Telephone and Data Systems, Inc. Aktie

Thank you, Alexia.

Good morning, ladies and gentlemen. I'm Walter Carlson, President and CEO and Chair of TDS, and I will be chairing this Annual Meeting of the TDS shareholders. At this meeting, at this time, I call the meeting to order, and I would like to thank everyone present and on the webcast for participating in this meeting. It is now -- oh my gosh, I would say 8:59. So we got to wait for a second as we decided 9:00. Would you like me to start again? It's -- now it's 9:00 (sic) [ 10:00 ]. Very good. Okay. So we will call the meeting to order. And at this time, polls are open for voting on the matters before this annual meeting as set forth in the notice of annual meeting and proxy statement and on the agenda for this meeting. The rules of conduct that we will follow for this meeting are set forth on the reverse side of the agenda. If you do not have a copy of the agenda and rules of conduct and would like a copy, please raise your hand and one will be brought to you. Does anybody need an agenda?

I'd like to take this opportunity to introduce the directors, officers and special guests of TDS. I'd first like to introduce the other directors of TDS who are present. LeRoy T. Carlson, Jr., Director and Vice Chair of TDS. Okay, that's better. Okay. Dr. Letitia G. Carlson, Director of TDS and Physician and Clinical Professor at George Washington University Medical Center; Prudence E. Carlson, Director of TDS; Kenneth S. Dixon, Director of TDS and President and Chief Executive Officer of TDS Telecommunications LLC; Kimberly D. Dixon, Director of TDS and former Executive Vice President and Chief Operating Officer of FedEx Office; Christopher D. O'Leary, Director of TDS and former Executive Vice President and Chief Operating Officer, International of General Mills; George W. Off, Director of TDS and former Chair and CEO of Checkpoint Systems; Wade Oosterman, Director of TDS and former President, Bell Media and Vice Chair of BCE and Bell. I'm introducing Napoleon. He is joining us, and I don't know whether he's had a chance to dial in, but Napoleon B. Rutledge, Director of TDS and Senior Vice President and Chief Accounting Officer; of McKesson Corporation; Vicki L. Villacrez, Director of TDS and Executive Vice President and Chief Financial Officer at TDS. And finally, our last Director, Dirk Woessner, Director of TDS and Senior Vice President at Warburg Pincus.

I'd also like to take this time to introduce the other officers of the company and officers of subsidiaries who are present today. So Joseph R. Hanley, Senior Vice President, Strategy and Corporate Development. And Joe has been at many annual meetings, and this is Joe's last annual meeting. Joe, thank you for your years of service. AnneMarie I. Kreitzer, Senior Vice President and Chief Human Resources Officer; William Case, Senior Vice President and Chief Information Officer; Elsa B. Ansani, Vice President, Internal Audit and Corporate Secretary; Kristina S. Bothfeld, Vice President, Financial Analysis and Strategic Planning; John P. Kelsh, General Counsel of TDS and partner of Sidley Austin LLP; Kenneth M. Cutillo, Vice President, Corporate Development; Ilan S. Pragaspathy, Vice President, Growth and Transformation; Rachel M. Tippery, Vice President, Supply Chain, Sourcing and Logistics; John M. Toomey, Treasurer and Vice President, Corporate Relations.

Now from the subsidiaries, we have Mark Nachman, Senior Vice President, sales at TDS Telecommunications. Welcome, Mark. Also from TDS Telecommunications, Curtis Adamson, Vice President, Customer Service. Welcome, Curtis. And then from Array Digital Infrastructure, Anthony Carlson, CEO and President of Array Digital Infrastructure. Welcome everyone.

I know there are many other guests, but there are 2 other people I want to call out today. First is Julie Mathews, and the second is Mitch Mick. And if you would both stand up together. Stand up. You got to stay standing up. So for those of you who don't know this, Julie Matthews and Mitch Mick have been the underpinnings of this annual meeting and the annual meetings at Array for many years. Each of them have sadly told me that they're interested in retiring. And so in all likelihood, other than as shareholders, they won't be back here next year, but everybody should give them a round of applause for the wonderful work that they've done.

PricewaterhouseCoopers, our independent registered public accountant, is also in attendance. Shaun Goldfarb of PricewaterhouseCoopers has advised me they have no formal statement to make and will be available to answer any appropriate questions during the Q&A portion at the end of this meeting.

To act as inspectors of election, I have appointed Julie Mathews of Telephone and Data Systems, Inc. and Douglas Ives of Computershare Investor Services, our independent transfer agent and registrar. Will the holders of any undelivered proxies, please hold them up so that they may be picked up by the inspectors of election at this time.

Okay. Seeing none, we'll proceed with our agenda here. So all matters scheduled for business at this meeting will be introduced by the Chair. If any shareholder with a proper purpose would like to address the business at hand, I would ask you to raise your hand and address the chair, identifying yourself and disclosing the nature of your business.

In addition, shareholders will have an opportunity following the formal part of the meeting and management presentation to ask any questions they may have. In the interest of time, we will dispense with the reading of the notice of the meeting and the affidavit of mailing of the notice. We will also dispense with the reading of the minutes of the Annual Meeting of Shareholders held on May 22, 2025. The Secretary has copies of these documents if any shareholder would like to examine them after the meeting.

The Board of Directors has set March 23, 2026, as the record date for this shareholders' meeting. By order of the Board of Directors, management of the company distributed a notice of annual meeting and proxy statement on April 8, 2026, and the company's solicited proxies from the shareholders for this meeting. The inspectors have tabulated the proxies received before this meeting and advised me of the voting results immediately prior to the commencement of this meeting. Virtually all votes are received through proxies and and the voting results with respect to all matters are generally known before the meeting starts.

Accordingly, the inspectors of election have been instructed to advise me prior to the announcement of such results only in the event that there are changes of outcome considering any votes delivered, changed or revoked after the commencement of this meeting and prior to the closing of the polls for voting. Subject to formal certification by the inspectors of election, I have been informed that a majority of the voting power of each requisite voting group of TDS shares issued and outstanding on March 23, 2026, the record date for this annual meeting, is represented at today's meeting. Accordingly, the formal business of the meeting will proceed on the basis that a quorum is present. The only matters which may properly come before the meeting involving a vote of shareholders are those that were set forth in the notice of annual meeting and proxy statement.

The 4 proposals in the notice of annual meeting and proxy statement are: number one, the election of directors; number two, the ratification of auditors; number three, approval of amendment to the company's restated certificate of incorporation to allow for exculpation of officers and number four, advisory vote on executive compensation.

The first item of business is the election of directors nominated by the Board of Directors. As indicated in the notice of annual meeting and proxy statement, 4 directors will be elected by the holders of common shares, and 8 directors will be elected by the holders of Series A common shares. The Board of Directors has nominated Kimberly D. Dixon, Christopher D. O'Leary, Wade Oosterman and Dirk S. Woessner for election as directors by the holders of common shares. The Board of Directors has also nominated LeRoy T. Carlson, Jr.; Letitia G. Carlson; Prudence Carlson; myself, Walter Carlson; Kenneth S. Dixon; George W. Off; Napoleon B. Rutledge, Jr.; and Vicki L. Villacrez [Technical Difficulty]

Ladies and gentlemen, thank you for joining us, and welcome to the TDS and Array First Quarter 2026 Operating Results Conference Call. [Operator Instructions]

I will now hand the conference over to John Toomey, Treasurer, Vice President. Corporate Relations. Please go ahead.

Good morning, and thank you for joining us. The presentation we prepared to accompany our comments this morning can be found on the Investor Relations section of the TDS and Array websites. With me today and offering prepared comments are on behalf of TDS, Walter Carlson, President and CEO; and Vicki Villacrez, Executive Vice President and Chief Financial Officer. On behalf of TDS Telecom; Ken Dixon, President and CEO of TDS Telecom; Kris Bothfeld, Vice President of Financial Analysis and Strategic Planning of TDS and on behalf of Array digital infrastructure; Anthony Carlson, President and CEO of Array.

This call is being simultaneously webcast on the TDS and Array Investor Relations websites. Please see the websites for the slides referenced on this call, including non-GAAP reconciliations. TDS and Array filed their SEC Forms 8-K, including the press releases earlier this morning. As shown on Slide 2, the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the safe harbor paragraphs in our press releases and the extended version included in our SEC filings.

I will now turn the call over to TDS President and CEO, Walter Carlson. Walter?

Thanks, John, and good morning, everyone. Today, we are pleased to share the first quarter results for TDS and Array digital infrastructure. But before doing so, I want to take a moment to address in my capacity as CEO and Chair of TDS, the proposal TDS submitted to the Board of Directors of Array to acquire the remaining shares of Array not currently owned by TDS in an all-stock transaction. As TDS continues its transformation, this proposal is the next step in executing our strategy, simplifying our corporate structure and enhancing our ability to invest in targeted areas of growth.

Array has successfully completed its transition into a tower-focused company with strong fundamentals, and we believe this transaction will position the combined company for long-term growth. By bringing Array fully under TDS' ownership, Array's stockholders would retain a significant interest in the tower business while gaining exposure to TDS' growing fiber business. Under the terms of the proposal, TDS would acquire all of the outstanding common shares of Array that TDS does not currently own by way of a merger in which each Array common share not owned by TDS would be exchanged for 0.86 of a TDS common share.

This exchange ratio assumes that the previously announced spectrum license sales identified in our offer letter, we'll have closed prior to the closing of the transaction contemplated by TDS' proposal and that the Array Board consistent with its treatment of net proceeds from prior spectrum sales will have declared and paid dividends of $10.40 per share to Array's stockholders prior to the closing. At $10.40 per share, Array would distribute approximately $900 million in net proceeds. This exchange ratio reflects an at-market offer based subject to the assumptions just described on yesterday's closing prices for TDS and Array.

The transaction is expected to qualify as a tax-free reorganization for U.S. federal income tax purposes. TDS expects the transaction to eliminate duplicative corporate costs, streamline corporate governance, increase share liquidity and strengthen the capital structure of the enterprise providing greater flexibility to pursue strategic investments across all our businesses, including towers and fiber.

As noted in this morning's press release, the proposal is subject to review and recommendation by a special committee of Array's disinterested directors and the approval of the majority of the disinterested shareholders of Array based on votes cast. It would also require approval of TDS' shareholders and the satisfaction of customary closing conditions. TDS does not intend to sell or otherwise transfer its interest in Array and will not entertain any third-party offers for Array or its assets in lieu of this proposal. TDS continues to support Array's previously disclosed intention to opportunistically monetize its remaining unsold wireless spectrum. TDS looks forward to working constructively with the Array Board's Special Committee as they evaluate this proposal.

Beyond what I just disclosed, and the information included in our press release and proposal letter to Array, we are not going to comment further on or take questions regarding the offer on today's call.

With that, let's turn to Slide 3. The enterprise is making good progress on its 2026 priorities. Our focus remains on advancing our strategy with financial and operational discipline. As I just mentioned, the proposal announced this morning will aid in strengthening TDS' corporate and capital structure and we look forward to working with Array's Special Committee. Both business units continue to make progress toward their operational goals. TDS Telecom continued to add fiber addresses and customers in the quarter. Array is off to a strong start in 2026 and is making good progress growing tower tenancy.

In the arena of spectrum, Array closed on a small transaction with T-Mobile earlier this week and expect the remaining announced T-Mobile and Verizon Spectrum sales to close in the second or third quarter, subject to regulatory approval and other customary conditions. I am pleased with the progress each business unit is making and with the efforts we have underway to strengthen our culture as we go through this period of transformation. I would like to personally thank every associate across the enterprise for their continued commitment and contribution.

And I will now turn the call over to Vicki.

Thank you, Walter, and good morning, everyone. Slide 4 updates you on our capital allocation priorities. TDS Telecom continues to make nice progress toward achieving its long-term objective of reaching 2.1 million marketable fiber service addresses, delivering 40,000 in the quarter. Ken and Kris will discuss more about the opportunities and momentum we are seeing in that space in a moment.

We continue to evaluate M&A opportunities in a financially disciplined accretive business case-driven fashion. In mid-April, we announced an agreement to acquire Granite State Communications. As I've communicated in the past, we are primarily focused on small- to medium-sized opportunities that are already fibered up or have an accretive economic path to all fiber and support our clustering strategy. Granite is just like that, fully fibered with over 11,000 service addresses that are adjacent to several of our existing markets in New Hampshire. We are excited to welcome these associates and customers into the TDS family and expect the transaction to close in the third quarter subject to regulatory approval.

Finally, in the area of shareholder return in the form of TDS share buybacks, we were not in the market during the quarter. At the end of the first quarter, we had a $520 million authorization for TDS share buybacks available, and we remain committed to executing on that program. Across all 3 priorities, the company intends to continue to be disciplined, balancing the needs of the business, evaluating future returns, along with market and other conditions as we move forward.

Thank you. And now I'll turn the call over to Ken Dixon to discuss TDS' fiber business.

Thank you, Vicki, and good morning, everyone. At TDS Telecom, 2026 is focused on executing our fiber growth plan, building fiber dresses, driving fiber sales and continuing to transform our operations. This quarter, we made progress across all 3 priorities as we scale our fiber network and advance our long-term strategy. As shown on Slide 6, our fiber builds are off to a good start. We delivered 40,000 marketable fiber service addresses in the first quarter. This is the highest first quarter total in our company's history and nearly 3x our delivery in the first quarter of 2025. This performance reflects both effective execution and increased construction capacity including our highest ever internal and external construction crew counts.

While we are pleased with the record construction number, we still have more work to do. We continue to invest in our internal construction teams by adding headcount, upgrading tools and equipment to support increased build capacity, giving us a strategic advantage. We believe these investments provide greater control over our execution and improve long-term efficiency.

In addition, we have a robust pipeline of addresses currently under construction, positioning us very well for the spring and summer build season. This pipeline includes a mix of addresses from our fiber expansion into new areas as well as fiber upgrades in our existing markets through our fiber deeper program and the federal EA-CAM program. As a reminder, the EA-CAM program provides federal support that enables us to bring fiber to approximately 300,000 service addresses, including those along the route, where it would otherwise not be economical helping to drive copper out of our network.

Looking at sales. We ended the quarter with approximately 11,000 fiber net adds, up 32% year-over-year. As we continue to scale our fiber footprint, we remain focused on converting new service addresses into customers and improving the overall customer experience. During the quarter, we strengthened leadership in key sales and customer experience roles to support these priorities. Our operational transformation is centered on efficiency, improving the customer experience and simplification. We continue to make progress modernizing our systems and remain on track with our transformation road map.

I'm happy to announce that we have now completed the billing conversion in our cable markets and have also introduced a new field force platform to support our technicians. These updates simplify our back office processes and provide an improved customer experience. We are now able to launch multi-gig speeds in our entire cable footprint. These areas are some of the best markets in the country, and we continue to see great opportunity here. So expect more to come.

Finally, as Vicki noted, in mid-April, we signed an agreement to acquire a fiber-based telecommunications business in New Hampshire. The transaction adds over 11,000 fiber addresses that are contiguous with existing TDS markets and supports our clustering strategy along with approximately 30 associates who will join the TDS team. We are excited about the opportunity to continue to deliver excellent service in this area, and look forward to closing this transaction in the third quarter, subject to regulatory approval.

Turning to Slide 7. Our long-term goals reflect our continued focus on executing our growth strategy that delivers scale, speed and long-term value. With the delivery of 40,000 fiber addresses in the quarter, we now serve approximately 1.1 million fiber service addresses, representing 58% of our total footprint and with 79% of addresses capable of gig speeds. While there is more work ahead, the progress we are making reinforces our confidence and the path forward as we continue transforming into a fiber-centric company.

I'll now turn it over to Kris to walk through our first quarter results.

Turning to Slide 8. The chart on the left shows our quarterly fiber service address delivery over the past 5 quarters. As Ken highlighted, our first quarter fiber address delivery nearly tripled year-over-year. This significant increase reflects the additional construction capacity we introduced last year and are continuing to scale this year. Our execution in the first quarter demonstrates the effectiveness of the strategy and the momentum we are building as we advance toward our long-term goals. The chart on the right illustrates the continued expansion of our fiber footprint. Over the past 3 years, we have nearly doubled the number of fiber service addresses across our markets, demonstrating steady and meaningful progress.

On Slide 9, residential fiber net adds were approximately 11,000 in the first quarter, a 32% increase compared to prior year, driven by continued footprint expansion and ongoing copper to fiber conversions. Residential fiber connections have also nearly doubled over the past 3 years, and we expect continued growth as we expand our fiber footprint.

Turning to Slide 10. The chart on the left depicts our residential revenue per connection, which increased 1% year-over-year. This growth reflects annual price increases offset by ongoing industry-wide declines in video attachment rates. The chart on the right is new this quarter and breaks down total residential revenue between copper, cable and fiber. You'll see our fiber revenue is up 13% versus prior year, an uplift of approximately $11 million, which helps offset the legacy revenue stream pressures we are experiencing.

In cable, revenues are down roughly 10% versus the first quarter of 2025. As Ken highlighted, we are increasing investment in our cable markets to stem these declines. Overall, total residential revenue declined $5 million compared to prior year. Approximately $3 million of this decline is attributable to divestitures of markets that were predominantly copper-based. We remain hyper-focused on driving fiber revenue at a pace that's expected to more than offset legacy declines.

Slide 11 summarizes our financial performance. Total operating revenues declined 3% in the quarter or 1% excluding the impact of divestitures. This reflects continued legacy revenue stream pressures partially offset by growth in fiber connections and modest improvement in revenue per connection. Cash expenses decreased 3%, driven primarily by benefits from our transformation initiatives including lower cost for billing, circuits and facilities. Adjusted EBITDA declined 3% in the quarter, driven largely by the revenue losses from divestitures. Capital expenditures totaled $126 million in the quarter, reflecting higher construction activity, a robust funnel of addresses under construction and accelerated investments in our internal construction crews and equipment.

Slide 12 reflects our guidance for 2026, which remains unchanged. We are projecting total telecom revenues of $1.015 billion to $1.055 billion. Current headwinds in our copper and cable markets are guiding us toward the lower half of this range. Adjusted EBITDA guidance remains between $310 million and $350 million as we continue our transformation efforts. Capital expenditures for the year are projected to be between $550 million and $600 million to support our goal of delivering between 200,000 and 250,000 new fiber service addresses.

Before turning over the call, I want to thank the entire TDS team for their continued execution and focus their efforts across fiber delivery, customer growth, and operational transformation are critical to the progress we're making toward achieving our long-term objectives.

I'll now turn the call over to Anthony.

Thanks, Kris, and good morning. 2026 has got off to a busy but great start. The organization is laser-focused on fully optimizing our tower operations and monetizing our spectrum. In the first quarter, we saw cash site rental revenue up 64% over Q1 of last year. We also demonstrated sequential tower tenancy growth when adjusted for DISH, and we continue to move our announced spectrum transactions forward.

Before I get to the details of the quarter, I want to acknowledge the Array Board's receipt of TDS' proposal to acquire the remaining public shares of Array. Our Board has formed a special committee of independent directors, who have retained independent advisers to carefully evaluate the proposal and make a recommendation as to what is in the best interest of Array's shareholders. Array will be providing updates as appropriate, but we won't be commenting further or taking questions regarding this proposal today.

Moving along to Slide 16. I want to provide an update regarding DISH. As previously disclosed, we received a letter from DISH Wireless in September 2025 in which DISH asserted that unforeseeable FCC actions impacted its master lease agreement with Array. And as a result, DISH believes it is relieved of its obligations under the MLA. Since early December, DISH has generally failed to make the required payments and is, therefore, in breach of its obligations. Array continues to take actions that deems necessary to protect its rights under the MLA.

Given the ongoing nonpayments, in the first quarter, Array ceased recognizing DISH revenue and all unpaid 2025 balances have now been fully reserved. Accordingly, our tenancy ratio no longer includes DISH colocations. When normalizing for this impact, we continue to see sequential growth in our tenancy ratio as depicted on the right from $0.95 in Q4 2025 and up to $0.96 in Q1 2026. Importantly, in Q1, we grew revenue and secured healthy colocation application volumes while supporting T-Mobile and its integration.

As noted on Slide 17, cash site rental revenue in Q1 increased 55% year-over-year from all customers. And when normalized for DISH impact, this increase was 64%. When layering in the T-Mobile Entrance site revenue, the increase was 86% year-over-year or 98% when normalized for DISH. Our application volume remains robust, and coupled with our existing pipeline will drive additional revenue growth in 2026 and beyond.

