What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-21 compared with 2024-02-16 · 336 added, 156 removed, 418 unchanged (54% of the section changed)

3 unchanged sentences

Terms used by UScellular

Operational Overview

Financial Overview

Financial Overview – UScellular

Wireless Operations

Towers Operations

Liquidity and Capital Resources

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however, certain calculated amounts and percentages are determined using the unrounded numbers.

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 in the Notes to Consolidated Financial Statements for additional information.

This report contains statements that are not based on historical facts, which may be identified by words such as “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects,” “will” and similar expressions.

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The accounting policies of UScellular conform to accounting principles generally accepted in the United States of America (GAAP).

However, UScellular uses certain “non-GAAP financial measures” in the MD&A.

However, UScellular uses certain “non-GAAP financial measures” in the MD&A and the business segment information.

A discussion of the reasons UScellular determines these metrics to be useful and reconciliations of these measures to their most directly comparable measures determined in accordance with GAAP are included in the disclosure under the heading Supplemental Information Relating to Non-GAAP Financial Measures within the MD&A of this report.

The following MD&A omits discussion of 2022 compared to 2021.

Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in UScellular's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 16, 2023, for that discussion.

Index to MD&A

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

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

UScellular is an 83%-owned subsidiary of Telephone and Data Systems, Inc.

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UScellular’s mission is to connect its customers to what matters most to them.

This includes providing exceptional wireless communication services which enhance consumers’ lives, increase the competitiveness of local businesses, and improve the efficiency of government operations in the markets UScellular serves.

This includes providing wireless communication services which enhance consumers’ lives, increase the competitiveness of local businesses, and improve the efficiency of government operations in the markets UScellular serves.

UScellular’s strategy is to attract and retain customers by providing a high-quality network, outstanding customer service, and competitive devices, plans and pricing - all provided with a local community focus.

Strategic efforts include:

▪ UScellular offers economical and competitively priced service plans and devices to its customers and is focused on increasing revenues from sales of related products such as device protection plans and from new services such as fixed wireless home internet.

In addition, UScellular is focused on increasing tower rent revenues and expanding its solutions available to business and government customers.

▪ UScellular continues to enhance its network capabilities, including by deploying 5G technology.

5G technology helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency.

UScellular's initial 5G deployment has predominantly used low-band spectrum to launch 5G services in portions of substantially all of its markets.

During 2023, UScellular continued to invest in 5G with a focus on deployment of mid-band spectrum, which will largely overlap portions of areas already covered with low-band 5G service.

5G service deployed over mid-band spectrum will further enhance speed and capacity for UScellular's mobility and fixed wireless services.

▪ UScellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its profitability.

As part of this strategy, UScellular may seek attractive opportunities to acquire and divest wireless spectrum as deemed necessary.

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.

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

▪ UScellular offers economical and competitively priced wireless service plans and devices to its customers and is focused on increasing revenues from sales of related products such as device protection plans and from services such as fixed wireless home internet.

In addition, UScellular is focused on expanding its solutions available to business and government customers.

▪ UScellular continues to enhance its network capabilities, including by deploying 5G technology to help address customers’ growing demand for data services and create opportunities for new services requiring high speed and reliability as well as low latency.

In 2019-2023, UScellular focused on 5G coverage and predominantly used low-band spectrum to launch 5G services in portions of substantially all of its markets.

During 2023 and 2024, UScellular has focused on deploying 5G over its mid-band spectrum, largely overlapping areas already covered with low-band 5G service to enhance speed and capacity for UScellular’s mobility and fixed wireless services.

Investments in the next several years are expected to be focused on continued mid-band spectrum deployment to enhance speed and capacity needs, building on the existing 5G coverage across UScellular’s footprint.

▪ UScellular seeks to grow revenue in its Towers segment primarily through increasing third-party colocations on existing towers through providing unique tower locations, attractive terms and streamlined implementation to third-party wireless operators.

Announced Transactions and Strategic Alternatives Review

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 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.

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.

To effect the disposition and wind down of the wireless operations in accordance with the terms of the Securities Purchase Agreement, UScellular expects that if the closing of the transaction were to occur that such closing 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.

UScellular also 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 financial statements.

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.

Index to MD&A

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 o f $35 million and $8 million for the years ended December 31, 2024 and 2023, respectively.

Significant Financial Matter

Net loss attributable to UScellular shareholders was $39 million for the year ended December 31, 2024.

Such net loss includes a non-cash charge related to the impairment of certain wireless spectrum licenses in the amount of $136 million ( $102 million , net of tax), which was recorded during the three months ended September 30, 2024.

The conclusion that this impairment was required was made in connection with the review and preparation of the September 30, 2024 financial statements.

See Note 8 — Intangible Assets for a detailed discussion regarding this impairment.

Refer to Supplemental Information to Non-GAAP Financial Measures within this MD&A for a reconciliation of the wireless spectrum license impairment, net of tax.

Index to MD&A

Terms Used by UScellular

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An account may include a variety of types of connections such as handsets and connected devices.

▪ Auctions 105, 107, 108 and 110 – Auction 105 was an FCC auction of 3.5 GHz wireless spectrum licenses that started in July 2020 and concluded in September 2020.

Auction 107 was an FCC auction of 3.7-3.98 GHz wireless spectrum licenses that started in December 2020 and concluded in February 2021.

