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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                    to
Commission file number 001-14157
TELEPHONE AND DATA SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
36-2669023
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)

30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (312) 630-1900
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Shares, $.01 par valueTDSNew York Stock Exchange
Depository Shares each representing a 1/1000th interest in a share of 6.625% Series UU Cumulative Redeemable Perpetual Preferred Stock, $.01 par valueTDSPrUNew York Stock Exchange
6.625% Senior Notes due 2045TDINew York Stock Exchange
6.875% Senior Notes due 2059TDENew York Stock Exchange
7.000% Senior Notes due 2060TDJNew York Stock Exchange
5.875% Senior Notes due 2061TDANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes
No

The number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 2021, is 107,093,000 Common Shares, $.01 par value, and 7,293,000 Series A Common Shares, $.01 par value.



Telephone and Data Systems, Inc.
Quarterly Report on Form 10-Q
For the Period Ended March 31, 2021
IndexPage No.
  
  
  
  
  
  
  
  
  
  


Table of Contents

Telephone and Data Systems, Inc.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Executive Overview
The following discussion and analysis compares Telephone and Data Systems, Inc.’s (TDS) financial results for the three months ended March 31, 2021, to the three months ended March 31, 2020. It should be read in conjunction with TDS’ interim consolidated financial statements and notes included herein, and with the description of TDS’ business, its audited consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) included in TDS’ Annual Report on Form 10-K (Form 10-K) for the year ended December 31, 2020. Certain numbers included herein are rounded to millions for ease of presentation; however, certain calculated amounts and percentages are determined using the unrounded numbers. 
This report contains statements that are not based on historical facts, including the words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions. These statements constitute and represent “forward looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward looking statements. See Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement for additional information.
TDS uses certain “non-GAAP financial measures” and each such measure is identified in the MD&A. A discussion of the reason TDS determines these metrics to be useful and reconciliations of these measures to their most directly comparable measures determined in accordance with accounting principles generally accepted in the United States of America (GAAP) are included in the Supplemental Information Relating to Non-GAAP Financial Measures section within the MD&A of this Form 10-Q Report.
General
TDS is a diversified telecommunications company that provides high-quality communications services to approximately 6 million connections nationwide. TDS provides wireless services through its 82%-owned subsidiary, United States Cellular Corporation (UScellular). TDS also provides broadband, video and voice services through its wholly-owned subsidiaries, TDS Telecommunications LLC and TDS Broadband LLC (collectively, TDS Telecom). TDS operates entirely in the United States.
During the first quarter of 2021, TDS modified its reporting segment structure to combine its Wireline and Cable segments into a single reportable segment for TDS Telecom. TDS Telecom believes this presentation better articulates its progress and performance against its strategy, which includes a focus on overall broadband growth and future fiber deployment across its markets. This change also reflects TDS Telecom's progress in aligning its organizational, operational and support structures to leverage one cost base to better support its customers across all of its markets. Prior periods have been updated to conform to this revised presentation. See Note 13 — Business Segment Information in the Notes to Consolidated Financial Statements for additional information about TDS' segments.
The global spread of coronavirus (COVID-19) did not have a material impact on TDS' financial results for the three months ended March 31, 2021. The impact of COVID-19 on TDS' future financial results is uncertain, but is not projected to have a material impact. There are many factors, including the severity and duration of the outbreak, as well as other direct and indirect impacts, that could negatively impact TDS.

