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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, 2022
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
tds-20220331_g1.jpg
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
Depository Shares each representing a 1/1000th interest in a share of 6.000% Series VV Cumulative Redeemable Perpetual Preferred Stock, $.01 par valueTDSPrVNew 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, 2022, is 107,243,900 Common Shares, $.01 par value, and 7,346,300 Series A Common Shares, $.01 par value.



Telephone and Data Systems, Inc.
Quarterly Report on Form 10-Q
For the Period Ended March 31, 2022
IndexPage No.
  
  
  
  
  
  
  
  
  
  


tds-20220331_g1.jpg
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, 2022, to the three months ended March 31, 2021. 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, 2021. 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 83%-owned subsidiary, United States Cellular Corporation (UScellular). TDS also provides broadband, video and voice services through its wholly-owned subsidiary, TDS Telecommunications LLC (TDS Telecom). TDS operates entirely in the United States.

tds-20220331_g2.jpg
1

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 continues to make progress on developing and enhancing its Environmental, Social and Governance (ESG) program, including the publication of the first TDS ESG Report in 2021.
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 device protection plans and from new services such as fixed wireless home internet. In addition, UScellular is focused on increasing revenues from prepaid plans, tower rent revenues and expanding its solutions available to business and government customers. 
UScellular continues 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 and mid-band spectrum, deployed high-band spectrum on a limited basis, and will further deploy high-band and mid-band in the future to further enable the delivery of 5G services. UScellular has launched 5G services in portions of substantially all of UScellular’s markets and will continue to launch in additional areas in the coming years.
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 focuses on driving growth by investing in fiber deployment in its expansion markets, and its incumbent markets that have historically utilized copper and coaxial cable technologies.
TDS Telecom seeks to grow its operations by creating new clusters of markets in attractive locations and may seek to acquire businesses that support and complement its existing markets. Fiber builds in strategically selected locations allow TDS Telecom to target attractive, growing markets to expand its total footprint.
2

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 certain 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, 107 and 110 – 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. Auction 110 was an FCC auction of 3.45-3.55 GHz wireless spectrum licenses that started in October 2021 and concluded in January 2022.
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.
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 – individual lines of service associated with each device activated by a postpaid or prepaid customer. Connections are associated with all types of devices that connect directly to the UScellular network.
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.
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.
3

Results of Operations — TDS Consolidated
Three Months Ended
March 31,
 202220212022 vs. 2021
(Dollars in millions)
Operating revenues
UScellular$1,010 $1,023 (1)%
TDS Telecom251 249 %
All other1
54 46 17 %
Total operating revenues1,315 1,318 
Operating expenses
UScellular939 939 
TDS Telecom223 217 %
All other1
58 52 12 %
Total operating expenses1,220 1,208 %
Operating income (loss)   
UScellular71 84 (15)%
TDS Telecom28 32 (11)%
All other1
(4)(6)22 %
Total operating income95 110 (14)%
Investment and other income (expense)
Equity in earnings of unconsolidated entities45 42 %
Interest and dividend income2 (55)%
Interest expense(33)(53)40 %
Total investment and other income (expense)14 (8)N/M
Income before income taxes109 102 %
Income tax expense37 31 24 %
Net income72 71 %
Less: Net income attributable to noncontrolling interests, net of tax11 12 (10)%
Net income attributable to TDS shareholders61 59 %
TDS Preferred Share dividends17 N/M
Net income attributable to TDS common shareholders$44 $57 (23)%
Adjusted OIBDA (Non-GAAP)2
$325 $338 (4)%
Adjusted EBITDA (Non-GAAP)2
$372 $383 (3)%
Capital expenditures3
$242 $197 23 %
Numbers may not foot due to rounding.
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.
4

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 or the net asset value practical expedient. TDS’ investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pre-tax income of $18 million and $19 million for the three months ended March 31, 2022 and 2021, respectively. See Note 7 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.
Interest expense
Interest expense decreased for the three months ended March 31, 2022, due primarily to efforts to lower financing costs, including the redemptions of Senior Notes during 2021 and utilizing term loans and other debt facilities with lower interest rates.
Income tax expense
The effective tax rate on Income before income taxes for the three months ended March 31, 2022 and 2021 was 34.5% and 30.1%, respectively. The effective tax rates for the three month periods reflect a combined rate of federal and state taxes, adjusted for impacts of nondeductible expenses.
During the three months ended March 31, 2022, TDS received a federal income tax refund of $125 million related to the 2020 net operating loss carryback enabled by the CARES Act.
Net income attributable to noncontrolling interests, net of tax
Three Months Ended
March 31,
 20222021
(Dollars in millions)
UScellular noncontrolling public shareholders’$9 $11 
Noncontrolling shareholders’ or partners’2 
Net income attributable to noncontrolling interests, net of tax$11 $12 
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.
TDS Preferred Share dividends
TDS Preferred Share dividends increased for the three months ended March 31, 2022, due to quarterly dividends for Series UU Preferred Shares issued in March 2021 and Series VV Preferred Shares issued in August 2021.
5

Earnings
(Dollars in millions)
tds-20220331_g3.jpg




Three Months Ended
Net income was relatively flat year-over-year, as lower interest expense was offset by higher operating and income tax expenses. Adjusted EBITDA decreased due primarily to 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.
6

tds-20220331_g4.jpg
UScellular OPERATIONS
Business Overview
UScellular owns, operates, and invests in wireless markets throughout the United States. UScellular is an 83%-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

tds-20220331_g5.jpg

Serves customers with 4.8 million retail connections including 4.3 million postpaid and 0.5 million prepaid connections
Operates in 21 states
Employs approximately 4,800 associates
4,310 owned towers
6,899 cell sites in service
7

Operational Overview — UScellular
tds-20220331_g6.jpg
As of March 31,20222021
Retail Connections – End of Period
 Postpaid4,335,000 4,406,000
 Prepaid495,000 496,000
 Total4,830,000 4,902,000
  
Q1 2022Q1 2021Q1 2022 vs. Q1 2021
Postpaid Activity and Churn
Gross Additions
Handsets91,000 104,000 (13)%
Connected Devices35,000 39,000 (10)%
Total Gross Additions126,000 143,000 (12)%
Net Additions (Losses)
Handsets(36,000)(3,000)N/M
Connected Devices(8,000)(3,000)N/M
Total Net Additions (Losses)(44,000)(6,000)N/M
Churn
Handsets1.10 %0.92 %
Connected Devices2.70 %2.53 %
Total Churn1.30 %1.12 %
N/M - Percentage change not meaningful
Total postpaid handset net losses increased for the three months ended March 31, 2022, when compared to the same period last year due to lower gross additions and higher defections resulting from aggressive industry-wide competition.
Total postpaid connected device net additions decreased for the three months ended March 31, 2022, when compared to the same period last year due primarily to lower demand for internet-related products as a result of a reduction in COVID-related funding vehicles.
Macroeconomic factors have caused some supply chain disruption and delays, including constraints on certain devices. These supply constraints are due primarily to component availability, resulting in extended lead times and additional uncertainty, which may negatively impact UScellular in future periods.
Postpaid Revenue
Three Months Ended
March 31,
 202220212022 vs. 2021
Average Revenue Per User (ARPU)$49.71 $47.65  %
Average Revenue Per Account (ARPA)$129.93 $125.25  %
Postpaid ARPU and Postpaid ARPA increased for the three months ended March 31, 2022, when compared to the same period last year, due to (i) an increase in cost recovery surcharges, (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 discounts.
8

Financial Overview — UScellular
Three Months Ended
March 31,
202220212022 vs. 2021
(Dollars in millions)   
Retail service1
$702 $683 %
Inbound roaming21 28 (27)%
Other1
64 60 %
Service revenues787 771 %
Equipment sales223 252 (12)%
Total operating revenues1,010 1,023 (1)%
System operations (excluding Depreciation, amortization and accretion reported below)185 185 
Cost of equipment sold257 275 (6)%
Selling, general and administrative325 305 %
Depreciation, amortization and accretion171 170 %
(Gain) loss on asset disposals, net2 (69)%
(Gain) loss on sale of business and other exit costs, net(1)(1)(5)%
Total operating expenses939 939 
Operating income$71 $84 (15)%
Net income$52 $62 (17)%
Adjusted OIBDA (Non-GAAP)2
$243 $258 (6)%
Adjusted EBITDA (Non-GAAP)2
$289 $302 (4)%
Capital expenditures3
$137 $125 10 %
12021 amounts have been adjusted to reclassify $2 million of Internet of Things (IoT) and Reseller revenues from Retail service to Other.
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.
9