Auction 110 was an FCC auction of 3.45-3.55 GHz wireless spectrum licenses that started in October 2021 and concluded in January 2022.

Auction 108 is an FCC auction of 2.5 GHz wireless spectrum licenses that started in July 2022 and concluded in August 2022.

▪ Auction 107 – Auction 107 was an FCC auction of 3.7-3.98 GHz wireless spectrum licenses that started in December 2020 and concluded in February 2021.

▪ Churn Rate – represents the percentage of the connections that disconnect service each month.

These rates represent the average monthly churn rate for each respective period.

▪ Colocations – represents instances where a third-party wireless carrier rents or leases space on a company-owned tower.

▪ Connected Devices – non-handset devices that connect directly to the UScellular network.

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Connections are associated with all types of devices that connect directly to the UScellular network.

▪ Tower Tenancy Rate – average number of tenants that lease space on company-owned towers, measured on a per-tower basis.

▪ Universal Service Fund (USF) – a system of telecommunications collected fees and support payments managed by the FCC intended to promote universal access to telecommunications services in the United States.

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Index to MD&A

Operational Overview

Financial Overview — UScellular

The following discussion and analysis compares financial results for the year ended December 31, 2024, to the year ended December 31, 2023 and the year ended December 31, 2023, to the year ended December 31, 2022.

Year Ended December 31, 2024 2023 2022 2024 vs.

2023 2023 vs.

(Dollars in millions)

Operating Revenues

Wireless $ 3,667 $ 3,805 $ 4,076 (4) % (7) %

Towers 234 228 216 3 % 5 %

Intra-company eliminations (131) (127) (123) (3) % (3) %

Total operating revenues 3,770 3,906 4,169 (3) % (6) %

Operating expenses

Wireless 3,757 3,743 4,075 — (8) %

Towers 156 151 148 3 % 2 %

Intra-company eliminations (131) (127) (123) (3) % (3) %

Total operating expenses 3,782 3,767 4,100 — (8) %

Operating income (loss) (12) 139 69 N/M N/M

Investment and other income (expense)

Equity in earnings of unconsolidated entities 161 158 158 2 % —

Interest and dividend income 12 10 8 19 % 26 %

Interest expense (183) (196) (163) 7 % (21) %

Total investment and other income (expense) (10) (28) 3 63 % N/M

Income (loss) before income taxes (22) 111 72 N/M 54 %

Income tax expense 10 53 37 (82) % 43 %

Net income (loss) (32) 58 35 N/M 67 %

Net income attributable to noncontrolling interests, net of tax 7 4 5 N/M (24) %

Net income (loss) attributable to UScellular shareholders $ (39) $ 54 $ 30 N/M 80 %

Adjusted OIBDA (Non-GAAP) 1

$ 845 $ 818 $ 790 3 % 4 %

Adjusted EBITDA (Non-GAAP) 1

$ 1,018 $ 986 $ 956 3 % 3 %

Capital expenditures 2

$ 577 $ 611 $ 717 (6) % (15) %

N/M - Percentage change not meaningful

1 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

2 Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.

Refer to individual segment discussions in this MD&A for additional details on operating revenues and expenses at the segment level.

2024-2023 Commentary

Equity in earnings of unconsolidated entities

Equity in earnings of unconsolidated entities represents UScellular’s share of net income from entities in which it has a noncontrolling interest and that are accounted for u sing the equity method or the net asset value practical expedient.

UScellular’s investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pre-tax income of $62 million and $65 million for 2024 and 2023, respectively.

See Note 9 — Investments in Unconsolidated Entities in the Notes to Consolid ated Financial Statements for additional information.

Index to MD&A

Interest expense

Interest expense decreased in 2024 due primarily to a decrease in the average principal balance outstanding on the receivables securitization agreement.

See Market Risk for additional information regarding maturities of long-term debt and weighted average interest rates.

Income tax expense

Income tax expense decreased in 2024 due primarily to the deferred tax impact of the wireless spectrum license impairment charge recorded in the third quarter of 2024.

See Note 5 — Income Taxes in the Notes to Consolidated Financial Statements for additional information.

2023-2022 Commentary

Equity in earnings of unconsolidated entities

UScellular’s investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pre-tax income of $65 million for both 2023 and 2022.

See Note 9 — Investments in Unconsolidated Entities in the Notes to Consolid ated Financial Statements for additional information.

Interest expense

Interest expense increased in 2023 due primarily to interest rate increases on variable rate debt.

See Market Risk for additional information regarding maturities of long-term debt and weighted average interest rates.

Income tax expense

Income tax expense increased in 2023 due primarily to the increase in Income before income taxes.

See Note 5 — Income Taxes in the Notes to Consolidated Financial Statements for additional information.

Index to MD&A

Wireless Operations

As of December 31, 2024 2023 2022

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Year Ended December 31, 2024 2023 2022 2024 vs.

2023 2023 vs.

Postpaid Activity and Churn

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N/M - Percentage change not meaningful

2024-2023 Commentary

Total postpaid handset net losses decreased in 2024 due primarily to lower defections as a result of improvements in churn, partially offset by lower gross additions as a result of continued aggressive industry-wide competition and a decrease in the pool of available customers.

