TELEPHONE DATA SYSTEMS INC DE

TDS operates a capital-intensive business. TDS makes substantial investments to acquire wireless spectrum licenses and to construct and upgrade communications networks and facilities with a goal of creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue‑enhancing and cost-saving upgrades to TDS’ networks. Revenues from certain of these investments are long-term and in some cases are uncertain. To meet its cash-flow needs, TDS may need to delay or reduce certain investments, dividend payments or sell assets. Refer to Liquidity and Capital Resources within this MD&A and Note 7 — Divestitures in the Notes to Consolidated Financial Statements for additional information. Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, timing and other factors. The following discussion summarizes TDS’ cash flow activities in 2024 and 2023. For a discussion of 2022, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in TDS' Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 16, 2024.

2024 Commentary

TDS’ Cash, cash equivalents and restricted cash increased $114 million. Net cash provided by operating activities was $1,145 million due to net loss of $26 million adjusted for non-cash items of $1,070 million and distributions received from unconsolidated entities of $169 million, including $75 million in distributions from the LA Partnership. This was partially offset by changes in working capital items which decreased net cash by $68 million. The working capital changes were primarily driven by an increase in receivable balances and the timing of vendor payments, partially offset by reduced inventory balances.

Distributions from certain equity method investments operated by Verizon are expected to include incremental discrete amounts in 2025 related to proceeds received by Verizon in the tower transaction with Vertical Bridge that closed in December 2024. The process of administering these distributions is in progress and it is uncertain whether such incremental discrete amounts will result in an increase in total distributions from these partnerships in 2025 relative to 2024 given that the final amount of the incremental distributions is not known, and total distributions are dependent upon the operations of the underlying operating companies, and the general partners’ decisions on the amount and timing of any distributions, among other factors.

Cash flows used for investing activities were $754 million, due primarily to payments for property, plant and equipment of $884 million and payments for wireless spectrum licenses of $20 million, partially offset by cash received from divestitures of $147 million.

Cash flows used for financing activities were $277 million, due primarily to $200 million in repayments on the TDS revolving credit agreement, $188 million in repayments on the UScellular receivables securitization agreement, $67 million in repayments on the TDS and UScellular term loan agreements, payment of $104 million in dividends, cash paid for software licenses of $67 million and the repurchase of $54 million of UScellular Common Shares. These were partially offset by $300 million borrowed under the TDS term loan agreements, $100 million borrowed under the TDS revolving credit agreement and $40 million borrowed under the receivables securitization agreement.

2023 Commentary

TDS’ Cash, cash equivalents and restricted cash decreased $129 million. Net cash provided by operating activities was $1,142 million due to a net loss of $487 million adjusted for non-cash items of $1,496 million and distributions received from unconsolidated entities of $150 million, including $69 million in distributions from the LA Partnership. This was partially offset by changes in working capital items which decreased net cash by $17 million. The working capital changes were primarily driven by the timing of vendor payments and an increase in receivables, partially offset by reduced inventory balances and a federal income tax refund of $57 million received during the second quarter of 2023.

Cash flows used for investing activities were $1,327 million, which included payments for property, plant and equipment of $1,211 million and payments for wireless spectrum licenses of $130 million.

Cash flows provided by financing activities were $56 million, due primarily to $365 million borrowed under the TDS revolving credit agreement, $315 million borrowed under the UScellular receivables securitization agreement, $300 million borrowed under the TDS secured term loan agreement, and $100 million borrowed under the TDS export credit agreement. These were partially offset by $440 million in repayments on the UScellular receivables securitization agreement, $265 million in repayments on the TDS revolving credit agreement, a $60 million repayment on the UScellular EIP receivables repurchase agreement, payment of $153 million in dividends and cash paid for software license agreements of $66 million.