Telephone and Data Systems, Inc. (TDS) | Investment Case

1. Company Snapshot

1.a. Company Description

Telephone and Data Systems, Inc., a telecommunications company, provides communications services in the United States.It operates through two segments: UScellular and TDS Telecom.The company offers wireless solutions to consumers and business and government customers, including a suite of connected Internet of things (IoT) solutions, and software applications for monitor and control, business automation/operations, communication, fleet and asset management, smart water solutions, private cellular networks and custom, and end-to-end IoT solutions; wireless priority services and quality priority and preemption options; smartphones and other handsets, tablets, wearables, mobile hotspots, routers, and IoT devices; and accessories, such as cases, screen protectors, chargers, and memory cards, as well as consumer electronics, including audio, home automation and networking products.

It also provides replace and repair services; Trade-In program through which it buys customers' used equipment; internet connections and all-home WI-FI services; TDS TV+, an integrated cloud television platform that offers video content; local and long-distance telephone service, VoIP, and enhanced services; and broadband, IP-based services, and hosted voice and video collaboration services.The company sells its products through retail sales, direct and indirect sales, third-party retailers, and independent agents, as well as through ecommerce and telesales.As of December 31, 2021, it offers its services to customers 5 million wireless connections, and 1.2 million wireline and cable connections.

The company was incorporated in 1968 and is headquartered in Chicago, Illinois.

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1.b. Last Insights on TDS

Telephone and Data Systems' recent performance was driven by several positive factors. The company's Q3 earnings beat estimates, fueled by growth in fiber connections and tower rentals. A new $500 million share repurchase authorization also boosted investor sentiment. Additionally, the company's debt reduction efforts, with net debt dropping from $6.6 billion to $2.2 billion, have strengthened its balance sheet. Furthermore, TDS Telecom is accelerating fiber builds in underserved markets, leveraging FCC subsidies to convert rural copper to high-penetration fiber.

1.c. Company Highlights

Last Price	46.1
Change Percentage	1.54%
Open	45.5
Previous Close	45.4
Market Cap ( Millions)	4979
Volume	733295
Year High	46.35
Year Low	31.07
M A 50	40.84
M A 200	38.18

FCF Yield	5.75%
Dividend Yield	0.35%
ROE	-1.16%
Debt / Equity	31.57%
Net Debt / EBIDTA	45.28%
Price To Book	1.19
Price Earnings Ratio	-93.42
Price To FCF	17.39
Price To sales	1.28
EV / EBITDA	5.18

2. TDS Reports Mixed Q3 2025 Results Amidst Fiber Expansion and Tower Growth

TDS reported a decline in total operating revenues by 3% year-over-year for TDS Telecom, with adjusted EBITDA also down 3%. The company's EPS came in at $0.07, beating estimates of -$0.06. The revenue decline was largely due to the divestiture of non-strategic assets and a decrease in equipment sales. Capital expenditures were up compared to the same period last year due to spending on the E-ACAM program and higher expansion address delivery. Array's site rental revenue grew 68% year-over-year, driven by the T-Mobile Master Lease Agreement.

Publication Date: Dec -22

                                    📋 Highlights
                                    Fiber Expansion Progress:
                                                TDS achieved 1 million fiber addresses, with 42,000 added in Q3 2025 and 11,200 residential net adds, aiming for 300,000 new rural addresses via E-ACAM builds.
Capital Allocation & Shareholder Returns:
                                                $500M share repurchase program announced, alongside $1.6B special dividend from Array to reduce debt and fund fiber expansion.
Array Spectrum Monetization:
                                                Sold 70% of spectrum holdings; site rental revenue grew 68% YoY in Q3 2025, excluding non-cash amortization.
Financial Performance:
                                                TDS Telecom’s revenue and adjusted EBITDA fell 3% YoY, while capex increased due to fiber and E-ACAM spending.
T-Mobile MLA Impact:
                                                Expected to drive significant revenue growth, with $7M annual site rental revenue from DISH MLA for 2025–2031 and C-band spectrum for 5G deployment post-2029.

                                

Fiber Expansion and Growth Prospects

TDS Telecom achieved a significant milestone with 1 million fiber addresses, delivering 42,000 fiber addresses in the quarter. The company is focused on executing its build plan and accelerating fiber penetration. The enhanced A-CAM builds are expected to bring fiber to rural markets over the next several years, adding approximately 300,000 new fiber addresses. TDS plans to update investors in February on its fiber plan, including potential targets of several hundred thousand fiber passings.

Tower Business and Monetization Strategies

Array Digital Infrastructure has made substantial progress in monetizing its spectrum, with agreements to sell 70% of its spectrum holdings. The company expects to recognize approximately $7 million of site rental revenue from the DISH MLA in 2025. Array has approximately 800 to 1,800 tenantless or "naked" towers, which it plans to aggressively lease and rationalize ground rents. The T-Mobile Master Lease Agreement is expected to significantly increase Array's revenue.

Valuation and Leverage

TDS has a leverage target of 1.5x for TDS Telecom, which is lower than many wireline operators. The company's current leverage and balance sheet strength provide a comfortable foundation for future investments. With a P/E Ratio of -108.21 and an EV/EBITDA of 7.4, the market is pricing in significant growth prospects. The company's ROE is currently at -0.81%, indicating room for improvement in profitability. The Free Cash Flow Yield is at 9.55%, suggesting a potentially attractive return for investors.

Capital Allocation and M&A

TDS's capital allocation plan prioritizes investing in the fiber business, achieving inorganic growth through M&A, and returning capital to shareholders. The company has announced a new $500 million share repurchase program, demonstrating the Board's confidence in the company's long-term strategy. Walter C.D. Carlson mentioned that the company is looking at M&A opportunities with ILECs or other owners proximate to their existing footprint, where they can expand in a clustered basis.

