TELEPHONE & DATA SYSTEMS INC /DE/

Sources of Liquidity

TDS believes that existing cash and investment balances, distributions from unconsolidated entities, funds available under its financing agreements, its ability to obtain future external financing, expected and potential dispositions, dividends and expected cash flows from operating activities will provide sufficient liquidity for TDS to meet its day-to-day operating needs and debt service requirements. In addition, TDS retains the ability, as described below, to reduce its capital expenditures to lower its funding needs.

TDS may require substantial additional funding for, among other uses, capital expenditures, fiber deployments and E-ACAM builds, making additional investments including acquisition of land, land easements or additional towers, agreements to purchase goods or services, leases, repurchases of shares, or payment of dividends. It may be necessary from time to time to increase the size of its existing credit facilities, to amend existing or put in place new credit agreements, to obtain other forms of financing, issue equity securities, or to divest assets in order to fund potential expenditures. TDS' liquidity would be adversely affected if it is unable to obtain short or long-term financing with acceptable terms.

Cash and Cash Equivalents

Cash and cash equivalents include cash and money market investments. The primary objective of TDS’ Cash and cash equivalents investment activities is to preserve principal. TDS does not have direct access to Array cash.

Cash and Cash Equivalents

The majority of TDS’ Cash and cash equivalents are held in money market funds that purchase only debt issued by the U.S. Treasury or U.S. government agencies. Refer to the Consolidated Cash Flow Analysis for additional information related to changes in Cash and cash equivalents.

In addition to Cash and cash equivalents, TDS and Array had available undrawn borrowing capacity from the following debt facilities at June 30, 2025.

Financing

Revolving Credit Agreements

TDS and Array have unsecured revolving credit agreements with maximum borrowing capacities of $400 million and $300 million, respectively. Amounts under the agreements may be borrowed, repaid and reborrowed from time to time until maturity. In April 2025, TDS and Array amended the revolving credit agreements to extend the maturity dates to July 2027 and allow for permitted dispositions, as specified in the amendments. The amendments also include a provision that was triggered upon the sale of the Array wireless operations to T-Mobile, which occurred on August 1, 2025, which accelerated the maturity date to the earliest of (i) 270 days following the consummation of the sale of the Array wireless operations to T-Mobile, (ii) the date on which Array receives net proceeds from the cumulative sale of wireless spectrum licenses to AT&T, Verizon and other parties that equals or exceeds $1.1 billion, or (iii) July 20, 2027. Additionally, the amendment to the Array revolving credit agreement includes a provision that will be triggered upon Array receiving net proceeds from the cumulative sale of wireless spectrum licenses to AT&T, Verizon and other parties that equals or exceeds $500 million, which provision would automatically reduce the maximum borrowing capacity of the Array revolving credit agreement from $300 million to $150 million five business days after Array's receipt of such net proceeds. As of June 30, 2025, there were no outstanding borrowings under the agreements, and TDS' and Array's unused borrowing capacity was $399 million and $300 million, respectively.

Unsecured Term Loan Agreements

At June 30, 2025, TDS had unsecured term loan agreements with $781 million of principal outstanding and unused borrowing capacity of $75 million. On August 1, 2025, TDS terminated the commitment for the $75 million unused borrowing capacity. In August 2025, TDS expects to repay the entire outstanding borrowings under these term loans.

At June 30, 2025, Array had unsecured term loan agreements with $713 million of principal outstanding. On August 4, 2025, Array repaid the entire outstanding borrowings under these term loans.

In June 2025, Array entered into an amendment to its term loan agreement with CoBank, ACB for an additional $800 million of borrowing capacity. The term loan may be drawn prior to November 1, 2025; amounts not drawn by that time will cease to be available. The maturity date of the term loan is June 2030. Borrowings bear interest at a rate of Secured Overnight Financing Rate (SOFR) plus 2.50%. Array expects to draw $325 million under the amended agreement in August 2025.

