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Item 1A. Risk Factors

2025-02-21 compared with 2024-02-16 · 138 added, 80 removed, 299 unchanged (42% of the section changed)

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UScellular undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

The reader should carefully consider the following risk factors and other information contained in, or incorporated by reference into, this Form 10-K to understand the material risks relating to UScellular’s business.

Announced Transactions and Strategic Alternatives Review Risk Factors

1) TDS and UScellular entered into a Securities Purchase Agreement dated as of May 24, 2024 with T-Mobile and USCC Wireless Holdings, LLC, pursuant to which, among other things, UScellular has agreed to sell its wireless operations and select spectrum assets to T-Mobile.

In addition, UScellular, and certain subsidiaries of UScellular, entered into the Verizon Purchase Agreement on October 17, 2024, and the AT&T Purchase Agreement on November 6, 2024 to sell certain wireless spectrum licenses.

There is no guarantee that the transactions contemplated by the Securities Purchase Agreement, the Verizon Purchase Agreement, or the AT&T Purchase Agreement will be able to be consummated or that UScellular will be able to find buyers at mutually agreeable prices for its spectrum assets not subject to the Securities Purchase Agreement, the Verizon Purchase Agreement, or the AT&T Purchase Agreement .

Costs and uncertainties related to the transactions could have adverse effects on UScellular's financial condition or results of operations.

On August 4, 2023, TDS and UScellular announced that the Boards of Directors of both companies decided to initiate a process to explore a range of strategic alternatives for UScellular.

As part of this review, on May 28, 2024, UScellular announced that its Board of Directors unanimously approved the execution of the Securities Purchase Agreement pursuant to which, among other things, UScellular has agreed to sell its wireless operations and select spectrum assets to T-Mobile.

The Securities Purchase Agreement also contemplates, among other things, a Short-Term Spectrum Manager Lease Agreement and Short-Term Spectrum Manager Sublease Agreements that will become effective at the closing date, which provide T-Mobile with an exclusive license to use certain UScellular spectrum assets and leases at no cost for up to one-year for the purpose of providing continued, uninterrupted service to customers.

On October 17, 2024, UScellular, and certain subsidiaries of UScellular, entered into the Verizon Purchase Agreement to sell certain AWS, Cellular and PCS wireless spectrum licenses and agreed to grant Verizon certain rights to lease such licenses prior to the transaction close.

On November 6, 2024, UScellular, and certain subsidiaries of UScellular, entered into the AT&T Purchase Agreement to sell certain 3.45 GHz and 700 MHz wireless spectrum licenses and agreed to grant AT&T certain rights to lease and sub-lease such licenses prior to the transaction close.

The transactions resulting from the strategic alternatives review are subject to regulatory approval, which UScellular may not be able to obtain on the terms or timeline currently contemplated, or at all.

Similarly, UScellular may not be able to satisfy the other closing conditions applicable to each of the transactions, which in the case of the Verizon and AT&T transactions include the closing of the T-Mobile transaction and, for the Verizon transaction, the termination of the T-Mobile Short-Term Spectrum Manager Lease Agreement.

The T-Mobile and AT&T transactions include certain wireless spectrum licenses that are held by entities in which UScellular is a non-controlling limited partner.

The closing with respect to these wireless spectrum licenses is contingent upon UScellular's purchase, which is pending receipt of regulatory approval, of the remaining equity in the entities that UScellular does not currently own.

The uncertainty regarding the transactions and continued strategic alternatives review process could result in:

a diversion of management's attention from UScellular's existing business;

a failure to achieve financial and operating objectives;

adverse effects on UScellular's financial condition or results of operations;

a failure to retain key personnel, customers, business partners or contracts;

and volatility in UScellular's stock price.

The strategic alternatives review process has already resulted in the incurrence of significant expense primarily related to legal and financial advisors - this is expected to continue.

Further, as a result of changes to its spectrum units of accounting, UScellular recognized a significant impairment on its spectrum assets during 2024 and there may be further events and circumstances that occur which may result in additional impairments for the spectrum that is retained, or for the spectrum that is pending sale if such sales do not close as expected.

There can be no assurance that the strategic alternatives review process, which is ongoing, will result in the transactions or any strategic alternative of any kind being successfully completed or that the process or any outcomes of the process will not have an adverse impact on UScellular's business or financial statements.

In addition, UScellular may be unable to find buyers at mutually agreeable prices for its spectrum assets not subject to the recent transactions, including the Securities Purchase Agreement, the Verizon Purchase Agreement, or the AT&T Purchase Agreement.

See Note 7 — Divestitures in the Notes to Consolidated Financial Statements for additional information related to the T-Mobile, Verizon and AT&T transactions, including the uncertainty related to certain portions of the transaction proceeds.

2) If the T-Mobile, Verizon and AT&T transactions are not consummated, substantial changes will be required to the manner in which UScellular’s wireless business is conducted, and we expect there will be a material adverse effect on UScellular's financial condition and results of operations.

