Q1 2025 United States Cellular Corp Earnings Call

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Operator: Hello and thank you for standing by.

Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the Tds and U S. Cellular first quarter 2025 operating results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question Andy.

Regina: My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the TDS and U.S. Cellular First Quarter 2025 Operating Results Conference Call.

Operator: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one a second time.

Speaker Change: Answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad to withdraw your question Press Star One a second time I would now like to turn the conference over to Colleen Thomson Vice President Corporate Relations. Please go ahead.

Colleen Thompson: I would now like to turn the conference over to Colleen Thompson, Vice President, Corporate Relations. Please go ahead. Good morning and thank you for joining us.

Colleen Thomson: Good morning, and thank you for joining us we want to make you all aware of the presentation. We have prepared to accompany our comments. This morning, which you can find on the Investor relations sections of the Tds and U S cellular websites.

Colleen Thompson: We want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find on the investor relations sections of the TDS and U.S. Cellular website.

Colleen Thompson: With me today and offering prepared comments are from TDS, Vicki Villacrez, Executive Vice President and Chief Financial Officer, from US Cellular, LT Therivel, President and Chief Executive Officer, Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer, and from TDS Telecom, Chris Botfield, Vice President of Finance and Chief Financial Officer. This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations website. Please see the websites for slides referred to on this call, including non-GAAP reconciliation. We provide guidance for both Adjusted Operating Income Before Depreciation and Amortization, or OIBDA, and Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization, or EBITDA, to highlight the contributions of U.S.

Speaker Change: With me today and offering prepared comments are from Tds, Vicki Villa Kratz Executive Vice President and Chief Financial Officer from U S. Cellular L. T thorough about president and Chief Executive Officer, Doug Chambers, Executive Vice President Chief Financial Officer and Treasurer.

Colleen Thomson: From Tds Telecom, Chris Basta, Vice President of Finance and Chief Financial Officer.

Colleen Thomson: This call is being simultaneously webcast on the Tds and U S cellular Investor Relations website. Please see the websites for slides referred to on this call, including non-GAAP reconciliations.

Colleen Thomson: We provide guidance for both adjusted operating income before depreciation and amortization or OIBDA and adjusted earnings before interest taxes, depreciation and amortization or EBITDA to highlight the contributions of U S Cellular's wireless partnerships.

Colleen Thompson: Cellular's wireless partnership. TDS and U.S. Cellular filed their SEC Forms 8K, including the press releases and our TANQs, earlier this morning.

Colleen Thomson: Tds and U S cellular filed their SEC forms 8-K, including the press releases and our 10-Qs earlier this morning.

Colleen Thompson: As shown on slide two, 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 risk and uncertainty.

Colleen Thomson: As shown on slide two.

Colleen Thomson: 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.

Colleen Thompson: Please review the Safe Harbor paragraphs in our press releases and the extended version included in our SEC filings.

Vicki Villacrez: And with that, I will now turn the call over to Vicki Villacrez. Okay, thank you, Colleen. And hello, everyone. Thanks for joining. As you will hear today, we are making progress on the 2025 priorities presented back in February, while keeping a close watch on the increased uncertainties in the broader economy and market.

Colleen Thomson: And with that I will now turn the call over to Vicki, though Chris Vickie, Okay. Thank you, calling and Hello, everyone. Thanks for joining us.

Colleen Thomson: As you will hear today, we are making progress on the 20th twenty-five priorities presented back in February while keeping a close watch on the increased uncertainties in the broader economy and markets.

Vicki Villacrez: We still expect a mid-2025 closing on the proposed transaction with T-Mobile at U.S. Cellular, which is subject to regulatory approval, and the organization has been making great progress on a number of activities in preparation for a successful close. First, in terms of financing, we extended our near-term bank maturities and amended our revolvers to ensure financial flexibility and liquidity going forward as we anticipate the close of the T-Mobile and U.S. Cellular transactions. There is also a significant amount of separation, integration, and transition work being done to ensure a smooth transition across both U.S. cellular and TDM.

Colleen Thomson: We still expect a mid 2025 closing on the proposed transaction with T mobile at U S cellular which is subject to regulatory approval and the organization has been making great progress on a number of activities in preparation for a successful close.

Colleen Thomson: First in terms of financing, we extended our near term bank maturities and amended our revolver to ensure financial flexibility and liquidity going forward as we anticipate the close of the T mobile and U S cellular transaction.

Colleen Thomson: There is also a significant amount of separation integration and transition work being done to ensure a smooth transition across both U S cellular and Tds.

Vicki Villacrez: And lastly, we are also focusing on the future organization to ensure we have the appropriate capital, leverage targets and cost structure going forward, right size to the remaining business.

And lastly, we're also focusing on the future organization to ensure we have the appropriate capital leverage targets and cost structure going forward right sized for the remaining business.

Vicki Villacrez: Our focus is on getting to the finish line with the various announced transactions while repositioning the remaining business for future success. Also, as LT will discuss shortly after the proposed transaction with T-Mobile closes and dependent on U.S. Cellular Board approval, U.S. Cellular expects to be in a position to declare a special dividend to shareholders. If that occurs, TDS would receive its pro-rata share. Those funds from the first closing are expected to be used to repay substantially all of TDS's outstanding bank debt, which was approximately $1.2 billion at the end of the quarter. Currently, TDS does not plan to redeem the Series UU and Series VV preferred stocks.

Colleen Thomson: Our focus is on getting to the finish line with the various announced transactions while repositioning the remaining business for future success.

Speaker Change: So as L. P will discuss shortly after the proposed transaction with a T mobile clauses and dependent on U S. Cellular board approval U S cellular expects to be in a position to declare a special dividend to shareholders. If that occurs GDS would receive its pro rata share though.

Speaker Change: Funds from the first closing or expect it to be used to prepay.

Speaker Change: To repay substantially all of Tds is outstanding Bank debt, which will was approximately $1 2 billion at the end of the quarter.

Speaker Change: Currently Tds does not plan to redeem the series you U N series B preferred stock.

Vicki Villacrez: If proceeds are received from subsequent closings, including the AT&T and Verizon transactions, TDS's priorities would be to fund and advance its current fiber program at TDS Telecom. as well as evaluate the potential return to shareholders. Critical to our mission, we continue to be pleased with our overall progress in the FIBER program, which has expanded our footprint over 30% in the last three years, and we see further opportunities to grow the program.

Speaker Change: These proceeds are received from the subsequent closings, including the AT&T and Verizon transactions T. D. S. As priorities would be to fund and advance its current fiber program at Tds Telecom as well as evaluate the potential return to shareholders critical to our mission we continue to be please.

Speaker Change: <unk> with our overall progress in the fiber program, which has expanded our footprint over 30% in the last three years and we see further opportunities to grow the program.

Vicki Villacrez: Briefly on the quarter, as a reminder, first quarter results were impacted by prior year divestment. In the first quarter of 2024, there was over $40 million in operating revenues from our one-neck business and $4 million in operating revenues from the sale of certain ILACs at TDS Telecom that did not occur in 2020.

Speaker Change: Briefly on the quarter as a reminder, first quarter results were impacted by prior year divestitures in the first quarter of 2024, there was over 40 million in operating revenue was from our one NEC business at.

Speaker Change: And <unk> 4 million and operating revenues from the sale of certain ILEC at Tds Telecom that did not occur in 2025.

LT Therivel: I will now turn the call over to Alfre Woodard. Thanks, Vicki. Good morning, everyone. As I look at the first quarter results, I'm pleased we continue to deliver solid operational performance. And that's notwithstanding all the efforts and the potential distractions associated with preparing to close the transactions that we announced last year. We delivered year-over-year improvements in post-paid handset results and we increased third-party tower revenue 6% in the quarter due to both new co-locations and escalators on renewed leases. We remain enthusiastic on the long-term potential for the tower business as the capacity needs of the wireless industry in the coming years will likely drive continued demand for towers.

Speaker Change: I will now turn the call over to L. T.

L. T.: Thanks, Vicki and good morning, everyone.

L. T.: Look at the first quarter results I'm pleased we continued to deliver solid operational performance.

L. T.: And that's notwithstanding all the efforts and the potential distractions associated with preparing to close the transactions that we announced last year.

L. T.: We delivered year over year improvements in postpaid handset results and we increased third party tower revenue, 6% in the quarter due to both new co locations and escalators on renewed leases.

L. T.: Remain enthusiastic on the long term potential for the tower business is the capacity needs of the wireless industry in the coming years will likely drive continued demand for towers.

LT Therivel: And we expect that the Tower business will be strengthened even further upon the anticipated closing of our transaction with T-Mobile and the initiation of the Tower MLA that's part of that transaction. In addition to improved postpaid handset results, the company also continued its focus on cost optimization during the quarter by driving year-over-year reductions in cash costs as operating expenses, including loss on equipment, were essentially flat and our capital expenditures declined. This drove $79 million of free cash flow in the first quarter of 2025, and that's an $18 million increase over the same quarter last year.

L. T.: And we expect that the tower business will be strengthened even further upon the anticipated closing of our transaction with T mobile and the initiation of the tower in a way that's part of that transaction.