Turning to Slide 18. T-Mobile has until January 2028 to finalize its 2015 committed sites under the new MLA. We continue to anticipate 800 to 1,800 tenantless towers after the integration is completed and all interim sites are terminated. Our ground lease optimization work remained a priority in Q1, and we are making progress on reducing the cash burden of these negative cash flow assets. As noted previously, this will be a multiyear effort focused on cost avoidance additional lease-up, evaluating long-term command and decommissioning in situations where it makes sense, a process we have already begun on a subset of sites with no path to economic viability. This approach allows us to thoughtfully assess all potential outcomes for the tenantless tower portfolio.

As shown on Slide 19, and presented in prior quarters, we have reached agreements to monetize roughly 70% of our spectrum holdings. As a reminder, the sale of spectrum to AT&T closed on January 13, 2026, with the Array Board declaring a $10.25 per share dividend that was paid on February 2. In Q1, the FCC approved the sale of certain 700 megahertz licenses to T-Mobile, and that transaction closed earlier this week. Additionally, the FCC approved the sale of the 600 megahertz in AWS licenses to T-Mobile and pending closing conditions, we expect that sale to close in Q2.

We continue to anticipate that the transaction with Verizon will close in Q2 or Q3 of this year, subject to regulatory approval and normal closing conditions. The remaining transactions with T-Mobile are expected to close by the end of 2026, once again dependent on regulatory approval and closing conditions.

We continue to pursue opportunistic monetization of our remaining spectrum, primarily C-band. We view our C-band spectrum as a highly compelling 5G asset with a mature ecosystem ready for carrier deployment and with no near-term build-out requirements, we have ample time to realize its value.

Slide 20 summarizes the results of our partnership or noncontrolling investment interests. As discussed last quarter, investment income and distributions for full year 2025 were impacted by several onetime factors, including the impact of the Iowa partnership selling their wireless operations to T-Mobile and distributions received from Verizon related to their transaction with Vertical Bridge. For Q1, equity income was elevated due to prior period adjustments recorded by the managers of certain investee entities. Regarding cash distributions, certain entities distribute cash only twice per year, resulting in an uneven distribution pattern throughout the year.

Slide 22 summarizes Array's financial results. Year-over-year, we continue to see the impact of the T-Mobile MLA driving revenue growth. As noted last quarter, there was a prospective change in classification of property taxes and insurance from SG&A to cost of operations. As such, that is driving roughly half of the year-over-year increase in cost of operations. SG&A expenses continue to include costs to support the wind down of legacy wireless operations, but sequential quarter-over-quarter results are declining as planned. We expect these wind down expenses to persist throughout 2026 but with additional reductions over future periods.

On Slide 23, our guidance across all metrics, total operating revenue, adjusted EBITDA and OIBDA and capital expenditures is unchanged. As a reminder, our guidance ranges are wider than industry norm due to uncertainty with the T-Mobile MLA and the timing of interim site terminations.

In closing, I want to again thank Array's associates for their continued passion and dedication to driving operational efficiencies and growth as we continue to move through our first year as a stand-alone tower company.

I will now turn the call back to Walter.

Thank you, Anthony. As I noted in my opening remarks, TDS continues to make solid progress advancing our strategic priorities. Our first quarter execution combined with the momentum we are seeing across the business, positions us well as we move forward into the year. I'd like to again thank all of the outstanding associates across the TDS enterprise for their continued dedication and hard work in serving our customers and supporting the advancement of our business.

Operator, please now open the line for questions.

[Operator Instructions] Your first question comes from Rick Prentiss with Raymond James & Associates.

Man, you continue to be very busy. A couple of questions. On the fiber side, the TDS Telecom side, have you looked at -- is there an ability to put fiber into a REIT structure or any desire at some point to put fiber into a REIT-like structure to be more tax efficient?

Yes, Rick, this is Vicki. I'll take that one. We've looked at a number of options, structural options. But given where we're at today, they're just not optimal. And I'm not going to speculate going forward, what we may or may not do in the future. But as I think about fiber in our program that we have this year, we're in a really good position. We've got a strong balance sheet, and we are focused on funding fiber with our cash.

Second question, I think this is a legit one. Can you update us as far as the number of shares or percent of ownership TDS has of Array digital just so we can understand exactly how many of the disinterested might be out there?

Well, let me take that. I think the press releases that have been issued speak to that, Rick. I think 81.9% is the right rough number and we can get back to you with precise numbers off-line.

Okay. That's good. We had some people [indiscernible] spoilers, saying there were some Bloomberg numbers out there stating like 70% we knew it was something. So I appreciate that. And then the last question for me, a little more strategic looking. I know you guys have been looking at maybe providing more reporting metrics on the fiber business. Any update to what you think you could provide or help people understand what's happening with the fiber business as far as any cohort analysis or any trend lines to help us kind of look at the value of that business as it's going through a [indiscernible] spending cycle, some EBITDA pressure as you watch the market. Just trying to think through, is there a burn rate? Or what can you give us to help understand the traction you're gaining in the future look at what the fiber business might be?

Yes. Okay. So lots of questions there, Rick. We'll try to piece part those. Let me just start out with the disclosures first. We added -- this quarter, we added disclosures for our residential revenues, and we broke them out by technology. So you'll see the reporting by fiber, cable and copper. And we think this is something that will be helpful to investors going forward. And furthermore, we've included metrics in our trending schedules on our Investor Relations website. So I'll point you to there.

But I will -- Ken, do you want to jump in on the rest of Rick's questions?

Yes. I think the metrics that I think are most important as we're going to a fiber-centric business, is how well are we delivering marketable addresses from a build plan perspective. And then what are our fiber net sales in terms of as we're selling into that new open for sale and then also increasing our overall penetration into those new cohorts. So those are the 2 big things that build velocity and also our overall fiber net performance.

Great. And I would assume as you get fiber out there, it becomes a significant maintenance capital or ongoing capital once you're done with the bill drops to pretty low levels?

Yes. We definitely see the cash cost per customer improvements on everything from just the trouble tickets, copper versus fiber, the call-in rate is lower. So we love the fiber business, and we think the faster we migrate away from copper and bring it to fiber, we'll continue to see improvements in the bottom line.

Your next question comes from the line of Sebastiano Petti from JPMorgan.

I guess sticking with TDS Telecom. And Ken, first, I can hear, you hired some sales folks and customer experience folks to kind of help support your priorities. Maybe just help us think about -- I think you had touched about -- touched on this on the last call, but where you are maybe from a process improvement or trying to maybe instill some of your decades of experience running fiber businesses into TDS Telecom? What inning are we in, in terms of priorities, what some of the near-term low-hanging fruit that you still think maybe you can achieve to improve process performance improvement and construction build? Just double-clicking on the investment idea.

And then it's interesting, you talked about, Ken, investing in the cable footprint which I think is -- it seems like some we haven't heard talked about in a bit here. Is that strategic? Is that core? How do you think about maybe the blocking and tackling and improvements needed for the cable KPIs to maybe to begin stabilizing? Just given the backdrop of what we hear from some of the larger cable guys out there, pretty competitive, pretty intense, some repricing pressures. Just maybe a little bit of color around that would be great.

Right. Thank you for the question. I would say we're in the early innings, very early innings, and I think we're starting to make what I would say very nice progress, and I continue to say to my team, I'm starting to see wind in our sales. But let me start off with address delivery. I'm very happy with the team's 40,000 service address delivery almost 3x more than last year. So what was important to us is that we had to prove that we could keep our crews working all winter and we accomplished that. And now we've started the spring and summer months with what I would consider record crew counts for the -- what -- the most important 2 quarters of the year were you have the most amount of day light and the most amount of opportunity to build fiber. So I think we've done that.

But speaking of crew counts, we're also at record numbers through the start of April. And what I could say to you it's a combination of our internal crews, but also external crews, and we continue to see sequential month-over-month crew count improvements as we're now heading into the month of May. So going into the second quarter, I'm bullish on what we can accomplish with service addresses because we had the largest funnel of addresses that we've ever had in our company's history in terms of addresses that are under some form of address.

So you asked me, early innings? Yes. But I like what we're starting to see, and I think we have good momentum. You are correct, I brought in some folks to run customer experience and sales and they're off to a wonderful start. I'll give you some updates. We continue to see the opportunity as fast as we can deliver a new address, how quickly can we try and penetrate that new to address and get a fiber customer in there. So we're very happy with our presales velocity. We typically go in 60 days before an address becomes marketable. And we are seeing excellent results again in that low 20% range. So very happy with that.

We have put a tremendous amount of sales capabilities into our door-to-door channel. We see that as a huge opportunity. We have been very, very aggressive in terms of bringing new vendors in. We added several last year in the fourth quarter, but we also have more door-to-door vendors who have been part of our April and May distribution plan, and we have several others in our funnel. We believe we have to be in the markets, and we have to use door-to-door to continue to drive our sales agenda. We've also expanded significantly our dot-com business. We have seen sales candidly improve significantly in a channel that's open 365 days a year and candidly 24 hours a day. So we will continue to put more resources in that.

But yet, we're in the early innings because we still have, in our opinion, we're now developing our multi-dwelling unit sales capabilities. And I think that there's a tremendous opportunity there. But again, early innings, but we're starting to see nice progress. The 11,000 fiber net adds, again, up 32% year-over-year, a very good start to the year but we have momentum.

The last question you asked was in reference to our cable business. And I want to tell you, I love our cable markets. I think we're in some of the best markets in the country. And last year, we made a decision that we were going to convert those markets first onto our new billing system and get them on a single stack across the whole company. We also, last year, made a significant investment in terms of enabling a new field service tool with our technicians to improve our overall service delivery. And at the end of the day, we think we're just getting started in terms of what we can do in those markets.

So a lot going on, but I like what I'm seeing. And I will tell you that we've got a lot more work to do, but we are definitely moving in the right direction.

And then I guess maybe for Vic -- Vicki and maybe -- or you, Ken. But the deal for Granite, is this kind of like what we should anticipate as you guys look for bolt-ons. It's like some of these maybe smaller systems that are adjacent versus like a big chunky deals out there? And then just to clarify that. And then I guess, one question not related to the deal, but just take a shot on this one. But does the combined entity does that make it easier to reach the tower business over time versus the current structure?

Yes, Sebastiano, thank you for the 2 questions. I'll take the last one first. Again, we're not going to comment on any impacts or implications of of the offer on the table. But again, we just can't speculate what we're what the future will look like at this point. So -- and on the second one, this is -- this acquisition is consistent with our capital allocation priorities -- three-pronged priorities, building fiber and M&A acquisitions in the space of fiber, and this is perfectly aligned with that. It's a tuck-in. It's accretive. It's adjacent to our current markets in New Hampshire. It's 100% fiber [indiscernible]. We're really excited to bring this company on board and welcome all of the associates with Granite State Communications, and it brings 11,000 fiber service addresses to our portfolio.

[Operator Instructions] Your next question comes from the line of -- a follow-up from Sebastiano Petti from JPMorgan.

For Kris, question, I guess, just about the cost transformation efforts, remind us about that is that $100 million run rate by 2028, is that still the right kind of figure to kind of think about? And is there -- are we at a point now where the cost savings maybe are falling to the bottom line here in 2026? Or related to my question is for Ken, is there some kind of reinvestment that's kind of going back in the business just to kind of contextualize, I guess, the cost program?

Yes. Sebastian. Yes, we remain on track to hit $100 million of run rate savings by year-end 2028. And as you heard in my remarks, we are starting to see some of those benefits this year, the bigger benefits you'll see in '27 and '28, but we absolutely are starting to see some of those benefits drop to the bottom line. As I've said before, we don't expect that entire $100 million to fall to the bottom line because some of that is helping offset inflationary cost increases, increases as we continue to expand our fiber footprint and our customer base and we do plan to reinvest some of those savings. But we are seeing some nice benefits and are still optimistic about the full potential of this program.

And then I guess one for Anthony. Any -- Anthony, the upcoming auction here for the AWS-3 re-auction and then upper C-band coming down the pipe next year. I think Chairman [ Car ] was out this week or maybe in the last couple of days, even just suggesting that there's more auctions or more stuff could be coming. Obviously, they have the 800 megahertz mandate by the One Big Beautiful Bill. But any change in your conversations that you're having perhaps regarding monetization of the remaining C-band and CBRS? I mean, to the extent that you can comment, that would be great.

Thanks for the question. I will start off by saying, as I've said many times, that we continue to believe that the C-band section we hold is excellent and valuable spectrum, [indiscernible] property available today with an ecosystem to support it. So we -- and additionally, we are not going to be a force seller of that in these circumstance. We believe the carrying costs are modest. And so while we are open to a deal at a fair value, we do not feel that we are in a position where its burning a hole in our pocket. So we don't have any further updates to give on any developments on the sale of our CBM spectrum at this time. But that said, we continue to be very optimistic about realizing fair value for it at the appropriate time.

Your next question is from Rick Prenstiss with Raymond James & Associates.

We'll do some tag team today. Question, just wanted to make sure on the service addresses, Ken, you obviously point out that the funnel is important top metric you're looking at. Is the build plan still this year targeting 200,000 to 250,000 service addresses? And what would cause you to miss it versus hit it or beat it?

Yes. That's still the target. And again, I have a very good degree of confidence based on true counts that we have that started the second quarter funnel and pipeline of addresses that are at a new record in terms of some form of construction. So I'm very confident that we're going to deliver in that target you referenced.

And Anthony, obviously, getting back from ConnectX, busy conference down there. One of the themes was the HRR high-rent relocation kind of efforts. Some of the carriers are looking at. I assume you guys don't probably have a whole lot of high-rent locations given the low level of tenancy. But what are you seeing out there on that? Do you have an appetite to do some new builds? What's the ability or capital commitment that you might put to work there?

Yes. So to be very clear, as we've stated multiple times, we are laser-focused on optimizing the value of the assets we have in hand, right? And we have a significant upside that we believe we can achieve on the towers that are currently in our portfolio. That's not to say that we're not going to be open to opportunities that appear. But what I will say is from what I've heard anecdotally and some of the numbers that I've seen, the current going rates for higher-end relocations for us to participate in new builds for higher-end relocations, we haven't seen numbers that are in constant with what we think we can get from optimizing our current portfolio. And in terms of higher-end relocation on our side, the only thing that I will say a little nugget for you guys is that we had only one total tenant churn in the entire first quarter. So that, I think, speaks to strength of our portfolio in terms of its relevant susceptibility to high revenue location.

Could be account churn on one hand and one finger is even better. One for Walter, obligatory satellite question. As you think about your assets, both broadband with fiber, and towers supporting the wireless world, how are you thinking about the somewhat existential threat of satellite coming into terrestrial?

That's an excellent question, Rick, and it's technology that has gotten a substantial additional focus, I'd say, over the last 18 months and substantial additional investment over the last 12 months. And I think satellites will have a substantial influence going forward on the communications industry. That being said, we feel very strongly about the continued benefit of a terrestrial tower portfolio, and we feel very strongly about the superior capabilities of fiber networks delivering specific communication into individuals' homes and businesses without interruption, without fear of being impacted by weather. But we are paying attention, and we feel very good about the thrust of both of our businesses, and we're watching.

Your next question comes from the line of Sergey Dluzhevskiy with GAMCO Investors, Inc.

First question on TDS Telecom side, last quarter, you obviously expanded the fiber build target by 300,000 edge outpacing in, I believe, 50 adjacent markets to your current expansion footprint. How do the demographics and the return profiles of these markets compared to your older cohorts? And also among this new cohort of markets, I guess, what types of markets are you prioritizing for build sooner rather than later?

Yes. Thank you for the question. We -- obviously, you're looking at markets that we've already planted a flag where we have established our brand, and we've deployed fiber. So we already have technicians, we already have sales capacity. And we've looked at the demographics and the overall market and the competitive intensity and studied very closely what our build cost ultimately would be and then what our return rates would be and then we prioritize those markets. That's what we're calling the edge-out opportunity. And we think those are excellent markets in terms of checking all the boxes that I just referenced. And the key is we were first to the original market with fiber and now it's just a natural extension. And we've -- we think that we've prioritized the right markets first with the highest opportunities and also the highest returns. So we like the markets that we've selected.

And in terms of cable, maybe following up on the previous question, could you talk a little bit about what you like the most about your cable footprint, maybe comment on the competitive environment? And in terms of investments that you're planning to make, if you could just maybe at a high level highlight where the dollars are going to go to? And how quickly do you expect those investments to pay off?

I would say from an investment perspective, our focus now is going to a multi-gig environment in our cable business. And I think that's the opportunity for 2026. In terms of the markets that we're operating in, we think that there's very -- what I'd say is they're highly attractive markets. Some of the cable businesses are in some of the markets that have some of the highest housing growth right now in the United States. So that's why we look at these markets, and we think there's definitely an opportunity going forward.

And the question on the Array side. Obviously, the wireless partnerships produce nice cash flow for you every year. And you are focused on, as you said, optimizing your tower business and monetizing spectrum, what are your -- any updated thoughts on partnerships? Obviously, if you look at [indiscernible] the recent transactions, I think the last transaction of size was Verizon acquiring minority stakes and some partnerships which consolidated that about 11.5x cash distributions. So at this multiple, obviously, your stakes could be versus significant amount. So kind of any updated thoughts on monetizing those stakes? And what could potentially move you closer to taking that step?

Yes. So thanks for the question. As we've said before, we like the cash flows from these assets. We think that, and moreover, there are some challenges with transactions for us, similar to the ones that you mentioned, right, the -- we have them in a very low tax basis. Candidly, I think if you were to look at those -- the performance of those investments over the very long term, and you would DCF on those, you would -- it would be challenging to get a multiple that was consummate what the full value of that. And that said, we're -- as we've said previously, we are open to offers that are -- that would deliver full value on that, but they would have to deliver full value net of taxes, and we like those cash flows, so we're not in a hurry to sell.

Got it. And in terms of -- last question also on Array side. Obviously, EBITDA is expected to be somewhat depressed in the medium term pressured by transition, wind down costs, some other cost. But if you can talk a little bit about kind of your targets, maybe more qualitatively than quantitatively in terms of taking cost out of the business and improving margins in 2026 and 2027? And also longer term, post T-Mobile transition, what kind of margins do you believe are realistic for Array?

Yes. So we do think there is significant opportunity to improve raise margins, particularly, we focus on the tower cash flow side because Array's -- we believe that we are on the trend of some of those legacy costs coming out of the business and the Array's direct team is also quite lean, right? So we focus most of our efforts on the tower cash flow side. And there are a couple of areas where we believe we have a significant opportunity to improve. The first, as we've said in previous forum, is our land ownership. Land is our largest cost for our tower business, and we also have a much lower rate of land ownership than many of the large public players in the market. So we think there is a significant opportunity and value to be realized by where appropriate, purchasing more of the land interest under our towers.

Second, we think we are a new tower company. We believe that we have opportunities as we transition from a maintenance posture that was more in line with operating a full fled wireless company to a tower company to improve our margins on that dimension. So those are the 2 big opportunities that we see to improve our target [indiscernible] just increasing colocations, which is something we work very hard to do every day.

There are no further questions at this time. I will now turn the call back to John Toomey for closing remarks.

Thank you again for joining us today. As always, please reach out to us if you have any questions. I hope everyone has a wonderful weekend. Thank you.

And this concludes today's call. Thank you all for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to the TDS and Array Fourth Quarter 2025 Operating Results Conference Call. [Operator Instructions]

I will now hand the conference over to John Toomey, Treasurer and Vice President of Corporate Relations. John, please go ahead.

Good morning, and thank you for joining us. The presentation we prepared to accompany our comments this morning can be found on the Investor Relations sections of the TDS and Array websites.

With me today and offering prepared comments are, on behalf of TDS, Walter Carlson, President and CEO; Vicki Villacrez, Executive Vice President and Chief Financial Officer. On behalf of TDS Telecom; Ken Dixon, President and CEO of TDS Telecom; Kris Bothfeld, Vice President of Financial Analysis and Strategic Planning of TDS, and on behalf of Array Digital Infrastructure, Anthony Carlson, President and CEO of Array. This call is being simultaneously webcast on the TDS and Array Investor Relations websites. Please see the websites for slides referred to on this call, including non-GAAP reconciliations. TDS and Array filed their SEC Forms 8-K, including the press releases, earlier this morning.

As shown on Slide 2, the information set forth in the presentation and discussed during this call contain 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 releases and the extended version included in our SEC filings.

I will now turn the call over to Walter Carlson. Walter?

Thanks, John, and good morning, everyone. We are pleased to report to you today our fourth quarter performance, review the progress made on our priorities for 2025 and share our goals for the future.