3. NewsRoom

The New Telephone and Data Systems

Jan -09

Source: seekingalpha.com

Telephone and Data Systems: Pending Spectrum Sales Set To Drive Further Deleveraging

Dec -10

Source: seekingalpha.com

Telephone And Data Systems Preferreds Offer Highest Investment Grade Yield

Dec -09

Source: seekingalpha.com

TDS Swings to a $40M Profit — So Why Did One Investor Sell $43.9 Million of Shares?

Dec -03

Source: fool.com

The Preferred Stock Of Telephone And Data Systems Is More Attractive Than Ever

Nov -27

Source: seekingalpha.com

Telephone and Data Systems, Inc. $TDS Shares Bought by Commonwealth of Pennsylvania Public School Empls Retrmt SYS

Nov -24

Source: defenseworld.net

TDS announces fourth quarter 2025 dividends

Nov -21

Source: prnewswire.com

Connor Clark & Lunn Investment Management Ltd. Has $1.88 Million Stake in Telephone and Data Systems, Inc. $TDS

Nov -17

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.00%)

6. Segments

United States Cellular

Expected Growth: 1.0%

United States Cellular's 1.0% growth is driven by increasing postpaid subscribers, higher average revenue per user (ARPU), and growing demand for data services. Additionally, the company's focus on 5G network expansion, cost savings initiatives, and strategic partnerships contribute to its steady growth.

Telephone and Data Systems Telecom

Expected Growth: 1.0%

Telephone and Data Systems Telecom's 1.0% growth is driven by increasing demand for high-speed internet and data services, expansion of 5G network infrastructure, and growing adoption of IoT devices. Additionally, the segment benefits from a strong brand presence, strategic partnerships, and cost savings initiatives.

Corporate, Eliminations and Other

Expected Growth: 1.0%

Corporate: Cost savings initiatives and operational efficiencies drive 1.0% growth. Eliminations: Intersegment eliminations of revenues and expenses between TDS and U.S. Cellular offset, resulting in minimal impact. Other: Growth in TDS' IT and consulting services, as well as its HMS business, contributes to the 1.0% growth rate.

7. Detailed Products

Wireline

Provides wireline services including voice, data, and video services to residential and business customers

Cable

Offers cable television, high-speed internet, and voice services to residential and business customers

Hosted and Managed Services

Provides cloud-based IT solutions, managed services, and data center services to business customers

Wireless

Offers wireless voice and data services to customers through its U.S. Cellular subsidiary

8. Telephone and Data Systems, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Telephone and Data Systems, Inc. is medium due to the presence of alternative communication services such as VoIP and messaging apps.

Bargaining Power Of Customers

The bargaining power of customers for Telephone and Data Systems, Inc. is low due to the lack of switching options and the company's strong brand presence.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Telephone and Data Systems, Inc. is medium due to the presence of multiple suppliers and the company's moderate dependence on them.

Threat Of New Entrants

The threat of new entrants for Telephone and Data Systems, Inc. is low due to the high barriers to entry and the company's established market presence.

Intensity Of Rivalry

The intensity of rivalry for Telephone and Data Systems, Inc. is high due to the presence of multiple competitors and the company's need to constantly innovate to stay competitive.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	49.71%
Debt Cost	4.65%
Equity Weight	50.29%
Equity Cost	8.03%
WACC	6.35%
Leverage	98.87%

11. Quality Control: Telephone and Data Systems, Inc. passed 1 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

ATN International

A-Score: 5.3/10

Value: 9.0

Growth: 4.7

Quality: 3.2

Yield: 6.0

Momentum: 5.5

Volatility: 3.7

1-Year Total Return ->

TDS

A-Score: 5.3/10

Value: 8.3

Growth: 3.2

Quality: 3.3

Yield: 3.0

Momentum: 8.5

Volatility: 5.3

1-Year Total Return ->

Shentel

A-Score: 4.7/10

Value: 8.0

Growth: 5.1

Quality: 2.6

Yield: 6.0

Momentum: 2.0

Volatility: 4.7

1-Year Total Return ->

Crexendo

A-Score: 4.6/10

Value: 2.4

Growth: 7.7

Quality: 7.4

Yield: 0.0

Momentum: 8.0

Volatility: 2.3

1-Year Total Return ->

Cable One

A-Score: 3.8/10

Value: 9.8

Growth: 4.1

Quality: 3.1

Yield: 3.0

Momentum: 0.0

Volatility: 2.7

1-Year Total Return ->

Consolidated Communications Holdings

A-Score: 2.8/10

Value: 6.5

Growth: 0.7

Quality: 1.2

Yield: 0.0

Momentum: 6.5

Volatility: 1.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-0.03%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.35%

Telephone and Data Systems, Inc. - US8794338298

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on TDS

1.c. Company Highlights

Higher Yield

Strong Momentum

Lower Quality

Earnings Beats

Lower Growth

Medium Volatility

Revenues Miss

Earnings Miss

Revenues Beats

Average Growth

Average Yield

Average Quality

Fairly Valued

2. TDS Reports Mixed Q3 2025 Results Amidst Fiber Expansion and Tower Growth

Fiber Expansion and Growth Prospects

Tower Business and Monetization Strategies

Valuation and Leverage

Capital Allocation and M&A

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.00%)

6. Segments

United States Cellular

Expected Growth: 1.0%

Telephone and Data Systems Telecom

Expected Growth: 1.0%

Corporate, Eliminations and Other

Expected Growth: 1.0%

7. Detailed Products

Wireline

Cable

Hosted and Managed Services

Wireless

8. Telephone and Data Systems, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Telephone and Data Systems, Inc. passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

46.1$

Current Price

46.1$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA