What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-21 compared with 2024-02-16 · 309 added, 180 removed, 993 unchanged (33% of the section changed)

30 unchanged sentences

Total operating expenses 3,782 3,767 4,100

Operating income 139 69 170

Operating income (loss) ( 12 ) 139 69

Investment and other income (expense)

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Total investment and other income (expense) ( 10 ) ( 28 ) 3

Income before income taxes 111 72 180

Income (loss) before income taxes ( 22 ) 111 72

Income tax expense 10 53 37

Net income 58 35 160

Net income (loss) ( 32 ) 58 35

Net income attributable to noncontrolling interests, net of tax 7 4 5

Net income attributable to UScellular shareholders $ 54 $ 30 $ 155

Net income (loss) attributable to UScellular shareholders $ ( 39 ) $ 54 $ 30

Basic weighted average shares outstanding 86 85 85

Basic earnings per share attributable to UScellular shareholders $ 0.64 $ 0.35 $ 1.80

Basic earnings (loss) per share attributable to UScellular shareholders $ ( 0.46 ) $ 0.64 $ 0.35

Diluted weighted average shares outstanding 86 87 86

Diluted earnings per share attributable to UScellular shareholders $ 0.63 $ 0.35 $ 1.77

Diluted earnings (loss) per share attributable to UScellular shareholders $ ( 0.46 ) $ 0.63 $ 0.35

The accompanying notes are an integral part of these consolidated financial statements.

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Cash flows from operating activities

Net income $ 58 $ 35 $ 160

Add (deduct) adjustments to reconcile net income to net cash flows from operating activities

Net income (loss) $ ( 32 ) $ 58 $ 35

Add (deduct) adjustments to reconcile net income (loss) to net cash flows from operating activities

Depreciation, amortization and accretion 665 656 700

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Cash paid for licenses ( 20 ) ( 130 ) ( 585 )

Advance payments for license acquisitions — — ( 20 )

Other investing activities 1 17 8

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Repayment of short-term debt — ( 60 ) ( 50 )

Common Shares reissued for benefit plans, net of tax payments ( 6 ) ( 5 ) ( 16 )

Common Shares reissued for stock-based compensation awards, net of tax payments ( 11 ) ( 6 ) ( 5 )

Repurchase of Common Shares ( 54 ) — ( 43 )

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December 31, 2023 $ 88 $ 1,726 $ ( 80 ) $ 2,892 $ 4,626 $ 16 $ 4,642

Net income attributable to UScellular shareholders — — — 54 54 — 54

Net income (loss) attributable to UScellular shareholders — — — ( 39 ) ( 39 ) — ( 39 )

Net income attributable to noncontrolling interests classified as equity — — — — — 3 3

Repurchase of Common Shares — — ( 55 ) — ( 55 ) — ( 55 )

Incentive and compensation plans — 57 23 ( 35 ) 45 — 45

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December 31, 2022 $ 88 $ 1,703 $ ( 98 ) $ 2,861 $ 4,554 $ 16 $ 4,570

Net income attributable to UScellular shareholders — — — 30 30 — 30

Net income (loss) attributable to UScellular shareholders — — — 54 54 — 54

Net income attributable to noncontrolling interests classified as equity — — — — — 3 3

Repurchase of Common Shares — — ( 43 ) — ( 43 ) — ( 43 )

Incentive and compensation plans — 23 18 ( 23 ) 18 — 18

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December 31, 2021 $ 88 $ 1,678 $ ( 68 ) $ 2,849 $ 4,547 $ 16 $ 4,563

Net income attributable to UScellular shareholders — — — 155 155 — 155

Net income (loss) attributable to UScellular shareholders — — — 30 30 — 30

Net income attributable to noncontrolling interests classified as equity — — — — — 3 3

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Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies

Note 1 Summary of Significant Accounting Policies and Recent Accounting Pronouncements

United States Cellular Corporation (UScellular), a Delaware Corporation, is an 83 %-owned subsidiary of Telephone and Data Systems, Inc.

Nature of Operations

UScellular owns, operates and invests in wireless systems throughout the United States.

UScellular provides wireless service throughout its footprint, and leases tower space to third-party carriers on UScellular-owned towers.

As of December 31, 2024, UScellular served customers with 4.4 million retail connections.

UScellular has one reportable segment.

UScellular has two reportable segments – Wireless and Towers.

Change in Reportable Segments

During the second quarter of 2024, UScellular modified its reporting structure due to the planned disposal of its wireless operations and, as a result, disaggregated its operations into two reportable segments – Wireless and Towers.

This presentation reflects how UScellular's chief operating decision maker allocates resources and evaluates operating performance following this strategic shift.

Prior periods have been updated to conform to the new reportable segments.

See Note 19 — Business Segment Information for additional information about UScellular's segments.

Principles of Consolidation

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Accounts receivable consist primarily of amounts owed by customers for wireless services and equipment sales, including sales of certain devices and accessories under installment plans, by agents and third-party distributors for sales of equipment to them and by other wireless carriers whose customers have used UScellular’s wireless systems.

Index to Financial Statements and Supplementary Data

UScellular estimates expected credit losses related to accounts receivable balances based on a review of available and relevant information including current economic conditions, projected economic conditions, historical loss experience, account aging, and other factors that could affect collectability.

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Net realizable value is determined by reference to the stand-alone selling price.

Index to Financial Statements and Supplementary Data

Cloud-Hosted Arrangements

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UScellular believes that it is probable that its future wireless spectrum license renewal applications will be granted.

UScellular applies a consistent treatment to its wireless spectrum licenses with FCC build-out requirements that have not yet been satisfied as UScellular believes it is reasonable to assume that such requirements will be met by the FCC imposed deadlines.

UScellular determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of the wireless spectrum licenses.

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UScellular performs its annual impairment assessment of wireless spectrum licenses as of November 1 of each year or more frequently if there are events or circumstances that cause UScellular to believe it is more likely than not that the carrying value of wireless spectrum licenses exceeds fair value.

For purposes of its impairment test, UScellular has one unit of accounting.

UScellular performed a quantitative assessment in 2023 and a qualitative assessment in 2022 to determine whether the wireless spectrum licenses were impaired.

Based on the impairment assessments performed, UScellular did not have an impairment of its wireless spectrum licenses in 2023 or 2022.

The events and circumstances related to the strategic alternatives review of UScellular may require an impairment assessment of the wireless spectrum licenses in the future.

See Note 7 — Intangible Assets for additional details related to wireless spectrum licenses.

For purposes of its impairment test, UScellular had twelve units of accounting in 2024 and one unit of accounting in 2023.

UScellular performed a quantitative impairment assessment in the third quarter of 2024 and a qualitative impairment assessment as of its annual testing date of November 1, 2024 to determine whether the wireless spectrum licenses were impaired.

Based on the impairment assessment performed during the third quarter of 2024, an impairment of wireless spectrum licenses was recorded.

There was no further quantitative assessment or impairment indicated in the fourth quarter of 2024.

See Note 8 — Intangible Assets for additional details related to the wireless spectrum license impairment.

In 2023, UScellular performed a quantitative assessment and concluded that there was no impairment of wireless spectrum licenses.

Investments in Unconsolidated Entities

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UScellular’s Property, plant and equipment is stated at the original cost of construction or purchase including capitalized costs of certain taxes, payroll-related expenses, interest and estimated costs to remove the assets.

Index to Financial Statements and Supplementary Data

Expenditures that enhance the productive capacity of assets in service or extend their useful lives are capitalized and depreciated.

1 unchanged sentence

Retirements and disposals of assets are recorded by removing the original cost of the asset (along with the related accumulated depreciation) from plant in service and recording it, together with proceeds, if any, and net removal costs (removal costs less an applicable accrued asset retirement obligation and salvage value realized), as a gain or loss, as appropriate.