As set forth on Slide 3, 2025 was a transformative year. We completed the largest transaction in our company's history and significantly strengthened our balance sheet. By divesting our wireless operations, we believe we have now positioned Array for success as a growing tower company, and we now have the financial capacity to support TDS Telecom as it continues to expand and grow its fiber operations. Our speakers this morning will highlight many of these accomplishments in more detail shortly, but let me summarize by saying that the TDS team of associates accomplished much in 2025 during a year of significant change.

As we look forward to 2026, we have 5 fundamental objectives for the enterprise as outlined on Slide 4. We plan to continue our efforts to strengthen the TDS corporate and capital structure. Vicki will share more details on those topics in a moment. We will continue to grow TDS Telecom's fiber business and work to delight our customers. Ken and Kris will share with you updated fiber address goals and other success targets.

We intend to support Array's success as a tower company and continue our efforts to successfully monetize Array's remaining spectrum holdings. Anthony will highlight Array's expectations for the year. We also intend to strengthen TDS' culture while delivering strong operational and financial results across all of our businesses. I want to personally thank every associate across the enterprise for their contributions in 2025 and look forward to all that we will accomplish together in 2026.

And I will now turn the call over to Vicki.

Thank you, Walter, and good morning, everyone. As I shared last quarter, across the enterprise, we continue to focus on moving the announced spectrum transactions forward, as well as executing on our capital allocation plans. Slide 5 highlights our progress in these areas.

In January 2026, Array closed on the announced spectrum sale to AT&T for $1.018 billion, and the same day, the Array Board declared a special dividend of $10.25 per share that was paid on February 2 to Array shareholders of record as of January 23. TDS received its pro rata share of the special dividend or $726 million.

Additionally, in January, TDS repaid the last of our outstanding term loan debt of $150 million. With this further debt reduction and cash from the proceeds of the those transactions, we are pleased with the flexibility this affords us to execute on our capital allocation priorities.

As a reminder, our TDS capital allocation plan has 3 key elements. First, continued investment in fiber. With the proceeds from the special dividend related to the AT&T spectrum, we are increasing our fiber goals. As you will hear from Ken in a moment, while we are still in the early stages, we have identified 300,000 additional fiber edge-out service address opportunities across approximately 50 new communities where we believe we can be first to market and achieve returns in the mid-teens, and we are increasing our marketable fiber service address goals.

Second, as it relates to M&A, we continue to evaluate fiber opportunities in a financially disciplined accretive business case-driven fashion. Third is shareholder returns. In the quarter, we invested $67 million to repurchase 1.8 million TDS common shares, bringing our total 2025 repurchase volume to $2.8 million. As announced in November, the TDS Board authorized a $500 million increase to the then existing share repurchase program. As of the end of 2025, we had $524 million remaining on this open authorization. The company intends to continue to be disciplined in the timing of its repurchase activity, balancing the needs of the business and market conditions as we move forward.

Looking back at 2025, we made great progress in transforming our businesses. We continue to unlock significant value and generated significant returns for our shareholders, particularly in the form of transaction-related special dividends at Array. I'm incredibly pleased with how we have positioned the businesses for the future and aligned our capital allocation strategy with our growth opportunities and return to shareholders.

Thank you. And now I'll turn the call over to Ken Dixon to discuss TDS' fiber business.

Thank you, Vicki, and good morning, everyone. I'd like to provide an update on our fiber strategy progress. We still have work to do to improve execution, modernize our systems and continue to scale our build and install operations. The foundation we have built positions us well for the future.

Before I talk about where we're headed, I want to share our 2025 full year and fourth quarter performance. As set forth on Slide 7, in the fourth quarter, we added 58,000 new marketable fiber addresses, up sequentially over Q3 and up 39% year-over-year. For the full year 2025, we delivered 140,000 new marketable fiber addresses and expanded our broadband footprint. Execution improved throughout the year. We delivered 40,000 marketable addresses in the first half of 2025, and $100,000 in the second half, showing momentum as our construction engine accelerated.

The fourth quarter was our strongest build quarter since 2023, and it was supported by record high construction crew cuts. We didn't reach our 150,000 address goal. However, we continue to make progress. We know what it will take to reach the level of output that we are targeting, and we are focused on carrying this progress into 2026.

Looking at sales. In each quarter, we delivered sequential growth in residential fiber net adds. We ended the fourth quarter with approximately 15,000 fiber net adds, up 11% from the fourth quarter of 2024, bringing us to approximately 45,000 residential fiber net adds for the year. Driving sales and increasing penetration across our fiber markets remains a top priority as we work to achieve our long-term objectives.

We also made progress in our business transformation program in 2025. Through process improvements, organizational alignment and targeted investments in best-in-class tools, we are strengthening the efficiency and agility of our operations, all with the focus on providing a superior customer experience. These improvements will be foundational to delivering consistent, scalable performance as we continue expanding our network.

We are continuing to optimize our portfolio to strengthen our strategic focus. The divestitures in 2025, which included the midyear sale of Colorado. And in December, the sale of our Oklahoma [ ILEC ] have concentrated our footprint in markets with an economic path to fiber.

Turning to Slide 8. The progress we made in 2025 and the availability of additional capital to invest gives us confidence to expand our long-term fiber goals. We have identified 300,000 fiber address opportunities in new edge-out markets that are increasing our long-term goal from 1.8 million to 2.1 million fiber addresses. With that updated target in place, let's move on to the priorities that will guide us in 2026.

Slide 9 sets forth our TDS Telecom priorities for 2026. First, we're focused on delivering our fiber build plan. In 2026, our goal is to deliver between 200,000 and 250,000 new marketable fiber addresses, as we ramp up construction in [indiscernible] markets, continuing expansion in growth markets, and enter targeted edge-out communities. This work is critical when we execute the build plan, we can see sales opportunities in these key markets.

Second, we are focused on driving sales and expanding our fiber customer growth. We delivered approximately 45,000 residential fiber net adds in 2025. And in 2026, we expect to increase that number by driving higher sales in both new and established fiber markets.

Third, we are committed to creating a best-in-class customer experience. That means improving every interaction from installation to service, to long-term retention, and ensuring the systems and processes behind these touch points support a seamless high-quality experience.

Fourth, we will continue executing on business transformation. The work underway will streamline processes and modernize systems in 2026, positioning us to operate as a faster, more efficient fiber-first organization. As part of this work, we remain on track to deliver $100 million in savings by year-end 2028. These priorities align the organization for future success.

I'll now hand it over to Kris to walk through our 2025 results and our financial outlook for 2026. Kris?

Turning to Slide 10. The chart on the left shows the last 5 quarters of fiber service address delivery which strengthened throughout the year. Our address cadence quarter-over-quarter reflects seasonality, but it also highlights the actions we took to increase crew counts in the second half of the year. In addition, EA-CAM activity contributed to this acceleration as those builds started to ramp in the fourth quarter.

As Ken mentioned, Q4 represents our highest production quarter since 2023, demonstrating the momentum we're seeing in our fiber build engine. On the right, you can see the continued expansion of our fiber footprint. Over the last 3 years, we've nearly doubled the number of fiber addresses across our markets.

Turning to the next slide. The chart on the left shows the last 5 quarters of residential fiber net adds. In the fourth quarter, we delivered over 15,000 residential fiber net adds, representing year-over-year, as well as sequential improvement. This growth reflects the investments we've made in fiber address delivery during the year.

The chart on the right highlights the growth in our residential fiber connections, which have also nearly doubled over the last 3 years. This growth is driven by ongoing footprint expansion, as well as copper to fiber conversions. We expect fiber connections to grow as we continue to expand our fiber footprint.

Turning to Slide 12. Average residential revenue per connection was up 2% year-over-year. As we've seen across the industry, fewer broadband customers are choosing to bundle with video, which puts downward pressure on this metric. In 2025, we indicated that we expected more modest revenue per connection growth and our results this quarter remain consistent with that outlook. The chart on the right shows our year-over-year revenue comparison. As a reminder, the markets we divested accounted for $3 million of the revenue decline in the quarter versus prior year. Additional detail on the recent divestitures is available in the trending schedule on our Investor Relations website.

Slide 13 focuses on the full year and quarterly financial results. Total operating revenues decreased 1% for the quarter and 2% for the full year. Excluding the impact of divestitures, revenues were flat year-over-year for both periods. This reflects continued secular declines in our cable and [indiscernible] markets, offset by growth in fiber connections and modest improvement in revenue per connection. Cash expenses decreased 4% in the quarter, but were up 1% for the full year, reflecting the impact of our transformation efforts in the second half of the year.

As a result of lower expenses, adjusted EBITDA improved 6% in the fourth quarter. For the full year, adjusted EBITDA declined 6%, primarily due to the impact of divestitures, as well as the first quarter's noncash adjustment to stock-based compensation. After a big fourth quarter, full year capital expenditures were $406 million as we prioritize investments in our internal construction crews and equipment to support future builds.

On Slide 14, we provide our guidance for 2026. We are forecasting total telecom revenues of $1.015 billion to $1.055 billion. This reflects top line growth from our fiber investments, offset by industry-wide declines in video, voice and wholesale revenues. These ranges also reflect a full year impact from the 2025 divestitures, which contributed $19 million in annual revenues.

Adjusted EBITDA is projected to be between $310 million and $350 million in 2026. The 2025 divestitures and legacy revenue stream declines put pressure on this metric, but continued advancement of our fiber program and the benefits from our transformation initiatives will help mitigate these pressures. In 2026, our goal is to deliver 200,000 to 250,000 fiber service addresses, up from what we delivered in 2025, and we expect capital expenditures to be in the range of $550 million to $600 million, up from $406 million in 2025. The increased CapEx is driven by EA-CAM builds, continued growth in our expansion markets, as well as spending on new edge-out opportunities.

Before turning over the call, I want to thank the entire TDS team. Because of your hard work and dedication, we ended the year on a strong footing. We're energized for 2026 and the opportunities ahead.

I'll now turn the call over to Anthony.

Thanks, Kris, and good morning. As I reflect on what the Array team accomplished in 2025, I am extremely grateful for the team's hard work and perseverance during a year of enormous change and new beginnings. I am honored to have the responsibility to lead Array and look forward to growing the business over the coming years.

As set forth on Slide 16, Array's business portfolio has 3 significant yet distinct drivers of value. First, we own a portfolio of more than 4,400 towers across the United States. Originally constructed to support U.S. Cellular's wireless network, these sites are primarily located in suburban and rural areas. Notably, about 1/3 of our towers have no competing site within a 2-mile radius, making them especially valuable as carriers expand 5G and other advanced technologies to meet increasing mobile data demand.

Second, we continue to hold wireless spectrum, principally C-band. This is a valuable asset with an existing ecosystem for deploying 5G that we are opportunistically seeking to monetize. Finally, we have minority interest in a number of primarily wireless partnerships referred to in our financials as noncontrolling investment interests. These are passive investments that have historically generated substantial income and cash distributions.

As I think about our strategic imperatives for 2026, as shown on Slide 17, and how we extract value from our business, you'll see the same key elements discussed last quarter. A laser focus on fully optimizing our tower operations and monetizing our spectrum.

First, a brief update on our spectrum monetization process. As shown on Slide 18, we have reached agreements to monetize roughly 70% of our spectrum holdings. As a reminder, in conjunction with the sale of our wireless operations on August 1, we conveyed 30% of our spectrum to T-Mobile. In addition, as previously announced, we signed agreements to sell spectrum to Verizon and AT&T in separate transactions in exchange for roughly $1 billion each. In August and October of 2025, we signed additional agreements with T-Mobile to sell spectrum for total gross proceeds of $178 million. This primarily includes the sale of 700 megahertz [ A-Block ] and the exercise of approximately 80% of T-Mobile's call option on the 600 megahertz spectrum.

In December 2025, we received regulatory approval for the spectrum sale to AT&T, and that transaction closed on January 13, 2026, with the Array Board declaring a $10.25 per share dividend that was paid on February 2. The remaining pending spectrum transactions are subject to regulatory approval and closing conditions.

Our retained spectrum principally consists of C-band. And as I previously noted, we continue to believe this is a highly attractive spectrum for 5G with an existing ecosystem that carriers can immediately put to use. While there are build-out requirements for the spectrum, the first fund does not apply until 2029, leaving us plenty of time to monetize the spectrum.

Turning to Slide 21. As noted with our Q3 results, the T-Mobile MLA significantly increases our revenue, and we continue to focus on a strong partnership with T-Mobile to ensure the integration process is well executed. The team has made material progress in Q4, processing over 2,000 applications, and completing structural analysis on over 95% of the applications. This is the first key step in the integration process, and we've executed seamlessly, and are now shifting focus to subsequent phases of integration.

Growing colocation revenue outside of the T-Mobile MLA continues to be a key priority, and both revenue growth and new colocation application volume remains strong. In Q4, cash site rental revenue increased 64% year-over-year from all customers and increased 8% when excluding the T-Mobile MLA committed sites. When layering in the T-Mobile interim site revenue, the increase was 96% year-over-year. We also continue to see a strong pipeline with full year 2025 new colocation applications, excluding the T-Mobile MLA, exceeding prior year by 47%.

Like others in the industry, we disclosed in Q3 that we received a letter dated September 2025 from [ DISH ] Wireless, whereby DISH asserts its master lease agreement with Array has been impacted by unforeseeable actions of the SEC and therefore, DISH believes it is relieved of its obligations under the MLA. And despite this, DISH continues to operate certain sites for a period of time. Array continues to believe that DISH's assertions are without merit, and DISH's obligations under the MLA remain intact. Since early December, DISH has generally failed to make contractually required payments. Array will take such actions that deems necessary to protect its rights under the MLA. For full year 2025, Array recognized approximately $7 million of site rental revenue from the DISH MLA. And DISH's obligations at similar levels from 2026 through 2031 with a declining revenue commitment in 2032 through 2035.

Slide 22 summarizes Array's financial results. Q4 was the first full quarter of T-Mobile MLA revenue, both the revenue from the MLA minimum committed sites as well as the full population of interim sites. The aforementioned T-Mobile integration volume in Q4 drove elevated service revenues as well as higher cost of operations expense due to the high volume of structural analyses conducted in Q4. Additionally, in Q4, there was a prospective change in classification of property taxes and insurance from SG&A to cost of operations. SG&A expenses in the second half of 2025 include costs to support the wind down of the legacy wireless operations. And while we began to see reductions in these costs, we continue to expect these expenses to persist into 2026, but declining over future periods.

Turning to Slide 24. As a reminder, T-Mobile has until January of 2028 to finalize its selection of 2015 committed sites under the new MLA. Once these selections have been made in addition to any incremental sites above the MLA commitment, Array expects to have between 800 to 1,800 tenantless or naked towers. As laid out in our strategic imperatives, we are hyper focused on ground lease optimization and more specifically, reducing the cash burden of our negative cash flow towers.

Those efforts are coupled with our sales team continuing to aggressively market our full portfolio of towers, which will aid in reducing the naked tower portfolio. We are also assessing the future leasability of these towers and will prudently evaluate all outcomes and options over a multiyear period as we determine a path forward for the naked Tower portfolio.

Slide 25 summarizes the results of our partnership or noncontrolling investment interests. This investment income and distributions are primarily from 4 wireless entities operated and managed by AT&T and Verizon. As discussed last quarter, investment income and distributions for full year 2025 were impacted by several onetime factors, including the impact of the Iowa partnerships, selling their wireless operations to T-Mobile and distributions received from Verizon related to their transaction with Vertical Bridge.

Shifting our focus to 2026. On Slide 26, we have provided guidance for Array for the following metrics. Total operating revenue, adjusted EBITDA and OIBDA and capital expenditures. Notably, our guidance ranges are wider than the industry norm, but there are a few key factors driving this dynamic for 2026.

First, there is uncertainty with the T-Mobile MLA and timing of interim site terminations, as well as the potential for incremental committed sites above the MLA minimum. And second, on the expense side, we discussed the currently elevated SG&A expenses and the wind down of these expenses that we expect throughout 2026 and beyond.

For total operating revenue, we are forecasting a range from $200 million to $215 million. This reflects a range of outcomes related to the T-Mobile MLA as uncertainty and includes anticipated colocation and amendment revenue driven from applications we received in 2025, and expect to receive in early 2026. Our guidance range does not include DISH revenues given the uncertainty related to their recent actions.

For adjusted EBITDA, we are forecasting a range from $200 million to $215 million. Given the passive nature of our noncontrolling investment interests, our guidance range assumes equity income similar to 2025, excluding the onetime events outlined on Slide 25. Adjusted OIBDA guidance of $50 million to $65 million simply removes the equity method investments. Finally, for capital expenditures, we are forecasting $25 million to $35 million. This range is largely driven by a degree of uncertainty around ground lease purchase volume. Our CapEx spending in the first half of 2026 will continue to include onetime tower light monitoring migration costs of about $6 million, as we complete our efforts to migrate tower light monitoring to our long-term solution.

In closing, I want to again thank the entire Array and TDS teams who have dedicated countless hours and energy to the stand-up of our tower company. Array's future is bright, and 2025 was a transformative year. I am excited about the opportunity to lead this team through a year of integration, growth and a focus on operational efficiency.

I will now turn the call back to Walter.

Thank you, Anthony. As you can see, TDS is in the midst of a vital period of transformative change. The successful close of the T-Mobile and AT&T transactions have unlocked tremendous value, enabling us to expand and deepen our fiber program, stand up a strong and growing tower business, and strengthen our capital structure. Let me again thank all of the outstanding associates across the TDS enterprise for the fine work you do every day to serve our customers and advance our business.

Operator, please now open the line for questions.

[Operator Instructions] Your first question comes from the line of Rick Prentiss with Raymond James. [Operator Instructions]

Sorry for the technical problems. I appreciate it, Anthony, good to talk to you. Thanks for update on the [indiscernible] wondering if it was in or out of guidance. So -- as I understand, then DISH is completely out of your '26 guidance from revenue to OIBDA to free cash flow then?

Correct.

And so any settlement from that would be upside from here?

Correct.

Okay. And when you think about what you're seeing in the tower leasing application area, how are you feeling about the application pipeline? It does feel like a lot of carriers are focusing on rural America, T-Mobile, Verizon and even AT&T, but what can you give us as far as some insight into what growth rates might look like from new lease activity?

Yes. So thank you, Rick, for the question. We're feeling quite optimistic about our, sort of both, prospects for 2026, of course. The T-Mobile MLA on a full year basis to present significant growth. But we also expect to see, excluding DISH and excluding the T-Mobile MLA, a significant same-store growth, right.

So for example, there are elements such as when [indiscernible] cellular was the market, we provided roaming to a lot of other carriers. And so without leaving the market, some carriers have elected to use to replace the roaming that they had with us building out some of their own sites. So that is one element that is driving the forward.

In addition, other elements, other actions that we've taken, such as insourcing our sales team and the agreement that we signed with Verizon, we have already seen positive results for in terms of driving our sales growth, and we expect that to continue into 2026.

And how is it coming along as far as other tower companies that have been focus as tower companies for longer than you guys, they're able to break out the cash revenue contribution, say, from escalators versus new lease activity, versus churn, call it, legacy churn versus kind of carrier consolidation churn, or audience like T-Mobile, Sprint and T-Mobile, U.S. Cellular and DISH. How is the company as far as getting reporting out there on new leasing activity escalators in churn?

We will -- we are continually in the process of evaluating which of these metrics we will put in our public reporting. Right now, we are focused on standing up an effective tower company's operations, and we reserve the right to make those changes in future reporting if and as we fit.

Yes, Rick, this is Vicki. I'll just jump in here. I was really pleased. We had a really strong fourth quarter. As you know, it's our first full quarter of reporting for Array, and we'll continue to focus on this as we go forward and keep our [indiscernible] in front of us.

Great. Okay. And on the TDS Telecom side -- thanks for, as we called it, [indiscernible] the number. So we now know the number of service addresses for the long-term target. Thanks for that, Vicki and Ken. So the $2.1 million, a couple of related questions, of course, to that is, what's the definition of long term? Because it does feel like there is a race to be first of fiber, as you mentioned, the markets you've identified. You think you've got a good chance to be first of fiber there. But help us understand why is 2.1 now the right number? What the competitive dynamics look like in that?

And what's the pacing? I know you mentioned 200,000 to 250,000 service addresses this year is the target. Is that something that could accelerate? But it was kind of -- give us a sense of what's that long term mean? What's the pacing to get there?

Rick, this is Kris. I'm going to take the first part of this question, and then I'm going to hand it off to Ken to add more color.

So yes, we are very excited to be raising our long-term fiber address target from $1.8 million to $2.1 million. These goals reflect 2 multiyear fiber programs that we have in place. We have our EA-CAM program, as well as our ongoing fiber expansion that we're building out to those 100 communities where we initially planted [ flags ] and now we're taking advantage of additional edge-out opportunities to further expand those strategic clusters. So these goals reflect when those builds are substantially complete.