Operating Revenues
Three Months Ended March 31, 2022 and 2021
(Dollars in millions)
tds-20220331_g7.jpg



Service revenues consist of:
Retail Service - Postpaid and prepaid charges for voice, data and value-added services and cost recovery surcharges
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, 2022, primarily as a result of an increase in Postpaid ARPU as previously discussed in the Operational Overview section.
Inbound roaming revenues decreased for the three months ended March 31, 2022, primarily driven by lower data revenues resulting from lower usage and lower rates. UScellular expects inbound roaming revenues to continue to decline during 2022 relative to prior year levels.
Other service revenues increased for the three months ended March 31, 2022, resulting from increases in tower rental revenues and miscellaneous other service revenues.
Equipment sales revenues decreased for the three months ended March 31, 2022, due primarily to a decrease in the volume of new smartphone and accessory sales, and higher promotional activity.
In recent periods, wireless service providers have increased promotional aggressiveness to attract new customers and retain existing customers. Operating revenues and Operating income may be negatively impacted in future periods by the competitive need to offer increased promotional discounts to new and existing customers.
Cost of equipment sold
Cost of equipment sold decreased for the three months ended March 31, 2022, due primarily to a decrease in the volume of new smartphone and accessory sales.
Selling, general and administrative expenses
Selling, general and administrative expenses increased for the three months ended March 31, 2022, due primarily to increases in bad debts expense.
10

tds-20220331_g8.jpg
TDS TELECOM OPERATIONS
Business Overview
TDS Telecom owns, operates and invests in communications services in a mix of rural and suburban communities throughout the United States. TDS Telecom is a wholly-owned subsidiary of TDS and provides a wide range of broadband, video and voice communications services to residential, commercial and wholesale customers. TDS Telecom's strategy is to be the preferred broadband provider in the markets it serves. TDS Telecom invests in high-quality networks, services and products, with the constant focus on delivering a best-in-class customer experience.
OPERATIONS

tds-20220331_g9.jpg

Serves 1.2 million connections in 32 states
Employs approximately 3,100 associates
11

Operational Overview — TDS Telecom
Total Service Address Mix
As of March 31,
tds-20220331_g10.jpg
*2021 fiber addresses in cable markets are included in Coaxial.





TDS Telecom grew its service addresses 7% from 1.3 million to 1.4 million through network expansion and offers 1Gig service to 62% of its total footprint as of March 31, 2022, compared to 55% a year ago.

In 2022, TDS Telecom began measuring fiber service addresses in its cable markets. Including cable, 33% of service addresses are served by fiber.
As of March 31,202220212022 vs. 2021
Residential connections
Broadband
Wireline, Incumbent250,100 243,700 %
Wireline, Expansion40,600 24,100 69 %
Cable204,600 199,500 %
Total Broadband495,200 467,300 %
Video140,000 142,700 (2)%
Voice301,700 308,700 (2)%
Total Residential Connections936,900 918,700 %
Commercial connections260,000 278,800 (7)%
Total connections1,196,900 1,197,400 
Numbers may not foot due to rounding.
Total connections are flat despite broadband connection growth due to offsetting decreases in legacy voice, video, and competitive local exchange carrier (CLEC) commercial connections.
A majority of TDS Telecom's residential customers take advantage of bundling options as 62% of customers subscribe to more than one service.
12

Residential Broadband Connections by Speed
As of March 31,
tds-20220331_g11.jpg
Residential broadband customers continue to choose higher speeds with 67% taking speeds of 100 Mbps or greater and 9% choosing 1Gig.
Residential Revenue per Connection
For the three months ended March 31,
tds-20220331_g12.jpg


Total residential revenue per connection increased 2%, due to product mix changes.

13

Financial Overview — TDS Telecom
Three Months Ended
March 31,
 202220212022 vs. 2021
(Dollars in millions)  
Residential   
Wireline, Incumbent$85 $85 
Wireline, Expansion10 54 %
Cable67 65 %
Total residential163 157 %
Commercial44 47 (6)%
Wholesale44 45 (2)%
Total service revenues251 249 %
Equipment revenues — 26 %
Total operating revenues251 249 %
Cost of services (excluding Depreciation, amortization and accretion reported below)96 97 (1)%
Cost of equipment and products — 28 %
Selling, general and administrative72 70 %
Depreciation, amortization and accretion54 49 11 %
(Gain) loss on asset disposals, net — %
Total operating expenses223 217 %
Operating income$28 $32 (11)%
Net income$23 $24 (7)%
Adjusted OIBDA (Non-GAAP)1
$83 $81 %
Adjusted EBITDA (Non-GAAP)1
$83 $81 %
Capital expenditures2
$105 $70 50 %
Numbers may not foot due to rounding.
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.
14

Operating Revenues
Three Months Ended March 31, 2022 and 2021
(Dollars in millions)
tds-20220331_g13.jpg



Residential revenues consist of:
Broadband services, including 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 regulatory 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, 2022, due primarily to growth in broadband connections, partially offset by a decline in voice connections and federal universal service charges.

Commercial revenues decreased for the three months ended March 31, 2022, due primarily to declining connections in CLEC markets, partially offset by an increase in broadband connections.

Wholesale revenues decreased for the three months ended March 31, 2022, due primarily to decreased access revenues.

Cost of services
Cost of services decreased for the three months ended March 31, 2022, due primarily to a decrease in plant and maintenance expense, partially offset by increased video programming costs.

Selling, general and administrative
Selling, general and administrative expenses increased for the three months ended March 31, 2022, due primarily to increases to support current and future growth, including advertising and marketing expenses, partially offset by decreases to federal universal service charges.

Depreciation, amortization and accretion
Depreciation, amortization and accretion increased for the three months ended March 31, 2022, due primarily to higher depreciation due to increased capital expenditures on new fiber assets and increased software amortization.
15

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 financing agreements, 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 financing 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 foreseeable future. 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, repurchases of shares, 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)

tds-20220331_g14.jpg





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. Refer to the Consolidated Cash Flow Analysis for additional information related to changes in Cash and cash equivalents.
In addition to Cash and cash equivalents, TDS and UScellular had undrawn borrowing capacity from existing debt facilities of $549 million and $590 million, respectively, at March 31, 2022. See the Financing section below for further details.
16

Financing
Revolving Credit Agreements
TDS and UScellular have unsecured revolving credit agreements with maximum borrowing capacities of $400 million and $300 million, respectively. Amounts under the revolving credit agreements may be borrowed, repaid and reborrowed from time to time until maturity in July 2026. During the three months ended March 31, 2022, UScellular borrowed and repaid $75 million under its revolving credit agreement. As of March 31, 2022, 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 $300 million, respectively.
Term Loan Agreements
TDS and UScellular have term loan agreements with maximum borrowing capacities of $500 million and $800 million, respectively. The maturity dates for the term loan agreements range from July 2026 to July 2031. During the three months ended March 31, 2022, TDS borrowed $150 million under its term loan credit agreements and UScellular borrowed $400 million under its term loan credit agreements. As of March 31, 2022, TDS' and UScellular's outstanding borrowings under the term loan agreements were $349 million and $699 million, respectively, and TDS' and UScellular's unused borrowing capacity was $150 million and $100 million, respectively.
Export Credit Financing Agreement
In December 2021, UScellular entered into a $150 million term loan credit facility with Export Development Canada to finance (or refinance) equipment imported from Canada, including equipment purchased prior to entering the term loan credit facility agreement. During the three months ended March 31, 2022, UScellular borrowed $150 million, which is the full amount available under the agreement and is due in January 2027.
Receivables Securitization Agreement
UScellular, through its subsidiaries, has a receivables securitization agreement to permit securitized borrowings using its equipment installment plan receivables. In March 2022, UScellular amended the agreement to extend the maturity date to March 2024. Amounts under the agreement may be borrowed, repaid and reborrowed from time to time until March 2024. During the three months ended March 31, 2022, UScellular repaid $50 million under the agreement. As of March 31, 2022, the outstanding borrowings under the agreement were $400 million and the unused borrowing capacity under the agreement was $50 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement.
In April 2022, UScellular repaid $50 million under the receivables securitization agreement.
Repurchase Agreement
In January 2022, UScellular, through a subsidiary (the repo subsidiary), entered into a repurchase agreement to borrow up to $200 million, subject to the availability of eligible equipment installment plan receivables and the agreement of the lender. The transaction is accounted for as a one-month secured borrowing. The expiration date of the repurchase agreement is in January 2023. During the three months ended March 31, 2022, the repo subsidiary borrowed $60 million under the repurchase agreement. As of March 31, 2022, the outstanding borrowings under the agreement were $60 million and the unused borrowing capacity was $140 million.
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, term loan credit agreements, export credit financing agreement and receivables securitization agreement as of March 31, 2022.
Other Long-Term Financing
TDS and UScellular have in place effective shelf registration statements on Form S-3 to issue senior or subordinated securities, preferred shares and depositary shares.
See Note 8 — Debt in the Notes to Consolidated Financial Statements for additional information related to the financing agreements.
17