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TDS Mission and Strategy
TDS’ mission is to provide outstanding communications services to its customers and meet the needs of its shareholders, its people, and its communities. In pursuing this mission, TDS seeks to grow its businesses, create opportunities for its associates, support the communities it serves, and build value over the long-term for its shareholders. Across all of its businesses, TDS is focused on providing exceptional customer experiences through best-in-class services and products and superior customer service. Since its founding, TDS has been committed to bringing high-quality communications services to rural and underserved communities.
TDS’ long-term strategy calls for the majority of its operating capital to be reinvested in its businesses to strengthen their competitive positions and financial performance, while also returning value to TDS shareholders primarily through the payment of a regular quarterly cash dividend. 
TDS plans to build shareholder value by continuing to execute on its strategies to build strong, competitive businesses providing high-quality, data-focused services and products. Strategic efforts include:
UScellular offers economical and competitively priced service plans and devices to its customers and is focused on increasing revenues from sales of related products such as accessories and device protection plans and from new services such as home internet. In addition, UScellular is focused on expanding its solutions available to business and government customers. 
UScellular continues to devote efforts to enhance its network capabilities, including by deploying 5G technology. 5G technology helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency. UScellular's 5G deployment is initially focused on mobility services using its low band spectrum. UScellular has acquired high-band spectrum and is in the process of acquiring mid-band spectrum, which it will deploy in the future to further enable the delivery of 5G services. UScellular has launched commercial 5G services in portions of substantially all of UScellular’s markets and will continue to launch in additional areas in the coming years. In addition to the deployment of 5G technology, UScellular is also modernizing its 4G LTE network to further enhance 4G LTE speeds.
UScellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on capital. As part of this strategy, UScellular actively seeks attractive opportunities to acquire wireless spectrum, including pursuant to FCC auctions.
TDS Telecom strives to be the preferred broadband provider in its markets with the ability to provide value-added bundling with video and voice service options. TDS Telecom continues to focus on driving growth in its broadband services by investing in fiber deployment in its new expansion markets, as well as in its incumbent markets that have historically utilized copper and coaxial cable technologies.
TDS Telecom may also seek to grow its operations through the acquisition of businesses that support and complement its existing markets or by creating entirely new clusters of markets where TDS Telecom can succeed. TDS Telecom intends to avoid markets served by other fiber overbuilders or municipalities which have constructed their own networks with fiber to the home.
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Terms Used by TDS
The following is a list of definitions of certain industry terms that are used throughout this document:
4G LTE – fourth generation Long-Term Evolution, which is a wireless technology that enables more network capacity for more data per user as well as faster access to data compared to third generation (3G) technology.
5G – fifth generation wireless technology that helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency.
Account – represents an individual or business financially responsible for one or multiple associated connections. An account may include a variety of types of connections such as handsets and connected devices.
Alternative Connect America Cost Model (A-CAM) – a USF support mechanism for rate-of-return carriers, which provides revenue support through 2028. This support comes with an obligation to build defined broadband speeds to a certain number of locations.
Auctions 105 and 107 – Auction 105 was an FCC auction of 3.5 GHz wireless spectrum licenses that started in July 2020 and concluded in September 2020. Auction 107 was an FCC auction of 3.7-3.98 GHz wireless spectrum licenses that started in December 2020 and concluded in February 2021.
Broadband Connections – refers to the individual customers provided high-speed internet access through various transmission technologies, including fiber, DSL, dedicated internet circuit technologies or cable modem service.
Broadband Penetration – metric which is calculated by dividing total broadband connections by total service addresses.
Churn Rate – represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.
Connected Devices – non-handset devices that connect directly to the UScellular network. Connected devices include products such as tablets, wearables, modems, and hotspots.
Coronavirus Aid, Relief, and Economic Security (CARES) Act – economic relief package signed into law on March 27, 2020 to address the public health and economic impacts of COVID-19, including a variety of tax provisions.
EBITDA – refers to earnings before interest, taxes, depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted EBITDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Expansion Markets – markets utilizing fiber networks in areas where TDS does not serve as the incumbent service provider.
FCC Keep Americans Connected Pledge – voluntary FCC initiative, through June 30, 2020, in response to the COVID-19 pandemic to ensure that Americans do not lose their broadband or telephone connectivity as a result of the exceptional circumstance.
Free Cash Flow – non-GAAP metric defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Gross Additions – represents the total number of new connections added during the period, without regard to connections that were terminated during that period.
Incumbent Markets – markets where TDS is positioned as the traditional local telephone or cable company.
IPTV – internet protocol television.
Net Additions (Losses) – represents the total number of new connections added during the period, net of connections that were terminated during that period.
OIBDA – refers to operating income before depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted OIBDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Postpaid Average Revenue per Account (Postpaid ARPA) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
Postpaid Average Revenue per User (Postpaid ARPU) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid connections and by the number of months in the period.
Residential Revenue per Connection – metric which is calculated by dividing total residential revenue by the average number of residential connections and by the number of months in the period.
Retail Connections – the sum of UScellular postpaid connections and UScellular prepaid connections.
Service Addresses – number of single residence homes, multi-dwelling units, and business locations that are capable of being connected to the TDS network, based on best available information.
Universal Service Fund (USF) – a system of telecommunications collected fees and support payments managed by the FCC intended to promote universal access to telecommunications services in the United States.
UScellular Connections – individual lines of service associated with each device activated by a customer. Connections include all types of devices that connect directly to the UScellular network.
Video Connections – represents the individual customers provided video services.
Voice Connections – refers to the individual circuits connecting a customer to TDS' central office facilities that provide voice services or the billable number of lines into a building for voice services.
VoLTE – Voice over Long-Term Evolution is a technology specification that defines the standards and procedures for delivering voice communications and related services over 4G LTE networks.
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Results of Operations — TDS Consolidated
Three Months Ended
March 31,
 202120202021 vs. 2020
(Dollars in millions)
Operating revenues
UScellular$1,023 $963 %
TDS Telecom249 240 %
All other1
46 58 (21)%
Total operating revenues1,318 1,261 %
Operating expenses
UScellular939 913 %
TDS Telecom217 212 %
All other1
52 64 (19)%
Total operating expenses1,208 1,189 %
Operating income (loss)   
UScellular84 50 67 %
TDS Telecom32 28 12 %
All other1
(6)(6)%
Total operating income110 72 52 %
Investment and other income (expense)
Equity in earnings of unconsolidated entities42 45 (7)%
Interest and dividend income3 (44)%
Interest expense(53)(37)(45)%
Total investment and other income (expense)(8)14 N/M
Income before income taxes102 86 18 %
Income tax expense31 N/M
Net income71 83 (14)%
Less: Net income attributable to noncontrolling interests, net of tax12 14 (9)%
Net income attributable to TDS shareholders59 69 (15)%
TDS Preferred dividend requirement2 — N/M
Net income attributable to TDS common shareholders$57 $69 (18)%
Adjusted OIBDA (Non-GAAP)2
$338 $311 %
Adjusted EBITDA (Non-GAAP)2
$383 $362 %
Capital expenditures3
$197 $292 (32)%
N/M - Percentage change not meaningful
1Consists of corporate and other operations and intercompany eliminations.
2Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
3Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.
Refer to individual segment discussions in this MD&A for additional details on operating revenues and expenses at the segment level.
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Equity in earnings of unconsolidated entities
Equity in earnings of unconsolidated entities represents TDS’ share of net income from entities in which it has a noncontrolling interest and that are accounted for using the equity method. TDS’ investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pretax income of $19 million and $22 million for the three months ended March 31, 2021 and 2020, respectively. See Note 8 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.
Income tax expense
The effective tax rate on Income before income taxes for the three months ended March 31, 2021 and 2020, was 30.1% and 4.2%, respectively. The higher effective tax rate in 2021 as compared to 2020 is due primarily to the income tax benefits of the CARES Act included in the 2020 tax rate, which do not recur as benefits in the 2021 tax rate.
The CARES Act provided retroactive eligibility of bonus depreciation on qualified improvement property put into service after December 31, 2017 and a 5-year carryback of net operating losses generated in years 2018-2020. As the statutory federal tax rate applicable to certain years within the carryback period is 35%, carryback to those years provided a tax benefit in excess of the current federal statutory rate of 21%, resulting in a reduction of income tax expense in 2020 and an expected cash refund of taxes paid in prior years.
Net income attributable to noncontrolling interests, net of tax
Three Months Ended
March 31,
 20212020
(Dollars in millions)
UScellular noncontrolling public shareholders’$11 $12 
Noncontrolling shareholders’ or partners’1 
Net income attributable to noncontrolling interests, net of tax$12 $14 

Net income attributable to noncontrolling interests, net of tax includes the noncontrolling public shareholders’ share of UScellular’s net income, the noncontrolling shareholders’ or partners’ share of certain UScellular subsidiaries’ net income and other TDS noncontrolling interests.
Earnings
(Dollars in millions)




Three Months Ended
Net income decreased due primarily to higher income tax, interest and operating expenses, partially offset by higher operating revenues. Adjusted EBITDA increased due primarily to higher operating revenues, partially offset by higher operating expenses.



*Represents a non-GAAP financial measure. Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
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UScellular OPERATIONS
Business Overview
UScellular owns, operates, and invests in wireless markets throughout the United States. UScellular is an 82%-owned subsidiary of TDS. UScellular’s strategy is to attract and retain wireless customers through a value proposition comprised of a high-quality network, outstanding customer service, and competitive devices, plans, and pricing - all provided with a community focus. 
OPERATIONS


Serves customers with 5.0 million connections including 4.4 million postpaid, 0.5 million prepaid and 0.1 million reseller and other connections
Operates in 21 states
Employs approximately 5,200 associates
4,270 owned towers
6,802 cell sites in service
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Operational Overview
As of March 31,20212020
Retail Connections – End of Period
 Postpaid4,406,000 4,359,000
 Prepaid496,000 494,000
 Total4,902,000 4,853,000
  