Secured Term Loan Agreement

TDS has a secured term loan agreement with maximum borrowing capacity of $300 million. In February 2025, TDS amended the agreement to extend the maturity date to the earlier of (i) September 2026 and (ii) the scheduled maturity date of TDS' existing revolving credit agreement (which had a then existing maturity date of July 2026, which has since been extended as described above). In April 2025, TDS amended the secured term loan agreement to extend the maturity date to the earliest of (i) 270 days following the consummation of the sale of the Array wireless operations to T-Mobile, (ii) the date on which Array receives net proceeds from the cumulative sale of wireless spectrum licenses to AT&T, Verizon and other parties that equals or exceeds $1.1 billion, or (iii) July 20, 2027, and to allow for permitted dispositions, as specified in the amendment. As of June 30, 2025, the outstanding borrowings under the agreement were $300 million, which is the full amount available under the agreement. In August 2025, TDS expects to repay the entire outstanding borrowings under its secured term loan agreement.

Export Credit Financing Agreements

At June 30, 2025, TDS and Array each have a term loan credit facility with Export Development Canada with $150 million of principal outstanding. On August 4, 2025, Array repaid the entire outstanding borrowings under its agreement.

Receivables Securitization Agreement

Array, through its subsidiaries, had a receivables securitization agreement that permitted securitized borrowings using its equipment installment plan receivables. During the six months ended June 30, 2025, Array repaid$2 million under the agreement. As of June 30, 2025, there were no outstanding borrowings under the agreement, and the unused borrowing capacity was$450 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement. On July 31, 2025, Array terminated the receivables securitization agreement.

Debt Covenants

The TDS and Array revolving credit agreements, term loan agreements including the secured term loan, export credit financing agreements and the Array receivables securitization agreement require TDS or Array, as applicable, to comply with certain affirmative and negative covenants, which include certain financial covenants that may restrict the borrowing capacity available. TDS and Array are required to maintain the Consolidated Leverage Ratio, based on gross debt, as of the end of any fiscal quarter at a level not to exceed 3.75 to 1.00 from April 1, 2025 and thereafter. TDS and Array are also required to maintain the Consolidated Interest Coverage Ratio at a level not lower than 3.00 to 1.00 as of the end of any fiscal quarter. TDS and Array believe they were in compliance as of June 30, 2025 with all such financial covenants.

The TDS $375 million term loan agreement with a maturity date of May 2029 requires TDS to comply with certain affirmative and negative covenants, which includes a financial covenant that may restrict the borrowing capacity available. TDS is required to maintain the Consolidated Leverage Ratio as of the end of any fiscal quarter at a level not to exceed 4.25 to 1.00 from April 1, 2025 and thereafter. TDS believes that it was in compliance as of June 30, 2025 with such financial covenant.

In April 2025, the TDS and Array revolving credit agreements, Array $300 million unsecured term loan agreement and TDS $300 million secured term loan agreement were amended to require, upon the consummation of the sale of the Array wireless operations to T-Mobile, TDS and Array to maintain the Consolidated Leverage Ratio, based on net debt, as of the end of any fiscal quarter from and including the quarter in which such sale occurs at a level not to exceed 3.50 to 1.00.

In June 2025, the TDS export credit financing agreement was amended to require, upon the consummation of the sale of the Array wireless operations to T-Mobile, TDS to maintain the Consolidated Leverage Ratio, based on net debt, as of the end of any fiscal quarter from and including the quarter in which such sale occurs at a level not to exceed 3.50 to 1.00.

In June 2025, the Array term loan agreement with CoBank, ACB was amended to require, upon the consummation of the sale of the Array wireless operations to T-Mobile, Array to maintain the Consolidated Leverage Ratio, based on net debt, as of the end of any fiscal quarter from and including the quarter in which such sale occurs at a level not to exceed 3.50 to 1.00.

See Note 8 — Debt and Note 12 — Subsequent Events in the Notes to Consolidated Financial Statements for additional information related to financing activities.

Credit Ratings

On August 1, 2025, Standard & Poor’s updated the TDS and Array issuer credit ratings from BB to BBB- with a stable outlook. On August 8, 2025, Moody’s confirmed the TDS and Array Ba1 issuer credit ratings and changed the outlook to stable.

Capital Expenditures

Capital expenditures (i.e., additions to property, plant and equipment and system development expenditures; excludes wireless spectrum license additions), which include the effects of accruals and capitalized interest, for the six months ended June 30, 2025 and 2024, were as follows:

Capital Expenditures

Array’s capital expenditures for the six months ended June 30, 2025 and 2024, were $132 million and $295 million, respectively.

In 2019-2023, Array focused capital expenditures on 5G coverage and predominantly used low-band spectrum to launch 5G services in portions of substantially all of its markets. During 2023 and 2024, Array focused on deploying 5G over its mid-band spectrum, largely overlapping areas already covered with low-band 5G service to enhance speed and capacity for Array’s mobility and fixed wireless services. Capital expenditures decreased by $163 million or 55% in line with the expectations that continued 5G deployment in 2025 focused on adding speed and capacity to existing areas.

Capital expenditures for the full year 2025 were used principally for the following purposes:

▪Continued deployment of 5G using mid-band spectrum to provide additional speed and capacity to accommodate increased data usage by wireless customers; and

▪Investment in information technology to support existing and new services and products.

TDS Telecom’s capital expenditures for the six months ended June 30, 2025 and 2024, were $149 million and $164 million, respectively.

Capital expenditures for the full year 2025 are expected to be between $375 million and $425 million. These expenditures are expected to be used principally for the following purposes:

▪Continue to expand fiber deployment;

▪Support broadband growth and success-based spending; and

▪Maintain and enhance existing infrastructure including build-out requirements of state broadband and E-ACAM programs.

TDS intends to finance its capital expenditures for 2025 using primarily Cash flows from operating activities, dividends and existing cash balances.

Divestitures

TDS is engaged and may in the future be engaged in negotiations (subject to all applicable regulations) relating to the divestiture of companies, properties and assets. In general, TDS does not disclose such transactions until there is a definitive agreement.

See Note 6 — Divestitures in the Notes to Consolidated Financial Statements for additional information related to divestitures.

Other Obligations

TDS will require capital for future spending on existing contractual obligations, including long-term debt obligations; preferred stock dividend obligations; lease commitments; E-ACAM obligations; agreements for software licensing; long-term marketing programs; and other agreements to purchase products or services. TDS has taken steps to reduce and defer capital expenditures to lower its funding needs. Refer to Liquidity and Capital Resources within this MD&A for additional information.

Common Share Repurchase Program

During the six months ended June 30, 2025, Array repurchased 328,835 Common Shares for $21 million at an average cost per share of $63.49. As of June 30, 2025, the total cumulative amount of Array Common Shares authorized to be repurchased is 658,107.

Dividends

TDS paid quarterly dividends per outstanding share of $0.04 and $0.19 in the second quarter of 2025 and 2024, respectively. It is uncertain at this time how the outcome of the strategic review process for Array, TDS' available opportunities to reinvest in its businesses, or TDS' ongoing liquidity needs, may impact the decisions of the TDS Board of Directors regarding the declaration of future dividends.

TDS paid quarterly dividends per outstanding Series UU depositary share (each representing 1/1,000th of a Preferred Share)of $0.414 in the second quarter of 2025 and 2024.

TDS paid quarterly dividends per outstanding Series VV depositary share (each representing 1/1,000th of a Preferred Share) of $0.375 in the second quarter of 2025 and 2024.

Array has not paid any regular cash dividends in recent periods. In conjunction with the close of the transaction of the sale of Array's wireless operations to T-Mobile on August 1, 2025, on this same date, the Array Board of Directors declared a special dividend per Common and Series A outstanding share of $23.00 for shareholders of record on August 11, 2025, which will be payable on August 19, 2025. TDS, which owns 82.5% of the equity of Array as of June 30, 2025, will receive its pro-rata share of the special dividend. Array expects its pending sales of spectrum licenses to AT&T and Verizon, which are subject to regulatory approvals and customary closing conditions, to deliver substantial proceeds and expects its Board of Directors to declare special dividends upon closure of these transactions. The Array Board of Directors may declare regular cash dividends after the close of these transactions.