If the T-Mobile, Verizon and AT&T transactions are not consummated, UScellular would continue to operate its wireless business in an environment of intensifying competitive pressures and limited capital resources.

In that scenario, UScellular would be required to develop and implement new strategic plans.

The continued operation of the wireless business with its lack of scale and structural disadvantages under these conditions will result in a material adverse effect on UScellular's customers, financial condition and results of operations.

In addition, if the T-Mobile, Verizon and AT&T transactions are not consummated, the funds contemplated to be received as a result of such transactions would not be available for investment in other UScellular businesses, repayment of debt or the payment of dividends to UScellular stockholders, including TDS.

Further, if the T-Mobile, Verizon and AT&T transactions are not consummated, UScellular's stock price likely would decline to the extent that the current market price reflects an assumption that the transactions will be completed.

3) If the T-Mobile, Verizon and AT&T transactions are consummated, substantial costs will be triggered and substantial changes will be required to the manner in which UScellular’s remaining business is conducted, which could have a material adverse effect on UScellular's financial condition and results of operations.

The successful consummation of the T-Mobile, Verizon and AT&T transactions will trigger substantial costs and require significant changes to the manner in which the UScellular business is operated.

In addition, UScellular would, following the closing of the T-Mobile, Verizon and AT&T transactions, be subject to certain business risks that it does not currently face.

In terms of costs, UScellular expects that the closing of the transaction will trigger or accelerate the recognition of certain cash and non-cash obligations.

Such obligations include contingent advisory fees, employee compensation and severance, employee stock award costs, debt extinguishment, income tax expense, administrative costs, restructuring expenses and other wind down costs.

Additionally, following the close of the T-Mobile transaction, it is uncertain which towers T-Mobile will choose to locate on, and therefore, it is unknown how many and which towers with no tenants will remain in UScellular's tower portfolio.

UScellular expects to incur significant decommissioning costs for certain towers that UScellular elects to retire, and such decommissioning costs are also expected to include remaining obligations under related ground leases.

These costs are expected to have a significant impact on UScellular's cash flows and financial statements.

If the transactions from the strategic alternatives process are successfully completed, the remaining UScellular business, which includes the tower business, interests in certain non-operating equity method investments and wireless spectrum licenses not included in the announced transactions, will be of a significantly smaller scale than its current operations.

This could produce operational, cost and borrowing disadvantages relative to its current operations.

At the T-Mobile closing, UScellular and T-Mobile will enter into a Master License Agreement, pursuant to which, among other things, T-Mobile will lease space on certain additional UScellular-owned towers for a minimum of 15 years and extend the term of certain existing leases to 15 years.

If T-Mobile fails to meet its obligations to UScellular, it would likely have an adverse impact on UScellular's business and financial statements.

In addition, if the transactions are successfully completed, UScellular will retain certain wireless spectrum licenses with FCC build-out requirements that have not yet been satisfied.

Such licenses would require significant investments to deploy and if the sale of its wireless operations is completed, UScellular would no longer have an existing wireless business to operate the retained spectrum.

Additionally, if the T-Mobile transaction is successfully completed, but the Verizon and AT&T transactions are not completed, UScellular would retain additional wireless spectrum licenses with no existing wireless business to operate the spectrum.

As renewal of all wireless spectrum licenses is predicated upon their initial and continued operation in accordance with FCC requirements, such licenses could be subject to forfeiture should UScellular not incur significant expenses to operate the spectrum or engage another carrier to do so.

Further, UScellular could fail to monetize remaining spectrum assets including the wireless spectrum licenses that are subject to a Put/Call Agreement with T-Mobile as it is uncertain if the call option will be exercised or if the conditions required to exercise the put option will occur.

All of these events could have a significant adverse effect on UScellular’s financial condition and results of operation.

See Note 7 — Divestitures in the Notes to Consolidated Financial Statements for additional information related to the Put/Call Agreement.

Operational Risk Factors

4) A delay or failure by UScellular 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 as well as renew wireless spectrum licenses, could adversely affect its operations.

UScellular’s business plan includes enhancements to its network, support and other systems and infrastructure.

UScellular also has the obligation to continue to maintain operation of wireless spectrum licenses that are currently deployed, as well as, FCC build-out requirements for certain wireless spectrum licenses that have not yet been satisfied.

Such licenses require significant investments to deploy and the incurrence of ongoing network expenses to operate, as renewal of all wireless spectrum licenses is predicated upon their initial and continued operation in accordance with FCC requirements.

Failure to continue to operate a wireless spectrum license or failure to initiate the operation of a spectrum license by the respective FCC build-out deadline could result in forfeiture of such license which could have a material adverse effect on UScellular's business, financial condition or results of operations.

Additionally, the deployment of new wireless technologies, including the continued deployment of 5G, will require substantial investments in UScellular's wireless network.

Also, as UScellular continues to build out and enhance its network, UScellular must, among other things, continue to:

▪ Lease, acquire or otherwise obtain rights to cell and switch sites;

▪ Obtain zoning variances or other local governmental or third-party approvals or permits for network construction;

▪ Complete and update the radio frequency design, including cell site design, frequency planning and network optimization, for each of UScellular’s markets;

▪ Improve, expand and maintain customer care, network management, billing and other financial and management systems.

Any difficulties encountered in completing these activities, as well as problems in vendor equipment availability, labor availability, inflation or other pressures on costs, technical resources, system performance or system adequacy, could delay implementation and deployment of new technologies, delay expansion of operations and product capabilities in new or existing markets or result in increased costs.

Failure to successfully deploy new technologies, including the continued deployment of 5G, and/or build-out and enhance UScellular’s network, support facilities and other systems and infrastructure in a cost-effective manner, and in a manner that satisfies consumers' expectations for quality and coverage, has adversely affected and could continue to adversely affect UScellular’s business, business prospects, financial condition or results of operations.

5) Intense competition involving products, services, pricing, promotions and network speed and technologies could adversely affect UScellular’s revenues or increase its costs to compete.

Competition in the wireless industry is intense and is expected to remain intense in the future due to multiple factors such as increasing market penetration, introduction of new products, new competitors, increasing promotional aggressiveness and changing prices.

Competition in the wireless industry is intense and is expected to increase in intensity into the foreseeable future due to multiple factors such as increasing market penetration, introduction of new products, new competitors, increasing promotional aggressiveness and changing prices.

There is competition in service plan pricing;

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new entrants;

bundled services and products, such as content;

bundled services, such as home internet and wireless;

and other categories.

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In addition, competition based on network speed may increase as customer demand for higher speeds increases.

These competitive factors have resulted in losses of retail connections and UScellular anticipates that they will continue to do so.

Similarly, these competitive pressures have caused the prices for services and products to decline and the costs to compete to increase and UScellular anticipates that they will continue to do so.

These competitive factors have and are expected to continue to result in losses of retail connections, may cause the prices for certain services and products to decline and the costs to compete to increase.

UScellular’s competitors include national or global telecommunications and cable wireless companies that are larger than UScellular, possess greater financial and other resources, possess more extensive coverage areas and more spectrum within their coverage areas, and market other services with their communications services that UScellular does not offer.

UScellular and its competitors are actively marketing their deployment of 5G and, as a result, are raising consumer awareness of the technology.

If UScellular cannot keep pace with its competitors in deploying 5G or other comparable offerings, or if UScellular's deployment of 5G technology does not result in significant incremental revenues, UScellular's financial condition, results of operations and ability to do business could continue to be adversely affected.

UScellular and its competitors are actively marketing their deployment of 5G and, as a result, continue to raise consumer awareness of the technology.

If UScellular continues to not keep pace with its competitors in deploying 5G or other comparable offerings, or if UScellular's deployment of 5G technology does not result in significant incremental revenues, UScellular's financial condition, results of operations and ability to do business could continue to be adversely affected.

In addition, new technologies, services and products that are more commercially effective than the technologies, services and products offered by UScellular may be developed and create new sources of competition.

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Sources of competition to UScellular’s business typically include at least four competing wireless telecommunications service providers across UScellular's service area, wireline telecommunications service providers, cable wireless companies, resellers (including MVNOs), and providers of alternative telecommunications services.

In particular, competition from cable wireless companies has increased in recent periods, as they have continued to expand their presence in the wireless industry and have offered more competitive pricing.

Many of UScellular’s wireless competitors and other competitors have substantially greater financial, technical, marketing, sales, purchasing and distribution resources than UScellular.

Competition in the tower industry is also challenging, as UScellular competes with public and private tower companies, wireless carrier tower alliances, private equity sponsored tower companies, and owners of non-communications sites such as utility towers, rooftop structures, water towers, and other alternative structures.

Many of these competitors are larger than UScellular, have greater financial and other resources, have more advantageous tower locations than UScellular, have greater capacity on their towers, and have more scale and coverage nationwide than UScellular – such factors could result in an inability to acquire or build additional towers, difficulty in leasing tower space, or cause lease revenue to decline in the future.

In particular, competition from cable wireless companies has increased in recent periods and is expected to increase into the foreseeable future, as they have continued to expand their presence in the wireless industry and have offered more competitive pricing.

Many of UScellular’s wireless and other competitors have substantially greater financial, technical, marketing, sales, purchasing and distribution resources than UScellular.

Competition in the tower industry is also challenging, as UScellular competes with public and private tower companies, private equity sponsored tower companies, and owners of non-communications sites such as utility towers, rooftop structures, water towers, and other alternative structures.

6) UScellular’s lack of scale and structural disadvantages relative to larger competitors that may have greater financial and other resources than UScellular has caused and could continue to cause UScellular to be unable to compete successfully, which has adversely affected and could continue to adversely affect its business, financial condition or results of operations.

UScellular has lack of scale and structural disadvantages compared to larger competitors.

UScellular may be unable to compete successfully with larger companies that have substantially greater financial, technical, marketing, sales, purchasing and distribution resources or that offer more services than UScellular, which has adversely affected and could continue to adversely affect UScellular’s revenues and costs of doing business.

Specifically, UScellular’s lack of scale and structural disadvantages relative to most of its competitors could have the following impacts, among others:

▪ Low profit margins and returns on investment that are below UScellular’s cost of capital;

▪ Increased operating and capital expenditure costs due to lack of leverage with vendors and dispersed geography;

▪ Higher costs per wireless subscriber;

▪ Inability to timely and successfully deploy 5G or other wireless technologies, or to realize significant incremental revenues from their deployment;

▪ Limited opportunities for strategic partnerships as potential partners are focused on telecommunications companies with greater scale and scope;

▪ Limited opportunities for bundling wireless service with other services such as home internet;

▪ Limited access to content, as well as limited ability to obtain acceptably priced content;

▪ Limited access to devices as larger competitors enter into exclusive device arrangements;

▪ Consumer expectations that UScellular provides lower-priced offerings relative to larger competitors;

▪ Limited ability to influence industry standards;

▪ Limited ability to acquire or build additional towers;

▪ Reduced ability to invest in research and development of new services and products;

▪ Lower risk tolerance when evaluating new markets;

▪ Vendors may deem UScellular non-strategic and not develop or sell services and products to UScellular, particularly where technical requirements differ from those of larger companies;

▪ Limited access to intellectual property;

▪ Other limited opportunities such as for software development or third-party distribution.

UScellular’s business depends on access to content for data and access to new wireless devices being developed by vendors.

UScellular’s ability to obtain such access depends in part on other parties.

If UScellular is unable to obtain timely access to new content or wireless devices being developed by vendors, its business, financial condition or results of operations could be adversely affected.

7) Changes in roaming practices or other factors could cause UScellular's roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact UScellular's ability to service its customers in geographic areas where UScellular does not have its own network, which could have an adverse effect on UScellular's business, financial condition or results of operations.

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Changes in FCC rules or actions, industry practices or the network footprints of carriers could have an adverse effect on UScellular’s roaming revenues.

For example, the expansion of other carriers' network coverage in UScellular's footprint and/or lower roaming rates with other carriers could continue to decrease future roaming revenues for UScellular.

For example, the expansion of other carriers' network coverage in UScellular's footprint and/or lower roaming rates with other carriers has decreased and is expected to continue to decrease roaming revenues for UScellular.

Similarly, UScellular's customers can access another carrier’s network automatically only if the other carrier allows UScellular's customers to roam on its network.

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This presents a risk to UScellular in that, to the extent UScellular is not able to enter into economically viable roaming arrangements with these other carriers, this could impact UScellular’s ability to service its customers in geographic areas where UScellular does not have its own network.

3) An inability to attract diverse 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 UScellular's business, financial condition or results of operations.

8) 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 UScellular's business, financial condition or results of operations.

UScellular’s business is highly technical and competition for skilled talent in the wireless industry is intense.

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In addition, a person's expectation of an in-office, remote or hybrid working model could negatively affect talent acquisition and retention.

The loss of existing key personnel due to competition, wage levels and/or retirements, the failure to recruit highly skilled and diverse personnel in a timely and cost-effective manner, the inability to foster and maintain a diverse and inclusive work environment, or failure to maintain its commitment to environmental and social responsibility could have an adverse effect on UScellular’s business, financial condition or results of operations.

The loss of existing key personnel due to competition, wage levels and/or retirements, the failure to recruit highly skilled personnel in a timely and cost-effective manner, the inability to foster and maintain an inclusive work environment, or failure to maintain its commitment to environmental and social responsibility could have an adverse effect on UScellular’s business, financial condition or results of operations.

The market for highly skilled leaders in the wireless industry also is extremely competitive.

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Failure to ensure effective transfer of knowledge and smooth transition involving key employees could also adversely affect UScellular’s business, financial condition and results of operations.

4) UScellular’s smaller scale relative to larger competitors that may have greater financial and other resources than UScellular could cause UScellular to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations.

UScellular has smaller scale efficiencies compared to larger competitors.

UScellular may be unable to compete successfully with larger companies that have substantially greater financial, technical, marketing, sales, purchasing and distribution resources or that offer more services than UScellular, which could adversely affect UScellular’s revenues and costs of doing business.

