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What changed in TELEPHONE & DATA SYSTEMS INC /DE/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TELEPHONE & DATA SYSTEMS INC /DE/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+365 added−312 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-16)

Top changes in TELEPHONE & DATA SYSTEMS INC /DE/'s 2023 10-K

365 paragraphs added · 312 removed · 263 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

48 edited+8 added−5 removed41 unchanged
Biggest changeTDS Telecom is committed to growing with its communities and meeting the needs of customers through great products and services, sponsorships, fundraising, and volunteering. TDS Telecom serves its local communities by financially supporting local projects to serve those in need and by providing TDS Telecom associates with paid time off each year to volunteer.
Biggest changeTDS Telecom serves its local communities by financially supporting local projects to serve those in need and by providing TDS Telecom associates with paid time off each year to volunteer. TDS Telecom believes serving its local communities through donations and volunteerism aligns with its corporate values and commitments to its customers, associates, and communities.
Sales and Distribution Channels UScellular supports a multi-faceted distribution program, including retail sales, direct sales, telesales, ecommerce, indirect sales, independent agents and third-party national retailers. Company retail store locations are designed to market wireless services and products to the consumer and small business segments in a setting familiar to these types of customers.
Sales and Distribution Channels UScellular supports a multi-faceted distribution program, including retail sales, direct sales, telesales, ecommerce, indirect sales including resellers, independent agents and third-party national retailers. Company retail store locations are designed to market wireless services and products to the consumer and small business segments in a setting familiar to these types of customers.
Premium Wi-Fi security and support services are available to enhance customers’ high-speed internet experience. • Video: TDS Telecom provides advanced home TV entertainment that includes basic channels and premium programming available in high-definition television combined with a digital video recording (DVR) service.
Whole-home Wi-Fi security and support services are available to enhance customers’ high-speed internet experience. • Video: TDS Telecom provides advanced home TV entertainment that includes basic channels and premium programming available in high-definition television combined with a digital video recording (DVR) service.
Local communities are at the center of TDS’ businesses, and it takes great pride in giving back to the people and places that contribute to its sustainability and long-term success. TDS — OTHER ITEMS Company Information TDS’ website address is www.tdsinc.com.
Local communities are at the center of TDS’ businesses, and TDS takes great pride in giving back to the people and places that contribute to its sustainability and long-term success. TDS — OTHER ITEMS Company Information TDS’ website address is www.tdsinc.com.
The map below highlights TDS’ consolidated areas of operations: 1 Table of Contents UScellular OPERATIONS General UScellular provides wireless telecommunications services to customers with 4.7 million retail connections in portions of 21 states collectively representing a total population of 32 million. UScellular operates in one reportable segment, and all of its wireless operating markets are in the United States.
The map below highlights TDS’ consolidated areas of operations: 1 Table of Contents UScellular OPERATIONS General UScellular provides wireless telecommunications services to customers with 4.6 million retail connections in portions of 21 states collectively representing a total population of 32 million. UScellular operates in one reportable segment, and all of its wireless operating markets are in the United States.
Fiber technology is being deployed to select markets to provide internet speeds of up to 8 Gbps. In certain non-fiber markets, TDS Telecom is deploying fiber-to-the-node and copper-based vectoring/pair bonding technology to increase data speeds reaching up to 100 Mbps. DOCSIS 3.1 technology is utilized across nearly all cable markets and offers speeds of up to 1 Gbps.
Fiber technology is being deployed to select markets to provide internet speeds of up to 8 Gbps. In certain non-fiber markets, TDS Telecom has deployed fiber-to-the-node and copper-based vectoring/pair bonding technology to increase data speeds reaching up to 100 Mbps. DOCSIS 3.1 technology is utilized across nearly all cable markets and offers speeds of up to 1 Gbps.
In 2022, UScellular continued exploring ways to leverage its assets, brand, partnerships, and resources to close the digital divide with a focus on helping to ensure youth in its markets have reliable and fast internet access in school and at home through the After School Access Project.
In 2023, UScellular continued exploring ways to leverage its assets, brand, partnerships, and resources to close the digital divide with a focus on helping to ensure youth in its markets have reliable and fast internet access in school and at home through the After School Access Project .
TDS provides job specific, diversity and inclusion, safety, and fraud awareness training for all associates – and also offers programs to further develop its associates including educational assistance, developmental assignments, and mentoring programs.
TDS provides job specific, diversity and inclusion, safety, and fraud awareness training for all associates – and also offers programs that further develop its associates including educational assistance, developmental assignments, and mentoring programs.
In addition, UScellular continues to contribute to the TDS Environmental, Social and Governance (ESG) program. UScellular believes in serving as a good steward of the environment and enacting governance practices that align with its corporate values and commitment to its customers, associates and its communitie s. Customers, Services, Products and Seasonality Customers.
In addition, UScellular continues to participate in the TDS Environmental, Social and Governance (ESG) program. UScellular believes in serving as a good steward of the environment and enacting governance practices that align with its corporate values and commitment to its customers, associates, communitie s and shareholders. Customers, Services, Products and Seasonality Customers.
In certain markets, TDS Telecom partners with a satellite TV provider to offer digital television. • Voice: Call plans include local and long-distance telephone service, Voice over Internet Protocol (VoIP) and enhanced services like Find-Me/Follow-Me, collaboration, instant messaging and more. Many features are bundled with calling plans to give customers the best value.
In certain markets, TDS Telecom partners with a satellite TV provider to offer digital television. 5 Table of Contents • Voice: Call plans include local and long-distance telephone service, Voice over Internet Protocol (VoIP) and enhanced services like Find-Me/Follow-Me, collaboration, instant messaging and more. Many features are bundled with calling plans to give customers the best value.
Item 1. Business Telephone and Data Systems, Inc. (TDS) provides high-quality communications services to customers with 4.7 million retail wireless connections and 1.2 million broadband, video and voice connections at December 31, 2022. TDS conducts all of its wireless operations through its majority-owned subsidiary, United States Cellular Corporation (UScellular).
Item 1. Business Telephone and Data Systems, Inc. (TDS) provides high-quality communications services to customers with 4.6 million retail wireless connections and 1.2 million broadband, video and voice connections at December 31, 2023. TDS conducts all of its wireless operations through its majority-owned subsidiary, United States Cellular Corporation (UScellular).
Voice offerings continue to be impacted by the industry-wide decline in access lines and TDS Telecom expects to continue to experience erosion in voice connections due to competition from alternative technologies. 5 Table of Contents Commercial. TDS Telecom commercial customer operations provide secure and reliable broadband, IP-based services, and hosted voice and video collaboration services to small- and medium-sized businesses.
Voice offerings continue to be impacted by the industry-wide decline in access lines and TDS Telecom expects to continue to experience erosion in voice connections due to competition from alternative technologies. Commercial. TDS Telecom commercial customer operations provide secure and reliable broadband, IP-based services, and hosted voice and video collaboration services to small- and medium-sized businesses.
A high-quality network, supported by continued investments in that network, is an important factor for UScellular to remain competitive. 5G technology helps address customers’ growing demand for data services and enhances services, including high-speed fixed wireless home internet services, requiring high speed and reliability as well as low latency.
A high-quality network, supported by continued investments in that network, is an important factor for UScellular to remain competitive. 3 Table of Contents 5G technology helps address customers’ growing demand for data services and enhances services, including high-speed fixed wireless home internet services, requiring high speed and reliability as well as low latency.
UScellular’s interests in wireless spectrum licenses include both direct interests whereby UScellular is the licensee and investment interests in entities which are licensees; together, these direct and investment interests involve operating and non-operating wireless spectrum licenses covering portions of 30 states and a total population of approximately 51 million at December 31, 2022.
UScellular’s interests in wireless spectrum licenses include both direct interests whereby UScellular is the licensee and investment interests in entities which are licensees; together, these direct and investment interests involve operating and non-operating wireless spectrum licenses covering portions of 30 states and a total population of approximately 51 million as of December 31, 2023.
As of December 31, 2022, TDS owned 84% of the combined total of the outstanding Common Shares and Series A Common Shares of UScellular and controlled 96% of the combined voting power of both classes of UScellular common stock. TDS provides broadband, video and voice services through its wholly-owned subsidiary TDS Telecommunications LLC (TDS Telecom).
As of December 31, 2023, TDS owned 83% of the combined total of the outstanding Common Shares and Series A Common Shares of UScellular and controlled 96% of the combined voting power of both classes of UScellular common stock. TDS provides broadband, video and voice services through its wholly-owned subsidiary TDS Telecommunications LLC (TDS Telecom).
TDS is a controlled company because over 50% of the voting power for the election of directors of TDS is held by the trustees of the TDS Voting Trust. TDS has two business segments: UScellular and TDS Telecom.
TDS is a controlled company because over 50% of the voting power for the election of a majority of the directors of TDS is held by the trustees of the TDS Voting Trust. TDS has two reportable segments: UScellular and TDS Telecom.
Federal Connect America Fund (CAF), including A-CAM, and state Universal Service Fund (USF) revenues, which support the cost of providing communication services in underserved high- cost areas, are also included in wholesale service revenues. Marketing, Sales and Distribution Channels and Customer Service Marketing.
Federal Connect America Fund (CAF), including ACAM, E-ACAM, and state Universal Service Fund (USF) revenues, which support the cost of providing communication services in underserved high- cost areas, are also included in wholesale service revenues. Marketing, Sales and Distribution Channels and Customer Service Marketing.
TDS Telecom residential customer operations provide high-speed broadband, video, and voice services. These services are bundled at competitive prices to encourage cross-selling within the customer base and to attract new customers. Approximately 60% of residential customers have at least two services. • Broadband: TDS Telecom offers reliable high-speed internet connections and all-home Wi-Fi.
TDS Telecom residential customer operations provide high-speed broadband, video, and voice services. These services are bundled at competitive prices to encourage cross-selling within the customer base and to attract and retain new customers. Approximately 56% of residential customers have at least two services. • Broadband: TDS Telecom offers reliable high-speed internet connections and whole-home Wi-Fi.
TDS provides a competitive wage and benefits package, a safe workplace, and an environment where associates feel engaged and included. TDS regularly surveys its associates - those surveys have consistently shown that associates have strong engagement and high overall job satisfaction.
TDS provides a competitive wage and benefits package, a safe workplace, and an environment where associates feel engaged and a sense of belonging. TDS regularly surveys its associates – those surveys have consistently shown that associates have strong engagement and high overall job satisfaction.
TDS is committed to supporting and enhancing the communities it serves through local and philanthropic initiatives that enrich the lives of those living where it operates and where its associates live, work and play. TDS encourages associates to volunteer and support local organizations and community groups.
Community TDS is committed to supporting and enhancing the communities it serves through local and philanthropic initiatives that enrich the lives of those living where it operates and where its associates live, work and play.
UScellular focuses on consumer, business and government customers located in its operating markets. These customers are served primarily through UScellular’s retail, digital platform, as well as its direct and indirect sales channels. Services. UScellular provides a wide variety of wireless services accessible on a broad range of devices. Customers can obtain wireless services on a postpaid or prepaid basis.
UScellular focuses on consumer, business and government customers located in its operating markets. These customers are served primarily through UScellular’s retail stores and digital platform, as well as its direct and indirect sales channels. Services. UScellular provides a wide variety of wireless services accessible on a broad range of devices.
A key strategic initiative for TDS Telecom is investing in fiber to provide broadband speeds of up to 8 Gigabits per second (Gbps).
A key strategic initiative for TDS Telecom, subject to the availability of capital, is investing in fiber to provide broadband speeds of up to 8 Gigabits per second (Gbps).
General Reference is made to Item 7 of this Form 10-K under “Regulatory Matters” for information regarding any other significant recent developments and proposals relating to regulatory matters. 7 Table of Contents HUMAN CAPITAL RESOURCES TDS had approximately 9,300 full-time and part-time associates as of December 31, 2022.
General Reference is made to Item 7 of this Form 10-K under “Regulatory Matters” for information regarding any other significant recent developments and proposals relating to regulatory matters. 7 Table of Contents HUMAN CAPITAL RESOURCES Company and Culture TDS had approximately 8,800 full-time and part-time associates as of December 31, 2023.
TDS Telecom continues to develop and maintain an efficient cost structure to ensure that it can compete with price-based initiatives from competitors. In addition to price, TDS Telecom competes based on a variety of factors including the reliability of its network, faster broadband speeds, the diversity and range of its product offerings and its exceptional customer service.
TDS Telecom continues to develop and maintain an efficient cost structure to enhance its ability to compete with price-based initiatives from competitors. In addition to price, TDS Telecom competes based on a variety of factors including the reliability of its network, faster broadband speeds, the diversity and range of its product offerings and its outstanding customer service.
Since each of these competitors operates on systems using spectrum licensed by the FCC and has comparable technology and facilities, competition among wireless service providers for customers is principally on the basis of types of services and products, price, brand, size of area covered, network quality, network speed and responsiveness of customer service.
Since each of these competitors has access to comparable technology and facilities, competition among wireless service providers for customers is principally on the basis of types of services and products, price, brand, size of area covered, network quality, network speed and responsiveness of customer service.
Fiber builds in strategically selected locations allow TDS Telecom to deliver more robust residential and commercial products in its incumbent markets that have historically utilized copper and coaxial cable technologies and to target growth in attractive, growing markets to increase its total footprint. TDS Telecom continues to scale up its fiber market expansions in Wisconsin and the Pacific Northwest.
Fiber builds in strategically selected locations allow TDS Telecom to deliver more robust residential and commercial products in its incumbent markets that have historically utilized copper and coaxial cable technologies and to target growth in attractive, growing markets to increase its total footprint.
As of December 31, 2022, there were 6,945 cell sites in service and UScellular owned 4,336 towers. 4 Table of Contents TDS TELECOM OPERATIONS General TDS Telecom provides communications services to 1.2 million connections in 32 states through its high-quality fiber, coaxial and copper networks.
As of December 31, 2023, there were 7,000 cell sites in service of which UScellular owned 4,373. 4 Table of Contents TDS TELECOM OPERATIONS General TDS Telecom provides communications services to 1.2 million connections in 32 states through its high-quality fiber, coaxial and copper networks.
UScellular has relationships with exclusive and non-exclusive agents (collectively “agents”), which are independent businesses that obtain customers for UScellular on a commission basis. UScellular’s agents are generally in the business of selling wireless devices, wireless service plans and other related products. UScellular provides support and training to its agents to increase customer satisfaction and to ensure a consistent customer experience.
UScellular has relationships with exclusive and non-exclusive agents (collectively “agents”), which are independent businesses that obtain customers for UScellular on a commission basis. UScellular’s agents are generally in the business of selling wireless devices, wireless service plans and other related products to consumer and business and government customers.
The TDS network consists of a highly reliable IP-based broadband network to facilitate the integration of broadband, video and voice services. In order to provide IP-based services, TDS Telecom has developed and deployed an inter-regional data routing infrastructure using owned and leased fiber capacity which allows it to leverage its 100-gigabit core network.
In order to provide IP-based services, TDS Telecom has developed and deployed an inter-regional data routing infrastructure using owned and leased fiber capacity which allows it to leverage its 100-gigabit core network.
As part of its business development strategy, UScellular may periodically be engaged in negotiations relating to strategic partnerships and/or the acquisition, exchange or disposition of companies, strategic properties, investment interests or wireless spectrum, including through Federal Communications Commission (FCC) auctions. The FCC conducts auctions through which additional spectrum is made available for the provision of wireless services.
As part of its business development strategy, UScellular may periodically be engaged in negotiations relating to strategic partnerships and/or the acquisition, exchange or disposition of companies, strategic properties, and investment interests. Additionally, UScellular may be engaged in negotiations related to wireless spectrum, including participation in Federal Communications Commission (FCC) auctions.
Service offerings vary from time to time based on customer needs, technology changes and market conditions - and may be provided as standard plans or as part of limited time promotional offers. UScellular offers home and business internet throughout the footprint via fixed wireless access. Options include an in-home self-installed device and externally-mounted professionally-installed equipment with an internal router.
Service offerings vary from time to time based on customer needs, technology changes and market conditions - and may be provided as standard plans or as part of limited time promotional offers. UScellular offers home and business internet throughout the footprint via fixed wireless access.
Additionally, for first responders, UScellular offers a suite of critical connectivity solutions that includes Wireless Priority Services (WPS) and Quality Priority and Preemption (QPP) options. UScellular intends to continue to further enhance these offerings in 2023 and beyond. 2 Table of Contents Products.
The business organization also offers a suite of professional and managed services. Lastly, for first responders, UScellular offers a suite of critical connectivity solutions that includes Wireless Priority Services (WPS) and Quality Priority and Preemption (QPP) options. UScellular intends to continue to further enhance these offerings in 2024 and beyond. Products.
UScellular offers advanced wireless solutions to consumers and business and government customers including "home and business internet", a fast-growing and expansive suite of connected Internet of things (IoT) solutions and software applications across the categories of monitor and control (e.g., sensors and cameras), business automation/operations (e.g., e-forms, office solutions), communication (e.g., enterprise messaging, primary and back-up internet connectivity for business continuity), fleet and asset management, smart water solutions, private cellular networks and custom, bespoke end-to-end IoT solutions et al.
In addition to selling direct to businesses and residential homes, UScellular works with several municipalities to bring broadband internet to underserved communities. 2 Table of Contents UScellular offers advanced wireless solutions to consumers and business and government customers including an expansive suite of connected Internet of things (IoT) solutions and software applications across the categories of monitor and control (e.g., sensors and cameras), business automation/operations (e.g., e-forms, office solutions), communication (e.g., enterprise messaging, primary and back-up internet connectivity for business continuity), fleet and asset management, smart water solutions, private cellular networks (PCN) and custom, bespoke end-to-end IoT solutions et al.