Q1 2021Q1 2020Q1 2021 vs. Q1 2020
Postpaid Activity and Churn
Gross Additions
Handsets104,000 90,000 16 %
Connected Devices39,000 42,000 (7)%
Total Gross Additions143,000 132,000 %
Net Additions (Losses)
Handsets(3,000)(20,000)85 %
Connected Devices(3,000)(6,000)50 %
Total Net Additions (Losses)(6,000)(26,000)77 %
Churn
Handsets0.92 %0.95 %
Connected Devices2.53 %3.11 %
Total Churn1.12 %1.21 %

Total postpaid handset net losses decreased for the three months ended March 31, 2021, when compared to the same period last year due primarily to (i) higher gross additions as a result of improved promotional offering effectiveness and higher consumer switching activity and (ii) lower handset defections as a result of a reduction in non-pay defections.
Total postpaid connected device net losses decreased for the three months ended March 31, 2021, when compared to the same period last year due to a decrease in tablet defections, partially offset by a decrease in gross additions due to lower demand for internet related products as compared to the three months ended March 31, 2020.
Postpaid Revenue
Three Months Ended
March 31,
 202120202021 vs. 2020
Average Revenue Per User (ARPU)$47.65 $47.23  %
Average Revenue Per Account (ARPA)$125.25 $122.92  %

Postpaid ARPU and Postpaid ARPA increased for the three months ended March 31, 2021, when compared to the same period last year, due primarily to (i) an increase in regulatory recovery revenues, (ii) favorable plan and product offering mix, and (iii) an increase in device protection plan revenues. These increases were partially offset by an increase in promotional expense.
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Financial Overview - UScellular
Three Months Ended
March 31,
202120202021 vs. 2020
(Dollars in millions)   
Retail service$685 $671 %
Inbound roaming28 37 (23)%
Other58 54 %
Service revenues771 762 %
Equipment sales252 201 26 %
Total operating revenues1,023 963 %
System operations (excluding Depreciation, amortization and accretion reported below)185 180 %
Cost of equipment sold275 217 26 %
Selling, general and administrative305 335 (9)%
Depreciation, amortization and accretion170 177 (4)%
(Gain) loss on asset disposals, net5 39 %
(Gain) loss on sale of business and other exit costs, net(1)— N/M
Total operating expenses939 913 %
Operating income$84 $50 67 %
Net income$62 $72 (14)%
Adjusted OIBDA (Non-GAAP)1
$258 $231 12 %
Adjusted EBITDA (Non-GAAP)1
$302 $281 %
Capital expenditures2
$125 $236 (47)%
N/M - Percentage change not meaningful
1Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
2Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.
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Operating Revenues
(Dollars in millions)



Service revenues consist of:
Retail Service - Charges for voice, data and value-added services and recovery of regulatory costs
Inbound Roaming - Charges to other wireless carriers whose customers use UScellular’s wireless systems when roaming
Other Service - Amounts received from the Federal USF, tower rental revenues, and miscellaneous other service revenues
Equipment revenues consist of:
Sales of wireless devices and related accessories to new and existing customers, agents, and third-party distributors
Key components of changes in the statement of operations line items were as follows:
Total operating revenues
Retail service revenues increased for the three months ended March 31, 2021, primarily as a result of an increase in Postpaid ARPU as previously discussed in the Operational Overview section as well as an increase in the average number of postpaid subscribers.
Inbound roaming revenues decreased for the three months ended March 31, 2021, primarily driven by lower data revenues resulting from lower usage. UScellular expects inbound roaming revenues to continue to decline during 2021 relative to prior year levels.
Other service revenues increased for the three months ended March 31, 2021, resulting from increases in tower rental revenues and miscellaneous other service revenues.
Equipment sales revenues increased for the three months ended March 31, 2021, due primarily to an increase in smartphone sales as well as an increase in the average revenue per device for smartphones due to an increase in sales of higher priced smartphones.
System operations expenses
System operations expenses increased for the three months ended March 31, 2021, due to higher circuit costs as well as an increase in roaming expense as a result of higher data roaming usage, partially offset by lower data rates.
Cost of equipment sold
Cost of equipment sold increased for the three months ended March 31, 2021, due primarily to an increase in smartphone sales as well as an increase in the average cost per device for smartphones due to an increase in sales of higher priced smartphones.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased for the three months ended March 31, 2021, due primarily to decreases in (i) bad debts expense driven by fewer non-pay customers as a result of better credit mix and improved customer payment behavior, as well as a discrete charge that was recorded in March 2020 related to UScellular's participation in the FCC Keep Americans Connected Pledge and (ii) advertising expenses.
Depreciation, amortization and accretion
Depreciation, amortization, and accretion decreased for the three months ended March 31, 2021, due to certain billing system assets reaching their end of life in 2020, partially offset by an increase in depreciation expense due to increased capital expenditures throughout 2020.
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TDS TELECOM OPERATIONS
Business Overview
TDS Telecom provides a wide range of communications services utilizing its high-quality telecommunications networks. TDS Telecom's strategy is to provide high-speed broadband services bundled with video and voice services. TDS Telecom seeks to be the leading provider of broadband services in the markets it serves by investing in high-quality networks and providing excellent customer service. TDS Telecom continues to focus on driving growth in its broadband services by investing in fiber deployment in its incumbent markets and in new expansion markets. Services are provided to residential, commercial and wholesale customers in a mix of rural, suburban and metropolitan communities.
OPERATIONS


Serves 1.2 million connections in 32 states.
Employs approximately 2,900 associates.
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Operational Overview

As of March 31, 2021, TDS Telecom offered 1Gig service to 55% of its total footprint.
TDS Telecom serves 38% of its wireline service addresses with fiber-to-the-home as of March 31, 2021, compared to 32% a year ago. Expansion markets have increased to 10% of wireline service addresses, up from 5% a year ago.

As of March 31,202120202021 vs. 2020
Residential connections
Broadband
Wireline, Incumbent243,700 230,400 %
Wireline, Expansion24,100 12,300 96 %
Cable199,500 184,100 %
Total Broadband467,300 426,800 %
Video142,700 143,600 (1)%
Voice308,700 313,900 (2)%
Total Residential Connections918,700 884,300 %
Commercial connections278,800 302,200 (8)%
Total connections1,197,400 1,186,400 %
Numbers may not foot due to rounding.
Total connections increased due primarily to broadband growth, partially offset by a decrease in competitive local exchange carriers (CLEC) commercial connections.
A majority of TDS Telecom's customers take advantage of bundling options as 64% of customers subscribe to more than one service.
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Total residential revenue per connection increased 5% due to a higher concentration of broadband connection growth as well as an increase in broadband speeds and price increases. Cable residential revenue per connection exceeds wireline due to a higher mix of video connections.
Residential broadband customers continue to choose higher speeds with 62% taking speeds of 100 Mbps or greater and 6% choosing 1Gig.
Broadband penetration increased to 34% in Wireline and to 46% in Cable due primarily to strong broadband connection growth.