Total postpaid connected device net additions increased in 2024 due primarily to a decrease in tablet, home phone, and mobile hotspot defections as a result of improvements in churn.

UScellular decommissioned its 3G Code Division Multiple Access (CDMA) network in 2024.

Total net additions (losses) for the year ended December 31, 2024 exclude a one-time adjustment to remove 11,000 connections that were dependent on the CDMA network.

2023-2022 Commentary

Total postpaid handset net losses increased in 2023 due primarily to lower gross additions resulting from aggressive industry-wide competition.

Total postpaid connected device net additions increased in 2023 due primarily to higher demand for fixed wireless home internet as well as decreases in tablet and mobile hotspot churn.

Index to MD&A

Postpaid Revenue

Year Ended December 31, 2024 2023 2022 2024 vs.

2023 2023 vs.

Average Revenue Per User (ARPU) $ 51.79 $ 51.01 $ 50.14 2 % 2 %

Average Revenue Per Account (ARPA) $ 131.32 $ 130.91 $ 130.39 — —

2024-2023 Commentary

Postpaid ARPU increased in 2024 due to an increase in favorable plan and product offering mix and an increase in cost recovery surcharges.

Postpaid ARPA was relatively flat in 2024 due to the impacts to Postpaid ARPU, offset by a decrease in the number of connections per account.

2023-2022 Commentary

Postpaid ARPU increased in 2023 due to favorable plan and product offering mix and an increase in device protection plan revenues, partially offset by an increase in promotional discounts.

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Index to MD&A

Financial Overview

The following discussion and analysis compares financial results for the year ended December 31, 2023, to the year ended December 31, 2022.

Financial Overview — Wireless

Year Ended December 31, 2024 2023 2022 2024 vs.

2023 2023 vs.

(Dollars in millions)

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$ 2,674 $ 2,742 $ 2,793 (2) % (2) %

Inbound roaming 32 67 (52) %

Other 210 201 239 5 % (16) %

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Depreciation, amortization and accretion 620 610 655 1 % (7) %

Loss on impairment of licenses — 3 N/M

Loss on impairment of licenses 136 — 3 N/M N/M

(Gain) loss on asset disposals, net 17 19 19 (11) % 3 %

(Gain) loss on sale of business and other exit costs, net — (1) N/M

(Gain) loss on license sales and exchanges, net (2) — N/M

(Gain) loss on sale of business and other exit costs, net — — (1) N/M N/M

(Gain) loss on license sales and exchanges, net 3 (2) — N/M N/M

Total operating expenses 3,757 3,743 4,075 — (8) %

Operating income $ 139 $ 69 N/M

Net income $ 58 $ 35 67 %

Operating income (loss) $ (90) $ 62 $ 1 N/M N/M

Adjusted OIBDA (Non-GAAP) 2

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▪ Retail Service – Postpaid and prepaid charges for voice, data and value-added services and cost recovery surcharges

▪ Inbound Roaming – Consideration from other wireless carriers whose customers use UScellular’s wireless systems when roaming

▪ Other Service – Amounts received from the Federal USF, third-party tower rental revenues, miscellaneous other service revenues and Internet of Things (IoT)

▪ Other Service – Amounts received from the Federal USF, inbound roaming, miscellaneous other service revenues and Internet of Things (IoT)

Equipment revenues consist of:

▪ Sales of wireless devices and related accessories to new and existing customers, agents, and third-party distributors

Index to MD&A

Key components of changes in the statement of operations line items were as follows:

2024-2023 Commentary

Total operating revenues

Retail service revenues decreased in 2024 primarily as a result of a decrease in average postpaid and prepaid connections, partially offset by an increase in Postpaid ARPU as previously discussed in the Operational Overview section.

Inbound roaming revenues decreased in 2023, primarily driven by lower data revenues resulting from lower rates.

Other service revenues increased in 2023, resulting from increases in tower rental revenues, partially offset by declines in miscellaneous revenues.

Equipment sales revenues decreased in 2023, due primarily to a decline in smartphone upgrades and gross additions, partially offset by a higher average price of new smartphone sales.

Equipment sales revenues decreased in 2024, due primarily to a decline in smartphone devices sold due to lower upgrades and gross additions, partially offset by a higher average price of new smartphone sales.

Wireless service providers have been aggressive promotionally and on price to attract and retain customers.

This includes both traditional carriers and cable companies operating as mobile virtual network operators (MVNOs).

UScellular expects promotional aggressiveness by traditional carriers and pricing pressures from cable companies to continue into the foreseeable future.

Operating revenues and Operating income have been negatively impacted in current and prior periods, and may be negatively impacted in future periods, by competitive promotional offers to new and existing customers.

This includes both traditional carriers and cable wireless companies.

UScellular expects promotional aggressiveness by traditional carriers to continue and pricing pressures from cable wireless companies and new entrants to increase into the foreseeable future.

Additionally, other larger wireless service providers have more developed networks and coverage as well as lower costs per subscriber than UScellular, which has negatively affected and may continue to negatively affect UScellular's ability to compete over time.

Operating revenues and Operating income (loss) have been negatively impacted by these factors in current and prior periods, and are expected to be negatively impacted in future periods.

System operations expenses

System operations expenses decreased in 2024, due primarily to a decrease in expenses driven by the shutdown of the 3G Code Division Multiple Access (CDMA) network in the first quarter of 2024, partially offset by increases in outbound roaming usage and maintenance, utilities, and cell site expenses.

