Telephone & Data Systems Inc. Reports Q2 Earnings: Strategic Gains Amid Challenges

Telephone & Data Systems Inc. (TDS) reported a successful completion of the T-Mobile transaction, which has improved its financial position and advanced its fiber expansion plans. The company's financial position has been bolstered by T-Mobile assuming $1.7 billion in debt, reducing Array's balance sheet debt to $364 million. TDS has delivered 27,000 new fiber service addresses in the quarter, with a target of 150,000 fiber addresses for the year. The company's credit rating was upgraded by S&P to BBB- from BB. However, TDS Telecom faced a 1% year-over-year decline in total operating revenues, and the transition to an independent tower company presents challenges.

Telephone & Data Systems Inc. (TDS) reported a successful completion of the T-Mobile transaction, which has significantly improved its financial position and advanced its fiber expansion plans. The transaction, which involved the sale of TDS's US Cellular Wireless business and spectrum assets to T-Mobile for $4.3 billion, has left TDS in a stronger financial position [1].

T-Mobile assumed $1.7 billion in debt, reducing Array's balance sheet debt to $364 million. Additionally, TDS received a special dividend of $23 per share, totaling approximately $1.63 billion. The company also plans to redeem approximately $1.1 billion in debt, reducing annual interest expenses by $80 million and lowering the average cost of debt to just over 6% [1].

TDS's credit rating has been upgraded by S&P to BBB- from BB, reflecting the company's improved financial health [1]. The company has delivered 27,000 new fiber service addresses in the quarter, with a target of 150,000 fiber addresses for the year. The company's focus on fiber expansion is expected to benefit from increasing demand for data and communication services [1].

However, TDS Telecom faced a 1% year-over-year decline in total operating revenues, partly due to divestitures and ongoing declines in legacy cable and copper markets. The transition to an independent tower company presents challenges, including potential labor and material issues in fiber construction. TDS expects to incur additional wind-down costs as it transitions from a wireless service provider to an independent tower company, negatively impacting profitability and adjusted EBITDA [1].

TDS's capital expenditures are over 80% focused on fiber, with increased spending on the E-ACAM program. The company's revenue guidance for the year has been revised to $1.03 billion to $1.05 billion, and adjusted EBITDA guidance is expected to be $320 million to $350 million [1].

TDS is focusing on its tower and fiber businesses, which are expected to benefit from increasing demand for data and communication services. The company's capital structure has been significantly strengthened, providing financial flexibility for future growth. However, the company faces potential challenges in monetizing its remaining spectrum holdings and maintaining growth in the face of market conditions and regulatory approvals [1].

References:
[1] https://finance.yahoo.com/news/telephone-data-systems-inc-tds-070423552.html
[2] https://za.investing.com/news/company-news/tds-q2-2025-slides-tmobile-deal-closes-debt-reduction-and-fiber-expansion-in-focus-93CH-3831686