L. T.: In addition to improved postpaid handset results. The company also continued its focus on cost optimization during the quarter.

L. T.: By driving year over year reductions in cash costs as operating expenses, including loss on equipment were essentially flat and our capital expenditures declined.

L. T.: Drove 79 million of free cash flow in the first quarter of 2025, and Thats, an $18 million increase over the same quarter last year.

LT Therivel: As we mentioned in our year-end call, we expect CapEx to decline in 2025, as we've largely completed our planned 5G coverage builds. However, we will continue to invest in 5G mid-band deployment across our network, so we can meet the capacity and speed needs of our customers, with the goal of providing them with a strong network. And those subscriber and financial results are delivered on the backdrop of an industry that continues to be very promotionally aggressive, and that's even during the typically less promotional first quarter of the year. What we're seeing, in addition to rich device promotions, our carrier competitors are offering multi-year price locks, contract buyouts, and aggressive price We're also seeing our cable wireless competitors offer free planned pricing for set periods of time.

L. T.: As we mentioned in our year end call, we expect capex to decline in 2025.

L. T.: Largely completed our planned <unk> coverage builds.

L. T.: However, we will continue to invest in <unk> mid band deployment across our networks. So we can meet the capacity and speed needs of our customers with the goal of providing them with a strong network experience.

L. T.: Although subscriber and financial results are delivered on the backdrop of an industry that continues to be very promotional and be aggressive and that's even during the typically less promotional first quarter of the year.

L. T.: What we're seeing in addition to rich device promotions, our carrier competitors are offering multiyear price locks contract buyouts and aggressive pricing.

L. T.: We're also seeing our cable wireless competitors offer free planned pricing for certain periods of time and that's now in conjunction with aggressive device promotions.

LT Therivel: And that's now in conjunction with aggressive device So in response to that, we've further increased the value of our promotional offers, which has helped to drive improvements in year-over-year handset life. However, even with those improvements, we still have negative net apps, and the ongoing loss of handset customers continues to put pressure on service reps. In response to that, we're cutting costs in order to sustain our cash flow. Our size and lack of scale makes it difficult to sustain this balance of high promotional expense and reduced investment.

L. T.: In response to that we've further increased the value of our promotional offers which has helped to drive improvements in year over year handset losses.

L. T.: However, even with those improvements we still have negative net adds and the ongoing loss of handset customers continues to put pressure on service revenues and.

L. T.: In response to that we're cutting costs in order to sustain our cash flows.

L. T.: And our size and lack of scale makes it difficult to sustain this balance of high promotional expense and reduced investment.

LT Therivel: That's why we continue to believe that the transaction with T-Mobile is in the best interest of our business and our customers. provides them with better competitive choices, better connectivity experience from the combined networks of both companies. and Access to Lower Prices with more.

L. T.: And that's why we continue to believe the transaction with T. Mobile was in the best interests of our business and our customers.

L. T.: Them with better competitive choices better connectivity experience from the combined networks with both companies.

L. T.: And access to lower prices with more features.

LT Therivel: returning to the T-Mobile agreement. We're having ongoing interactions with regulators across multiple agencies. The process is progressing as expected. We still expect a mid-2025 closing. As part of the agreement with T-Mobile, they'll be making offers of employment to more than half of our employee base. And for those who won't be hired by T-Mobile or the remaining Tower companies, will be providing career transition services as well as severance pay and benefits.

L. T.: So turning to the T mobile agreement, we're having ongoing interactions with regulators across multiple agencies.

L. T.: <unk> is progressing as expected and we still expect a mid 2025 closing.

L. T.: As part of the agreement with T mobile there'll be making offers of employment to more than half of our employee base.

L. T.: And for those who won't be hired by T mobile or the remaining tower company.

L. T.: I'll be providing career transition services as well as severance pay and benefits.

LT Therivel: Doug will be providing you with some high level estimates of those costs shortly. As a reminder, we expect the agreement with T-Mobile, combined with the various spectrum transactions that we announced, to deliver substantial proceeds across the coming quarter.

L. T.: I will be providing you with some high level estimates of those costs shortly.

L. T.: As a reminder, we expect the agreement with T mobile combined with the various spectrum transactions that we announced to deliver substantial proceeds across the coming quarters.

LT Therivel: And consequently, when the proposed transaction with T-Mobile closes, and that's subject to regulatory We expect the U.S. Cellular Board of Directors to declare the first of potentially several special dividends to U.S. cellular shareholders.

L. T.: Consequently, when the proposed transaction with T mobile closes and that's subject to regulatory approval.

L. T.: We expect the U S cellular board of directors to declare the first of potentially several special dividends to U S cellular shareholders.

LT Therivel: And before turning it over to Doug, I want to thank all of our associates for their continued efforts and dedication as we focus on serving our customers with And with that, I'm going to hand it over to. Thanks LT.

L. T.: Now before turning it over to Doug I want to thank all of our associates for their continued efforts and dedication as we focus on serving our customers with excellence.

Doug Chambers: And with that I'm going to hand, it over to Doug.

Doug Chambers: Hey, good morning, Okay covered the key operational and financial highlights for the first quarter and I'll provide an update unexpected net proceeds related to our pending transactions.

Doug Chambers: Good morning. LT covered the key operational and financial highlights of the first quarter, and I'll provide an update on expected net proceeds related to our pending transactions. As a reminder, given the expected close of the sale of our wireless operations to T-Mobile in mid-2025, we are not providing 2025 financial guidance for U.S. Cellular. During our fourth quarter 2024 earnings call in February of this year, we provided an overview of the significant items that are expected to impact net proceeds related to our various pending transactions. As we move closer to the expected close of these transactions, we have further refined these estimates and have included an updated summary on slides 12 and 13.

Doug Chambers: A reminder, given the expected close of the sale of our wireless operations to T. Mobile in mid 2025, we are not providing 2025 financial guidance for U S. Cellular.

Doug Chambers: During the fourth quarter 2024 earnings call in February of this year, we provided an overview of the significant items that are expected to impact net proceeds related to our various pending transactions.

Doug Chambers: As we move closer to the expected close these transactions. We are further refine these estimates and have included an updated summary on slides 12 and 13.

Doug Chambers: The spectrum transactions with Verizon and AT&T are contingent upon the close of the T-Mobile transaction, regulatory approval, and other closing conditions. First, as outlined in the Securities Purchase Agreement with T-Mobile, $100 million of the $4.4 billion stated transaction price is contingent on U.S. cellular achieving certain performance metrics prior to close. Based on projected performance relative to these targets through an expected mid-year 2025 close, we do not expect to receive most of this $100 million, and the purchase price is likely to be much closer to $4.3 billion. Also included in the stated transaction price of the T-Mobile and AT&T transactions are $400 million and $232 million, respectively, of spectrum licenses owned by designated entities in which U.S.

Doug Chambers: The spectrum transactions with Verizon and AT&T are contingent upon the close of the T mobile transaction regulatory approval and other closing conditions.

Doug Chambers: First is all buying in the securities purchase agreement with T mobile $100 million of the $4 4 billion stated transaction price is contingent on U S cellular achieving certain performance metrics prior to close.

Doug Chambers: Based on projected performance relative to these targets through an expected mid year 2025, close we do not expect to receive most of this $100 million and the purchase price is likely to be much closer to four 3 billion.

Doug Chambers: Also included in the studio transaction price of the T mobile and AT&T transactions, our $400 million and $232 million, respectively. A spectrum licenses owned by designated entities in which U S. Cellular is a noncontrolling limited partner.

Doug Chambers: Cellular is a non-controlling limited partner. U.S. Cellular has agreed to purchase the interests of the respective partners in these designated entities. And transfers of these interests are pending regulatory approval. U.S. Cellular is obligated to pay an incremental aggregate amount of $7 million to the non-controlling limited partners upon transfer of these interests. We expect the transfers of these interests to be approved, however, timing of such approvals is uncertain. Prior to transaction closed, T-Mobile will conduct a debt exchange offer pursuant to which holders of $2.044 billion of U.S. cellular unsecured senior notes will be offered to exchange their U.S.

Doug Chambers: U S. Cellular has agreed to purchase the interests of the respective partners in these designated entities and transfers of these interests are pending regulatory approval.

Doug Chambers: U S. Cellular is obligated to pay an incremental aggregate amount of 7 million to the Noncontrolling limited partners on transfer of these interests.

Doug Chambers: We expect the transfers of these interests to be approved however, timing of such approvals is uncertain.

Doug Chambers: Prior to transaction close T mobile will conduct a debt exchange offer pursuant to which holders of 2.044 billion of U S cellular or unsecured senior notes will be offered to exchange their U S cellular dead for T mobile that.

Doug Chambers: cellular debt for T-Mobile debt. The amount of debt the respective holders elect to exchange will correspondingly reduce transaction proceeds. In addition, U.S. Cellular is expected to repay its term loans, export credit financing agreement, receivable securitization agreement, and revolving line of credit. At March 31, 2025, the cumulative principal amount of this debt that requires repayment upon close was $870 million. U.S. Cellular expects the following cash obligations as it relates to employee liabilities. First, T-Mobile is expected to hire at least a majority of U.S. Cellular employees. For these employees that are ultimately hired by T-Mobile upon close, U.S.

