Thank you for standing by. My name is Mandeep, and I will be your operator today. At this time, I would like to welcome everyone to the TDS US Cellular third quarter 2024 operating results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask questions during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Colleen Thompson, Vice President, Corporate Relations. You may begin.

Good morning, and thank you for joining us. We want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find on the Investor Relations sections of the TDS and US Cellular websites. With me today in offering prepared comments are from TDS, Vicki Villacrez, Executive Vice President and Chief Financial Officer; from US Cellular, LT Therivel, President and Chief Executive Officer; Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer; and from TDS Telecom, Michelle Brukwicki, Senior Vice President of Finance and Chief Financial Officer. This call is being simultaneously webcast on the TDS and US Cellular Investor Relations Website. Please see the websites for slides referred to on this call, including non-GAAP. We provide guidance for both adjusted operating income before depreciation and amortization or OIBDA and adjusted earnings before interest, taxes, depreciation and amortization or EBITDA to highlight the contributions of US Cellular's wireless partnerships. As shown on Slide two, the information set forth in the presentation and discussed during this call contain statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the Safe Harbor paragraph in our press releases and the extended version included in our SEC filings. And with that, I will now turn the call over to Vicki Villacrez.

Thank you, Colleen, and good morning, everyone. Before we begin, I do want to acknowledge the devastating impact of the recent hurricanes and the fires that swept through Ruidoso, New Mexico. Our hearts go out to all who were affected and suffered loss. I want to thank our teams, especially those who came together to offer support and assistance in all our affected communities when our customers and our communities needed us most. Thank you. As I turn to the results, I want to highlight that we had another quarter of progress. As LT will cover in more detail, US Cellular has made nice progress on monetizing portions of the spectrum that were not included in the proposed transaction with T-Mobile. These transactions really highlight the significant value and demand for these licenses. We have looked across our enterprise, entering into several other transactions that will help to focus our resources and further optimize our footprint. First, the sale of our OneNet IT solutions closed in early September. The sale of OneNet is accretive to free cash flow. We also reached agreements on divestitures of certain non-strategic assets at TDS Telecom, expected to close later this year. Turning to results, I am pleased with our third quarter performance. Both business units are focused on meeting their financial objectives, resulting in US Cellular increasing its profitability outlook for adjusted EBITDA and adjusted OIBDA, and TDS Telecom reaffirming its guidance. We ended the quarter in a solid cash and liquidity position. Sequentially, each quarter our debt to EBITDA ratios have improved throughout 2024. Both businesses are continuing to generate positive free cash flow while continuing to invest in their networks. We are pleased to see that the Fed cut interest rates in mid-September as this drives modestly lower interest costs for us. We will continue to manage our balance sheet through a combination of primarily long-dated debt maturities issued at historically low interest rates. We will continue to maintain reasonable leverage and sufficient liquidity, all of which provides flexibility as we go into the fourth quarter and look forward to executing on our operational objectives and longer-term strategic goals. Before turning the call over, we recently announced that Michelle Brukwicki will be leaving TDS in December after seventeen years with the enterprise. On behalf of the organization, I want to thank her for her leadership and wish her well in her next endeavors. With Michelle's upcoming departure, Chris Bosfield, who is currently TDS Telecom's Vice President, Financial Analysis and Strategic Planning, will be stepping into the role of Vice President of Finance and CFO at TDS Telecom. Michelle and Chris will be transitioning over the next month. I would also like to thank all of our associates for their hard work in these dynamic times.

And now, LT, I will turn it over to you. Thanks, Vicki. Good morning, everyone. I want to just briefly echo Vicki's sentiments regarding Hurricane Helane. I also want to pass along my sincere thanks to our network and operations teams that have worked tirelessly to restore our network and support our customers. Our operations have recovered, but it is going to take a long time for that area to fully recover, and everyone that is affected is certainly in our thoughts. With that, let's pivot to the materials. I am going to take us to page five, and that covers some recent highlights. First, following our announcement back in May, the process to sell our wireless operations and select spectrum to T-Mobile is proceeding as expected. As you may have seen, we filed our public interest statement with the FCC in September. We believe we are on track for a mid-2025 closing. We remain confident that the transaction with T-Mobile is the best long-term solution for our customers that gives them the long-term benefits of greater scale and a more competitive network. The T-Mobile transaction will also provide us with an additional long-term tower tenant and a strengthened tower business. If you recall, we began reporting separate wireless and tower segment information last quarter, and we plan to continue to provide this detail going forward up to the expected close of the T-Mobile transaction. Also, as we talked about in our May announcement, after the proposed T-Mobile transaction, we will be left with approximately seventy percent of our spectrum. We have been running a process to opportunistically monetize that spectrum. In October, we entered into agreements with multiple carriers to sell certain portions of those in exchange for aggregate proceeds of over $1 billion. Slide six shows our progress…