And as we shared last year, we said that roughly a 5-year time horizon from our initial goal was a reasonable time frame, and that time frame has not changed with these increased goals. So still that 2029, 2030 time frame, but we're doing everything we can to accelerate these goals because, as you said, we see a window of opportunity to be first of fiber is new expansion markets, and we want to make sure to seize that opportunity.

Yes. So I will add to that. I absolutely love the markets that have been selected prior to my joining. And we still see very favorable competitive landscapes. And as Chris mentioned, we have a great opportunity to be first to fiber and continue to plant those flags in the marketplace.

We also see these edge-outs candidly, where we're already building and have a presence, and it allows us to expand into a bigger strategic cluster. So we're very bullish on the markets that we've chosen, and we have confidence in that incremental 300,000 to bring us to the $2.1 million.

Great. And a couple of extra color questions around that. Can you break out for us how much is going to be EA-CAM versus expansion markets? Because I would assume the capital spending is greater in the EA-CAM markets and the expansion markets. So maybe a rough breakout on how much is the EA-CAM versus expansion of the $2.1 million target?

And then you mentioned, Ken, I think in your prepared remarks talking about focusing on sales, and that you still have a top priority and what your long-term objective is, and maybe update us on what that long-term objective is for fiber penetration?

This is Vicki. I'll just jump in, say, our guidance is a total capital number. But specifically, as you're thinking about the size of the EA-CAM program relative to our full fiber target. Kris, do you want to comment on that?

Yes. So raising our goals from $1.8 million to $2.1 million, that is entirely for these additional 300,000 agile communities adjacent to existing expansion communities. So this does not include any incremental EA-CAM addresses. When we raised our guidance last year, that included 300,000 EA-CAM addresses. And so we are not moving off of that.

Right. I'll give you a quick update to your sales question. Obviously, address delivery create sales opportunities. So our plan for 2026 is to continue our momentum. We're seeing very good presales volumes 60 days in advance of launch.

The other update I will give you is we're spending a lot of time on sales channel development. In addition, we brought on some new door-to-door vendors based on all of the markets that we've launched, and the markets that we're expecting to bring in into these new agile opportunities. So that allows us to increase our sales capabilities.

We've also put significant improvement into our dot-com channel and we have a great road map of go-to-market execution outlined for the remainder of 2026. We also are very focused in penetration rates. And you'll see us focus more on multi-dwelling unit in 2026 in addition to single-family homes. And we've also brought in some new leadership to help run sales in our call center environment, and sales throughout our various distribution channels, 2 folks that are very tenured in the industry and have a great background in fiber sales. Thank you.

Your next question comes from the line of Sebastiano Petti with JPMorgan.

I guess maybe, cleaning up there on the fiber questions. Any help in terms of thinking about the shaping of in-year service delivery? I think, Ken, you kind of talked about -- I mean the fourth quarter delivery was, I think, the strongest you said since 2023. How should we think about that [ 200 to 250 ] ratably over the balance of 2026? Obviously, weather implications in 1Q, 4Q. So just trying to help think about that.

And then, I guess, in the press release, I feel like the comments regarding the C-band or just spectrum monetization. It seemed a little bit new, a little bit more pointed. So I was just wondering if you can help update us on how you're thinking about that, the level of conversations you might be having in the market. Obviously, the re-auction of the [ AWS-3 ] midyear this year, you have visibility into the upper C-band next year. So any color there would be helpful.

And then lastly, I'll just throw it out there. As it pertains to the buyback, any interest, or what's your view on potentially buying back [ AD ] shares in the market as opposed to the TDS shares given the implied look-through discount on your own shares? How is the Board perhaps maybe evaluating that? How do you think about that?

I'll start off with the fiber goals for 2026. As I mentioned earlier, we have -- I love the markets that we're currently operating in. One of the first things that the team focused on was how do we absolutely get as many crews into the markets, constructing our service addresses as possible.

As you saw in my opening remarks, in the fourth quarter, we had record true counts, and we were able to keep those crews throughout those, what I'd say, winter months and that gives us confidence going into 2026.

One of the other big things that we did in 2025 as we made some very strategic investments in our internal construction capacity. We added additional equipment and plan to have additional proved capacity throughout 2026. I believe one of the biggest advantages that TDS has in the marketplace is the fact that we have internal construction crews, and we also have contractors throughout the marketplace.

And I mentioned with those construction crew count levels in the fourth quarter, it gave us, what I'd say, a very healthy funnel of service addresses coming in 2026, which we had not had coming into 2025. So I'm very bullish on what we can accomplish in 2026, and I'll hand it off over the tower question.

Yes. So in terms of the spectrum, right, as you know, the primary spectrum -- from a value [indiscernible]. We believe that spectrum is very attractive. [indiscernible] mid-band spectrum, is an established infrastructure ecosystem. All major carriers can use it, and it's deployable immediately. And in addition to the major big 3 carriers, of course, there may even be other potential acquirers, such as cable regional carriers, speculators, what have you.

Certainly, the availability of other spectrum could affect demand, but that could be positive for us as well because of where companies were potential acquirers of the of the upper C-band spectrum line up [ in ] the band range. So we think that, that is a potential upside for us as well. And then we want to reiterate simply that the C-band is very attractive spectrum, and we are optimistic that it has significant value.

I'm going to hand over the capital structure questions to Vicki.

Yes. Thank you for the question. Sebastiano, each company's board determines their own capital allocation based on a number of multiple factors. As you know, TDS has announced that share repurchases are a part of its capital allocation plan and use of proceeds that have come from the transactions in the special dividends. The array organization is very focused right now on standing up the new tower business. We're excited with the fourth quarter results and our outlook for next year, and very focused on growing that business going forward. So I can't comment that's a decision that each individual board makes.

Yes. But would TDS consider buying AD shares rather than its own TDS shares? To not only accrete yourselves higher, but also buy back your stock at a discount to the market?

Sebastiano, this is Walter. I think that Vicki has given the guidance that we can offer in response to your question. Issue of share buybacks is one that each Board thinks about. And we don't have any further comments at this time.

Okay. And then one last question. Is the implied EBITDA guide at TDS. Does that imply ex divestitures? Does that imply growth? Or how should we think about that?

Yes, Sebastiano, I can take this. This is Kris. So for our adjusted EBITDA guidance for 2026, we are seeing an impact from the divestitures, as well as those legacy revenue stream declines. [ The past, that noise ], there is growth there. And really, that's coming from not only our investments in our fiber markets, but our continued business transformation efforts, and we're really liking the potential we're seeing from that program.

Your next question comes from the line of Michael Rolands with Citi.

Thanks to the additional disclosures in the deck today. If I can turn to Slide 21. So in that slide where it walks through the tower revenues, you described 8% growth, excluding the committed and interim sites. And just curious if we take that now to 2026, what growth rate is embedded within the revenue guidance for '26? And then I have a question on TDS Telecom afterwards.

Sure. So assuming I'm [indiscernible] correctly your question which is sort of same-store growth, right? So I want to -- like -- if you take out the DISH revenue, right, the fact that that's going to zero, we're expecting the growth of around 6% or so on a same-store basis. With DISH included, that would be closer to -- if you -- with DISH included, it would be closer to zero. So flattish, if you assume DISH was still around, about 6% excluding DISH.

And when you think about same store, is that the combination of existing leases and then new colocation, or amendment leases signed on those locations?

Yes, correct, excluding all the T-Mobile activity.

Great. And including any churn, normal course churn?

Correct.

Great. Very helpful. And moving over to the TDS Telecom side of the equation. You mentioned some of the issues with video take rates influencing overall account [indiscernible] ARPA. And just kind of curious how you're thinking about video on a go-forward basis? Are you able to discern in your current footprint the types of customer lifetime value, churn, margin and economics of customers that are just like stand-alone broadband, versus those that bundle video?

And at some point, is there going to -- call a fork in the road where you decide you know what, if you just kind of let video be handled by others, in terms of streaming and so forth that you could deliver a more efficient, effective broadband E&L for investors?

Thank you. So I will tell you, when I came to TDS Telecom, I was very, very happy with the video business and what I would say, very strong margins out of that video business. So I do not see us looking to outdoor video. I think it's a critical part of our overall value proposition to attract a bundled customer that still wants broadband. And we still do hear loud and clear from some segments of customers that if we did not offer a video bundle they would not have chosen TDS for their broadband service. So I still think it's very important.

So I would say the other big opportunity for us in long-term value and churn reduction by having a bundled customer. We see that, and we think it's still very important to our business. As you know, in 2025, we launched [ the mobile ] product to have a quad-play offering to our customers. And you will see us, again, as we have with video bundles also look to bundle the mobile product much stronger throughout 2026.

But we have a very healthy video business. We're happy with the margins. And I think the team has done a very good job in terms of the content packaging. And I like where we are positioned in the market for '26.

Your next question comes from the line of David [ Barden ] with New Street Research.

So you guys have been pretty clear about your strategy to monetize the C-band? I'm interested in your cost or on monetizing specifically the naked towers that you foresee that may emerge over the course of this decision-making that T-Mobile makes between now and 2008, but also the unconsolidated investment interest that you have largely with Verizon. How actively you're considering the monetization of those?

Or if you consider them kind of the anchor tenants of a going concern business and that we should really think about this as a terminal value run rate cash flow business, or is a sale value business? Or which ones we should consider which?

All right. So starting on -- with the second question first on the noncontrolling interest. We like the cash flow from these investments. We're not in any hurry to sell them. There's only one natural buyer for those investments.

If those companies are interested in buying them at a price that is attractive to us, of course, we will entertain that, but we are in no hurry to sell the that we like the cash flow through [indiscernible]

In terms of the naked towers, our perspective on those are those that there is significant latent value in the majority of those naked towers, right? Some obviously we will need to, at some point, decommission or otherwise [indiscernible], although decommissioning is quite expensive, and it's an interesting map exercise [indiscernible] take a look at that versus the cost of retaining them. But we view it as an option, and it is our objective at Array to reduce the holding cost to that option as quickly as possible in order to get the potential value from those towers. Because we do think that there is substantial lease-up opportunity on those naked towers over the long term.

So the kind of industry standard has been to underwrite a 0.1 incremental tenant per tower per year. Is that something that you would underwrite? Or are you not confident in underwriting that? Or are you more optimistic than that?

We're not going to take a position on that at this time given just how new situation we are in with this portfolio of towers no longer having the U.S. Cellular [indiscernible] that.

Your next question comes from the line of Sergey Dluzhevskiy with GAMCO Investors, Inc.

My first question is on the TDS Telecom side. Obviously, you're increasing the run rate of the build, although in the fourth quarter, it was pretty close to the lower end of your guidance. As you look into 2026, and maybe if you look at your past build history -- and what are sound the lessons learned and maybe what are some of the best practices that you're planning to utilized in 2026 to -- and going forward to make sure that the build is more efficient and more successful? Obviously, you didn't meet your target in 2025 by about 10,000. But in 2026, obviously, you feel much better about the opportunity.

So thank you for the question. What I will tell you is our focus is around execution of how many crews we have out in the marketplace that is vital to our success to deliver our targets for 2026. What we have seen at TDS in the past is that you have typically good service address delivery in the fourth quarter, but you lose most of your external construction crews through what I would say, the winter months post holiday, and then it's very difficult in the past to get those crews back in time for spring. So we have monitored that very, very closely and kept our crew counts stable in the fourth quarter, and we now are monitoring those crew counts and have those same levels here in the first quarter. So that gives us much better confidence than we have had in years past about getting off to a strong start with our service address delivery at the beginning of the year.

Got it. Great. My second question is on the Array digital side. And Anthony, it's nice to meet you virtually. I guess my question is, obviously, you have made progress on improving tenancy ratios since the T-Mobile transaction and running this company as a more focused tower business. As you look into 2026 and maybe even 2027, what are some of the initiatives that are working well for you in terms of improving this tenancy ratio ex T-Mobile?

And also what are some of the new things that you're potentially contemplating and maybe would focus more on in 2026 and 2027 to accelerate tenancy rate increase?

So Sergey, thanks for the question, and nice to meet you virtually as well. So there are a number of initiatives that are in place that we expect will help our performance in terms of increasing our [indiscernible] ratio.

So first, as we've mentioned before, we in-sourced our sales team, and we believe that, that is already paying significant dividends in terms of getting our tenancy ratios up. The new deal that we signed with Verizon that we announced last year also was having an impact, as well as I mentioned the fact that some carriers are doing roaming replacement builds for the old U.S. cellular network.

Finally, we did not have much of a focus at all on non-tower carriers within our sales team. We do have roles that are doing that now, and we believe are seeing early results from approaching more vertical potential tenants. So all of those are elements that we believe are going to help us increase our tenancy ratio going forward in 2026 and beyond.

Great. And maybe my last question is also on the Array side. So you have talked already about your focus on monetizing C-band spectrum. Obviously, we've seen several transactions last year involving [ EchoStar ] and their spectrum, we have several spectrum auctions coming up. So maybe if you can just provide more color on how you're thinking about the monetization opportunities for C-band? Maybe the time line, and to what degree some of those developments, either with other third-party transactions, or these auctions are putting, or creating more urgency to find an appropriate transaction sooner [indiscernible]?

So a couple of comments on that. First, I think those transactions with [ EchoStar ] show that there is a very robust demand for spectrum. And I think that bodes well for the spectrum that we indeed do have. Second is that we believe our spectrum is very valuable. We believe that if we have to, the carrying cost of maintaining that spectrum are manageable relative to the potential value that we project for it.

So we are not going to be a fourth seller of the spectrum and nor do we feel that we need to be. With all that said, we continue to look for opportunities to monetize it, and we are going to continue to be active in pursuing those.

There are no further questions at this time. I will now turn the call back to John for closing remarks.

Thank you. And thanks again to everyone for joining the call this morning. As always, please don't hesitate to reach out with further questions or follow-up. And I hope everyone has a wonderful weekend. Thank you.

Hello, and welcome to the TDS [indiscernible] Array Third Quarter 2025 Operating Results Conference Call. [Operator Instructions] I would now like to turn the call over to John Toomey. Please go ahead.

Good morning, and thank you for joining us today. I'm pleased to be here in my new role as Treasurer and Vice President of Corporate Relations. I've been with TDS for 25 years, serving as Treasurer since 2018, and I look forward to meeting and talking with you as part of my expanded role. We want to make you aware of the presentation that has been prepared to accompany our comments this morning, which you can find on the Investor Relations sections of the TDS and Array websites.

With me today and offering prepared comments are: from TDS, Walter Carlson, President and CEO; Vicki Villacrez, Executive Vice President and Chief Financial Officer; from TDS Telecom; Ken Dickson, President and CEO; Chris Botfeld, Vice President of Finance; and from Array Digital infrastructure, Doug Chambers, Interim President and CEO.

This call is being simultaneously webcast on the TDS and Array Investor Relations websites. Please see the websites for the slides referred to on this call, including non-GAAP reconciliations. TDS and Array filed their SEC Forms 8-K, including the press releases and our 10-Qs earlier this morning.

Finally, as shown on Slide 2, the information set forth in the presentation and discussed during this call contain statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the safe harbor paragraphs in our press releases and the extended version included in our SEC filings.

I will now turn over the call to Walter Carlson.

Thanks, John, and good morning, everyone. We are pleased to report to you on our third quarter performance and the progress we have made on our priorities for 2025. Our priorities for 2025 are set forth on Slide 3.

As we reported to you in August, the T-Mobile transaction closed on August 1. The close of that transaction and the subsequent transition activities have gone well and the successful close has enabled us to continue our progress on all our other priorities. Array digital infrastructure has seamlessly transitioned into an independent tower company and has hit the ground running, already showing nice growth, as Doug Chambers will highlight shortly.

Doug has done an excellent job leading Array during this transition. With Array established as a stand-alone tower company, we are pleased to name Anthony Carlson as the President and CEO to lead the Array team into the future. Anthony has an outstanding business background and has led significant teams at both U.S. Cellular and TDS Telecom for the past 6 years. We are confident that he will be an excellent leader for Array.

Turning to TDS Telecom. The third quarter was Ken Dixons first full quarter as its CEO. TDS Telecom continues to be laser-focused on its fiber transformation. In the quarter, the company achieved an important milestone of 1 million fiber addresses. You'll hear more from Ken and Chris Barfield on this achievement and TDS Telecom's other accomplishments later in the presentation.

TDS has also strengthened its capital structure, having received a $1.6 billion special dividend from Array in August and we expect to receive additional proceeds after the close of the pending spectrum transactions. The proceeds received to date have enabled the substantial paydown of debt and will support the existing fiber expansion program at TDS Telecom. As we receive the proceeds from the additional spectrum sales, we expect to further expand our fiber program, and to use a significant portion to support the new $500 million share repurchase program that the company announced this morning.

Vicki Villacrez will provide additional details on our capital allocation program during her remarks. And lastly, we are keenly focused on our culture. Transformational changes are never easy, but TDS has a strong culture and our associates are effectively executing against our objectives through their continued hard work, collaboration and professionalism. I want to personally thank all of the teams whose efforts to put the enterprise in this strong position heading into 2026.

I will now turn the call over to Vicki.

Thank you, Walter, and good morning, everyone. At TDS, we are focusing heavily on capital allocation decisions in light of the U.S. Cellular transaction to T-Mobile, the debt reduction at TDS and Array and the anticipated closing of Array Spectrum sales to AT&T and Verizon within the next year.

At Array, we anticipate, as we have disclosed previously that cash received upon closing of the AT&T and Verizon transactions will be used subject to the determination of the Array Board primarily to fund ongoing business operations and special dividends. We anticipate the pending AT&T transaction of $1 billion to close either in the fourth quarter of 2025 or the first half of 2026, depending on government approval. While any decision on dividends will be made by the Array Board, we anticipate that following the closing of the AT&T transaction, the Array Board would declare a special dividend in the amount of approximately $10 per share.

At TDS, our capital allocation plan has 3 priorities. The first is to invest in our fiber business. As Walter highlighted, we continue to believe that our fiber business has numerous opportunities for investments with attractive return profiles. We will use a portion of the anticipated special dividend proceeds to fund both our current fiber program and additional fiber builds that are incremental to our current goals. These additional opportunities are mostly edge-out communities adjacent to our markets and could be at least several hundred thousand service addresses or more. We believe there's an immediate window of opportunity to plant our flag and pursue investments in communities without a fiber provider. We are currently working through the business cases, and we'll update you in February.

Our second priority is to achieve inorganic growth through M&A. We intend to be opportunistic and disciplined. Only considering those opportunities that are accretive and meet our return objectives. To that end, we would specifically be interested in smaller, highly synergistic, accretive M&A fiber opportunities, particularly adjacent to our existing markets. As we have demonstrated in the past, TDS will remain financially disciplined and business case-driven and any M&A pursuits. Clustering to achieve synergies will continue to be an important strategy at TDS Telecom. The company has recently divested ILEC markets that were not a strategic fit to its fiber objectives.

Our third priority is to return capital directly to shareholders. In September, TDS began repurchasing its stock and bought back a little over 1 million shares. During the third quarter under its existing stock repurchase authorization. In addition, TDS' Board authorized a $500 million increase to our existing share repurchase program, leaving the remaining authorization intact. This authorization reflects the Board's confidence in the company's long-term strategy and the belief that repurchasing TDS shares at present valuation is an attractive use of the company's capital.

The timing and manner will be determined at the company's discretion and will be dependent on closings of the announced spectrum transactions as well as general business and market conditions. We believe share repurchase is tax-efficient for our shareholders. while also providing flexibility for the company.

To be clear, TDS also expects to retain its current regular quarterly dividend. All decisions regarding dividends in future quarters, of course, are subject to the determination of our Board. I think these balanced capital allocation priorities will make TDS stronger, both operationally as we make investments in our fiber business and by returning capital to our shareholders in a measured way.

Thank you, and I now will turn the call over to Ken Dickson to discuss his vision for TDS' fiber business. Ken?

Thank you, Vicki. Good morning, everyone. My first quarter at TDS Telecom has been fantastic. One highlight, of course, was achieving 1 million fiber passings. It was a significant milestone for the business and years in the making. I have also enjoyed traveling to our markets and listening to our TDS frontline associates who are executing every day on our fiber build plans and growth strategy. Before we get into the slides, I'd like to take a moment to reaffirm our strategic priorities.

These include executing on our build plan accelerating fiber penetration, advancing our business transformation program and delivering an excellent customer experience. These pillars are central to our long-term growth strategy and will continue to shape our path forward.