Doug Chambers: The amount of debt the respective holders electric exchange will correspondingly reduce transaction proceeds.

Doug Chambers: In addition, U S. Cellular is expected to repay its term loans export credit financing agreement receivable securitization agreement and revolving line of credit at March 31, 2025, the cumulative principle amount of this debt that requires repayment upon close with $870 million.

U S cellular expects the following cash obligations as it relates to employee liabilities first T. Mobile is expected to hire at least a majority of USA employees for these employees that are ultimately hired by T. Mobile upon close USA. There is obligated to pay these employees accrued wages bonus.

Doug Chambers: Cellular is obligated to pay these employees accrued wages, bonuses, and other benefits that were earned prior to the close date. We expect a cash outflow related to this obligation in the range of $30 to $40 million. This will not result in any incremental expense as these obligations are fully accrued at the end of each reporting period. Second, U.S. Cellular expects to have severance obligations for employees that are neither employed by T-Mobile nor retained by the remaining U.S. Cellular business. These obligations include salary-related severance, accrued bonus, and other benefits, and we expect this obligation to be in the range of $60 to $80 million.

Doug Chambers: This and other benefits that were earned prior to the close date, we expect the cash outflow related to this obligation in the range of $30 million to $40 million.

Doug Chambers: This will not result in any incremental expense. These obligations are fully accrued at the end of each reporting period.

Doug Chambers: Second U S cellular expects to have severance obligations for employees that are neither employed by T mobile nor retained by the remaining U S cellular business.

Doug Chambers: These obligations include salary related severance accrued bonus and other benefits and we expect this obligation to be in the range of $60 million to $80 million.

Doug Chambers: In addition, we expect unvested stock boards held by severed employees to vest at the close of the T-Mobile transaction. Certain of these stock awards may be settled with the affected employees in cash in lieu of shares. Further, for stock award settlement shares, U.S. Cellular withholds shares from employees vested in stock awards to cover tax withholding obligations and remits the corresponding amounts to the taxing authorities in cash. Therefore, U.S. Cellular expects a cash obligation associated with the accelerated vesting of stock award. The amount of any such obligation is dependent upon the amount of stock awards U.S.

Doug Chambers: In addition, we expect Unvested stock warrants held by sovereign employees to burst at the close of the T mobile transaction.

Doug Chambers: Certain of these stock awards may be settled with the affected employees in cash <unk> shares.

Doug Chambers: Further for stock awards settled in shares U S. Cellular withhold shares from employees vested stock awards to cover tax withholding obligations and remix the corresponding amounts to the taxing authorities in cash therefore U S. Either expects a cash obligation associated with the accelerated vesting of stock awards.

Doug Chambers: Out of any such obligation is dependent upon the amount of stock Awards U S hydro electric to settle in cash.

Doug Chambers: Cellular elects to settle in cash, if any, and the U.S. Cellular share price proximate to close, among other factors. This cash obligation is expected to approximate $50 million if all affected stock awards are settled and shared. This cash obligation is expected to increase if certain stock awards are settled in cash, and any such cash settlement would lessen the dilutive impact of these stock awards relative to share settlement. U.S. Cellular expects to incur cash income tax obligations related to the tax gain on sale of the T-Mobile transaction in the range of $225 to $325 million. U.S.

Doug Chambers: And the U S cellular share price proximate to close among other factors.

Doug Chambers: This cash obligations is expected to approximate 50 million if all affected stock awards are settled in shares this.

Doug Chambers: Cash obligations is expected to increase of certain stock awards are settled in cash and any such cash settlement with Boston the dilutive impact of these stock awards relative to share settlement.

Doug Chambers: U S cellular expects to incur cash income tax obligations related to the tax gain on sale of the T mobile transaction in the range of $225 million to $325 million.

Doug Chambers: U S. Cellular also expect other cash outflows of $80 million to $90 million related to the following items.

Doug Chambers: Cellular also expects other cash outflows of $80 million to $90 million related to the following items, banking fees related to both the T-Mobile transaction and the related debt exchange transaction. Distribution of a portion of the proceeds from the T-Mobile transaction to non-controlling interests in certain U.S. cellular operating markets and other adjustments. As LT mentioned, we expect the U.S.

Doug Chambers: Kim fees banking fees related to both the T mobile transaction and the related debt exchange transaction.

Doug Chambers: Distribution of a portion of the proceeds from the T mobile transaction to Noncontrolling interests and certain U S cellular operating markets and other adjustments.

Doug Chambers: As already mentioned, we expect the U S side of our board to declare a special dividend proximate to the close date of the T mobile transaction to distribute net proceeds received from this initial transaction close after incorporating the items on slide slides 12 and certain other items.

Doug Chambers: Cellular Board to declare a special dividend approximate to the close date of the T-Mobile transaction to distribute net proceeds received from this initial transaction close after incorporating the items on slide 12 and certain other items . along with excess cash expected to be available resulting from the operation of U.S. Cellular's wireless business through the date of close. Moving to slide 13, we expect to incur cash income tax obligations related to the gain on sale of Spectrum in the Verizon and AT&T transactions in the range of $325 to $375 million. U.S. Cellular also expects to incur additional legal, advisory, and banking fees in 2025 and 2026 associated with the T-Mobile and Spectrum transactions.

Doug Chambers: Along with excess cash expected to be available, resulting from the operation of U S. Cellular's wireless business through the date of close.

Doug Chambers: Moving to slide 13, we expect to incur cash income tax obligations related to the gain on sale of spectrum in the Verizon and AT&T transactions in the range of $325 million to $375 million.

Doug Chambers: U S. Cellular also expects to incur additional legal advisory and banking fees in 2025, and 2026 associated with the T mobile and spectrum transactions.

Doug Chambers: In periods after the close of the T-Mobile transaction, U.S. Cellular expects to incur decommissioning costs related to select towers that have no co-location. Post-close of the T-Mobile transaction, U.S. Cellular intends to initially maintain leverage ratios relatively consistent with its current leverage levels. However, this target could be impacted by the result of the debt exchange offset. Again, we expect a mid-2025 close of the proposed T-Mobile transaction, and we hope this discussion helps you understand the expected net proceeds, along with various dependencies and contingencies.

Doug Chambers: In periods after the close of the T mobile transaction U S cellular expects to incur decommissioning costs related to select towers that have no co locators.

Doug Chambers: Post close of the T mobile transaction U S. Cellular intends to initially maintain leverage ratios relatively consistent with its current leverage levels. However, this target could be impacted by the result of the debt exchange offer.

Doug Chambers: We expect a mid 'twenty three or five close of the proposed T mobile transaction and we hope. This discussion helps you understand the expected net proceeds along with various dependencies and contingencies.

Chris Botfield: I will now turn the call over to Chris Bosfeld. Thank you, Doug. Good morning, everyone. Turning to slide 16, in the quarter, we delivered 14,000 new fiber service addresses, and we remain confident in achieving our goal of 150,000 fiber addresses this year. As a reminder, our expansion markets are primarily in Wisconsin and the Pacific Northwest and therefore are impacted by seasonality. Now that we have moved beyond the winter months, we expect construction activity and address delivery to accelerate. In the quarter, we had 2,800 residential broadband net additions, with 8,300 coming from our fiber markets. Fiber net ads are lower than prior quarters due to the timing of service address delivery.

Speaker Change: I'll now turn the call over to Chris Boswell.

Chris Boswell: Thank you Doug good morning, everyone turning to slide 16 in the quarter, we delivered 14000, new fiber service addresses and we remain confident in achieving our goal of 150000 fiber addresses this year as a reminder, our expansion markets are primarily in Wisconsin in the Pacific Northwest and therefore are impacted by seasonality.

Chris Boswell: Now that we have moved beyond the winter months, we expect construction activity and address delivery to accelerate.

Chris Boswell: In the quarter, we had 2800 residential broadband net additions with 8300 coming from our fiber markets fiber net adds are lower than prior quarters due to the timing of service address delivery.

Chris Botfield: As our bills continue to ramp over the course of the year, we expect fiber net ads to follow.

Chris Boswell: And their builds continue continue to ramp over the course of the year, we expect fiber net adds to follow.

Chris Botfield: We also made meaningful improvements to our sales and marketing programs, including increases in third-party staffing of our door-to-door sales reps and changes to our internal door-to-door teams. As service address delivery ramps and we've strengthened our sales teams, we are optimistic that we can drive increased fiber net ads and penetration this year. In preparation for the Enhanced ACAM Program, we executed on a number of construction contracts with third-party vendors and have begun construction in our first eACAM market in Wisconsin. The teams are excited to begin this program as it will bring cyber deeper into these communities.

Chris Boswell: We also made meaningful improvements to our sales and marketing programs, including increases in third party staffing of our door to door sales reps and changes to our internal door to door team.

Chris Boswell: Service I, just delivery ramp and we've strengthened our sales team. We are optimistic that we can drive increased fiber net ads and penetration this year.