Specifically, UScellular’s smaller scale relative to most of its competitors could have the following impacts, among others:

▪ Low profit margins and returns on investment that are below UScellular’s cost of capital;

▪ Increased operating and capital expenditure costs due to lack of leverage with vendors;

▪ Inability to timely and successfully deploy 5G or other wireless technologies, or to realize significant incremental revenues from their deployment;

▪ Limited opportunities for strategic partnerships as potential partners are focused on telecommunications companies with greater scale and scope;

▪ Limited opportunities for bundling wireless service with other services such as home internet;

▪ Limited access to content, as well as limited ability to obtain acceptably priced content;

▪ Limited access to devices as larger competitors enter into exclusive device arrangements;

▪ Consumer expectations that UScellular provides lower-priced offerings relative to larger competitors;

▪ Limited ability to influence industry standards;

▪ Limited ability to acquire or build additional towers;

▪ Reduced ability to invest in research and development of new services and products;

▪ Lower risk tolerance when evaluating new markets;

▪ Vendors may deem UScellular non-strategic and not develop or sell services and products to UScellular, particularly where technical requirements differ from those of larger companies;

▪ Limited access to intellectual property;

▪ Other limited opportunities such as for software development or third-party distribution.

UScellular’s business depends on access to content for data and access to new wireless devices being developed by vendors.

UScellular’s ability to obtain such access depends in part on other parties.

If UScellular is unable to obtain timely access to new content or wireless devices being developed by vendors, its business, financial condition or results of operations could be adversely affected.

5) 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 UScellular’s business, financial condition or results of operations.

9) Changes in various business factors, including changes in demand, consumer preferences and perceptions, price competition, cost increases, churn from customer switching activity and other factors, could have an adverse effect on UScellular’s business, financial condition or results of operations.

Changes in any of several factors could have an adverse effect on UScellular’s business, financial condition or results of operations.

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▪ The pricing of tower leases that can be charged to third parties;

▪ Increases in ground lease rates for owned towers;

▪ Inflationary pressures on costs without corresponding price increases for UScellular's services;

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UScellular’s business depends on the ability to use portions of the radio spectrum licensed by the FCC.

UScellular could fail to obtain access to sufficient spectrum capacity, including spectrum needed to support 5G and future technologies, in new or existing markets, whether through FCC auctions or other transactions, to meet the anticipated spectrum requirements associated with increased demand for existing services, especially increases in customer demand for data services and network speed, and to enable deployment of next-generation services.

UScellular could fail to obtain access to sufficient spectrum capacity, including spectrum needed to support future technologies, in new or existing markets, whether through FCC auctions or other transactions, to meet the anticipated spectrum requirements associated with increased demand for existing services, especially increases in customer demand for data services and network speed, and to enable deployment of next-generation services.

UScellular believes that this increased demand for data services and network speed reflects a trend that will continue for the foreseeable future.

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Transition to 5G or other new technologies involves significant time, cost and risk, and anticipated products and revenues may not be realized.

Furthermore, the wireless business experiences rapid technology changes and new services and products.

Due to its lack of scale, UScellular has higher costs per subscriber than its larger competitors and is balancing the timing of investments, such as its 5G deployment, with liquidity constraints.

Furthermore, the wireless business experiences rapid changes in technology and services and products.

If UScellular fails to effectively deploy new wireless technologies, services or products on a timely basis, this could have an adverse impact on UScellular’s business, financial condition and results of operations.

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13) Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of UScellular’s business could have an adverse effect on UScellular’s business, financial condition or results of operations.

As part of UScellular’s operating strategy, UScellular from time to time may be engaged in the acquisition, divestiture or exchange of companies, businesses, strategic properties, wireless spectrum or other assets.

UScellular has entered into and may continue to enter into agreements to divest of companies, businesses, wireless spectrum and other assets.

UScellular may also be engaged in the acquisition, divestitures or exchange of companies, businesses, strategic properties, wireless spectrum or other assets.

UScellular may change the markets in which it operates and the services that it provides through such acquisitions, divestitures and/or exchanges.

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No assurance can be given that UScellular will be successful with respect to its acquisition, divestiture or exchange strategies or initiatives.

10) A failure by UScellular 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.

UScellular’s business plan includes significant construction activities and enhancements to its network, support and other systems and infrastructure.

Additionally, the deployment of new wireless technologies, including 5G, will require substantial investments in UScellular's wireless network.

As UScellular deploys, expands and enhances its network, it may need to acquire additional spectrum.

Also, as UScellular continues to build out and enhance its network, UScellular must, among other things, continue to:

▪ Lease, acquire or otherwise obtain rights to cell and switch sites;

▪ Obtain zoning variances or other local governmental or third-party approvals or permits for network construction;

▪ Complete and update the radio frequency design, including cell site design, frequency planning and network optimization, for each of UScellular’s markets;

▪ Improve, expand and maintain customer care, network management, billing and other financial and management systems.

Failure to successfully deploy new technologies, including 5G, and/or build-out and enhance UScellular’s network, support facilities and other systems and infrastructure in a cost-effective manner, and in a manner that satisfies consumers' expectations for quality and coverage, could have an adverse effect on UScellular’s business, business prospects, financial condition or results of operations.