Software licenses that qualify for capitalization as an asset are accounted for as the acquisition of a fixed asset and the incurrence of a liability to the extent that the license fees are not fully paid at acquisition.

Software licenses that qualify for capitalization as an asset are accounted for as the acquisition of an asset and the incurrence of a liability to the extent that the license fees are not fully paid at acquisition.

Depreciation and Amortization

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such periods approximate the shorter of the assets’ economic lives or the specific lease terms.

Index to Financial Statements and Supplementary Data

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating the depreciation of those specific assets.

There were no material changes to the assigned useful lives of the various categories of property, plant and equipment in 2024, 2023 or 2022.

However, in 2023, 2022 and 2021, depreciation for certain specific assets was accelerated due to changes in technology.

See Note 10 — Property, Plant and Equipment for additional details related to useful lives.

Impairment of Long-Lived Assets

UScellular reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired.

UScellular has one asset group for purposes of assessing property, plant and equipment for impairment based on the integrated nature of its assets and operations.

The cash flows generated by this single interdependent asset group represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

UScellular reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.

Due to its plan to divest of its wireless operations, UScellular expects to generate cash flows from the wireless operations separately from the retained business and during 2024, bifurcated the historical single asset group into two asset groups – wireless and towers.

See Note 7 — Divestitures for additional information.

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.

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Debt issuance costs include underwriters’ and legal fees and other charges related to issuing and renewing various borrowing instruments and other long-term agreements and are amortized over the respective term of each instrument.

Debt issuance costs related to UScellular’s revolving credit, receivables securitization, and repurchase agreements are recorded in Other assets and deferred charges in the Consolidated Balance Sheet.

Debt issuance costs related to UScellular’s revolving credit and receivables securitization agreements are recorded in Other assets and deferred charges in the Consolidated Balance Sheet.

All other debt issuance costs are presented as an offset to the related debt obligation in the Consolidated Balance Sheet.

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The difference between the cost of the treasury shares and reissuance price is included in Additional paid-in capital or Retained earnings.

Index to Financial Statements and Supplementary Data

Revenue Recognition

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UScellular had no tax receivable balance with TDS as of December 31, 2024 and 2023, respectively.

Index to Financial Statements and Supplementary Data

Deferred taxes are computed using the liability method, whereby deferred tax assets are recognized for future deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for future taxable temporary differences.

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These plans are considered compensatory plans, and therefore recognition of costs for grants made under these plans is required.

UScellular recognizes stock compensation expense based upon the fair value of the specific awards granted using established valuation methodologies.

The amount of stock compensation cost recognized on a straight-line basis is based on the portion of the award that is expected to vest over the requisite service period, which generally represents the vesting period.

UScellular recognizes stock compensation expense based upon the estimated fair value of the specific awards granted on a straight-line basis over the requisite service period, which generally represents the vesting period.

Stock-based compensation cost recognized has been reduced for estimated forfeitures.

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Total costs incurred for UScellular’s contributions to the 401(k) plan were $ 15 million for each of 2024, 2023 and 2022.

Recent Development

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

During 2023, UScellular incurred third-party expenses of $ 8 million related to the strategic alternatives review, which are included in Selling, general and administrative expenses.

At this time, UScellular cannot predict the ultimate outcome of such process or estimate the potential impact of such process on the financial statements.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued Accounting Standards Update (ASU) 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40).

ASU 2024-03 requires more detailed information about specific types of expenses included in the expense captions presented on the face of the Consolidated Statement of Operations.

ASU 2024-03 is effective on a prospective or retrospective basis for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

UScellular is evaluating the impact this ASU will have on its financial statement disclosures.

Index to Financial Statements and Supplementary Data

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Wireless services generally are billed and paid in advance on a monthly basis.

Wireless devices and accessories UScellular offers a comprehensive range of wireless devices such as handsets, tablets, mobile hotspots, home phones and routers for purchase by its customers, as well as accessories.

Wireless devices and accessories UScellular offers a comprehensive range of wireless devices such as handsets, tablets, mobile hotspots and routers for purchase by its customers, as well as accessories.

UScellular also sells wireless devices to agents and other third-party distributors for resale.

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ETC revenues recognized in the reporting period represent the amounts which UScellular is entitled to receive for such period, as determined and approved in connection with UScellular’s designation as an ETC in various states.

Wireless tower rents UScellular receives tower rental revenues when another carrier leases tower space on a UScellular-owned tower.

Tower rents UScellular receives tower rental revenues when another carrier leases tower space on a UScellular-owned tower.

UScellular recognizes revenue in Service revenues in the period during which the services are provided.

Tower rental revenues are generally billed and paid in advance on a monthly basis.

Activation fees UScellular charges its end customers activation fees in connection with the sale of certain services and equipment.

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Discounts, incentives, and rebates to agents and end customers that are deemed cash are recognized as a reduction of Operating revenues concurrently with the associated revenue.

Index to Financial Statements and Supplementary Data

From time to time, UScellular may offer certain promotions to incentivize customers to switch to, or to purchase additional services from, UScellular.

1 unchanged sentence

UScellular accounts for the future discounts as material rights at the time of the initial transaction by allocating and deferring revenue based on the relative proportion of the future discounts in comparison to the aggregate initial purchase.

The deferred revenue will be recognized as service revenue in future periods.

Index to Financial Statements and Supplementary Data

The deferred revenue is recognized as service revenue in future periods.

Amounts Collected from Customers and Remitted to Governmental Authorities

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Disaggregation of Revenue

In the following table, UScellular's revenues are disaggregated by type of service, which represents the relevant categorization of revenues for UScellular, and timing of recognition.

In the following table, UScellular's revenues are disaggregated by type of service, which represents the relevant categorization of revenues for UScellular's Wireless segment, and timing of recognition.

Service revenues are recognized over time and Equipment sales are recognized at a point in time.

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$ 2,674 $ 2,742 $ 2,793

Inbound roaming 32 67 110

Other service 210 201 239

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$ 3,667 $ 3,805 $ 4,076

1 For 2021, amounts have been adjusted to reclassify $ 8 million of Internet of Things (IoT) and Reseller revenues from Retail service to Other service.

2 UScellular recorded an adjustment to correct a prior period error related to the timing of recognition of regulatory fee billings, which increased Service revenue by $ 9 million in 2021.

This adjustment was not material to any of the periods impacted.

1 UScellular recorded an adjustment to correct a prior period error related to the recognition of discounts for certain Prepaid customers, which decreased Service revenue by $ 5 million in 2023.

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A financial instrument’s level within the fair value hierarchy is not representative of its expected performance or its overall risk profile and, therefore Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets.

As of December 31, 2024, UScellular recorded a net written call option at fair value, which was considered Level 3 within the fair value hierarchy.

See Note 7 — Divestitures for additional information.

UScellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below.

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Long-term debt 2 $ 2,890 $ 2,785 $ 3,099 $ 2,611

2 $ 1,500 $ 1,097 $ 1,500 $ 899

Institutional

2 536 451 536 395

2 1,063 1,063 1,208 1,208

Long-term debt excludes lease obligations, the current portion of Long-term debt and debt financing costs.

The fair value of “Retail” Long-term debt was estimated using market prices for UScellular Senior Notes, which are traded on the New York Stock Exchange.

UScellular’s “Institutional” debt consists of the 6.7 % Senior Notes which are traded over the counter.

UScellular’s “Other” debt consists of term loan credit agreements, receivables securitization agreement and export credit financing agreement.

UScellular estimated the fair value of its Institutional and Other debt through a discounted cash flow analysis using the interest rates or estimated yield to maturity for each borrowing, which ranged from 6.48 % to 7.96 % and 5.38 % to 8.28 % at December 31, 2023 and 2022, respectively.

The fair value of Long-term debt was estimated using various methods, including quoted market prices and discounted cash flow analyses.