Chris Boswell: In preparation for the enhanced ATM program, we executed on a number of construction contracts with third party vendors and have begun construction in our first a cam market in Wisconsin. The teams are excited to begin this program as it will bring fiber deeper into these communities.

Chris Botfield: We are also making progress on our transformation efforts that I mentioned at the year-end call. To date, we've already identified $100 million in annual cost savings expected by year-end 2028. These cost reductions will help mitigate increased costs as we expand our fiber footprint and bring on new subscribers. These initiatives will streamline our operations and enhance elements of the customer experience. We are still in the early stages of identifying opportunities and remain optimistic about the full potential of this program.

We are also making progress on our transformation efforts that I mentioned at the year end call to date, we've already identified $100 million in annual cost savings expected by year end 2028. These cost reductions will help mitigate increased costs as we expand our fiber footprint and bring on new subscribers.

Chris Boswell: These initiatives will streamline our operation and enhanced elements of the customer experience.

Chris Boswell: We are still in the early stages of identifying opportunities and remain optimistic about the full potential of this program.

Chris Botfield: Turning to slide 17, the teams remain focused on driving increased penetration. We added 2,800 residential broadband subscribers in the first quarter. 8,300 were in our fiber markets. Our fiber strategy is driving growth to help overcome industry-wide competitive pressures facing our copper and cable markets. In our fiber expansion market, we have a solid track record of achieving 25 to 30% residential broadband penetration in year one, attributed to the success of our pre-sales model. We ultimately expect to reach 40% average penetration in steady state, which is roughly five years after launch. Several of our mature markets have exceeded this goal.

Chris Boswell: Turning to slide 17, the teams remain focused on driving increased penetration.

Chris Boswell: We added 2800 residential broadband subscribers in the first quarter 8300 were in our fiber markets. Our fiber strategy is driving growth to help overcome the industry wide competitive pressures facing our copper and cable markets.

In our fiber expansion markets, we have a solid track record of achieving 25% to 30% residential broadband penetration in year, one attributed to the success of our pre sales model.

Chris Boswell: We ultimately expect to reach 40% average penetration in steady state, which is roughly five years after launch.

Chris Boswell: Several of our mature markets have exceeded this goal.

Chris Botfield: In our EA-CAM markets, we are expecting even higher penetration, 65 to 75 percent in steady state, as we will be the only gig-capable provider in these areas. We are excited to bring gig speeds to some of the most rural geographies in our footprint.

Chris Boswell: In our E. A cam markets, we are expecting even higher penetration, 65% to 75% and steady state and we will be the only gig capable provider in these areas we.

Chris Boswell: We are excited to bring gig speeds to some of the most rural geographies in our footprint.

Chris Botfield: Starting this quarter, we are sharing residential fiber churn and total residential broadband churn. Customers like the speed and reliability of fiber. You can see this in our fiber churn, which was 0.9% in the quarter, lower than our overall broadband churn.

Chris Boswell: Starting this quarter, we are sharing residential fiber churn in total residential broadband churn customer.

Chris Boswell: Customers like the speed and reliability of fiber you can see this in our favorite tree, which was <unk>, 9% in the quarter lower than our overall broadband churn.

Chris Boswell: Turning to slide 18 earlier this year, we updated our goals to reflect our ongoing fiber expansion any ATM programs.

Chris Botfield: Turning to slide 18, earlier this year, we updated our goals to reflect our ongoing cyber expansion and the ACAM program. We are targeting 1.8 million marketable cyber service addresses. We ended the quarter at 942,000. We are also targeting 80% of total addresses to be served by FIBER. We ended the quarter at 52%. And finally, we are expecting to offer speeds of one gig or higher to at least 95% of our footprint, and we finished the quarter with 74% at gig speed. We will use a combination of fiber and coax technologies to achieve this goal. On the right side of the slide, you can see the current service address mix and the projected service address mix once these goals are met.

Chris Boswell: We are targeting $1 8 million marketable fiber service addresses we ended the quarter at 942000.

Chris Boswell: We are also targeting 80% of total addresses to be served by fiber.

Chris Boswell: We ended the quarter at 52%.

Chris Boswell: And finally, we are expecting to offer speeds of one gig or higher to at least 95% of our footprint and we finished the quarter with 74% at gig speeds.

I'll use a combination of fiber and collect technologies to achieve this goal.

Chris Boswell: On the right side of the slide you can see the current service mix and the projected service out of snakes. Once these goals are met.

Chris Botfield: Our goal is to reduce the number of addresses served by COPPER to just 5% over time. In effort to minimize reliance on copper, we will continue to look for opportunities to divest markets that do not have an economic path to fiber.

Chris Boswell: Our goal is to reduce the number of Edison served by copper to just 5% overtime.

Chris Boswell: In effort to minimize reliance on copper, we will continue to look for opportunities to divest markets that do not have an economic path to fiber.

Chris Botfield: In the first quarter, we reached agreements to sell two copper islet companies in Colorado. On slide 19, you can see we grew total service addresses 6% year over year. Shown on the right side of the slide, we see increased demand for higher broadband speeds, with 82% of our residential broadband customers taking 100 meg or higher, and 24% taking 1 gig or higher at the end of the quarter. When looking at new customers that we added in the quarter, 56% took speeds of 1 gig or higher. Demand for faster speeds remains strong. As shown on slide 20, average residential revenue per connection was up 2% year over year, due primarily to price increases.

Chris Boswell: In the first quarter, we reached agreements to sell two copper ILEC companies in Colorado.

Chris Boswell: Yeah.

Chris Boswell: On slide on Slide 19, you can see we grew total service addresses 6% year over year.

Shown on the right side of the slide we see increased demand for higher broadband speeds with 82% of our residential broadband customers, taking 100, Meg or higher and 24%, taking one gig or higher at the end of the quarter.

Chris Boswell: We're looking at new customers that we added in the quarter, 56% took speeds of one gig or higher demand for faster speeds remained strong.

Chris Boswell: As shown on slide 20 average residential revenue per connection was up 2% year over year due primarily to price increases.

Chris Botfield: We expect residential revenue per connection to moderate in 2025 as we focus on driving penetration. The chart on the right shows our revenue comparison year-over-year. As a reminder, the divestitures contributed $4 million of operating revenues in the first quarter of 2024. We'll talk more about revenue on the next slide.

Chris Boswell: We expect residential revenue per connection to moderate in 2025, as we focus on driving penetration.

Chris Boswell: The chart on the right shows our revenue comparison year over year as a reminder, the divestitures contributed $4 million of operating revenues in the first quarter of 2024.

Chris Boswell: We'll talk more about revenue on the next slide.

Chris Botfield: On slide 21, I'll touch on the financials. Total operating revenues were down 3% in the quarter compared to prior years, impacted by the divestitures, along with continued declines in commercial and wholesale revenue, as well as decreases in residential video and voice connections. These variances were partially offset by increased residential revenue per connection and growth in fiber connection. Cash expenses increased 6%, or $11 million in the quarter, compared to prior year. $4 million of this increase was a cumulative, non-cash adjustment to stock-based compensation. The remaining increase in expense aligns with our 2025 priorities and guidance, including investments in sales and marketing, and advancing our transformation efforts.

Chris Boswell: On slide 21, I'll touch on the financials.

Chris Boswell: Total operating revenues were down 3% in the quarter compared to prior years impacted by the divestitures along with continued declines in commercial and wholesale revenue as well as decreases in residential video and voice connection.

Chris Boswell: These variances were partially offset by increased residential revenue per connection and growth in fiber connections.

Chris Boswell: Cash expenses increased 6% or $11 million in the quarter compared to prior year four.

Chris Boswell: $4 million of this increase was a cumulative noncash adjustment to stock based compensation.

Chris Boswell: The remaining increase in expense aligned with our 2025 priorities and guidance.

Chris Boswell: Including investments in sales and marketing and advancing our transformation efforts.

Chris Botfield: Additionally, we are working to staff and scale our internal construction crews to drive increased addresses at a lower average cost compared to external contractors. We expect to use these crews for approximately one-third of our fiber builds this year. All of these factors are putting pressure on adjusted EBITDA this quarter. Capital expenditures were down, consistent with lower service address delivery. We expect both CAPEX and service address delivery to ramp throughout the rest of the year, as we are still targeting to deliver 150,000 new fiber addresses in 2025. More than 80% of our full-year capital expenditures will be dedicated to fiber, primarily through investments in both our Expansion and EA-CAM programs. On slide 22, our 2025 guidance remains unchanged.

Chris Boswell: Additionally, we are working to staff and scale, our internal construction crews to drive increased addresses at a lower average cost compared to external contractors.

Chris Boswell: We expect to use these crews for approximately one third of our fiber builds this year.

Chris Boswell: All of these factors are putting pressure on adjusted EBITDA This quarter.

Chris Boswell: Uh huh.

Chris Boswell: Capital expenditures were down consistent with lower service address delivery, we expect both Capex and service address delivery to ramp throughout the rest of the year as we are still targeting to deliver 150000, new fiber addresses in 2025.

Chris Boswell: More than 80% of our full year capital expenditures will be dedicated to fiber primarily through investments in both our expansion and E Cam programs.

