Financial Data and Key Metrics Changes - Postpaid service revenues grew by 9% year over year, accelerating from Q1, while total service revenues increased by 6%, significantly outpacing closest competitors [19][24] - Core adjusted EBITDA growth was 6% year over year, with adjusted free cash flow reaching $4.6 billion, setting a new Q2 record and translating to an industry-leading adjusted free cash flow conversion from service revenues of 26% [19][24] Business Line Data and Key Metrics Changes - The business group achieved record growth, leading the industry in net additions, with postpaid account nets accelerating year over year [5][7] - The launch of new rate plans in April resulted in a 5% increase in ARPA, the highest growth in eight years, with customers increasingly selecting premium tiers [7][19] Market Data and Key Metrics Changes - T-Mobile's postpaid share of households grew across all cohorts within the top 100 markets, as well as in smaller markets and rural areas [6][19] - The company reported leading the broadband industry in net additions for the fourteenth consecutive quarter, with significant growth in both speeds and usage [14][19] Company Strategy and Development Direction - T-Mobile announced a multiyear partnership with Cable to enhance mobile service offerings to small and mid-market businesses, aiming for incremental revenue growth in underexposed areas [8][20] - The company is focused on expanding its network capabilities, with plans to add nearly 4,000 sites this year, enhancing coverage in smaller markets and rural areas [11][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the competitive environment, noting that T-Mobile thrives in dynamic conditions and continues to see robust customer growth despite increased churn [6][39] - The company anticipates a decrease in churn in Q3, with expectations for strong postpaid ARPA growth and service revenue growth of at least 6% for the full year [24][39] Other Important Information - T-Mobile is set to close its joint venture acquisition of MetroNet, which is expected to enhance its fiber offerings and customer base [26][100] - The company reached an agreement to divest its 800 megahertz licenses for $2.9 billion, which is anticipated to generate approximately $850 million in incremental income taxes [29][102] Q&A Session Summary Question: What is the current market environment and churn expectations? - Management noted that the competitive market is dynamic, and while churn increased in Q2, it is expected to decrease in Q3, remaining flat to slightly up year over year [39][40] Question: Can you provide more details on fiber growth expectations? - The company expects to achieve 100,000 fiber net additions this year, with growth driven by joint ventures and wholesale markets [41][42] Question: How does T-Mobile plan to improve network perception? - Management indicated that advertising and customer experience will play significant roles in improving network perception, with a focus on maintaining network leadership [68][70] Question: What is the strategy behind the partnership with cable operators? - The partnership targets small and mid-market businesses, where T-Mobile has limited exposure, and is expected to generate incremental revenue without entering the consumer market [60][61] Question: What is the current market share in rural areas? - T-Mobile has surpassed a 20% share of households in smaller markets and continues to see growth opportunities, especially with the addition of U.S. Cellular assets [110][113]

Financial Data and Key Metrics Changes - Postpaid service revenues grew 9% year over year, an acceleration from Q1, while total service revenues grew 6%, significantly outpacing closest competitors [18] - Adjusted free cash flow reached $4.6 billion, setting a new Q2 record, with an industry-leading adjusted free cash flow conversion from service revenues of 26% [18] - Core adjusted EBITDA growth was 6% year over year, with full-year expectations for core adjusted EBITDA set between $33.3 billion and $33.7 billion [23][24] Business Line Data and Key Metrics Changes - The business group led the industry in net additions, with postpaid account nets accelerating year over year [6] - The company achieved its highest ever business 5G broadband net additions, continuing to lead the overall broadband industry in net additions for the fourteenth consecutive quarter [13] - ARPA (Average Revenue Per Account) grew over 5%, marking the highest growth in eight years, with customers increasingly selecting premium rate plans [6][17] Market Data and Key Metrics Changes - The company surpassed 20% share of households in smaller markets and rural areas, achieving its goal set for 2025 [108] - The competitive environment remains dynamic, with the company benefiting from increased customer speeds and lower costs in real terms over the past few years [35] - The company is focused on