Cost of equipment sold

Cost of equipment sold decreased in 2024, due primarily to a decline in smartphone devices sold due to lower upgrades and gross additions, partially offset by a higher average cost of new smartphone sales.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased in 2024, due primarily to decreases in various general and administrative and sales related expenses, partially offset by an increase in the strategic alternatives review expenses of $27 million.

Loss on impairment of licenses

Loss on impairment of licenses increased in 2024 due to the wireless spectrum license impairment charge recorded during the third quarter of 2024.

See Note 8 — Intangible Assets for a detailed discussion regarding this impairment.

2023-2022 Commentary

Total operating revenues

Retail service revenues decreased in 2023 primarily as a result of a decrease in average postpaid and prepaid connections, partially offset by an increase in Postpaid ARPU as previously discussed in the Operational Overview section.

Other service revenues decreased in 2023, resulting from decreases in inbound roaming revenues, primarily driven by lower data revenues resulting from lower rates.

Equipment sales revenues decreased in 2023, due primarily to a decline in smartphone upgrades and gross additions, partially offset by a higher average price of new smartphone sales.

Total operating expenses

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Depreciation, amortization and accretion expenses decreased in 2023 due primarily to enhancements that extended the useful life of a software platform.

Components of Other Income (Expense)

Index to MD&A

Towers Operations

As of December 31, 2024 2023 2022 2024 vs.

2023 2023 vs.

Owned towers 4,409 4,373 4,336 1 % 1 %

Number of colocations 2,444 2,390 2,401 2 % —

Tower tenancy rate 1.55 1.55 1.55 — —

2024-2023 Commentary

Number of colocations

Number of colocations increased in 2024 due to an increase in new tenant and equipment change executions partially offset by terminations.

Colocation terminations decreased in 2024 compared to 2023 in part due to a decrease in legacy Sprint colocation terminations which decreased from 44 to 21 year over year.

Financial Overview — Towers

Year Ended December 31, 2024 2023 2022 2024 vs.

2023 2023 vs.

(Dollars in millions)

Operating income $ 139 $ 69 N/M

Investment and other income (expense)

Equity in earnings of unconsolidated entities 158 158 –

Interest and dividend income 10 8 26 %

Interest expense (196) (163) (21) %

Total investment and other income (expense) (28) 3 N/M

Income before income taxes 111 72 54 %

Income tax expense 53 37 43 %

Net income 58 35 67 %

Net income attributable to noncontrolling interests, net of tax 4 5 (24) %

Net income attributable to UScellular shareholders $ 54 $ 30 80 %

Third-party revenues $ 103 $ 101 $ 93 2 % 8 %

Intra-company revenues 131 127 123 3 % 3 %

Total tower revenues 234 228 216 3 % 5 %

System operations (excluding Depreciation, amortization and accretion reported below) 78 73 71 6 % 2 %

Selling, general and administrative 32 34 32 (5) % 7 %

Depreciation, amortization and accretion 45 46 45 (1) % 1 %

(Gain) loss on asset disposals, net 1 (2) — N/M N/M

Total operating expenses 156 151 148 3 % 2 %

Operating income $ 78 $ 77 $ 68 2 % 13 %

Adjusted OIBDA (Non-GAAP) 1

$ 126 $ 121 $ 113 4 % 7 %

Adjusted EBITDA (Non-GAAP) 1

$ 126 $ 121 $ 113 4 % 7 %

Capital expenditures $ 23 $ 31 $ 28 (24) % 9 %

N/M - Percentage change not meaningful

Equity in earnings of unconsolidated entities

UScellular’s investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pre-tax income of $65 million for both 2023 and 2022.

See Note 8 — Investments in Unconsolidated Entities in the Notes to Consolid ated Financial Statements for additional information.

Interest expense

Interest expense increased in 2023 due primarily to interest rate increases on variable rate debt.

See Market Risk for additional information regarding maturities of long-term debt and weighted average interest rates.

Income tax expense

Income tax expense increased in 2023 due primarily to the increase in Income before income taxes.

See Note 5 — Income Taxes in the Notes to Consolidated Financial Statements for additional information.

1 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

Key components of changes in the statement of operations line items were as follows:

2024-2023 Commentary

Total tower revenues

Total tower revenues increased in 2024 due primarily to an increase in intra-company revenues primarily as a result of an increase in the intra-company rate charged by Towers to Wireless and an increase in the number of owned towers.

Upon closing of the transaction to dispose of the wireless operations and select spectrum assets to T-Mobile, UScellular expects an increase in Third-party revenues that will be recognized under the Master License Agreement that will go into effect under the Securities Purchase Agreement.

However, at such time Intra-company revenues would cease, resulting in significantly lower Tower revenues in the periods following the close.

Index to MD&A

Total operating expenses

Total operating expenses increased in 2024 due to an increase in System operations expenses as a result of increases in cell site ground rent and maintenance expenses.

Upon and following closing of the transaction to dispose of the wireless operations and select spectrum assets to T-Mobile, UScellular expects expenses may be incurred to affect the separation including costs to decommission certain towers and record remaining ground lease obligations on such decommissioned towers.