Chris Boswell: On slide 22.

Chris Boswell: Our 2025 guidance remains unchanged.

Chris Botfield: Before I hand over the call, I want to take a moment to thank the entire TDS Telecom team for their hard work and dedication. Executing on our transformation requires alignment across the entire organization. I'm confident in our fiber strategy and excited about the opportunities ahead.

Speaker Change: Before I hand over the call I want to take a moment to thank the entire Tds telecom team for their hard work and dedication executing on our transformation requires alignment across the entire organization.

I'm confident in our fiber strategy and excited about the opportunities ahead.

Colleen Thompson: I will now turn the call back over to Colleen. Okay, Regina, we are ready for the first question.

Speaker Change: I will now turn the call back over to Kelly.

Speaker Change: Okay, Regina, we're ready for the first question.

Rick Prentiss: Our first question comes from the line of Rick Prentiss with Raymond James. Please go ahead. Thanks. Good morning, everybody. Morning, Rick.

Speaker Change: Our first question comes from the line of Ric Prentiss with Raymond James. Please go ahead.

Speaker Change: Thanks, Good morning, everybody.

Good morning, Rick.

Doug Chambers: Hey, thanks for the slide 12 in particular, the more refinement and granularity on the net proceeds of the transaction. One couple questions on that slide. Obviously, the designated entity spectrum still requires some different approval. Do you expect that's on a similar timeline to improving the whole merger? It's a separate timeline, a delayed timeline, just trying to think of what that process looks like.

Speaker Change: Hey.

Speaker Change: Thanks for the slide 12 in particular.

Speaker Change: More refinement and granularity on the net proceeds of the transaction.

Speaker Change: Couple of questions on that slide obviously, the designated entities spectrum.

Speaker Change: It still requires some different approval do you expect it on a similar timeline to improving the whole merger. It's a separate timeline of delayed timeline just trying to think of.

Speaker Change: What that process looks like.

Doug Chambers: Yeah, good morning, Rick. Yeah, with respect to designated entity close, the timing is uncertain. It is dependent upon regulatory approval by the FCC, which which we don't control. We did, you know, get good news related to our King Street key TAM matter during the second quarter, we got noticed that the DC Circuit Court of Appeals dismissed claims brought by the relators. That was good news. And hopefully, that will bode well for getting FCC approval. We're still waiting on the advantage ruling on that topic. But the short answer to your question is the timing is uncertain, but we're optimistic that we will be able to close the designated entities at some point in time.

Brook: Yes, good morning Brook.

Speaker Change: With respect to designated entity close timing is uncertain. It is dependent upon regulatory approval by the FCC, which we don't control we did.

Speaker Change: You'll get good news related to our King Street.

Speaker Change: TTM matter during the second quarter, we had noticed that the DC circuit court of Appeals.

Speaker Change: Dismissed claims brought by the <unk> that was good news and hopefully.

Speaker Change: That will bode well forgetting FCC approval, we're still waiting on the advantage ruling on that topic, but the short answer to your question is the timing is uncertain, but we're optimistic that we will be able to close the designated entities at some point in time.

Doug Chambers: Okay. And then I think you also mentioned the proceeds, net proceeds. There would also be the cash flow, excess cash flow through closing. I think LT, you mentioned maybe $79 million of cash flow in the quarter. How should we think about that run rate of free cash flow? Is that the right number to kind of look like and think about what it could mean over the next time until you close?

Speaker Change: Okay.

Speaker Change: I think you also mentioned the.

Speaker Change: The proceeds net proceeds there would also be the cash.

Speaker Change: Cash flow excess cash flow through closing.

Speaker Change: LTE, you mentioned, maybe $79 million of cash flow in the quarter, how should we think about that run rate of free cash flow is that the right number to kind of look like and think about what it could move over the next time until you close.

Yeah, Rick I wouldn't take that necessarily as a run rate I would say, we said directionally that our capital expenditures are down in 2025 relative to 2024, so that that is a positive for free cash flow.

Speaker Change: We're not providing guidance on where we end up at transaction close but user will be we do anticipate an excess amount of cash that will be part of the distribution if and when the board declared a special dividend.

Doug Chambers: Okay, and then any thoughts on the debt exchange offer? Obviously, how much of that this exchange impacts the purchase price or what debt is left at USM? Yeah, we don't, you know, we don't know for certain, obviously, that's going to be in control of the holders. Certainly, we, it's very attractive debt, given that, you know, most of it's at 5.5 or 6.25 rates. So, you know, to the extent some of that debt is left over, we would be interested in keeping it. However, we do expect a lot of it to convert certainly, you know, Portions that are held by institutional investors, given the credit rating differential between U.S.

Speaker Change: Okay and then.

Speaker Change: Any thoughts on the.

Speaker Change: Debt exchange offer.

Speaker Change: Obviously, how much of that this exchange impact the purchase price or what John is left with U S. M.

Speaker Change: Yeah.

Speaker Change: Yeah, we don't.

Speaker Change: We don't know for certain obviously, that's going to be in control of the holders.

Certainly we are it's very attractive debt given that most of it's at five five or a $6 five range. So to the extent some of that debt is left over we would.

Speaker Change: Keeping it.

Speaker Change: However, we do expect a lot of it to convert certainly.

Speaker Change: Portions that are held by institutional investors given the credit rating differential between U S and T mobile we're going to see.

Doug Chambers: Cellular and T-Mobile, we're going to see some amount of conversion, but it's just very difficult to predict where that will end up.

Speaker Change: Some amount of conversion, but it's just very difficult to predict where that will end up.

Doug Chambers: Okay, and one final one on USM side, Tower Company reporting more in line with like a REIT, AFFO type of stuff. Is that something we should expect post-closing? Correct. As we indicated last quarter, in the first quarter after close, first full quarter after close, we would anticipate providing, you know, tower company reporting, including AFFO and related messages.

Speaker Change: Okay.

Speaker Change: And one final one on U S M side Tower company reporting more in line with like a REIT.

Speaker Change: Types of stuff is that something we should expect post closing.

Speaker Change: Correct, yes.

Speaker Change: The last quarter.

Speaker Change: In the first quarter after close first full quarter after close we would anticipate.

Speaker Change: Providing tower company reporting, including <unk> and related metrics.

Unknown Attendee: Great.

Speaker Change: Great and one over on the Tds Telecom side, if I could.

Chris Botfield: And one over on the TDS Telecom side, if I could. Obviously, you've talked about the third party. door-to-door efforts. Can you help us understand? Because obviously it was a week quarter on the broadband ads. How is that working out? When are you going to see kind of better net ad traction as you head towards those targets of year one penetration and ultimate penetration? Yep, so let me add a little more color on our fiber net ads in the quarter. So we delivered 8,300. That was lower than prior quarters due to timing of address delivery. So the addresses that we launched this quarter, 14,000, were significantly lower than prior quarters.

Speaker Change: Obviously, you've talked about the.

Speaker Change: Third party.

Speaker Change: Gordon's door efforts can you help us understand because obviously.

Speaker Change: But weak quarter from a broadband adds.

Speaker Change: Working out where you're going to see.

Speaker Change: Better net traction.

Speaker Change: As you head towards those targets, so far youre, one penetration and ultimate congratulations.

Speaker Change: Yeah. So let me add a little more color on our fiber net adds in the quarter. So we delivered 8300 that was lower than prior quarters due to timing of address delivery. So the addresses that we launched this quarter at 14000 were significantly lower than prior quarters that was largely because of the cold weather.

Chris Botfield: That was largely because of the cold weather and our markets largely being in Pacific Northwest and Wisconsin. And because of our presales model, we see the most net ads come from those initial fiber launches. And so as our fiber address delivery is expected to ramp over the next several quarters, we do expect net ads to follow. And to your point around the door-to-door teams, we have done a lot of great work this quarter to set a great foundation. We've brought on additional third-party resources. We've made some changes to our own internal teams to attract more candidates.

Speaker Change: And our markets largely being in Pacific.

Speaker Change: Pacific Northwest and Wisconsin, and because of our pre sales model, we see the most net adds come from those initial fiber launches and so as our fiber address delivery is expected to ramp over the next several quarters. We do expect net adds to follow and to your point around the door to door team.

Speaker Change: We have done a lot of great work this quarter to set a great Foundation. We've brought on additional third party resources. We've made some changes to our own internal team to attract more candidates. So we feel like we've really strengthened our sales teams and once that address delivery ramps up we're in a good position to capitalize that and.

Chris Botfield: So we feel like we've really strengthened our sales teams. And once that address delivery ramps up, we're in a good position to capitalize that and add more subscribers.

Speaker Change: Add more subscribers.

Rick Prentiss: Okay. Thanks, everybody.

Speaker Change: Okay. Thanks, everybody.

Unknown Attendee: Thanks, Rick.

Speaker Change: Thanks, Rick.

Sebastiano Petty: Our next question comes from the line of Sebastiano Petty with J.P. Morgan. Please go ahead. I thank you for taking the question.

Speaker Change: Our next question comes from the line of Sebastiano Petti with Jpmorgan. Please go ahead.

Sebastiano Petti: Hi, Thank you for taking the question.

Sebastiano Petti: I've just touching upon I guess in the prepared remarks, there that you don't necessarily intend to redeem Tds preferreds I mean, one of the questions that we do get is that on an after tax basis those instruments, perhaps might be a little became expensive. So just kind of thoughts around that in terms of wide, leaving them outstanding and then I have a couple.

Vicki Villacrez: I'm just touching upon, I guess, in the prepared remarks there, that you don't necessarily intend to redeem TDS prefers. I mean, one of the questions that we do get is that, you know, on an after tax basis, you know, those instruments perhaps might be a little, seem expensive. And so just kind of the thoughts around that in terms of why leaving them out. Then I have a couple other houses.

Sebastiano Petti: The other question.

Vicki Villacrez: Yeah, good morning, Sebastiano. Thank you for your question. You know, I think my prepared remarks, TDS currently does not plan to redeem the Series UU and the Series VV preferred stock. We, you know, these are perpetual preferred stock. They're nice foundational capital going forward that we intend to keep in place. As we think about, you know, right now, we've made a series of moves to put in place our interim financing and liquidity options, post close, to give us time to put in a more permanent structure. As we as we look forward, I think our opportunity right now is to pay down our debt, you know, the 1.2 billion.

Speaker Change: Yeah. Good morning Sebastiano. Thank you for your question you know I think my prepared remarks Tds are currently does not plan to redeem the series U and the series B preferred stock.

Sebastiano Petti: We you know these are perpetual preferred stock.

Sebastiano Petti: Stock, they're nice foundational capital going forward that we intend to keep in place as we think about them.

Sebastiano Petti: Right now we have made US a series of moves too.

Sebastiano Petti: To put in place our interim.

Sebastiano Petti: Financing and liquidity options post close to give us time to put in a more permanent structure.

As we look forward I think our opportunity right now is to pay down our debt.

Sebastiano Petti: You know the $1 2 billion. So we really we really like these is foundational capital going forward.

Chris Botfield: So we really, we really like these as foundational capital. Great, thank you.

Chris: Great. Thank you and then for Chris.

Chris Botfield: And then for Chris. on the $100 million cost program by 2028.

Chris: On the $100 million cost program by 2028, any help maybe perhaps contextualize ing just the ramp there.

Chris Botfield: Any help maybe perhaps contextualizing just the the ramp there and you know what if any benefit you might see within 2025 but just as you know help us think about how that scales up over time as you get to that 2028 run rate you know it's phasing over the next several years and then sticking with Chris on the TDS side so the Colorado sales so I think it's in the Q18 million of proceeds any help in terms of When you think that might close and what the financial impact could be?

Chris: What if any.

Chris: Benefit you might see within 2025, but just.

Chris: Help us think about how that scales up over time as you get to that 2028 run rate.

Chris: Anything over the next several years and then sticking with Chris on the Tds side, So the Colorado.

Chris: Sales. So I think it's in the Q $18 million of proceeds any help in terms of.

Chris: When you think that might close and what the financial impact could be.

Chris Botfield: Yep.

Sebastiano Petti: Yep, Hi, Sebastiana I'll start with the latter question on Colorado islets. These were very small we only had approximately 2000 subscribers.

Chris Botfield: Hi, Sebastiano. I'll start with the latter question on Colorado ILEX. So these were very small, we only had approximately 2000 subscribers. But we're getting 18 million in proceeds. These were markets that were very isolated, copper markets, no economic path to fiber. And so we were very pleased that we were able to find a good buyer for these markets. And it goes hand in hand with our strategy to try to minimize our exposure as much as possible on the copper network. And so in terms of, that helps you in terms of the magnitude, these are relatively small and any impact has been incorporated in our guidance.

Sebastiano Petti: But we're getting $18 million in proceeds these were markets that were very isolated copper markets no economic path to flavor and so we were very pleased that we were able to find a good buyer for these markets and it goes hand in hand, with our strategy to try to minimize our exposure as much as possible on the copper network.

Sebastiano Petti: And so in terms of that that helps you with the in terms of the magnitude of these are relatively small and any impact has been incorporated in our guidance and then from a transformation perspective, yeah. We're very pleased with our early results on this program. We're just getting started and we are confident in achieving the $100 million of cost savings.

Chris Botfield: And then from a transformation perspective, yeah, we're very pleased with our early results on this program. We're just getting started and we are confident in achieving the $100 million of cost savings. So this is a cost savings both on the OPEX and CAPEX side. So we do expect some of this to get absorbed by normal inflationary cost increases, cost increases as we expand our footprint and bring on new subscribers. As well as on the CAPEX side, we may choose to reinvest some of those proceeds. We're doing a lot of great work right now. We do expect to see some savings by the end of this year, and then that will ramp to the $100 million by the end of 2028.

Sebastiano Petti: So this is a cost savings both on the Opex and Capex side. So we do expect some of this to get absorbed by normal inflationary cost increases cost increases as we expand our footprint and bring on new subscribers as well as on the Capex side, we may choose to reinvest some of those proceeds.

Sebastiano Petti: We're doing a lot of great work right now we do expect to see some savings by the end of this year and then that will ramp to the $100 million by the end of 2028, and we're not sharing any kind of year by year savings at this time, but more to come.

Unknown Attendee: We're not sharing any kind of year by year savings at this time, but more to come. That's very helpful. Thanks. Again, for questions, press star one.

Speaker Change: That's very helpful. Thank you.

Speaker Change: Again for a question press Star one and our next question comes from the line of surveillance <unk> with Gamco investors. Please go ahead.

Sergei Dluzhevskiy: And our next question comes from the line of Sergei Dluzhevskiy with Gamco Investors. Please go ahead. Good morning, guys. Thank you for taking the question. All right.

Speaker Change: Good morning, guys. Thank you for taking the questions.

Speaker Change: Okay.

LT Therivel: My first question is for LT. On the tower side, as you're preparing for T-Mobile transaction close, and as you're dealing with kind of current collocation demand environment, which is impacted by care capex slowdown to a degree, I guess, what are some of the things that are working well for you right now, even in this environment in terms of getting additional collocations? And what are some of the things that you're working on improving in order to increase third party collocation ratio as you close the transaction and focus squarely on the power business going forward? Good morning, Sergei.

Speaker Change: My first question is for LTE.

Speaker Change: On the power side as you're preparing for T mobile transaction close and of you're dealing with a kind of corn co location demand environment, which is impacted by carrier Capex are slow down to a degree I guess what are some of the things that are working well for you right now even in this environment.

Speaker Change: Guessing additional co locations and what are some of the things that youre working on improving in order to increase so it's part of the Colocation ratio as you close.

Speaker Change: Election focused squarely on solar power business going forward.

Speaker Change: Hey, good morning, Sergey I thought I was going to get off Scot free to skol.

LT Therivel: I thought I was going to get off scot-free this call, but I suppose not. Tower business, I mean, as you saw, in terms of what we're pleased about, I mean, a 6% revenue growth, and that's coming from not just the escalators, which is obviously, I mean, you can brag about them, but that's kind of set and you put them in place and they kind of are where they are. It's coming from ramping from co-location and new amendment activity and new co-location activity that's starting to ramp up. And so we are seeing increased volumes. I think there's a few reasons that we're seeing those increased volumes and I'll give you three.

Speaker Change: It was not tower business I mean as you saw in terms of in terms of what we're pleased about.

Speaker Change: I mean, the 6% revenue growth and that's coming from not just the escalators, which is obviously I mean, not I mean, you can brag about them, but that's kind of set you.

Speaker Change: Put them in place and they kind of are where they are it's coming from ramping from co location and new amendment activity and new co location activity, that's starting to ramp up.

Speaker Change: And so we are seeing increased volumes.

Speaker Change: I think theres a few reasons that we're seeing those increased volumes and I'll give you three.

LT Therivel: The first is... There probably is some movement from AT&T or Verizon in terms of looking at Unknown Attendee, Colleen Thompson, Shaun Goldfarb, Douglas Shuma, Unknown Attendee, Colleen Thompson, providing service on those towers that we have that are differentiated from recovery. So that's probably one. The second driver is we have moved some of our sales and our marketing in-house. So we went from a situation where we were doing sales and marketing through a third party. We decided to bring those services in-house as we focused more on driving growth in the tower business. I think that move is starting to bear fruit, still very, very early, don't get me wrong.

The first is there.

Speaker Change: There probably is some movement from AT&T or Verizon in terms of looking at.

Speaker Change: Spots that they currently we currently cover for them with roaming, there's probably a little bit of concerns hey, what's going to happen with that roaming post the T mobile transaction.

Speaker Change: Do we need to start filling in those gaps by moving from roaming to actually <unk>.

Speaker Change: <unk> service on those towers that we have that are differentiated from a coverage perspective, that's probably one drug.

Speaker Change: The second driver is.

Speaker Change: We have moved some of our sales and our marketing in house.

Speaker Change: So we went from a.

Speaker Change: We went from a situation, where we were doing sales and marketing in Q a third party.