The fair values of Cash and cash equivalents, restricted cash and short-term debt approximate their book values due to the short-term nature of these financial instruments.

Index to Financial Statements and Supplementary Data

Note 4 Equipment Installment Plans

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For certain equipment installment plans, after a specified period of time or amount of payments, the customer may have the right to upgrade to a new device and have the remaining unpaid equipment installment contract balance waived, subject to certain conditions, including trading in the original device in good working condition and signing a new equipment installment contract.

Index to Financial Statements and Supplementary Data

The following table summarizes equipment installment plan receivables.

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Write-offs, net of recoveries $ ( 1 ) $ 18 $ 40 $ 16 $ 73

Index to Financial Statements and Supplementary Data

Activity for the years ended December 31, 2024 and 2023, in the allowance for credit losses for equipment installment plan receivables was as follows:

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Allowance for credit losses, end of year $ 82 $ 90

Index to Financial Statements and Supplementary Data

Note 5 Income Taxes

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(Dollars in millions)

Federal income taxes receivable $ 1 $ 4

Federal income taxes receivable (payable) $ ( 1 ) $ 1

Net state income taxes receivable — —

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1 State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to state valuation allowances.

State taxes in 2021 are a net benefit due primarily to the reduction of tax accruals resulting from expirations of state statute of limitations for prior tax years.

State taxes in 2022 and 2023 include discrete valuation allowance adjustments that did not recur in 2024.

2 Change in federal valuation allowance is due primarily to annual interest expense from partnership investments that carryforward but may not be realized.

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Net deferred income tax liability $ 728 $ 755

At December 31, 2023, UScellular and certain subsidiaries had $ 78 million of federal NOL carryforwards (generating a $ 16 million deferred tax asset) available to offset future taxable income.

At December 31, 2024, UScellular and certain subsidiaries had $ 31 million of federal NOL carryforwards (generating a $ 7 million deferred tax asset) whose future utilization is subject to certain limitations.

The federal NOL carryforwards generally expire between 2025 and 2038, with the exception of federal NOLs generated after 2017, which do not expire.

UScellular and certain subsidiaries had $ 3,158 million of state NOL carryforwards (generating a $ 136 million deferred tax asset) available to offset future taxable income.

The state NOL carryforwards expire between 2024 and 2043.

The state NOL carryforwards generally expire between 2025 and 2044.

A valuation allowance was established for certain federal and state NOL carryforwards since it is more likely than not that a portion of such carryforwards will expire before they can be utilized.

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Reductions for tax positions of prior years ( 6 ) ( 3 ) —

Reductions for settlements of tax positions — — ( 2 )

Reductions for lapses in statutes of limitations ( 7 ) ( 6 ) ( 6 )

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Unrecognized tax benefits are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

If these benefits were recognized at each respective year end period, they would have reduced income tax expense by $ 28 million, net of the federal benefit from state income taxes in each of 2023, 2022 and 2021.

If these benefits were recognized at each respective year end period, they would have reduced income tax expense by $ 23 million, $ 28 million and $ 28 million in 2024, 2023 and 2022, respectively.

UScellular recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax expense (benefit).

The amounts charged to income tax expense related to interest and penalties resulted in $ 1 million expense in 2023, nominal expense in 2022 and a benefit of $ 10 million in 2021.

The amounts charged to income tax expense related to interest and penalties were immaterial in 2024, 2023 and 2022.

Net accrued liabilities for interest and penalties were $ 13 million at December 31, 2024 and 2023, and are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

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Note 6 Earnings Per Share

Basic earnings per share attributable to UScellular shareholders is computed by dividing Net income attributable to UScellular shareholders by the weighted average number of Common Shares outstanding during the period.

Diluted earnings per share attributable to UScellular shareholders is computed by dividing Net income attributable to UScellular shareholders by the weighted average number of Common Shares outstanding during the period adjusted to include the effects of potentially dilutive securities.

Basic earnings (loss) per share attributable to UScellular shareholders is computed by dividing Net income (loss) attributable to UScellular shareholders by the weighted average number of Common Shares outstanding during the period.

Diluted earnings (loss) per share attributable to UScellular shareholders is computed by dividing Net income (loss) attributable to UScellular shareholders by the weighted average number of Common Shares outstanding during the period adjusted to include the effects of potentially dilutive securities.

Potentially dilutive securities primarily include incremental shares issuable upon the exercise of outstanding stock options and the vesting of performance and restricted stock units, as calculated using the treasury stock method.

The amounts used in computing basic and diluted earnings per share attributable to UScellular shareholders were as follows:

The amounts used in computing basic and diluted earnings (loss) per share attributable to UScellular shareholders were as follows:

Year Ended December 31, 2024 2023 2022

(Dollars and shares in millions, except per share amounts)

Net income attributable to UScellular shareholders $ 54 $ 30 $ 155

Weighted average number of shares used in basic earnings per share 85 85 86

Net income (loss) attributable to UScellular shareholders $ ( 39 ) $ 54 $ 30

Weighted average number of shares used in basic earnings (loss) per share 86 85 85

Effects of dilutive securities — 2 1

Weighted average number of shares used in diluted earnings per share 87 86 87

Basic earnings per share attributable to UScellular shareholders $ 0.64 $ 0.35 $ 1.80

Diluted earnings per share attributable to UScellular shareholders $ 0.63 $ 0.35 $ 1.77

Certain Common Shares issuable upon the exercise of stock options or vesting of performance and restricted stock units were not included in weighted average diluted shares outstanding for the calculation of Diluted earnings per share attributable to UScellular shareholders because their effects were antidilutive.

The number of such Common Shares excluded was 1 million in 2023 and less than 1 million in each of 2022 and 2021.

Weighted average number of shares used in diluted earnings (loss) per share 86 87 86

Basic earnings (loss) per share attributable to UScellular shareholders $ ( 0.46 ) $ 0.64 $ 0.35

Diluted earnings (loss) per share attributable to UScellular shareholders $ ( 0.46 ) $ 0.63 $ 0.35

Certain Common Shares issuable upon the exercise of stock options or vesting of performance and restricted stock units were not included in weighted average diluted shares outstanding for the calculation of Diluted earnings (loss) per share attributable to UScellular shareholders because their effects were antidilutive.

The number of such Common Shares excluded was 3 million, 1 million and less than 1 million in 2024, 2023 and 2022, respectively.

Note 7 Divestitures

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.

On May 28, 2024, UScellular announced that its Board of Directors unanimously approved the execution of a Securities Purchase Agreement (Securities Purchase Agreement) by and among TDS, UScellular, T-Mobile US, Inc.

(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 for a purchase price, subject to adjustments, as specified in the Securities Purchase Agreement, of $ 4,400 million, which is payable in a combination of cash and the assumption of up to approximately $ 2,000 million in debt.

The purchase price includes $ 100 million contingent on the satisfaction of certain financial and operational metrics.

The purchase price also includes $ 400 million allocated to certain wireless spectrum licenses 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 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 sole purpose of providing continued, uninterrupted service to customers.

UScellular expects to present the wireless operations and select spectrum assets sold to T-Mobile as discontinued operations if and when the accounting criteria is met.

The sale of the wireless business to T-Mobile is expected to close in mid-2025, subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions.

Index to Financial Statements and Supplementary Data

On October 17, 2024, UScellular, and certain subsidiaries of UScellular, entered into a License Purchase Agreement (Verizon Purchase Agreement) with Verizon Communications, Inc.

(Verizon) 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 for total proceeds of $ 1,000 million.

As of December 31, 2024, the book value of the wireless spectrum licenses to be sold was $ 586 million.

The transaction is subject to regulatory approval and other customary closing conditions, and is contingent on the closing of the T-Mobile transaction and the termination of the T-Mobile Short-Term Spectrum Manager Lease Agreement.

