TELEPHONE & DATA SYSTEMS INC /DE/

Business Overview

Array connects America through digital infrastructure by leasing tower space to tenants and providing ancillary services. Array also holds noncontrolling interests in primarily wireless operating companies and holds certain wireless spectrum licenses. As of September 30, 2025, Array is an 82.0%-owned subsidiary of Telephone and Data Systems, Inc. (TDS). Through July 31, 2025, Array provided wireless communication services; these operations and certain wireless spectrum licenses were disposed of on August 1, 2025, as discussed further above.

Towers

Array seeks to grow tower revenue primarily through increasing colocations on existing towers and amendments to existing colocations. Array seeks to provide unique tower locations, attractive terms and streamlined implementation to wireless network operators, internet service providers, government and public safety agencies, broadcast and media companies, and other businesses. As of September 30, 2025, Array owns 4,449 towers in 19 U.S. states.

Noncontrolling interest investments

Array holds noncontrolling interests in primarily wireless operating companies that generate material amounts of income and cash distributions. These entities primarily consist of wireless entities managed by Verizon and AT&T. The noncontrolling wireless entities managed by Array also sold their wireless operations to T-Mobile in separate transactions on August 1, 2025, coterminous with the sale of Array's consolidated wireless operations sold to T-Mobile on the same date. Going forward, these noncontrolling entities that are managed by Array consist primarily of tower operations.

Retained spectrum

Array holds wireless spectrum that is subject to sale agreements described above, and additional wireless spectrum not subject to pending sale agreements that Array seeks to opportunistically monetize. As of September 30, 2025, the book value of the remaining spectrum not subject to pending sale agreements was $1,591.2 million and includes primarily C-Band spectrum. Array incurred costs related to the management of the retained spectrum of $2.4 million during the three months ended September 30, 2025.

1 Excludes Interim Sites whereby T-Mobile is leasing up to 1,800 sites for a period of up to 30 months subject to the terms and conditions of the MLA.

Financial Overview — Array

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.

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

Total operating revenues

Tower site rental revenues increased for the three and nine months ended September 30, 2025, primarily as a result of the execution of the T-Mobile MLA, pursuant to which T-Mobile leases space on an additional minimum 2,015 Array-owned towers for a minimum of 15 years and leases space on approximately 1,800 Array-owned towers on an interim basis. The duration of the interim lease is 30 months, and T-Mobile may cancel such interim leases at their option on a tower-by-tower basis at any time. We expect T-Mobile to cancel the interim leases prior to the full 30-month duration, and expect revenue to decline correspondingly. Revenue from the interim leases in the three months ended September 30, 2025, which represents two months of revenue from the August 1, 2025 MLA commencement date, was $5.4 million. Further, the MLA extends the license term for approximately 600 existing T-Mobile colocations on Array towers for a new 15-year term commencing on August 1, 2025.

Site rental revenues from Echostar Communications could be negatively impacted in future periods; see Risk Factors in this report for additional information.

Array fully insourced sales and leasing operations in early 2025, and as a result of this change, began retaining application and related fees in 2025. Prior to this operational change, a large majority of these fees were retained by the outsourced provider as a component of their compensation.

Cost of operations

Cost of operations increased in the three months ended September 30, 2025 primarily due to an increase in cell site ground rent, partially attributable to a discrete ground rent benefit recorded in the three months ended September 30, 2024. For the nine months ended September 30, 2025, Cost of operations increased both due to cell site ground rent increases related to annual escalators and additional sites, and increased cell site maintenance expenses.

Selling, general and administrative

SG&A expenses decreased for the three and nine months ended September 30, 2025, due primarily to decreases in various general and administrative expenses, partially offset by an increase in bad debts expense. Array estimates that approximately 40% of SG&A expenses in the three months ended September 30, 2025 include costs to support the following activities: wireless operations prior to divestiture that are not reflected as discontinued operations, wireless operations winddown costs incurred after the August 1, 2025 close date, administrative expenses associated with managing spectrum assets, and expenses associated with the ongoing strategic alternatives review. Array expects legacy wireless operations winddown expenses to persist at third quarter of 2025 levels into the first half of 2026, and while some winddown expenses will remain after that time (e.g., legal matters, taxes), Array expects such winddown expenses to begin declining in the second half of 2026.

Loss on impairment of licenses

Loss on impairment of licenses decreased for the three and nine months ended September 30, 2025, due to decreases in the amount of impairments recorded on wireless spectrum licenses. See Note 8 — Intangible Assets in the Notes to Consolidated Financial Statements for additional information regarding these impairments.

Equity in earnings of unconsolidated entities

Equity in earnings of unconsolidated entities represents Array’s 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. Array holds noncontrolling interests in three entities in the state of Iowa that sold their wireless operations to T-Mobile in three separate transactions on August 1, 2025, the same date that Array sold its wireless operations to T-Mobile. As a result of the Iowa entities' sale of their wireless operations, these entities recognized a gain on sale, and Array's proportionate share of that gain was included in Equity in earnings of unconsolidated entities in the amount of $34.1 million, which was the primary driver of the year-over-year increase in the three and nine months ended September 30, 2025. See Note 9 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.

Interest and dividend income

Interest and dividend income increased for the three and nine months ended September 30, 2025 primarily due to an increase in interest income earned on the proceeds from the sale of the wireless operations to T-Mobile.

Interest expense

Interest expense from continuing operations excludes interest costs in all periods associated with term loans repaid, and debt exchanged, in conjunction with the sale of Array's wireless operations to T-Mobile. As a result, the increase in interest expense is primarily attributable to the new term loanthat Array entered into during the three months ended September 30, 2025.

Short-term imputed spectrum lease income

Short-term imputed lease income increased for the three and nine months ended September 30, 2025 due to the execution of the Short-Term Spectrum Manager Lease Agreement and Short-Term Spectrum Manager Sublease Agreements, which provide T-Mobile with an exclusive license to use certain Array spectrum assets and leases at no cost for up to one year. The portion of the purchase price allocated to the use of this spectrum will be amortized over one year.

Income tax expense (benefit)

Income tax benefit on continuing operations increased for the three and nine months ended September 30, 2025, due primarily to favorable reductions to valuation allowances related to deferred tax assets that are now likely to be realized by the taxable income generated from the sale of wireless operations and select spectrum assets to T-Mobile, and/or the pending License Purchase Agreements currently classified as held for sale as of September 30, 2025. This increase was partially offset by a decrease in the deferred tax benefit on the impairment of certain wireless spectrum licenses, which was smaller in the third quarter of 2025 than the impairment recorded in the third quarter of 2024.