TELEPHONE DATA SYSTEMS INC DE

Business Overview

TDS Telecom owns, operates and invests in high-quality networks, services and products in a mix of small to mid-sized urban, suburban and rural communities throughout the United States. TDS Telecom is a wholly-owned subsidiary of TDS and provides a wide range of broadband, video and voice communications services to residential, commercial and wholesale customers, with the constant focus on delivering outstanding customer service.

OPERATIONS

▪Serves 1.2 million connections in 32 states.

▪Employs approximately 3,600 associates.

TDS Telecom Mission and Strategy

TDS Telecom's mission is to create a better world by providing high-quality communications services to connect people and businesses, support education, and strengthen communities.

TDS Telecom's strategic efforts include:

▪TDS Telecom strives to provide high-quality broadband services in its markets with the ability to provide value-added bundling with video and voice service options. TDS Telecom focuses on driving growth by investing in fiber deployment primarily in its expansion markets and also in its incumbent markets that have historically utilized copper and coaxial cable technologies.

▪TDS Telecom seeks to grow its operations by creating clusters of markets in attractive, growing locations and may seek to acquire and/or divest of assets to support its strategy.

Operational Overview — TDS Telecom

Total Service Address Mix

As of December 31,

TDS Telecom increased its service addresses 12% from a year ago to 1.7 million as of December 31, 2023, through network expansion.

TDS Telecom offers 1Gig+ service to 72% of its total footprint as of December 31, 2023, compared to 66% a year ago.

Total connections decreased due to legacy voice, video, and competitive local exchange carrier (CLEC) connections declines, partially offset by broadband connection growth.

A majority of TDS Telecom's residential customers take advantage of bundling options as 56% of customers subscribe to more than one service.

Residential Broadband Connections by Speed

As of December 31,

Residential broadband customers continue to choose higher speeds with 76% taking speeds of 100 Mbps or greater and 16% choosing 1Gig+.

Residential Revenue per Connection

For the year ended December 31,

Total residential revenue per connection increased 4% for 2023, due to price increases and product mix changes, partially offset by increased promotional activity.

Financial Overview — TDS Telecom

The following discussion and analysis compares financial results for the year ended December 31, 2023, to the year ended December 31, 2022.

N/M - Percentage change not meaningful.

1 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

2 Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.

Operating Revenues

Residential revenues consist of:

•Broadband services

•Video services, including IPTV, traditional cable programming and satellite offerings

•Voice services

Commercial revenues consist of:

•High-speed and dedicated business internet services

•Video services

•Voice services

Wholesale revenues consist of:

•Network access services primarily to interexchange and wireless carriers for carrying data and voice traffic on TDS Telecom's networks

•Federal and state regulatory support, including ACAM

Key components of changes in the statement of operations items were as follows:

Total operating revenues

Residential revenues increased for 2023 due primarily to price increases and growth in broadband connections, partially offset by promotional activity and a decline in voice and video connections.

Commercial revenues decreased for 2023 due primarily to declining connections in CLEC markets.

Cost of services

Cost of services increased for 2023 due primarily to higher video programming costs, information processing costs, and employee-related expenses, partially offset by a decrease in cost to provide legacy services.

Selling, general and administrative

Selling, general and administrative expenses increased for 2023 due primarily to increases to support current and future growth, including employee-related expenses, information processing, and advertising and marketing expenses.

Depreciation, amortization and accretion

Depreciation, amortization and accretion increased for 2023 due primarily to increased capital expenditures on new fiber assets and customer premise equipment.

Loss on impairment of goodwill

During the fourth quarter of 2023, TDS Telecom recorded a $547 million loss on impairment of Goodwill. See Note 7 — Intangible Assets in the Notes to Consolidated Financial Statements for additional information.