On November 6, 2024, UScellular, and certain subsidiaries of UScellular, entered into a License Purchase Agreement (AT&T Purchase Agreement) with New Cingular Wireless PCS, LLC (AT&T), a subsidiary of AT&T Inc.

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 for total proceeds of $ 1,018 million, subject to certain purchase price adjustments.

As of December 31, 2024, the book value of the wireless spectrum licenses to be sold was $ 859 million.

The transaction is subject to regulatory approval and other customary closing conditions and substantially all of the licenses subject to the transaction are contingent on the closing of the T-Mobile transaction.

The purchase price includes $ 232 million allocated to certain wireless spectrum licenses that are held by an entity in which UScellular is a non-controlling limited partner.

The strategic alternatives review process is ongoing as UScellular works toward closing the transactions signed during 2024, including the T-Mobile, Verizon and AT&T transactions and continues to seek to opportunistically monetize its spectrum assets that are not subject to the Securities Purchase Agreement, the Verizon Purchase Agreement, or the AT&T Purchase Agreement.

UScellular incurred third-party expenses related to the announced transactions and strategic alternatives review of $ 35 million and $ 8 million for the years ended December 31, 2024 and 2023 , respectively, which are included in Selling, general and administrative expenses.

UScellular also assessed whether the execution of the Securities Purchase Agreement constituted a significant change in the way it expects to operate its long-lived assets.

Specifically, given the Securities Purchase Agreement, and UScellular's plan to divest of its wireless operations, UScellular expects to generate cash flows from the wireless operations separately from the retained business.

Therefore, in the second quarter of 2024, UScellular bifurcated the historical single asset group into two asset groups – wireless and towers.

At that time, UScellular also assessed whether an impairment test of its long-lived assets was required and determined that there was no triggering event present due to the factors just described that required a recoverability test to be performed.

In the third quarter of 2024, UScellular re-assessed whether an impairment test of its long-lived assets was required considering the wireless spectrum license impairment and determined that there was no triggering event that required a recoverability test to be performed.

No additional changes were made to its asset groups nor were any triggering events identified during the fourth quarter of 2024.

As part of the transaction, UScellular entered into a Put/Call Agreement with T-Mobile whereby T-Mobile has the right to call certain spectrum assets and UScellular has the right to put certain spectrum assets to T-Mobile for an aggregate agreed upon price of $ 106 million.

The call option notice period started on May 24, 2024, and the put exercise period starts at the close of the broader transaction.

There was no cash exchanged at the inception of the Put/Call Agreement.

All license transfers pursuant to any put/call are subject to Federal Communications Commission (FCC) approval.

UScellular accounts for this instrument as a net written call option and records such option at fair value each reporting period unless/until such option is exercised or terminated.

UScellular estimated the fair value of the net written call option at $ 5 million as of December 31, 2024, which was recorded to Other current liabilities in the Consolidated Balance Sheet.

The change in fair value is recorded to (Gain) loss on license sales and exchanges, net in the Consolidated Statement of Operations.

Note 8 Intangible Assets

UScellular reviews opportunities to acquire additional wireless spectrum, including pursuant to FCC auctions.

UScellular also may seek to divest outright or exchange wireless spectrum that is not strategic to its long-term success.

In February 2021, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 254 wireless spectrum licenses in the 3.7-3.98 GHz bands (Auction 107) 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 was obligated to pay approximately $ 179 million in total from 2021 through 2025 related to relocation costs and accelerated relocation incentive payments.

Such additional costs were accrued and capitalized at the time the licenses were granted, and are adjusted as necessary as the estimated obligation changes.

UScellular paid $ 122 million, $ 8 million and $ 36 million related to the additional costs for the years ended December 31, 2023, 2022 and 2021, respectively.

At December 31, 2023, the remaining estimated payments of approximately $ 13 million are included in Other current liabilities in the Consolidated Balance Sheet.

At December 31, 2022, the remaining estimated payments of approximately $ 133 million and $ 8 million were included in Other current liabilities and Other deferred liabilities and credits, respectively, in the Consolidated Balance Sheet.

On February 24, 2021, the FCC announced by way of Public Notice that UScellular was the provisional winning bidder of 254 wireless spectrum licenses in the 3.7-3.98 GHz bands for $ 1,283 million in Auction 107.

UScellular paid $ 30 million of this amount in 2020 and the remainder in March 2021 and the wireless spectrum licenses were granted by the FCC in July 2021.

Additionally, UScellular was obligated to pay relocation costs and accelerated relocation incentive payments of $ 8 million, $ 122 million, $ 8 million and $ 36 million in the years ended December 31, 2024, 2023, 2022 and 2021, respectively.

Such additional costs were estimated, accrued and capitalized at the time the licenses were granted and have been adjusted as such costs were finalized.

UScellular received full access to the spectrum in the third quarter of 2023.

Wireless Spectrum License Impairment

Wireless spectrum licenses represent a significant component of UScellular’s consolidated assets.

Wireless spectrum licenses are considered to be indefinite-lived assets, and therefore, are not amortized but are tested for impairment annually or more frequently if there are events or circumstances that cause UScellular to believe that their carrying values exceed their fair values.

Wireless spectrum licenses are tested for impairment at the level of reporting referred to as a unit of accounting.

Index to Financial Statements and Supplementary Data

In January 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 380 wireless spectrum licenses in the 3.45-3.55 GHz band (Auction 110) for $ 580 million.

UScellular paid $ 20 million of this amount in 2021 and the remainder in the first quarter of 2022.

The wireless spectrum licenses from Auction 110 were granted by the FCC in May 2022.

As a result of executing the Securities Purchase Agreement with T-Mobile during the second quarter of 2024, UScellular bifurcated its historical single unit of accounting into two units of accounting – wireless spectrum licenses to be sold under the Securities Purchase Agreement and wireless spectrum licenses to be retained.

During the third quarter of 2024, UScellular’s efforts to monetize its spectrum assets not subject to the Securities Purchase Agreement provided new evidence that the highest and best use of the retained spectrum to current buyers would be in separate tranches.

As a result, UScellular further divided its wireless spectrum licenses units of accounting from one retained unit into eleven units, resulting in twelve total units of accounting.

UScellular concluded that there were events and circumstances in the third quarter of 2024 that caused UScellular to believe the carrying values of five of the units of accounting may exceed their respective fair values (i.e.

triggering event), and accordingly a quantitative impairment assessment was performed for those units.

There was no triggering event for the other units of accounting.

A market approach was used for purposes of the quantitative impairment assessment to value the wireless spectrum licenses for the five units tested, using a range of values established largely through industry benchmarks, FCC auction data, and precedent transactions.

The midpoint of the range was established as the estimate of fair value for each unit of accounting.

Based on this valuation, the fair value of the wireless spectrum licenses exceeded their respective carrying values by amounts ranging from 9 % to 80 % for three of the units of accounting.

For two of the units of accounting, the fair value of the wireless spectrum licenses was less than the respective carrying value, and a $ 136 million impairment was recorded to Loss on impairment of licenses in the Consolidated Statement of Operations within UScellular’s Wireless segment during the third quarter of 2024.

Substantially all of the impairment loss related to the retained high-band spectrum unit of accounting which includes the 28 GHz, 37 GHz and 39 GHz frequency bands, the carrying value of which was $ 161 million after the impairment loss.

The impairment loss is driven by the change in the units of accounting described above combined with lower fair value primarily attributed to high-band spectrum as a result of industry-wide challenges encountered related to the operationalization of this spectrum.

UScellular performed a qualitative impairment assessment as of its annual testing date of November 1, 2024 to determine whether the wireless spectrum licenses were impaired.

Based on the impairment assessment performed, there was no further quantitative assessment performed or impairment indicated in the fourth quarter of 2024.