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Financial Overview - TDS Telecom
Three Months Ended
March 31,
 202120202021 vs. 2020
(Dollars in millions)  
Residential   
Wireline, Incumbent$85 $81 %
Wireline, Expansion7 80 %
Cable65 60 %
Total residential157 144 %
Commercial47 49 (6)%
Wholesale45 47 (3)%
Total service revenues249 240 %
Equipment revenues — %
Total operating revenues249 240 %
Cost of services (excluding Depreciation, amortization and accretion reported below)97 95 %
Cost of equipment and products — (1)%
Selling, general and administrative70 65 %
Depreciation, amortization and accretion49 52 (5)%
(Gain) loss on asset disposals, net — N/M
Total operating expenses217 212 %
Operating income$32 $28 12 %
Net income$24 $28 (12)%
Adjusted OIBDA (Non-GAAP)1
$81 $80 %
Adjusted EBITDA (Non-GAAP)1
$81 $82 (1)%
Capital expenditures2
$70 $54 30 %
Numbers may not foot due to rounding.
N/M - Percentage change not meaningful
1Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
2Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.
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Operating Revenues
(Dollars in millions)


Residential revenues consist of:
Broadband services, including internet, security and support services
Video services, including IPTV, traditional cable programming and satellite offerings
Voice services
Commercial revenues consist of:
High-speed and dedicated business internet services
Video services
Voice services
Wholesale revenues consist of:
Network access services primarily to interexchange and wireless carriers for carrying data and voice traffic on TDS Telecom's networks
Federal and state USF support, including A-CAM
Key components of changes in the statement of operations items were as follows:
Total operating revenues
Residential revenues increased for the three months ended March 31, 2021, due primarily to growth in broadband connections and price increases, partially offset by a decline in voice connections.
Commercial revenues decreased for the three months ended March 31, 2021, due primarily to declining connections in CLEC markets.
Wholesale revenues decreased for the three months ended March 31, 2021, due primarily to decreased access revenues.
Cost of services
Cost of services increased for the three months ended March 31, 2021, due primarily to higher employee expenses and increases in video programming costs, partially offset by a decrease in costs to provide legacy services.
Selling, general and administrative
Selling, general and administrative expenses increased for the three months ended March 31, 2021, due primarily to higher employee expenses, higher information processing costs including the preparation for the implementation of a new customer relationship management system and increases to charges for universal service support.
Depreciation, amortization and accretion
Depreciation, amortization and accretion decreased for the three months ended March 31, 2021, due primarily to certain assets becoming fully depreciated partially offset by higher depreciation due to increased capital expenditures on new fiber assets throughout 2020.
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Liquidity and Capital Resources
Sources of Liquidity
TDS and its subsidiaries operate capital-intensive businesses. In the past, TDS’ existing cash and investment balances, funds available under its revolving credit and receivables securitization agreements, funds from other financing sources, including term loans, other long-term debt, preferred share offerings, and cash flows from operating and certain investing and financing activities, including sales of assets or businesses, provided sufficient liquidity and financial flexibility for TDS to meet its normal day-to-day operating needs and debt service requirements, to finance the build-out and enhancement of markets and to fund acquisitions. There is no assurance that this will be the case in the future. See Market Risk for additional information regarding maturities of long-term debt.
TDS has incurred negative free cash flow at times in the past and this could occur in the future. However, TDS believes that existing cash and investment balances, funds available under its revolving credit agreements, expected future tax refunds and expected cash flows from operating and investing activities will provide sufficient liquidity for TDS to meet its normal day-to-day operating needs and debt service requirements for the coming years. TDS will continue to monitor the rapidly changing business and market conditions and plans to take appropriate actions, as necessary, to meet its liquidity needs.
TDS may require substantial additional capital for, among other uses, funding day-to-day operating needs including working capital, acquisitions of providers of telecommunications services, wireless spectrum license acquisitions, capital expenditures, agreements to purchase goods or services, leases, debt service requirements, the repurchase of shares, the payment of dividends, or making additional investments, including new technologies and fiber builds. It may be necessary from time to time to increase the size of the existing revolving credit agreements, to put in place new credit agreements, or to obtain other forms of financing in order to fund potential expenditures.
Cash and Cash Equivalents
Cash and cash equivalents include cash and money market investments. The primary objective of TDS’ Cash and cash equivalents investment activities is to preserve principal. TDS does not have direct access to UScellular cash.
Cash and Cash Equivalents
(Dollars in millions)






The majority of TDS’ Cash and cash equivalents are held in bank deposit accounts and in money market funds that purchase only debt issued by the U.S. Treasury or U.S. government agencies.
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Financing
Revolving Credit Agreements
In March 2020, TDS entered into a $400 million unsecured revolving credit agreement with certain lenders and other parties and UScellular entered into a $300 million unsecured revolving credit agreement with certain lenders and other parties. Amounts under the revolving credit agreements may be borrowed, repaid and reborrowed from time to time until maturity in March 2025. As of March 31, 2021, there were no outstanding borrowings under the revolving credit agreements, except for letters of credit, and TDS’ and UScellular’s unused borrowing capacity was $399 million and $298 million, respectively. In May 2021, TDS initiated a borrowing of $100 million under its revolving credit agreement.
Term Loan Agreements
In January 2021, TDS borrowed $75 million under its senior term loan credit agreement. In February 2021, UScellular borrowed $217 million under its senior term loan credit agreement. As of March 31, 2021, TDS and UScellular have both borrowed the full amounts available under the senior term loan credit agreements of $200 million and $300 million, respectively. See Note 9 — Debt in the Notes to Consolidated Financial Statements for additional information related to the senior term loan agreements.
Receivables Securitization Agreement
UScellular, through its subsidiaries, has a receivables securitization agreement to permit securitized borrowings using its equipment installment plan receivables. In March 2021, UScellular borrowed $275 million under its receivables securitization agreement. As of March 31, 2021, UScellular has borrowed the full amount available under the receivables securitization agreement of $300 million. Amounts under the receivables securitization agreement may be repaid and reborrowed from time to time until December 2022, which may be extended from time to time as specified therein. See Note 9 — Debt in the Notes to Consolidated Financial Statements for additional information related to the receivables securitization agreement.
Financial Covenants
TDS and UScellular believe they were in compliance with all of the financial covenants and requirements set forth in their revolving credit agreements, senior term loan credit agreements and receivables securitization agreement as of March 31, 2021.
Other Long-Term Financing
In 2020, UScellular issued $500 million of 6.25% Senior Notes due in 2069 and $500 million of 5.5% Senior Notes due in 2070. The proceeds from both issuances will be used for general corporate purposes, including but not limited to, the purchase of additional wireless spectrum licenses acquired in Auction 107, funding of capital expenditures and retirement of existing debt.
In March 2021, TDS issued 16,800 shares of 6.625% Series UU Cumulative Redeemable Perpetual Preferred Stock (Preferred Shares) for $25,000 per Preferred Share, for total gross proceeds of $420 million. The Preferred Shares were issued to a depositary to facilitate the issuance of 16,800,000 depositary shares (Depositary Shares), each representing 1/1,000th of a Preferred Share. TDS received net cash proceeds of $406 million after payment of issuance costs of $14 million. The proceeds will be used for general corporate purposes, including but not limited to, the funding of capital expenditures associated with TDS Telecom's fiber program and retirement of existing debt. See Note 12 — Shareholders' Equity in the Notes to Consolidated Financial Statements for additional information related to TDS' Preferred Shares.
In April 2021, TDS announced that it will redeem its outstanding $225 million of 6.875% Senior Notes due 2059 and $300 million of 7.0% Senior Notes due 2060, and UScellular announced that it will redeem its outstanding $275 million of 7.25% Senior Notes due 2063. At time of redemption, $26 million of interest expense will be recorded related to unamortized debt issuance costs for these notes. The notes are expected to be redeemed on May 12, 2021, at a redemption price of 100% of the principal amount, including accrued and unpaid interest to the redemption date.
TDS and UScellular have in place effective shelf registration statements on Form S-3 to issue senior or subordinated securities and TDS' shelf registration includes preferred shares and depository shares.
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Capital Expenditures
Capital expenditures (i.e., additions to property, plant and equipment and system development expenditures; excludes wireless spectrum license additions), which include the effects of accruals and capitalized interest, for the three months ended March 31, 2021 and 2020, were as follows:

Capital Expenditures
(Dollars in millions)





UScellular’s capital expenditures for the three months ended March 31, 2021 and 2020, were $125 million and $236 million, respectively.
Capital expenditures for the full year 2021 are expected to be between $775 million and $875 million. These expenditures are expected to be used principally for the following purposes:
Continue network modernization and 5G deployment;
Enhance and maintain UScellular's network coverage, including providing additional speed and capacity to accommodate increased data usage by current customers; and
Invest in information technology to support existing and new services and products.

TDS Telecom’s capital expenditures for the three months ended March 31, 2021 and 2020, were $70 million and $54 million, respectively.
Capital expenditures for the full year 2021 are expected to be between $425 million and $475 million. These expenditures are expected to be used principally for the following purposes:
Continue to expand fiber deployment;
Maintain and enhance existing infrastructure including build-out requirements to meet state broadband and A-CAM programs;
Upgrade broadband capacity and speeds; and
Support success-based spending for broadband and video growth.
TDS intends to finance its capital expenditures for 2021 using primarily Cash flows from operating activities, existing cash balances and, if required, additional debt financing from its revolving credit agreements and/or other forms of financing.
Acquisitions, Divestitures and Exchanges
TDS may be engaged from time to time in negotiations (subject to all applicable regulations) relating to the acquisition, divestiture or exchange of companies, properties, wireless spectrum licenses (including pursuant to FCC auctions) and other possible businesses. In general, TDS may not disclose such transactions until there is a definitive agreement.
Other Obligations
TDS will require capital for future spending on existing contractual obligations, including long-term debt obligations; Preferred Share obligations; lease commitments; commitments for device purchases, network facilities and transport services; agreements for software licensing; long-term marketing programs; Auction 107 relocation costs and accelerated relocation incentive payments; and other agreements to purchase goods or services.
Variable Interest Entities
TDS consolidates certain “variable interest entities” as defined under GAAP. See Note 10 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information related to these variable interest entities. TDS may elect to make additional capital contributions and/or advances to these variable interest entities in future periods in order to fund their operations.
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Common Share Repurchase Programs
During the three months ended March 31, 2021, TDS repurchased 162,500 Common Shares for $3 million at an average cost per share of $18.50. As of March 31, 2021, the maximum dollar value of TDS Common Shares that may yet be repurchased under TDS’ program was $182 million. For additional information related to the current TDS repurchase authorization, see Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended March 31, 2021, UScellular repurchased 54,900 Common Shares for $2 million at an average cost per share of $29.52. As of March 31, 2021, the total cumulative amount of UScellular Common Shares authorized to be repurchased is 4,452,000.
Off-Balance Sheet Arrangements
TDS had no transactions, agreements or other contractual arrangements with unconsolidated entities involving “off-balance sheet arrangements,” as defined by SEC rules, that had or are reasonably likely to have a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources.
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Consolidated Cash Flow Analysis
TDS operates a capital-intensive business. TDS makes substantial investments to acquire wireless spectrum licenses and properties and to construct and upgrade communications networks and facilities as a basis for creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue‑enhancing and cost-saving upgrades to TDS’ networks. Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, the timing of acquisitions and divestitures, capital expenditures and other factors. The following discussion summarizes TDS' cash flow activities for the three months ended March 31, 2021 and 2020.
2021 Commentary
TDS’ Cash, cash equivalents and restricted cash decreased $373 million. Net cash provided by operating activities was $165 million due to net income of $71 million adjusted for non-cash items of $230 million and distributions received from unconsolidated entities of $23 million. This was partially offset by changes in working capital items which decreased net cash by $159 million. The working capital changes were primarily influenced by the timing of vendor payments and annual associate bonus payments.
Cash flows used for investing activities were $1,480 million. Cash paid for additions to property, plant and equipment totaled $220 million. Cash payments for wireless spectrum license acquisitions were $1,253 million.
Cash flows provided by financing activities were $942 million, due primarily to the issuance of $420 million of TDS Preferred Shares, $275 million borrowed under the UScellular receivables securitization agreement, $217 million borrowed under the UScellular term loan, and $75 million borrowed under the TDS term loan. These were partially offset by the payment of dividends and the payment of debt and equity issuance costs.
2020 Commentary
TDS’ Cash, cash equivalents and restricted cash decreased $40 million. Net cash provided by operating activities was $367 million due to net income of $83 million adjusted for non-cash items of $314 million and distributions received from unconsolidated entities of $25 million. This was offset by changes in working capital items which decreased net cash by $55 million. The working capital changes were primarily influenced by annual associate bonus payments, an increase in inventory and tax impacts from the CARES Act, partially offset by the timing of vendor payments and collections of customer and agent receivables.
Cash flows used for investing activities were $404 million. Cash paid for additions to property, plant and equipment totaled $377 million. Cash payments for wireless spectrum license acquisitions were $26 million.
Cash flows used for financing activities were $3 million, due primarily to the repurchase of TDS and UScellular Common Shares and the payment of dividends, partially offset by cash received from the TDS term loan borrowing.
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Consolidated Balance Sheet Analysis
The following discussion addresses certain captions in the consolidated balance sheet and changes therein. This discussion is intended to highlight the significant changes and is not intended to fully reconcile the changes. Notable balance sheet changes during 2021 were as follows:
Licenses
Licenses increased $1,286 million due primarily to wireless spectrum license rights acquired through Auction 107. See Note 7 — Intangible Assets in the Notes to Consolidated Financial Statements for additional information.
Accounts payable
Accounts payable decreased $148 million due primarily to vendor payment timing differences.
Accrued compensation
Accrued compensation decreased $59 million due primarily to associate bonus payments in March 2021.
Long-term debt, net
Long-term debt, net increased $567 million due primarily to $275 million borrowed under the UScellular receivables securitization agreement, $217 million borrowed under the UScellular term loan, and $75 million borrowed under the TDS term loan.
Preferred Shares
Preferred Shares increased $408 million due to the issuance of $420 million of TDS Preferred Shares, plus accrued dividends and net of issuance costs.
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Supplemental Information Relating to Non-GAAP Financial Measures
TDS sometimes uses information derived from consolidated financial information but not presented in its financial statements prepared in accordance with GAAP to evaluate the performance of its business. Specifically, TDS has referred to the following measures in this Form 10-Q Report:
EBITDA
Adjusted EBITDA
Adjusted OIBDA
Free cash flow