Turning to Slide 6. We delivered 42,000 fiber addresses in the quarter, which puts us just over halfway to our goal of 150,000 service addresses for the full year. Consistent with historical trends, we expect to have our strongest address delivery here in the fourth quarter. We generated 11,200 residential fiber net adds in the quarter, contributing to a 19% growth in residential fiber connections since last year.

Fiber net adds have improved sequentially every quarter this year. On the sales and build front, we recognize that performance isn't where we want it to be. We are taking actions to change this trajectory. Since the end of the second quarter, we have nearly doubled the number of construction crews we have across our markets and are continuing to increase crew counts through the end of the year. We are focused on executing our build plan so we have a large funnel of addresses to sell into and increasing penetration rates in our existing launched fiber areas.

And lastly, our enhanced ACAM or EA-CAM builds are very well underway, which will help bring fiber to the most rural markets in our footprint over the next several years. On the next slide, I want to share a little bit more about EA-CAM which will be absolutely a transformative program to our network, our business and our customers. First, this program enables us to replace a substantial portion of legacy copper infrastructure.

This will add approximately 300,000 new fiber addresses, which includes EA-CAM addresses as well as addresses that will be picked up along the route. This directly supports our long-term goal of reducing copper to less than 5% of our total network footprint. This will greatly improve network reliability and the customer experience. As construction activity ramps up, we expect to see strong copper to fiber conversions as well as new customer growth throughout our rural footprint.

Second, the program delivers over $1.2 billion in regulatory revenue support over a 15-year period, providing a funding stream that supports this continued investment in fiber. Third, these markets are uniquely positioned for success. With no gig capable competitors, we anticipate penetration rates between 65% and 75%, which translates into very attractive returns. In short, ACAM is an outstanding program strategically, operationally and financially. It allows us to bring world-class fiber services to communities that were previously cost-prohibitive, while delivering meaningful value to both our customers and to our business.

Before turning over the call, I want to say how much I've enjoyed my first quarter here. We have a lot of work to do, but I'm excited about the direction we're heading and the opportunities ahead as we transform TDS Telecom into a fiber-centric company.

I'll now let Chris Baufeld take us through the quarter results. Chris?

Thanks, Ken. Turning to Slide 8. You can see our progress towards the long-term fiber goals we shared earlier this year. We are targeting 1.8 million marketable fiber service addresses and we crossed the 1 million fiber address mark this quarter. Across our entire footprint, our goal is to have 80% of total addresses served by fiber compared to 55% today.

We expect this percentage to grow as our EA-CAM deployments ramp. And finally, we expect to offer speeds of 1 gig or higher to at least 95% of our footprint. We finished the quarter with 76% of our footprint at gig speeds. As a reminder, we will use a combination of fiber and coax technologies to reach this target.

Turning to Slide 9. The graph on the left shows the most recent 5 quarters of fiber service address delivery. Address delivery typically increases throughout the year given seasonality impacts. As Ken said, we are behind schedule for the year, and we are working to get our build plan back on track and are expecting the fourth quarter to be the strongest of the year. The graph on the right shows the significant growth in our fiber footprint nearly doubling over the last 3 years.

Turning to Slide 10. The graph on the left shows the last 5 quarters of residential fiber net additions. We delivered 11,200 this quarter, up 8% year-over-year. We have seen year-over-year and sequential improvement in residential fiber net adds this quarter and we expect to see improvement in fiber net adds in the fourth quarter. The graph on the right highlights our residential fiber connection growth. Connections have nearly doubled over the last 3 years, driven by our expansion efforts and copper to fiber conversions.

As we continue to invest in fiber, we expect broadband connection growth to continue. Broadband penetration remains a key metric for our fiber program. with our expansion markets hitting 20% to 25% penetration on average within the first 12 months of launch and approximately 40% in steady state by year 4 to 5.

On Slide 11, average residential revenue per connection was up slightly year-over-year. Consistent with industry trends, fewer broadband customers are bundling with our video product, which dilutes this metric. As we shared earlier this year, we anticipate more modest growth in residential revenue per connection as we focus on driving penetration. The chart on the right shows our revenue comparison year-over-year. As a reminder, divested markets accounted for a $6 million decrease in revenues compared to the prior year.

Now let's talk about revenues on Slide 12. Total operating revenues were down 3% in the quarter compared to prior year. Excluding the impact of divestitures, revenues were down 1%, driven by continued declines in our legacy cable and copper markets, partially offset by growth from our fiber investments. Adjusted EBITDA is down 3% year-over-year, which is pressured by the divestitures and legacy revenue stream declines offset in part by disciplined cost control. A key priority for the company is to drive business transformation, and we are starting to see benefits from these efforts to improve our cost structure. Capital expenditures are up compared to the same period last year due to spending on the EA-CAM program as well as higher expansion address delivery. We expect both CapEx and service address delivery to continue to increase in the fourth quarter as we accelerate construction to meet our full year address target.

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

I will now turn the call over to Doug.

Thanks, Chris. Good morning. The third quarter was momentous as we closed the sale of our wireless operations and returned significant value to shareholders in the form of a special dividend. We also launched our operations as an independent tower company, and the team has done an outstanding job of executing a seamless transition and delivering strong results which were bolstered by the new T-Mobile MLA that commenced on August 1.

In addition, we continue to make progress on our process to opportunistically monetize our spectrum as we entered into additional agreements to sell spectrum. As a reminder, Arrays business has 3 significant value drivers: retained wireless spectrum, tower operations and noncontrolling investment interests.

Further, our strategic imperatives included on Slide 17 and continued to be focused on fully optimizing our tower operations and monetizing our spectrum. I will discuss these value drivers and progress on our strategic imperatives as I walk through our third quarter results. From a financial reporting standpoint, given the divestiture of our wireless business in the third quarter, results from wireless operations, including the book loss on sale of such operations are presented as discontinued operations in our financial statements. This discussion is solely focused on our continuing operations and therefore excludes wireless operations results and the related book loss on sale.

Further, now that we are an independent tower company, we have adjusted our reporting to include relevant tower company financial measures, including adjusted free cash flow, which is similar to the adjusted funds from operations or AFFO measure reported by other tower companies and also includes the cash flows from our noncontrolling investment interest which are a significant portion of Array's total cash flows.

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

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

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

Further, our decision to in-source our sales and intake operations at the beginning of 2025 has helped enhance our sales results as new colocation applications excluding T-Mobile applications, which are subject to the MLA have increased 125% on a year-to-date basis through September 30, 2025 relative to 2024. Related to site rental revenues, we received a letter dated September 2025 from DISH Wireless whereby DISH asserts its master lease agreement with Array has been impacted by unforeseeable actions by the FCC, and therefore, DISH believes it is relieved of its obligations under the MLA. And despite this, DISH plans to continue to operate certain sites for a period of time.

Array believes DISH's assertions are completely without merit, and DISH's obligations under the MLA remain intact. Array plans to enforce DISH's performance and payment obligations under the MLA. Array expects to recognize approximately $7 million of site rental revenue from the DISH MLA in 2025, and DISH's obligations at similar levels from 2026 through 2031 and with the declining revenue commitment in 2032 through 2035.

Slide 22 summarizes a raised financial results. In the third quarter of 2025, we estimate approximately 40% of selling, general and administrative or SG&A expenses include costs to support the following activities wireless operations prior to divestiture that are not reflected as discontinued operations, wireless operations wind-down costs incurred after the August 1 close date administrative expenses associated with managing spectrum assets and expenses associated with the ongoing strategic alternatives review.

We expect legacy wireless operations wind down expenses to persist into the first half of 2026 at levels similar to the third quarter of 2025 and while some wind-down expenses will remain after that time, we expect such expenses to begin declining in the second half of 2026.

Turning to Slide 24. T-Mobile has until January 2028 to finalize the selection of 2015 committed sites under the new MLA. Based on these final selections, Array expects to have between 800 to 1,800 tenantless or naked towers. We are aggressively continuing our efforts to lease these Daka towers and we'll also plan on working with our ground lessors to rationalize ground rents based on the economics associated with naked towers. Over time, based on the results of these efforts, and the projected future lease potential of each tower, we will assess the economics of each naked tower and evaluate alternatives, including potential decommissioning.

Slide 25 summarizes the result of noncontrolling investment interest. As noted, historically, greater than 80% of our investment income and related distributions are attributable to 4 wireless operating entities operated and managed by Verizon and AT&T. Investment income and distributions for the 9 months ended September 30, 2025 were impacted by several events, including the following 2 items: First, we own noncontrolling interest in 3 additional entities that had wireless operations and have tower operations in the state of Iowa. These 3 entities sold their wireless operations to T-Mobile in 3 separate transactions on August 1, 2025, the same date that Array sold its wireless operations to T-Mobile.

As a result of these 3 separate transactions, Array recognized $34 million of equity income and received $42 million of distributions in the third quarter of 2025. Second, in the first half of 2025, Array received distributions from Verizon managed entities of $25 million related to proceeds from Verizon's prepaid tower lease transaction with Vertical Bridge.

I want to thank the entire array and TDS teams who have worked tirelessly to close the sale of our wireless operations and stand up an independent tower company. It has been a transformational and highly successful quarter. I also want to thank the Array board for their trust in me to lead Array for the past several months. It has been an absolute pleasure to lead our outstanding array team. Lastly, I am pleased to turn the reins over to Anthony. I had the pleasure of working alongside Anthony, while we are both members of the U.S. Cellular leadership team and have great confidence in Anthony as both an outstanding strategic thinker and leader and combined with the existing array team, I am confident that Array has a very bright future.

I will now turn the call back to Walter.

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

Operator, please now open the line for questions.

[Operator Instructions] Your first question comes from the line of Rick Prentiss with Raymond James & Associates.

A lot of moving pieces, but a lot of interesting things going on here. First, Doug, I have enjoyed working with you good luck in the future, and I appreciate the adjusted free cash flow similar to AFFO calculation that we've been asking for. So thanks for that, again, thanks for working with you.

Thanks, Rick. I appreciate it.

Yes. Vicki, I think one of the more interesting things is obviously we're looking for an update in February on the fiber plan. You mentioned several hundred thousand or more might be added. So that helps us frame it a little bit. One of the other things we're interested in is, can you give us some cohort analysis or something to take a look at how the older markets of fiber, say, 1, 2, 3, 4 years ago are doing because it's kind of blurred, right?

You guys are spending CapEx, you're spending OpEx and trying to understand the progress towards those penetration rates. So any thoughts on -- when you give that update in February, can we start getting some maybe some cohort analysis or some thoughts on how the prior markets are doing?

Yes. Thank you, Rick. Two piece parts to your question. Let me take the first one and then -- and address the several hundred thousand fiber opportunity. First of all, we are a fiber a fiber-centric company, and we love the markets that we're operating in. And so we see a lot of opportunity, and I'm going to have -- can talk about some of the opportunities he sees as he's joined the company.

We are currently right now in the process of evaluating our business cases and our engineering designs as we evaluate those opportunities. And we do see several hundred thousand or more, and we'll come back and update investors in February on that on what that looks like from a capital allocation perspective. Second, on the cohort penetration. We've heard you loud and clear, for sure. And to be honest, we did go back and we looked at what the industry is reporting. And we didn't find a lot. There seems to be little reporting out there. And quite frankly, it wasn't enough information really to set a clear industry standard for us.

With that said, with Ken just coming on board, we are internally aligned as a team as we're ramping up our fiber builds in a number of markets. evaluating our edge-out opportunities. And so we're aligning on what the appropriate success measures are going to look like.

As Vicki said, I'm very bullish on the markets that we selected. I think they're fantastic the ATM program, along with our expansion program gives us tremendous fiber opportunities going forward, especially to convert our copper to fiber transition -- so great programs all along. But as Vicki said, when we look at these expansion markets as we've been first to fiber and have planted our flag we look around and we see adjacent neighborhoods, adjacent communities that candidly do not have a fiber provider and we can continue to be first to fiber. And so we're evaluating all those markets now, and -- but we do see several hundred thousand as an opportunity.

I think one of the other interesting and exciting things actually, Vicki, was the stock buyback program. Historically, TDS USM, AD, have not done a lot of buybacks except for really kind of handling stock comp kind of creep. So it sounds like this is something a big change for you guys, that you are seeing. You did some in September, you're seeing value in the stock. How should we think about that sizing of the $500 million, the execution of that? And am I right to interpret that this is actually a pretty big change for TDS.

Yes. Well, thanks, Rick. First off, I think that this move and the authorization, the recent authorization by the Board really demonstrates the Board's confidence in the company's long-term strategy and belief that repurchasing its shares is an attractive use of capital. I see it as a really important part of our capital allocation plan, and we are going to balance that with investment back into the business.

So first and foremost is investing into the business. We see a lot of fiber opportunity. We're in the process of evaluating and quantifying that. But I think this is a real balance. And it's going to be something that's balanced with timing and the opportunity and the timing of our builds over time. Execution of it, I would say, certainly to the management's discretion, but the timing and matter first and foremost, is dependent on the successful closing of our spectrum transactions. And that is a priority. It's a top focus for the leadership team. And then, of course, we'll execute in a disciplined opportunistic manner as we evaluate the current business environment and the market environment.

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

Yes. Thanks, Rick. So with respect to the 40%, we're not going to break down those 4 components individually. What I would say about that, though, if you're trying to triangulate to a run rate is -- there's at 40%. But in addition, there's structural costs that we have being a large wireless company that we also have to work on within the SG&A infrastructure. So it's not just at 40%. It goes beyond that, think about IT platforms that we use to support wireless and the related IT support we had for that.

That's an example of additional opportunity that is beyond the 40%. So just keep that in mind as you're thinking about a run rate for SG&A. There's still quite a bit of work for us to do on SG&A. We completely expected the SG&A cost to be high in Q3, we expect them to be high through the first half of next year, as we indicated. Spectrum management costs, I mean, we still hold spectrum, as you know. And so we incur costs. So we're still fulfilling coverage requirements for certain spectrum incurring some cell site rental costs and that. We have legal costs, we have personnel that manage the spectrum. All that is owning of costs for incurring ultimately be temporary as we're, of course, in a process of opportunistically monetizing the spectrum. So with time, those will eventually go away.

Your next question comes from the line of Eric Lucha with Wells Fargo.

[Operator Instructions]

We will move on to our next question from Vikash Harlalka with New Street Research.

I have a couple of questions on the array side and then some on the TDS Telecom side. On the side, what is the Naked tower strategy from a go-to-market standpoint but also from a sale or decommissioning standpoint, how long is too long to wait and do you have exit rights on the land leases. And then I'll ask the PD questions after this.

So with respect to the naked towers, in the slide that we included is, at a high level, particulate strategy, which, obviously, we're working hard to lease up all our towers.

That continues, and we hope over time, that minimize the naked towers. The other thing we're doing is an initiative going to our ground lessors, and we obviously can't rationalize the rents we're paying on a lot of our naked towers, and we're going to seek to reduce those rents over time. We also have fairly robust analysis, and we're continuing to refine it on future leasability of the towers.

So where competitor towers are using crowdsourced traffic, understanding our view of what the leasability is. And then after going through all those steps, and this will be a multiyear process, and it will be on a tower-by-tower basis, we will make decisions as to what to do with each tower hold some other strategic option and then potentially decommission some as well.

And then Vikash, sorry, you asked the question, what was your second question?

My question was, do you have exit rights on the land leases?

The land commitments by and large, we have some that are extended, but they're fairly minimal. A large portion of our ground leases, we're able to terminate upon very short notice. So those are not significant commitments overall in our portfolio. There's some, but they're minor.

Got it. And then I have 1 sort of financial question on the -- on TDS side and then 1 strategic question on the on your leverage target of 1.5x for TDS telecom, it's probably the lowest that I've heard from any of the wireline operators. One, does it include the impact from the several hundred thousand fiber passing that you're going to announce next year in February? And then two, just help us understand like how did you land on this target? And I mean why not just lever more in return more capital to shareholders?

Okay. Thank you, yes, let me -- this is Vicki. Let me address the leverage target question. First off, let me just say, we're really pleased with where our current leverage is and our balance sheet strength with our preferreds. We think it maximizes our future flexibility and we feel comfortable with where our leverage is at currently.

When you think about our leverage at TDS currently as of the end of the quarter, on a gross basis, we're at 1.4x. And we intend to stay under that leverage ratio. Now we've got cash on the balance sheet as we're anticipating the funding the fiber builds through the rest of the fourth quarter and into 2026 and through 2026. And at the same time, we also have tax obligations that are -- that will come due with the closing in the sale of the transaction to T-Mobile.

So our leverage targets are intended to -- with the principle that we're going to put our cash to use over time. And therefore, that plays into our philosophy on our capital allocation strategy. Vikash, he did ask about, does this include the updated fiber goals? What we publicly stated so far is that we plan to double our fiber addresses from where we ended 2024 from around $900,000 to $1.8 million, and we said we will do that over roughly a 5-year period. What that doesn't include are the additional edge-out opportunities that we've been discussing that we believe are several hundred thousand or more.

And in February, we will come back and update everyone on our new goals.

Got it. That's super helpful. And my last question, sort of a strategic question. So you obviously gave us some color on potential fiber targets, that's helpful. Just flipping that a little bit, would you be open to getting acquired by someone like a Verizon or AT&T?

Vikash, this is Walter, and thank you for the question. TDS has been in business for a long time. Our objective is to remain in business and be very successful for all of our shareholders for a long time going forward.

Your next question will come from the line of Eric Luebchow with Wells Fargo. [Operator Instructions] Eric, are you there?

Let me try that again, I apologize. Just a couple of questions for Doug on the tower side. Doug, I know you talked about getting to a 45% to 50% margin longer term. Maybe you could just talk about some of the moving parts there between the decommissioning of the towers, the expense rationalization, your ability to bring down ground rents. Like how should we think about the patient of that over the next couple of years as we kind of think about the growth, not just at the top line but at the bottom line as well.

You hit on a lot of them in your question. So when we think about increasing margins over time, obviously, growing our colo revenue is a priority and that we're very focused on. I talked about the SG&A expenses. We expected them to be high in Q3. We expect to be high through the first half of next year. But also over time, need those to go down, obviously, as wind down and other cost side as well as what I talked about in response to Rick's question, making structural changes as well to some of our SG&A infrastructure.

So focused on that. Ground rents, there's really 2 components of that. One is, I talked about rent rationalization with our ground lessors and that initiative. So we're focused on that. And then at the end of the day, if towers are uneconomical, making the decision as to potentially decommissioning them to again, rationalize ground rents. Offsetting that somewhat, I mean, on I think recognized that the interim revenues on the T-Mobile sites are going to go away over time.

T-Mobile has the ability to cancel those on fairly short notice in the third month period. But certainly, margins we're looking to increase over time, and we expect that as we launched Array because of all the reasons I just went through, that margins were going to be lower and will increase over time.

Great. I appreciate that. And maybe just 1 follow-up. I know you're looking at potential spectrum monetization, and you still have some extended build-out time frames for the C-band kind of the bulk of your remaining spectrum assets. I guess given there's an auction plan in the upper C band in a couple of years, how does that kind of influence the timing of when you may look to monetize that just in terms of the supply of spectrum coming to market?

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

[Operator Instructions] Our next question comes from the line of Sergey Dluzhevskiy with Gamco Investors.

First of all, Doug, it has been a pleasure working with you over the years, and good luck to is everything going forward.

Likewise. Sergey, thank you.

Great. And maybe my first question is for you. So you talked a lot about the kind of organic opportunity for the tower business. I guess my question is, -- what role do you expect M&A to play in the tower business strategy what types of assets could potentially amplify or accelerate your strategy? And also -- on the flip side, are there disposal opportunities? Obviously, you're going to look at naked towers, but just looking maybe at cluster of towers. I mean, you have some towers in California, Oregon, Washington, that appear to be not as clusters, maybe as others. So I was wondering if there is a monetization opportunity there.

Yes, Sergey. Thanks for the question. So with respect to our inorganic acquisition and our disposals, that's not a strategic focus right now. We have so much on our plate operationally and really great things on with integrating the T-Mobile MLA. I mentioned you saw our tenant growth on a cash basis -- cash revenue basis for the quarter grew 8% this quarter, and our apps are up year-to-date, 125%. So operationally, things are going so well, and we have so much to execute on. That is our sole focus. Longer term, after a few years, whether we start focusing on inorganic M&A or disposing towers, that's always something that what we looked at over time. But right now, that's not our strategic focus.

Got it. Great. And my next question is for Walter or for kind of also on the M&A side, but also related to edge-out opportunities that you're considering at telecom. So you mentioned that you see a number of edge-outs where you have the ability to be first to fiber but you're not the only one looking obviously at those spaces and a number of larger companies are looking at remaining white space as well.