Note 9 Investments in Unconsolidated Entities

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Total liabilities and equity $ 7,744 $ 7,386

Index to Financial Statements and Supplementary Data

Year Ended December 31, 2024 2023 2022

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Net income $ 1,617 $ 1,566 $ 1,597

Index to Financial Statements and Supplementary Data

Note 10 Property, Plant and Equipment

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Lessee Agreements

UScellular’s most significant leases are for land and tower spaces, network facilities, retail spaces, and offices.

Nearly all of UScellular’s leases are classified as operating leases, although it does have a small number of finance leases.

UScellular has agreements with both lease and nonlease components, which are accounted for separately.

As part of the present value calculation for the lease liabilities, UScellular uses an incremental borrowing rate as the rates implicit in the leases are not readily determinable.

The incremental borrowing rates used for lease accounting are based on UScellular's unsecured rates, adjusted to approximate the rates at which UScellular would be required to borrow on a collateralized basis over a term similar to the recognized lease term.

UScellular applies the incremental borrowing rates to lease components using a portfolio approach based upon the length of the lease term.

The cost of nonlease components in UScellular’s lease portfolio (e.g., utilities and common area maintenance) are not typically predetermined at lease commencement and are expensed as incurred at their relative standalone price.

Variable lease expense occurs when, subsequent to the lease commencement, lease payments are made that were not originally included in the lease liability calculation.

UScellular’s variable lease payments include lease payment escalations that are tied to an index, real estate taxes, and additional payments linked to performance.

The incremental changes are recorded as variable lease expense and are not included in the right-of-use assets or lease liabilities.

The identified lease term determines the periods to which expense is allocated and is also utilized in the right-of-use asset and liability calculations.

UScellular's most significant leases are for land and tower spaces, network facilities, retail spaces, and offices, substantially all of which are classified as operating leases.

Many of UScellular's leases include renewal and early termination options.

At lease commencement, the lease terms include options to extend the lease when UScellular is reasonably certain that it will exercise the options.

The lease terms do not include early termination options unless UScellular is reasonably certain to exercise the options.

UScellular has applied the portfolio approach in cases where asset classes have similar lease characteristics including tower space, retail, and certain ground lease asset classes.

Lease terms include options to extend or terminate when it is reasonably certain that UScellular will exercise the option.

UScellular has recognized a right-of-use asset and a corresponding lease liability that represents the present value of UScellular's obligation to make payments over the lease term.

The present value of the lease payments is calculated using an incremental borrowing rate, which was determined using a portfolio approach based on UScellular's unsecured rates, adjusted to approximate the rates at which UScellular would be required to borrow on a collateralized basis over a term similar to the recognized lease term.

Lease and nonlease components are accounted for separately and the cost of nonlease components (e.g., utilities and common area maintenance) are typically expensed as incurred at their relative standalone price.

UScellular recognizes variable lease expense related to lease payments that were not originally included in the lease liability calculation, which primarily relate to lease payment escalations that are tied to an index, real estate taxes, and additional payments linked to performance.

The following table shows the components of lease cost included in the Consolidated Statement of Operations:

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Lessor Agreements

UScellular's most significant lessor leases are for tower space.

All of UScellular’s lessor leases are classified as operating leases.

A lease is generally present in a contract if the lessee controls the use of identified property, plant, or equipment for a period of time in exchange for consideration.

UScellular’s lessor agreements with lease and nonlease components are generally accounted for separately.

The identified lease term determines the periods to which revenue is allocated over the term of the lease.

UScellular's most significant lessor leases are for tower space, all of which are classified as operating leases.

Many of UScellular's leases include renewal and early termination options.

At lease commencement, lease terms include options to extend the lease when UScellular is reasonably certain that lessees will exercise the options.

Lease terms would not include periods after the date of a termination option that lessees are reasonably certain to exercise.

Variable lease income occurs when, subsequent to the lease commencement, lease payments are received that were not originally included in the lease receivable calculation.

UScellular’s variable lease income is primarily a result of leases with escalations that are tied to an index.

The incremental increases due to the index changes are recorded as variable lease income.

Lease terms include options to extend or terminate when it is reasonably certain that the lessee will exercise the option.

UScellular’s lessor agreements with lease and nonlease components are generally accounted for separately.

UScellular recognizes variable lease income related to lease payments that were not originally included in the lease receivable calculation, which primarily relate to lease payment escalations that are tied to an index.

The following table shows the components of lease income which are included in Service revenues in the Consolidated Statement of Operations:

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Operating lease income $ 103 $ 101 $ 93

Index to Financial Statements and Supplementary Data

The maturities of expected lease payments to be received are as follows:

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Total future lease maturities $ 311

Index to Financial Statements and Supplementary Data

Note 12 Asset Retirement Obligations

UScellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations.

Asset retirement obligations generally include obligations to restore leased land, towers, retail store and office premises to their pre-lease conditions.

UScellular is subject to asset retirement obligations associated with certain cell sites, land, switching offices, retail stores and office locations.

These obligations are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

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Revolving Credit Agreement

At December 31, 2023, UScellular had a revolving credit agreement available for general corporate purposes.

At December 31, 2024, UScellular had an unsecured revolving credit agreement available for general corporate purposes.

Amounts under the agreement may be borrowed, repaid and reborrowed from time to time until maturity in July 2026.

The following table summarizes the revolving credit agreement as of December 31, 2023:

The following table summarizes the unsecured revolving credit agreement as of December 31, 2024:

(Dollars in millions)

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Letters of credit outstanding $ —

Amount borrowed $ —

Amount borrowed and outstanding $ —

Amount available for use $ 300

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UScellular’s credit spread and commitment fees on its revolving credit agreement may be subject to increase if its current credit rating from nationally recognized credit rating agencies is lowered, and may be subject to decrease if the rating is raised.

Index to Financial Statements and Supplementary Data

Term Loan Agreements

The following table summarizes the term loan credit agreements as of December 31, 2023:

Term Loan 1 Term Loan 2 Term Loan 3 Total

The following table summarizes the unsecured term loan credit agreements as of December 31, 2024:

Term Loan 1 1

Term Loan 2 Term Loan 3 Total

(Dollars in millions)

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Quarterly installments $ 4 million from March 2024 to December 2025;

$ 4 million from March 2024 to December 2025;

$ 8 million from March 2026 to maturity date

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$ 1 million from December 2026 to maturity date

1 During 2024, UScellular repaid $ 40 million, in addition to required quarterly installments, under its term loan agreement due July 2026.

Index to Financial Statements and Supplementary Data

Export Credit Financing Agreement

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At December 31, 2024, UScellular, through its subsidiaries, had a $ 450 million receivables securitization agreement that permits securitized borrowings using its equipment installment plan receivables.

In September 2023, UScellular amended the agreement to extend the maturity date to September 2025.

Amounts under the agreement may be borrowed, repaid and reborrowed from time to time until maturity.

Amounts under the agreement may be borrowed, repaid and reborrowed from time to time until September 2025.

Unless the agreement is amended to extend the maturity date, repayments based on receivable collections commence in October 2025.

1 unchanged sentence

During 2024, UScellular borrowed $ 40 million and repaid $ 188 million under the agreement.

As of December 31, 2023, the outstanding borrowings under the agreement were $ 150 million and the unused borrowing capacity was $ 300 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement.

As of December 31, 2024, the outstanding borrowings under the agreement were $ 2 million and classified as Current portion of long-term debt in the Consolidated Balance Sheet, and the unused borrowing capacity was $ 448 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement.

As of December 31, 2024, the USCC Master Note Trust held $ 94 million of assets available to be pledged as collateral for the receivables securitization agreement.

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Refer to Note 15 — Variable Interest Entities for additional information.

In January 2024, UScellular repaid $ 50 million under the agreement.