Before discussing quarterly results, I want to provide some additional details on the proposed license sales transaction that LT previously highlighted and some broader impacts to our licensed portfolio. Subject to closing the pending T-Mobile transaction and regulatory approvals of the license transactions, we expect proceeds of just over $1.0 billion on the license sale transactions announced in October and highlighted on Slide six. These licenses have a net book value of approximately $590 million, and after transaction fees and transaction accounting adjustments, we expect to recognize a gain on the license sales upon their respective close dates. Further, we expect total cash taxes related to these recently announced spectrum transactions to be in the range of $200 to $250 million for US Cellular and $150 million to $200 million for TDS. This is in addition to estimated cash taxes on the pending T-Mobile transaction we expect to be in the range of $225 million to $325 million for US Cellular and $150 million to $250 million for TDS. Additionally, as a result of our efforts to monetize spectrum assets not subject to the securities purchase agreement with T-Mobile, US Cellular was required to review and update the groupings of licenses or units of accounting for purposes of impairment testing. As a result of this review, our millimeter wave licenses in the 28, 37, and 39 gigahertz bands were identified as a separate unit of accounting. Due in part to industry-wide challenges related to operationalizing this millimeter wave spectrum, US Cellular estimated the fair value of these licenses to be less than their corresponding carrying value, and this was the primary driver of US Cellular recording a loss on impairment of licenses of $136 million or $102 million net of tax in the third quarter of 2024. After recognition of…

Thank you, Doug, and good morning, everyone. Let's turn to slide fifteen for our third-quarter highlights. This quarter, we reached an important milestone in that fifty percent of our service addresses are now served by fiber. We continue to grow our footprint, expanding service addresses nine percent year over year. The team delivered thirty-two thousand new marketable fiber addresses in the quarter, bringing our year-to-date total to eighty-seven thousand, making progress on our one hundred and twenty-five thousand marketable fiber service address goal for the year. Our fiber broadband strategy is continuing to deliver good results, contributing to a two percent increase in total operating revenue and a twenty-one percent increase in adjusted EBITDA for the quarter. We also grew total residential broadband connections four percent year over year. Our fiber strategy is extremely important. Fiber in our expansion and incumbent markets is providing growth, helping to overcome industry-wide competitive pressures facing our copper and cable markets. Moving to slide sixteen, you can see where we are on our longer-term scorecard. We are targeting 1.2 million marketable fiber service addresses. We ended the quarter with 886,000. This reflects progress in growing fiber through our expansion market as well as fibering up our incumbent markets. We are also targeting sixty percent of our total service addresses to be served by fiber. We ended the quarter with fifty percent. And finally, we are expecting to offer speeds of one gig or higher to at least eighty percent of our footprint. We finished the quarter with seventy-four percent at gig speeds. These goals do not include fiber deployment that will be completed through the enhanced ACAM program. Therefore, these goals will increase once we add in eACAM fiber addresses. We are working closely with the FCC to finalize our precise service address obligations.…

Okay. Operator, we are now ready for the first question.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad, raise your hand, and join the queue. When you are called upon to ask your question and are listening, please ensure that your phone is not on mute. Again, press star one to join the queue.

Our first question comes from the line of Ric Prentiss with Raymond James. Please go ahead.

Hi. Good morning, everybody.

Morning, Rick.

Hey. Couple questions. Thanks for the color on some of the cash taxes impacts. Wanted to probe a little further on the T-Mobile sale and the Verizon Spectrum sale. Are those fully using the net of NOLs and other tax shields? Or is that kind of the gross liabilities that you might be applying more shields to them?

Yeah. Rick, Doug here on that question. That is net of what we expect to use for both NOLs and for interest carried forward. And that is the reason why the TDS cash taxes are estimated to be lower because they have more of those attributes, NOLs and interest carry forwards than US Cellular does.

Makes sense. And on the Verizon spectrum sale, you mentioned that there will also be some fees and other items. For the non-cash tax items, is it probably a couple percent that we are taking that would be the fee-related items that we take the billion, a couple percent for fees, etcetera, and then the $200 to $250 million cash taxes. That is the way broadly to think about it?

Yeah. There are two things to think about with the gain. One is transaction fees, and the other thing that we have to account for is there is a lease of the spectrum that we offer to Verizon before the regulatory close of the Verizon deal. For accounting purposes, we need to ascribe value to these, and that is also going to impact the eventual gain that we recognize upon close of that transaction.