So maybe I understand that you're going to provide more guidance in February, but maybe if you could provide more color on how you think about those opportunities in terms of age outs, what is realistic for the company the size of TDS Telecom.

And in regards to M&A, what would be the primary determining factors for you to in choosing to buy something versus doing and are gaining fiber build.

All right. From an edge perspective, the areas that we're really looking at are the areas that are adjacent to current operations. So think of these as Tier 2, Tier 3 markets, what we would refer to as not urban areas, but rural markets where we already operate, already have facilities already have garages and candidly already have a brand and customers, and we see the opportunity to edge out into additional communities because we've already been first to plant the fiber flag in these rural markets. It's just extending our plant to these additional communities.

And the advantage that we have is because we were first in fiber, these are opportunities we already have the transport, we already have our operations there. So it's just a natural extension. So those are -- when we talk about agile opportunities, it's expanding and flexing from where we're today already operating in the Tier 2 and Tier 3 markets. Okay?

Got it. And in terms of kind of buying something versus building organically. What are the primary determining reasons for it.

So Serge, this is Walter. I think your question is, in addition to the potential edge out opportunities, what sort of possible M&A opportunities and without getting into specifics, as Vicki described, we are very much focused on those types of ILEC or other owners who are proximate to our existing footprint where we believe that in a disciplined way, we could expand our footprint in a clustered basis -- we don't know whether that's going to be successful, but there are opportunities there, and they are being very closely looked at.

Yes, Sergey, I would just follow up and say again, with respect to M&A, we're going to be highly disciplined -- it will be accretive to our business. And it fits in with the organic cluster strategy that Ken was describing. We've embarked on this fiber strategy out of footprint and our selection of our markets. We're very centered around where we saw clusters of growth. And so whether it's organic or we see a synergistic M&A opportunity, that's how the whole picture will fit together. So it's really executing on that strategy going forward.

Great. And my last question is for Ken. So I think earlier this year, TDS Telecom has been making investments in sales and marketing, including door-to-door sales force. I guess with you coming in, what are your thoughts on kind of the level of success an improvement in gross additions that you could attribute to some of those efforts? And what other initiatives as part of your go-to-market day that -- do you expect to improve and contribute to kind of improving your conversion rate of fiber pricings into paying customers?

Yes. Thank you. One of the things that I've noticed is that a lot of our sales activity is based on address delivery. So if we have a quarter where we don't deliver the addresses, we see sales suffer.

So mission #1 is to get our build plan to execute and to deliver service address delivery in the markets that we're building. And I will tell you that we have doubled our crew counts in our expansion markets here in the third quarter. So we had a record amount of crew counts for 2025. And we actually increased our crew counts here in October of '25, and that's key in delivering on our targets in the fourth quarter.

So we will execute on that new open for sale when it comes in. We also are looking at additional vendors that we've brought on to Canvas our different communities and help us with presale and also with our door-to-door efforts. And I think that variable cost model will help us win penetration. And we're also, as part of our transformation efforts, we are putting a lot of time, effort and energy into our dot-com business.

As you know, website is open 24 hours a day, 7 days a week and we think that's a big opportunity for us as well to penetrate some of these new cohorts. But also, we recognize that we have a lot of ILEC fiber that we can still sell into.

So a tremendous amount of initiatives in place. I believe we have some nice momentum but that is a key focus, is go-to-market strategy, executing on the fundamentals and delivering sales and penetration goals.

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

Hi, everyone. Good morning. I am Mark Schilsky, Citi's TMT sector specialist. Obviously, not Mike Rollins. I'm pinch-hitting for him today. Welcome to day 2 of Citi's Global TMT Conference.

Today, we're going to be talking about TDS. We've got Kris Bothfeld, the CFO of TDS Telecom, and I've got Doug Chambers, Interim President and CEO of the newly minted Array Digital Infrastructure. So we're talking about both companies today. Thank you, both for coming.

The deal, the T-Mobile, U.S. mobile deal closed August 1. So we've been about a month past. So Kris, if you want to give us a quick update, just remind everyone what happened, you learned anything in the incremental month since then, and then we'll take it from there.

Yes. Maybe I can take that one. That impacts our business more so. So as Mark said, we closed the deal with T-Mobile to sell our wireless operations on August 1. Array always a tower business embedded within our UScellular wireless business. Now we're a separate Array business. We own 4,400 towers. We're the fifth largest tower company, and we are solely focused on towers at this point. And we are very operationally focused right now. We have a lot of exciting opportunities ahead of us operationally and 4 key areas of focus. One is we have pending spectrum sales, $1 billion sale with AT&T, $1 billion with Verizon, focused on getting those through regulatory approval and close, we're confident we'll do that.

We have remaining spectrum. We have -- we sold 70% of our spectrum through deals that have closed with T-Mobile or the pending deals I just spoke of, but we also have remaining spectrum, including C-Band. We're going to -- we are opportunistically monetizing that. We're ensuring that we extract the maximum value we can. We have time. The C-Band does not have build requirements until 2029 first build, 2031 second build. So we feel good about the fact we're well positioned to sell that spectrum and have time to do it.

Third thing, colocation growth. So we're doing quite well from a colocation growth perspective. In Q2, we grew revenues 12%. Some of that's application fees, even taking that out, we grew revenues 7%. Our colo apps in the first half of 2025 are up over 100% year-over-year. We're doing really, really well operationally. From a colo growth standpoint, we brought sales in-house in the fourth quarter of 2024. It's been a huge tailwind with respect to customer relationships. We have MLAs with all 3 major carriers. We're very easy to do business with.

And of course, the other thing with colo growth is T-Mobile has committed to 2015 colocations with us. And we're currently working through that with them. That's a lot of work for me and my team. It's great work. It's going to increase our cash revenues in the order of magnitude of 50% from the level where we are now. So very excited about that.

And the fourth thing I'll say is we're really focused on our ground leases. One is in the normal course, buying that land, gaining control of it as well as extending our leases. It's always been a focus. We're doubling down on that.

The other opportunity we have is because of the fact we're no longer a wireless carrier, and after T-Mobile completes their integration, we will have between 800 and 1,800 naked towers, that gives us the opportunity to go to our landlords, seek rent abatements, sequence rent reductions. We're going to do that. And after we finish that process, we'll have optionality as to what to do with the naked towers, hold on to them for future co-locations, we may decommission some, sell, give away. That really depends on where we end up with our rent abatement program. So operationally, a lot in front of us, but a lot of great opportunities and things are going very, very well for us here in 2025.

And then -- so at TDS Telecom, we're on a path to transform into a fiber-centric company. And earlier this year, we came out with new bold fiber goals. So we're planning to double our fiber footprint from where we ended at the end of 2024, around 900,000 addresses to 1.8 million addresses over the next roughly 5 years or so.

And just yesterday, we passed a really significant milestone for the company as we transform into a fiber company, and we surpassed 1 million fiber addresses. So there's only a handful of companies in the U.S. who have passed this milestone, and we're really excited and really excited about the momentum we have with this program going into the second half of the year.

All right. Perfect. Doug, let's continue with you. So you mentioned spectrum sales, AT&T, Verizon, you even have some that has not been sold. Can you talk about the timing for that, the level and then when those deals are done and what are you doing with the cash?

So the AT&T deal, $1 million, we expect it to close before the end of this year. The gating item is regulatory approval from the FCC. As I mentioned, we're optimistic we'll receive that. And we do expect our Board of Directors to declare a dividend, a special dividend after that AT&T sale. The Verizon pending spectrum sale, that's also $1 billion spectrum sale. We expect that to close in the third quarter of next year. That sale is -- needs the T-Mobile spectrum lease we have in place for a year to expire. So therefore, that one needs to close later. When we receive that $1 billion, which we expect, we also expect our Board of Directors to declare a special dividend for those funds. And so similar to the T-Mobile deal we just closed in this year plus span, we're returning a lot of funds to shareholders.

Right. And then you still have a chunk of spectrum left to potentially sell?

We do. And it's -- as I mentioned in my initial comments, it's primarily our C-Band spectrum. And we feel really good about the marketability of that spectrum. It's beachfront, mid-band spectrum. All the carriers can use that spectrum. There's an established equipment ecosystem for that spectrum. And I mentioned the build deadlines. We have time. We're not in a rush to sell it. We're not a wireless carrier. We'll sell it as soon as we're able. But certainly, we'll wait for the right value before we agree to sell it.

And then assuming that it does get sold, should we assume that the base case is it also would result in a special dividend?

I would expect the Board to declare a special dividend, correct?

Okay. Perfect.

We have -- our business generates sufficient cash. We have plenty of liquidity. So we don't have sort of a need for that level of funding at this juncture.

Right. And so the deal closed August 1. We're going to get kind of like, call it, normalized financials, I believe, on Q3 when we get that. Can you walk us through that? So you talked about you're now the fifth largest tower company. Do you comp yourself to Crown Castle, American Tower? How do you think about disclosures to investors? Is it going to look a lot the same? Could you give us any preview on what that will look like in Q3?

Sure, sure, happy to. We are now a tower company, and we're going to provide tower companies disclosure. Through the second quarter of this year, we're primarily a wireless company, and our financial statements look like wireless company financial statements. We did provide insights into our tower business, tenancy ratio and the like. We're converting to full tower company reporting, things like AFFO, showing adjusted EBITDA for our tower segment, all the metrics related to tendency rate and so forth. And then showing the impact of the T-Mobile transaction.

I will say in our financial statements, there's going to have to be a story we have to tell related to certain items that are nonrecurring. For example, we're incurring wind-down costs as we complete the full divestiture of our wireless operations. Those are temporary costs, but they'll be in our financial statements for a period of time.

Likewise, we have start-up costs. As we ramp up this T-Mobile MLA, it's a lot of temporary work for our business for a period of 1, 2, maybe 2.5 years. That's going to be in the financial statements. And the other thing longer term that I mentioned we're working on is all of our naked towers and working on that ground lease expense over time. That's not going to move right away because T-Mobile has interim leases. And until they cancel those interim leases, we're not going to be able to abate rent substantially. But as those interim leases start to be canceled by T-Mobile, we'll have that opportunity to address ground rents.

All right. Perfect. And then can you talk a little bit about capital structure, capital return, what are your medium, long-term plans for that?

Yes. We have a leverage ratio target right now of 3x, and we're satisfied at that level. And one thing about being at that level, it gives us future flexibility to extend. I mean, right now, as I mentioned, our sole focus is operations, and we have a lot in front of us. So we're not looking at any substantial inorganic growth or other transactions. But being at 3x affords us the ability in 2, 4, 6 years. If we decide to do something, we have flexibility to move that upward if we need to.

Are you at 3x like post deal? Or what are you today?

3x.

Yes, you are...

Yes.

And also -- so capital return, what are your priorities there for shareholders?

Well, it's really -- as I mentioned, our focus is we're -- just speaking about a dividend. So what we're doing is, I mentioned we have a series of special dividends. We have the one we just declared here in August. We'll have the AT&T dividend. And then, as I mentioned, I expect our Board to declare a dividend from Verizon. As we generate cash from operations over the next 1.5 years, that cash can be subsumed in the dividends that we declare the special dividends.

Once we get past the special dividends, I expect our Board to declare a regular recurring dividend much like the other tower companies do. We're going to be a cash-flowing company, and we -- I expect our Board to return most of that cash to shareholders, but I wouldn't expect that regular recurring dividend to be instituted until late 2026 or early 2027.

All right. Perfect. And then as you mentioned earlier, you were for a long time, just a wireless company, gone to T-Mobile. Anything from a strategic standpoint that changes now that, that retail wireless business is gone or status quo, like how should we think about that going forward, if any material change?

Yes. I would say no major strategy changes, but there are some important things that we've done over the last year. I mentioned bringing our sales in-house and having that team report directly to me as opposed to outsourcing sales. We've seen substantial dividends from that in our business and the relationship building that's going on. And we're really -- because of that, that's one of the drivers of the increase in our colo app. So that's a significant operational improvement that we've made.

I'd also cite the fact that being a separate tower company is a slight tailwind. There's no more perception of us also being a carrier, so that is helpful. And also focus. Organizationally, I'm not saying we weren't focused on UScellular, but there is no more wireless company. We have our people solely focused on making our tower companies succeed. And we have the right people in place. We've built a lean organization. We rely on TDS for a lot of shared services like finance, IT, and HR and other administrative services. And so we are really well equipped for future success.

Perfect. And then nothing is, again, relatively new company. Where are you in terms of the management team, you're Interim President and CEO, just what's the timing to have like, let's call it, a permanent management team in place at all levels?

Well, I would say we have a permanent team in place. Under me, I have 4 direct reports that are not interim. They are the right people. I'm Head of Operations. My Head of Sales had a legal and my Head of Finance that report to me are all people that are permanently there, and they run the business and they're very high-performing people. My role, I'm here until the Board will assess it over time, and we'll see how that plays out. But right now, I'm the guy.

Okay. Sounds good. Kris, I'm going to pivot to you. I asked the strategy question of Doug, but same thing. So you're one of the larger fiber companies out there. Has anything changed as a result of this deal? Or it's still, again, status quo and like how do you look out over the next several years in terms of what your plans are?

I'd say not a change in strategy, but if anything, kind of doubling down on our existing strategy. So we're really bullish on our fiber program. And really with additional proceeds from the sale, what we're looking to do is, one, accelerate our existing program, build programs that we have in flight. So we have 2 big build programs, our expansion program where we've gone out into brand-new communities that we've hand selected based on their growth characteristics, competitive landscape, among other factors. So we're continuing to build those out and want to accelerate those builds.

And then the other big program is our EA-CAM program. So this is in our more rural areas in our incumbent footprint, converting those existing copper addresses to fiber addresses, also great economics with that program, and we're looking to accelerate that. So first and foremost, accelerating our existing plans.

We're also looking at additional organic edge-out opportunities. So we handpicked those expansion markets because of great kind of clustering and growth characteristics, and we see significant opportunity to continue to expand those clusters. So we're currently evaluating all of that across our footprint.

And then lastly, M&A. So with M&A, I do want to say that our focus is going to be on highly synergistic opportunities that are adjacent to our existing strategic clusters. And I'll also say that any additional organic or inorganic opportunities, we're going to be very financially disciplined, business case driven, anything would have to make economic sense and also be a really good, great strategic fit. So again, we're just very bullish on the fiber program, and we think that there's a lot more opportunity ahead, and we're still kind of evaluating and we plan to share more in the upcoming quarters on any updates to those plans.

Yes. So have you been explicit in the past in terms of what your annual passing looks like and how -- when you said accelerate, like how much?

Yes. So this year, we're committed to 150,000 addresses. And we have to increase that at a slight clip to hit our 1.8 million in kind of that 5-year time frame. So that's the context of what we came out kind of pre-deal close. So now we're evaluating that, and we haven't shared any updated goals beyond that. But kind of on that 150,000 to 200,000 addresses.

Did your plans change at all, by the way, post one big beautiful bill as a result of some of the cash tax savings that I assume you're going to get as a result of that?

So not yet, that also will go into the -- factor into the analysis. Yes, we're very pleased with that legislation. It's definitely going to help us advance our goals and then also help as we take on additional opportunities. It will provide material cash tax savings over the upcoming years, not as much so in 2025, but definitely in 2026 and beyond.

You mentioned EA-CAM and can you talk about potential opportunities there as well as BEAD and is one materially larger or better than the other?

Yes. So EA-CAM, so we actually accepted EA-CAM in all of our states. So it's over 20 states, all of our states except for one. And what that means is that those areas are actually not BEAD eligible. So we will not be participating in BEAD. EA-CAM is the program that we've chosen. And we really love this program because not only did it extend our regulatory revenue, so it's approximately $90 million annually that we receive in revenues, and it was extended an additional 10 years by accepting this enhanced EA-CAM program. So that's one great benefit.

And then we're going to be bringing fiber to approximately 300,000 addresses in our footprint. And that includes not only the EA-CAM-eligible addresses, but also ones that will pick up along the route as we get to those more rural areas. But even those rural addresses represent roughly 1/3 of our incumbent footprint. And there's no other gig capable provider in those areas. So we expect like 65% to 75% penetration in those areas. So it's a really good business case to not only extend the regulatory revenues but also have very high penetration rates in some of these rural communities in the future.

I think can we talk a little bit about mobile? I actually do want to talk about fixed wireless. Like so how do you view fixed wireless as -- I'm going to characterize it as a potential threat?

I'd say not a material threat to our fiber or cable businesses in the long run. Definitely, in the -- right now, where we see it as the biggest threat is actually in our DSL footprint, as you can imagine. But again, with this EA-CAM program, we're going to be bringing significant fiber to these areas. And we do believe that once we bring fiber there, we can win back those customers. It's a superior -- it's absolutely the superior technology, fastest speeds, symmetrical speeds, reliability. And so -- and with EA-CAM and our fiber investments, we're actually going to minimize our copper footprint to just -- to less than 5% in the future. So we -- so across our landscape, we actually don't view it as a material threat.

And then is there a meaningful price difference between your standard offerings in fiber versus fixed wireless in a lot of your footprint?

It's very competitive, yes.

Yes. Okay. And then recently, I think you announced TDS Mobile. Could you walk us through what that looks like and what the strategy is to roll that out?

Correct. So we do believe that offering a fixed mobile offering is very important to achieve our penetration targets. We have high penetration goals, and there's a segment of the customer base that really values that bundle. And so we're very pleased that we initially launched our MVNO that we call TDS Mobile at the end of 2024 to select markets. We really wanted to take a phased approach to work out the kinks and make sure we have a great customer experience.

And just recently, we launched across all of our footprint. So now we do offer a converged mobile fixed bundle across our entire footprint. And we're very excited because that allows us to offer the same product as our competitors. And then in some areas like in our cable markets, it's actually a differentiator against our competition. It also should help us attract customers and also retain customers because we see that customers who are part of a bundle have lower churn characteristics. So we're very excited. One more thing regarding the rollout is we are planning on doing kind of a more full holistic marketing and advertising push in a couple of months to end the year.

Right. Do you have a target penetration rate for TDS Mobile amongst your footprint?

So we're just getting started is what I would say, but everything that we -- some of the analysis that we had done prior to launching is that really like 1 in 10 gross adds should probably take the mobile bundle.

Right. And I know the rollout is new, so it's like it's really hard to ask exactly what the churn improvement characteristics are, but like give us a sense for how much better churn has gotten once someone takes...

It's too new, but we do -- we offer video, voice. And so what we tend to see is that customers who are single play versus double play or triple play, I mean, it's meaningful churn benefits like 30 to 50 basis points. So we do expect meaningful churn, but it's too early to really say if we're seeing that on the mobile side. That's our thinking.

Okay. And then can we just talk briefly about ACP. I mean that was really a 2024 event, but like is there any sort of tail of that? Is that done? Is that in the rearview mirror or that's still potentially impacting your...

That's a review mirror. That was kind of Q2, Q3 last year, and now that's behind us.

Okay. I think you talked about obviously ramping up fiber investments. Your CapEx intensity is reasonably high. Can you talk about is there a longer-term -- medium- to long-term target for CapEx intensity or CapEx dollars? And does that ramp down eventually? Because I'm sure a lot of your shareholders are excited about the future possibilities of free cash flow ramping, but could you walk us through that, your thoughts there?

Yes. So what I'd say about capital is -- obviously, I'm not going to give any specific guidance beyond 2025. But as we have EA-CAM obligations that we need to meet, we're going to continue to ramp up our expansion program builds. And as we look to take advantage of additional edge-out opportunities, we do expect to increase our capital from this year to next year and plan to keep it elevated for a few years as we really accelerate and build out those programs.

But from a free cash flow perspective, what I would say is that after our build what we see is in a given market, once our build completes, we generate positive free cash flow. So when we're heavy in those build years, we expect a drag on free cash flow. However, once those -- more and more of those builds complete, we expect to turn free cash flow positive. And then we also have a transformation program that we've recently launched that's really focused on trying to streamline processes, find efficiencies in our business and we expect that to also help improve margins and free cash flow over time.

Sure. And obviously, the deal just closed in August, business delevered meaningfully. So where are you today? What's your long-term target? And then you mentioned M&A earlier, like talk a little bit more about your strategy there and like where could that leverage go if you found the right dealer deals?

Yes. So what I'd say is we recently announced that we have -- at the TDS level, have paid off almost all of our debt. We have a small portion of debt still left, and we still have our preferreds. But we really like this because it gives us, in the near term, a lot of balance sheet strength, flexibility as we continue to evaluate these additional opportunities. And so in the near term, we're going to kind of stay at the overall TDS consolidated level around 1.5x leverage. But again, that's in the near term, and we'll continue to evaluate over time.