These factors and other uncertainties in how the ongoing tower operations will be supported in the long-term may significantly impact operating expenses recorded in periods following the close.

Capital expenditures

Total capital expenditures decreased in 2024 due primarily to a decrease in the number of owned towers placed into service to support UScellular's wireless network.

2023-2022 Commentary

Total tower revenues

Total tower revenues increased in 2023 due primarily to an increase in third-party revenues primarily as a result of new colocator agreements and rent escalations.

Capital expenditures

Total capital expenditures increased in 2023 due primarily to an increase in the leasehold improvements on owned towers and an increase in perpetual easements and outright land purchases.

Index to MD&A

Liquidity and Capital Resources

5 unchanged sentences

UScellular believes that existing cash and investment balances, funds available under its financing agreements, its ability to obtain future external financing, potential dispositions and expected cash flows from operating and investing activities will provide sufficient liquidity for UScellular to meet its day-to-day operating needs and debt service requirements.

UScellular may require substantial additional funding for, among other uses, capital expenditures, acquisitions of providers of wireless telecommunications services, wireless spectrum license acquisitions, agreements to purchase goods or services, leases, repurchases of shares, or making additional investments.

UScellular may require substantial additional funding for, among other uses, capital expenditures, agreements to purchase goods or services, leases, repurchases of shares, or making additional investments.

It may be necessary from time to time to increase the size of its existing credit facilities, to amend existing or put in place new credit agreements, to obtain other forms of financing, issue equity securities, or to divest assets in order to fund potential expenditures.

UScellular will continue to monitor the rapidly changing business and market conditions and is taking and intends to take appropriate actions, as necessary, to meet its liquidity needs.

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

Cash and Cash Equivalents

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(Dollars in millions)

The majority of UScellular’s Cash and cash equivalents are held in bank deposit accounts and in money market funds that purchase only debt issued by the U.S.

The majority of UScellular’s Cash and cash equivalents are held in money market funds that purchase only debt issued by the U.S.

Treasury or U.S.

1 unchanged sentence

Refer to the Consolidated Cash Flow Analysis for additional information related to changes in Cash and cash equivalents.

In addition to Cash and cash equivalents, UScellular had available undrawn borrowing capacity (taking into account debt covenant restrictions) from the following debt facilities at December 31, 2023.

In addition to Cash and cash equivalents, UScellular had available undrawn borrowing capacity from the following debt facilities at December 31, 2024.

See the Financing section below for further details.

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Receivables Securitization Agreement 448

Repurchase Agreement 1

Total undrawn borrowing capacity 800

Debt covenant restrictions 1

Total available undrawn borrowing capacity $ 748

1 The capacity available under the Repurchase Agreement and the Debt covenant restrictions in the table above relate to the Repurchase Agreement facility that subsequently expired in January 2024.

Index to MD&A

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Term Loan Agreements

UScellular has term loan agreements with maximum borrowing capacities of $800 million.

The maturity dates for the term loan agreements range from July 2026 to July 2031.

UScellular has unsecured term loan agreements with maximum borrowing capacities of $800 million.

The maturity dates for the agreements range from July 2026 to July 2031.

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

As of December 31, 2024, UScellular has borrowed the full amount available under the agreements and the outstanding borrowings were $723 million.

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UScellular, through its subsidiaries, has a 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.

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.

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

Repurchase Agreement

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.

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

As of December 31, 2023, there were no outstanding borrowings under the repurchase 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.

The repurchase agreement expired in January 2024.

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.

Debt Covenants

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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The ability of UScellular to complete an offering pursuant to such shelf registration statement is subject to market conditions and other factors at the time.

Index to MD&A

UScellular, at its discretion, may from time to time seek to retire or purchase its outstanding debt through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise.

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See Note 13 — Debt in the Notes to Consolidated Financial Statements for additional information related to the financing agreements.

Index to MD&A

Credit Ratings

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UScellular is rated as a sub-investment grade issuer.

The UScellular issuer credit ratings as of December 31, 2023, and the dates such ratings were re-affirmed were as follows:

The UScellular issuer credit ratings as of December 31, 2024, and the dates such ratings were issued were as follows:

Rating Agency Rating Outlook

Moody's (re-affirmed October 2023) Ba1 stable outlook

Moody's (issued May 2024) Ba1 rating under review

Standard & Poor's (issued August 2023) BB watch-developing outlook

Fitch Ratings (re-affirmed March 2023) BB+ stable outlook

Following the announcement on August 4, 2023 related to the review of strategic alternatives for UScellular, Standard & Poor's placed the BB issuer credit rating for UScellular on CreditWatch with developing implications.

Per the release, this action reflects the potential for a higher or lower rating depending on the outcome of the strategic alternatives review.

Further, Standard & Poor's indicated they expect to resolve the CreditWatch placement once they have sufficient information following the conclusion of the strategic review process.

At the same time, Moody's issued a release indicating that UScellular's Ba1 issuer credit rating is not immediately impacted given the uncertainty around potential outcomes.

Fitch Ratings did not issue a public statement.

Fitch Ratings (issued May 2024) BB+ rating watch negative

The UScellular credit ratings may be impacted in the future based on the outcomes of the T-Mobile, Verizon and AT&T transactions and the remaining UScellular business, among other factors.

Capital Requirements

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Significant cash requirements that are not routine or in the normal course of business could arise from time to time.