Certain of these measures are considered “non-GAAP financial measures” under U.S. Securities and Exchange Commission Rules. Following are explanations of each of these measures.
EBITDA, Adjusted EBITDA and Adjusted OIBDA
EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation below. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under GAAP and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. TDS does not intend to imply that any such items set forth in the reconciliation below are non-recurring, infrequent or unusual; such items may occur in the future.
Adjusted EBITDA is a segment measure reported to the chief operating decision maker for purposes of assessing their performance. See Note 13 — Business Segment Information in the Notes to Consolidated Financial Statements for additional information.
Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to applicable GAAP income measures are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as presented below as they provide additional relevant and useful information to investors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The following tables reconcile EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income and Operating income.
Three Months Ended
March 31,
TDS - CONSOLIDATED20212020
(Dollars in millions) 
Net income (GAAP)$71 $83 
Add back:
Income tax expense31 
Interest expense53 37 
Depreciation, amortization and accretion224 235 
EBITDA (Non-GAAP)379 358 
Add back or deduct:
(Gain) loss on asset disposals, net5 
(Gain) loss on sale of business and other exit costs, net(1)— 
Adjusted EBITDA (Non-GAAP)383 362 
Deduct:
Equity in earnings of unconsolidated entities42 45 
Interest and dividend income3 
Adjusted OIBDA (Non-GAAP)338 311 
Deduct:
Depreciation, amortization and accretion224 235 
(Gain) loss on asset disposals, net5 
(Gain) loss on sale of business and other exit costs, net(1)— 
Operating income (GAAP)$110 $72 
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Three Months Ended
March 31,
UScellular20212020
(Dollars in millions)
Net income (GAAP)$62 $72 
Add back:
Income tax expense27 
Interest expense39 24 
Depreciation, amortization and accretion170 177 
EBITDA (Non-GAAP)298 277 
Add back or deduct:
(Gain) loss on asset disposals, net5 
(Gain) loss on sale of business and other exit costs, net(1)— 
Adjusted EBITDA (Non-GAAP)302 281 
Deduct:
Equity in earnings of unconsolidated entities42 45 
Interest and dividend income2 
Other, net 
Adjusted OIBDA (Non-GAAP)258 231 
Deduct:
Depreciation, amortization and accretion170 177 
(Gain) loss on asset disposals, net5 
(Gain) loss on sale of business and other exit costs, net(1)— 
Operating income (GAAP)$84 $50 
Three Months Ended
March 31,
TDS TELECOM
20212020
(Dollars in millions)
  
Net income (GAAP)
$24 $28 
Add back:
Income tax expense8 
Interest expense(1)(1)
Depreciation, amortization and accretion49 52 
EBITDA (Non-GAAP)80 82 
Add back or deduct:
(Gain) loss on asset disposals, net — 
Adjusted EBITDA (Non-GAAP)81 82 
Deduct:
Interest and dividend income 
Adjusted OIBDA (Non-GAAP)81 80 
Deduct:
Depreciation, amortization and accretion49 52 
Operating income (GAAP)
$32 $28 
Numbers may not foot due to rounding.
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Free Cash Flow
The following table presents Free cash flow, which is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure which TDS believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.
 Three Months Ended
March 31,
 20212020
(Dollars in millions)  
Cash flows from operating activities (GAAP)$165 $367 
Less: Cash paid for additions to property, plant and equipment220 377 
Free cash flow (Non-GAAP)$(55)$(10)
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Application of Critical Accounting Policies and Estimates
TDS prepares its consolidated financial statements in accordance with GAAP. TDS’ significant accounting policies are discussed in detail in Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements, Note 2 — Revenue Recognition and Note 10 — Leases in the Notes to Consolidated Financial Statements and TDS’ Application of Critical Accounting Policies and Estimates is discussed in detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in TDS’ Form 10-K for the year ended December 31, 2020.
Regulatory Matters
5G Fund
On October 27, 2020, the FCC adopted rules creating the 5G Fund for Rural America, which will distribute up to $9 billion over ten years to bring 5G wireless broadband connectivity to rural America. The 5G Fund will be implemented through a two-phase competitive process, using multi-round auctions to award support. The winning bidders will be required to meet certain minimum speed requirements and interim and final deployment milestones. The order provides that the 5G Fund be in lieu of the previously proposed fund (the Phase II Connect America Mobility Fund) for the development of 4G LTE. The order also provides that over time a growing percentage of the legacy support a carrier receives must be used for 5G deployment.
UScellular cannot predict at this time when the 5G fund auction will occur, when the phase down period for its existing legacy support from the Federal USF will commence, or whether the 5G fund auction will provide opportunities to UScellular to offset any loss in existing support.
FCC Rulemaking - Restoring Internet Freedom
In December 2017, the FCC approved rules reversing or revising decisions made in the FCC’s 2015 Open Internet and Title II Order (Restoring Internet Freedom). The 2017 action reversed the FCC’s 2015 decision to reclassify Broadband Internet Access Services as telecommunications services subject to regulation under Title II of the Telecommunications Act. The 2017 action also reversed the FCC’s 2015 restrictions on blocking, throttling and paid prioritization, and modified transparency rules relating to such practices. Several parties filed suit in federal court challenging the 2017 actions. On October 1, 2019, the Court of Appeals for the D.C. Circuit issued an order reaffirming the FCC in most respects, but limiting the FCC's ability to preempt state and local net neutrality laws. On February 19, 2020, the FCC issued a Public Notice seeking comment on three issues under further consideration by the FCC based on a recent D.C. Circuit decision. On October 27, 2020, the FCC adopted an Order on Remand in response to the U.S. Court of Appeals for the D.C. Circuit’s remand on the three issues under further consideration by the FCC and found no basis to alter the FCC’s conclusions in the Restoring Internet Freedom Order.
A number of states, including certain states in which TDS operates, have adopted or considered laws intended to reinstate aspects of the foregoing net neutrality regulations that were reversed or revised by the FCC in 2017. To the extent such laws are enacted, it is expected that legal proceedings will be pursued challenging such laws, subject now to the DC Circuit ruling limiting the FCC's preemptive authority in this matter. The new administration may also conduct rulemaking proceedings that may reinstate, in some form, net neutrality rules. TDS cannot predict the outcome of any of these proceedings or the impact on its business.
Spectrum Auctions
On March 2, 2020, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.5 GHz band (Auction 105). On September 2, 2020, the FCC announced by public notice that UScellular was the provisional winning bidder for 243 wireless spectrum licenses for a purchase price of $14 million. The wireless spectrum licenses are expected to be granted by the FCC in 2021.
On August 7, 2020, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.7-3.98 GHz bands (Auction 107). On February 24, 2021, the FCC announced by public notice that UScellular was the provisional winning bidder for 254 wireless spectrum licenses for $1,283 million. UScellular paid $30 million of this amount in 2020 and the remainder in March 2021. Additionally, UScellular expects to capitalize costs of approximately $178 million related to the estimated relocation costs and accelerated relocation incentive payments. The wireless spectrum licenses from Auction 107 are expected to be granted by the FCC in 2021. The spectrum must be cleared by incumbent providers before UScellular can access it. UScellular does not expect to have access to this spectrum until late 2023. Combined with prior mid-band purchases in Auction 105, UScellular will have mid-band spectrum in nearly all of its operating footprint, covering approximately 95% of subscribers.
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Private Securities Litigation Reform Act of 1995
Safe Harbor Cautionary Statement

