Telecommunications services provider Telephone and Data Systems (NYSE: TDS) reported Q2 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 4.2% year on year to $1.19 billion. Its GAAP loss of $0.05 per share was significantly below analysts’ consensus estimates.

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StockStory’s Take

Telephone and Data Systems’ second quarter was marked by significant portfolio transformation, with the closing of its UScellular wireless business sale to T-Mobile serving as a key milestone. Management attributed the quarter’s performance to the focus on winding down wireless operations, ongoing investments in fiber expansion, and one-time divestiture activity. Executive Vice President and CFO Vicki Villacrez highlighted the company’s progress in strengthening its capital structure, noting, “These actions will result in approximately $80 million in annual interest savings and will reduce our total TDS average cost of debt to just over 6%.”

Looking forward, management emphasized the company’s strategic pivot toward broadband and tower infrastructure, with new leadership at TDS Telecom and a focus on capital allocation. CEO Walter Carlson stated that TDS is prioritizing fiber investment, evaluating M&A opportunities, and preparing for further spectrum monetization, saying, “We have significant opportunities to make incremental organic investments in fiber with attractive returns that exceed our cost of capital.” The company also plans to introduce a regular dividend once pending spectrum transactions close, while targeting continued growth in fiber connections and tower colocations.

Key Insights from Management’s Remarks

Management cited the completed wireless divestiture, new capital allocation priorities, and ramp-up of fiber and tower operations as the main themes shaping the quarter and future outlook.

• Wireless business divestiture: The T-Mobile transaction marked the exit from the wireless segment, unlocking shareholder value and enabling redeployment of capital toward core broadband and infrastructure areas.
• Tower business repositioning: The company launched Array Digital Infrastructure as an independent tower company, with over 4,400 towers and new master license agreements with national carriers, especially T-Mobile, which is expected to drive future colocation and margin growth.
• Fiber expansion momentum: TDS Telecom delivered 27,000 new fiber service addresses in the quarter and is on track to reach 150,000 for the year, with strong demand for higher-speed broadband reflected in 56% of new customers choosing gigabit plans.
• Capital structure overhaul: Proceeds from the wireless sale and pending spectrum sales are being used to reduce debt, fund fiber buildouts, and position Array for regular dividend payments, with annual interest savings projected at $80 million.
• Portfolio optimization and leadership: The hiring of Ken Dixon as CEO of TDS Telecom, together with the exit from copper markets and selective market divestitures, is intended to sharpen the company’s operational focus and improve long-term returns.

Drivers of Future Performance

Management expects future performance to hinge on fiber buildouts, tower leasing, and the ability to capitalize on proceeds from spectrum sales and M&A opportunities.

• Fiber investment acceleration: The company aims to increase organic fiber expansion, targeting markets with limited competition and aiming for high penetration rates, especially in E-ACAM areas where management expects 65% to 75% customer take-up.
• Tower revenue growth: Array Digital Infrastructure’s new master license agreements with major carriers, particularly the 15-year T-Mobile deal, are anticipated to support long-term tower revenue and margin expansion as colocation activity rises.
• Capital allocation flexibility: Management is evaluating M&A in fiber, further spectrum monetization, and potential shareholder returns, but cautions that execution will depend on regulatory approvals and market dynamics for spectrum and infrastructure assets.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will focus on (1) the speed and efficiency of fiber network expansion, particularly the ramp-up of E-ACAM buildouts and penetration in new markets; (2) successful integration and revenue contribution from new tower colocation agreements, especially with T-Mobile; and (3) progress on monetizing remaining spectrum assets and deploying proceeds toward M&A or shareholder returns. Continued updates on capital allocation strategy and operational milestones will be important markers of execution.

Telephone and Data Systems currently trades at $38.69, in line with $38.76 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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