expanding its network in smaller markets and rural areas, with plans to increase site coverage significantly through acquisitions and new builds [12][88] Company Strategy and Development Direction - The company announced a multiyear partnership with Cable to enhance mobile service offerings to small and mid-market businesses, aiming for incremental growth in an area with previously low exposure [7] - The strategy emphasizes maintaining a competitive edge through network leadership and customer experience, with ongoing investments in infrastructure and technology [9][10] - The company is committed to digital transformation, with significant progress in customer engagement through its app, which has over 75 million installs [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate a competitive environment, highlighting the unique value proposition of best network, best value, and best experiences [19] - The company anticipates continued strong growth in service revenues and customer additions, with expectations for postpaid net additions raised to between 6.1 million and 6.4 million for the year [22] - Management noted the potential for significant growth in the broadband sector, particularly through fiber investments and partnerships [97] Other Important Information - The company is set to close the acquisition of MetroNet, which is expected to enhance its fiber capabilities and customer base [25][99] - A recent agreement to divest its 800 megahertz licenses is anticipated to generate approximately $2.9 billion in cash, with additional potential upside [27] - The company expects a $1.5 billion benefit to cash taxes in 2026 from recent legislation, which will be allocated thoughtfully [26] Q&A Session Summary Question: What is the outlook for churn in the second half and the competitive environment? - Management indicated that while churn increased in Q2 due to rate plan optimizations, they expect it to decrease in Q3 and remain flat to slightly up year over year [36][37] Question: Can you provide more details on fiber growth and potential inorganic opportunities? - Management confirmed that the fiber business is expected to add 100,000 net additions this year, with ongoing evaluations for inorganic growth opportunities [39][40] Question: How does the company plan to improve network perception among prospective customers? - Management acknowledged that while current customers recognize the network's quality, efforts will focus on advertising and customer experience to enhance perception among prospective customers [62][66] Question: What is the current market share in rural areas and future expectations? - Management reported surpassing 20% market share in rural areas and expressed optimism for further growth, especially with the integration of U.S. Cellular assets [108][112] Question: How will the $1.5 billion tax benefit be utilized? - Management stated that the capital will be deployed thoughtfully, considering various options such as M&A, buybacks, or network investments [106]

Core Viewpoint - The Federal Communications Commission has approved the transaction between United States Cellular Corporation and T-Mobile US, Inc., allowing the companies to proceed with the deal upon meeting closing conditions [1]. Company Overview - United States Cellular Corporation provides a wide range of wireless products and services, serving 4.4 million retail connections across 21 states, with a workforce of 4,100 associates as of March 31, 2025 [2]. - Telephone and Data Systems, Inc. operates through UScellular and TDS Telecom, offering wireless, broadband, video, and voice services to approximately 5.5 million connections nationwide, employing around 7,800 associates as of March 31, 2025 [3].

Group 1 - The US Department of Justice Antitrust Division has closed its investigation into the proposed transaction between United States Cellular Corporation and T-Mobile, but the transaction still requires approval from the Federal Communications Commission (FCC) [1] - United States Cellular Corporation serves 4.4 million retail connections across 21 states and had 4,100 employees as of March 31, 2025 [2] - Telephone and Data Systems, Inc. owns approximately 83 percent of United States Cellular Corporation [2] Group 2 - Telephone and Data Systems, Inc. provides services to around 5.5 million connections nationwide through its subsidiaries, including UScellular and TDS Telecom [3] - TDS was founded in 1969 and has approximately 7,800 employees as of March 31, 2025 [3]