Index to MD&A

Capital Expenditures

UScellular makes substantial investments to acquire, construct and upgrade wireless telecommunications networks and facilities to remain competitive and as a basis for creating long-term value for shareholders.

In recent years, rapid changes in technology and new opportunities (such as 5G and VoLTE technology) have required substantial investments in potentially revenue‑enhancing and cost-saving upgrades of UScellular’s networks to remain competitive;

In recent years, changes in technology have required substantial investments in UScellular's network to remain competitive;

this is expected to continue in 2025 and future years with the continued deployment of 5G technology.

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In 2024, UScellular's capital expenditures were used for the following purposes:

▪ Enhance and maintain UScellular's network capacity and coverage, including continued deployment of 5G with a focus on mid-band spectrum to provide additional speed and capacity to accommodate increased data usage by current customers;

▪ Continue to deploy 5G using mid-band spectrum to provide additional speed and capacity to accommodate increased data usage by current customers;

▪ Invest in information technology to support existing and new services and products.

UScellular’s capital expenditures for 2024 are expected to be between $550 million and $650 million.

These expenditures are expected to be used for similar purposes as those listed above.

UScellular intends to finance its capital expenditures for 2025 using primarily Cash flows from operating activities, existing cash balances and, as required, additional debt financing from its existing agreements and/or other forms of available financing.

Acquisitions, Divestitures and Exchanges

UScellular may be engaged in negotiations (subject to all applicable regulations) relating to the acquisition, divestiture or exchange of companies, properties, assets, or wireless spectrum licenses (including pursuant to FCC auctions).

In general, UScellular may not disclose such transactions until there is a definitive agreement.

Index to MD&A

See Note 7 — Divestitures in the Notes to Consolidated Financial Statements for additional information related to divestitures.

Other Obligations

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long-term marketing programs;

commitments for wireless spectrum licenses acquired through FCC auctions;

and other agreements to purchase goods or services.

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Common Share Repurchase Program

There were no share repurchases during 2023.

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

At December 31, 2024 , the total cumulative amount of UScellular Common Shares authorized to be repurchased is 986,942 .

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UScellular operates a capital‑intensive business.

UScellular makes substantial investments to acquire wireless spectrum licenses and properties and to construct and upgrade wireless telecommunications networks and facilities with a goal of creating long-term value for shareholders.

UScellular makes substantial investments to acquire wireless spectrum licenses and to construct and upgrade wireless telecommunications networks and facilities with a goal of creating long-term value for shareholders.

In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue‑enhancing and cost-saving upgrades to UScellular’s networks.

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To meet its cash-flow needs, UScellular may need to delay or reduce certain investments or sell assets.

Refer to Liquidity and Capital Resources within this MD&A for additional information.

Refer to Liquidity and Capital Resources within this MD&A and Note 7 — Divestitures in the Notes to Consolidated Financial Statements for additional information.

Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, timing and other factors.

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UScellular’s Cash, cash equivalents and restricted cash decreased $20 million.

Net cash provided by operating activities was $883 million due to net loss of $32 million adjusted for non-cash items of $791 million and distributions received from unconsolidated entities of $169 million including $75 million in distributions from the LA Partnership.

This was partially offset by changes in working capital items which decreased net cash by $45 million.

The working capital changes were primarily driven by an increase in receivable balances and the timing of vendor payments, partially offset by reduced inventory balances.

Distributions from certain equity method investments operated by Verizon are expected to include incremental discrete amounts in 2025 related to proceeds received by Verizon in the tower transaction with Vertical Bridge that closed in December 2024.

The process of administering these distributions is in progress and it is uncertain whether such incremental discrete amounts will result in an increase in total distributions from these partnerships in 2025 relative to 2024 given that the final amount of the incremental distributions is not known, and total distributions are dependent upon the operations of the underlying operating companies, and the general partners’ decisions on the amount and timing of any distributions, among other factors.

Cash flows used for investing activities were $556 million, which included payments for property, plant and equipment of $537 million and payments for wireless spectrum licenses of $20 million.

Cash flows used for financing activities were $347 million, due primarily to repayments of $188 million on the receivables securitization agreement, $60 million of repayments on term loan agreements, cash paid for software license agreements of $66 million and the repurchase of $54 million Common Shares, partially offset by $40 million borrowed under the receivables securitization agreement.

2023 Commentary

UScellular’s Cash, cash equivalents and restricted cash decreased $129 million.

Net cash provided by operating activities was $866 million due to net income of $58 million adjusted for non-cash items of $693 million and distributions received from unconsolidated entities of $150 million including $69 million in distributions from the LA Partnership.

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Notable balance sheet changes during 2024 were as follows:

Accounts receivable, other

Accounts receivable, other decreased $33 million due primarily to the collection of vendor credits from original equipment manufacturers.

Inventory, net

Inventory, net decreased $62 million due primarily to efforts to reduce inventory on hand which was elevated due to lower than expected sales in the fourth quarter of 2022.

Accounts payable, trade

Accounts payable, trade decreased $103 million due primarily to the timing of vendor invoice payments related to inventory.

Property, plant and equipment

The gross basis of Property, plant and equipment as well as the related Accumulated depreciation and amortization, decreased by $1,173 million and $1,099 million, respectively, due primarily to the decommissioning of fully depreciated assets no longer in service related to the CDMA shutdown.