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, 2022 and 2021, were as follows:

Capital Expenditures
(Dollars in millions)
tds-20220331_g15.jpg




UScellular’s capital expenditures for the three months ended March 31, 2022 and 2021, were $137 million and $125 million, respectively.
Capital expenditures for the full year 2022 are expected to be between $700 million and $800 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, 2022 and 2021, were $105 million and $70 million, respectively.
Capital expenditures for the full year 2022 are expected to be between $500 million and $550 million. These expenditures are expected to be used principally for the following purposes:
Continue to expand fiber deployment in incumbent and expansion markets;
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 growth.
Macroeconomic factors may impact the acquisition or cost of products and materials as well as contribute to internal and external labor shortages.
TDS intends to finance its capital expenditures for 2022 using primarily Cash flows from operating activities, existing cash balances and, as required, additional debt financing from its existing 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; dividend obligations; lease commitments; commitments for device purchases, network facilities and transport services; agreements for software licensing; long-term marketing programs; commitments for wireless spectrum licenses acquired through FCC auctions; and other agreements to purchase goods or services.
18

Variable Interest Entities
TDS consolidates certain “variable interest entities” as defined under GAAP. See Note 9 — 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.
Common Share Repurchase Programs
During the three months ended March 31, 2022, TDS repurchased 254,102 Common Shares for $5 million at an average cost per share of $18.21. As of March 31, 2022, the maximum dollar value of TDS Common Shares that may yet be repurchased under TDS’ program was $173 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, 2022, UScellular repurchased 363,821 Common Shares for $10 million at an average cost per share of $28.64. As of March 31, 2022, the total cumulative amount of UScellular Common Shares authorized to be repurchased is 3,153,000.
19

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, timing and other factors. The following discussion summarizes TDS' cash flow activities for the three months ended March 31, 2022 and 2021.
2022 Commentary
TDS’ Cash, cash equivalents and restricted cash increased $182 million. Net cash provided by operating activities was $381 million due to net income of $72 million adjusted for non-cash items of $252 million, distributions received from unconsolidated entities of $19 million, and changes in working capital items which increased net cash by $38 million. The working capital changes were primarily driven by a federal income tax refund of $125 million received during the quarter, partially offset by payment of associate bonuses and timing of vendor payments.
Cash flows used for investing activities were $848 million, which included payments for property, plant and equipment of $271 million and payments for wireless spectrum licenses of $561 million.
Cash flows provided by financing activities were $649 million, due primarily to $550 million borrowed under the term loans, $150 million borrowed under the UScellular export credit financing agreement, $75 million borrowed under the UScellular revolving credit agreement, and $60 million borrowed under the UScellular EIP receivables repurchase agreement. These were partially offset by a $75 million repayment on the UScellular revolving credit agreement, a $50 million repayment on the UScellular receivables securitization agreement, the payment of dividends and repurchase of TDS and UScellular Common Shares.
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, which included payments for property, plant and equipment of $220 million and payments for wireless spectrum licenses of $1,256 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.
20

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 2022 were as follows:
Income taxes receivable
Income taxes receivable decreased $126 million due primarily to a federal income tax refund received related to the 2020 net operating loss carryback enabled by the CARES Act.
Accounts payable
Accounts payable decreased $93 million due primarily to vendor payment timing differences.
Accrued compensation
Accrued compensation decreased $60 million due primarily to associate bonus payments in March 2022.
Other current liabilities
Other current liabilities increased $65 million due primarily to $60 million borrowed under the EIP receivables repurchase agreement. See Note 8 — Debt in the Notes to Consolidated Financial Statements for additional information.
Long-term debt, net
The following table presents the components of the $639 million increase in Long-term debt, net:
Long-term debt, net
(Dollars in millions)
Balance at December 31, 2021$2,928 
Borrowings under Revolving Credit Agreements75 
Borrowings under Term Loan Agreements550 
Borrowings under Export Credit Financing Agreement150 
Repayments under Revolving Credit Agreements(75)
Repayments under Receivables Securitization Agreement(50)
Other(11)
Balance at March 31, 2022$3,567 
21

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 the segments' performance. See Note 11 — 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 - CONSOLIDATED20222021
(Dollars in millions)  
Net income (GAAP)$72 $71 
Add back:
Income tax expense37 31 
Interest expense33 53 
Depreciation, amortization and accretion229 224 
EBITDA (Non-GAAP)371 379 
Add back or deduct:
(Gain) loss on asset disposals, net2 
(Gain) loss on sale of business and other exit costs, net(1)(1)
Adjusted EBITDA (Non-GAAP)372 383 
Deduct:
Equity in earnings of unconsolidated entities45 42 
Interest and dividend income2 
Adjusted OIBDA (Non-GAAP)325 338 
Deduct:
Depreciation, amortization and accretion229 224 
(Gain) loss on asset disposals, net2 
(Gain) loss on sale of business and other exit costs, net(1)(1)
Operating income (GAAP)$95 $110 
22

Three Months Ended
March 31,
UScellular20222021
(Dollars in millions)  
Net income (GAAP)$52 $62 
Add back:
Income tax expense32 27 
Interest expense33 39 
Depreciation, amortization and accretion171 170 
EBITDA (Non-GAAP)288 298 
Add back or deduct:
(Gain) loss on asset disposals, net2 
(Gain) loss on sale of business and other exit costs, net(1)(1)
Adjusted EBITDA (Non-GAAP)289 302 
Deduct:
Equity in earnings of unconsolidated entities45 42 
Interest and dividend income1 
Adjusted OIBDA (Non-GAAP)243 258 
Deduct:
Depreciation, amortization and accretion171 170 
(Gain) loss on asset disposals, net2 
(Gain) loss on sale of business and other exit costs, net(1)(1)
Operating income (GAAP)$71 $84 
Three Months Ended
March 31,
TDS TELECOM
20222021
(Dollars in millions)
Net income (GAAP)
$23 $24 
Add back:
Income tax expense8 
Interest expense(2)(1)
Depreciation, amortization and accretion54 49 
EBITDA (Non-GAAP)83 80 
Add back or deduct:
(Gain) loss on asset disposals, net — 
Adjusted EBITDA (Non-GAAP)83 81 
Deduct:
Interest and dividend income — 
Adjusted OIBDA (Non-GAAP)83 81 
Deduct:
Depreciation, amortization and accretion54 49 
Operating income (GAAP)
$28 $32 
Numbers may not foot due to rounding.
23

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,
 20222021
(Dollars in millions)  
Cash flows from operating activities (GAAP)$381 $165 
Less: Cash paid for additions to property, plant and equipment271 220 
Free cash flow (Non-GAAP)$110 $(55)
24