Repurchase Agreement

At December 31, 2023, UScellular, through a subsidiary (the repo subsidiary), had 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.

In January 2023, UScellular amended the repurchase agreement to extend the expiration date to January 2024.

The outstanding borrowings bear interest at a rate of the lender's cost of funds (which has historically tracked closely to SOFR) plus 1.35 %.

As of December 31, 2022, the outstanding borrowings under the agreement were $ 60 million and were included in Other current liabilities in the Consolidated Balance Sheet.

During 2023, the repo subsidiary repaid $ 60 million under the agreement.

As of December 31, 2023, there were no outstanding borrowings under the agreement and the unused borrowing capacity was $ 200 million, which was restricted from being borrowed due to covenants within the TDS and UScellular credit agreements that limit secured borrowings on an enterprise-wide basis.

As of December 31, 2023, UScellular held $ 669 million of assets available for inclusion in the repurchase facility;

these assets are distinct from the assets held by the USCC Master Note Trust for UScellular's receivables securitization agreement.

The repurchase agreement expired in January 2024.

Index to Financial Statements and Supplementary Data

Debt Covenants and Other

The revolving credit agreement, term loan agreements, export credit financing agreement and receivables securitization agreement require UScellular to comply with certain affirmative and negative covenants, which include certain financial covenants that may restrict the borrowing capacity available.

In March 2023, the agreements were amended to require UScellular to maintain the Consolidated Leverage Ratio as of the end of any fiscal quarter at a level not to exceed the following:

4.25 to 1.00 from January 1, 2023 through March 31, 2024;

UScellular is required to maintain the Consolidated Leverage Ratio as of the end of any fiscal quarter at a level not to exceed the following:

4.25 to 1.00 from January 1, 2023 to March 31, 2024;

4.00 to 1.00 from April 1, 2024 through March 31, 2025;

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UScellular entered into a performance guaranty whereby UScellular guarantees the performance of certain wholly-owned subsidiaries under the receivables securitization agreement and repurchase agreement.

Index to Financial Statements and Supplementary Data

Other Long-Term Debt

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The annual requirements for principal payments on long-term debt are approximately $ 22 million, $ 228 million, $ 158 million, $ 286 million and $ 5 million for the years 2025 through 2029, respectively.

These amounts do not include payments on the $ 150 million of outstanding borrowings under the receivables securitization agreement.

The 2025 amount includes repayment of $ 2 million of outstanding borrowings under the receivables securitization agreement.

If the maturity date of the facility is not extended, principal repayments begin in October 2025.

Principal repayments are not scheduled but are instead based on actual receivable collections.

Index to Financial Statements and Supplementary Data

The covenants associated with UScellular’s long-term debt obligations, among other things, restrict UScellular’s ability, subject to certain exclusions, to incur additional liens, enter into sale and leaseback transactions, and sell, consolidate or merge assets.

If the T-Mobile transaction is consummated, UScellular expects to repay outstanding borrowings under certain long-term debt obligations.

UScellular’s long-term debt notes do not contain any provisions resulting in acceleration of the maturities of outstanding debt in the event of a change in UScellular’s credit rating.

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UScellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts.

If UScellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss.

If only a range of loss can be determined, the best estimate within that range is accrued;

if none of the estimates within that range is better than another, the low end of the range is accrued.

The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events.

The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures.

The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

UScellular had no material accruals with respect to legal proceedings and unasserted claims as of both December 31, 2024 and 2023.

Index to Financial Statements and Supplementary Data

In April 2018, the United States Department of Justice (DOJ) notified UScellular and its parent, TDS, that it was conducting inquiries of UScellular and TDS under the federal False Claims Act relating to UScellular’s participation in wireless spectrum license auctions 58, 66, 73 and 97 conducted by the FCC.

UScellular is or was a limited partner in several limited partnerships which qualified for the 25 % bid credit in each auction.

The investigation arose from civil actions under the Federal False Claims Act brought by private parties in the U.S.

The investigation arose from two civil actions under the Federal False Claims Act brought by private parties in the U.S.

District Court for the Western District of Oklahoma.

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District Court for the District of Columbia.

In March 2023, the District Court for the District of Columbia granted UScellular’s motions to dismiss the two actions.

The private party plaintiffs are appealing the district court’s decisions to grant the motions to dismiss.

The appeals are pending before the U.S.

In March 2023, the District Court for the District of Columbia granted UScellular’s motions to dismiss both actions.

The private party plaintiffs appealed the district court’s orders granting the motions to dismiss.

On February 11, 2025, the U.S.

Court of Appeals for the D.C.

Circuit affirmed the dismissal of one matter, while the second matter remains pending before the appellate court.

UScellular believes that its arrangements with the limited partnerships and the limited partnerships’ participation in the FCC auctions complied with applicable law and FCC rules.

At this time, UScellular cannot predict the outcome of any proceeding.

At this time, UScellular cannot predict the outcome of the matter remaining before the appellate court.

On May 2, 2023, a putative stockholder class action was filed against TDS and UScellular and certain current and former officers and directors in the United States District Court for the Northern District of Illinois.

An Amended Complaint was filed on September 1, 2023, which names TDS, UScellular, and certain current UScellular officers and directors as defendants, and alleges that certain public statements made between May 6, 2022 and November 3, 2022 (the potential class period) regarding, among other things, UScellular’s business strategies to address subscriber demand, violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934.

The plaintiff seeks to represent a class of stockholders who purchased TDS equity securities during the potential class period and demands unspecified monetary damages.

UScellular is unable at this time to determine whether the outcome of this action would have a material impact on its results of operations, financial condition, or cash flows.

The plaintiff seeks to represent a class of stockholders who purchased TDS equity securities during the potential class period and demands unspecified money damages.

On June 18, 2024, a stockholder derivative lawsuit was filed in the Circuit Court of Cook County, Illinois, Chancery Division against UScellular, certain TDS and UScellular directors and officers, and nominal defendant TDS.

The derivative lawsuit takes issue with the same public statements made between May 6, 2022 and November 3, 2022, alleging that the fact that the statements were made was a breach of fiduciary duty on the part of the officer and director defendants, and bringing claims for indemnification and contribution against the officer and director defendants and UScellular.

In addition to indemnification and contribution, the plaintiff seeks money damages and the implementation of certain governance proposals.

On January 31, 2025, a second stockholder derivative lawsuit was filed in the Circuit Court of Cook County, Illinois, Chancery Division against certain TDS and UScellular directors and officers, and nominal defendant TDS.

The derivative lawsuit makes similar claims as in the derivative lawsuit filed in 2024, and seeks similar relief.

UScellular is unable at this time to determine whether the outcome of these actions would have a material impact on its results of operations, financial condition, or cash flows.

UScellular intends to contest plaintiffs’ claims vigorously on the merits.

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UScellular reviews the criteria for a controlling financial interest at the time it enters into agreements and subsequently when events warranting reconsideration occur.

These VIEs have risks similar to those described in the “Risk Factors” in UScellular’s Form 10-K for the year ended December 31, 2023.

Index to Financial Statements and Supplementary Data

UScellular formed USCC EIP LLC (Seller/Sub-Servicer), USCC Receivables Funding LLC (Transferor) and the Trust, collectively the special purpose entities (SPEs), to facilitate a securitized borrowing using its equipment installment plan receivables.

These VIEs have risks similar to those described in the “Risk Factors” in this Form 10-K.

UScellular formed USCC EIP LLC (Seller/Sub-Servicer), USCC Receivables Funding LLC (Transferor) and the USCC Master Note Trust (Trust), collectively the special purpose entities (SPEs), to facilitate a securitized borrowing using its equipment installment plan receivables.

Under a Receivables Sale Agreement, UScellular wholly-owned, majority-owned and unconsolidated entities, collectively referred to as “affiliated entities”, transfer device equipment installment plan contracts to the Seller/Sub-Servicer.