Okay. That makes sense. And so the lease before closing, is that implying that, you know, the T-Mobile deal closes, but then you cannot free up the Spectrum immediately?

Well, it implies that the T-Mobile deal may close, and we may not yet have regulatory approval for the Verizon Spectrum deal.

Okay. Because I would assume there has got to be some integration time for T-Mobile to kind of migrate the customers off of the USM network over to the T-Mobile network. Is that, like, a year's time frame or something?

Correct. There is a Spectrum lease for up to a year after the close of the T-Mobile deal where T-Mobile may lease most of our spectrum for that period of time.

Makes sense. Okay. And then when you think about the Spectrum sale, the Verizon and the gain, the down imply, obviously, philosophical. Assuming things go through, what would the use of proceeds be? Is that, like, a special dividend thought? And if it is a special dividend thought, what are the thoughts of TDS? Is that to reduce leverage? Is that to start applying more capex? Philosophically knowing that we have got a lot of bridges to still cross.

Yeah. Good morning, Rick. Obviously, first and foremost, right now, we are focused on getting these transactions closed. And I would like to say and repeat we are very pleased with the value these transactions are unlocking for our shareholders. And so our top priority is to get to a successful close. When we get closer to that closing, I expect discussions on the use of proceeds to begin, and any use of proceeds would be the decision of the US Cellular Board of Directors. If there is a special dividend and TDS got its share, it would be an opportunity for TDS to do a number of things that would include paying down the potential to pay down debt, improve leverage, help the advancement and potential acceleration of the fiber deployment program that we have in place at TDS Telecom. As we continue to be bullish on that and really pleased with the results that we are seeing across our markets, as well as the expansion into new markets. And TDS may look at returning value to shareholders. So more to come. It is early. Again, our focus is on getting close.

Makes sense. One other more long-term question for LT on the wireless side. A lot of people at the beginning of the year were worried would there be a, quote, super cycle? Was the iPhone refresh going to drive competitive changes on loss on equipment or what would happen in the switcher pool? How are you viewing AI broadly from a wireless operator standpoint of what it could help you do but also what it might do as far as on the handset side?

Yeah. Good morning, Rick. I guess I will give you two viewpoints on it. Let me start with the handset side. The jury is still completely out. Right? So we, like every other operator, actually saw a decline in upgrade rates. People are hanging on their devices for longer. And it is unclear to me if that is because consumers still see relatively little differentiation between next generations of devices, or if they are waiting for this most recent upgrade, in this case, from Apple, where some of the AI capabilities for the device are beginning to become unveiled. And I just think it is too early to tell. We certainly have not seen a super cycle to date. But I think it is too early. Right? A lot of the AI capabilities can now be delivered via software upgrades. So it is not going to require those customers who have already purchased a new device to go get a new one. And so we will see. Right? I have played around with some of the capabilities. They are pretty interesting. And I think that those and I think that they will mature over time. And so I think from a let's call it a consumer-facing standpoint, AI truly changing the customer experience. It has not yet. But it is next. And I think it displays a lot of promise. Where we are seeing impact is on the cost side of our operations. And so, I see a lot of promise in AI. For example, in care. Being able to provide a better customer experience in our care centers, not necessarily replacing humans, but providing them with better prompts, next best offer, here's what we suggest, here's how we propose you answer that customer, here's how you could do it more effectively, more efficiently. One of the things we are seeing is it is taking us a lot less time to ramp up care associates because of some of these AI capabilities. And so it can help us from attrition. It can help us from training. It can help us be more efficient. Over time, I expect that same level of efficiency to translate into our stores, into our digital experience. And so from a cost perspective, I do think we are already seeing a fair amount of benefit. And that is reflected in some cases in some of the year-over-year expense savings that we have seen. Some of those expense savings are driven by our care. They are doing a fantastic job managing expenses, and AI is helping there. So consumer side jury is still out. I am long-term bullish. Near-term operational efficiency, we are already seeing the benefit.

Great. Thanks, everybody.

You bet. Thanks, guys. Operator, next question.

Our next question comes from the line of Sebastian Pette with JPMorgan. Please go ahead.

Hi. Thank you for taking the question. Just a quick clarification, housekeeping here. In terms of, in the TDS press release, I think you called out just agreements to sell high, like, and cable properties. Is that above and beyond what you have kind of already identified, or is there anything else perhaps in process there? In addition, you know, I guess, LT, thinking about the remainco tower portfolio pro forma for all the different transactions out there. I mean, as you think about it, do you see USM as a, you know, net acquirer perhaps of towers with the tower portfolio, you know, expanding over time, as that perhaps comes to the operating business, or is it more about, you know, increasing tendencies, preparing the business, you know, for further densification, some of the, you know, talent that you will see across the wireless ecosystem from there?

Hi, Sebastiano. Yeah. The divestitures that Vicki mentioned, the non-strategic ILEC and cable divestitures are the same ones that we have just disclosed over the last few months. We had a couple of small Virginia ILECs that we are divesting. We announced that in the second quarter, and we also announced in the third quarter the sale of our tech cable properties. And so those are the ones that Vicki was referring to, and those are the ones that we expect to close here very, very soon in the fourth quarter.

Let me tackle question number two. So let me talk a bit about how we can see our current tower portfolio. Job one is to improve colocation rates on the assets we have today. So one of the interesting things about our portfolio is that we only really started treating it as a revenue center, as a profit center a few years ago. And that has driven some increase in colocation rates over time. As Doug mentioned, we are in a bit of a slowdown right now in the wireless industry in terms of capital spending. And, you know, we have reduced our capital guidance. A lot of our competitors have as well. That reflects then in terms of new colocation opportunities, new amendment opportunities, and so on into our tower business. So we have seen a slower rate of growth in the last year or two, but long run, we are still very bullish because our colocation rates are considerably below a lot of our competitors. We think there is opportunity. That tower portfolio is geographically relatively unique. Right? We have a small number of towers that are within a mile, within a mile and a half, within three, five miles of our towers. And so over time, as carriers densify, we see an opportunity to increase those colocation rates. And that is job one. A second question then when you think about our tower business, and I am getting to your question of when we look at acquisition opportunities, is you know, is this business is this a business that operates at scale? And my perspective on the tower business is yes. One of the issues that we have had with the wireless business and why we pursued the transaction with T-Mobile is because we really struggled to…

No. That is super helpful. We appreciate that. And then I guess one more question back to TDS. I know last quarter you announced an MVNO agreement. Right. Launch of an MVNO. As you are thinking about the space, obviously, tons of focus on convergence, tons of focus on fiber assets and, you know, where perhaps that could go over time. And given the company's given TDS's fiber efforts, you know, fiber roadmap and targets longer term. I guess number one, obviously, not to Yep. Maybe that makes sense to continue to operate on a standalone basis, but would you entertain, you know, unique perhaps, agreements with scaled wireless operators. There are some, you know, regional ILEC assets I think Windstream and AT&T, for example, have an agreement. But is that within perhaps the longer-term roadmap perhaps although you have stood up the MVNO? I mean, I guess, a better way to ask a question, is the fact that you stood up the MVNO now preclude you from perhaps entering into, you know, agreements with perhaps scaled national wireless operators to, you know, combine your efforts for a converged bundle offer? Thank you.

Hi, Sebastiano. So, yeah, let me talk a little bit about our MVNO. We are in the process of getting that all rolled out. And as we have mentioned in the past, we are launching our MVNO through our participation in the NCTC. So we are part of that industry cooperative. And they have partnered with very strong partners that are coming together and integrating and offering that MVNO opportunity to companies that participate in NCTC like us. And so we are taking advantage of that. And the wireless partner that NCTC is working with is a national 5G player. So we do have that available to us through the NCTC MVNO arrangement. And we are in the process of getting that launch right now. We have been doing associate trials over the last couple of months, and we are now in customer trials. And as soon as we are comfortable with how those trials are going, then we will go to a full commercial launch and eventually get that launched across our entire footprint. So that is how we are thinking about the MVNO, and we are very excited to get that launched in a bigger way. Hopefully coming up very soon.

Thank you again.

Our next question comes from Sergei Dluzhevskiy with GAMCO Investors. Please go ahead.

Good morning.

Good morning.

Thanks for taking the questions. My first question is for LT on the tower business. So I understand that obviously the industry is in a slower CapEx cycle, and that impacts on new customer additions and amendments. But to the degree but I guess looking at the things that you can control, I guess, what is working well to the degree that things are moving along and what still needs to be improved in order for you to increase your colocation ratio and also maybe your thoughts on what kind of third-party colocation ratio is realistic for your company on a medium-term subject, sir.