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, 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, 2021.
Regulatory Matters
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 way of public notice that UScellular was the provisional winning bidder for 243 wireless spectrum licenses for a purchase price of $14 million, of which up to $5 million relates to licenses which are subject to the FCC's spectrum aggregation and ownership attribution rules for Auction 105. None of the wireless spectrum licenses have been granted yet by the FCC.
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 way of 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. The wireless spectrum licenses from Auction 107 were granted by the FCC in July 2021. Additionally, UScellular expects to be obligated to pay approximately $187 million in total from 2021 through 2024 related to relocation costs and accelerated relocation incentive payments. Such additional costs were accrued and capitalized at the time the licenses were granted. In October 2021, UScellular paid $36 million related to the additional costs. 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.
On June 9, 2021, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.45-3.55 GHz band (Auction 110). On January 14, 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 380 wireless spectrum licenses for $580 million. UScellular paid $20 million of this amount in 2021 and the remainder in January and February 2022. The wireless spectrum licenses from Auction 110 were granted by the FCC on May 4, 2022.
25

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, 2021 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, 2021, 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, promotions 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, including supply chain disruptions, 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 technologies, or a material disruption thereof, could have an adverse effect on TDS’ business, financial condition or results of operations.
26

Financial Risk Factors
Uncertainty in TDS’ future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, changes in interest rates, 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 or frequencies used by other industries, 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.
27

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’ Form 10-K for the year ended December 31, 2021, 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, 2021, 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’ Form 10-K for the year ended December 31, 2021.
Quantitative and Qualitative Disclosures about Market Risk
Market Risk
As of March 31, 2022, approximately 60% of TDS' long-term debt was in fixed-rate notes and approximately 40% in variable-rate debt. Fluctuations in market interest rates can lead to volatility in the fair value of fixed-rate notes and interest expense on variable-rate debt.
The following table presents the scheduled principal payments on long-term debt, lease obligations, and the related weighted average interest rates by maturity dates at March 31, 2022.
Principal Payments Due by Period
Long-Term Debt Obligations1
Weighted-Avg. Interest Rates on Long-Term Debt Obligations2
(Dollars in millions)
Remainder of 2022$2.7 %
202316 2.3 %
202416 2.3 %
202516 2.3 %
202616 2.3 %
Thereafter3,180 4.7 %
Total$3,249 4.6 %
1    The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to unamortized debt issuance costs on all non-revolving debt instruments, unamortized discounts related to UScellular's 6.7% Senior Notes, and outstanding borrowings under the receivables securitization agreement, which principal repayments are not scheduled but are instead based on actual receivable collections.
2    Represents the weighted average stated interest rates at March 31, 2022, for debt maturing in the respective periods.
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, 2022.
28

Financial Statements

Telephone and Data Systems, Inc.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
March 31,
 20222021
(Dollars and shares in millions, except per share amounts)
Operating revenues
Service$1,062 $1,042 
Equipment and product sales253 276 
Total operating revenues1,315 1,318 
Operating expenses
Cost of services (excluding Depreciation, amortization and accretion reported below)298 299 
Cost of equipment and products282 293 
Selling, general and administrative410 388 
Depreciation, amortization and accretion229 224 
(Gain) loss on asset disposals, net2 5 
(Gain) loss on sale of business and other exit costs, net(1)(1)
Total operating expenses1,220 1,208 
Operating income95 110 
Investment and other income (expense)
Equity in earnings of unconsolidated entities45 42 
Interest and dividend income2 3 
Interest expense(33)(53)
Total investment and other income (expense)14 (8)
Income before income taxes109 102 
Income tax expense37 31 
Net income72 71 
Less: Net income attributable to noncontrolling interests, net of tax11 12 
Net income attributable to TDS shareholders61 59 
TDS Preferred Share dividends17 2 
Net income attributable to TDS common shareholders$44 $57 
Basic weighted average shares outstanding115 114 
Basic earnings per share attributable to TDS common shareholders$0.38 $0.49 
Diluted weighted average shares outstanding116 116 
Diluted earnings per share attributable to TDS common shareholders$0.37 $0.48 
The accompanying notes are an integral part of these consolidated financial statements.
29

Telephone and Data Systems, Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
Three Months Ended
March 31,
 20222021
(Dollars in millions)
Net income$72 $71 
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 income73 72 
Less: Net income attributable to noncontrolling interests, net of tax11 12 
Comprehensive income attributable to TDS shareholders$62 $60 
The accompanying notes are an integral part of these consolidated financial statements.
30

Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
20222021
(Dollars in millions)
Cash flows from operating activities
Net income$72 $71 
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion229 224 
Bad debts expense26 8 
Stock-based compensation expense12 10 
Deferred income taxes, net29 27 
Equity in earnings of unconsolidated entities(45)(42)
Distributions from unconsolidated entities19 23 
(Gain) loss on asset disposals, net2 5 
(Gain) loss on sale of business and other exit costs, net(1)(1)
Other operating activities (1)
Changes in assets and liabilities from operations
Accounts receivable14 17 
Equipment installment plans receivable (18)
Inventory(5)8 
Accounts payable(60)(115)
Customer deposits and deferred revenues9 9 
Accrued taxes129  
Accrued interest10 9 
Other assets and liabilities(59)(69)
Net cash provided by operating activities381 165 
Cash flows from investing activities
Cash paid for additions to property, plant and equipment(271)(220)
Cash paid for intangible assets(568)(1,261)
Cash received from divestitures and exchanges1 1 
Other investing activities(10) 
Net cash used in investing activities(848)(1,480)
Cash flows from financing activities
Issuance of long-term debt776 567 
Repayment of long-term debt(127) 
Issuance of short-term debt60  
Issuance of TDS Preferred Shares 420 
TDS Common Shares reissued for benefit plans, net of tax payments(2)(1)
UScellular Common Shares reissued for benefit plans, net of tax payments (1)
Repurchase of TDS Common Shares(4)(3)
Repurchase of UScellular Common Shares(10)(2)
Dividends paid to TDS shareholders(38)(20)
Payment of debt and equity issuance costs(2)(14)
Distributions to noncontrolling interests(1)(1)
Other financing activities(3)(3)
Net cash provided by financing activities649 942 
Net increase (decrease) in cash, cash equivalents and restricted cash182 (373)
Cash, cash equivalents and restricted cash
Beginning of period414 1,452 
End of period$596 $1,079 
The accompanying notes are an integral part of these consolidated financial statements.
31

Telephone and Data Systems, Inc.
Consolidated Balance Sheet — Assets
(Unaudited)
March 31, 2022December 31, 2021
(Dollars in millions)
Current assets
Cash and cash equivalents$549 $367 
Accounts receivable
Customers and agents, less allowances of $63 and $60, respectively
1,046 1,058 
Other, less allowances of $1 and $2, respectively
77 93 
Inventory, net184 178 
Prepaid expenses109 103 
Income taxes receivable58 184 
Other current assets62 61 
Total current assets2,085 2,044 
Assets held for sale15 18 
Licenses4,686 4,097 
Goodwill547 547 
Other intangible assets, net of accumulated amortization of $95 and $91, respectively
199 197 
Investments in unconsolidated entities506 479 
Property, plant and equipment
In service and under construction14,423 14,265 
Less: Accumulated depreciation and amortization10,038 9,904 
Property, plant and equipment, net4,385 4,361 
Operating lease right-of-use assets1,033 1,040 
Other assets and deferred charges668 710 
Total assets1
$14,124 $13,493 
The accompanying notes are an integral part of these consolidated financial statements.
32

Telephone and Data Systems, Inc.
Consolidated Balance Sheet — Liabilities and Equity
(Unaudited)
March 31, 2022December 31, 2021
(Dollars and shares in millions, except per share amounts)  
Current liabilities  
Current portion of long-term debt$9 $6 
Accounts payable388 481 
Customer deposits and deferred revenues245 236 
Accrued interest20 10 
Accrued taxes43 45 
Accrued compensation77 137 
Short-term operating lease liabilities144 141 
Other current liabilities189 124 
Total current liabilities1,115 1,180 
Deferred liabilities and credits
Deferred income tax liability, net948 921 
Long-term operating lease liabilities951 960 
Other deferred liabilities and credits770 759 
 
Long-term debt, net3,567 2,928 
 
Commitments and contingencies
 
Noncontrolling interests with redemption features12 11 
 
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 115 shares (7 Series A Common and 108 Common Shares)
Par Value ($