Other current liabilities

Other current liabilities decreased $181 million due primarily to the payment of Auction 107 relocation fees and repayments on the EIP receivables repurchase agreement.

Other current liabilities decreased $36 million due primarily to payments related to software license agreements.

Treasury shares

Treasury shares increased $32 million due primarily to share repurchases, partially offset by shares issued under stock-based compensation plans.

Index to MD&A

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Management believes the application of the following critical accounting policies and the estimates required by such application reflect its most significant judgments and estimates used in the preparation of UScellular’s consolidated financial statements.

Wireless Spectrum Licenses

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 at least annually for impairment.

Significant negative events, such as changes in any of the assumptions described below as well as decreases in forecasted cash flows, could result in an impairment.

Wireless spectrum licenses, including those with FCC build-out requirements that have not yet been satisfied, 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.

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

UScellular performed a quantitative impairment assessment in 2023 and a qualitative impairment assessment in 2022.

In 2023, a market approach was used to value the wireless spectrum license portfolio.

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.

For purposes of its annual impairment test as of November 1, 2024, UScellular performed a qualitative test for all twelve of its units of accounting.

The test considered several factors, including the results of the quantitative impairment assessment performed in the third quarter of 2024 as well as purchase prices of executed agreements to sell certain wireless spectrum licenses and other market factors.

Based on these assessments, UScellular concluded that it was more likely than not that the fair value of each unit of accounting exceeded its respective carrying value.

Therefore, no quantitative impairment evaluation was completed.

For purposes of its 2023 impairment test, UScellular had one unit of accounting and used a quantitative market approach to value the wireless spectrum license portfolio.

The wireless spectrum licenses were pooled by band, and a range of values was established using industry benchmarks, FCC auction data, and precedent transactions.

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Based on this valuation, the fair value of the wireless spectrum licenses exceeded the respective carrying value by 17% and there was no impairment of wireless spectrum licenses.

In 2022, UScellular considered several qualitative factors, including analyst estimates of wireless spectrum license values, recent spectrum auction results, UScellular and other market participant transactions, and other industry and market factors.

Based on these assessments, UScellular concluded that it was more likely than not that the fair value of the unit of accounting exceeded its carrying value.

Therefore, no quantitative impairment evaluation was completed.

See Note 7 — Intangible Assets in the Notes to Consolidated Financial Statements for information related to wireless spectrum licenses activity in 2023 and 2022.

UScellular is included in a consolidated federal income tax return with other members of the TDS consolidated group.

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The amounts of income tax assets and liabilities, the related income tax provision and the amount of unrecognized tax benefits are critical accounting estimates because such amounts are significant to UScellular’s financial condition and results of operations.

Index to MD&A

The preparation of the consolidated financial statements requires UScellular to calculate a provision for income taxes.

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See Note 5 — Income Taxes in the Notes to Consolidated Financial Statements for additional information.

Index to MD&A

Regulatory Matters

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The FCC sought comment on, among other things, the definition of areas eligible for 5G Fund support, adjustment factors and metrics used to identify winning bids, and the potential inclusion of cybersecurity and supply chain management requirements for those receiving 5G Fund support.

On August 29, 2024, the FCC adopted new rules to move forward with targeted investments in the deployment of advanced, 5G mobile wireless broadband services in rural communities through the 5G Fund auction process.

The start date of the auction was not announced.

UScellular cannot predict at this time when the 5G Fund auction will occur, when the phase down period for its existing legacy support from the Federal USF will commence, or whether the 5G Fund auction will provide opportunities to UScellular to offset any loss in existing support.

Spectrum Auctions

On March 2, 2020, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.5 GHz band (Auction 105).

On September 2, 2020, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 243 wireless spectrum licenses for a purchase price of $14 million.

On July 15, 2022, the FCC released a Consent Decree related to its spectrum aggregation and ownership attribution rules in which UScellular agreed to relinquish its rights to 27 wireless spectrum licenses awarded in Auction 105 and subsequently received a full refund of $2 million.

The remaining 216 wireless spectrum licenses were granted by the FCC on July 26, 2022.

On August 7, 2020, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.7-3.98 GHz bands (Auction 107).

On February 24, 2021, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 254 wireless spectrum licenses for $1,283 million.

UScellular paid $30 million of this amount in 2020 and the remainder in March 2021.

The wireless spectrum licenses from Auction 107 were granted by the FCC in July 2021.

Additionally, UScellular 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.

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.

On June 9, 2021, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 3.45-3.55 GHz band (Auction 110).

On January 14, 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 380 wireless spectrum licenses for $580 million.

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

The wireless spectrum licenses from Auction 110 were granted by the FCC on May 4, 2022.

On March 21, 2022, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 2.5 GHz band (Auction 108).

On September 1, 2022, the FCC announced by way of public notice that UScellular was the provisional winning bidder for 34 wireless spectrum licenses for $3 million.

The wireless spectrum licenses from Auction 108 were granted by the FCC on December 1, 2022.

Index to MD&A

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Readers should evaluate any statements in light of these important factors.

Announced Transactions and Strategic Alternatives Review Risk Factors

▪ 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.

▪ 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 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.

Operational Risk Factors

▪ 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.