14) Difficulties involving third parties with which UScellular does business, including changes in UScellular's relationships with or financial or operational difficulties, including supply chain disruptions, of key suppliers or independent agents and third-party national retailers who market UScellular’s services, could adversely affect UScellular's business, financial condition or results of operations.

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If overall demand for wireless devices or the mix of demand for wireless devices is significantly different than UScellular’s expectations, UScellular could face inadequate or excess supplies of particular models of wireless devices.

This could result in lost sales opportunities or an excess supply of device inventory or network equipment that may need to be written down, depreciated, or disposed of for a loss.

This could result in lost sales opportunities or an excess supply of device inventory that may need to be written down, depreciated, or disposed of for a loss.

If network equipment is not available or requires extended lead times due to supply chain challenges, or if overall demand for wireless services or the mix of demand for wireless services is significantly different than UScellular’s expectations, UScellular may not be able to adequately maintain a network that supports customer demand.

Also, if UScellular fails to accurately forecast customer usage and network demands, UScellular may have excess supply of network equipment inventory that may need to be written down, depreciated or disposed at a loss.

Further, UScellular's supply chain could be disrupted unexpectedly by raw material shortages, wars, natural disasters, disease or other factors.

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Financial Risk Factors

13) Uncertainty in UScellular’s or TDS' future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, changes in interest rates, other changes in UScellular’s or TDS' performance or market conditions, changes in UScellular’s or TDS' credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to UScellular, which has required and could in the future require UScellular to reduce or delay its construction, development or acquisition programs, reduce the amount of wireless spectrum licenses acquired, divest assets or businesses, and/or reduce or cease share repurchases.

16) Uncertainty in UScellular’s or TDS' future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, changes in interest rates, other changes in UScellular’s or TDS' performance or market conditions, changes in UScellular’s or TDS' credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to UScellular, which has required and could in the future require UScellular to reduce or delay its construction, development or acquisition programs, divest assets or businesses, and/or reduce or cease share repurchases.

UScellular operates a capital-intensive business.

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UScellular’s credit rating currently is sub-investment grade.

UScellular has incurred negative free cash flow (defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment and less Cash paid for software license agreements) at times in the past and this could occur in the future.

UScellular may require substantial additional capital for, among other uses, acquisitions of providers of telecommunications services or products, spectrum license or system acquisitions, capital expenditures, the repurchase of shares, or making additional investments.

UScellular may require substantial additional capital for, among other uses, capital expenditures, acquisitions, investments in new technologies, and the repurchase of shares.

There can be no assurance that sufficient funds will continue to be available to UScellular or its subsidiaries on terms or at prices acceptable to UScellular.

Insufficient cash flows from operating activities, changes in UScellular's credit ratings, defaults of the terms of debt or credit agreements, uncertainty of access to capital, deterioration in the capital markets, reduced regulatory capital at banks which in turn limits their ability to lend, other changes in the performance of UScellular or in market conditions or other factors could limit or restrict the availability of financing on terms and prices acceptable to UScellular, which could require UScellular to reduce its acquisition, capital expenditure and business development programs, reduce the acquisition and development of wireless spectrum licenses, divest assets and/or reduce or cease share repurchases.

Insufficient cash flows from operating activities, changes in UScellular's credit ratings, defaults of the terms of debt or credit agreements, uncertainty of access to capital, deterioration in the capital markets, reduced regulatory capital at banks which in turn limits their ability to lend, other changes in the performance of UScellular or in market conditions or other factors could limit or restrict the availability of financing on terms and prices acceptable to UScellular, which could require UScellular to reduce its capital expenditure, acquisition and business development programs, reduce the development of wireless spectrum licenses, divest assets and/or reduce or cease share repurchases.

Due to its lack of scale, UScellular has higher costs per subscriber than its competitors and is balancing the timing of investments, such as its 5G deployment, with liquidity constraints.

UScellular cannot provide assurance that circumstances that could have a material adverse effect on its liquidity or capital resources will not occur.

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UScellular’s ability to make scheduled payments on its indebtedness or to refinance it will depend on its financial and operating performance which, in turn, is subject to prevailing economic and competitive conditions and other factors beyond its control.

A substantial portion of UScellular's debt is subject to variable interest rates, which has increased interest expense in recent periods and UScellular will continue to be vulnerable to unfavorable changes in market interest rates.

UScellular’s revolving credit agreement, term loan agreement, export credit financing agreement and receivables securitization agreement require UScellular to comply with certain affirmative and negative covenants, including certain financial covenants.

A substantial portion of UScellular's debt is subject to variable interest rates, which causes UScellular to be vulnerable to unfavorable changes in market interest rates.

UScellular’s revolving credit agreement, term loan agreements, export credit financing agreement and receivables securitization agreement require UScellular to comply with certain affirmative and negative covenants, including certain financial covenants.

