TELEPHONE & DATA SYSTEMS INC /DE/

TDS Consolidated

The following discussion and analysis compares financial results for the three and six months ended June 30, 2025, to the three and six months ended June 30, 2024. The financial results include the wireless operations that were sold to T-Mobile on August 1, 2025.

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 $20 million and $17 million for the three months ended June 30, 2025 and 2024, respectively and $35 million and $33 million for the six months ended June 30, 2025 and 2024, respectively. See Note 7 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.

Interest expense

Interest expense decreased for the three and six months ended June 30, 2025 due primarily to a decrease in the average principal balance outstanding on the Array term loan and receivables securitization agreements and the TDS revolving credit agreement, partially offset by an increase in borrowings under the TDS term loan agreements and lower capitalized interest. 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 six months ended June 30, 2025, due primarily to excess stock compensation deductions for awards vesting in the current period.

TDS calculated income taxes for the three and six months ended June 30, 2025, based on an estimated year-to-date tax rate. The effective tax rates are expected to vary in subsequent interim periods in 2025 due to fluctuations in Income (loss) before income taxes.

On July 4, 2025, H.R.1 – the One big beautiful bill Act (OBBBA) was enacted into law. The OBBBA makes several impactful changes, including 100% bonus depreciation for qualifying assets, domestic research cost expensing, and increasing the business interest expense limitation threshold. TDS expects these changes to result in favorable deferral of cash taxes in future periods.

Net income attributable to noncontrolling interests, net of tax

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

Earnings

Three Months Ended

Net income increased due primarily to lower operating and tax expenses and higher equity in earnings of unconsolidated entities, partially offset by lower operating revenues.

Adjusted EBITDA decreased due primarily to lower operating revenues, partially offset by lower operating expenses and higher equity in earnings of unconsolidated entities

Six Months Ended

Net income decreased due primarily to lower operating revenues, partially offset by lower operating and tax expenses.

Adjusted EBITDA decreased due primarily to lower operating revenues, partially offset by lower operating expenses.

*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.