Historically, UScellular has participated in certain FCC auctions both directly and indirectly through its limited partnership interests. UScellular has a longstanding commitment to supporting its local communities through donations and volunteerism.
The FCC has historically conducted auctions through which additional spectrum is made available for the provision of wireless services. Historically, UScellular has participated in certain FCC auctions both directly and indirectly through its limited partnership interests. UScellular has a longstanding commitment to supporting its local communities through donations and volunteerism.
In order to expand its retail presence, UScellular also maintains relationships with national retailers, primarily selling prepaid devices. Competition The wireless telecommunication industry is highly competitive. UScellular competes directly with several wireless service providers in each of its markets.
UScellular provides support and training to its agents to increase customer satisfaction and to ensure a consistent customer experience. To expand its retail presence, UScellular also maintains a relationship with a large national retailer, selling postpaid and prepaid devices. Competition The wireless telecommunication industry is highly competitive. UScellular competes directly with several wireless service providers in each of its markets.
TDS Telecom invests in high-quality networks, services and products, with the constant focus on delivering a best-in-class customer experience. Through its investments, TDS Telecom intends to grow its broadband services in its incumbent markets and by extending its footprint into new expansion markets. TDS Telecom will augment that broadband growth by bundling with video, voice and other value-added services.
Through its investments, TDS Telecom intends to improve its broadband services in its incumbent markets and extend its footprint into new expansion markets. TDS Telecom intends to augment that broadband growth by bundling with video, voice and other value-added services.
Finally, TDS Telecom is selecting expansion markets in order to grow in areas where it has determined customers are underserved in terms of these criteria. 6 Table of Contents TDS — REGULATION TDS’ operations are subject to federal, state and local regulation. Key regulatory considerations are discussed below.
TDS Telecom is building fiber in select expansion and incumbent markets. 6 Table of Contents TDS — REGULATION TDS’ operations are subject to federal, state and local regulation. Key regulatory considerations are discussed below.
TDS Telecom may also seek to grow its operations through the acquisition of and/or partnership with businesses that support and complement its existing markets or by creating entirely new clusters of markets in attractive locations. TDS Telecom believes that being a good corporate citizen is fundamental to its long-term success.
In 2023, TDS Telecom continued to invest in its fiber market expansions in Wisconsin and the Pacific Northwest. TDS Telecom may seek to grow its operations through investments in fiber and through the acquisition of and/or partnership with businesses that support and complement its existing markets or by creating entirely new clusters of markets in attractive locations.
UScellular’s prepaid service enables individuals to obtain services without credit verification by paying for all services in advance. Approximately 90% of retail connections were postpaid connections as of December 31, 2022. UScellular offers various service plans with nationwide coverage tailored to the needs of customers.
Approximately 90% of retail connections were postpaid connections as of December 31, 2023. UScellular offers various service plans with nationwide coverage tailored to the needs of customers.
A single account may include monthly wireless services for a variety of handsets, connected devices and IoT Solutions. A postpaid connection represents an individual line of service for a device for which a customer is generally billed one month in advance for a monthly access charge in return for access to and usage of network services.
A postpaid connection represents an individual line of service for a device for which a customer is generally billed one month in advance for a monthly access charge in return for access to and usage of network services. UScellular’s prepaid service enables individuals to obtain services without credit verification by paying for all services in advance.
UScellular has entered into roaming agreements with a number of wireless companies in order to offer its customers nationwide services, including 4G LTE, VoLTE and 5G, as well as a variety of international roaming options. 3 Table of Contents Towers . UScellular owns and leases cell towers to provide service to its customers throughout its footprint.
Inter-carrier roaming agreements are negotiated between wireless operators to enable customers to use wireless services outside of their home service area. UScellular has entered into roaming agreements with a number of wireless companies so that it can offer its customers nationwide services, including 4G LTE, VoLTE and 5G, as well as a variety of international roaming options. Towers.
In addition, UScellular receives tower rental revenues when another carrier leases tower space on a UScellular owned tower.
UScellular owns and leases cell towers to provide service to its customers throughout its footprint. UScellular receives tower rental revenues when another carrier leases tower space on a UScellular owned tower.
TDS Telecom operates in one reportable segment, and its operating markets are located in a mix of rural and suburban communities throughout the United States. Operating Strategy and Community Focus TDS Telecom’s strategic goal is to be the preferred broadband provider in the markets it serves.
TDS Telecom operates in one reportable segment, and its operating markets are located in a mix of small to mid-sized urban, suburban and rural communities throughout the United States. Operating Strategy and Community Focus TDS Telecom invests in high-quality networks, services and products, with the constant focus on delivering outstanding customer service.
Additionally, TDS supports numerous associate resource groups to promote diverse and inclusive experiences that align with TDS’ vision and values, increase associate engagement and empowerment, and support professional development. Since its founding, TDS has been committed to associate development, which is critical to its success.
TDS is committed to demonstrating equity and fairness through the inclusion of diverse associates, customers, and suppliers. Additionally, TDS sponsors Associate Resource Groups to promote dynamic community experiences that align with TDS’ vision and values, increase associate engagement and empowerment, and support professional development.
TDS Telecom believes serving its local communities through donations and volunteerism aligns with its corporate values and commitments to its customers, associates, and communities. Technology TDS Telecom continues to upgrade and enhance its networks by utilizing various technologies to improve levels of performance and provide additional speed and security to increase value for its customers.
Technology TDS Telecom continues to upgrade and enhance its networks by utilizing various technologies to improve levels of performance and provide additional speed and security to increase value for its customers. The TDS network consists of a highly reliable IP-based broadband network to facilitate the integration of broadband, video and voice services.
UScellular also operates a VoLTE network. VoLTE technology allows customers to utilize a 4G LTE and 5G network for voice and 4G LTE data services which offers enhanced services such as high definition voice and simultaneous voice and data sessions. Roaming.
UScellular also operates a VoLTE network, which allows customers to utilize a 4G LTE enabled mobile device for voice and data services, including high-definition voice and simultaneous voice and data sessions. As a result of its continued investment and modernization of its network, UScellular decommissioned its third-generation (3G) CDMA network in the first quarter of 2024. Roaming.
UScellular's low-band and high-band spectrum is currently supporting mobility and fixed wireless services. UScellular has acquired mid-band spectrum which it will deploy in the future to further enable the delivery of 5G services. UScellular has launched commercial 5G services in portions of substantially all of its markets and will continue to launch in additional areas in the coming years.
UScellular supports mobility and fixed wireless services through a combination of low-band, mid-band and high-band spectrum. UScellular's initial 5G deployment has predominantly used low-band spectrum to launch 5G services in portions of substantially all its markets.
TDS strives to build a diverse and inclusive workforce, which leads to broader diversity of thoughts, ideas and the innovation needed to move the business forward.
TDS endeavors to encourage a broad diversity of thoughts, ideas and the innovation needed to move the business forward. Training Since its founding, TDS has been committed to associate development, including for emerging and existing leaders, which is critical to its success.
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Additional routers are available for a whole-home Wi-Fi experience. In addition to selling direct to businesses and residential homes, UScellular works with several municipalities to bring broadband internet to underserved communities.
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On August 4, 2023, TDS and UScellular announced that the Boards of Directors of both companies decided to initiate a process to explore a range of strategic alternatives for UScellular. At this time, UScellular cannot predict the ultimate outcome of such process or estimate the potential impact of such process on the financial statements.
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In general, there are between three and four competitors in each wireless market in which UScellular provides service, excluding resellers and mobile virtual network operators (MVNOs).
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Customers can obtain wireless services on a postpaid or prepaid basis. A single account may include monthly wireless services for a variety of handsets, connected devices and IoT Solutions.
Removed
In its footprint, UScellular competes to varying degrees against each of the national wireless companies: Verizon, AT&T, T-Mobile USA, and an emerging Dish as the fourth national carrier, in addition to smaller regional carriers, cable and other MVNOs in specific areas of its footprint.
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Options include an in-home self-installed device, a self-installation device mounted on the external side of a window, and externally-mounted professionally-installed equipment with an internal router.
Removed
Inter-carrier roaming agreements are negotiated between wireless operators to enable customers to use wireless services outside of their home service area.
Added
In general, there are at least four competitors across UScellular's service area, including to a varying degree: the national wireless companies - Verizon Communications Inc., AT&T Inc., T-Mobile US, Inc., and Dish Network Corporation, cable wireless, including Comcast Corporation and Charter Communications, Inc., and mobile virtual network operators (MVNOs).
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TDS wants its associates to feel supported without regard to race, color, religion, national origin, age, genetic information, sex, gender identity or expression, sexual orientation, marital status, disability, protected veteran status, or any other characteristics protected by applicable federal, state or local law. TDS is committed to demonstrating equity and fairness through the inclusion of diverse associates, customers, and suppliers.
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During 2023, UScellular continued to invest in 5G with a focus on deployment of mid-band spectrum, which will largely overlap portions of areas already covered with low-band 5G service. 5G service deployed over mid-band spectrum will further enhance speed and capacity for UScellular's mobility and fixed wireless services.
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To optimize its portfolio and raise capital, TDS is exploring opportunities to divest certain markets. TDS Telecom believes that being a good corporate citizen is fundamental to its long-term success. TDS Telecom is committed to growing with its communities and meeting the needs of customers through great products and services, sponsorships, fundraising, and volunteering.
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Diversity, Equity, and Inclusion TDS wants each associate to make a meaningful contribution and leverages diversity and inclusion efforts to harness the talent and potential of its associates. These efforts strive to value and connect diverse people and perspectives, amplify their voices, and enable business performance through strategic collaboration.
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This includes a focus on addressing gaps in STEM education by connecting tomorrow’s innovators with the resources they need today to help shape their future opportunities. TDS is addressing the digital divide and providing critical resources in local communities, and encourages associates to volunteer and support local organizations and community groups.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

78 edited+31 added−12 removed99 unchanged
Biggest changeFinancial Risk Factors 13) Uncertainty in TDS’ future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, changes in interest rates, other changes in TDS’ performance or market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its construction, development or acquisition programs, reduce the amount of wireless spectrum licenses acquired, and/or reduce or cease share repurchases and/or the payment of dividends.
Biggest changeIn addition, TDS’ networks and information technologies and the networks and information technologies of vendors on which TDS relies are subject to damage or interruption due to various events, including power outages, computer, network and telecommunications failures, computer viruses, security breaches, hackers and other cyber security risks, catastrophic events, natural disasters, severe weather, adverse climate changes, errors or unauthorized actions by employees and vendors, flawed conversion of systems, disruptive technologies and technology changes. 14 Table of Contents Financial Risk Factors 13) Uncertainty in TDS’ or UScellular's future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, changes in interest rates, other changes in TDS’ or UScellular's performance or market conditions, changes in TDS’ or UScellular's credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which has required and could in the future require TDS to reduce or delay its construction, development or acquisition programs, reduce the amount of wireless spectrum licenses acquired, divest assets or businesses, and/or reduce or cease share repurchases and/or the payment of dividends.
Sources of competition to TDS’ wireline and cable businesses include, but are not limited to, resellers of local exchange services, interexchange carriers, incumbent carriers, satellite broadband providers, wireless communications providers, other cable companies, access providers, fiber overbuilders, VoIP providers and providers using other emerging technologies.
Sources of competition to TDS’ wireline and cable businesses include, but are not limited to, other cable companies, fiber overbuilders, incumbent carriers, wireless communications providers, resellers of local exchange services, interexchange carriers, satellite broadband providers, access providers, VoIP providers and providers using other emerging technologies.
If these key suppliers (i) experience product availability shortages, (ii) require extended lead times to fulfill orders, (iii) experience financial difficulties or file for bankruptcy or experience other operational difficulties or (iv) deem TDS non-strategic and not develop or sell services and products to TDS, particularly where technical requirements differ from those of larger companies, they may not provide equipment, services or content to TDS on a timely basis, or at all, or they may otherwise fail to honor their obligations to TDS.
If these key suppliers (i) experience product availability shortages, (ii) require extended lead times to fulfill orders, (iii) experience financial difficulties or file for bankruptcy or experience other operational difficulties or (iv) deem TDS non-strategic and do not develop or sell services and products to TDS, particularly where technical requirements differ from those of larger companies, they may not provide equipment, services or content to TDS on a timely basis, or at all, or they may otherwise fail to honor their obligations to TDS.
Competition from cable companies has increased in recent periods, as they have continued to expand their presence in the wireless industry and have offered more competitive pricing. Many of TDS’ wireless competitors and other competitors have substantially greater financial, technical, marketing, sales, purchasing and distribution resources than TDS.
In particular, competition from cable wireless companies has increased in recent periods, as they have continued to expand their presence in the wireless industry and have offered more competitive pricing. Many of TDS’ wireless competitors and other competitors have substantially greater financial, technical, marketing, sales, purchasing and distribution resources than TDS.
Such a failure could have an adverse impact on the quality of TDS’ services or TDS’ ability to roll out such future services in some markets, could require that TDS curtail existing services in order to make spectrum available for next-generation services, or TDS could be effectively capped in increasing market share.
Such a failure could have an adverse impact on the quality of TDS’ services or TDS’ ability to roll out such future services in some markets, could require that TDS curtail existing services to make spectrum available for next-generation services, or TDS could be effectively capped in increasing market share.
If TDS cannot keep pace with its competitors in deploying 5G or other comparable offerings, or if TDS' deployment of 5G technology does not result in significant incremental revenues, TDS' financial condition, results of operations or ability to do business could continue to be adversely affected.
If TDS cannot keep pace with its competitors in deploying 5G or other comparable offerings, or if TDS' deployment of 5G technology does not result in significant incremental revenues, TDS' financial condition, results of operations and ability to do business could continue to be adversely affected.
However, TDS is unable to predict the future actions of the various legislative and regulatory bodies that govern TDS, and such actions could have adverse effects on TDS’ business. 18) TDS receives significant regulatory support, and is also subject to numerous surcharges and fees from federal, state and local governments – the applicability and the amount of the support and fees are subject to great uncertainty, including the ability to pass through certain fees to customers, and this uncertainty could have an adverse effect on TDS’ business, financial condition or results of operations.
However, TDS is unable to predict the future actions of the various legislative and regulatory bodies that govern TDS, and such actions could have adverse effects on TDS’ business. 20) TDS receives significant regulatory support, and is also subject to numerous surcharges and fees from federal, state and local governments – the applicability and the amount of the support and fees are subject to great uncertainty, including the ability to pass through certain fees to customers, and this uncertainty could have an adverse effect on TDS’ business, financial condition or results of operations.
If the lenders agree to amendments, this may result in additional payments or higher interest rates payable to the lenders and/or additional restrictions. Restrictions in such debt instruments may limit TDS’ operating and financial flexibility.
If the lenders agree to amendments, this may result in additional payments or higher interest rates payable to the lenders and/or additional restrictions. Restrictions with such debt instruments may limit TDS’ operating and financial flexibility.
These transactions commonly involve a number of risks, including: ▪ Identification of attractive companies, businesses, properties, spectrum or other assets for acquisition or exchange, and/or the selection of TDS’ businesses or assets for divestiture or exchange; ▪ Competition for acquisition targets and the ability to acquire or exchange businesses at reasonable prices; ▪ Inability to make acquisitions that would achieve sufficient scale to be competitive with competitors with greater scale; ▪ Possible lack of buyers for businesses or assets that TDS desires to divest and the ability to divest or exchange such businesses or assets at reasonable prices; ▪ Ability to negotiate favorable terms and conditions for acquisitions, divestitures and exchanges; ▪ Significant expenditures associated with acquisitions, divestitures and exchanges; ▪ Risks associated with integrating new businesses or markets, including risks relating to cybersecurity and privacy; 12 Table of Contents ▪ Ability to enter markets in which TDS has limited or no direct prior experience and competitors have stronger positions; ▪ Ability to integrate and manage TDS’ different business operations and services, including wireless services, traditional wireline services and cable businesses; ▪ Uncertain revenues and expenses associated with acquisitions or the entry into new expansion markets, with the result that TDS may not realize the growth in revenues, anticipated cost structure, profitability, or return on investment that it expects; ▪ Difficulty of integrating the technologies, services, products, operations and personnel of the acquired businesses, or of separating such matters for divested businesses or assets; ▪ Diversion of management’s attention; ▪ Disruption of ongoing business; ▪ Impact on TDS’ cash and available credit lines for use in financing future growth and working capital needs; ▪ Inability to retain key personnel; ▪ Inability to successfully incorporate acquired assets and rights into TDS’ service offerings; ▪ Inability to maintain uniform standards, controls, procedures and policies; ▪ Possible conditions to approval by the FCC, the Federal Trade Commission and/or the Department of Justice; and ▪ Impairment of relationships with employees, customers or vendors.
These transactions commonly involve a number of risks, including: ▪ Identification of attractive companies, businesses, properties, spectrum or other assets for acquisition or exchange, and/or the selection of TDS’ businesses or assets for divestiture or exchange; ▪ Competition for acquisition targets and the ability to acquire or exchange businesses at reasonable prices; ▪ Inability to make acquisitions that would achieve sufficient scale or substantial benefit to be competitive with competitors with greater scale; ▪ Possible lack of buyers for businesses or assets that TDS desires to divest and the ability to divest or exchange such businesses or assets at reasonable prices; ▪ Ability to negotiate favorable terms and conditions for acquisitions, divestitures and exchanges; ▪ Significant expenditures associated with acquisitions, divestitures and exchanges; ▪ Risks associated with integrating new businesses or markets, including risks relating to cybersecurity and privacy; ▪ Ability to enter markets in which TDS has limited or no direct prior experience and competitors have stronger positions; ▪ Ability to integrate and manage TDS’ different business operations and services, including wireless services, traditional wireline services and cable businesses; ▪ Uncertain revenues and expenses associated with acquisitions or the entry into new expansion markets, with the result that TDS may not realize the growth in revenues, anticipated cost structure, profitability, or return on investment that it expects; ▪ Difficulty of integrating the technologies, services, products, operations and personnel of the acquired businesses, or of separating such matters for divested businesses or assets; ▪ Diversion of management’s attention; ▪ Disruption of ongoing business; ▪ Impact on TDS’ cash and available credit lines for use in financing future growth and working capital needs; ▪ Inability to retain key personnel; ▪ Inability to successfully incorporate acquired assets and rights into TDS’ service offerings; ▪ Inability to utilize acquired wireless spectrum; ▪ Inability to maintain uniform standards, controls, procedures and policies; ▪ Possible conditions to approval by the FCC, the Federal Trade Commission and/or the Department of Justice; and ▪ Impairment of relationships with employees, customers or vendors.
If TDS is unable to obtain timely access to new content or wireless devices being developed by vendors, its business, financial condition or results of operations could be adversely affected. 6) Changes in various business factors, including changes in demand, consumer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on TDS’ business, financial condition or results of operations.
If TDS is unable to obtain timely access to new content or wireless devices being developed by vendors, its business, financial condition or results of operations could be adversely affected. 5) Changes in various business factors, including changes in demand, consumer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on TDS’ business, financial condition or results of operations.
Any claims of infringement of intellectual property and proprietary rights of others could prevent TDS from using necessary technology to provide its services or subject TDS to expensive intellectual property litigation or monetary penalties. 22) Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS or have other consequences.
Any claims of infringement of intellectual property and proprietary rights of others could prevent TDS from using necessary technology to provide its services or subject TDS to expensive intellectual property litigation or monetary penalties. 24) Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS or have other consequences.
TDS may or may not be able to recover some or all of those taxes from its customers and the amount of taxes may deter demand for its services or increase its cost to provide service. 19) Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ business, financial condition or results of operations.
TDS may or may not be able to recover some or all of those taxes from its customers and the amount of taxes may deter demand for its services or increase its cost to provide service. 21) Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ business, financial condition or results of operations.
The extent of the impact of public health emergencies on TDS' business, financial condition and results of operations will depend on the severity and duration of the emergency, actions taken by governmental authorities and other possible direct and indirect consequences, all of which are uncertain and cannot be predicted . 18 Table of Contents Item 1B. Unresolved Staff Comments None.
The extent of the impact of public health emergencies on TDS' business, financial condition and results of operations will depend on the severity and duration of the emergency, actions taken by governmental authorities and other possible direct and indirect consequences, all of which are uncertain and cannot be predicted . 20 Table of Contents Item 1B. Unresolved Staff Comments None.
Changes in economic conditions, changes in financial markets, changes in U.S. trade policies, deterioration in the capital markets or other factors could have an adverse effect on TDS’ business, financial condition, revenues, results of operations and cash flows. 25) The impact of public health emergencies on TDS' business is uncertain, but depending on duration and severity could have a material adverse effect on TDS' business, financial condition or results of operations.
Changes in economic conditions, changes in financial markets, changes in U.S. trade policies, deterioration in the capital markets or other factors could have an adverse effect on TDS’ business, financial condition, revenues, results of operations and cash flows. 27) The impact of public health emergencies on TDS' business is uncertain, but depending on duration and severity could have a material adverse effect on TDS' business, financial condition or results of operations.
Insufficient cash flows from operating activities, changes in TDS' credit ratings, defaults of the terms of debt or credit agreements, uncertainty of access to capital, deterioration in the capital markets, reduced regulatory capital at banks which in turn limits their ability to borrow and lend, other changes in the performance of TDS or in market conditions or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its acquisition, capital expenditure and business development programs, reduce the acquisition of wireless spectrum licenses, reduce or cease share repurchases and/or the payment of dividends.
Insufficient cash flows from operating activities, changes in TDS' credit ratings, defaults of the terms of debt or credit agreements, uncertainty of access to capital, deterioration in the capital markets, reduced regulatory capital at banks which in turn limits their ability to lend, other changes in the performance of TDS or in market conditions or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its acquisition, capital expenditure and business development programs, reduce the acquisition and development of wireless spectrum licenses, divest assets, reduce or cease share repurchases and/or the payment of dividends.
Telecommunications companies may be designated by states, or in some cases by the FCC, as an Eligible Telecommunications Carrier (ETC) to receive universal service support payments if they provide specified services in “high-cost” areas. UScellular has been designated as an ETC in certain states and received $92 million in high-cost support for service to high-cost areas in 2022.
Telecommunications companies may be designated by states, or in some cases by the FCC, as an Eligible Telecommunications Carrier (ETC) to receive universal service support payments if they provide specified services in “high-cost” areas. UScellular has been designated as an ETC in certain states and received $92 million in high-cost support for service to high-cost areas in 2023.
If appropriate, TDS and UScellular may request an amendment to one or more credit agreements to adjust financial covenants in order to provide additional financial flexibility to TDS and UScellular, and may also seek other changes to such agreements. There is no assurance that the lenders will agree to any amendments.
If appropriate, TDS and UScellular may request an amendment to one or more credit agreements to adjust financial covenants to provide additional financial flexibility to TDS and UScellular, and may also seek other changes to such agreements. There is no assurance that the lenders will agree to any amendments.
This could have an adverse effect on TDS’ ability to attain and sustain long-term, profitable revenue growth and could have an adverse effect on its business, financial condition or results of operations. 16) TDS has significant investments in entities that it does not control.
This could have an adverse effect on TDS’ ability to attain and sustain long-term, profitable revenue growth and could have an adverse effect on its business, financial condition or results of operations. 17) TDS has significant investments in entities that it does not control.
TDS’ primary wireless competitors are national or global telecommunications and cable companies that are larger than TDS, possess greater financial and other resources, possess more extensive coverage areas and more spectrum within their coverage areas, and market other services with their communications services that TDS does not offer.
TDS’ wireless competitors include national or global telecommunications and cable wireless companies that are larger than TDS, possess greater financial and other resources, possess more extensive coverage areas and more spectrum within their coverage areas, and market other services with their communications services that TDS does not offer.
If TDS fails to effectively deploy new wireless technologies, services or products on a timely basis, this could have an adverse impact on TDS’ business, financial condition and results of operations. Furthermore, it is not certain that TDS’ investments in various new, unproven technologies and the related service and product offerings will be effective.
If TDS fails to effectively deploy new wireless technologies, services or products on a timely basis, this could have an adverse impact on TDS’ business, financial condition and results of operations. 12 Table of Contents Furthermore, it is not certain that TDS’ investments in various new, unproven technologies and the related service and product offerings will be effective.
Furthermore, consolidation among key suppliers may result in less competition, higher prices, the discontinuation of equipment and/or services typically purchased by TDS or the discontinuation of support for equipment owned by TDS. 13 Table of Contents Operation of TDS’ supply chain and management of its device inventory and network equipment, including customer premise equipment, require accurate forecasting of customer growth and demand.
Furthermore, consolidation among key suppliers may result in less competition, higher prices, the discontinuation of equipment and/or services typically purchased by TDS or the discontinuation of support for equipment owned by TDS. Operation of TDS’ supply chain and management of its device inventory and network equipment, including customer premise equipment, require accurate forecasting of customer growth and demand.
TDS could fail to accurately forecast its future spectrum requirements considering changes in plan offerings, customer usage patterns, technology requirements and the expanded demands of new services.
TDS could fail to accurately forecast its future spectrum requirements considering changes in plan offerings, customer usage patterns, spectrum build-out and technology requirements and the expanded demands of new services.
TDS could fail to obtain access to sufficient spectrum capacity, including spectrum needed to support 5G technology, in new or existing markets, whether through FCC auctions or other transactions, in order to meet the anticipated spectrum requirements associated with increased demand for existing services, especially increases in customer demand for data services and network speed, and to enable deployment of next-generation services.
TDS could fail to obtain access to sufficient spectrum capacity, including spectrum needed to support 5G and future technologies, in new or existing markets, whether through FCC auctions or other transactions, to meet the anticipated spectrum requirements associated with increased demand for existing services, especially increases in customer demand for data services and network speed, and to enable deployment of next-generation services.
If regulatory support is discontinued or reduced from current levels, or if receipt of future regulatory support is contingent upon making certain network-related expenditures, this could have an adverse effect on TDS’ business, financial condition or operating results.
If regulatory support is discontinued or reduced from current levels, or if receipt of future regulatory support is contingent upon making certain network-related expenditures, this could have an adverse effect on TDS’ business, financial condition or operating results and cash flows.
These concerns could lead to potential litigation relating to accidents, deaths or serious bodily injuries. 21) Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations.
These concerns could lead to potential litigation relating to accidents, deaths or serious bodily injuries. 18 Table of Contents 23) Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations.
TDS’ revenues include roaming revenues related to the use of TDS’ network by other wireless carriers’ customers who travel within TDS’ coverage areas. Changes in FCC rules or actions, industry practices or the network footprints of carriers due to mergers, acquisitions or network expansions could have an adverse effect on TDS’ roaming revenues.
TDS’ revenues include roaming revenues related to the use of TDS’ network by other wireless carriers’ customers who travel within TDS’ coverage areas. Changes in FCC rules or actions, industry practices or the network footprints of carriers could have an adverse effect on TDS’ roaming revenues.
Failure to ensure effective transfer of knowledge and smooth transition involving key employees could also adversely affect TDS’ business, financial condition and results of operations. 5) TDS’ smaller scale relative to larger competitors that may have greater financial and other resources than TDS could cause TDS to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations.
Failure to ensure effective transfer of knowledge and smooth transition involving key employees could also adversely affect TDS’ business, financial condition and results of operations. 10 Table of Contents 4) TDS’ smaller scale relative to larger competitors that may have greater financial and other resources than TDS could cause TDS to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations.
Failure to complete its implementation activities or successfully scale up resources could have an adverse effect on TDS’ business, business prospects, financial condition or results of operations. 11) Difficulties involving third parties with which TDS does business, including changes in TDS’ relationships with or financial or operational difficulties, including supply chain disruptions, of key suppliers or independent agents and third party national retailers who market TDS’ services, could adversely affect TDS’ business, financial condition or results of operations.
Failure to complete its fiber deployment activities could have an adverse effect on TDS’ business, business prospects, financial condition or results of operations. 11) Difficulties involving third parties with which TDS does business, including changes in TDS’ relationships with or financial or operational difficulties, including supply chain disruptions, of key suppliers or independent agents and third-party national retailers who market TDS’ services, could adversely affect TDS’ business, financial condition or results of operations.
Changes in the administration of the various regulatory agencies and legislative bodies could result in different policies with respect to many federal laws and regulations, including but not limited to changes to fiscal and tax policies, trade policies, tariffs on import goods and climate change. New or amended regulatory requirements could increase TDS’ costs and divert resources from other initiatives.
Various regulatory agencies and legislative bodies could implement different policies with respect to many federal laws and regulations, including but not limited to changes to fiscal and tax policies, trade policies, tariffs on import goods and climate change. New or amended regulatory requirements could increase TDS’ costs and divert resources from other initiatives.
Specifically, TDS’ smaller scale relative to most of its competitors could have the following impacts, among others: ▪ Low profit margins and returns on investment that are below TDS’ cost of capital; ▪ Increased operating costs due to lack of leverage with vendors; ▪ Inability to timely and successfully deploy 5G or other wireless technologies, execute on fiber expansion plans, or to realize significant incremental revenues from their deployment; ▪ Limited opportunities for strategic partnerships as potential partners are focused on wireless, wireline and cable companies with greater scale and scope; ▪ Limited access to content, as well as limited ability to obtain acceptably priced content and programming; ▪ Limited access to devices as larger competitors enter into exclusive device arrangements; ▪ Consumer expectations that TDS provides lower-priced wireless offerings relative to larger competitors; ▪ Limited ability to influence industry standards; ▪ Reduced ability to invest in research and development of new services and products; ▪ Lower risk tolerance when evaluating new markets; ▪ Vendors may deem TDS non-strategic and not develop or sell services and products to TDS, particularly where technical requirements differ from those of larger companies; ▪ Limited access to intellectual property; and ▪ Other limited opportunities such as for software development or third-party distribution.
Specifically, TDS’ smaller scale relative to most of its competitors could have the following impacts, among others: ▪ Low profit margins and returns on investment that are below TDS’ cost of capital; ▪ Increased operating and capital expenditure costs due to lack of leverage with vendors; ▪ Inability to timely and successfully deploy 5G or other wireless technologies, execute on fiber expansion plans, or to realize significant incremental revenues from their deployment; ▪ Inability to meet build-out requirements of state and federal broadband programs; ▪ Limited opportunities for strategic partnerships as potential partners are focused on telecommunications companies with greater scale and scope; ▪ For TDS' wireless business, limited opportunities for bundling wireless service with other services such as home internet; ▪ Limited access to content, as well as limited ability to obtain acceptably priced content and programming; ▪ Limited access to devices as larger competitors enter into exclusive device arrangements; ▪ Consumer expectations that TDS provides lower-priced wireless offerings relative to larger competitors; ▪ Limited ability to influence industry standards; ▪ Limited ability to acquire or build additional towers; ▪ Reduced ability to invest in research and development of new services and products; ▪ Lower risk tolerance when evaluating new markets; ▪ Vendors may deem TDS non-strategic and not develop or sell services and products to TDS, particularly where technical requirements differ from those of larger companies; ▪ Limited access to intellectual property; and ▪ Other limited opportunities such as for software development or third-party distribution.
TDS may be unable to compete successfully with larger companies that have substantially greater financial, technical, marketing, sales, purchasing and distribution resources or that offer more services than TDS, which could adversely affect TDS’ revenues and costs of doing business.
TDS has smaller scale efficiencies compared to larger competitors. TDS may be unable to compete successfully with larger companies that have substantially greater financial, technical, marketing, sales, purchasing and distribution resources or that offer more services than TDS, which could adversely affect TDS’ revenues and costs of doing business.
The FCC may not be able to allocate spectrum sufficient to meet the demands of all those wishing to obtain wireless spectrum licenses for new market entry or to expand their spectrum holdings to meet the expanding demand for data services or to address other spectrum constraints.
The FCC currently does not have authority to conduct spectrum auctions. The FCC may not be able to allocate spectrum sufficient to meet the demands of all those wishing to obtain wireless spectrum licenses for new market entry or to expand their spectrum holdings to meet the expanding demand for data services or to address other spectrum constraints.
There can be no assurance that TDS will be able to compete successfully in this environment. Sources of competition to TDS’ wireless business typically include three to four competing wireless telecommunications service providers in each market, wireline telecommunications service providers, cable companies, resellers (including MVNOs), and providers of alternative telecommunications services.
There can be no assurance that TDS will be able to compete successfully in this environment. Sources of competition to TDS’ wireless business typically include at least four competing wireless telecommunications service providers across TDS' service area, wireline telecommunications service providers, cable wireless companies, resellers (including MVNOs), and providers of alternative telecommunications services.
TDS has incurred negative free cash flow (defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment and less Cash paid for software license agreements) at times in the past and this could occur in the future.
TDS has incurred negative free cash flow (defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment and less Cash paid for software license agreements) at times in the past and expects to incur negative free cash flow in future periods.
Customers may choose to substitute their wireline services using satellite, wireless and other technologies, which may be preferred to technologies offered by TDS. Customers may demand the bundling of wireline and wireless services.
Customers may choose to substitute their wireline services using satellite, wireless and other technologies, which may be preferred to technologies offered by TDS.
Such access is dependent upon the FCC actually granting wireless spectrum licenses won, which can be rescinded or delayed for various reasons, including but not limited to exceeding spectrum ownership and attribution limits, and safety concerns due to interference with other spectrum bands.
Access to wireless spectrum licenses won in FCC auctions may not be available on a timely basis. Such access is dependent upon the FCC actually granting wireless spectrum licenses won, which can be rescinded or delayed for various reasons, including but not limited to exceeding spectrum ownership and attribution limits, and safety concerns due to interference with other spectrum bands.
Due to factors such as geographic size of wireless spectrum licenses and auction bidders that may raise prices beyond acceptable levels, TDS may not be successful in FCC auctions in obtaining access to the spectrum that it believes is necessary to implement its business and technology strategies. 10 Table of Contents Access to wireless spectrum licenses won in FCC auctions may not be available on a timely basis.
Due to factors such as geographic size of wireless spectrum licenses and auction bidders that may raise prices beyond acceptable levels, TDS may not be successful in FCC auctions in obtaining access to the spectrum that it believes is necessary to implement its business and technology strategies.
TDS is a party to and may in the future be a party to lawsuits against wireless carriers and other parties claiming damages for alleged health effects, including cancer or tumors, arising from wireless phones or radio frequency transmitters. Concerns over radio frequency emissions may discourage use of wireless devices or expose TDS to potential litigation.
TDS is a party to and may in the future be a party to lawsuits against wireless carriers and other parties claiming damages for alleged health effects, including cancer or tumors, arising from wireless phones, radio frequency transmitters, or harmful emissions from network equipment.