This Form 10-Q, including exhibits, contains statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address activities, events or developments that TDS intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, but are not limited to, those set forth below, as more fully described under “Risk Factors” in TDS’ Form 10-K for the year ended December 31, 2020 and in this Form 10-Q. Each of the following risks could have a material adverse effect on TDS’ business, financial condition or results of operations. However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. You should carefully consider the Risk Factors in TDS’ Form 10-K for the year ended December 31, 2020, the following factors and other information contained in, or incorporated by reference into, this Form 10-Q to understand the material risks relating to TDS’ business, financial condition or results of operations.
Operational Risk Factors
Intense competition involving products, services, pricing, and network speed and technologies could adversely affect TDS’ revenues or increase its costs to compete.
Changes in roaming practices or other factors could cause TDS’ roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network, which could have an adverse effect on TDS’ business, financial condition or results of operations.
A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business, financial condition or results of operations.
An inability to attract people of outstanding talent throughout all levels of the organization, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on TDS' business, financial condition or results of operations.
TDS’ smaller scale relative to larger competitors that may have greater financial and other resources than TDS could cause TDS to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations.
Changes in various business factors, including changes in demand, consumer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on TDS’ business, financial condition or results of operations.
Advances or changes in technology could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business.
Complexities associated with deploying new technologies present substantial risk and TDS’ investments in unproven technologies may not produce the benefits that TDS expects.
Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of TDS’ businesses could have an adverse effect on TDS’ business, financial condition or results of operations.
A failure by TDS to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations.
Difficulties involving third parties with which TDS does business, including changes in TDS’ relationships with or financial or operational difficulties of key suppliers or independent agents and third party national retailers who market TDS’ services, could adversely affect TDS’ business, financial condition or results of operations.
A failure by TDS to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, could have an adverse effect on TDS’ business, financial condition or results of operations.
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Financial Risk Factors
Uncertainty in TDS’ future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, other changes in TDS’ performance or market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its construction, development or acquisition programs, reduce the amount of wireless spectrum licenses acquired, and/or reduce or cease share repurchases and/or the payment of dividends.
TDS has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt.
TDS’ assets and revenue are concentrated primarily in the U.S. telecommunications industry. Consequently, its operating results may fluctuate based on factors related primarily to conditions in this industry.
TDS has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on TDS’ financial condition or results of operations.
Regulatory, Legal and Governance Risk Factors
Failure by TDS to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect TDS’ business, financial condition or results of operations.
TDS receives significant regulatory support, and is also subject to numerous surcharges and fees from federal, state and local governments – the applicability and the amount of the support and fees are subject to great uncertainty, including the ability to pass through certain fees to customers, and this uncertainty could have an adverse effect on TDS’ business, financial condition or results of operations.
Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ business, financial condition or results of operations.
The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on TDS’ wireless business, financial condition or results of operations.
Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations.
Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS or have other consequences.
General Risk Factors
TDS has experienced, and in the future expects to experience, cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on TDS' business, financial condition or results of operations.
Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations.
The impact of public health emergencies, such as the COVID-19 pandemic, on TDS' business is uncertain, but depending on duration and severity could have a material adverse effect on TDS' business, financial condition or results of operations.
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Risk Factors
In addition to the information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in TDS’ Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect TDS’ business, financial condition or future results. The risks described in this Form 10-Q and the Form 10-K for the year ended December 31, 2020, may not be the only risks that could affect TDS. Additional unidentified or unrecognized risks and uncertainties could materially adversely affect TDS’ business, financial condition and/or operating results. Subject to the foregoing, TDS has not identified for disclosure any material changes to the risk factors as previously disclosed in TDS’ Annual Report on Form 10-K for the year ended December 31, 2020.
Quantitative and Qualitative Disclosures about Market Risk
Market Risk
Refer to the disclosure under Market Risk in TDS’ Form 10-K for the year ended December 31, 2020, for additional information, including information regarding required principal payments and the weighted average interest rates related to TDS’ Long-term debt. The changes to such information since December 31, 2020 were as follows: in January 2021 TDS borrowed $75 million under its senior term loan credit agreement, in February 2021 UScellular borrowed $217 million under its senior term loan credit agreement and in March 2021 UScellular borrowed $275 million under its receivables securitization agreement. Such transactions changed the weighted average interest rate on long-term debt obligations to 5.7% at March 31, 2021 from 6.3% at December 31, 2020. In May 2021, TDS initiated a borrowing of $100 million under its revolving credit agreement.
See Note 3 — Fair Value Measurements in the Notes to Consolidated Financial Statements for additional information related to the fair value of TDS’ Long-term debt as of March 31, 2021.
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Financial Statements