Right. But we should expect at the TDS Telecom level, leverage at some point in the future is going to go up. I mean you are a telecom company, right, running unlevered is probably inefficient.

Correct. Yes. I'll just say that we're continuing to evaluate that. I'm just going to comment kind of on where we are in the near term. And yes, we have a lot of great opportunities ahead, and we'll talk more about that in the future.

Sure. And then along with that, Doug talked about a recurring dividend in the future. You talked about capital return plans, again, medium to long term, what your plans are down the road?

So on the Q2 call, really, what we shared is that there's a handful of key priorities from a use of proceeds perspective, one, advancing the fiber program. Also with that includes potentially some M&A opportunities, more focused on the fiber side and again, very highly synergistic opportunities and then third, return to shareholders. So definitely, that's -- there'll be more to come is what I would say. We're still -- the deal just closed, and we're evaluating a lot of opportunities.

Sure. I think just talk a little bit about margin opportunities. Do you think today's EBITDA margins are appropriate for the business? Like are there efficiencies you can find? Like what are you kind of looking to target in the future to kind of potentially get those margins up?

Yes. I would say, no, we have a lot of opportunity and really kind of -- I touched on this a little bit in one of my earlier comments, but I'll say it again. So as we transform into a fiber-centric company, like fiber networks are absolutely the most efficient networks to run. So we're going to see a lot of nice margin improvement just from that kind of network transformation. But then we also have a business transformation program that's all the back office, like IT systems. We have like 3 different systems today. We're getting that to 1 system. There's a whole set of initiatives to really streamline operations, enhance elements of the customer experience, drive more to the web and more digital transformation. So all of that, we expect meaningful margin improvement over time.

Sure. And I feel like I'm obligated to ask a question about AI, just how are you utilizing it in your business, whether to generate revenue or to lower OpEx or both?

Yes, I'd say both. So I would say we're just scratching the surface right now on AI capabilities. I think that there's significant opportunity to streamline our operations, help drive margin improvement. So that's on the OpEx side. And then, yes, on the revenue side, I mean, I think that new AI applications are going to drive the need for even more fiber in the future, which could help on the revenue side as well.

Doug, same question to you on AI.

Yes. I mean, in our wireless business, we're using it extensively for things like network management and customer care. On the tower side, I would say there's less current uses that we have in our business right now, but a lot of opportunity. We have obviously 4,400 towers. It's 4,400 payments coming in every quarter, our ground lease payments. So we have a lot of opportunity and we're looking at our operational systems that we have in place, our lease administration system as well as our operational project planning system that we have in place. And that's one of the things that we're focused on is how we can use AI to enhance efficiency.

All right. Perfect. And then, Kris, can you talk a little bit about macro? Have you seen any noticeable change in customer payment behavior as inflation cut into the ability for your customers to pay? Are people potentially down trading? Are you seeing any of that?

We haven't seen any impacts from the economy this year. The great thing about our product is that it's highly desirable and it's sort of recession resistant. So no, our churn is actually down year-over-year. Some of that is due to kind of the ACP headwinds kind of being behind us. But no, we haven't seen any changes, material changes due to the macro economy this year.

Sure. And then I did want to talk a little bit about -- so we talked about FWA earlier, but anything notable with cable -- with overbuilders anywhere in your footprint, anything that's noticeably changing in the competitive landscape?

Yes. So what I -- because you're talking about overbuilders, I'll go right there. So in our cable markets, the vast majority of our cable footprint had very low like fiber. So that was the perfect opportunity for an overbuilder to come in and overbuild those markets. So we are seeing pickup in pace of overbuilder activity in our cable markets. But the thing is that it's still just introducing one more gig capable competitor. So instead of us having the vast majority of the market share and being the only gig-capable provider in the area, we now face another competitor. And so just that other competitor coming in and offering choice, we're seeing declines in our market share and our net adds this year. And we expect that to continue for the next couple of years, but we do expect that to stabilize after those builds are complete and we kind of hit that new equilibrium. So that's in the cable market.

But what I will say, too, is we have a very competitive product in our cable footprint, gig speeds. We just launched TDS Mobile. That's a differentiator against a lot of the overbuilder competition in cable. We can get aggressive on price if we need to, where there's more fiber competition. And we also will do things like automatic speed upgrades to also help kind of stem those cable losses.

In our incumbent footprint, what -- I touched on it earlier, really where we're seeing more of the competition is in our DSL areas. But again, we're going to be bringing a lot more fiber to those areas. So that's more of a near term versus a longer-term risk.

And then in our expansion markets, we handpicked these markets for their favorable competitive characteristics. And really, it had very LEC fiber, and we specifically picked kind of Tier 2, Tier 3 cities that we thought would be low priority for the LEC to upgrade. And so far, we've seen that play out, and we are pleased with our competitive landscape in that area.

And one other thing I'll say is that because we are planning to accelerate our fiber builds in those markets, that should even further solidify us being first to fiber and making it a lot tougher for the economics to work for the LEC to upgrade.

And one more competition question in the last, say, a year. I started to get questions about Starlink satellite-based broadband. Just any thoughts on how that potentially impacts you in the medium to long term. Do you see that as a potential threat?

I'd put it right. I'd have a very similar answer to fixed wireless in that we just do not view it as a material threat, especially in the long run.

Yes. Doug, does like Starlink or any satellite-based company impact your business in any obvious way?

No, not substantially. I mean, obviously, the terrestrial networks, when you think about capacity, you're still king, and it's not really impacting colocations and rural edge-outs and things that we're seeing in our business. In fact, rural edge-outs are part of the tailwind we're experiencing now particularly with T-Mobile and what they're doing. And it's not just them, but other carriers. And so I would say no.

All right. And I just want to talk business, SMB, in particular, just could you just walk us through real quick what that opportunity in fiber looks like, what your penetration rates are like how do you think about that? Could that be like a meaningful tailwind for the business?

Yes. So SMB, I do think that it's an opportunity. We're definitely under-penetrated in that segment, really we are very focused on kind of residential first in our markets. But SMB, a lot of SMB is very much resi like. And so we are launching some more aggressive offers there, and we think that we can drive some improved penetration rates there.

Okay. We only have a small amount of time left. Is there any questions from the audience? No, if not, I guess last one for me is just, again, a lot has been going on with the company. You have some -- you're going to probably provide incremental disclosures for Array. Just any future plans to do something more than just an earnings call, whether it's an Investor Day or some sort of way to just kind of reframe and kind of reintroduce yourselves to the investing community. Is there any potential plans for that? How do you think about that?

We don't have any current plans for that. We're going to -- one of our goals on our third quarter earnings call is to give a really clear view of the tower business with tower company reporting and a detailed understanding of nonrecurring costs and what's going on in the business. And we've been very transparent with our strategic priorities. So something we'll consider in the future, but we have no current plans to do that. And again, we're going to provide very fulsome disclosure as part of our third quarter earnings call.

And I'd say for third quarter, we also plan on just continuing to try to tell our story better about us being a fiber company and not just a telco -- an old school telco. So we plan on providing more penetration metrics and things like that over time. And then once we have evaluated all these additional opportunities that I talked about, more likely that would be kind of the Q4 call, we plan on kind of sharing what those updates are.

Okay. Sounds great. I look forward to it. All right. Kris, Doug, thank you so much.

Yes, thank you.

Thank you, everyone.

Thank you for standing by, and welcome to TDS and [ Array ] Second Quarter 2025 Operating Results Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your host, Colleen Thompson, Vice President of Corporate Relations. Ma'am, you may begin.

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 Array website.

With me today and offering prepared comments are from TDS, Walter Carlson, President and Chief Executive Officer; Vicki Villacrez, Executive Vice President and Chief Financial Officer. From Array digital infrastructure, Doug Chambers, Interim President and CEO. From TDS Telecom, Kris Bothfeld, Vice President of Finance and Chief Financial Officer.

This call is being simultaneously webcast on the TDS and Array Investor Relations website. Please see the website for slides referred to on this call, including non-GAAP reconciliations. TDS and Array filed their SEC Forms 8-K, including the press releases and our 10-Qs earlier this morning. As shown on Slide 2, the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the safe harbor paragraphs in our press releases and the extended version included in our SEC filings. And with that, I will now turn the call over to Walter Carlson, Walter?

Thank you, Colleen, and good morning, everyone. We'll start on Slide 3 and review the progress that we've made on our priorities for 2025.

As we announced on August 1, and we are very pleased that we closed on the sale of U.S. Cellular Wireless business and certain spectrum assets to T-Mobile. The teams at U.S. Cellular and TDS worked tirelessly over the last several years to negotiate and complete a $4.3 billion transaction. I also want to thank T-Mobile for their partnership in this transaction and throughout the integration process. This transaction unlocks significant value for shareholders and strengthens the balance sheets at both Array and TDS and as Vicki will discuss shortly.

Equally important, completion of this sale will enable us to focus on our tower and fiber businesses where we believe we are well positioned to win. Looking ahead, I am excited for a new chapter in the company's history. Going forward, we like the towers business and are operating under a new name, Array, Digital Infrastructure Inc. We believe Array has many opportunities. Array holds valuable assets, towers, spectrum and equity method investment interest all of which are the product of significant work and investment over the prior 40 years.

Our towers business at Array has an outstanding management team led by Doug Chambers. We believe Array is uniquely and attractively positioning, and we look forward to running a tower company.

With approximately 4,400 towers, Array has the strength and stability of the new master license agreement with T-Mobile. And with increasing demand for data and communication services in the United States, we believe we have a great opportunity to grow colocations and margins over time.

Turning to TDS Telecom. In June, we were pleased to announce Ken Dickson had joined us as the new CEO of TDS Telecom to lead that business going forward. Ken comes to us with decades of telecom and fiber experience. Ken has hit the ground running and his deep knowledge and expertise in sales, marketing, customer satisfaction and operations are already making a difference. I'm looking forward to you hearing from Ken on our next earnings call. Kris Bothfeld will report to you today on the progress that TDS Telecom made on our fiber business during the second quarter.

Turning to the fourth item on our set of objectives. Throughout the year, we have made significant progress in strengthening our capital structure. This increases our financial flexibility and positions us to take advantage of opportunities as they present themselves. Vicki will highlight those accomplishments shortly. And lastly, with all of the changes in the organization, we remain focused on our culture, and TDS' culture is one of its greatest strengths. I want to thank all of the teams across the TDS enterprise for their contributions and these accomplishments, and I'm excited about what lies ahead.

I will now turn the call over to Vicki.

Okay. Good morning, everyone. As you heard from Walter, closing the T-Mobile transaction earlier this month was a major step to unlock shareholder value and strengthen our businesses, focusing on where we can win. We have taken a number of steps, which will provide us the financial strength to be able to grow our businesses. To recap, $1.7 billion in debt was assumed by T-Mobile in an exchange offer, leaving approximately $364 million on the Array balance sheet. We extended the revolvers for both TDS and Array and signed amendments to several term loans to provide post-transaction liquidity as we prepare to put in place a more permanent capital structure.

On August 1, the Array Board of Directors declared a special dividend of $23 per share that will be paid on August 19. TDS will receive its pro rata share of the dividend or approximately $1.63 billion. Once the dividend is paid at TDS we plan to redeem approximately $1.1 billion in debt that carried a weighted average cost of 7.5%. The -- these actions will result in approximately $80 million in annual interest savings and will reduce our total TDS average cost of debt to just over 6%, which includes the preferred. We plan to maintain the perpetual preferred Series U and Series B preferred stock. They provide foundational capital for our fiber program, and we currently have no plans to redeem them.

Briefly in the past, we've shared the expected cash tax ranges related to the T-Mobile transaction. As a result of the new One Big Beautiful bill, TDS is expecting a benefit that can be used to offset the taxes at the consolidated level, reducing the transaction tax estimate to $150 million. The sale of our wireless operations has simplified the TDS portfolio and increased our financial flexibility while allowing us to focus on our growing broadband and tower businesses in addition to returning significant value to shareholders.

TDS has a long history of disciplined financial policy while maintaining a relatively conservative balance sheet. With a significant amount of our debt repaid, we will target 3x bank leverage ratio at Array, which translates into $700 million of debt on a raised balance sheet. We expect TDS' leverage to remain below 1.5x in the near term as we evaluate our next steps and strategic opportunities for both our fiber and tower businesses.

As we look forward, we anticipate Array to receive $2 billion of proceeds from the previously announced spectrum sales, with a portion of the proceeds expected to potentially come in later this year. Of course, these are both subject to regulatory and other customary approvals. In addition, we'll be working to opportunistically monetize the remaining spectrum at Array.

On principle, we do not plan to hold excess cash on the balance sheet for too long without putting it to use. To that end, we anticipate a rate to put in place a regular dividend once the spectrum transactions have been completed. Therefore, we are developing an allocation strategy across three main categories: which we intend to further refine and share with our investors going forward. First, fiber. We know we have significant opportunities to make incremental organic investments in fiber with attractive returns that exceed our cost of capital. We believe we have an immediate window of opportunity to pursue these investments that do not yet have a fiber provider. With [ Ken Dixon ] on board, we are working to size these investments.

Second, M&A. We are currently evaluating this space to identify where it might make sense to accelerate growth at the right price, particularly for the fiber program. And third, shareholder returns. Once we've quantified our growth opportunities, we will look for ways to increase returns to our shareholders.

Before I turn it over to Doug for more detail, I wanted to highlight that on August 1, S&P raised TDS' credit rating to BBB- from BB and remove the ratings from credit watch. We are very pleased with this rating and believe it reflects our strong balance sheet, valuable assets and growth outlook for our businesses going forward.

I will now turn the call over to Doug. Doug?

Thanks, Vicki. Good morning. I would like to start off by thanking the Board for placing its confidence in me to lead away during this interim period, and I would also like to thank [indiscernible] and the U.S. same leadership team had of guided security process due to the successful close of the T-Mobile transaction.

Slide 6 summarizes the proceeds received from the T-Mobile transaction, along with various transaction-related costs and other items that impacted our cash available for distribution. We are pleased to return these funds to shareholders through the special dividend previously mentioned by Vicki.

Further, as we have discussed previously, the sale of our wireless operations to T-Mobile is a win for our customers and for our associates. Our customers will have the enhanced connectivity with the combined networks of the two companies and access to lower prices and more features and a significant number of our associates accepted positions with T-Mobile. We are very pleased that our customers and associates are in great hands as part of the T-Mobile family. Further, the sale of portions of our spectrum to T-Mobile, along with the pending spectrum sales to AT&T and Verizon are wins for rural America as this spectrum will be deployed to serve customers across our nation. And we look forward to opportunistically monetizing our remaining spectrum to ensure this spectrum can also be port to use to serve customers across America. With that, I am excited to discuss our business going forward, array digital infrastructure.

Slide 7 and 8 summarize the status of our efforts to opportunistically monetize our spectrum. As previously announced, we have reached agreements to monetize approximately 70% of Array's total spectrum holdings, including the T-Mobile transaction and agreements with AT&T and Verizon. The AT&T and Verizon transactions will result in additional gross proceeds of $2.0 billion. We expect cash taxes on the AT&T and Verizon transactions of approximately $125 million and in the range of $200 million to $250 million, respectively.

Further, we expect the AT&T and Verizon transactions to close in the second half of 2025 and the third quarter of 2026, respectively, subject to regulatory approval and other closing conditions. Also, following the closing of each of the AT&T and Verizon transactions, we anticipate that the Array Board will declare special dividends to distribute a substantial portion of the resulting net proceeds. The large majority of the remaining spectrum is C-band spectrum, and we believe these licenses are attractive beachfront spectrum for 5G and there's an existing infrastructure ecosystems or carriers are easily able to put the C-band spectrum to use. And although there are build-out requirements associated with this ban, first 1 does not apply until 2029 and so there's plenty of time for us to monetize this spectrum.

Turning to Slide 9. Following the close of the T-Mobile transaction, and divestiture of our wireless operations, our Going Forward business has three components: The fifth largest U.S. tower business with 4,400 owned towers. Noncontrolling investment interest, which primarily consists of investments in wireless operating companies managed by Verizon and AT&T and the retained spectrum.

Turning to Slide 10. I would like to discuss the strategic priorities of a way to position the business for continued success. Two key priorities will be to close the pending spectrum transactions with AT&T and Verizon and to continue to opportunistically monetize the remaining spectrum. Focusing on the tower business, now that we are set up as an independent tower company and have a strong team in place from our existing business, we have two key strategic priorities going forward.

Ground lease optimization has been and remains a key priority as we seek to expand our long-term ownership easement and lease agreements with our ground lessors. The other key priority of the tower business is continued strong revenue growth, which we have been achieving through robust new co-locations and will be further bolstered by the new T-Mobile master license agreement or MLA, which commenced on August 1 upon the close of the larger transaction.

Turning to Slide 11. I Implementation of the new MLA between T-Mobile and Array will be a significant near-term focus as T-Mobile has committed to 2015 colocation sites for a period of 15 years beginning August 1 and has also extended the term on 600 existing colocations by 15 years from the same August 1 date.

Also effective August 1, T-Mobile will have interim leases on 1,800 sites for a period of 30 months, which they may cancel at their discretion during this period. We expect this MLA with T-Mobile to significantly strengthen our tower business with substantial increases in long-term revenue and profitability.

Turning to our tower operations and results on Slides 12 and 13, third-party tower revenues increased by 12% and a number of third-party colocations increased by 6% year-over-year. One area that we believe will continue to drive momentum is our decision in the fourth quarter of 2024 to bring our sales function in-house. We have built strong sales leadership and have hired an outstanding sales team that we believe will position us well for future revenue growth. We also benefit from MLAs with all three major U.S. carriers, which provide for compelling pricing and ease of doing business with Array that benefit both Array and our large carrier tenants.

In addition, as we have discussed in the past, 1/3 of our towers have no competing tower structure within a 2-mile radius. And we believe this attribute positions our tower portfolio well for future colocation growth. Going forward, upon divestiture of our wireless operations, Array will lose U.S. Cellular as a tenant on every owned power as reported historically in our Tower segment and gain T-Mobile as a tenant on a significant amount of incremental towers subject to the MLA, as a result, Array's reported tenancy rate will decline from a reported amount of 1.57 at June 30, 2025, and to approximately 1.0 at August 1 on the close of the T-Mobile transaction and commencement of the related MLA.

This 1.0 tenancy rate excludes T-Mobile interim tower sites. Further, intercompany revenues allocated to the Tower segment from U.S. Cellular's wireless business, will be reduced to 0 in future periods, and this will be partially offset by incremental revenues from the T-Mobile MLA.

Shifting to our equity method investments. Distributions from our noncontrolling investment interest increased from $58 million to $77 million in the second quarter of 2024 and 2025, respectively. Of this increase, approximately $23 million was related to nonrecurring distributions from Verizon wireless partnerships related to their tower transaction with Vertical Bridge that closed in December 2024.

As we have indicated previously, we are not providing guidance on our as expected operational and financial results for 2025. We expect to incur additional wind down costs for the remainder of 2025 and into 2026 as the business transforms from primarily a wireless service provider to an independent tower company, and we expect these wind down expenses to negatively impact profitability and adjusted EBITDA during this period. We expect to provide additional tower-related financial and operational metrics in the third quarter of 2025, which will represent our initial quarter reporting as an independent tower company. Regulatory approvals on the sale of the wireless operations occurred in the third quarter, therefore, discontinued operations reporting will be applicable and presented in the third quarter filings.

Lastly, details of the T-Mobile transaction are discussed in the subsequent events footnote in our second quarter Form 10-Q. I would like to convey my deepest appreciation and gratitude to all of the U.S. Cellular associates who have provided many years of dedicated service to carry out our mission of connecting our customers to what matters most. We would not be here today without your outstanding service, dedication, determination and enthusiasm. You would say there was a special carrier with special people for many years, and we will all remember U.S. Cellular proudly and fondly. I would like to also express my thanks to the Array employees that are operating in the tower business. They have worked extremely hard and have made our transition to an independent tower company a success. These are exciting times, and I look forward to working with this talented team to continue to drive success in our tower business. I will now turn the call over to Kris Bothfeld.

Thank you, Doug. Good morning, everyone. Turning to Slide 15. As Walter mentioned, Ken Dixon recently joined the telecom team as CEO and the organization is energized and excited for what's ahead under his leadership.

Turning to the quarter. We delivered 27,000 new fiber service addresses and remain confident in achieving our goal of 150,000 fiber addresses this year. We are pleased that EAM construction kicked off at the end of the first quarter and is now underway in multiple states. During the second quarter, we began bringing E-ACAM customers online, an exciting milestone for the program. As a reminder, over the next several years, E-ACAM is expected to contribute approximately 300,000 additional addresses to our fiber footprint.

