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, Inc.'s recent performance was driven by the pending $4.4B UScellular asset sale to T-Mobile, which will significantly reduce debt and strengthen its balance sheet. The company's focus on fiber broadband expansion is expected to improve margins and profitability through economies of scale and operational streamlining. Additionally, the proposed class action settlement and the upcoming asset sale to Verizon and AT&T are expected to provide a cash infusion, further boosting the company's financial position.

1.c. Company Highlights

Last Price	39.4
Change Percentage	1.08%
Open	38.72
Previous Close	38.98
Market Cap ( Millions)	4255
Volume	403587
Year High	42.74
Year Low	31.07
M A 50	38.84
M A 200	37.19

FCF Yield	9.35%
Dividend Yield	0.41%
ROE	-0.81%
Debt / Equity	101.56%
Net Debt / EBIDTA	384.94%
Price To Book	0.91
Price Earnings Ratio	-110.51
Price To FCF	10.69
Price To sales	0.89
EV / EBITDA	7.47

2. TDS Delivers Mixed Q3 Results Amidst Transformative Change

TDS reported a 3% year-over-year decline in total operating revenues to $1.6 billion, driven by continued declines in legacy cable and copper markets. However, the company's residential fiber net adds increased, and average residential revenue per connection rose slightly. The company's EPS came in at $0.07, beating estimates of -$0.06. Adjusted free cash flow was not directly disclosed, but the company shared its calculation for Array, indicating a focus on cash generation. Analysts estimate next year's revenue growth at -46.3%, indicating a significant decline.

Publication Date: Nov -30

                                    📋 Highlights
                                    Fiber Expansion Milestone:
                                                TDS Telecom achieved 1 million fiber addresses, targeting 1.8 million marketable addresses with 1 gig+ speeds for 95% of its footprint.
Capital Allocation Plan:
                                                $500 million share repurchase authorized alongside $1.6 billion in special dividends from Array, prioritizing fiber growth and debt reduction.
Array Tower Growth:
                                                Site rental revenue surged 68% YoY, with 46% growth excluding T-Mobile; 70% of spectrum sold, pending AT&T deal closing by Q4 2025–H1 2026.
Regulatory Revenue Support:
                                                Enhanced A-CAM program to unlock $1.2 billion in regulatory support for rural fiber expansion.
Leverage Strategy:
                                                TDS Telecom targets 1.5x leverage ratio (lowest among wireline peers), aiming to stay under 1.4x excluding 2026 fiber passings.

                                

Segment Performance

TDS Telecom achieved a significant milestone with 1 million fiber addresses, and the company is focused on expanding its fiber program, with a goal of offering speeds of 1 gig or higher to at least 95% of its footprint. The Enhanced A-CAM program is expected to bring fiber to rural markets and deliver over $1.2 billion in regulatory revenue support. Array, now an independent tower company, reported site rental revenue growth of 68% year-over-year, driven by the T-Mobile MLA.

Strategic Progress

The company is making progress in its tower business, with Array in-sourcing its sales and intake operations, leading to a 125% increase in new colocation applications. TDS is also exploring M&A opportunities, with a focus on disciplined acquisitions that are accretive to its business. The company has announced a $500 million share repurchase program, indicating its commitment to returning capital to shareholders.

Valuation and Outlook

With a P/E Ratio of -112.95 and an EV/EBITDA of 7.55, the market is pricing in significant challenges for the company. However, the Dividend Yield is 0.4%, and the Free Cash Flow Yield is 9.15%, indicating potential value for income investors. As TDS navigates its transformative change, the company's focus on fiber expansion, tower growth, and strategic M&A will be crucial in driving long-term success. As Kenneth Dixon noted, "We're looking at adjacent areas to our current operations in Tier 2 and 3 markets," highlighting the company's efforts to expand its fiber footprint.

3. NewsRoom

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

Howard Marks Exits Sitio Royalties Corp, Impacting Portfolio by -5.04%

Nov -14

Source: gurufocus.com

Oaktree Buys $145 Million in TDS Stock Amid Wireless Exit and Turnaround Strategy

Nov -14

Source: fool.com

TDS Q3 Earnings Beat Estimates on Solid Fiber Connection Growth

Nov -10

Source: zacks.com

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

TDS

A-Score: 5.4/10

Value: 8.1

Growth: 3.2

Quality: 3.1

Yield: 4.0

Momentum: 9.0

Volatility: 4.7

1-Year Total Return ->

Shentel

A-Score: 5.3/10

Value: 7.2

Growth: 5.1

Quality: 2.6

Yield: 6.0

Momentum: 6.0

Volatility: 4.7

1-Year Total Return ->

ATN International

A-Score: 4.5/10

Value: 8.8

Growth: 4.6

Quality: 2.7

Yield: 7.0

Momentum: 0.0

Volatility: 3.7

1-Year Total Return ->

Crexendo

A-Score: 4.4/10

Value: 1.7

Growth: 7.7

Quality: 7.0

Yield: 0.0

Momentum: 7.0

Volatility: 3.0

1-Year Total Return ->

Cable One

A-Score: 3.6/10

Value: 7.6

Growth: 4.1

Quality: 2.8

Yield: 5.0

Momentum: 0.0

Volatility: 2.3

1-Year Total Return ->

Consolidated Communications Holdings

A-Score: 3.2/10

Value: 7.2

Growth: 0.7

Quality: 1.1

Yield: 0.0

Momentum: 5.0

Volatility: 5.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-1.72%

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 Delivers Mixed Q3 Results Amidst Transformative Change

Segment Performance

Strategic Progress

Valuation and Outlook

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

39.4$

Current Price

39.4$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA