TELEPHONE & DATA SYSTEMS INC /DE/

Business Overview

TDS Telecom owns, operates and invests in high-quality networks, services and products in a mix of small to mid-sized urban, suburban and rural communities throughout the United States. TDS Telecom is a wholly-owned subsidiary of TDS and provides a wide range of broadband, video, voice and wireless communications services to residential, commercial and wholesale customers, with the constant focus on delivering outstanding customer service.

The following MD&A omits discussion of 2024 compared to 2023. 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, 2024, filed with the SEC on February 21, 2025, for that discussion.

OPERATIONS

▪Serves 1.1 million connections in 30 states.

▪Employs approximately 3,500 associates.

TDS Telecom Mission and Strategy

TDS Telecom's mission is to provide high-quality communications services to connect people and businesses, support education, and strengthen communities.

TDS Telecom seeks to be the preferred broadband provider by offering fiber-rich networks, high-quality products and services, and a seamless customer experience. TDS Telecom's strategic efforts include:

▪Provide high-quality broadband services in its markets with the ability to provide value-added bundling with video, voice and wireless service options.

▪Drive growth by investing in fiber deployment. TDS Telecom seeks to grow its operations by creating clusters of markets in attractive, growing locations and may seek to acquire and/or divest of assets to support its strategy.

Operational Overview — TDS Telecom

Total Service Address Mix

As of December 31,

TDS Telecom increased its service addresses 4% from a year ago to 1.9 million as of December 31, 2025, through footprint expansion. TDS Telecom services 48% of incumbent service addresses with fiber.

TDS Telecom offers 1Gig+ service to 78% of its total footprint as of December 31, 2025, compared to 74% a year ago.

Total connections decreased due to legacy voice, video, and competitive local exchange carrier (CLEC) connection declines, partially offset by broadband and wireless connection growth.

Divestitures in 2025 resulted in a decrease of 19,400 connections, including 7,700 residential broadband connections and 45,000 service addresses.

Residential Broadband Connections by Speed

As of December 31,

Residential broadband customers continue to take higher speeds with 86% taking speeds of 100 Mbps or greater and 43% taking 1Gig+.

Residential Revenue per Connection

For the year ended December 31,

Total residential revenue per connection increased 1% for 2025, due primarily to price increases.

Financial Overview — TDS Telecom

The following discussion and analysis compares financial results for the year ended December 31, 2025, to the year ended December 31, 2024.

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.

Operating Revenues

Residential revenues consist of:

•Broadband services

•Video services, including IPTV, traditional cable programming and satellite offerings

•Voice services

•Wireless services

Commercial revenues consist of:

•High-speed and dedicated business internet services

•Video services

•Voice services

Wholesale revenues consist of:

•Network access services primarily related to interexchange and wireless carriers for carrying data and voice traffic on TDS Telecom's networks

•Federal and state regulatory support, including E-ACAM

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

Total operating revenues

Residential revenues decreased for 2025 due primarily to divestitures, declines in voice and video connections, and promotional activity, partially offset by growth in broadband connections and price increases.

Commercial revenues decreased for 2025 due primarily to declining connections in CLEC markets, decreases in ad revenue, and divestitures.

Wholesale revenues decreased for 2025, due primarily to the continued decline of special access circuits and divestitures, partially offset by final E-ACAM support adjustments.

Total operating revenues decreased for 2025 by $18.5 million due to the 2024 and 2025 divestitures.

Cost of operations decreased for 2025 due primarily to lower video programming costs, costs to provide legacy services, plant and maintenance costs, and information processing costs, partially offset by higher employee-related expenses, vehicle costs, and lease acceleration costs.

Selling, general and administrative

Selling, general and administrative expenses increased for 2025 due primarily to increased employee-related expenses and lease acceleration costs, partially offset by lower bad debts expense and property taxes.

Depreciation, amortization and accretion

Depreciation, amortization and accretion increased for 2025 due primarily to changes in asset useful lives and capital expenditures on fiber assets.

(Gain) loss on asset disposals, net

Losses on asset disposals increased for 2025 due primarily to the write-off of cancelled projects.

(Gain) loss on sale of business and other exit costs, net

See Note 7 — Acquisitions and Divestitures in the Notes to Consolidated Financial Statements for additional information regarding divestitures of certain markets in both 2025 and 2024.