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

▪ 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.

▪ 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.

▪ 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.

▪ 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.

▪ 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.

▪ 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.

▪ 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.

▪ A failure by UScellular to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on UScellular’s business, financial condition or results of operations.

Index to MD&A

▪ Advances or changes in technology could render certain technologies used by UScellular obsolete, could put UScellular at a competitive disadvantage, could reduce UScellular’s revenues or could increase its costs of doing business.

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▪ 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.

▪ 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.

▪ 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.

▪ A failure by UScellular to maintain flexible and capable telecommunication networks or information technologies, or a material disruption thereof, could have an adverse effect on UScellular’s business, financial condition or results of operations.

Index to MD&A

Financial Risk Factors

▪ 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.

▪ 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 has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt.

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Regulatory, Legal and Governance Risk Factors

▪ 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.

▪ 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 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.

▪ 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 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.

▪ 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.

▪ 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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▪ Certain matters, such as control by TDS and provisions in the UScellular Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of UScellular or have other consequences.

Index to MD&A

General Risk Factors

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2028 286 6.5 %

2028 286 7.5 %

Thereafter 2,224 6.1 %

Total $ 2,923 6.1 %

1 The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to unamortized debt issuance costs on all non-revolving debt instruments, unamortized discounts related to the 6.7% Senior Notes, and outstanding borrowings under the receivables securitization agreement, which principal repayments are not scheduled but are instead based on actual receivable collections.

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.

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

See Note 13 — Debt in the Notes to Consolidated Financial Statements for additional information.

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▪ Free cash flow

▪ Licenses impairment, net of tax

Following are explanations of each of these measures:

EBITDA, Adjusted EBITDA and Adjusted OIBDA

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as Net income adjusted for the items set forth in the reconciliation below.

EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under GAAP and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as Net income (loss) adjusted for the items set forth in the reconciliation below.

EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under GAAP and should not be considered as alternatives to Net income (loss) or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.

UScellular does not intend to imply that any such items set forth in the reconciliation below are non-recurring, infrequent or unusual;

such items may occur in the future.

Adjusted EBITDA is a segment measure reported to the chief operating decision maker for purposes of assessing the segments' performance.

See Note 19 — Business Segment Information in the Notes to Consolidated Financial Statements for additional information.

Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to applicable GAAP income measures are deemed appropriate.

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Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, gains and losses, and expenses related to the strategic alternatives review of UScellular, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities.

The following tables reconcile EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income and Operating income.

The following tables reconcile EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income (loss) and/or Operating income (loss).

Income and expense items below Operating income (loss) are not provided at the individual segment level for Wireless and Towers;

therefore, the reconciliations begin with EBITDA and the most directly comparable GAAP measure is Operating income (loss) rather than Net income (loss) at the segment level.

Index to MD&A

UScellular 2024 2023 2022

(Dollars in millions)

Net income (GAAP) $ 58 $ 35

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

Income tax expense

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(Gain) loss on license sales and exchanges, net

Operating income (loss) (GAAP) $ (12) $ 139 $ 69

UScellular Wireless 2024 2023 2022

(Dollars in millions)

EBITDA (Non-GAAP) $ 530 $ 672 $ 656

Add back or deduct:

Expenses related to strategic alternatives review 33 8 —

Loss on impairment of licenses 136 — 3

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

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

(Gain) loss on license sales and exchanges, net 3 (2) —

Adjusted EBITDA and Adjusted OIBDA (Non-GAAP) 719 697 677

Depreciation, amortization and accretion 620 610 655

Expenses related to strategic alternatives review 33 8 —

Loss on impairment of licenses 136 — 3

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

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

(Gain) loss on license sales and exchanges, net 3 (2) —

Operating income (loss) (GAAP) $ (90) $ 62 $ 1

Index to MD&A

UScellular Towers 2024 2023 2022

(Dollars in millions)

EBITDA (Non-GAAP) $ 123 $ 123 $ 113

Add back or deduct:

Expenses related to strategic alternatives review 2 — —

(Gain) loss on asset disposals 1 (2) —

Adjusted EBITDA and Adjusted OIBDA (Non-GAAP) 126 121 113

Depreciation, amortization and accretion 45 46 45

Expenses related to strategic alternatives review 2 — —

(Gain) loss on asset disposals, net 1 (2) —

Operating income (GAAP) $ 78 $ 77 $ 68

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Free cash flow is a non-GAAP financial measure which UScellular believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment and Cash paid for software license agreements.

2024 2023 2022

(Dollars in millions)

3 unchanged sentences

Free cash flow (Non-GAAP)

$ 280 $ 192 $ 208

Licenses impairment, net of tax

The following non-GAAP financial measure isolates the total effects on net income of the Loss on impairment of licenses, including tax impacts.

UScellular believes this measure may be useful to investors and other users of its financial information to assist in comparing financial results with periods that were not impacted by impairment charges.

2024 2023 2022

(Dollars in millions)

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

Loss on impairment of licenses 136 — 3

Deferred tax benefit on the tax-amortizable portion of the impaired licenses (34) — —

Subtotal of Non-GAAP adjustments 102 — 3

Net income attributable to UScellular shareholders excluding licenses impairment charge (Non-GAAP) $ 63 $ 54 $ 33

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

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 7. Management’s Discussion and Analysis