Failure to successfully deploy new technologies, including 5G, and/or build-out and enhance TDS’ network, support facilities and other systems and infrastructure in a cost-effective manner, and in a manner that satisfies consumers' expectations for quality and coverage, could have an adverse effect on TDS’ business, business prospects, financial condition or results of operations.
Failure to successfully deploy new technologies, including 5G, and/or build-out and enhance TDS’ network, support facilities and other systems and infrastructure in a cost-effective manner, and in a manner that satisfies consumers' expectations for quality and coverage, could have an adverse effect on TDS’ business, business prospects, financial condition or results of operations. 13 Table of Contents TDS’ wireline and cable businesses are devoting a substantial amount of capital for fiber overbuilds and expansion into new markets.
Depending on a range of factors, these or similar proceedings could impose restraints on TDS’ current or future manner of doing business. 16 Table of Contents 20) The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices or frequencies used by other industries, could have an adverse effect on TDS’ wireless business, financial condition or results of operations.
Depending on a range of factors, these or similar proceedings could impose restraints on TDS’ current or future manner of doing business. 22) The possible development of adverse precedent in litigation or conclusions in professional or environmental studies to the effect that potentially harmful emissions from devices or network equipment, including but not limited to radio frequencies emitted by wireless signals or due to contamination from network cabling, may cause harmful health or environmental consequences, including cancer, tumors or otherwise harmful impacts, or may interfere with various electronic medical devices or frequencies used by other industries, could have an adverse effect on TDS’ wireless and/or wireline business, financial condition or results of operations.
If overall demand for devices and network equipment or the mix of demand for devices and network equipment is significantly different than TDS’ expectations, TDS could face inadequate or excess supplies of particular models of devices and network equipment. This could result in lost sales opportunities or an excess supply of device inventory or network equipment.
If overall demand for devices and network equipment or the mix of demand for devices and network equipment is significantly different than TDS’ expectations, TDS could face inadequate or excess supplies of particular models of devices and network equipment.
If the trend toward convergence continues, TDS is at a competitive disadvantage to larger competitors, including cable companies, the national wireless carriers and other potential large new entrants with much greater financial and other resources in adapting to such convergence.
Further, fixed-mobile bundled services that combine wireline broadband services with mobile services represent a competitive threat. If the trend toward bundling continues, TDS is at a competitive disadvantage compared to larger competitors, including cable companies, the national wireless carriers and other potential large new entrants with much greater financial and other resources in adapting to such bundling.
These factors include, but are not limited to: ▪ Demand for or usage of services, particularly data services; 11 Table of Contents ▪ Consumer preferences, including internet speed and type of wireless devices; ▪ Consumer perceptions of network quality and performance; ▪ Consumer expectations for self-service options through digital means; ▪ Competitive pressure to deliver higher speed; ▪ Competitive pressure from promotional activity; ▪ The pricing of services, including an increase in price-based competition; ▪ Inflationary pressures on costs without corresponding price increases for TDS' services; ▪ Access to and cost of programming; ▪ The overall size and growth rate of TDS’ customer base; ▪ Penetration rates; ▪ Churn rates; ▪ Selling expenses; ▪ Net customer acquisition and retention costs; ▪ Customers’ ability to pay for services and the potential impact on bad debts expense; ▪ Roaming agreements and rates; ▪ Third-party vendor support; ▪ Capacity constraints; ▪ The mix of services and products offered by TDS and purchased by customers; and ▪ The costs of providing services and products. 7) Advances or changes in technology could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business.
These factors include, but are not limited to: ▪ Demand for or usage of services, particularly data services; ▪ Demand for leasing space on a tower; ▪ Consumer preferences, including internet speed and type of wireless devices; ▪ Consumer perceptions of network quality and performance; ▪ Consumer expectations for self-service options through digital means; ▪ Competitive pressure to deliver higher speed; ▪ Competitive pressure from promotional activity; ▪ The pricing of services, including an increase in price-based competition; ▪ The pricing of tower leases that can be charged to third parties; ▪ Inflationary pressures on costs without corresponding price increases for TDS' services; ▪ Access to and cost of programming; ▪ The overall size and growth rate of TDS’ customer base; ▪ Penetration rates; ▪ Churn rates; ▪ Selling expenses; ▪ Net customer acquisition and retention costs; ▪ Customers’ ability to pay for services and the potential impact on bad debts expense; ▪ Roaming agreements and rates; ▪ Third-party vendor support; ▪ Capacity constraints; ▪ The mix of services and products offered by TDS and purchased by customers; and ▪ The costs of providing services and products. 11 Table of Contents 6) A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business, financial condition or results of operations.
In addition, a remote or hybrid working model and applicability of health protocols could negatively affect talent acquisition and retention.
In addition, a person's expectation of an in-office, remote or hybrid working model could negatively affect talent acquisition and retention.
While there is uncertainty, UScellular expects that regulatory support payments will likely decline in future periods, and there is no assurance that UScellular will qualify for future regulatory support programs. TDS Telecom also received support under the Connect America Fund support program. The A-CAM program has build-out requirements that if not met, would result in penalties and loss of support.
While there is uncertainty, UScellular expects that regulatory support payments will likely decline in future periods, and there is no assurance that UScellular will qualify for future regulatory support programs. TDS Telecom also received support under the Connect America Fund support program.
Further, the increased provision of data services on TDS’ networks has created an increased level of risk related to quality of service and data speeds. This is due to the fact that many customers increasingly rely on data communications to execute and validate transactions.
The increased provision of data services, including IPTV, has introduced significant demands on TDS’ network and also has increased complexities related to network management which creates an increased level of risk related to quality of service and data speeds. This is due to the fact that many customers increasingly rely on data communications to execute and validate transactions.
TDS’ focus on the U.S. telecommunications industry, together with its positioning relative to larger competitors with greater resources within the industry, may represent increased risk for investors due to the lack of diversification.
The U.S. telecommunications industry is facing significant change and an uncertain operating environment. TDS’ focus on the U.S. telecommunications industry, together with its sub-scale position relative to larger competitors with greater resources within the industry, may represent increased risk for investors due to the lack of diversification.
TDS may require substantial additional capital for, among other uses, funding day-to-day operating needs including working capital, acquisitions of providers of cable, wireless or wireline telecommunications services, or other businesses, spectrum license or system acquisitions, capital expenditures, debt service requirements, the repurchase of shares, the payment of dividends, or making additional investments.
TDS may require substantial additional capital for, among other uses, acquisitions of providers of cable, wireless or wireline telecommunications services or products, or other businesses, spectrum license or system acquisitions, capital expenditures, the repurchase of shares, the payment of dividends, or making additional investments including new technologies and fiber deployments.
In 2022, TDS Telecom received $111 million under all federal regulatory support programs. There is no assurance that regulatory support payments will continue for TDS Telecom, and no assurance that TDS Telecom will qualify for future regulatory support programs.
There is no assurance that regulatory support payments will continue for TDS Telecom, and no assurance that TDS Telecom will qualify for future regulatory support programs.
TDS anticipates that these competitive factors may continue to result in losses of retail connections, and may cause the prices for services and products to decline and the costs to compete to increase.
These competitive factors have resulted in losses of retail connections and TDS anticipates that they will continue to do so. Similarly, these competitive pressures have caused the prices for services and products to decline and the costs to compete to increase and TDS anticipates that they will continue to do so.
The trustees of the TDS Voting Trust have advised TDS that they intend to maintain the ability to keep or dispose of voting control of TDS. 17 Table of Contents The TDS Restated Certificate of Incorporation also authorizes the TDS Board of Directors to designate and issue TDS Undesignated Shares in one or more classes or series of preferred or common stock from time to time.
The TDS Restated Certificate of Incorporation also authorizes the TDS Board of Directors to designate and issue TDS Undesignated Shares in one or more classes or series of preferred or common stock from time to time.
In addition, TDS’ wireless technology may not be compatible with technologies used by other carriers, which may limit the ability of TDS to enter into voice or data roaming agreements with such other carriers.
In addition, TDS’ wireless technology may not be compatible with technologies used by other carriers, which may limit the ability of TDS to enter into voice or data roaming agreements with such other carriers. Carriers whose customers roam on TDS’ network could switch their business to new operators, limit their high-speed usage or move traffic to their own networks.
To the extent that other carriers expand their networks in TDS’ service areas, the roaming arrangements between TDS and these other carriers could become less strategic for them.
Changes in roaming usage patterns, rates for roaming usage, or roaming relationships with other carriers could continue to have an adverse effect on TDS’ roaming revenues and/or expenses. To the extent that other carriers expand their networks in TDS’ service areas, the roaming arrangements between TDS and these other carriers could become less strategic for them.
Difficulties in gaining acceptance from new market communities or with third party performance could cause delays or additional costs. Any difficulties in supply chain constraints or labor shortages, as well as scaling up project management, engineering and construction resources could delay construction and expansion of operations in new or existing markets or result in increased costs.
Any difficulties in supply chain constraints, labor shortages, project management, engineering or construction resources could delay construction and expansion of operations in new or existing markets or result in increased costs.
Interpretation and application of these rules, including conflicts between federal and state laws, may result in additional costs for compliance and may limit opportunities to derive profits from certain business practices or resources. TDS attempts to timely and fully comply with all regulatory requirements.
Interpretation and application of these rules and of rules relating to other recent NPRMs issued by the FCC (for example, with respect to digital discrimination), including conflicts between federal and state laws, may result in additional costs for compliance and may limit opportunities to derive profits from certain business practices or resources.
TDS’ liquidity would be adversely affected if, among other things, TDS is unable to obtain short or long-term financing on acceptable terms, interest rates increase, TDS makes significant spectrum license purchases, TDS makes significant capital investments, TDS makes significant business acquisitions, the Los Angeles SMSA Limited Partnership (LA Partnership) discontinues or significantly reduces distributions compared to historical levels, or Federal USF and/or other regulatory support payments decline. 14 Table of Contents TDS’ credit rating currently is sub-investment grade.
TDS’ liquidity would be adversely affected if, among other things, cash flows from operations significantly decline, TDS is unable to obtain short or long-term financing on acceptable terms, TDS is not able to comply with certain debt covenants or TDS is unsuccessful in negotiating related consents, waivers, or amendments, interest rates increase, TDS makes significant spectrum license purchases, TDS makes significant capital investments, TDS makes significant business acquisitions, the Los Angeles SMSA Limited Partnership (LA Partnership) and other minority-owned partnerships discontinue or significantly reduce distributions compared to historical levels, or Federal USF and/or other regulatory support payments decline.
Although TDS has implemented and continues to enhance its protection and recovery measures in response to such attacks, these efforts may be insufficient to prevent a material denial of service attack in the future. 24) Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations.
Cybersecurity of this Form 10-K for additional information. 26) Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations.
Also, TDS has other arrangements with third parties, including arrangements pursuant to which TDS outsources certain support functions to third-party vendors.
Also, TDS has other arrangements with third parties, including arrangements pursuant to which TDS outsources certain support and billing functions to third-party vendors, including service providers and third-party wireless network operators for TDS' wireline MVNO product.
TDS maintains administrative, technical and physical controls, as well as other preventative actions, to reduce the risk of security breaches. Although to date TDS has not discovered a material security breach, these efforts may be insufficient to prevent a material security breach stemming from future cyber-attacks including ransomware.
Although to date TDS has not discovered a material security breach, these efforts may be insufficient to prevent a material security breach stemming from future cyber-attacks including ransomware.
This presents a risk to TDS in that, to the extent TDS is not able to enter into economically viable roaming arrangements with these other carriers, this could impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network. 3) A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business, financial condition or results of operations.
This presents a risk to TDS in that, to the extent TDS is not able to enter into economically viable roaming arrangements with these other carriers, this could impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network. 3) An inability to attract diverse people of outstanding talent throughout all levels of the organization, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on TDS' business, financial condition or results of operations.
Also, high-speed wireless networks (wireless broadband) represent a product offering and opportunity for TDS’ wireless business, but also represent a risk for TDS’ wireline and cable businesses as customers may elect to substitute their wireline or cable broadband connection with wireless broadband. Further, fixed-mobile convergence services that combine wireline broadband services with mobile services represent a competitive threat.
Advances in technology could change the amount of tower space needed by wireless companies. Also, high-speed wireless networks (wireless broadband) represent a product offering and opportunity for TDS’ wireless business, but also represent a risk for TDS’ wireline and cable businesses as customers may elect to substitute their wireline or cable broadband connection with wireless broadband.
These include cyber-attacks intended to wrongfully obtain private and valuable information, or cause other types of malicious events, including denial of service attacks which may cause TDS' services to be disrupted or unavailable to customers. The increasing number of associates working remotely increases risks associated with data handling and vulnerability management.
TDS experiences cyber-attacks of varying degrees on a regular basis. These include cyber-attacks intended to wrongfully obtain private and valuable information, or cause other types of malicious events, including denial of service attacks which may cause TDS' services to be disrupted or unavailable to customers.
Overbuilding activity is increasing with investments by venture capital and private equity and with additional access to state and federal funding.
Incumbent carriers are upgrading existing networks with higher speed broadband services and overbuilders are deploying broadband to compete with legacy incumbent carriers. Overbuilding activity is increasing with investments by venture capital and private equity and with additional access to state and federal funding.
Media reports and certain professional studies have suggested that certain radio frequency emissions from wireless devices may be linked to various health problems, including cancer or tumors, and may interfere with various electronic medical devices, including hearing aids and pacemakers.
Media reports and certain professional studies have suggested that certain potentially harmful emissions from devices or network equipment, including but not limited to radio frequencies emitted by wireless signals or due to contamination from network cabling, may cause harmful health or environmental consequences, including cancer, tumors or otherwise harmful impacts, and may interfere with various electronic medical devices, including hearing aids and pacemakers.
If TDS cannot keep pace with its competition in deploying higher speed technologies, offering competitive products and services at competitive prices and providing attractive video content options, TDS' financial condition, results of operations or ability to do business could be adversely affected. 9 Table of Contents 2) Changes in roaming practices or other factors could cause TDS’ roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network, which could have an adverse effect on TDS’ business, financial condition or results of operations.
If TDS cannot keep pace with its competition in deploying higher speed technologies, offering competitive products and services at competitive prices and providing attractive video content options, TDS' financial condition, results of operations or ability to do business could be adversely affected. TDS’ wireline business intends to introduce MVNO plans offering wireless services to customers in its service areas.
General Risk Factors 23) TDS has experienced, and in the future expects to experience, cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on TDS' business, financial condition or results of operations. TDS experiences cyber-attacks of varying degrees on a regular basis.
The provisions of the TDS Restated Certificate of Incorporation and the existence of different classes of capital stock and voting rights could result in the exclusion of TDS Common Shares from certain major stock indices at some point in the future, unless TDS is grandfathered by such stock indices or qualifies for some other exception. 19 Table of Contents General Risk Factors 25) TDS has experienced, and in the future expects to experience, cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on TDS' business, financial condition or results of operations.
As a result, TDS’ level of indebtedness, restrictions contained in debt instruments and/or possible breaches of covenants, defaults, and acceleration of indebtedness could have an adverse effect on TDS’ business, financial condition, revenues, results of operations and cash flows. 15) TDS’ assets and revenue are concentrated primarily in the U.S. telecommunications industry.
As a result, TDS’ level of indebtedness, restrictions contained in debt instruments and/or possible breaches of covenants, defaults, and acceleration of indebtedness could have an adverse effect on TDS’ business, financial condition, revenues, results of operations and cash flows. 15) TDS has entered into a new Senior Secured Credit Agreement that imposes certain restrictions on its business and operations that may affect its ability to operate its business and make payments on its indebtedness.
TDS cannot provide assurance that circumstances that could have a material adverse effect on its liquidity or capital resources will not occur. 14) TDS has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt.
To the extent that UScellular's credit rating is downgraded, it may adversely affect TDS' credit rating, which could result in the impacts described above. 14) TDS has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt.
In addition, some studies have indicated that some aspects of using a wireless device while driving may impair a driver's attention in certain circumstances, making accidents more likely.
Any resulting decrease in demand for wireless services, costs of litigation and damage awards or regulation could have an adverse effect on TDS’ business, financial condition or results of operations. In addition, some studies have indicated that some aspects of using a wireless device while driving may impair a driver's attention in certain circumstances, making accidents more likely.
A substantial portion of TDS' debt is subject to variable interest rates, which has increased interest expense in recent periods and TDS will continue to be vulnerable to unfavorable changes in market interest rates.
A substantial portion of TDS' debt is subject to variable interest rates, which has increased interest expense in recent periods and TDS will continue to be vulnerable to unfavorable changes in market interest rates. 15 Table of Contents The TDS and UScellular revolving credit agreements, the TDS and UScellular term loan agreements, the TDS and UScellular export credit financing agreements and the UScellular receivables securitization agreement require TDS or UScellular, as applicable, to comply with certain affirmative and negative covenants, including certain financial covenants.
New regulatory mandates or enforcement may require unexpected or increased capital expenditures, lost revenues, higher operating expenses or other changes. Court decisions and rulemakings could have a substantial impact on TDS’ operations, including rulemakings on broadband access to the internet, intercarrier access compensation, state and federal support funding, and treatment of VoIP traffic or unbundled network elements.
Court decisions and rulemakings could have a substantial impact on TDS’ operations, including rulemakings on broadband access to the internet, intercarrier access compensation, state and federal support funding, court decisions regarding the FCC's universal service fund program, and treatment of VoIP traffic or unbundled network elements or, more broadly, the scope of authority of the federal agencies that regulate TDS.
For example, consolidation among other carriers which have network footprints that currently overlap TDS’ network, the expansion of other carriers' network coverage in TDS' footprint, and/or lower roaming rates with other carriers are expected to continue to decrease future roaming revenues for TDS.
For example, the expansion of other carriers' network coverage in TDS' footprint and/or lower roaming rates with other carriers could continue to decrease future roaming revenues for TDS. Similarly, TDS’ wireless customers can access another carrier’s network automatically only if the other carrier allows TDS’ customers to roam on its network.
Also, although FCC rules relating to net neutrality have been repealed, the FCC, and federal and state legislators may seek to reinstate net neutrality in some form and some state legislators and regulators are seeking to or have already enacted state net neutrality laws and regulations.
In the interim, some state legislators and regulators are seeking to or have already enacted state net neutrality laws and regulations, and it is unclear whether more states will seek to do so now that the FCC has announced its intent to reinstate net neutrality rules.
Telecommunications providers pay a variety of surcharges and fees on their gross revenues from interstate and intrastate services, including USF fees and common carrier regulatory fees.
Adding to this uncertainty are a series of court cases challenging the constitutionality of the universal service fund program that establishes and administers these regulatory support payments. 17 Table of Contents Telecommunications providers pay a variety of surcharges and fees on their gross revenues from interstate and intrastate services, including USF fees and common carrier regulatory fees.
TDS’ wireline and cable businesses are devoting an increasing amount of capital for fiber overbuilds and expansion into new markets. TDS is often reliant on third parties for items such as construction, franchises, utility locates and easements, aerial attachments and other permits.
TDS is often reliant on third parties for items such as construction, franchises, utility locates and easements, aerial attachments and other permits. Difficulties with third-party performance could cause delays or additional costs.
Consequently, its operating results may fluctuate based on factors related primarily to conditions in this industry. The U.S. telecommunications industry is facing significant change and an uncertain operating environment.
If TDS' indebtedness were to be accelerated, there can be no assurance that the assets would be sufficient to repay such indebtedness in full. 16) TDS’ assets and revenue are concentrated primarily in the U.S. telecommunications industry. Consequently, its operating results may fluctuate based on factors related primarily to conditions in this industry.
In addition, certain investments have historically contributed significant cash flows to TDS and a reduction or suspension of such cash flows could adversely affect TDS’ financial condition. 15 Table of Contents Regulatory, Legal and Governance Risk Factors 17) Failure by TDS to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect TDS’ business, financial condition or results of operations.
In addition, certain investments have historically contributed significant cash flows to TDS and a reduction or suspension of such cash flows could adversely affect TDS’ financial condition. 16 Table of Contents Regulatory, Legal and Governance Risk Factors 18) TDS and UScellular have initiated a process to explore a range of strategic alternatives for UScellular and there can be no assurance that any strategic alternative will be successfully identified or completed, that any such strategic alternative will result in additional value for TDS and its shareholders, or that the process will not have an adverse impact on TDS' business or financial statements.
In addition, the FCC or other regulatory authorities may adopt regulations in response to concerns about radio frequency emissions. Any resulting decrease in demand for wireless services, costs of litigation and damage awards or regulation could have an adverse effect on TDS’ business, financial condition or results of operations.
Concerns over radio frequency emissions may discourage use of wireless devices or expose TDS to potential litigation. In addition, the FCC or other regulatory authorities may adopt regulations in response to concerns about radio frequency or harmful network equipment emissions.
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Competition in the wireline industry is intensified with the increasing deployment of broadband technologies and enhanced video services. Incumbent carriers are upgrading existing networks with higher speed broadband services and overbuilders are deploying broadband to compete with legacy incumbent carriers.
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Competition in the tower industry is also challenging, as TDS competes with public and private tower companies, wireless carrier tower alliances, private equity sponsored tower companies, and owners of non-communications sites such as utility towers, rooftop structures, water towers, and other alternative structures.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeParent and Other fixed assets consist of assets, which are either owned or leased, at TDS Corporate, HMS, and Suttle-Straus. As of December 31, 2022, the gross investment in property, plant and equipment was $9,334 million at UScellular, $5,312 million at TDS Telecom and $325 million at Parent & Other.
Biggest changeParent and Other fixed assets consist of assets, which are either owned or leased, at TDS Corporate, HMS, and Suttle-Straus. As of December 31, 2023, the gross investment in property, plant and equipment was $9,560 million at UScellular, $5,737 million at TDS Telecom and $315 million at Parent & Other.
Item 2. Properties TDS has properties located throughout the United States. As of December 31, 2022, TDS’ gross investment in property, plant and equipment was as follows: UScellular’s local business offices, cell sites, cell site equipment, connectivity centers, data centers, call centers and retail stores are located primarily in UScellular’s operating markets.
Item 2. Properties TDS has properties located throughout the United States. As of December 31, 2023, TDS’ gross investment in property, plant and equipment was as follows: UScellular’s local business offices, cell sites, cell site equipment, connectivity centers, data centers, call centers and retail stores are located primarily in UScellular’s operating markets.
See Note 9 — Property, Plant and Equipment in the Notes to Consolidated Financial Statements for additional information.
See Note 9 — Property, Plant and Equipment in the Notes to Consolidated Financial Statements for additional information. 21 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. 19 Table of Contents PART II
Biggest changeMine Safety Disclosures Not applicable. 22 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSubject to these considerations, TDS may approve the repurchase of its shares from time to time when circumstances warrant.
Biggest changeSubject to these considerations and to legal requirements, TDS may approve the repurchase of its shares from time to time when circumstances warrant. The maximum dollar value of shares that may yet be purchased under this program was $132 million as of December 31, 2023.
The Common Shares of United States Cellular Corporation, an 84%-owned subsidiary of TDS, are listed on the New York Stock Exchange under the symbol “USM.” Stock Performance Graph The following chart provides a comparison of TDS’ cumulative total return to shareholders (stock price appreciation plus dividends) during the previous five years to the returns of the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones U.S.
The Common Shares of United States Cellular Corporation, an 83%-owned subsidiary of TDS, are listed on the New York Stock Exchange under the symbol “USM.” Stock Performance Graph The following chart provides a comparison of TDS’ cumulative total return to shareholders (stock price appreciation plus dividends) during the previous five years to the returns of the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones U.S.
Telecommunications Index. 20 Table of Contents Dividend Reinvestment Plan TDS’ dividend reinvestment plans provide its common shareholders with a convenient and economical way to participate in the future growth of TDS. Holders of record of ten (10) or more Common Shares may purchase Common Shares with their reinvested dividends at a five percent discount from market price.
Telecommunications Index. 23 Table of Contents Dividend Reinvestment Plan TDS’ dividend reinvestment plans provide its common shareholders with a convenient and economical way to participate in the future growth of TDS. Holders of record of ten (10) or more Common Shares may purchase Common Shares with their reinvested dividends at a five percent discount from market price.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Information TDS' Common Shares are listed on the New York Stock Exchange under the symbol “TDS.” As of January 31, 2023, the last trading day of the month, TDS Common Shares were held by 1,599 record owners, and the Series A Common Shares were held by 64 record owners.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Information TDS' Common Shares are listed on the New York Stock Exchange under the symbol “TDS.” As of January 31, 2024, the last trading day of the month, TDS Common Shares were held by 1,561 record owners, and the Series A Common Shares were held by 64 record owners.
TDS did not determine to terminate the foregoing Common Share repurchase program, or cease making further purchases thereunder, during the fourth quarter of 2022.
TDS did not determine to terminate the foregoing Common Share repurchase program, or cease making further purchases thereunder, during the fourth quarter of 2023.
TDS paid quarterly dividends per outstanding share of $0.180 in 2022, $0.175 in 2021 and $0.170 in 2020. TDS increased the dividend per share to $0.185 in the first quarter of 2023. TDS has no current plans to change its policy of paying dividends. TDS has paid cash dividends on its common stock since 1974.
TDS paid quarterly dividends per outstanding share of $0.185 in 2023, $0.180 in 2022 and $0.175 in 2021. TDS increased the dividend per share to $0.190 in the first quarter of 2024. TDS has paid cash dividends on its common stock since 1974.
The following table provides certain information with respect to all purchases made by or on behalf of TDS, and any open market purchases made by any "affiliated purchaser" (as defined by the SEC) of TDS, of TDS Common Shares during the fourth quarter of 2022.
There were no purchases made by or on behalf of TDS, and any open market purchases made by any "affiliated purchaser" (as defined by the SEC) of TDS, of TDS Common Shares during the fourth quarter of 2023. Item 6. [Reserved] 24 Table of Contents
Telecommunications Index 100 93.27 119.28 112.22 102.50 96.60 The comparison above assumes $100.00 invested at the close of trading on the last trading day of 2017, in TDS Common Shares, S&P 500 Index and the Dow Jones U.S.
Telecommunications Index 100 127.88 120.31 109.89 103.57 107.20 The comparison above assumes $100.00 invested at the close of trading on the last trading day of 2018, in TDS Common Shares, S&P 500 Index and the Dow Jones U.S.
Telecommunications Index. Note: Cumulative total return assumes reinvestment of dividends. 2017 2018 2019 2020 2021 2022 TDS Common Shares (NYSE: TDS) $ 100 $ 119.58 $ 95.69 $ 72.43 $ 81.18 $ 44.43 S&P 500 Index 100 95.62 125.72 148.85 191.58 156.88 Dow Jones U.S.
Telecommunications Index. Note: Cumulative total return assumes reinvestment of dividends. 2018 2019 2020 2021 2022 2023 TDS Common Shares (NYSE: TDS) $ 100 $ 80.02 $ 60.57 $ 67.89 $ 37.15 $ 69.21 S&P 500 Index 100 131.49 155.68 200.37 164.08 207.21 Dow Jones U.S.
Removed
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1 - 31, 2022 279,255 $ 14.32 279,255 $ 147,541,711 November 1 - 30, 2022 527,894 $ 12.03 527,894 $ 141,191,278 December 1 - 31, 2022 351,897 $ 10.37 351,897 $ 137,541,726 Total for or as of the end of the quarter ended December 31, 2022 1,159,046 $ 12.08 1,159,046 $ 137,541,726 Item 6. [Reserved] 21 Table of Contents
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It is uncertain at this time how the strategic alternatives review for UScellular, 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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTDS - CONSOLIDATED 2022 2021 (Dollars in millions) Net income (GAAP) $ 72 $ 188 Add back: Income tax expense 53 33 Interest expense 174 232 Depreciation, amortization and accretion 929 895 EBITDA (Non-GAAP) 1,228 1,348 Add back or deduct: Loss on impairment of licenses 3 — (Gain) loss on asset disposals, net 27 26 (Gain) loss on sale of business and other exit costs, net (1) (2) Adjusted EBITDA (Non-GAAP) 1,257 1,372 Deduct: Equity in earnings of unconsolidated entities 159 182 Interest and dividend income 17 11 Other, net 1 (1) Adjusted OIBDA (Non-GAAP) 1,080 1,180 Deduct: Depreciation, amortization and accretion 929 895 Loss on impairment of licenses 3 — (Gain) loss on asset disposals, net 27 26 (Gain) loss on sale of business and other exit costs, net (1) (2) Operating income (GAAP) $ 122 $ 261 53 Index to MD&A UScellular 2022 2021 (Dollars in millions) Net income (GAAP) $ 35 $ 160 Add back: Income tax expense 37 20 Interest expense 163 175 Depreciation, amortization and accretion 700 678 EBITDA (Non-GAAP) 935 1,033 Add back or deduct: Loss on impairment of licenses 3 — (Gain) loss on asset disposals, net 19 23 (Gain) loss on sale of business and other exit costs, net (1) (2) Adjusted EBITDA (Non-GAAP) 956 1,054 Deduct: Equity in earnings of unconsolidated entities 158 179 Interest and dividend income 8 6 Adjusted OIBDA (Non-GAAP) 790 869 Deduct: Depreciation, amortization and accretion 700 678 Loss on impairment of licenses 3 — (Gain) loss on asset disposals, net 19 23 (Gain) loss on sale of business and other exit costs, net (1) (2) Operating income (GAAP) $ 69 $ 170 TDS TELECOM 2022 2021 (Dollars in millions) Net income (GAAP) $ 53 $ 90 Add back or deduct: Income tax expense 23 24 Interest expense (7) (5) Depreciation, amortization and accretion 215 198 EBITDA (Non-GAAP) 284 308 Add back or deduct: (Gain) loss on asset disposals, net 7 2 Adjusted EBITDA (Non-GAAP) 291 310 Deduct: Interest and dividend income 2 1 Other, net 1 (1) Adjusted OIBDA (Non-GAAP) 288 310 Deduct: Depreciation, amortization and accretion 215 198 (Gain) loss on asset disposals, net 7 2 Operating income (GAAP) $ 66 $ 110 Numbers may not foot due to rounding. 54 Index to MD&A Free Cash Flow The following table presents Free cash flow, which is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment and Cash paid for software license agreements.
Biggest changeThe following tables reconcile EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income (loss) and Operating income (loss). 59 Index to MD&A TDS - CONSOLIDATED 2023 2022 (Dollars in millions) Net income (loss) (GAAP) $ (487) $ 72 Add back: Income tax expense 10 53 Interest expense 244 174 Depreciation, amortization and accretion 915 929 EBITDA (Non-GAAP) 682 1,228 Add back or deduct: Expenses related to strategic alternatives review 13 — Loss on impairment of intangible assets 547 3 (Gain) loss on asset disposals, net 27 27 (Gain) loss on sale of business and other exit costs, net — (1) (Gain) loss on license sales and exchanges, net (2) — Adjusted EBITDA (Non-GAAP) 1,267 1,257 Deduct: Equity in earnings of unconsolidated entities 159 159 Interest and dividend income 20 17 Other, net 2 1 Adjusted OIBDA (Non-GAAP) 1,086 1,080 Deduct: Depreciation, amortization and accretion 915 929 Expenses related to strategic alternatives review 13 — Loss on impairment of intangible assets 547 3 (Gain) loss on asset disposals, net 27 27 (Gain) loss on sale of business and other exit costs, net — (1) (Gain) loss on license sales and exchanges, net (2) — Operating income (loss) (GAAP) $ (414) $ 122 UScellular 2023 2022 (Dollars in millions) Net income (GAAP) $ 58 $ 35 Add back: Income tax expense 53 37 Interest expense 196 163 Depreciation, amortization and accretion 656 700 EBITDA (Non-GAAP) 963 935 Add back or deduct: Expenses related to strategic alternatives review 8 — Loss on impairment of licenses — 3 (Gain) loss on asset disposals, net 17 19 (Gain) loss on sale of business and other exit costs, net — (1) (Gain) loss on license sales and exchanges, net (2) — Adjusted EBITDA (Non-GAAP) 986 956 Deduct: Equity in earnings of unconsolidated entities 158 158 Interest and dividend income 10 8 Adjusted OIBDA (Non-GAAP) 818 790 Deduct: Depreciation, amortization and accretion 656 700 Expenses related to strategic alternatives review 8 — Loss on impairment of licenses — 3 (Gain) loss on asset disposals, net 17 19 (Gain) loss on sale of business and other exit costs, net — (1) (Gain) loss on license sales and exchanges, net (2) — Operating income (GAAP) $ 139 $ 69 60 Index to MD&A TDS TELECOM 2023 2022 (Dollars in millions) Net income (loss) (GAAP) $ (483) $ 53 Add back or deduct: Income tax expense (benefit) (26) 23 Interest expense (8) (7) Depreciation, amortization and accretion 245 215 EBITDA (Non-GAAP) (272) 284 Add back or deduct: Loss on impairment of goodwill 547 — (Gain) loss on asset disposals, net 10 7 Adjusted EBITDA (Non-GAAP) 285 291 Deduct: Interest and dividend income 4 2 Other, net 2 1 Adjusted OIBDA (Non-GAAP) 279 288 Deduct: Depreciation, amortization and accretion 245 215 Loss on impairment of goodwill 547 — (Gain) loss on asset disposals, net 10 7 Operating income (loss) (GAAP) $ (523) $ 66 Numbers may not foot due to rounding.
This includes providing exceptional wireless communication services which enhance consumers’ lives, increase the competitiveness of local businesses, and improve the efficiency of government operations in the markets UScellular serves. UScellular’s strategy is to attract and retain customers by providing a high-quality network, outstanding customer service, and competitive devices, plans and pricing - all provided with a community focus.
This includes providing exceptional wireless communication services which enhance consumers’ lives, increase the competitiveness of local businesses, and improve the efficiency of government operations in the markets UScellular serves. UScellular’s strategy is to attract and retain customers by providing a high-quality network, outstanding customer service, and competitive devices, plans and pricing - all provided with a local community focus.
Connected devices include products such as tablets, wearables, modems, and hotspots. ▪ Coronavirus Aid, Relief, and Economic Security (CARES) Act – economic relief package signed into law on March 27, 2020 to address the public health and economic impacts of COVID-19, including a variety of tax provisions. ▪ DOCSIS – Data Over Cable Service Interface Specification is an international telecommunications standard that permits the addition of high-bandwidth data transfer to an existing cable TV (CATV) system.
Connected devices include products such as tablets, wearables, modems, fixed wireless, and hotspots. ▪ Coronavirus Aid, Relief, and Economic Security (CARES) Act – economic relief package signed into law on March 27, 2020 to address the public health and economic impacts of COVID-19, including a variety of tax provisions. ▪ DOCSIS – Data Over Cable Service Interface Specification is an international telecommunications standard that permits the addition of high-bandwidth data transfer to an existing cable TV (CATV) system.
EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under GAAP and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.
EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under GAAP and should not be considered as alternatives to Net income (loss) or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.
Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as presented below as they provide additional relevant and useful information to investors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance.
Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS’ operating results before significant recurring non-cash charges, nonrecurring expenses, gains and losses, and other items as presented below as they provide additional relevant and useful information to investors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance.
General Risk Factors ▪ TDS has experienced, and in the future expects to experience, cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on TDS' business, financial condition or results of operations. ▪ Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations. ▪ The impact of public health emergencies on TDS' business is uncertain, but depending on duration and severity could have a material adverse effect on TDS' business, financial condition or results of operations. 51 Index to MD&A Market Risk Long-Term Debt As of December 31, 2022, approximately 50% of TDS' long-term debt was in fixed-rate senior notes and approximately 50% in variable-rate debt.
General Risk Factors ▪ TDS has experienced, and in the future expects to experience, cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on TDS' business, financial condition or results of operations. ▪ Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations. ▪ The impact of public health emergencies on TDS' business is uncertain, but depending on duration and severity could have a material adverse effect on TDS' business, financial condition or results of operations. 57 Index to MD&A Market Risk Long-Term Debt As of December 31, 2023, approximately 50% of TDS' long-term debt was in fixed-rate senior notes and approximately 50% in variable-rate debt.
Refer to individual segment discussions in this MD&A for additional details on operating revenues and expenses at the segment level. 26 Index to MD&A Equity in earnings of unconsolidated entities Equity in earnings of unconsolidated entities represents TDS’ 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.
Refer to individual segment discussions in this MD&A for additional details on operating revenues and expenses at the segment level. 30 Index to MD&A Equity in earnings of unconsolidated entities Equity in earnings of unconsolidated entities represents TDS’ 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.
See Note 5 — Income Taxes in the Notes to Consolidated Financial Statements for additional information. 48 Index to MD&A Regulatory Matters 5G Fund On October 27, 2020, the FCC adopted rules creating the 5G Fund for Rural America, which will distribute up to $9 billion over ten years to bring 5G wireless broadband connectivity to rural America.
See Note 5 — Income Taxes in the Notes to Consolidated Financial Statements for additional information. 54 Index to MD&A Regulatory Matters 5G Fund On October 27, 2020, the FCC adopted rules creating the 5G Fund for Rural America, which will distribute up to $9 billion over ten years to bring 5G wireless broadband connectivity to rural America.
Fluctuations in market interest rates can lead to volatility in the fair value of fixed-rate notes and interest expense on variable-rate debt. The following table presents the scheduled principal payments on long-term debt, lease obligations and the related weighted average interest rates by maturity dates at December 31, 2022: Principal Payments Due by Period Long-Term Debt Obligations 1 Weighted-Avg.
Fluctuations in market interest rates can lead to volatility in the fair value of fixed-rate notes and interest expense on variable-rate debt. The following table presents the scheduled principal payments on long-term debt, lease obligations and the related weighted average interest rates by maturity dates at December 31, 2023: Principal Payments Due by Period Long-Term Debt Obligations 1 Weighted-Avg.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Executive Overview The following Management’s Discussion and Analysis (MD&A) should be read in conjunction with the audited consolidated financial statements and notes of Telephone and Data Systems, Inc. (TDS) for the year ended December 31, 2022, and with the description of TDS’ business included herein.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Executive Overview The following Management’s Discussion and Analysis (MD&A) should be read in conjunction with the audited consolidated financial statements and notes of Telephone and Data Systems, Inc. (TDS) for the year ended December 31, 2023, and with the description of TDS’ business included herein.
See Note 3 — Fair Value Measurements in the Notes to Consolidated Financial Statements for additional information. 52 Index to MD&A Supplemental Information Relating to Non-GAAP Financial Measures TDS sometimes uses information derived from consolidated financial information but not presented in its financial statements prepared in accordance with GAAP to evaluate the performance of its business.
See Note 3 — Fair Value Measurements in the Notes to Consolidated Financial Statements for additional information. 58 Index to MD&A Supplemental Information Relating to Non-GAAP Financial Measures TDS sometimes uses information derived from consolidated financial information but not presented in its financial statements prepared in accordance with GAAP to evaluate the performance of its business.
Operational Risk Factors ▪ Intense competition involving products, services, pricing, promotions and network speed and technologies could adversely affect TDS’ revenues or increase its costs to compete. ▪ Changes in roaming practices or other factors could cause TDS’ roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network, which could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ An inability to attract diverse people of outstanding talent throughout all levels of the organization, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on TDS' business, financial condition or results of operations. ▪ TDS’ smaller scale relative to larger competitors that may have greater financial and other resources than TDS could cause TDS to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations. ▪ Changes in various business factors, including changes in demand, consumer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ Advances or changes in technology could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business. ▪ Complexities associated with deploying new technologies present substantial risk and TDS’ investments in unproven technologies may not produce the benefits that TDS expects. ▪ Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of TDS’ businesses could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ A failure by TDS to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations. ▪ Difficulties involving third parties with which TDS does business, including changes in TDS’ relationships with or financial or operational difficulties, including supply chain disruptions, of key suppliers or independent agents and third party national retailers who market TDS’ services, could adversely affect TDS’ business, financial condition or results of operations. ▪ A failure by TDS to maintain flexible and capable telecommunication networks or information technologies, or a material disruption thereof, could have an adverse effect on TDS’ business, financial condition or results of operations. 50 Index to MD&A Financial Risk Factors ▪ Uncertainty in TDS’ future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, changes in interest rates, other changes in TDS’ performance or market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its construction, development or acquisition programs, reduce the amount of wireless spectrum licenses acquired, and/or reduce or cease share repurchases and/or the payment of dividends. ▪ TDS has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt. ▪ TDS’ assets and revenue are concentrated primarily in the U.S. telecommunications industry.
Operational Risk Factors ▪ Intense competition involving products, services, pricing, promotions and network speed and technologies could adversely affect TDS’ revenues or increase its costs to compete. ▪ Changes in roaming practices or other factors could cause TDS’ roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network, which could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ An inability to attract diverse people of outstanding talent throughout all levels of the organization, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on TDS' business, financial condition or results of operations. ▪ TDS’ smaller scale relative to larger competitors that may have greater financial and other resources than TDS could cause TDS to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations. ▪ Changes in various business factors, including changes in demand, consumer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ Advances or changes in technology could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business. ▪ Complexities associated with deploying new technologies present substantial risk and TDS’ investments in unproven technologies may not produce the benefits that TDS expects. ▪ Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of TDS’ businesses could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ A failure by TDS to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations. ▪ Difficulties involving third parties with which TDS does business, including changes in TDS’ relationships with or financial or operational difficulties, including supply chain disruptions, of key suppliers or independent agents and third-party national retailers who market TDS’ services, could adversely affect TDS’ business, financial condition or results of operations. ▪ A failure by TDS to maintain flexible and capable telecommunication networks or information technologies, or a material disruption thereof, could have an adverse effect on TDS’ business, financial condition or results of operations. 56 Index to MD&A Financial Risk Factors ▪ Uncertainty in TDS’ or UScellular's future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, changes in interest rates, other changes in TDS’ or UScellular's performance or market conditions, changes in TDS’ or UScellular's credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which has required and could in the future require TDS to reduce or delay its construction, development or acquisition programs, reduce the amount of wireless spectrum licenses acquired, divest assets or businesses, and/or reduce or cease share repurchases and/or the payment of dividends. ▪ TDS has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt. ▪ TDS has entered into a new Senior Secured Credit Agreement that imposes certain restrictions on its business and operations that may affect its ability to operate its business and make payments on its indebtedness. ▪ TDS’ assets and revenue are concentrated primarily in the U.S. telecommunications industry.
Management believes the application of the following critical accounting policies and the estimates required by such application reflect its most significant judgments and estimates used in the preparation of TDS’ consolidated financial statements. Intangible Asset Impairment Licenses and Goodwill represent a significant component of TDS’ consolidated assets.
Management believes the application of the following critical accounting policies and the estimates required by such application reflect its most significant judgments and estimates used in the preparation of TDS’ consolidated financial statements. Intangible Asset Impairment Wireless spectrum licenses and Goodwill represent a significant component of TDS’ consolidated assets.
In the past, TDS’ existing cash and investment balances, funds available under its financing agreements, preferred share offerings, and cash flows from operating and certain investing and financing activities, including sales of assets or businesses, provided sufficient liquidity and financial flexibility for TDS to meet its normal day-to-day operating needs and debt service requirements, to finance the build-out and enhancement of markets and to fund acquisitions.
In the past, TDS’ existing cash and investment balances, funds available under its financing agreements, preferred share offerings, and cash flows from operating and certain investing and financing activities, including sales of assets or businesses, provided sufficient liquidity and financial flexibility for TDS to meet its day-to-day operating needs and debt service requirements, to finance the build-out and enhancement of markets, pay dividends and to fund acquisitions.
UScellular is an 84%-owned subsidiary of TDS. UScellular’s strategy is to attract and retain customers by providing a high-quality network, outstanding customer service, and competitive devices, plans and pricing - all provided with a community focus.
UScellular is an 83%-owned subsidiary of TDS. UScellular’s strategy is to attract and retain customers by providing a high-quality network, outstanding customer service, and competitive devices, plans and pricing - all provided with a community focus.
In addition, UScellular is focused on increasing revenues from prepaid plans, tower rent revenues and expanding its solutions available to business and government customers. ▪ UScellular continues to enhance its network capabilities, including by deploying 5G technology. 5G technology helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency.
In addition, UScellular is focused on increasing tower rent revenues and expanding its solutions available to business and government customers. ▪ UScellular continues to enhance its network capabilities, including by deploying 5G technology. 5G technology helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency.
An account may include a variety of types of connections such as handsets and connected devices. ▪ Alternative Connect America Cost Model (A-CAM) – a USF support mechanism for certain carriers, which provides revenue support through 2028.
An account may include a variety of types of connections such as handsets and connected devices. ▪ Alternative Connect America Cost Model (ACAM) – a USF support mechanism for certain carriers, which provides revenue support through 2028.
Acquisitions, Divestitures and Exchanges TDS may be engaged from time to time in negotiations (subject to all applicable regulations) relating to the acquisition, divestiture or exchange of companies, properties, wireless spectrum licenses (including pursuant to FCC auctions) and other possible businesses. In general, TDS may not disclose such transactions until there is a definitive agreement.
Acquisitions, Divestitures and Exchanges TDS may be engaged in negotiations (subject to all applicable regulations) relating to the acquisition, divestiture or exchange of companies, properties, assets, wireless spectrum licenses (including pursuant to FCC auctions) and other possible businesses. In general, TDS may not disclose such transactions until there is a definitive agreement.
See Note 12 — Debt in the Notes to Consolidated Financial Statements for additional information. 2 Represents the weighted average stated interest rates at December 31, 2022, for debt maturing in the respective periods.
See Note 12 — Debt in the Notes to Consolidated Financial Statements for additional information. 2 Represents the weighted average stated interest rates at December 31, 2023, for debt maturing in the respective periods.
In recent years, rapid changes in technology and new opportunities (such as 5G and VoLTE technology for UScellular and fiber for TDS Telecom) have required substantial investments in potentially revenue-enhancing and cost-saving upgrades to TDS’ networks to remain competitive; this is expected to continue in 2023 and future years with the continued deployment of 5G technology for UScellular, and the continued deployment of fiber for TDS Telecom. 43 Index to MD&A 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, in 2022 and 2021, were as follows: Capital Expenditures (Dollars in millions) UScellular’s capital expenditures in 2022 were $717 million compared to $780 million in 2021.
In recent years, rapid changes in technology and new opportunities (such as 5G and VoLTE technology for UScellular and fiber for TDS Telecom) have required substantial investments in potentially revenue-enhancing and cost-saving upgrades to TDS’ networks to remain competitive; this is expected to continue in 2024 and future years with the continued deployment of 5G technology for UScellular, and the continued deployment of fiber for TDS Telecom. 48 Index to MD&A 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, in 2023 and 2022, were as follows: Capital Expenditures (Dollars in millions) UScellular’s capital expenditures in 2023 were $611 million compared to $717 million in 2022.
These assets are considered to be indefinite-lived assets and, therefore, are not amortized but rather are tested at least annually for impairment. TDS performs annual impairment testing of Licenses and Goodwill as of November 1 of each year, or more frequently if triggering events occur.
These assets are considered to be indefinite-lived assets, and therefore are not amortized but are tested at least annually for impairment. TDS performs annual impairment testing of wireless spectrum licenses and Goodwill as of November 1 of each year, or more frequently if triggering events occur.
See Note 19 — Business Segment Information in the Notes to Consolidated Financial Statements for additional information about TDS' segments. 2022 Operating Revenues by Segment 23 Index to MD&A TDS Mission and Strategy TDS’ mission is to provide outstanding communications services to its customers and meet the needs of its shareholders, its people, and its communities.
See Note 19 — Business Segment Information in the Notes to Consolidated Financial Statements for additional information about TDS' segments. 2023 Operating Revenues by Segment 26 Index to MD&A TDS Mission and Strategy TDS’ mission is to provide outstanding communications services to its customers and meet the needs of its shareholders, its people, and its communities.
OPERATIONS ▪ Serves 1.2 million connections in 32 states. ▪ Employs approximately 3,400 associates. 35 Index to MD&A TDS Telecom Mission and Strategy TDS Telecom's mission is to create a better world by providing high-quality communications services to connect people and businesses, support education, and strengthen communities.
OPERATIONS ▪ Serves 1.2 million connections in 32 states. ▪ Employs approximately 3,600 associates. 39 Index to MD&A TDS Telecom Mission and Strategy TDS Telecom's mission is to create a better world by providing high-quality communications services to connect people and businesses, support education, and strengthen communities.
The 5G Fund will be implemented through a two-phase competitive process, using multi-round auctions to award support. The winning bidders will be required to meet certain minimum speed requirements and interim and final deployment milestones.
The 5G Fund will be implemented through a two-phase competitive process, using multiround auctions to award support. The winning bidders will be required to meet certain minimum speed requirements and interim and final deployment milestones.
Quantitative and Qualitative Disclosures About Market Risk See section entitled "Market Risk" in Item 7 of this Form 10-K. 56 Table of Contents
Quantitative and Qualitative Disclosures About Market Risk See section entitled "Market Risk" in Item 7 of this Form 10-K. 62 Table of Contents
For additional information related to the current TDS and UScellular repurchase authorizations, see Note 17 — Shareholders’ Equity in the Notes to Consolidated Financial Statements. Dividends TDS paid quarterly dividends per outstanding Common Share of $0.180 in 2022 and $0.175 in 2021. TDS increased the dividend per share to $0.185 in the first quarter of 2023.
For additional information related to the current TDS and UScellular repurchase authorizations, see Note 17 — Shareholders’ Equity in the Notes to Consolidated Financial Statements. Dividends TDS paid quarterly dividends per outstanding Common Share of $0.185 in 2023 and $0.180 in 2022. TDS increased the dividend per share to $0.190 in the first quarter of 2024.
Significant negative events, such as changes in any of the assumptions described below or decreases in forecasted cash flows, could result in an impairment in future periods. Licenses are tested for impairment at the level of reporting referred to as a unit of accounting. Goodwill is tested for impairment at the level of reporting referred to as a reporting unit.
Significant negative events, such as changes in any of the assumptions described below or decreases in forecasted cash flows, could result in an impairment. Wireless spectrum licenses are tested for impairment at the level of reporting referred to as a unit of accounting. Goodwill is tested for impairment at the level of reporting referred to as a reporting unit.
Specifically, TDS has referred to the following measures in this Form 10-K Report: ▪ EBITDA ▪ Adjusted EBITDA ▪ Adjusted OIBDA ▪ Free cash flow Following are explanations of each of these measures: EBITDA, Adjusted EBITDA and Adjusted OIBDA EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation below.
Specifically, TDS has referred to the following measures in this Form 10-K Report: ▪ EBITDA ▪ Adjusted EBITDA ▪ Adjusted OIBDA ▪ Free cash flow ▪ Goodwill impairment, net of tax Following are explanations of each of these measures: EBITDA, Adjusted EBITDA and Adjusted OIBDA EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as Net income (loss) adjusted for the items set forth in the reconciliation below.
TDS makes substantial investments to acquire wireless spectrum licenses and properties and to construct and upgrade communications networks and facilities as a basis for creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue‑enhancing and cost-saving upgrades to TDS’ networks.
TDS makes substantial investments to acquire wireless spectrum licenses and properties and to construct and upgrade communications networks and facilities with a goal of creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue‑enhancing and cost-saving upgrades to TDS’ networks.
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. 39 Index to MD&A Operating Revenues (Dollars in millions) Residential revenues consist of: • Broadband services, including security and support services • Video services, including IPTV, traditional cable programming and satellite offerings • Voice services Commercial revenues consist of: • High-speed and dedicated business internet services • Video services • Voice services Wholesale revenues consist of: • Network access services primarily to interexchange and wireless carriers for carrying data and voice traffic on TDS Telecom's networks • Federal and state regulatory support, including A-CAM Key components of changes in the statement of operations items were as follows: Total operating revenues Residential revenues increased for 2022 due primarily to price increases and growth in broadband connections, partially offset by a decline in voice and video connections and federal universal service charges.
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. 43 Index to MD&A Operating Revenues (Dollars in millions) Residential revenues consist of: • Broadband services • Video services, including IPTV, traditional cable programming and satellite offerings • Voice services Commercial revenues consist of: • High-speed and dedicated business internet services • Video services • Voice services Wholesale revenues consist of: • Network access services primarily to interexchange and wireless carriers for carrying data and voice traffic on TDS Telecom's networks • Federal and state regulatory support, including ACAM Key components of changes in the statement of operations items were as follows: Total operating revenues Residential revenues increased for 2023 due primarily to price increases and growth in broadband connections, partially offset by promotional activity and a decline in voice and video connections.
Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, timing and other factors. The following discussion summarizes TDS’ cash flow activities in 2022 and 2021. 2022 Commentary TDS’ Cash, cash equivalents and restricted cash decreased $15 million.
Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, timing and other factors. The following discussion summarizes TDS’ cash flow activities in 2023 and 2022. 2023 Commentary TDS’ Cash, cash equivalents and restricted cash decreased $129 million.
Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities.
Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, gains and losses, and expenses related to the strategic alternatives review of UScellular, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities.
Adjusted EBITDA decreased in 2022 due primarily to higher operating expenses, partially offset by higher operating revenues. *Represents a non-GAAP financial measure. Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure. 28 Index to MD&A UScellular OPERATIONS Business Overview UScellular owns, operates, and invests in wireless markets throughout the United States.
Adjusted EBITDA increased in 2023 due primarily to lower operating expenses, partially offset by lower operating revenues. *Represents a non-GAAP financial measure. Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure. 32 Index to MD&A UScellular OPERATIONS Business Overview UScellular owns, operates, and invests in wireless markets throughout the United States.
UScellular paid $30 million of this amount in 2020 and the remainder in March 2021. The wireless spectrum licenses from Auction 107 were granted by the FCC in July 2021. Additionally, UScellular expects to be obligated to pay approximately $185 million in total from 2021 through 2024 related to relocation costs and accelerated relocation incentive payments.
UScellular paid $30 million of this amount in 2020 and the remainder in March 2021. The wireless spectrum licenses from Auction 107 were granted by the FCC in July 2021. Additionally, UScellular was obligated to pay approximately $179 million in total from 2021 through 2025 related to relocation costs and accelerated relocation incentive payments.
A majority of TDS Telecom's residential customers take advantage of bundling options as 60% of customers subscribe to more than one service. 37 Index to MD&A Residential Broadband Connections by Speed As of December 31, Residential broadband customers continue to choose higher speeds with 72% taking speeds of 100 Mbps or greater and 11% choosing 1Gig.
A majority of TDS Telecom's residential customers take advantage of bundling options as 56% of customers subscribe to more than one service. 41 Index to MD&A Residential Broadband Connections by Speed As of December 31, Residential broadband customers continue to choose higher speeds with 76% taking speeds of 100 Mbps or greater and 16% choosing 1Gig+.
Interest Rates on Long-Term Debt Obligations 2 (Dollars in millions) 2023 $ 19 6.3 % 2024 26 6.2 % 2025 26 6.2 % 2026 275 5.9 % 2027 218 6.0 % Thereafter 2,983 6.2 % Total $ 3,547 6.2 % 1 The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to unamortized debt issuance costs on all non-revolving debt instruments, unamortized discounts related to the UScellular's 6.7% Senior Notes, and outstanding borrowings under the receivables securitization agreement, which principal repayments are not scheduled but are instead based on actual receivable collections.
Interest Rates on Long-Term Debt Obligations 2 (Dollars in millions) 2024 $ 26 7.2 % 2025 26 7.2 % 2026 676 7.2 % 2027 319 7.0 % 2028 482 7.5 % Thereafter 2,500 6.4 % Total $ 4,029 6.7 % 1 The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to unamortized debt issuance costs on all non-revolving debt instruments, unamortized discounts related to UScellular's 6.7% Senior Notes, and outstanding borrowings under the receivables securitization agreement, which principal repayments are not scheduled but are instead based on actual receivable collections.
TDS Telecom's strategic efforts include: ▪ TDS Telecom strives to be the preferred broadband provider in its markets with the ability to provide value-added bundling with video and voice service options.
TDS Telecom's strategic efforts include: ▪ TDS Telecom strives to provide high-quality broadband services in its markets with the ability to provide value-added bundling with video and voice service options.
TDS may require substantial additional capital for, among other uses, funding day-to-day operating needs including working capital, acquisitions of providers of telecommunications services, wireless spectrum license acquisitions, capital expenditures, agreements to purchase goods or services, leases, debt service requirements, repurchases of shares, payment of dividends, or making additional investments, including new technologies and fiber deployments.
TDS may require substantial additional funding for, among other uses, capital expenditures, making additional investments including new technologies, fiber deployments and E-ACAM builds, acquisitions of providers of telecommunications services, wireless spectrum license acquisitions, agreements to purchase goods or services, leases, repurchases of shares, or payment of dividends.
TDS’ long-term strategy calls for the majority of its operating capital to be reinvested in its businesses to strengthen their competitive positions and financial performance, while also returning value to TDS shareholders primarily through the payment of a regular quarterly cash dividend.
TDS’ historical long-term strategy has been to re-invest the majority of its operating capital in its businesses to strengthen their competitive positions and financial performance, while also returning value to TDS shareholders primarily through the payment of a regular quarterly cash dividend.
Certain numbers included herein are rounded to millions for ease of presentation; however, certain calculated amounts and percentages are determined using the unrounded numbers. This report contains statements that are not based on historical facts, including the words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions.
Certain numbers included herein are rounded to millions for ease of presentation; however, certain calculated amounts and percentages are determined using the unrounded numbers. This report contains statements that are not based on historical facts, which may be identified by words such as “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects,” “will” and similar expressions.
TDS paid quarterly dividends per outstanding Series VV depositary share (each representing 1/1,000th of a Preferred Share) of $0.375 in 2022, $0.183 in September 2021 and $0.375 in December 2021. 45 Index to MD&A Consolidated Cash Flow Analysis TDS operates a capital-intensive business.
TDS paid quarterly dividends per outstanding Series UU depositary share (each representing 1/1,000th of a Preferred Share) of $0.414 in 2023 and 2022. TDS paid quarterly dividends per outstanding Series VV depositary share (each representing 1/1,000th of a Preferred Share) of $0.375 in 2023 and 2022. 50 Index to MD&A Consolidated Cash Flow Analysis TDS operates a capital-intensive business.
TDS and UScellular also are required to maintain the Consolidated Leverage Ratio at a level not to exceed 3.75 to 1.00 as of the end of any fiscal quarter. TDS and UScellular believe they were in compliance as of December 31, 2022 with all such financial covenants.
TDS and UScellular 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 UScellular believe that they were in compliance as of December 31, 2023 with all such financial covenants.
Net income attributable to noncontrolling interests, net of tax Year Ended December 31, 2022 2021 (Dollars in millions) UScellular noncontrolling public shareholders’ $ 6 $ 28 Noncontrolling shareholders’ or partners’ 4 4 Net income attributable to noncontrolling interests, net of tax $ 10 $ 32 Net income attributable to noncontrolling interests, net of tax includes the noncontrolling public shareholders’ share of UScellular’s net income, the noncontrolling shareholders’ or partners’ share of certain UScellular subsidiaries’ net income and other TDS noncontrolling interests. 27 Index to MD&A Earnings (Dollars in millions) Net income decreased in 2022 due primarily to higher operating and income tax expenses, partially offset by higher operating revenues and lower interest expense.
Net income attributable to noncontrolling interests, net of tax Year Ended December 31, 2023 2022 (Dollars in millions) UScellular noncontrolling public shareholders’ $ 9 $ 6 Noncontrolling shareholders’ or partners’ 4 4 Net income attributable to noncontrolling interests, net of tax $ 13 $ 10 Net income attributable to noncontrolling interests, net of tax includes the noncontrolling public shareholders’ share of UScellular’s net income, the noncontrolling shareholders’ or partners’ share of certain UScellular subsidiaries’ net income and other TDS noncontrolling interests. 31 Index to MD&A Earnings (Dollars in millions) Net income (loss) decreased in 2023 due primarily to the impairment of the TDS Telecom Goodwill as well as lower operating revenues and higher interest expense, partially offset by lower cash operating and tax expenses.
OPERATIONS ▪ Serves customers with 4.7 million retail connections including 4.2 million postpaid and 0.5 million prepaid connections ▪ Operates in 21 states ▪ Employs approximately 4,900 associates ▪ 4,336 owned towers ▪ 6,945 cell sites in service 29 Index to MD&A UScellular Mission and Strategy UScellular’s mission is to connect its customers to what matters most to them.
OPERATIONS ▪ Serves customers with 4.6 million retail connections including 4.1 million postpaid and 0.5 million prepaid connections ▪ Operates in 21 states ▪ Employs approximately 4,300 associates ▪ Owns 4,373 towers ▪ Operates 7,000 cell sites in service 33 Index to MD&A UScellular Mission and Strategy UScellular’s mission is to connect its customers to what matters most to them.
Fair Value of Long-Term Debt At December 31, 2022 and 2021, the estimated fair value of long-term debt obligations, excluding lease obligations, the current portion of such long-term debt and debt financing costs, was $3,047 million and $3,197 million, respectively, and the book value was $3,789 million and $2,979 million, respectively.
Fair Value of Long-Term Debt At December 31, 2023 and 2022, the estimated fair value of long-term debt obligations, excluding lease obligations, the current portion of such long-term debt and debt financing costs, was $3,651 million and $3,047 million, respectively, and the book value was $4,139 million and $3,789 million, respectively.
Regulatory, Legal and Governance Risk Factors ▪ Failure by TDS to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect TDS’ business, financial condition or results of operations. ▪ TDS receives significant regulatory support, and is also subject to numerous surcharges and fees from federal, state and local governments – the applicability and the amount of the support and fees are subject to great uncertainty, including the ability to pass through certain fees to customers, and this uncertainty could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices or frequencies used by other industries, could have an adverse effect on TDS’ wireless business, financial condition or results of operations. ▪ Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS or have other consequences.
Regulatory, Legal and Governance Risk Factors ▪ TDS and UScellular have initiated a process to explore a range of strategic alternatives for UScellular and there can be no assurance that any strategic alternative will be successfully identified or completed, that any such strategic alternative will result in additional value for TDS and its shareholders, or that the process will not have an adverse impact on TDS' business or financial statements. ▪ Failure by TDS to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect TDS’ business, financial condition or results of operations. ▪ TDS receives significant regulatory support, and is also subject to numerous surcharges and fees from federal, state and local governments – the applicability and the amount of the support and fees are subject to great uncertainty, including the ability to pass through certain fees to customers, and this uncertainty could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ The possible development of adverse precedent in litigation or conclusions in professional or environmental studies to the effect that potentially harmful emissions from devices or network equipment, including but not limited to radio frequencies emitted by wireless signals or due to contamination from network cabling, may cause harmful health or environmental consequences, including cancer, tumors or otherwise harmful impacts, or may interfere with various electronic medical devices or frequencies used by other industries, could have an adverse effect on TDS’ wireless and/or wireline business, financial condition or results of operations. ▪ Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations. ▪ Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS or have other consequences.
On January 14, 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 380 wireless spectrum licenses for $580 million. UScellular paid $20 million of this amount in 2021 and the remainder in January and February 2022. The wireless spectrum licenses from Auction 110 were granted by the FCC on May 4, 2022.
On January 14, 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 380 wireless spectrum licenses for $580 million. UScellular paid $20 million of this amount in 2021 and the remainder in the first quarter of 2022.
Capital expenditures for 2023 are expected to be between $600 million and $700 million. These expenditures are expected to be used for similar purposes as those listed above. TDS Telecom’s capital expenditures in 2022 were $556 million compared to $411 million in 2021.
Capital expenditures for 2024 are expected to be between $550 million and $650 million. These expenditures are expected to be used for similar purposes as those listed above. TDS Telecom’s capital expenditures in 2023 were $577 million compared to $556 million in 2022.
Connections are associated with all types of devices that connect directly to the UScellular network. ▪ Service Addresses – number of single residence homes, multi-dwelling units, and business locations that are capable of being connected to the TDS network, based on best available information. ▪ Universal Service Fund (USF) – a system of telecommunications collected fees and support payments managed by the FCC intended to promote universal access to telecommunications services in the United States. ▪ Video Connections – represents the individual customers provided video services. ▪ Voice Connections – refers to the individual circuits connecting a customer to TDS’ central office facilities that provide voice services or the billable number of lines into a building for voice services. ▪ VoLTE – Voice over Long-Term Evolution is a technology specification that defines the standards and procedures for delivering voice communications and related services over 4G LTE networks. 25 Index to MD&A Results of Operations — TDS Consolidated Year Ended December 31, 2022 2021 2022 vs. 2021 (Dollars in millions) Operating revenues UScellular $ 4,169 $ 4,122 1 % TDS Telecom 1,020 1,006 1 % All other 1 224 201 11 % Total operating revenues 5,413 5,329 2 % Operating expenses UScellular 4,100 3,952 4 % TDS Telecom 954 896 6 % All other 1 237 220 8 % Total operating expenses 5,291 5,068 4 % Operating income (loss) UScellular 69 170 (59) % TDS Telecom 66 110 (40) % All other 1 (13) (19) 27 % Total operating income 122 261 (53) % Investment and other income (expense) Equity in earnings of unconsolidated entities 159 182 (12) % Interest and dividend income 17 11 45 % Interest expense (174) (232) 25 % Other, net 1 (1) N/M Total investment and other income 3 (40) N/M Income before income taxes 125 221 (44) % Income tax expense 53 33 59 % Net income 72 188 (62) % Less: Net income attributable to noncontrolling interests, net of tax 10 32 (69) % Net income attributable to TDS shareholders 62 156 (61) % TDS Preferred Share dividends 69 39 79 % Net income (loss) attributable to TDS common shareholders $ (7) $ 117 N/M Adjusted OIBDA (Non-GAAP) 2 $ 1,080 $ 1,180 (8) % Adjusted EBITDA (Non-GAAP) 2 $ 1,257 $ 1,372 (8) % Capital expenditures 3 $ 1,285 $ 1,201 7 % N/M - Percentage change not meaningful 1 Consists of corporate and other operations and intercompany eliminations. 2 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure. 3 Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.
Connections are associated with all types of devices that connect directly to the UScellular network. ▪ Service Addresses – number of single residence homes, multi-dwelling units, and business locations that are capable of being connected to the TDS network, based on best available information. ▪ Universal Service Fund (USF) – a system of telecommunications collected fees and support payments managed by the FCC intended to promote universal access to telecommunications services in the United States. ▪ Video Connections – represents the individual customers provided video services. ▪ Voice Connections – refers to the individual circuits connecting a customer to TDS’ central office facilities that provide voice services or the billable number of lines into a building for voice services. 28 Index to MD&A ▪ VoLTE – Voice over Long-Term Evolution is a technology specification that defines the standards and procedures for delivering voice communications and related services over 4G LTE networks. 29 Index to MD&A Results of Operations — TDS Consolidated The following discussion and analysis compares financial results for the year ended December 31, 2023, to the year ended December 31, 2022 Year Ended December 31, 2023 2022 2023 vs. 2022 (Dollars in millions) Operating revenues UScellular $ 3,906 $ 4,169 (6) % TDS Telecom 1,028 1,020 1 % All other 1 226 224 1 % Total operating revenues 5,160 5,413 (5) % Operating expenses UScellular 3,767 4,100 (8) % TDS Telecom 1,551 954 63 % All other 1 256 237 8 % Total operating expenses 5,574 5,291 5 % Operating income (loss) UScellular 139 69 N/M TDS Telecom (523) 66 N/M All other 1 (30) (13) N/M Total operating income (414) 122 N/M Investment and other income (expense) Equity in earnings of unconsolidated entities 159 159 – Interest and dividend income 20 17 19 % Interest expense (244) (174) (40) % Other, net 2 1 94 % Total investment and other income (expense) (63) 3 N/M Income (loss) before income taxes (477) 125 N/M Income tax expense 10 53 (81) % Net income (loss) (487) 72 N/M Less: Net income attributable to noncontrolling interests, net of tax 13 10 28 % Net income (loss) attributable to TDS shareholders (500) 62 N/M TDS Preferred Share dividends 69 69 – Net loss attributable to TDS common shareholders $ (569) $ (7) N/M Adjusted OIBDA (Non-GAAP) 2 $ 1,086 $ 1,080 1 % Adjusted EBITDA (Non-GAAP) 2 $ 1,267 $ 1,257 1 % Capital expenditures 3 $ 1,197 $ 1,285 (7) % N/M - Percentage change not meaningful 1 Consists of corporate and other operations and intercompany eliminations. 2 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure. 3 Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.
Executive Overview 23 Terms used by TDS 25 Results of Operations – TDS Consolidated 26 UScellular Operations 29 TDS Telecom Operations 35 Liquidity and Capital Resources 41 Consolidated Cash Flow Analysis 46 Consolidated Balance Sheet Analysis 47 Application of Critical Accounting Policies and Estimates 48 Regulatory Matters 49 Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement 50 Market Risk 52 Supplemental Information Relating to Non-GAAP Financial Measures 53 22 Index to MD&A Telephone and Data Systems, Inc.