Thanks, Sergei. So, I mean, a few thoughts on the slowdown and then, you know, why I do believe over time that we are going to see a pivot to that. You know, so I referenced the slowdown in capital spending. This is one area where it helps to be running a wireless business at the same time as you are running a tower business because you kind of get visibility into exactly what is driving trends. And for us, right, what is driving the trends is we have completed our coverage not completed, but we are well down the path of coverage built. Most of our investments are going into capacity. And the next big round of investment is going to be triggered by one of two things. Right? The first will be 6G. And any densification or new spectrum that needs to be brought to bear in order to enable the 6G build. But the second, interestingly enough, is going to be driven, I believe, by paucity of spectrum. Right? There is not really a roadmap for carriers to get access to new spectrum anytime in the near future. Absent, of course, some spectrum that we are marketing. So we are kind of bullish on that piece of the equation. But broadly, right, if you are a carrier, the most obvious way to get access to spectrum is via spectrum online. The FCC does not have spectrum auction authority right now. There is a notional roadmap that the NTIA has put forward, and I commend them for doing it. That identifies bands for analysis, but we have been analyzing bands of the country for a long time. And we have not been able to take action. We have not taken action in granting the FCC spectrum authority back.…

Got it. Thank you. My second question is in regards to wireless partnerships. So Verizon has been buying in minority stakes in their partnerships over the past few years. Obviously, one of the larger transactions there was with Spentalia Communications. But US Cellular, obviously, has had an even larger minority interest in terms of size in the LA market. So if you could maybe share with us your latest thinking on the partnership interest and what could move you closer to monetizing those assets.

Well, we have had a couple of things on our plate over the last couple of quarters when it comes to strategic deals and monetizing assets. Certainly, getting those deals done, not just getting them structured, but also getting them over the goal line remains our focus. We are pleased with those partnerships. They generate attractive cash flow. That cash flow has helped our wireless business. It helps us continue to pay down debt. And so we are not in any hurry to change direction with those partnerships. I mean, that being said, right, we are, you know, there is as part of this strategic review that we mentioned, I mean, we took a really comprehensive view across the business. And, you know, as you can see, from what we did with the wireless business, what we are doing with Spectrum, how we establish the tower business, there are not any sacred cows. And, we did take a really comprehensive look short term and long term about what we wanted the enterprise to look like. And we will continue to do that moving forward. And so if there is an opportunity for a really good deal to monetize those partnerships, we would certainly be open to it, but we are not in any hurry. I think we are happy with how they are performing. We are happy with the relationship that we have within those partnerships. They are attractive financially. And at least right now, we have got plenty on our plate in terms of getting our wireless deal with T-Mobile done plus getting a lot of incremental spectrum monetized as well.

Got it. And my next question is for Michelle. TDS Telecom side. You provided distribution for your residential broadband customer base. In the slide deck, think about twenty percent are on the Gig plus, ten percent on six hundred meg and so on. How does the distribution differ for incoming this is your entire base, but how would it look for your incoming customers maybe for the last quarter or year to date?

Yeah. Hi, Sergei. Yeah. So for our incoming customers, I would say I think we are at about twenty percent is on gig service today for our whole base. But for incoming customers, we are at about forty percent coming in on gig service. So that is why you continue to see quarter over quarter, we keep moving our customers up that stack of speeds. And, you know, and that is also helping drive a bit of our ARPU increase. And, of course, improving, you know, the customer experience and meeting the customer demand for broadband usage.

Got it. Great. And my last question, going back to some of your comments about things that you are doing to improve broadband net additions, including either door-to-door Salesforce, that you have in your markets. Maybe if you could provide more color on that front and also what are the things that you are pursuing to in addition to, I guess, door-to-door Salesforce that would improve conversion of your presence into paying customers?

Yeah. So this is a huge focus of our organization. We have got lots of people working on this and focused on this. So, yeah, you know, last year, we turned up a lot of service addresses. We are turning up a lot this year as well. And so it is, you know, our top priority to sell into those addresses and get our broadband penetration up. So we did have 7,600 broadband net adds this quarter in our expansion markets. And that is fantastic that we are getting that because that is providing the growth in our broadband net adds in total. But it is coming in a little slower than we had expected. And what we are finding is that we need to enhance our door-to-door sales representatives and get more people out there selling. About half of our sales come from door-to-door, and we just needed more resources out there. And so we have been working on that for the last few months. And as I mentioned, we are starting to see some really nice leading indicators, telling us that our efforts are working and that we are on the right track based on what we are seeing so far come through in October. So, you know, that is where our focus is right now is on getting those sales, you know, really ramped up and making sure we have got all the resources there that are required to do so.

Got it. Thank you.

Thanks, Sergei. Thanks.

This concludes today's Q&A session. I would like to now turn the call back over to Colleen Thompson for closing remarks.

Okay. Thanks, everyone, for all your time today. Please reach out to Investor Relations with any additional questions, and have a great weekend.

This concludes today's call. You may now disconnect.