contracts, particularly if ground lease escalations exceed revenue escalations or high inflation persists.
• A substantial portion of Array's revenues are derived from a small number of tenants (T-Mobile, AT&T, Verizon), making it vulnerable to their financial difficulties or reduced demand; DISH Wireless has already failed to make payments.
• TDS's lack of scale relative to larger competitors could cause it to be unable to compete successfully, adversely affecting its business.
• Inability to protect TDS's real estate rights, with respect to land leases, could have an adverse effect on Array's business.
• TDS's business may be adversely impacted by extreme weather events, climate-related events, natural disasters (including wildfires), and other unforeseen events.
• An inability to attract, develop, and retain outstanding talent throughout all levels of the organization could have an adverse effect on TDS's business.
• Changes in various business factors, including consumer preferences, price competition, and cost increases, could adversely affect TDS's business.
• Advances or changes in technology, including artificial intelligence, could render certain technologies used by TDS obsolete or put it at a competitive disadvantage.
• Costs, integration problems, or other factors associated with acquisitions or divestitures and/or expansion of TDS businesses could have an adverse effect on operations.
• Difficulties involving third parties TDS does business with, including supply chain disruptions of key suppliers, could adversely affect business.
• A failure by TDS to maintain flexible and capable telecommunication networks or information technologies, or a material disruption thereof, could have an adverse effect on business.
• Uncertainty in TDS or Array's future cash flow and liquidity, their level of indebtedness, or their inability to access capital could limit financing and require reduction or delay of programs.
• TDS's assets and revenue are concentrated primarily in the U.S. telecommunications industry, representing increased risk due to lack of diversification.
• Significant investments in wireless operating entities that TDS does not control could lead to losses in value or cash flows.
• Failure by TDS to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect business.
• TDS's receipt of financial support through various government programs is subject to uncertainty, which could adversely affect business.
• Settlements, judgments, or costs resulting from pending and future legal and policy proceedings could have an adverse effect on business.
• Control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation may serve to discourage or make more difficult a change in control of TDS.
• TDS has experienced, and expects to experience, cyber-attacks or other breaches of network or information technology security, which could have an adverse effect on business.
• Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions, or other events could impede TDS's access to or increase the cost of financing.

Future Outlook

TDS Telecom plans to continue significant fiber deployment in expansion markets and to meet E-ACAM build-out requirements, with capital expenditures expected to be between $550 million and $600 million in 2026. Array aims to drive increased colocation on its tower portfolio and opportunistically monetize its remaining spectrum assets, with 2026 capital expenditures projected between $25.0 million and $35.0 million. The strategic alternatives review process is ongoing for Array's remaining spectrum assets. TDS expects to record a book gain of approximately $150.0 million ($114.0 million net of tax) in Q1 2026 from the AT&T spectrum sale. Array's Board may declare regular cash dividends after the Verizon transaction closes.

Management Comments

• TDS Telecom invests in high-quality networks, services and products, with the constant focus on delivering outstanding customer service.
• TDS Telecom seeks to be the preferred broadband provider by offering fiber-rich networks, high-quality products and services, and a seamless customer experience.
• Array has built a strong and focused organization that has been and will be relied upon as an efficient and cost-effective partner for colocation.
• Array believes that on balance there is significant value in its towers without tenants portfolio that it will strive to unlock through a combination of activities, including increased leasing, ground rent rationalization, and if necessary, divesting, including potential decommissioning, for these locations.
• TDS believes that existing cash and investment balances, dividends, distributions from unconsolidated entities, expected cash flows from operating activities and funds available under its financing agreements will provide sufficient liquidity for TDS to meet its funding needs.
• TDS intends to finance its capital expenditures for 2026 using primarily Cash flows from operating activities, dividends and existing cash balances.
• TDS and Array believe that they were in compliance as of December 31, 2025 with all such financial covenants.
• TDS and Array believe that the Relators claims are without merit and that Advantages and King Streets participation in FCC auctions complied with applicable law and FCC Rules.
• TDS intends to contest plaintiffs' claims vigorously on the merits.

Industry Context

StockSavvy.ai notes that TDS's strategic divestiture of its wireless operations aligns with a broader industry trend of telecommunications companies streamlining their portfolios to focus on core infrastructure assets like fiber and tower networks. The increasing competition in wireline and tower industries, driven by fiber overbuilders and 5G deployment, necessitates significant capital investments, as seen in TDS Telecom's planned fiber builds. The challenges faced by legacy voice and video services are common across the industry, pushing providers towards high-speed broadband and value-added services. Array's lower tenancy rate compared to other tower operators (American Tower, Crown Castle, SBA Communications) presents both an opportunity for growth and a competitive challenge in a market with established players.