Speaker Change: We decided to bring those services in house as we focused more on driving growth in the tower business and I think that move is starting to bear fruit still very very early don't get me wrong.

LT Therivel: But we control our own destiny a little bit more in terms of growth. So I think, you know, that's a that's that's good news as well. And then I think third, you know, you continue to see data demand growing. We don't see any meaningful slowdown in that. And so there's this kind of the more fundamental, call it secular growth that is across the entire category. We're not the only tower business to start to see some growth in terms of demand. And so we, I think carriers across the board are starting to need to fill in some gaps.

Speaker Change: We control our own destiny, a little bit more in terms of growth.

Speaker Change: So I think that's a that's that's good news as well.

Speaker Change: And then I think third you continue to see the data demand growing.

Speaker Change: We don't see any meaningful slowdown in that.

Speaker Change: And so there's just kind of a more fundamental call. It secular growth that is across the entire category. We're not the only tower business to start to see some growth in terms of demand.

Speaker Change: And so I think carriers across the board are starting to I was wondering do you need to fill in some gaps.

LT Therivel: I think those are gaps also created by the lack of incremental spectrum. So we're seeing some positive movement in terms of spectrum and spectrum conversations in the government, but there's still nothing that's been identified, nothing that's been clear, no obvious options. And so in the absence of that. carriers, you're going to need to do two things.

Speaker Change: I think those are gaps also created by the lack of incremental spectrum.

So we're seeing some positive movement in terms of in terms of spectrum and the spectrum conversations in the government, but there's still nothing that's been identified nothing that's been clear no obvious auctions and so in the absence of that.

Speaker Change: You're going to need to do two things.

Speaker Change: They're going to need to buy incremental spectrum by the way we're sitting on C. Band that is quite valuable and that we think will be attractive for people and two in the absence of buying incremental spectrum, they need to densify and so I put those three things together I think that's what's driving some of the growth that we've seen thus far and I think that drives the optimism that I talked about in the tower business.

LT Therivel: When we when we think about the long term, in terms of areas of opportunity, I'd focus kind of entirely on OPEX and on just the overall operating structure of the business. that business has operated, obviously, as a business unit inside of us. And so they've received a lot of Online Support, Overhead Support, and so on, not just from US Cellular, but also from TDF. And so we have a really robust effort underway in order to create the structure for that business to stand on its own, post-closed. That's going to take some time. It will not be done at close, right?

Speaker Change: When we are when you think about the long term.

Speaker Change: In terms of areas of opportunity I'd focus kind of entirely on Opex and on just the overall operating structure of the business.

Speaker Change: That business has operated obviously as a business unit inside of us.

Speaker Change: And so they've received a lot of.

Speaker Change: Support overhead support and so on not just from U S cellular but also from Tds.

Speaker Change: And so we have a really robust.

Speaker Change: The effort underway in order to create a structure for that business to stand on its own it was close.

Speaker Change: I'm going to take some time it.

Speaker Change: It will not be done at close alright, and so I would expect that.

LT Therivel: And so I would expect that after close, we'll still have some residual overhead that will kind of fade over time. We'll obviously provide those details when we get into those future quarters. But putting a structure in place where that business can stand on its own, do so in a really operationally efficient way and do so as quickly as possible. I'd say that's probably the largest. Got it. Great.

Speaker Change: After close we'll still have some residual overhead that will kind of fade over time, we'll obviously provide those details when we get into those future quarters.

Speaker Change: But putting a structure in place where that business can stand on its own.

Speaker Change: Do so in a really operationally efficient way.

Speaker Change: So as quickly as possible I would say, it's probably the largest opportunity there.

Speaker Change: Got it great and.

LT Therivel: And another question on the US side, in regards to retained spectrum that is outside of announced transactions. You mentioned, obviously, the majority of the values there relates to C-band, and there's still some time to monetize the build-out requirements, not kicking them until 2029. So while you are obviously going to be on the lookout for the right transaction, I guess my question is, in the meantime, do you see opportunities for some collective uses of the spectrum that could provide some revenue-generating opportunities, kind of in the near term, medium term, whether it's leasing the spectrum, whether it's focusing on specific sets of users, for example, in the critical infrastructure industries, or other industries?

Speaker Change: And that was a question.

Speaker Change: Question on the ASO side in regards to everything.

Speaker Change: <unk> spectrum that was outside of the announced transaction.

Speaker Change: You mentioned that this is the majority of those are items that relates to C band and there is still some time to monetize the build out requirements are not kicking in until 2029. So while you are obviously going to be on the lookout was the right transaction.

Speaker Change: Yes, My question that in the meantime, we see opportunities just to sum up for something like the seriousness of the spectrum that could provide some revenue generating opportunity just kind of engineered Tom Hey, Jim Jong, whether it's leasing or the spectrum whether it's.

Speaker Change: Focusing on specific sets.

So its users for example in the critical infrastructure industries.

LT Therivel: So kind of your thoughts on that front. We're certainly open to it. The problem with that is that when you start generating revenue from Spectrum, normally people aren't interested in paying you to use Spectrum that you can then turn around and sell in the next quarter. And so our focus is definitely more on, when I talk about opportunistic monetization, we mean selling it. There's, if we don't see a robust market to sell it, we certainly would be open to the concept of leasing it or finding other creative ways to generate some returns on it. But certainly our focus is on sale, on selling it, and not just the C-band, but the rest of the kind of incremental Spectrum that's still left over, much, much smaller in terms of value.

Speaker Change: Just so kind of your thoughts on that front.

Speaker Change: Yeah, we're certainly open to it the problem with that is that when you start generating revenue from spectrum normally people arent interested in paying you to use spectrum that you can then turn around and sell in the next quarter and so.

Speaker Change: Our focus is definitely more on when I talked about opportunistic monetization.

Speaker Change: I mean selling it.

Speaker Change: There is if we don't see a robust market to sell it.

Speaker Change: We certainly would be open to the concept of leasing it or finding other creative ways to generate some returns on it.

Speaker Change: But certainly our focus is on sale on selling it and not just the C band, but the rest of the kind of incremental spectrum to stone leftover much much smaller in terms of value, but the goal certainly is to sell all that spectrum. The good news for US and you mentioned this is we don't need to be in a hurry.

LT Therivel: But the goal certainly is to we don't need to be in a hurry. We have, in many cases, pretty long build-out timelines. And even if there is, even if we get close to that build-out timeline, the value that's resident in that Spectrum and in getting a good deal for that Spectrum is much greater than the cost that would be required to build it out. And so if we have to, we would be prepared to put some kind of a license saver operational build-out in place for that Spectrum. Obviously, we hope not to do that. We'd vastly prefer to sell it.

Speaker Change: We have in many cases pretty long build out time lines and even if there is even if we get close to that build out timeline the value that's resident in that spectrum and in getting a good deal for that spectrum is much greater than the cost that would be required to build it out and so if we have to we would be prepared.

Speaker Change: <unk> put a some kind of a license favor operational build out in place for that spectrum, obviously, we hope not to do that with vastly prefer to sell it and we think that's the past it will go down.

LT Therivel: And we think that's the path that we'll go down. So that's kind of the way to think about the monetization of not just the C-band, but the rest of those other Yeah, great.

Speaker Change: So that's kind of a way to think about the monetization of not just to see that but the rest of those other bands.

Speaker Change: Great and.

Chris Botfield: And a question on the TDS Telecom side. So over the past year or year and a half, TDS Telecom has announced and closed on several debentures. Obviously, Ilex properties in Virginia, Cable Operations in Texas, most recently Ilex in Colorado. I guess, question for Chris. In general, how are you approaching the vestitures in your wireline and cable portfolio? Do you see additional opportunities to dispose non-core assets? How meaningful could they be kind of over medium term? And what are the main criteria you employ when you decide whether to monetize a market or continue investing? Yep, I can add a little more color on that.

Speaker Change: On the telecom side, so over the past.

Speaker Change: Year over year and a half.

Speaker Change: Tds Telecom has.

Speaker Change: Announced and closed several divestitures, obviously ILEC properties in Virginia cable operations in Texas Most recently.

Speaker Change: Alex in Colorado.

Chris: I guess a question for Chris.

Speaker Change: In general how are you approaching divestitures in our wireline and cable portfolio.

Speaker Change: See additional opportunities to dispose non core assets, how meaningful could they be kind of a forward. It may jump charm and what are the main criteria employed when you decide whether to monetize.

Speaker Change: As a market or concerning to us.

Speaker Change: Yeah, I can add a little more color on that.

Speaker Change: We do have a lot of capital needs in front of US we have bold flavor goals with our E. A cam program and our ongoing fiber expansion program. So we really are constantly evaluating our portfolio to ensure that we're putting our resources and our most strategic opportunities.

Chris Botfield: So we do have a lot of capital needs in front of us. We have bold cyber goals with our EA-CAM program, and our ongoing fiber expansion program. So we really are constantly evaluating our portfolio to ensure that we're putting our resources in our most strategic opportunities. And we're especially focused on looking at copper markets that do not have an economic path to fiber, because we want to minimize our exposure to our copper network in the long run, and ultimately get out of the copper business. And so a lot of these markets are markets that were overbuilt, so they were not eligible for EA-CAM.