As our E-ACAM builds continue to ramp over the second half of the year, we expect service adverse growth in fiber net adds to follow. In the quarter, we also generated 10,300 fiber net additions, leading to 19% growth in total fiber connection since last year. Lastly, we closed on the sale of our Colorado ILEC market on June 2 and recently announced the pending sale of our ILEC companies in Oklahoma. Although these transactions impact short-term results, they are a key part of our strategy to optimize our portfolio and exit copper markets where there is not an economic path to fiber.

Turning to Slide 16. You can see our progress towards the long-term fiber goals we shared earlier this year. We are targeting 1.8 million marketable fiber service addresses. We ended the quarter at $968,000. We are also targeting 80% of total addresses to be served by fiber. We ended the quarter at 53%. And finally, we expect to offer speeds of 1 gig or higher to at least 95% of our footprint, and we finished the quarter with 75% at gig speed. To reach this target, we will use a combination of fiber and coax technologies. Our goal is to reduce the number of addresses served by copper to less than 5% over time.

Turning to Slide 17. The graph on the left shows the significant growth in our total footprint, up 27% over the last 3 years, driven by our fiber investments. The graph on the right shows the most recent 5 quarters of fiber service address delivery this quarter is flat compared to prior year. Our service average growth generally ramps throughout the year, which is consistent with our expectations for this year. We've added 41,000 addresses through the second quarter and plan to hit 150,000 new fiber addresses this year as we continue to increase the number of construction crews. We are also on track to hit an exciting milestone in the back half of the year. 1 million marketable fiber service addresses. It will be a big achievement for the company and a reflection of the momentum behind our growing fiber program.

Turning to Slide 18. The graph on the left highlights our residential fiber connection growth. Connections have nearly doubled over the past 3 years, driven by our expansion efforts and the ongoing conversion of copper customers to fiber products in our incumbent markets. As we invest in fiber, we expect residential broadband connection growth to continue. The graph on the right shows the last 5 quarters of residential fiber net additions. We delivered 10,300 this quarter comparable to the same period last year.

On Slide 19, we grew total service eases 5% year-over-year. On the right side of the slide, we see increased demand for higher broadband speeds with 83% of our residential broadband customers taking 100 meg or higher and 26% 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 remain strong.

On Slide 20, average residential revenue per connection was up 1% year-over-year. due primarily to price increases. As reflected in our guidance, we expect for modest growth in residential revenue per connection this year as we focus on driving penetration. The chart on the right shows our revenue comparison year-over-year. Overall revenue is down 1%. As a reminder, divested markets accounted for a $4 million decrease in revenues compared to prior year. We'll talk more about revenues on the next slide.

On Slide 21, I'll touch on the financials. Total operating revenues were down 1% in the second quarter compared to prior year. Excluding the impact of divestitures revenue increased 1%, driven by growth in fiber subscribers and higher residential revenue per connection. This growth was partially offset by continued declines in our legacy cable and copper market. Cash expenses increased 1% or $2 million year-over-year.

As we discussed last quarter, this increase in expense aligns with our 2025 priorities, which include investments in sales and marketing and advancing our transformation efforts. We're also continuing to staff our internal construction crews to drive more cost-effective address growth when compared to external contractors. Capital expenditures were higher than the same period last year, primarily due to spending on the E-ACAM program. We expect both CapEx and service adjust delivery to continue to increase in the back half of the year as we accelerate construction to deliver 150,000 new fiber service addresses in 2025. Over 80% of our full year capital expenditures will be focused on fiber.

Slide 22 shows our revised 2025 guidance. We have updated the ranges for revenue, adjusted EBITDA and adjusted OIBDA to reflect the divestiture of our Oklahoma ILEC market, which was not included in our previous guidance. as well as ongoing declines in our cable and copper markets. We are now projecting revenues to be in the range of $1.03 billion to $1.05 billion, adjusted EBITDA is expected to be $320 million to $350 million. Adjusted OIBDA is expected to be $310 million to $340 million, and our CapEx guidance remains unchanged.

Before closing, I want to recognize the entire TDS Telecom team for their outstanding commitment and hard work. We have a lot in flight, and I'm confident in the team's ability to execute. We're building momentum as we head into the second half of the year, and I'm excited about the company's future. I will now turn the call back over to Walter.

Thank you, Kris. Before opening it up for questions, I want to share a few concluding thoughts. We are pleased to have closed the T-Mobile transaction and are pleased to be able to use the proceeds to improve our balance sheet and to fund our fiber program. We also look forward to closing the AT&T and Verizon spectrum sales and to thoughtfully deploying those proceeds back into the business and into returns to shareholders. TDS is in a strong financial position and has excellent operating businesses in both towers and broadband. We look forward to continuing to delight our customers and to build our businesses.

Now Operator, Janine, let's open it up to questions

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Rick Prentiss from Raymond James.

Rick. Nice to get the T-Mobile deal over the finish line. I want to start on the TDS Telecom side. Obviously, there's definitely an incentive to race the plant the fiber flag I know Dixon just started recently, but can you give us an idea of when you can update us on, would you expand and accelerate the 1.8 million service addresses.

Rick, this is Kris Bothfeld. Yes, we are super excited that 10 Dixon join. He brings a lot of enthusiasm, momentum. And right now, we do think that there's a significant opportunity or edge out in our footprint to further expand our fiber footprint, and we're currently sizing those opportunities, and we expect to share more in the upcoming quarters. But I will say that we intentionally chose specific markets to flag plants that we thought had great edge out and clustering abilities. So again, I just want to reinforce that we think there's significant opportunity, but we're just not quite yet ready to share exactly what that looks like.

Thank you, Kris. And Rick, I would add this is a critical step in our going forward capital allocation strategy and with Ken on board, were echo, we're really excited for what he's seen across the business and the opportunities going forward. So we'll bring more back to the table.

Okay. And Vicki, I think you mentioned TDS will keep leverage under 1.5 turns while you evaluate that. Where do you see leverage at the TDS Telecom side kind of stabilizing at longer term?

Well, TDS Telecom is certainly consolidated in a wholly owned subsidiary of TDS. So I'm looking at it collectively. As you know, we're putting in place leverage at the Array balance sheet at 3x. We expect when we complete our spectrum of transactions that we put in place if the array as Board of Directors would approve a more regular dividend and that would provide funding on a longer-term basis.

So when I'm looking at our opportunities at [ Celcom ] and on the TDS consolidated basis, we're going to have significant proceeds that will help fund our opportunities, which is why we're looking right now to put a more rigorous and defined capital allocation strategy in place. So we haven't quantified it yet, but we'll come back and share that with you. But for right now, we may -- we expect to stay at 1.5x, which is really all the debt is paid off at the TDS level. And with leaving the preferreds in place and then we have an option on our export credit with $150 million on whether we keep that in place or pay that off in the near term.

Continuing on the TDS Telecom side, Interesting to hear you brought the construction crew in -- or some construction cement in-house. We've been hearing about there could be some labor issues, material issues, particularly as the One Big Beautiful bill kind of has ramped people's homes pass service addresses passing. So can you talk a little bit just about access to getting the bill plan down?

Yes, Rick, we still feel very confident in our ability to hit our 150,000 service addresses for the year. So just a little more color on that. we were a little late to get all of our E-ACAM contracts executed. But now we have those executed, crews are really ramping up. We're liking what we're seeing. So we continue -- or we expect to continue to see that CAM construction and address delivery to really ramp in the second half of the year.

We're also bringing on significant increase in our in both our age rental construction cruise and external construction groups to continue to ramp those expansion bills. And just to remind you the seasonality of our bills. It is very common that we see significant average delivery in the second half of the year, not uncommon to see about 70% of our address delivery to occur in the second half of the year. So we're really pleased with the momentum, we had the strongest adverse delivery all year in June, and we beat that in July. We have great momentum, and we feel really confident in hitting our 150,000 address goal for the year.

Okay. And last one on TDS Telecom, probably the most I've asked on TDS Telecom, and then I'll have a quick one on Array. I think it would be helpful if we had some cohort analysis, just looking at what you deployed in maybe '22, '23, just to understand because the industry is evolving rapidly. Just trying to figure out what the ultimate penetration goals would be and what kind of market share but also what kind of margins. So any thoughts on providing in a later date cohort analysis? And what are your thoughts as far as ultimate penetrations in your fiber markets?

Yes. So Rick, this is something we're starting to report on internally, and we plan to share very soon externally. And just to remind you what our -- what we expect to be for our expansion markets and those penetration curves is by year -- by month 12, we expect around 25% to 30% penetration. That's because we have an aggressive presales model that we put in place for 60 days in advance of new address delivery. We're out knocking on doors and signing up folks. So we see pretty high presales penetration right at launch, and that helps us achieve a really nice starting point for month 12. And then year 5, so more steady state is when we expect 40% steady-state penetration in these expansion markets, and in some markets take longer to get to that 40% and some take quicker. Those that are a little bit slower to get there, are some of our focus, so that's our expansion market. But then we also have our E- ACAM fiber market. Those have really good competitive dynamics where, by definition, any E-ACAM-eligible location has no gig-capable competition. That's approximately 30% of our ILEC footprint. And so we expect 65% to 75% penetration in those areas.

Yes. That's really the background, Kris. And to answer your question, Rick, we have cohort, penetration reporting in place internally that we've been reviewing with Ken Dixon on board. And we intend to share that. I think those are critical proof points that are the underpinning of our investments that we're making as we go forward. So we will bring that to investors.

That's really great news. I appreciate that under the market. We appreciate that. Quickly for Ken. Tower reporting, good to hear that's coming as well. I'm getting my Christmas list early this year. the dividend sizing, would that be kind of sized on AFFO, so we can kind of see a payout ratio? And the other quick one to talk to that is time to close AT&T, you're saying second half, are you thinking that's like a 3-month process post T-Mobile closed? Or is that kind of closer to year-end, just trying to think through dividend timing.

So with respect to AFFO reporting dividend per share, et cetera, all that's coming in Q3. So as I said, our first the quarter reported independent tower companies Q3, we'll bring all that reporting to you in Q3. With respect to the AT&T spectrum closed, it is subject to FCC approval we don't control that process, obviously. So we -- second half of 2025 is our best estimate, getting more precise in that time frame, we're not able to do right now.

[Operator Instructions] Our next question comes from Sebastiano Petti from JP Morgan.

Congratulation as well on closing the T-Mobile transaction. Just I guess following up on Rick's follow-ups, if we could just perhaps think about the fiber backdrop. Kris, great to hear that your confidence in -- with the delivery -- the locations for the year, 150,000. How should we think about the trajectory or shaping of overall fiber broadband additions for the year? Should we anticipate or do you still anticipate higher fiber additions year-on-year just kind of given the $150 million is kind of still on track there?

And then just one last one there as you're -- relatedly, Rick talked about the cohort analysis, I think that would be helpful. Just -- the question that we get from investors is -- a lot of the growth is coming from some of your expansion markets and with some of these big broad build-out programs, is that shrinking the white space opportunity. So perhaps you can contextualize the confidence in the net additions and maybe the competitive backdrop, if anything has changed quite yet? And then I have a follow-up for Doug.

So yes, the first hit on your question about fiber net addition. We are targeting still year-over-year improvement in fiber net additions. And so I touched on this a little bit with Rick, but our sales model is very closely tied to new fiber address delivery because of our aggressive presales model and selling all new addresses 60 days before they launch. So when we see slower address delivery to start the year, we also tend to see slower net adds.

However, you heard me say, we expect significant increase in address delivery in the second half of the year with our EA can builds ramping up and us bringing on additional construction crews. So we expect net additions to follow with that address delivery. We're also making sure that we don't lose sight on those addresses that we've launched several years ago that still don't have TDS fiber service. So there are additional tactics that [indiscernible] has put in place to ensure that we're going aggressively after those areas and increasing the penetration there. With those tactics and we finally have a fully staffed door-to-door team going into the second half of the year, we still feel very confident in improving our net additions for the full year compared to last year.

So a little bit on competition, and you were specifically asking about our expansion markets. So these were handpicked markets. There was nearly 100 communities, and we hand pick these based on their favorable competitive characteristics their growth characteristics among other factors. And we also specifically chose Tier 2 and Tier 3 communities because we -- our hypothesis was that these would be lower priority for Lex to upgrade. And we've seen that play out. We still feel very confident and really pleased with the competitive landscape in our expansion markets.

That's super helpful. And Doug, I think I asked you and LT is perhaps last quarter, but just kind of thinking about -- you talked about the C-band being beachfront. We don't disagree. But just thinking about trying to balance maybe value maximization against the backdrop of a big spectrum pipeline and portfolio that's going to be coming to market after the reconciliation bill. And particularly also have AWS-3 re-auction from DISH potential maybe secondary market spectrum coming from that entity as well? And again, and then the upper C-band, perhaps in 2026.

I mean just kind of thinking about how that -- this upcoming pipeline of additional spectrum and what perhaps what that might do to carry your budgets and balance sheets influences perhaps how you're kind of thinking about the monetization of the remaining spectrum proceeds portfolio.

And so the nice thing with the C-band spectrum is, one, it's deployable now, and it's very desirable mid-band spectrum, as you know. The other thing I mentioned in my script is that our first build deadline is until 2029, second deadline is 2031. So we have the luxury of time to be opportunistic about the out the sale of the spectrum. Certainly, supply and demand of spectrum and what's coming available through FCC auction and DISH and what happens there. is a factor. We're considering that. And our goal is to maximize the value, and we have time to do it. And our strategy is to take the time we need to make sure we're realize the best value and we'll be gauging interest in doing our marketing in the future. .

Our next question comes from the line of Vikash Harlalka from New Street Research.

Couple of questions on the bus side telecom and then just a broader question on M&A. On the business side, can you just provide us an update on your mobile launch. If I remember correctly, you done some test markets. Where are you in terms of launching it nationwide.

So an update on our MVNO is we launched in select markets in the fourth quarter of 2024. We're calling our MVNO product, TDS Mobile, we just launched in the second quarter to all markets across our footprint. We have been taking a very phased methodical approach as we're trying to work out all the kinks and ensure a great customer experience. But we are very excited because now we'll be able to offer the same products as our competitors. And in some markets, this will actually be a differentiator against our competition. It's also allowing us to offer the products that our customers want and should help us attract and retain customers over time. So we're very pleased, and we're just getting kind of fully launched, and we expect to see a lot more growth in the future.

And then my second question was about your pricing. I saw that recently you launched gig product for $49.99. That's a very aggressive pricing. What kind of step-up should customers see and over what time frame on that?

Yes. So our pricing strategy, we -- it really depends on what the competitive landscape is in a given market. And we want to make sure that there are no barriers to entry. So typically, you'll see our entry-level pricing be just as aggressive as the other gig capable provider in the market. And we just to make sure that the economics hold true if we offer a very aggressive entry-level price point, then we do have usually after 2 years step up in price on to the full retail rack rate. And typically, that's like a $20 increase that you'll see after 2 years. But we are starting to test more with different pricing strategies and in some cases, we are offering pricing that does not have that step up. So we're kind of test and learn to figure out the right optimization.

Got it. That's helpful. And then last question on M&A. You mentioned that you'll be looking for opportunities at the [ CitCom ] level. Could you just give us some idea of what kind of assets you're looking at? I'm assuming you're only looking at fiber assets. What kind of profile are you looking at for those assets? .

Yes. with the bringing in-house of the proceeds from the T-Mobile transaction and the expected proceeds from the AT&T and Verizon transactions. I'd say we are at the beginning point of considering what M&A opportunities would make sense. And in particular, we are focused on fiber opportunities and fiber opportunities that would be synergistic with our existing properties and footprint. So it's just at the beginning of that analysis and more to come in the future.

Our last question comes from the line of Sergey Dluzhevskiy from Gabelli.

My first question is for Doug. Doug, maybe you could talk a little bit about the main building blocks of your growth strategy for the tower business and the key steps that you're taking already to accelerate third-party allocations and what else on that front you expect to do in over the next 12 to 24 months, what you would be doing differently potentially as an independent provider and what parts of your tower business gives you a generally underappreciated by investors in your opinion?

Okay. Yes. Sure. So what we've done -- I'll start with the fact in the fourth quarter of 2024, we brought our sales team and intake operations in-house from an outsourced provider, hired ahead of sales, and that yielded great dividends for us. Our new colo applications in the first half of 2025 are up over 100% versus first quarter 2024. And that team is just doing a fantastic job. They're fully staffed, and we're really pleased with the progress they've made part of the revenue increase, you saw 12% quarter-over-quarter. Part of that was due to the application fees that we received in '25, we didn't get in '24, but even without those, we had 7% quarter-over-quarter increase.

The other thing we have is we have strong MLAs with all three carriers. They have compelling pricing carriers like them with favorable pricing, and it also provides good economics to us, and there's ease of implementation. And so we believe that helps us. Obviously, the T-Mobile new MLA is a tailwind for us. I'd also point in fact now we have array as a separate brand and no longer part of a carrier. I don't think that's a significant benefit, but I do think it provides some benefit more focused, we're perceived as a pure-play power company.

We also think there's tailwind in carrier investments in the next 3 years. So we're very optimistic about our future with respect to sales growth. doing all the right things with our team. And right now, we're very focused on getting to T-Mobile MLE implemented. That's a significant effort for organization and one that we will be successful and look forward to getting that completed.

My second question is for Kris on the TDS Telecom side. So I'll just say, fiber footprint expansion is a significant priority and you have your $1.8 million passings target. In addition to just scaling the fiber footprint and is new CEO coming in, how would you describe the top 2 or 3 operational and strategic priorities beyond just fiber expansion over the next few years? And what are the key steps that you're taking to improve conversion of your fiber passings into paying customers.

Yes. Sergey. So what I'll say, over the next several years, we do have a handful of top strategic priorities that we're marching towards First and foremost, like you said, is executing on the build plan and expanding our fiber footprint. We have a few large programs in place, E-ACAM, which we're very excited about to bring fiber to more rural areas. We have our expansion program, which is continuing to build to the 100 communities and hopefully even accelerate those. You also heard Vicki and I talk about edge out opportunities. So we're going to continue to look at even expanding the fiber footprint further. ,[indiscernible] one.

Number two is executing our sales and marketing and driving revenue and driving penetration. And so there's a lot of different efforts in place. This is where Ken Dixon and his background is great because this is the sweet spot. And so there's a lot of initiatives in place to ensure that we hit our targeted penetration curves as we deliver those addresses.

And then lastly is the -- executing on our business transformation. So last quarter, I talked about how we've been transforming into a fiber company in a meaningful way over the last few years. But now we're also focused on streamlining our operations, enhancing elements of the customer experience, all to make sure we're driving margin improvement OCF expansion over the next several years. So those are really our top 3 priorities as we look over the next few years.

Great. And my last question is for Walter. Walter, as you beyond -- or will be the two remaining announced deals at Array and potentially additional spectrum monetizations. How do the two companies to [indiscernible] Telecom, which is largely a consumer and a fiber operator and array which is a midsized tower companies additional spectrum and wireless partnership assets, how do those companies fit together.

And in your opinion, that's having these two companies under the same holding company umbrella, in the current form or otherwise to optimize shareholder value going forward? And also what types of additional shareholder value enhancing moves beyond the announced transactions could we be looking for in terms of things that would come out of your toolkit.

Sergey, thank you. Obviously, we've been focused immensely on the very near term in terms of the T-Mobile transaction, the AT&T and Verizon transactions. Over the intermediate horizon or near to intermediate horizon, we do have the additional spectrum that you spoke to, and we do believe we will be successful in monetizing that for many of the reasons that Doug stated. That frees up a lot of capital. And you're right that a tower business, which we believe will be very successful is different in concept perhaps than a largely consumer or small business-focused fiber business. So they are different in concept, but they're in the same industry and the financial power that the tower business can bring to the enterprise is very significant.

So from my perspective, I view the combined power of these two businesses as we improve the execution that we have. And I think there will be a lot of value unlocked through improved execution as Doug and Kris have each indicated. And that will redound greatly to shareholder value.

In terms of longer-term ideas with respect to other ways to unlock value, those will be considered. They're not the nearest term priority, but they are very much on our mind, and we will continue to report to you as we go forward. I do think there are synergies between the type of thinking that goes into building a tower business and making it successful, as well as the type of thinking that goes into making the fiber business successful. So they are different, but they are related in good ways that are productive.

Thank you. This concludes our Q&A session. I will now turn the call over back to Colleen Thompson for closing remarks.

Hey, thanks, everyone, for joining us today. Please reach out to Investor Relations with any additional questions, and have a great week.

This concludes today's conference, you may now disconnect.