Comparison to Industry Standards

• Array is the fifth largest tower owner and operator of shared wireless communications infrastructure in the United States, competing with larger operators like American Tower Corporation, Crown Castle Inc, and SBA Communications Corporation.
• Array's tenancy rate is lower than other tower companies, providing sufficient capacity for additional tenants and greater opportunity for lease-up, but also indicating a competitive challenge.
• TDS Telecom's investment in fiber to provide broadband speeds of up to 8 Gigabits per second (Gbps) for residential and up to 10 Gbps for select business connections is competitive with leading broadband providers.
• The industry-wide decline in video connections due to cord-cutting and voice connections due to alternative technologies is a common trend affecting all telecommunication providers.

Management Changes

Corporate Governance

Legal Proceedings

• DOJ inquiries under the federal False Claims Act relating to Array's participation in wireless spectrum license auctions. The King Street case is concluded after the Supreme Court denied certiorari on January 12, 2026. The Advantage case was remanded to district court for further proceedings on September 26, 2025, with a motion to dismiss filed on January 22, 2026.
• Stockholder derivative lawsuit filed on January 31, 2025, in Illinois Circuit Court against certain TDS and Array directors and officers, and nominal defendant TDS, alleging breach of fiduciary duty related to public statements. A status conference on the motion to dismiss is set for April 24, 2026.

Related Party Transactions

• TDS owns 82.0% of Array Digital Infrastructure, Inc.
• The TDS Voting Trust holds over 50% of the voting power for the election of a majority of TDS directors, making TDS a controlled company.
• T-Mobile, a major tenant for Array, was also the buyer of Array's wireless operations and spectrum assets.
• Array holds noncontrolling interests in primarily wireless operating companies, some managed by Array, others by Verizon and AT&T.

Stakeholder Impact

• Shareholders: Received special dividends from Array asset sales and benefited from an increased stock repurchase program, but also experienced a net loss attributable to common shareholders and uncertainty regarding future TDS common dividends.
• Employees: Experienced headcount reductions related to the wireless operations sale, and changes to executive retirement plans (frozen for new contributions/participants from 2026).
• Customers: TDS Telecom's fiber investments aim to improve broadband speeds and service quality, while legacy video and voice services continue to decline.
• Creditors: Benefited from significant debt repayments and exchanges, with Array securing a new term loan and both companies maintaining compliance with debt covenants.
• Suppliers: Potential for supply chain disruptions and reliance on third-party vendors remain noted risks.

Next Steps

• Array to work towards closing Verizon and T-Mobile spectrum transactions (estimated Q2/Q3 2026 and 2026, respectively).
• Array to opportunistically monetize its remaining spectrum assets not subject to executed agreements.
• TDS to continue exploring opportunities to transform its business operations given the change in scale following the wireless divestiture.
• TDS Telecom to continue fiber deployment in expansion markets and meet E-ACAM build-out requirements in 2026, with capital expenditures between $550 million and $600 million.
• Array to continue ground lease optimization and evaluation of its towers without tenants portfolio.
• Array Board of Directors may declare regular cash dividends after the Verizon transaction closes.
• TDS will no longer make contributions to its qualified noncontributory defined contribution pension plan and unfunded nonqualified deferred supplemental executive retirement plan beginning in 2026.
• A status conference on the stockholder derivative lawsuit is set for April 24, 2026.

Key Dates

Recommendation

The filing presents a mixed picture. While the strategic divestiture of Array's wireless operations and subsequent spectrum sales have significantly improved liquidity and led to special dividends, the core TDS Telecom business faces declining legacy revenues and increased capital expenditures for fiber expansion. The ongoing legal proceedings and the reliance on a few major tenants for Array's tower business introduce notable risks. The authorized stock repurchase program is a positive for shareholders, but the overall net loss attributable to common shareholders and the uncertainty around future common dividends suggest a 'hold' position until the benefits of the strategic transformation fully materialize and risks are further mitigated.

Keywords

Telecommunications, Fiber Optics, Wireless Infrastructure, Tower Leasing, Spectrum Licenses, SEC Filing, 10-K, TDS Telecom, Array Digital Infrastructure, T-Mobile, Verizon, AT&T, Broadband, 5G, Capital Expenditures, Dividends, Stock Repurchase, Corporate Governance, Risk Factors, Cybersecurity, Asset Sales, Strategic Alternatives