Telephone and Data Systems, Inc.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
March 31,
 20212020
(Dollars and shares in millions, except per share amounts)
Operating revenues
Service$1,042 $1,026 
Equipment and product sales276 235 
Total operating revenues1,318 1,261 
Operating expenses
Cost of services (excluding Depreciation, amortization and accretion reported below)299 293 
Cost of equipment and products293 246 
Selling, general and administrative388 411 
Depreciation, amortization and accretion224 235 
(Gain) loss on asset disposals, net5 4 
(Gain) loss on sale of business and other exit costs, net(1) 
Total operating expenses1,208 1,189 
Operating income110 72 
Investment and other income (expense)
Equity in earnings of unconsolidated entities42 45 
Interest and dividend income3 6 
Interest expense(53)(37)
Total investment and other income (expense)(8)14 
Income before income taxes102 86 
Income tax expense31 3 
Net income71 83 
Less: Net income attributable to noncontrolling interests, net of tax12 14 
Net income attributable to TDS shareholders59 69 
TDS Preferred dividend requirement2  
Net income attributable to TDS common shareholders$57 $69 
Basic weighted average shares outstanding114 115 
Basic earnings per share attributable to TDS common shareholders$0.49 $0.60 
Diluted weighted average shares outstanding116 116 
Diluted earnings per share attributable to TDS common shareholders$0.48 $0.59 
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
Three Months Ended
March 31,
 20212020
(Dollars in millions)
Net income$71 $83 
Net change in accumulated other comprehensive income
Change related to retirement plan
Amounts included in net periodic benefit cost for the period
Amortization of prior service cost1 1 
Comprehensive income72 84 
Less: Net income attributable to noncontrolling interests, net of tax12 14 
Comprehensive income attributable to TDS shareholders$60 $70 
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
20212020
(Dollars in millions)
Cash flows from operating activities
Net income$71 $83 
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion224 235 
Bad debts expense8 34 
Stock-based compensation expense10 11 
Deferred income taxes, net27 75 
Equity in earnings of unconsolidated entities(42)(45)
Distributions from unconsolidated entities23 25 
(Gain) loss on asset disposals, net5 4 
(Gain) loss on sale of business and other exit costs, net(1) 
Other operating activities(1) 
Changes in assets and liabilities from operations
Accounts receivable17 43 
Equipment installment plans receivable(18)23 
Inventory8 (52)
Accounts payable(115)87 
Customer deposits and deferred revenues9 (9)
Accrued taxes (74)
Accrued interest9 9 
Other assets and liabilities(69)(82)
Net cash provided by operating activities165 367 
Cash flows from investing activities
Cash paid for additions to property, plant and equipment(220)(377)
Cash paid for intangible assets(1,261)(26)
Cash paid for investments (1)
Cash received from divestitures and exchanges1  
Net cash used in investing activities(1,480)(404)
Cash flows from financing activities
Issuance of long-term debt567 50 
Repayment of long-term debt (2)
Issuance of TDS Preferred Shares420  
TDS Common Shares reissued for benefit plans, net of tax payments(1)(1)
UScellular Common Shares reissued for benefit plans, net of tax payments(1) 
Repurchase of TDS Common Shares(3)(6)
Repurchase of UScellular Common Shares(2)(21)
Dividends paid to TDS shareholders(20)(19)
Payment of debt and equity issuance costs(14)(3)
Distributions to noncontrolling interests(1)(1)
Other financing activities(3) 
Net cash provided by (used in) financing activities942 (3)
Net decrease in cash, cash equivalents and restricted cash(373)(40)
Cash, cash equivalents and restricted cash
Beginning of period1,452 474 
End of period$1,079 $434 

The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Balance Sheet — Assets
(Unaudited)
March 31, 2021December 31, 2020
(Dollars in millions)
Current assets
Cash and cash equivalents$1,042 $1,429 
Short-term investments3 3 
Accounts receivable
Customers and agents, less allowances of $60 and $67, respectively
978 1,004 
Other, less allowances of $2 and $2, respectively
119 108 
Inventory, net145 154 
Prepaid expenses114 105 
Income taxes receivable188 187 
Other current assets53 36 
Total current assets2,642 3,026 
Assets held for sale1 2 
Licenses3,924 2,638 
Goodwill547 547 
Other intangible assets, net of accumulated amortization of $75 and $71, respectively
213 213 
Investments in unconsolidated entities497 477 
Property, plant and equipment
In service and under construction13,742 13,659 
Less: Accumulated depreciation and amortization9,791 9,687 
Property, plant and equipment, net3,951 3,972 
Operating lease right-of-use assets1,005 998 
Other assets and deferred charges627 652 
Total assets1
$13,407 $12,525 
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Balance Sheet — Liabilities and Equity
(Unaudited)
March 31, 2021December 31, 2020
(Dollars and shares in millions, except per share amounts)  
Current liabilities  
Current portion of long-term debt$6 $5 
Accounts payable360 508 
Customer deposits and deferred revenues202 193 
Accrued interest25 16 
Accrued taxes67 69 
Accrued compensation73 132 
Short-term operating lease liabilities134 129 
Other current liabilities96 101 
Total current liabilities963 1,153 
 
Liabilities held for sale 1 
Deferred liabilities and credits
Deferred income tax liability, net890 863 
Long-term operating lease liabilities941 940 
Other deferred liabilities and credits558 541 
 
Long-term debt, net3,991 3,424 
 
Commitments and contingencies
 
Noncontrolling interests with redemption features10 10 
 
Equity
TDS shareholders’ equity
Series A Common and Common Shares
Authorized 290 shares (25 Series A Common and 265 Common Shares)
Issued 133 shares (7 Series A Common and 126 Common Shares)
Outstanding 114 shares (7 Series A Common and 107 Common Shares)
Par Value ($0.01 per share)
1 1 
Capital in excess of par value2,488 2,482 
Preferred Shares, par value $0.01 per share, $25,000 liquidation preference per share, .017 shares outstanding
408  
Treasury shares, at cost, 19 Common Shares
(472)(477)
Accumulated other comprehensive loss(3)(4)
Retained earnings2,830 2,802 
Total TDS shareholders' equity5,252 4,804 
 
Noncontrolling interests802 789 
 
Total equity6,054 5,593 
 
Total liabilities and equity1
$13,407 $12,525 
The accompanying notes are an integral part of these consolidated financial statements.
1The consolidated total assets as of March 31, 2021 and December 31, 2020, include assets held by consolidated variable interest entities (VIEs) of $1,244 million and $1,042 million, respectively, which are not available to be used to settle the obligations of TDS. The consolidated total liabilities as of March 31, 2021 and December 31, 2020, include certain liabilities of consolidated VIEs of $17 million and $18 million, respectively, for which the creditors of the VIEs have no recourse to the general credit of TDS. See Note 10 — Variable Interest Entities for additional information.
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Telephone and Data Systems, Inc.
Consolidated Statement of Changes in Equity
(Unaudited)
 TDS Shareholders  
 
Series A
Common and
Common
shares
Capital in
excess of
par value
Preferred Shares
Treasury
shares
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total TDS
shareholders'
equity
Noncontrolling
interests
Total equity
(Dollars in millions)