TELEPHONE & DATA SYSTEMS INC /DE/

Sources of Liquidity

TDS believes that existing cash and investment balances, distributions from unconsolidated entities, expected cash flows from operating activities, expected and potential dispositions, dividends and funds available under its financing agreements 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. TDS expects a cash income tax liability on the T-Mobile transaction of between $75.0 million and $125.0 million, most of which will be paid during the three months ending December 31, 2025.

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.

Financing

Revolving Credit Agreements

TDS and Array have unsecured revolving credit agreements with maximum borrowing capacities of $400.0 million and $300.0 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 included 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 dates to April 2026. Additionally, the amendment to the Array revolving credit agreement included 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 $500.0 million, which provision will automatically reduce the maximum borrowing capacity of the Array revolving credit agreement from $300.0 million to $150.0 million five business days after Array's receipt of such net proceeds. As of September 30, 2025, there were no outstanding borrowings under the agreements, except for letters of credit, and TDS' and Array's unused borrowing capacity was $399.4 million and $299.9 million, respectively.

Unsecured Term Loan Agreements

In August 2025, TDS repaid the entire outstanding borrowings under all of its unsecured term loan agreements of $781.3 million.

In August 2025, Array repaid the entire outstanding borrowings under its unsecured term loan agreements of $713.3 million.

In August 2025, Array borrowed $325.0 million under a term loan agreement with CoBank, ACB. 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%.

Secured Term Loan Agreement

In August 2025, TDS repaid the entire outstanding borrowing under its secured term loan agreement of $300.0 million. TDS incurred a termination penalty of $8.9 million as a result of the repayment.

Export Credit Financing Agreements

At September 30, 2025, TDS has a term loan credit facility with Export Development Canada with $150.0 million of principal outstanding.

In August 2025, Array repaid the entire outstanding borrowings under its term loan agreement with Export Development Canada of $150.0 million.

Receivables Securitization Agreement

Array, through its subsidiaries, had a receivables securitization agreement that permitted securitized borrowings using its equipment installment plan receivables. In May 2025, Array repaid the entire outstanding borrowings under the agreement of $2.0 million. In July 2025, Array terminated the receivables securitization agreement.

Debt Covenants

The TDS and Array revolving credit agreements, term loan agreement with CoBank and the TDS export credit financing 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. Following the sale of the Array wireless operations to T-Mobile, TDS and Array are required 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. 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 September 30, 2025 with all such financial covenants.

Other Long-Term Debt

The T-Mobile transaction to sell the wireless operations and select spectrum assets included a debt exchange offer whereby debt issued by Array could be exchanged for debt issued by T-Mobile, which reduced the cash portion of the purchase price. The debt exchange offering closed on August 5, 2025 and resulted in the exchange of $1,680.1 million of long-term debt comprised of the following Array notes: $488.9 million of 6.7% Senior Notes, $394.2 million of 6.25% Senior Notes, $401.5 million of 5.5% March 2070 Senior Notes and $395.5 million of 5.5% June 2070 Senior Notes. As a result, on August 5, 2025, after the debt exchange, Array retained $363.9 million of senior notes, consisting of $55.1 million of 6.7% Senior Notes, $105.8 million of 6.25% Senior Notes, $98.5 million of 5.5% March 2070 Senior Notes, and $104.5 million of 5.5% June 2070 Senior Notes. The write-off of the unamortized discount and debt issuance costs related to the exchanged debt of $47.7 million was recorded to (Gain) loss on sale of business and other exit costs, net within discontinued operations during the three months ended September 30, 2025.

See Note 11 — Debt 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. On September 2, 2025, Fitch Ratings confirmed the TDS and Array BB+ issuer credit ratings and changed the outlook to stable.

Capital Expenditures

Capital expenditures for continuing operations (i.e., additions to property, plant and equipment), which include the effects of accruals and capitalized interest, for the nine months ended September 30, 2025 and 2024, were as follows:

Capital Expenditures

TDS Telecom’s capital expenditures for the nine months ended September 30, 2025 and 2024, were $251.5 million and $242.1 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.

Array's capital expenditures for the nine months ended September 30, 2025 and 2024, were $17.0 million and $11.6 million, respectively. Capital expenditures were used principally for tower maintenance, purchases of land interests and tower builds.

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 7 — Acquisitions and 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; and E-ACAM obligations. Refer to Liquidity and Capital Resources within this MD&A for additional information.

Common Share Repurchase Program

During the nine months ended September 30, 2025, TDS repurchased 1,077,564 Common Shares for $40.7 million at an average cost per share of $37.77. As of September 30, 2025, the total maximum dollar value of the TDS Common Shares that may yet be repurchased under TDS' program was $91.3 million. For additional information related to the current repurchase authorization, see Unregistered Sales of Equity Securities and Use of Proceeds.

During the nine months ended September 30, 2025, Array repurchased 328,835 Common Shares for $20.9 million at an average cost per share of $63.49. As of September 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 in the third quarter of 2025 and 2024. The TDS Board of Directors may continue to declare regular cash dividends. 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 cash 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 third 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 third 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 was paid on August 19, 2025. TDS, which owns 82.0% of the equity of Array as of September 30, 2025, received 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.