Depending on the actual financial performance of UScellular, there is a risk that UScellular could fail to satisfy the required financial covenants.

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UScellular’s focus on the U.S.

wireless telecommunications industry, together with its sub-scale position relative to larger competitors with greater resources within the industry, may represent increased risk for investors due to the lack of diversification.

wireless telecommunications industry, together with its lack of scale relative to larger competitors with greater resources within the industry, may represent increased risk for investors due to the lack of diversification.

This could have an adverse effect on UScellular’s ability to attain and sustain long-term, profitable revenue growth and could have an adverse effect on its business, financial condition or results of operations.

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Losses in the values of such investments or a reduction in income from these investments could adversely affect UScellular’s financial condition or results of operations.

In addition, certain investments have historically contributed significant cash flows to UScellular and a reduction or suspension of such cash flows could adversely affect UScellular’s financial condition.

Regulatory, Legal and Governance Risk Factors

17) TDS and UScellular have initiated a process to explore a range of strategic alternatives for UScellular and there can be no assurance that any strategic alternative will be successfully identified or completed, that any such strategic alternative will result in additional value for UScellular and its shareholders, or that the process will not have an adverse impact on UScellular's business or financial statements.

On August 4, 2023, TDS and UScellular announced that the Boards of Directors of both companies decided to initiate a process to explore a range of strategic alternatives for UScellular.

This comprehensive process could result in a diversion of management's attention from UScellular's existing business;

a failure to achieve financial and operating objectives;

the failure to retain key personnel, customers, business partners or contracts;

and volatility in UScellular's stock price.

In addition, this process has already resulted in the incurrence of significant expense - this is expected to continue.

It is possible that any outcomes of the strategic alternatives review could change the composition of UScellular's long-lived assets, how UScellular may derive cash flows from these assets and may result in uncertainty related to asset recoverability.

This may impact UScellular's asset groups for purposes of assessing wireless spectrum licenses and/or property, plant and equipment for impairment and may require in the near term an impairment assessment to be performed which may result in an impairment.

There can be no assurance that such comprehensive process will result in any strategic alternative of any kind being successfully identified or completed or that the process or any outcomes of the process will not have an adverse impact on UScellular's business or financial statements.

20) Failure by UScellular to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect UScellular’s business, financial condition or results of operations.

UScellular’s operations are subject to varying degrees of regulation by the FCC, state public utility commissions and other federal, state and local regulatory agencies and legislative bodies.

Various regulatory agencies and legislative bodies could implement different policies with respect to many federal laws and regulations, including but not limited to changes to fiscal and tax policies, trade policies, tariffs on import goods and climate change.

Changes in the administration of the various regulatory agencies and legislative bodies are resulting in and could continue to result in different policies with respect to many federal laws and regulations, including but not limited to changes to fiscal and tax policies, trade policies, tariffs on imported goods, climate change and workforce-related practices.

New or amended regulatory requirements could increase UScellular’s costs and divert resources from other initiatives.

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Further, wireless spectrum licenses are subject to renewal by the FCC and could be revoked in the event of a violation of applicable laws or regulatory requirements.

Also, although FCC rules relating to net neutrality have been repealed, on October 19, 2023, the FCC adopted a draft Notice of Proposed Rulemaking (NPRM) that proposes to reinstate such rules and reclassify broadband internet access service as a telecommunications service under Title II of the Communications Act of 1934.

In the interim, some state legislators and regulators are seeking to or have already enacted state net neutrality laws and regulations, and it is unclear whether more states will seek to do so now that the FCC has announced its intent to reinstate net neutrality rules.

Also, the FCC recently renewed its decision to regulate Broadband Internet Access Service (BIAS), including reclassifying BIAS as a telecommunications service under Title II of the Communications Act and mobile BIAS as a commercial mobile radio service.

However, the Sixth Circuit Court of Appeals struck down the FCC’s Order, halting implementation.

Some state legislators and regulators are seeking to or have already enacted state net neutrality laws and regulations, and it is unclear whether more states will seek to do so.

Interpretation and application of these rules and of rules relating to other recent NPRMs issued by the FCC (for example, with respect to digital discrimination), including conflicts between federal and state laws, may result in additional costs for compliance and may limit opportunities to derive profits from certain business practices or resources.

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However, UScellular is unable to predict the future actions of the various legislative and regulatory bodies that govern UScellular, and such actions could have adverse effects on UScellular’s business.

19) UScellular 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 UScellular’s business, financial condition or results of operations.

21) UScellular 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 uncertainty, including the ability to pass through certain fees to customers, and this uncertainty could have an adverse effect on UScellular’s business, financial condition or results of operations.

Telecommunications companies may be designated by states, or in some cases by the FCC, as an Eligible Telecommunications Carrier (ETC) to receive universal service support payments if they provide specified services in “high-cost” areas.

