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TELEPHONE & DATA SYSTEMS INC /DE/ (TDS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 consolidated operating revenues were $1.240B, down 5.6% year over year; diluted EPS improved to $(0.10) versus $(4.64) in Q4 2023, with operating income turning positive at $37M versus a $(524)M loss a year ago .
  • UScellular showed improved churn and subscriber trajectory but still negative retail net adds; equipment loss increased $13M in Q4 on elevated promotions, and service revenues declined 2% YoY, pressuring adjusted EBITDA sequentially .
  • TDS Telecom executed its fiber strategy, delivering 129,000 marketable fiber addresses in 2024 and lifting full-year adjusted EBITDA 23% YoY; however, Q4 EBITDA growth moderated due to ramped sales and marketing to drive penetration .
  • 2025 guidance introduced for TDS Telecom: revenue $1.03–$1.07B, adjusted EBITDA $320–$360M, capex $375–$425M; UScellular is not providing 2025 guidance given the pending sale to T-Mobile targeted for mid-2025 .
  • Dividend declared for Q1 2025 ($0.04 per common share), reinforcing capital returns amid the transformation; catalysts include transaction closings, tower economics with planned AFFO reporting, and accelerated fiber build under E-ACAM .

What Went Well and What Went Wrong

  • What Went Well

    • TDS Telecom delivered 129,000 marketable fiber addresses in 2024, drove residential revenue up 6%, and increased adjusted EBITDA 23% YoY; “We now have more than 50% of our addresses served by fiber” .
    • Free cash flow turned positive for 2024 at $194M versus $(135)M in 2023, supported by lower capex and improved operating cash flows .
    • Strategic alternatives advanced: definitive agreement to sell UScellular wireless ops to T-Mobile and multiple spectrum sales agreements with Verizon, AT&T and others, with closing targeted mid-2025 .

  • What Went Wrong

    • Consolidated revenue fell 6% YoY in Q4; UScellular Q4 service revenues declined 2% YoY, with adjusted EBITDA down 11% sequentially, reflecting subscriber mix and promotional intensity .
    • UScellular remained negative on retail net adds despite improvements; postpaid handset net adds were still negative, highlighting ongoing competitive headwinds and lack of scale .
    • TDS Telecom’s Q4 adjusted EBITDA growth moderated as the company increased sales/marketing investments to improve penetration, creating near-term margin pressure into 2025 .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Operating Revenues ($USD Millions)$1,313 $1,224 $1,240
Operating Income (Loss) ($USD Millions)$(524) $(80) $37
Net Income (Loss) Attributable to TDS Common ($USD Millions)$(523) $(83) $(11)
Diluted EPS ($USD)$(4.64) $(0.73) $(0.10)
Operating Margin % (calc)(39.9%)(6.5%)3.0%
EPS ex intangible impairment (Non-GAAP)$(0.11) N/A$(0.09)
Versus EstimatesN/AN/AN/A

Segment performance

Segment MetricQ4 2023Q3 2024Q4 2024
UScellular Total Operating Revenues ($USD Millions)$1,000 $922 $970
UScellular Operating Income (Loss) ($USD Millions)$21 $(90) $(9)
UScellular Adjusted EBITDA ($USD Millions)$233 $269 $208
TDS Telecom Operating Revenues ($USD Millions)$261 $263 $264
TDS Telecom Operating Income (Loss) ($USD Millions)$(538) $10 $49
TDS Telecom Adjusted EBITDA ($USD Millions)$78 $83 $80

KPIs

KPI12/31/20233/31/20246/30/20249/30/202412/31/2024
USM Postpaid ARPU ($)$51.61 $51.96 $51.45 $52.04 $51.73
USM Postpaid ARPA ($)$131.63 $132.00 $130.41 $131.81 $131.10
USM Postpaid Churn (%)1.44% 1.22% 1.16% 1.25% 1.29%
USM Postpaid Connections (000s)4,106 4,051 4,027 3,999 3,985
USM Prepaid ARPU ($)$32.32 $32.25 $32.37 $32.01 $30.59
USM Capex ($MM)$148 $131 $165 $120 $162
USM Owned Towers (#)4,373 4,382 4,388 4,407 4,409
USM Colocations (#)2,390 2,397 2,392 2,418 2,444
TDS Telecom Total Broadband Connections (#)539,800 547,900 550,000 552,700 553,000
TDS Telecom Residential Revenue per Connection ($)$62.74 $64.58 $65.26 $65.41 $64.72
TDS Telecom Capex ($MM)$143 $87 $78 $78 $82

Notes: UScellular fixed wireless customers surpassed 150,000 by Q4 per management commentary .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
TDS Telecom Total Operating Revenues ($MM)FY 2025None$1,030–$1,070 Introduced
TDS Telecom Adjusted EBITDA ($MM, Non-GAAP)FY 2025None$320–$360 Introduced
TDS Telecom Adjusted OIBDA ($MM, Non-GAAP)FY 2025None$310–$350 Introduced
TDS Telecom Capex ($MM)FY 2025None$375–$425 Introduced
UScellular GuidanceFY 2025N/ANot providing due to pending T-Mobile transaction Maintained “no guidance”
Dividend (Common)Q1 2025N/A$0.04/share declared Declared