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(King Street Wireless) and King Street Wireless, Inc., the general partner of King Street Wireless.

Index to Financial Statements and Supplementary Data

These particular VIEs are collectively referred to as designated entities.

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See Note 13 — Debt for additional information.

Index to Financial Statements and Supplementary Data

Unconsolidated VIEs

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UScellular made contributions, loans or advances to its VIEs totaling $ 331 million, $ 306 million and $ 282 million during 2024, 2023 and 2022, respectively;

of which $ 271 million in 2023 and $ 249 million in 2022 are related to USCC EIP LLC as discussed above.

of which $ 285 million, $ 271 million and $ 249 million, in 2024, 2023 and 2022, respectively are related to USCC EIP LLC as discussed above.

UScellular may agree to make additional capital contributions and/or advances to these or other VIEs and/or to their general partners to provide additional funding for their operations or the development of wireless spectrum licenses granted in various auctions.

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There is no assurance that UScellular will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.

The limited partnership agreement of Advantage Spectrum also provides the general partner with a put option whereby the general partner may require the limited partner, a subsidiary of UScellular, to purchase its interest in the limited partnership.

The put option has not been exercised.

Index to Financial Statements and Supplementary Data

Note 16 Noncontrolling Interests

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The corresponding carrying value of the mandatorily redeemable noncontrolling interests in finite-lived consolidated partnerships at December 31, 2024, was $ 14 million, and is included in Noncontrolling interests in the Consolidated Balance Sheet.

The excess of the aggregate settlement value over the aggregate carrying value of these mandatorily redeemable noncontrolling interests is due primarily to the unrecognized appreciation of the noncontrolling interest holders’ share of the underlying net assets in the consolidated partnerships.

Neither the noncontrolling interest holders’ share, nor UScellular’s share, of the appreciation of the underlying net assets of these subsidiaries is reflected in the consolidated financial statements.

Neither the noncontrolling interest holders’ share, nor UScellular’s share, of the appreciation of the underlying net assets and operations of these subsidiaries is reflected in the consolidated financial statements.

Note 17 Common Shareholders’ Equity

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As of December 31, 2024, a majority of UScellular’s outstanding Common Shares and all of UScellular’s outstanding Series A Common Shares were held by TDS.

Index to Financial Statements and Supplementary Data

Common Share Repurchase Program

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The Pricing Committee also was authorized to decrease the cumulative amount of the authorization at any time, but has not taken any action to do so at this time.

During 2024, UScellular repurchased 939,999 Common Shares for $ 55 million at an average cost per share of $ 58.06 .

As of December 31, 2024, the total cumulative amount of Common Shares authorized to be purchased is 986,942 .

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At December 31, 2024, UScellular had reserved 13,035,000 Common Shares for equity awards granted and to be granted under the Long-Term Incentive Plans and 480,000 Common Shares for issuance under the Non-Employee Director compensation plan.

Index to Financial Statements and Supplementary Data

UScellular uses treasury stock to satisfy requirements for Common Shares issued pursuant to its various stock-based compensation plans.

Long-Term Incentive Plans – Restricted Stock Units

UScellular grants restricted stock unit awards to key employees that generally vest after three years or one-third graded vesting each year.

UScellular grants restricted stock unit awards to key employees that generally vest after two years , three years or one-third graded vesting each year.

Each outstanding restricted stock unit is convertible into one Common Share Award.

The restricted stock unit awards currently outstanding were granted in 2022, 2023 and 2024 and vest in 2025, 2026 and 2027.

UScellular modified certain restricted stock unit awards in 2024, which resulted in the recognition of $ 4 million of incremental expense in 2024.

UScellular estimates the fair value of restricted stock units based on the closing market price of UScellular shares on the date of grant.

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Long-Term Incentive Plans – Performance Share Units

Beginning in 2017, UScellular granted performance share units to key employees.

The performance share units generally vest after three years .

Index to Financial Statements and Supplementary Data

During 2023, UScellular’s Long-Term Incentive Compensation Committee adopted resolutions to apply a 75 % floor, and allow for an additional discretionary amount up to a maximum of 100 %, for the performance based operating target for the 2021 and 2022 grants.

These modifications resulted in additional expense recognized in 2023 of $ 3 million and $ 1 million for the 2021 and 2022 grants, respectively.

For the 2021 and 2022 grants, each recipient may be entitled to shares of UScellular common stock equal to 75 % to 200 % of a communicated target award depending on the achievement of a predetermined Return on Capital target over the performance period, which is a three -year period beginning on January 1 in the year of grant to December 31 of the third year.

For the 2023 grants, each recipient may be entitled to shares of UScellular common stock equal to 0 % to 150 % of a communicated target award depending on the achievement of a predetermined Return on Capital target over the performance period, which is a one -year period beginning on January 1 in the year of grant to December 31 in the year of grant.

UScellular grants performance share units to key employees that generally vest after three years .

UScellular modified certain performance share unit awards in 2023, which resulted in the recognition of $ 10 million and $ 4 million of incremental expense in 2024 and 2023, respectively.

UScellular modified certain performance share unit awards in 2024, which resulted in the recognition of $ 6 million of incremental expense in 2024.

For the 2022 grants, each recipient may be entitled to shares of UScellular common stock equal to 75 % to 200 % of a communicated target award depending on the achievement of a predetermined Return on Capital target over the performance period, which is a three -year period from January 1, 2022 to December 31, 2024.

For the 2024 grants, each recipient may be entitled to shares of UScellular common stock equal to 0 % to 175 % of a communicated target award depending on the achievement of predetermined Return on Capital and Simple Free Cash Flow targets over the performance period, which is a one -year period from January 1, 2024 to December 31, 2024.

The performance share units currently outstanding were granted in 2022, 2023 and 2024 and will vest in 2025, 2026 and 2027, respectively.

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Each reporting period, during the performance period, the estimate of the number of performance share units expected to vest is reviewed and stock compensation expense is adjusted as appropriate to reflect the revised estimate of the aggregate fair value of the performance share units expected to vest.

Index to Financial Statements and Supplementary Data

A summary of UScellular's nonvested performance share units and changes during 2024 is presented in the table below:

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Vested ( 263,000 ) $ 20.06

Change in units based on approved performance factors 114,000 $ 23.06

Forfeited ( 109,000 ) $ 21.35

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UScellular issued 20,000 , 36,000 and 22,000 Common Shares in 2024, 2023 and 2022, respectively, under its Non-Employee Director compensation plan.

Index to Financial Statements and Supplementary Data

Stock‑Based Compensation Expense

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UScellular’s tax benefits realized from the vesting of awards totaled $ 10 million in 2024.

Index to Financial Statements and Supplementary Data

Note 19 Business Segment Information

During the second quarter of 2024, UScellular modified its reporting structure due to the planned disposal of the wireless operations and, as a result, disaggregated the UScellular operations into two reportable segments – Wireless and Towers.

This presentation reflects how UScellular's chief operating decision maker allocates resources and evaluates operating performance following this strategic shift.

Wireless generates its revenues by providing wireless services and equipment.

Towers generates its revenues by leasing tower space on UScellular-owned towers to other wireless carriers.

The Towers segment records rental revenue and the Wireless segment records a related expense when the Wireless segment uses company-owned towers to locate its network equipment, using estimated market pricing - this revenue and expense is eliminated in consolidation.

Prior periods have been updated to conform to the new reportable segments.

Adjusted earnings before interest, taxes, depreciation, amortization and accretion (Adjusted EBITDA) is the segment measure of profit or loss reported to the chief operating decision maker for purposes of assessing the segments' performance and making capital allocation decisions.

Adjusted EBITDA is a non-GAAP financial measure that shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, gains and losses, and expenses related to the strategic alternatives review of UScellular.

UScellular believes Adjusted EBITDA is a useful measure of UScellular's operating results before significant recurring non-cash charges, gains and losses, and other items as presented below as it provides additional relevant and useful information to investors and other users of UScellular's 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.

UScellular's chief operating decision maker is the TDS President and Chief Executive Officer.

Index to Financial Statements and Supplementary Data

Year Ended December 31, 2024 Wireless Towers Total

(Dollars in millions)

Revenues from external customers $ 3,667 $ 103 $ 3,770

Intersegment revenues — 131 131

3,667 234 3,901

Reconciliation of revenue:

Elimination of intersegment revenues ( 131 )

Total operating revenues $ 3,770

Cost of services (excluding Depreciation, amortization and accretion reported below) 777 78

Cost of equipment and products 906 —

Selling, general and administrative 1,298 32

Expenses related to strategic alternatives review (included in Selling, general and administrative) ( 33 ) ( 2 )

Segment Adjusted EBITDA (Non-GAAP) $ 719 $ 126 $ 845

Reconciliation of Segment Adjusted EBITDA to Income (loss) before income taxes:

Depreciation, amortization and accretion ( 665 )

Expenses related to strategic alternatives review (included in Selling, general and administrative) ( 35 )

Loss on impairment of licenses ( 136 )

Loss on asset disposals, net ( 18 )

Loss on license sales and exchanges, net ( 3 )

Equity earnings of unconsolidated entities 161

Interest and dividend income 12

Interest expense ( 183 )

Income (loss) before income taxes $ ( 22 )

Other segment disclosures

Year Ended or as of December 31, 2024 Wireless Towers Segment Total UScellular

Depreciation, amortization and accretion $ ( 620 ) $ ( 45 ) $ ( 665 )

Loss on impairment of licenses ( 136 ) — ( 136 )

Loss on asset disposals, net ( 17 ) ( 1 ) ( 18 )

Loss on license sales and exchanges, net ( 3 ) — ( 3 )

Investments in unconsolidated entities 2

Total assets 3

Capital expenditures $ 554 $ 23 $ 577

Index to Financial Statements and Supplementary Data

Year Ended December 31, 2023 Wireless Towers Total

(Dollars in millions)

Revenues from external customers $ 3,805 $ 101 $ 3,906

Intersegment revenues — 127 127

3,805 228 4,033

Reconciliation of revenue:

Elimination of intersegment revenues ( 127 )

Total operating revenues $ 3,906

Cost of services (excluding Depreciation, amortization and accretion reported below) 794 73

Cost of equipment and products 988 —

Selling, general and administrative 1,334 34

Expenses related to strategic alternatives review (included in Selling, general and administrative) ( 8 ) —

Segment Adjusted EBITDA (Non-GAAP) $ 697 $ 121 $ 818

Reconciliation of Segment Adjusted EBITDA to Income before income taxes:

Depreciation, amortization and accretion ( 656 )

Expenses related to strategic alternatives review (included in Selling, general and administrative) ( 8 )

Loss on asset disposals, net ( 17 )

Gain on license sales and exchanges, net 2

Equity earnings of unconsolidated entities 158

Interest and dividend income 10

Interest expense ( 196 )

Income before income taxes $ 111

Other segment disclosures

Year Ended or as of December 31, 2023 Wireless Towers Segment Total UScellular

Depreciation, amortization and accretion $ ( 610 ) $ ( 46 ) $ ( 656 )

Gain (loss) on asset disposals, net ( 19 ) 2 ( 17 )

Gain on license sales and exchanges, net 2 — 2

Investments in unconsolidated entities 2

Total assets 3

Capital expenditures $ 580 $ 31 $ 611

Index to Financial Statements and Supplementary Data

Year Ended December 31, 2022 Wireless Towers Total

(Dollars in millions)

Revenues from external customers $ 4,076 $ 93 $ 4,169

Intersegment revenues — 123 123

4,076 216 4,292

Reconciliation of revenue:

Elimination of intersegment revenues ( 123 )

Total operating revenues $ 4,169

Cost of services (excluding Depreciation, amortization and accretion reported below) 807 71

Cost of equipment and products 1,216 —

Selling, general and administrative 1,376 32

Segment Adjusted EBITDA (Non-GAAP) $ 677 $ 113 $ 790

Reconciliation of Segment Adjusted EBITDA to Income before income taxes:

Depreciation, amortization and accretion ( 700 )

Loss on impairment of licenses ( 3 )

Loss on asset disposals, net ( 19 )

Gain on sale of business and other exit costs, net 1

Equity earnings of unconsolidated entities 158

Interest and dividend income 8

Interest expense ( 163 )

Income before income taxes $ 72

Other segment disclosures

Year Ended or as of December 31, 2022 Wireless Towers Segment Total UScellular

Depreciation, amortization and accretion $ ( 655 ) $ ( 45 ) $ ( 700 )

Loss on impairment of licenses ( 3 ) — ( 3 )

Loss on asset disposals, net ( 19 ) — ( 19 )

Gain on sale of business and other exit costs, net 1 — 1

Investments in unconsolidated entities 2

Total assets 3

Capital expenditures $ 689 $ 28 $ 717

1 The significant segment expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker.

Intersegment expenses are included within the amounts shown.

2 This item is not included in the evaluation of operating performance of the Wireless and Towers segments, and therefore is reported for "UScellular".

3 Assets are not provided at the individual segment level for Wireless and Towers, and therefore is reported for "UScellular".

The UScellular segments operate under a common capital structure, and management has historically considered its assets collectively as part of a combined wireless network.

Index to Financial Statements and Supplementary Data

Note 20 Supplemental Cash Flow Disclosures

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Aggregate value of Common Shares withheld $ 13 $ 9 $ 5

Cash receipts upon exercise of stock options 2 — —

Cash disbursements for payment of taxes ( 13 ) ( 6 ) ( 5 )

Net cash receipts (disbursements) from exercise of stock options and vesting of other stock awards $ ( 11 ) $ ( 6 ) $ ( 5 )

Software License Agreements

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At December 31, 2023, liabilities of $ 68 million and $ 35 million related to software license agreements were recorded to Other current liabilities and Other deferred liabilities and credits, respectively, in the Consolidated Balance Sheet.

Index to Financial Statements and Supplementary Data

Note 21 Certain Relationships and Related Transactions

Sidley Austin LLP is the principal law firm of UScellular and its subsidiaries:

Carlson, a director of UScellular, a director and non-executive Chair of the Board of Directors of TDS and a trustee and beneficiary of a voting trust that controls TDS is Senior Counsel at Sidley Austin LLP;

Kelsh, the former General Counsel of UScellular and the General Counsel and/or an Assistant Secretary of TDS and certain other subsidiaries of TDS is a partner at Sidley Austin LLP.

Carlson does not provide legal services to TDS, UScellular or their subsidiaries.

Sidley Austin LLP performs legal services for UScellular and its subsidiaries:

Carlson, TDS President and Chief Executive Officer as of February 1, 2025, a director of UScellular, a director and executive Chair of the Board of Directors of TDS and a trustee and beneficiary of a voting trust that controls TDS was formerly Senior Counsel at Sidley Austin LLP until January 31, 2025.

Kelsh, the former General Counsel of UScellular and the General Counsel and/or an Assistant Secretary of TDS and certain subsidiaries of TDS is a partner at Sidley Austin LLP.

Carlson did not provide legal services to TDS, UScellular or their subsidiaries.

UScellular and its subsidiaries incurred legal costs from Sidley Austin LLP of $ 7 million, $ 7 million and $ 5 million in 2024, 2023 and 2022, respectively.

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of United States Cellular Corporation and its subsidiaries (“the Company” or “UScellular”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of changes in equity, and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of United States Cellular Corporation and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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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 8. Financial Statements and Supplementary Data