Financial Performance - U.S. Cellular Corporation reported a net income of $18 million or 21 cents per share, compared to $18 million or 20 cents in the prior-year quarter, missing the Zacks Consensus Estimate by 16 cents [2] - The company generated $891 million in operating revenues, down from $950 million in the prior-year quarter, also missing the Zacks Consensus Estimate of $925 million [2] - Service revenues decreased to $741 million from $754 million, while equipment sales fell to $150 million from $196 million in the prior-year quarter [3] Customer Metrics - Fixed wireless customers grew by 21% year over year to 150,000, while total postpaid connections declined to 3,946,000 from 4,051,000 in the year-earlier quarter [3][4] - Handset connections increased to 68,000 from 63,000 in the prior-year quarter, with a churn rate of 1.03%, unchanged from the previous year [4] - Prepaid connections decreased to 431,000 from 436,000 in the year-ago quarter, with a prepaid churn rate increasing to 4.17% from 4.06% [4][5] Revenue Metrics - Postpaid average revenues per account improved to $132.25 from $132 in the year-ago quarter, while postpaid ARPU rose to $52.06 from $51.96 [5] - Prepaid ARPU decreased to $30.76 from $32.25 in the prior-year quarter [5] Operational Efficiency - Adjusted EBITDA for the quarter was $254 million, down from $272 million in the prior-year quarter, while adjusted OIBDA decreased to $215 million from $228 million [6] - Total operating expenses were $850 million, down 5% year over year, with operating income reported at $41 million compared to $51 million in the prior-year quarter [6] Cash Flow and Liquidity - U.S. Cellular generated $160 million of cash from operating activities, down from $203 million in the year-ago quarter [7] - As of March 31, 2025, the company had $182 million in cash and cash equivalents and $2.82 billion in long-term debt [7]

Financial Data and Key Metrics Changes - The company reported a year-over-year increase in free cash flow of $79 million for Q1 2025, an increase of $18 million compared to the same quarter last year [14] - Total operating revenues decreased by 3% compared to the prior year, impacted by divestitures and declines in commercial and wholesale revenue [47] - Cash expenses increased by 6% or $11 million in the quarter compared to the prior year, with part of the increase attributed to stock-based compensation adjustments [47] Business Line Data and Key Metrics Changes - The company saw a 6% increase in third-party tower revenues due to new co-locations and escalators on renewed leases [13] - Fiber service addresses grew by 6% year-over-year, with 14,000 new addresses delivered in the quarter [19][36] - Residential broadband net additions were 2,800, with 8,300 coming from fiber markets, lower than prior quarters due to timing of service address delivery [37][40] Market Data and Key Metrics Changes - The company continues to face competitive pressures in the wireless market, with aggressive promotions from competitors impacting service revenues [15] - The fiber strategy is expected to drive growth, with a target of achieving 40% average penetration in steady state within five years after launch [41] Company Strategy and Development Direction - The company is focused on completing the transaction with T-Mobile, which is expected to close in mid-2025, and is preparing for a smooth transition [9][10] - Post-transaction, the company plans to declare a special dividend to shareholders, with proceeds expected to be used to repay outstanding bank debt [11][19] - The company is also investing in its fiber program, aiming to expand its footprint and improve operational efficiency [39][100] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainties in the broader economy and markets but remains optimistic about the long-term potential of the tower business [13][18] - The company expects to continue facing competitive pressures but believes the T-Mobile transaction will provide better competitive choices and connectivity experiences for customers [16][17] - Management is confident in achieving $100 million in annual cost savings by 2028 through transformation efforts [39][78] Other Important Information - The company does not plan to redeem its Series UU and Series BV preferred stock, viewing them as foundational capital for future operations [11][73] - The company is actively evaluating its portfolio for potential divestitures, particularly in copper markets without an economic path to fiber [99] Q&A Session Summary Question: Timing of designated entity spectrum approval - The timing is uncertain and dependent on regulatory approval by the FCC, but there is optimism for a positive outcome [58] Question: Free cash flow run rate - The reported free cash flow of $79 million is not necessarily a run rate, but capital expenditures are expected to be down in 2025, which is positive for free cash flow [60][61] Question: Debt exchange offer impact - The debt exchange offer will be launched about 50 days before the anticipated close, and the amount of debt exchanged will impact the purchase price [62][111] Question: Fiber net adds and sales efforts - Fiber net adds were lower due to timing of address delivery, but as construction ramps up, net adds are expected to improve [66] Question: Rationale for remaining a public entity - The incremental cost to operate as a public company is minimal, and there are no immediate incentives to collapse the structure [107][108]

Financial Data and Key Metrics Changes - Total operating revenues decreased by 3% year over year, impacted by divestitures and declines in commercial and wholesale revenue, as well as decreases in residential video and voice connections [44] - Free cash flow for Q1 2025 was $79 million, an increase of $18 million compared to the same quarter last year [13][19] - Cash expenses increased by 6% or $11 million compared to the prior year, with $4 million of this increase attributed to a cumulative non-cash adjustment to stock-based compensation [44] Business Line Data and Key Metrics Changes - Postpaid handset results showed year-over-year improvements, while third-party tower revenues increased by 6% due to new co-locations and escalators on renewed leases [12] - Fiber service addresses grew by 6% year over year, with 14,000 new addresses delivered in the quarter [33][42] - Residential broadband net additions were 2,800, with 8,300 coming from fiber markets, lower than prior quarters due to timing of service address delivery [34][38] Market Data and Key Metrics Changes - The company continues to face aggressive promotional competition in the wireless industry, with competitors offering multi-year price locks and aggressive pricing [14] - Demand for higher broadband speeds remains strong, with 82% of residential broadband customers taking 100 megabits or higher and 24% taking one gig or higher at the end of the quarter [42] Company Strategy and Development Direction - The company is focused on completing the proposed transaction with T-Mobile, which is expected to close in mid-2025, and is preparing for a smooth transition [9][16] - A special dividend to shareholders is anticipated following the closing of the T-Mobile transaction, with proceeds expected to be used to repay outstanding bank debt [10][18] - The fiber program has expanded the company's footprint by over 30% in the last three years, with further growth opportunities identified [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainties in the broader economy and markets but remains optimistic about the long-term potential of the tower business and fiber expansion [7][12] - The company is focused on cost optimization and expects capital expenditures to decline in 2025 as planned 5G coverage builds are largely completed [13][46] - Management expressed confidence in achieving $100 million in annual cost savings by the end of 2028 through transformation efforts [35][72] Other Important Information - The company does not plan to redeem Series UU and Series BV preferred stock, viewing them as foundational capital for future operations [10][68] - The expected cash income tax obligations related to the T-Mobile transaction are estimated to be between $225 million and $325 million [28][30] Q&A Session Summary Question: Timeline for designated entity spectrum approval - The timing is uncertain and dependent on regulatory approval by the FCC, but there is optimism for a positive outcome [52][54] Question: Free cash flow run rate - The $79 million in free cash flow is not necessarily a run rate, but capital expenditures are expected to be down in 2025, which is positive for free cash flow [55] Question: Debt exchange offer impact - The debt exchange offer will be launched about 50 days before the anticipated close, and the amount of debt exchanged will impact transaction proceeds [56][110] Question: Fiber net adds and sales efforts - Fiber net additions were lower due to timing of address delivery, but management expects improvements as construction activity ramps up [60][62] Question: Divestiture strategy and criteria - The company is focused on divesting non-core assets, particularly isolated copper markets without an economic path to fiber, ensuring that net proceeds exceed the present value of cash flows from continued operations [95][96]

Financial Data and Key Metrics Changes - Total operating revenues decreased by 3% year over year, impacted by divestitures and declines in commercial and wholesale revenue, as well as decreases in residential video and voice connections [47] - Cash expenses increased by 6% or $11 million compared to the prior year, with $4 million of this increase attributed to a cumulative non-cash adjustment to stock-based compensation [47] - Free cash flow for the first quarter was $79 million, an increase of $18 million over the same quarter last year [14] Business Line Data and Key Metrics Changes - Postpaid handset results showed year-over-year improvements, while third-party tower revenue increased by 6% due to new co-locations and escalators on renewed leases [13] - Fiber service addresses grew by 6% year over year, with 14,000 new addresses delivered in the quarter [45] - Residential broadband net additions were 2,800, with 8,300 coming from fiber markets, lower than prior quarters due to timing of service address delivery [36][62] Market Data and Key Metrics Changes - The company continues to face aggressive promotional competition in the wireless market, with competitors offering multi-year price locks and aggressive pricing [15] - Demand for higher broadband speeds remains strong, with 82% of residential broadband customers taking 100 megabits or higher and 24% taking one gig or higher at the end of the quarter [45] Company Strategy and Development Direction - The company is focused on closing the proposed transaction with T-Mobile and repositioning the remaining business for future success, including a potential special dividend to shareholders [10][18] - The fiber program has expanded the company's footprint by over 30% in the last three years, with further opportunities for growth [11] - The company is evaluating its portfolio to minimize exposure to copper markets without an economic path to fiber [97] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainties in the broader economy and markets but remains optimistic about the long-term potential of the tower business [13][17] - The anticipated closing of the T-Mobile transaction is expected to provide better competitive choices and connectivity experiences for customers [16] - Management expects to incur cash income tax obligations related to the gain on the sale of spectrum in the Verizon and AT&T transactions, estimated between $325 million to $375 million [33] Other Important Information - The company does not plan to redeem Series UU and Series BV preferred stock, viewing them as foundational capital going forward [69] - The company expects to incur severance obligations for employees not retained by T-Mobile, estimated between $60 million to $80 million [28] Q&A Session Summary Question: Timeline for designated entity spectrum approval - The timing is uncertain and dependent on regulatory approval by the FCC, but there is optimism for a successful outcome [56] Question: Free cash flow run rate - The $79 million in free cash flow is not necessarily a run rate, but capital expenditures are expected to be down in 2025, which is positive for free cash flow [58] Question: Debt exchange offer impact - The impact of the debt exchange offer on the purchase price is uncertain, but there is interest in retaining attractive debt [60] Question: Fiber net adds and sales efforts - Fiber net adds were lower due to timing of address delivery, but as construction ramps up, net adds are expected to follow [62] Question: Divestiture strategy for wireline and cable portfolio - The company is focused on divesting non-core assets, particularly isolated copper markets without an economic path to fiber [97]

Core Viewpoint - U.S. Cellular reported quarterly earnings of $0.21 per share, missing the Zacks Consensus Estimate of $0.37 per share, representing an earnings surprise of -43.24% [1] - The company posted revenues of $891 million for the quarter, missing the Zacks Consensus Estimate by 3.72% and down from $950 million a year ago [2] Financial Performance - Over the last four quarters, U.S. Cellular has surpassed consensus EPS estimates three times [2] - The company had a previous quarter surprise of 150%, with actual earnings of $0.05 against an expected loss of $0.10 [1] - The current consensus EPS estimate for the upcoming quarter is $0.39 on revenues of $912.36 million, and for the current fiscal year, it is $1.16 on revenues of $3.69 billion [7] Stock Performance - U.S. Cellular shares have increased by approximately 9.8% since the beginning of the year, contrasting with the S&P 500's decline of -4.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Outlook - The Wireless National industry, to which U.S. Cellular belongs, is currently ranked in the top 38% of over 250 Zacks industries, suggesting a favorable outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5]

Part I. Financial Information [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=3&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) UScellular's Q1 2025 financial performance declined due to wireless segment pressures, while the company undergoes a major strategic transformation with pending sales of its wireless operations to T-Mobile for $4.4 billion and spectrum to Verizon and AT&T [Executive Overview](index=3&type=section&id=Executive%20Overview) UScellular is undergoing a major strategic shift, highlighted by the announced sale of its wireless operations and select spectrum to T-Mobile for **$4.4 billion**, alongside separate spectrum sales to Verizon for **$1 billion** and AT&T for **$1.018 billion**, all expected to close mid-2025 - UScellular has agreed to sell its wireless operations and select spectrum assets to T-Mobile for **$4.4 billion**, which includes a combination of cash and the assumption of up to approximately **$2.0 billion** in debt. The transaction is expected to close in mid-2025[15](index=15&type=chunk) - Separate agreements have been made to sell spectrum licenses to Verizon for **$1.0 billion** and to AT&T for **$1.018 billion**. These sales are contingent on the closing of the T-Mobile transaction[17](index=17&type=chunk)[18](index=18&type=chunk) - Upon closing the T-Mobile transaction, UScellular expects to incur significant one-time costs, including advisory fees, employee compensation and severance, debt extinguishment, and tower decommissioning costs[16](index=16&type=chunk) | Description | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Third-party expenses related to strategic review | $10 million | $7 million | [Overall Financial Performance](index=8&type=section&id=Financial%20Overview%20%E2%80%94%20UScellular) UScellular's Q1 2025 total operating revenues decreased **6% to $891 million**, with operating income falling **19% to $41 million**, while capital expenditures were significantly reduced by **60% to $53 million** | Financial Metric (in millions) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $891 | $950 | (6)% | | Operating Income | $41 | $51 | (19)% | | Net Income (to shareholders) | $18 | $18 | 3% | | Adjusted OIBDA (Non-GAAP) | $215 | $228 | (6)% | | Adjusted EBITDA (Non-GAAP) | $254 | $272 | (7)% | | Capital Expenditures | $53 | $131 | (60)% | - Equity in earnings of unconsolidated entities, primarily from the LA Partnership, contributed **$15 million** in pre-tax income for Q1 2025, down from **$16 million** in Q1 2024[26](index=26&type=chunk) - Interest expense decreased due to a lower average principal balance on receivables securitization and term loan agreements[27](index=27&type=chunk) [Wireless Operations](index=10&type=section&id=Wireless%20Operations) The Wireless segment's operating revenue declined **7% to $864 million** in Q1 2025, driven by a **24% drop in equipment sales** and fewer connections, despite improved postpaid net losses amidst intense competition | Wireless Financials (in millions) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $864 | $925 | (7)% | | - Retail Service Revenues | $660 | $678 | (3)% | | - Equipment Sales | $150 | $196 | (24)% | | Operating Income | $20 | $29 | (30)% | | Adjusted EBITDA (Non-GAAP) | $182 | $195 | (7)% | | Postpaid Customer Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Net Losses | (39,000) | (44,000) | | - Handset Net Losses | (38,000) | (47,000) | | - Connected Device Net Losses | (1,000) | 3,000 (gain) | | Total Churn | 1.21% | 1.22% | - The decrease in retail service revenue was driven by a decline in average postpaid and prepaid connections. The drop in equipment sales revenue was due to fewer smartphone upgrades and a lower average sales price[37](index=37&type=chunk) - System operations expenses decreased due to the shutdown of the 3G CDMA network in Q1 2024[39](index=39&type=chunk) [Towers Operations](index=13&type=section&id=Towers%20Operations) The Towers segment's total revenue increased **5% to $61 million** in Q1 2025, driven by third-party revenues, though operating income dipped **5% to $21 million** due to higher expenses, with significant revenue composition changes expected post-T-Mobile transaction | Tower Operations Metrics | As of Mar 31, 2025 | As of Mar 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Owned towers | 4,413 | 4,382 | 1% | | Number of colocations | 2,469 | 2,397 | 3% | | Tower tenancy rate | 1.56 | 1.55 | 1% | | Towers Financials (in millions) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Tower Revenues | $61 | $58 | 5% | | - Third-party revenues | $27 | $25 | 6% | | Operating Income | $21 | $22 | (5)% | | Adjusted EBITDA (Non-GAAP) | $33 | $33 | (1)% | - Following the T-Mobile transaction, intra-company revenues will cease, but third-party revenues are expected to increase under a new Master License Agreement, leading to significantly lower total tower revenues[47](index=47&type=chunk) [Liquidity and Capital Resources](index=15&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, UScellular maintained **$748 million** in available borrowing capacity, significantly reduced capital expenditures by **60% to $53 million**, and anticipates declaring special dividends to shareholders upon closing the T-Mobile transaction - As of March 31, 2025, UScellular had **$748 million** in total available undrawn borrowing capacity from its Revolving Credit and Receivables Securitization Agreements[56](index=56&type=chunk)[57](index=57&type=chunk) - In April 2025, UScellular amended its revolving credit and a term loan agreement to extend maturities to July 2027 and modify covenants, anticipating the proceeds from asset sales[59](index=59&type=chunk)[61](index=61&type=chunk)[63](index=63&type=chunk) | Item | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Capital Expenditures | $53 million | $131 million | (60)% | - During Q1 2025, UScellular repurchased **328,835 Common Shares** for **$21 million**[71](index=71&type=chunk) - Upon closing the T-Mobile transaction, the Board of Directors is expected to declare the first of potentially several special dividends to shareholders[72](index=72&type=chunk) [Consolidated Cash Flow Analysis](index=18&type=section&id=Consolidated%20Cash%20Flow%20Analysis) In Q1 2025, cash and cash equivalents increased by **$42 million**, with net cash from operating activities at **$160 million**, while investing activities used **$74 million** and financing activities used **$44 million** | Cash Flow Activity (in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $160 | $203 | | Net cash used in investing activities | ($74) | ($144) | | Net cash used in financing activities | ($44) | ($28) | | Net increase in cash | $42 | $31 | - The decrease in operating cash flow in Q1 2025 was primarily driven by working capital changes, including payments for associate bonuses and other benefits[75](index=75&type=chunk) - Financing activities in Q1 2025 included **$21 million** for share repurchases, **$9 million** for software licenses, and **$5 million** in term loan repayments[76](index=76&type=chunk) [Non-GAAP Financial Measures](index=20&type=section&id=Supplemental%20Information%20Relating%20to%20Non-GAAP%20Financial%20Measures) UScellular utilizes non-GAAP measures like Adjusted EBITDA (**$254 million**) and Adjusted OIBDA (**$215 million**) for performance evaluation, with Free Cash Flow increasing to **$79 million** in Q1 2025 primarily due to lower capital expenditures | UScellular Reconciliation (in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income (GAAP) | $20 | $24 | | EBITDA (Non-GAAP) | $243 | $260 | | Adjusted EBITDA (Non-GAAP) | $254 | $272 | | Adjusted OIBDA (Non-GAAP) | $215 | $228 | | Operating income (GAAP) | $41 | $51 | | Free Cash Flow (Non-GAAP, in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash flows from operating activities (GAAP) | $160 | $203 | | Less: Cash paid for additions to PP&E | ($72) | ($133) | | Less: Cash paid for software license agreements | ($9) | ($9) | | **Free cash flow (Non-GAAP)** | **$79** | **$61** | [Financial Statements (Unaudited)](index=27&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) The unaudited consolidated financial statements for Q1 2025 report total operating revenues of **$891 million** and net income of **$20 million**, with total assets at **$10.365 billion**, reflecting ongoing operations before major divestitures [Consolidated Statement of Operations](index=29&type=section&id=Consolidated%20Statement%20of%20Operations) For Q1 2025, UScellular reported total operating revenues of **$891 million**, operating income of **$41 million**, and net income attributable to shareholders of **$18 million**, with basic and diluted EPS at **$0.21** | (in millions, except per share) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total operating revenues | $891 | $950 | | Operating income | $41 | $51 | | Net income attributable to UScellular shareholders | $18 | $18 | | Basic EPS | $0.21 | $0.21 | | Diluted EPS | $0.21 | $0.20 | [Consolidated Statement of Cash Flows](index=30&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) In Q1 2025, net cash from operating activities was **$160 million**, investing activities used **$74 million**, and financing activities used **$44 million**, leading to a **$42 million** net increase in cash and equivalents | (in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $160 | $203 | | Net cash used in investing activities | ($72) | ($133) | | Net cash used in financing activities | ($44) | ($28) | | Net increase in cash, cash equivalents and restricted cash | $42 | $31 | | Cash, cash equivalents and restricted cash, end of period | $201 | $210 | [Consolidated Balance Sheet](index=31&type=section&id=Consolidated%20Balance%20Sheet) As of March 31, 2025, UScellular's total assets were **$10.365 billion**, total liabilities **$5.766 billion**, and total shareholders' equity **$4.585 billion**, with significant assets in licenses and property, plant, and equipment | (in millions) | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Total current assets | $1,373 | $1,345 | | Licenses | $4,581 | $4,579 | | Property, plant and equipment, net | $2,394 | $2,502 | | **Total Assets** | **$10,365** | **$10,449** | | **Liabilities & Equity** | | | | Total current liabilities | $807 | $884 | | Long-term debt, net | $2,829 | $2,837 | | Total UScellular shareholders' equity | $4,585 | $4,577 | | **Total Liabilities & Equity** | **$10,365** | **$10,449** | [Note 6: Divestitures](index=39&type=section&id=Note%206%3A%20Divestitures) Note 6 details UScellular's pending divestitures, including the sale of wireless operations and select spectrum to T-Mobile for **$4.4 billion**, and separate spectrum sales to Verizon for **$1 billion** and AT&T for **$1.018 billion**, all expected to close mid-2025 - Agreement to sell wireless operations and select spectrum assets to T-Mobile for **$4.4 billion**, consisting of cash and assumption of up to **~$2 billion** in debt[151](index=151&type=chunk) - Agreement to sell certain spectrum licenses to Verizon for **$1.0 billion** (book value **$586 million**)[152](index=152&type=chunk) - Agreement to sell certain spectrum licenses to AT&T for **$1.018 billion** (book value **$859 million**)[153](index=153&type=chunk) - Third-party expenses related to these transactions were **$10 million** for Q1 2025[155](index=155&type=chunk) [Note 10: Business Segment Information](index=44&type=section&id=Note%2010%3A%20Business%20Segment%20Information) Note 10 outlines UScellular's Wireless and Towers segments, with Q1 2025 external revenues of **$864 million** and **$27 million** respectively, contributing to a total Segment Adjusted EBITDA of **$215 million** | Q1 2025 Segment Performance (in millions) | Wireless | Towers | Total | | :--- | :--- | :--- | :--- | | Revenues from external customers | $864 | $27 | $891 | | Intersegment revenues | $0 | $34 | $34 | | **Segment Adjusted EBITDA (Non-GAAP)** | **$182** | **$33** | **$215** | | Q1 2024 Segment Performance (in millions) | Wireless | Towers | Total | | :--- | :--- | :--- | :--- | | Revenues from external customers | $925 | $25 | $950 | | Intersegment revenues | $0 | $33 | $33 | | **Segment Adjusted EBITDA (Non-GAAP)** | **$195** | **$33** | **$228** | [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As of March 31, 2025, UScellular's **$2.918 billion** long-term debt is approximately **70% fixed-rate** and **30% variable-rate**, exposing the company to interest rate risk with significant principal payments due in 2026 and 2028 - As of March 31, 2025, approximately **70% of long-term debt was fixed-rate** and **30% was variable-rate**[105](index=105&type=chunk) | Principal Payments Due by Period (in millions) | Long-Term Debt Obligations | Weighted-Avg. Interest Rate | | :--- | :--- | :--- | | Remainder of 2025 | $17 | 6.1% | | 2026 | $228 | 5.9% | | 2027 | $158 | 6.0% | | 2028 | $286 | 6.4% | | Thereafter | $2,224 | 6.1% | | **Total** | **$2,918** | **6.1%** | Part II. Other Information [Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to the potential non-consummation or costs of its announced T-Mobile, Verizon, and AT&T transactions, alongside operational challenges from intense competition, lack of scale, and regulatory uncertainties - **Transaction Risks:** There is no guarantee the T-Mobile, Verizon, or AT&T transactions will be consummated. Failure to close or costs associated with closing could have adverse effects on financial condition[97](index=97&type=chunk) - **Operational Risks:** Intense competition, lack of scale relative to larger competitors, and reliance on third parties for network construction and equipment supply pose significant risks to operations and profitability[97](index=97&type=chunk) - **Financial Risks:** A significant amount of indebtedness could affect financial performance. The company's concentration in the U.S. wireless industry makes it vulnerable to industry-specific downturns[100](index=100&type=chunk) - **Regulatory & Legal Risks:** The company faces risks from potential non-compliance with regulations, changes in regulatory support like the USF, and various legal proceedings, including patent infringement claims and shareholder lawsuits[100](index=100&type=chunk) [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) UScellular is involved in several legal proceedings, including a False Claims Act case, a settled stockholder class action, and three pending stockholder derivative lawsuits alleging breach of fiduciary duty - A False Claims Act lawsuit related to FCC auction bidding credits remains pending before an appellate court after one of two related matters was dismissed[188](index=188&type=chunk) - A settlement in principle was reached on February 28, 2025, for a putative stockholder class action lawsuit filed in May 2023[189](index=189&type=chunk) - Three separate stockholder derivative lawsuits have been filed making similar claims related to breach of fiduciary duty. The company is unable to determine the potential impact but will contest the claims[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) [Share Repurchases](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2025, UScellular repurchased **328,835 Common Shares** for approximately **$21 million**, with **658,107 shares** remaining authorized for repurchase under its ongoing program | Period | Shares Purchased | Average Price Paid | Total Cost (approx.) | | :--- | :--- | :--- | :--- | | Q1 2025 | 328,835 | $63.49 | $21 million | - As of March 31, 2025, the maximum number of shares that may yet be purchased under the company's plan is **658,107**[197](index=197&type=chunk)