Management also reiterated mid-2025 targeted closing for T-Mobile transaction and follow-on spectrum transactions contingent on that close .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Strategic alternatives & transaction closingQ2: Announced definitive agreement to sell UScellular wireless ops to T-Mobile; UScellular retains towers and ~70% spectrum . Q3: Announced spectrum sales to Verizon and others contingent on T-Mobile close .On track for mid-2025 close; regulators engaged; spectrum deals progress contingent on T-Mobile closing .Advancing toward close
Tower business & AFFO reportingInitial segment reporting shift (Wireless vs Towers) noted; tower rev steady .Plan to provide AFFO reporting post T-Mobile close; REIT structure not currently on roadmap .Greater transparency post-close
Fiber expansion & E-ACAMQ2: 27k addresses; long-term target 1.2M addresses . Q3: 32k addresses; 50% served by fiber .New long-term goals: 1.8M fiber service addresses, 80% served by fiber; 150k addresses planned in 2025; E-ACAM adds ~$90M annual regulatory revenue for 15 years .Accelerating build and targets
Sales & marketing investmentGrowing door-to-door sales capacity .Heavier 2025 investments in sales/marketing and internal construction teams to drive penetration; near-term EBITDA pressure .Investment up; near-term margin impact
Fixed wireless (FWA)134k customers in Q2 ; 140k by Q3 .Surpassed 150k customers; continued mid-band deployment .Sustained growth
Margins/cost and FCFQ2/Q3: cost discipline improved profitability; FCF grew .Consolidated FCF of $194M in 2024; adjusted EBITDA up YoY; UScellular paid down >$200M debt .Strengthening financials
Spectrum monetization & FCC spectrum capQ3: Multiple spectrum sales announced .Monetization will remain opportunistic; FCC spectrum cap discussions not dictating timing; sold prior spectrum above book/market values .Value-driven approach maintained

Management Commentary

  • “Our first priority is to close the T-Mobile transaction… Following the closing… we will focus on closing the other announced spectrum transactions.” — Walter Carlson, President & CEO .
  • “We remain bullish on the long-term outlook for our tower business as the long-term capacity needs of the industry will likely require further densification and drive demand for towers.” — Laurent Therivel, UScellular CEO .
  • “Loss on equipment… increased $13 million in the fourth quarter, primarily driven by increased promotional expenses… which drove favorable year-over-year retail subscriber results.” — Doug Chambers, UScellular CFO .
  • “We are targeting to deliver 150,000 fiber service addresses in 2025… Adjusted EBITDA is projected to be between $320–$360 million in 2025… We expect capital expenditures to be in the range of $375–$425 million.” — Kristina Bothfeld, TDS Telecom CFO .

Q&A Highlights

  • Tower financials: Management intends to provide AFFO reporting post-close; corporate structure is not currently positioned for a REIT, though that could evolve .
  • Fiber target timing: Long-term fiber goals expected over ~5 years, paced by construction and financial capacity .
  • 2025 Telecom EBITDA pressure: Investments in sales/marketing, internal construction, and transformation initiatives will weigh on 2025 EBITDA but are designed to drive future growth .
  • Spectrum cap: FCC spectrum cap changes are not the driver of monetization timing; focus remains on fair value; prior deals priced above book/market .
  • Capital allocation post-close: Attractive cash flows from towers and partnerships could enable returns to shareholders; potential for regular dividend longer term subject to Board decisions .

Estimates Context

  • Wall Street consensus estimates (S&P Global) were unavailable at the time of request due to a data access limit, so beat/miss analysis versus revenue and EPS consensus could not be performed. As a result, any comparison to estimates is N/A in the tables above.

Key Takeaways for Investors

  • Transaction closings are the key 2025 catalyst: mid-2025 targeted close with T-Mobile, plus contingent spectrum deals; watch regulatory milestones and net cash proceeds drivers (debt exchanges, repayments, taxes, fees) .
  • Tower business should gain transparency with planned AFFO reporting; co-location growth from T-Mobile MLA and long-term densification underpin tower cash flow durability .
  • TDS Telecom is accelerating fiber build under E-ACAM, lifting long-term address targets to 1.8M and 80% fiber coverage; expect higher 2025 capex and near-term EBITDA pressure as sales and construction scale .
  • UScellular operating metrics improved (churn, fixed wireless), but negative net adds and competitive intensity persist; promotions weighed on equipment margins in Q4 .
  • Positive liquidity trajectory: consolidated 2024 free cash flow of $194M and ongoing cost discipline provide flexibility into the transformation and fiber investments .
  • Dividend continuity: Q1 2025 common dividend declared, signaling commitment to capital returns while strategic actions progress .
  • Near-term trading lens: stock likely sensitive to regulatory updates and clarity on proceeds, tower co-location ramp, and evidence that telecom sales/marketing spend is translating into sustained net add and ARPU gains .