Speaker Change: And we're especially focused on looking at copper markets that do not have an economic path to fiber because we want to minimize our exposure to a copper network in the long run and ultimately get out of the copper business and so a lot of these markets are markets that were overbuilt. So they were not eligible for a cam and and.

Chris Botfield: And given the density of these markets, it just was not economic to then also upgrade these areas. So from a strategic lens, that is exactly what we're looking for, are these markets that are more isolated, do not have an economic path to fiber, but then they also have to meet our financial criteria. We want to make sure that the net proceeds we receive are greater than what the present value of those cash flows would be to us if we continue operating those markets. And so all the divestitures we've done so far have met that criteria, and we're constantly looking for other opportunities that fit that as well.

Speaker Change: Given the density of these markets. It just would not economic to then also upgrade these areas. So that from a strategic win that is exactly what we're looking for are these markets that are more isolated do not have a economic path to fiber, but then they also have to meet our financial criteria. We wanted to make sure that the net proceeds we receive.

Speaker Change: These are greater than what the present value of those cash flows would be to us. If we continue operating in those markets and so all the divestitures. We've done so far has met those criteria and we're constantly looking for other opportunities that fit that as well.

Unknown Attendee: Great, thank you.

Speaker Change: Great. Thank you.

Sebastiano Petty: We have a follow-up question from the line of Sebastiano Petty with J.P. Morgan. Please go ahead. Hi, thanks for getting me back in the queue.

Sebastiano Petti: We have a follow up question from the line of Sebastiano Petti with Jpmorgan. Please go ahead.

Sebastiano Petti: Hi, Thanks for getting me back in the queue.

Sebastiano Petti: Just something something I brought up on the call announcement.

Vicki Villacrez: Just something I brought up on the call announcement when when you first announced the USM sale to eMobile, but we get this question as well from investors, but Why does USM need to remain a public entity? Is there any sense or any pros and cons from collapsing the structure and the TDS just buying in the remaining, you know, buying out the minority shareholders and collapsing the structure and minimizing tax leakage from some of the assets that, you know, asset proceeds. down the road here. Just wanted to, Vicki, to the extent that you would like to just share any thoughts around that would be lovely.

Speaker Change: You first announced the USF.

Speaker Change: The sale to T mobile, but when.

Sebastiano Petti: When we get this question as well from investors, but.

Sebastiano Petti: Why does use 70 to remain a public entity is there any sense or any pros and cons from collapsing the structure and the Tds just buying in the remaining of buying out the minority shareholders and collapsing the structure in.

Sebastiano Petti: <unk> tax leakage from some of the assets that asset proceeds down the road here just wanted to.

Sebastiano Petti: Thank you to the extent you like to.

Sebastiano Petti: Could you share any thoughts around that would be lovely. Thank you.

Vicki Villacrez: Thank you. Yeah, sure. Sure. Thank you for the for the follow up question. First of all, look, when we close the transaction with T-Mobile and U.S. Cellular, we will be two public companies, and we will have a strong business in place at U.S. Cellular with the towers and the partnerships, both providing predictable cash flow. and Attractive Margins and, you know, Attractive Growth as we're looking at our tower portfolio. And then, of course, on the TDS side, we have the FIBER program and its profile of attractive returns over the long term and its investment cycle. So, you know, I think there's any number of paths that we could take longer term.

Sebastiano Petti: Yeah sure sure. Thank you for the for the follow up question.

Sebastiano Petti: First of all look when we when we closed the transaction with T mobile and U S cellular.

Sebastiano Petti: We will be two public companies and we will have.

Sebastiano Petti: Strong are strong.

Sebastiano Petti: Business in place at U S cellular with the towers and the partnerships both providing predictable.

Sebastiano Petti: Cash flow.

Sebastiano Petti: And attractive margins and you know attractive growth as we're looking at our tower portfolio.

Sebastiano Petti: And then of course on the Tds.

Sebastiano Petti: Side, we have a the fiber program and its its profile of <unk>.

Sebastiano Petti: Attractive returns over the long term and it's an investment cycle.

Sebastiano Petti: So you know I think there is there is any number of paths that we could take longer term.

Vicki Villacrez: We're not, you know, we're not there yet. As you know, right now, we're just really focused on our top priorities of getting to a successful close in a couple of months. And, you know, there's a sequence of critical steps that we're focused on before close and after close, which, you know, I outlined in my in my comments today. Instead of that, I'll just add from the from the U.S. cellular perspective, right, we the incremental cost to operate as a public company, it's relative. I mean, you're not we're not getting a ton of cost savings if you combine the two.

Sebastiano Petti: We're not you know we're not there yet as you know right now we're just really focused on our top priorities of getting to a successful close.

Sebastiano Petti: And a couple of months and you know there's a sequence of critical steps that we're focused on before close and after close.

Sebastiano Petti: Which you know I I outlined in my in my comments today so.

Sebastiano Petti: And so to say and I'll just add from the from the U S cellular perspective right.

Sebastiano Petti: Incremental costs to operate as a public company, it's relatively minimal.

Speaker Change: You're not.

Speaker Change: We're not getting a ton of cost savings if you combine the two.

Vicki Villacrez: And so it really comes down to more efficient and effective uses of capital, more efficient tax flow structure. I'm sure TDS will continue to evaluate that, you know, on a go-forward basis, but we don't have some huge incentive at U.S. Cellular to try to collapse it either. Thank you both.

Speaker Change: So it really comes down to more efficient and effective uses of capital more.

Speaker Change: Sufficient tax low structures.

Speaker Change: I am sure Tds will continue to evaluate that on a go forward basis, but we don't have some huge incentive at U S cellular trying to collapsing.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Thank you both.

Rick Prentiss: We have a follow-up from the line of Rick Prentiss with Raymond James. Please go ahead.

Speaker Change: We have a follow up from the line of Ric Prentiss with Raymond James. Please go ahead.

Vicki Villacrez: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host like to keep leverage similar. So are we talking like two and a half to three terms of leverage at at US Cellular post-transaction when it becomes predominantly, as L.T. pointed out, the tower company? Yeah, I would say closer to three, but it really depends also on the debt exchange offer and the residual that is left there that, you know, that might compel us to go higher, given the attractiveness of that debt, but that's in the ballpark where I Okay, and it really does come down to that how much it gets exchanged.

Speaker Change: Hey, we're tag teaming today.

Speaker Change: I wanted to come back to the question on leverage.

Speaker Change: Doug I think you mentioned you would post transaction.

Speaker Change: Leverage similar so we're talking like two 5% to three turns of leverage that you have.

Speaker Change: Post transaction when it becomes predominantly as you pointed out the tower company.

Speaker Change: Yes, I would say closer to three but it really depends also on the debt exchange offer and residual that is left there.

Speaker Change: Mike can Polish people higher given the attractiveness of that yet, but that's in the ballpark Ric.

Speaker Change: Okay, and it really does come down to that how much gets exchanged whats the timeframe for the exchange.

Doug Chambers: What's the timeframe for the exchange? as transaction closes and then what time frame people have. Yeah, it'd be it'd be launched about, you know, 50 days or so before we anticipate a close to make sure we have adequate time to for the holders to to in fact, affect their exchange and there's certain requirements there. So that's the estimated timing.

Speaker Change: <unk>.

Speaker Change: As transaction closes and then what timeframe people have.

Speaker Change: Yeah, It would be it would be launched about.

Speaker Change: 50 days or so before we anticipate a close to.

Speaker Change: To make sure we have adequate time to.

Speaker Change: For the holders to tune in fact affect their exchange and there's certain requirements there. So.

Speaker Change: That's the estimated timing and you know once we have.

Doug Chambers: And you know, once we have I'm going to ask you to close gate, that'll determine the launch of that offer. and then expecting to have exchanged on concurrent with the closing or shortly after or before. Concur, yes. Perfect. Thanks, Vicki. Thanks, Doug. Yep, thank you.

Speaker Change: Estimated closed gate that that'll determine the launch of that offer.

Speaker Change: And then expecting to have exchanged on concurrent with the closing or shortly after.

Speaker Change: To close.

Speaker Change: Correct, yes.

Speaker Change: Perfect. Thanks, Toshi Thanks, Doug.

Speaker Change: Thank you.

Speaker Change: Yeah.

Colleen Thompson: And that will conclude our question and answer session.

Speaker Change: And that will conclude our question and answer session I'll turn the call back over to Colleen Thompson for closing remarks.

Colleen Thompson: I'll turn the call back over to Colleen Thompson for closing remarks. Okay, thanks again for joining us today. Please reach out to IR if you have additional questions and have a great weekend. That will conclude today's call. Thank you all for joining.

Colleen Thompson: Okay. Thanks again for joining us today, please reach out to IR. If you have additional questions and have a great weekend.

Colleen Thompson: That will conclude today's call. Thank you all for joining you may now disconnect.

Operator: You may now disconnect.

Colleen Thompson: Yeah.

Colleen Thompson:

Colleen Thompson: Yeah.

Colleen Thompson:

Colleen Thompson: Yeah.

Colleen Thompson: [noise].