Executive Overview 26 Terms used by TDS 28 Results of Operations – TDS Consolidated 30 UScellular Operations 33 TDS Telecom Operations 39 Liquidity and Capital Resources 45 Consolidated Cash Flow Analysis 51 Consolidated Balance Sheet Analysis 52 Application of Critical Accounting Policies and Estimates 53 Regulatory Matters 55 Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement 56 Market Risk 58 Supplemental Information Relating to Non-GAAP Financial Measures 59 25 Index to MD&A Telephone and Data Systems, Inc.
However, TDS believes that existing cash and investmen t balances, funds available under its financing agreements, expected future tax refunds and ex pected cash flows from operating and investing activities will provide sufficient liquidity for TDS to meet its normal day-to-day operating needs and debt service requirements for the next several years.
TDS believes that existing cash and investmen t balances, funds available under its financing agreements, its ability to obtain future external financing, potential dispositions and ex pected cash flows from operating and investing activities will provide sufficient liquidity for TDS to meet its day-to-day operating needs and debt service requirements.
UScellular does not expect to have access to this spectrum until late 2023. On June 9, 2021, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.45-3.55 GHz band (Auction 110).
UScellular received full access to the spectrum in the third quarter of 2023. On June 9, 2021, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.45-3.55 GHz band (Auction 110).
In 2022, UScellular's capital expenditures were used for the following purposes: • Continue network modernization and 5G deployment; • Enhance and maintain UScellular's network coverage, including providing additional speed and capacity to accommodate increased data usage by current customers; and • Invest in information technology to support existing and new services and products.
In 2023, UScellular's capital expenditures were used for the following purposes: • Enhance and maintain UScellular's network capacity and coverage, including continued deployment of 5G with a focus on mid-band spectrum to provide additional speed and capacity to accommodate increased data usage by current customers; and • Invest in information technology to support existing and new services and products.
System operations expenses System operations expenses decreased in 2022, due primarily to decreases in roaming and customer usage expenses, partially offset by an increase in maintenance, utility, and cell site expenses. The decrease in roaming expense was driven by a decrease in roaming rates partially offset by an increase in usage.
System operations expenses System operations expenses decreased in 2023, due primarily to decreases in roaming and customer usage expenses, partially offset by an increase in maintenance, utility, and cell site expenses.
TDS may elect to make additional capital contributions and/or advances to these variable interest entities in future periods in order to fund their operations. 44 Index to MD&A Common Share Repurchase Programs During 2022, TDS repurchased 2,754,339 Common Shares for $40 million at an average cost per share of $14.46.
TDS may elect to make additional capital contributions and/or advances to these variable interest entities in future periods to fund their operations. 49 Index to MD&A Common Share Repurchase Programs During 2023, TDS repurchased 545,990 Common Shares for $6 million at an average cost per share of $10.09.
Treasury or U.S. government agencies. Refer to the Consolidated Cash Flow Analysis for additional information related to changes in Cash and cash equivalents. 41 Index to MD&A In addition to Cash and cash equivalents, TDS and UScellular had undrawn borrowing capacity from the following debt facilities at December 31, 2022. See the Financing section below for further details.
Treasury or U.S. government agencies. Refer to the Consolidated Cash Flow Analysis for additional information related to changes in Cash and cash equivalents. 45 Index to MD&A In addition to Cash and cash equivalents, TDS and UScellular had available undrawn borrowing capacity (taking into account debt covenant restrictions) from the following debt facilities at December 31, 2023.
Net cash provided by operating activities was $1,103 million due to net income of $188 million adjusted for non-cash items of $959 million and distributions received from unconsolidated entities of $180 million, including $76 million in distributions from the LA Partnership. This was partially offset by changes in working capital items which decreased net cash by $224 million.
Net cash provided by operating activities was $1,142 million due to a net loss of $487 million adjusted for non-cash items of $1,496 million and distributions received from unconsolidated entities of $150 million, including $69 million in distributions from the LA Partnership. This was partially offset by changes in working capital items which decreased net cash by $17 million.
There is no assurance that TDS will continue to increase the dividend rate or pay dividends and no assurance that TDS will make any significant amount of share repurchases in the future. 24 Index to MD&A Terms Used by TDS The following is a list of definitions of certain industry terms that are used throughout this document: ▪ 4G LTE – fourth generation Long-Term Evolution, which is a wireless technology that enables more network capacity for more data per user as well as faster access to data compared to third generation (3G) technology. ▪ 5G – fifth generation wireless technology that helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency. ▪ Account – represents an individual or business financially responsible for one or multiple associated connections.
Refer to Supplemental Information to Non-GAAP Financial Measures within this MD&A for a reconciliation of the Goodwill impairment, net of tax. 27 Index to MD&A Terms Used by TDS The following is a list of definitions of certain industry terms that are used throughout this document: ▪ 4G LTE – fourth generation Long-Term Evolution, which is a wireless technology that enables more network capacity for more data per user as well as faster access to data compared to third generation (3G) technology. ▪ 5G – fifth generation wireless technology that helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency. ▪ Account – represents an individual or business financially responsible for one or multiple associated connections.
It may be necessary from time to time to increase the size of the existing credit facilities, to amend existing or put in place new credit agreements, or to obtain other forms of financing in order to fund potential expenditures. Cash and Cash Equivalents Cash and cash equivalents include cash and money market investments.
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’ investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pre-tax income of $65 million and $82 million for 2022 and 2021, respectively. See Note 8 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.
TDS’ investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pre-tax income of $65 million for both 2023 and 2022. See Note 8 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information. Interest expense Interest expense increased in 2023 due primarily to interest rate increases on variable rate debt.
As of December 31, 2022, the maximum dollar value of TDS Common Shares that may yet be purchased under TDS' program was $138 million. During 2022, UScellular repurchased 1,589,784 Common Shares for $43 million at an average cost per share of $26.78. At December 31, 2022, the total cumulative amount of UScellular Common Shares authorized to be repurchased is 1,927,000.
As of December 31, 2023, the maximum dollar value of TDS Common Shares that may yet be purchased under TDS' program was $132 million. UScellular had no share repurchases during 2023. At December 31, 2023, the total cumulative amount of UScellular Common Shares authorized to be repurchased is 1,927,000.
Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward looking statements. See Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement for additional information.
Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward looking statements.
During 2022, UScellular repaid $250 million and borrowed $75 million under the agreement. As of December 31, 2022, the outstanding borrowings under the agreement were $275 million and the unused borrowing capacity was $175 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement.
During 2023, UScellular borrowed $315 million and repaid $440 million under the agreement. As of December 31, 2023, the outstanding borrowings under the agreement were $150 million and the unused borrowing capacity was $300 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement. In January 2024, UScellular repaid $50 million under the agreement.
The agreements do not cease to be available nor do the maturity dates accelerate solely as a result of a downgrade in TDS’ or UScellular’s credit rating. However, downgrades in TDS’ or UScellular’s credit rating could adversely affect their ability to renew the agreements or obtain access to other credit agreements in the future.
The agreements do not cease to be available nor do the maturity dates accelerate solely as a result of a downgrade in TDS’ or UScellular’s credit rating.
Variable Interest Entities TDS consolidates certain “variable interest entities” as defined under GAAP. See Note 15 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information related to these variable interest entities.
See Note 15 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information related to these variable interest entities.
In 2022, these capital expenditures were used for the following purposes: • Continue to expand fiber deployment in incumbent and expansion markets; • Maintain and enhance existing infrastructure including build-out requirements to meet state broadband and A-CAM programs; • Upgrade broadband capacity and speeds; and • Support success-based spending for broadband growth.
In 2023, these capital expenditures were used for the following purposes: • Continue to expand fiber deployment in expansion and incumbent markets; • Support broadband growth and success-based spending; and • Maintain and enhance existing infrastructure including build-out requirements of state broadband and ACAM programs. Capital expenditures for 2024 are expected to be between $310 million and $340 million.
Commercial revenues decreased for 2022 due primarily to declining connections in CLEC markets, partially offset by an increase in broadband connections. Cost of services Cost of services increased for 2022 due primarily to higher employee-related expenses, video programming costs and vehicle maintenance and fuel costs.
Commercial revenues decreased for 2023 due primarily to declining connections in CLEC markets. Cost of services Cost of services increased for 2023 due primarily to higher video programming costs, information processing costs, and employee-related expenses, partially offset by a decrease in cost to provide legacy services.
TDS intends to finance its capital expenditures for 2023 using primarily Cash flows from operating activities, existing cash balances and, as required, additional debt financing from its existing agreements and/or other forms of financing.
These expenditures are expected to be used for similar purposes as those listed above. TDS intends to finance its capital expenditures for 2024 using primarily Cash flows from operating activities, existing cash balances and additional debt financing from its existing agreements and/or other forms of available financing.
In February 2023, UScellular borrowed $25 million under the receivables securitization agreement. Repurchase Agreement In January 2022, UScellular, through a subsidiary (the repo subsidiary), entered into a repurchase agreement to borrow up to $200 million, subject to the availability of eligible equipment installment plan receivables and the agreement of the lender.
Repurchase Agreement UScellular, through a subsidiary (the repo subsidiary), had a repurchase agreement to borrow up to $200 million, subject to the availability of eligible equipment installment plan receivables and the agreement of the lender. In January 2023, UScellular amended the repurchase agreement to extend the expiration date to January 2024.
Income taxes receivable Income taxes receivable decreased $125 million due primarily to a federal income tax refund received related to the 2020 net operating loss carryback enabled by the CARES Act.
Income taxes receivable Income taxes receivable decreased $55 million due primarily to a federal income tax refund received in the second quarter of 2023 related to the 2020 net operating loss carryback enabled by the CARES Act. Goodwill Goodwill decreased $547 million due to the impairment of TDS Telecom's Goodwill in the fourth quarter of 2023.
Free cash flow is a non-GAAP financial measure which TDS believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment and Cash paid for software license agreements. 2022 2021 (Dollars in millions) Cash flows from operating activities (GAAP) $ 1,155 $ 1,103 Cash paid for additions to property, plant and equipment (1,161) (1,131) Cash paid for software license agreements (23) (9) Free cash flow (Non-GAAP) $ (29) $ (37) 55 Table of Contents Item 7A.
Free cash flow is a non-GAAP financial measure which TDS believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment and Cash paid for software license agreements. 2023 2022 (Dollars in millions) Cash flows from operating activities (GAAP) $ 1,142 $ 1,155 Cash paid for additions to property, plant and equipment (1,211) (1,161) Cash paid for software license agreements (66) (23) Free cash flow (Non-GAAP) $ (135) $ (29) Goodwill impairment, net of tax The following non-GAAP financial measure isolates the total effects on net income of the current period Loss on impairment of goodwill at TDS Telecom, including tax impacts.
TDS Telecom focuses on driving growth by investing in fiber deployment in its expansion markets and in its incumbent markets that have historically utilized copper and coaxial cable technologies. ▪ TDS Telecom seeks to grow its operations and expand its total footprint by creating new clusters of markets in attractive, growing locations and may seek to acquire businesses that support and complement its existing markets. 36 Index to MD&A Operational Overview — TDS Telecom Total Service Address Mix As of December 31, *2021 Fiber addresses in cable markets are included in Coaxial.
TDS Telecom focuses on driving growth by investing in fiber deployment primarily in its expansion markets and also in its incumbent markets that have historically utilized copper and coaxial cable technologies. ▪ 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. 40 Index to MD&A Operational Overview — TDS Telecom Total Service Address Mix As of December 31, TDS Telecom increased its service addresses 12% from a year ago to 1.7 million as of December 31, 2023, through network expansion.
These were partially offset by $250 million of repayments on the UScellular receivables securitization agreement, a $75 million repayment on the UScellular revolving credit agreement, a $50 million repayment on the UScellular EIP receivables repurchase agreement, the payment of dividends totaling $151 million, the repurchase of TDS and UScellular Common Shares totaling $83 million and cash paid for software license agreements of $23 million. 2021 Commentary TDS’ Cash, cash equivalents and restricted cash decreased $1,038 million.
These were partially offset by $440 million in repayments on the UScellular receivables securitization agreement, $265 million in repayments on the TDS revolving credit agreement, a $60 million repayment on the UScellular EIP receivables repurchase agreement, payment of $153 million in dividends and cash paid for software license agreements of $66 million. 2022 Commentary TDS’ Cash, cash equivalents and restricted cash decreased $15 million.
As of December 31, 2022 2021 2022 vs. 2021 Residential connections Broadband Wireline, Incumbent 249,100 250,200 — Wireline, Expansion 56,100 36,900 52 % Cable 204,800 203,200 1 % Total Broadband 510,000 490,300 4 % Video 135,300 141,500 (4) % Voice 291,600 303,700 (4) % Total Residential Connections 936,900 935,600 — Commercial connections 236,000 264,300 (11) % Total connections 1,173,000 1,199,900 (2) % Numbers may not foot due to rounding.
As of December 31, 2023 2022 2023 vs. 2022 Residential connections Broadband Wireline, Incumbent 244,800 249,100 (2) % Wireline, Expansion 92,200 56,100 64 % Cable 202,900 204,800 (1) % Total Broadband 539,800 510,000 6 % Video 131,500 135,300 (3) % Voice 281,600 291,600 (3) % Total Residential Connections 952,900 936,900 2 % Commercial connections 210,200 236,000 (11) % Total connections 1,163,100 1,173,000 (1) % Numbers may not foot due to rounding.
In December 2021, UScellular entered into a $150 million term loan credit facility with Export Development Canada to finance (or refinance) imported equipment, including equipment purchased prior to entering the term loan credit facility agreement. During 2022, UScellular borrowed $150 million, which is the full amount available under the agreement and is due in January 2027.
As of December 31, 2023, the outstanding borrowings under the agreement were $150 million, which is the full amount available under the agreement. UScellular has a $150 million term loan credit facility with Export Development Canada to finance (or refinance) imported equipment, including equipment purchased prior to entering the term loan facility agreement.
A discussion of the reason TDS determines these metrics to be useful and reconciliations of these measures to their most directly comparable measures determined in accordance with accounting principles generally accepted in the United States of America (GAAP) are included in the Supplemental Information Relating to Non-GAAP Financial Measures section within the MD&A of this Form 10-K Report.
A discussion of the reasons TDS determines these metrics to be useful and reconciliations of these measures to their most directly comparable measures determined in accordance with GAAP are included in the disclosure under the heading Supplemental Information Relating to Non-GAAP Financial Measures within the MD&A of this report. The following MD&A omits discussion of 2022 compared to 2021.
During 2022, TDS borrowed $50 million under the agreement. As of December 31, 2022, the outstanding borrowings under the agreement were $50 million and the unused borrowing capacity was $100 million. TDS borrowed $50 million under its export credit financing agreement in both January and February 2023.
As of December 31, 2023, the outstanding borrowings under the TDS agreement were $100 million and TDS' and UScellular’s unused borrowing capacity was $299 million and $300 million, respectively. In January 2024, TDS borrowed $25 million under its revolving credit agreement.
On March 21, 2022, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 2.5 GHz band (Auction 108). On September 1, 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 34 wireless spectrum licenses for $3 million.
On September 1, 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 34 wireless spectrum licenses for $3 million. The wireless spectrum licenses from Auction 108 were granted by the FCC on December 1, 2022.
As part of this strategy, UScellular actively seeks attractive opportunities to acquire wireless spectrum, including pursuant to FCC auctions. 30 Index to MD&A Operational Overview — UScellular As of December 31, 2022 2021 Retail Connections – End of Period Postpaid 4,247,000 4,380,000 Prepaid 493,000 513,000 Total 4,740,000 4,893,000 Year Ended December 31, 2022 2021 2022 vs. 2021 Postpaid Activity and Churn Gross Additions Handsets 397,000 434,000 (9) % Connected Devices 162,000 159,000 2 % Total Gross Additions 559,000 593,000 (6) % Net Additions (Losses) Handsets (110,000) (11,000) N/M Connected Devices (23,000) (21,000) (10) % Total Net Additions (Losses) (133,000) (32,000) N/M Churn Handsets 1.12 % 0.96 % Connected Devices 2.95 % 2.72 % Total Churn 1.34 % 1.18 % N/M - Percentage change not meaningful Total postpaid handset net losses increased in 2022 due to lower gross additions and higher defections resulting from aggressive industry-wide competition and an increase in non-pay customers.
As part of this strategy, UScellular may seek attractive opportunities to acquire and divest wireless spectrum as deemed necessary. 34 Index to MD&A Operational Overview — UScellular As of December 31, 2023 2022 Retail Connections – End of Period Postpaid 4,106,000 4,247,000 Prepaid 451,000 493,000 Total 4,557,000 4,740,000 Year Ended December 31, 2023 2022 2023 vs. 2022 Postpaid Activity and Churn Gross Additions Handsets 339,000 397,000 (15) % Connected Devices 178,000 162,000 10 % Total Gross Additions 517,000 559,000 (8) % Net Additions (Losses) Handsets (145,000) (110,000) (32) % Connected Devices 7,000 (23,000) N/M Total Net Additions (Losses) (138,000) (133,000) (4) % Churn Handsets 1.10 % 1.12 % Connected Devices 2.77 % 2.95 % Total Churn 1.31 % 1.34 % N/M - Percentage change not meaningful Total postpaid handset net losses increased in 2023 due primarily to lower gross additions resulting from aggressive industry-wide competition.
The working capital changes were primarily influenced by an increase in customer and agent receivables and increases in inventory purchases, partially offset by a federal income tax refund of $125 million received during the first quarter.
The working capital changes were primarily driven by the timing of vendor payments and an increase in receivables, partially offset by reduced inventory balances and a federal income tax refund of $57 million received during the second quarter of 2023.

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