UScellular has been designated as an ETC in certain states and received $92 million in high-cost support for service to high-cost areas in 2024 .

While there is uncertainty, UScellular expects that regulatory support payments will likely decline in future periods, and there is no assurance that UScellular will qualify for future regulatory support programs.

While there is uncertainty, UScellular expects regulatory support payments to decline in future periods, and there is no assurance that UScellular will qualify for future regulatory support programs.

If regulatory support is discontinued or reduced from current levels, or if receipt of future regulatory support is contingent upon making certain network-related expenditures, this could have an adverse effect on UScellular’s business, financial condition or operating results and cash flows.

Adding to this uncertainty are a series of court cases challenging the constitutionality of the universal service fund program that establishes and administers these regulatory support payments.

On July 24, 2024, differing from earlier decisions at the Sixth and Eleventh Circuits, the U.S.

Court of Appeals for the Fifth Circuit ruled the universal service fund program is unconstitutional as currently administered, and remanded the case to the FCC.

On November 22, 2024, the Supreme Court granted the FCC's petition for certiorari to review the U.S.

Court of Appeals for the Fifth Circuit ruling.

UScellular anticipates oral arguments to occur in the end of March 2025 and that the court could potentially release a decision in mid-2025.

This ruling may have significant adverse effects on the funding that UScellular receives from programs like USF high-cost support.

Additionally, the ruling may have significant adverse effects on federal government supported programs that many of UScellular’s customers benefit from.

In addition, a working group within Congress is considering legislative reform of the universal service funding program, but has not yet released legislative text.

In addition, any change in the approval by the federal government to spending programs such as USF could have a significant adverse impact on UScellular's cash flows and financial condition.

Telecommunications providers pay a variety of surcharges and fees on their gross revenues from interstate and intrastate services, including USF fees and common carrier regulatory fees.

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In addition, state regulators and local governments have imposed and may continue to impose various surcharges, taxes and fees on telecommunications services.

The applicability of these surcharges and fees to UScellular’s services is uncertain in many cases and jurisdictions may contest whether UScellular has assessed and remitted those monies correctly.

Periodically, state and federal regulators may increase or change the surcharges and fees UScellular currently pays.

The applicability of these surcharges and fees to UScellular’s services is uncertain in many cases and periodically, state and federal regulators may increase or change the surcharges and fees UScellular currently pays.

In some instances, UScellular passes through these charges to its customers.

However, Congress, the FCC, state regulatory agencies or state legislatures may limit the ability to pass through transaction-based tax liabilities, regulatory surcharges and regulatory fees imposed on UScellular to customers.

UScellular may or may not be able to recover some or all of those taxes from its customers and the amount of taxes may deter demand for its services or increase its cost to provide service.

20) 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 UScellular’s business, financial condition or results of operations.

UScellular may or may not be able to recover some or all those taxes from its customers and the amount of taxes may deter demand for its services or increase its cost to provide service.

22) Settlements, judgments, restraints on its current or future manner of doing business and/or costs resulting from pending and future legal and policy proceedings could have an adverse effect on UScellular’s business, financial condition or results of operations.

UScellular is regularly involved in a number of legal and policy proceedings before the FCC and various state and federal courts.

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Depending on a range of factors, these or similar proceedings could impose restraints on UScellular’s current or future manner of doing business.

See Note 14 — Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information related to legal proceedings.

23) The possible development of adverse precedent in litigation or conclusions in professional or environmental studies to the effect that potentially harmful emissions from devices or network equipment, including but not limited to radio frequencies emitted by wireless signals, may cause harmful health or environmental consequences, including cancer, tumors or otherwise harmful impacts, or may interfere with various electronic medical devices or frequencies used by other industries, could have an adverse effect on UScellular's business, financial condition or results of operations.

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These include cyber-attacks intended to wrongfully obtain private and valuable information, or cause other types of malicious events, including denial of service attacks which may cause UScellular's services to be disrupted or unavailable to customers.

The increased number of associates working remotely increases risks associated with data handling and vulnerability management.

The number of associates working remotely increases risks associated with data handling and vulnerability management.

The rapid evolution and increased adoption of artificial intelligence technologies may intensify UScellular's cybersecurity risk.

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Although to date UScellular has not discovered a material security breach, these efforts may be insufficient to prevent a material security breach stemming from future cyber-attacks including ransomware.

Recently, companies in the telecommunications industry have been the subject of targeted cybersecurity attacks, which may increase the risk for UScellular.

If UScellular’s or its vendors’ networks and information technology are not adequately adapted to changes in technology or are damaged or fail to function properly, and/or if UScellular’s or its vendors’ security is breached or otherwise compromised, UScellular could suffer adverse consequences, including theft, destruction or other loss of critical and private data, including customer and/or employee data, interruptions or delays in its operations, inaccurate billings, inaccurate financial reporting, and significant costs to remedy the problems.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors