TELEPHONE DATA SYSTEMS INC DE

TDS Consolidated

The following discussion and analysis compares financial results for the three and nine months ended September 30, 2024, to the three and nine months ended September 30, 2023.

1 Consists of corporate and other operations and intercompany eliminations.

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

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

Refer to individual segment discussions in this MD&A for additional details on operating revenues and expenses at the segment level.

Equity in earnings of unconsolidated entities

Equity in earnings of unconsolidated entities represents TDS’ share of net income from entities in which it has a noncontrolling interest and that are accounted for using the equity method or the net asset value practical expedient. TDS’ investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pre-tax income of $16 million and $14 million for the three months ended September 30, 2024 and 2023, respectively and $48 million and $52 million for the nine months ended September 30, 2024 and 2023, respectively. See Note 9 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.

Interest expense

Interest expense increased for the three and nine months ended September 30, 2024 due primarily to an increase in borrowings under the TDS term loan agreements, partially offset by a decrease in the average principal balance outstanding on the receivables securitization agreement. See Market Risk for additional information regarding maturities of long-term debt and weighted average interest rates.

Income tax expense

Income tax expense decreased for the three and nine months ended September 30, 2024 due primarily to the deferred tax benefit on the impairment of certain wireless spectrum licenses recorded in the third quarter of 2024.

TDS calculated income taxes for the three and nine months ended September 30, 2024, based on an estimated year-to-date tax rate. The effective tax rates are expected to vary in the fourth quarter and the annual period of 2024 due primarily to fluctuations in Income before income taxes, the impairment of wireless spectrum licenses in the third quarter of 2024, and tax impacts of divestiture activities. See Note 7 — Divestitures in the Notes to Consolidated Financial Statements for additional information.

Net income (loss) attributable to noncontrolling interests, net of tax

Net income (loss) attributable to noncontrolling interests, net of tax includes the noncontrolling public shareholders’ share of UScellular’s net income, the noncontrolling shareholders’ or partners’ share of certain UScellular subsidiaries’ net income and other TDS noncontrolling interests.

Earnings

Three Months Ended

Net income (loss) decreased due primarily to the impairment of UScellular wireless spectrum licenses and lower operating revenues, partially offset by lower cash operating and tax expenses. Adjusted EBITDA increased due primarily to lower operating expenses, partially offset by lower operating revenues.

Nine Months Ended

Net income (loss) decreased due primarily to the impairment of UScellular wireless spectrum licenses as well as lower operating revenues and higher interest expense, partially offset by lower cash operating and tax expenses. Adjusted EBITDA increased due primarily to lower operating expenses, partially offset by lower operating revenues.

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