Array Digital (AD) Q1 2026 Earnings TranscriptMay 8, 2026
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DATE
Friday, May 8, 2026 at 10 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer and Chair of TDS — Walter Carlson Executive Vice President and Chief Financial Officer — Vicki L. Villacrez Senior Vice President, TDS Telecom — Ken Dixon Vice President, Finance and Corporate Development — Chris Bothfeld President and CEO, Array Digital Infrastructure, Inc. — Anthony Carlson Head of Investor Relations — John Toomey
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Full Conference Call Transcript
Walter Carlson: In my capacity as CEO and chair of TDS, the proposal TDS submitted to the board of directors of Array Digital Infrastructure, Inc. to acquire the remaining shares of Array Digital Infrastructure, Inc. not currently owned by TDS in an all-stock transaction. As TDS continues its transformation, this proposal is the next step in executing our strategy, simplifying our corporate structure, and enhancing our ability to invest in targeted areas of growth. Array Digital Infrastructure, Inc. has successfully completed its transition into a tower-focused company with strong fundamentals, and we believe this transaction will position the combined company for long-term growth.
By bringing Array Digital Infrastructure, Inc. fully under TDS' ownership, Array Digital Infrastructure, Inc.'s stockholders would retain a significant interest in the tower business while gaining exposure to TDS' growing fiber business. Under the terms of the proposal, TDS would acquire all of the outstanding common shares of Array Digital Infrastructure, Inc. that TDS does not currently own by way of a merger in which each Array Digital Infrastructure, Inc. common share not owned by TDS would be exchanged for 0.86 of a TDS common share.
This exchange ratio assumes that the previously announced spectrum license sales identified in our offer letter will have closed prior to the closing of the transaction contemplated by TDS's proposal, and that the Array Digital Infrastructure, Inc. board, consistent with its treatment of net proceeds from prior spectrum sales, will have declared and paid dividends of $10.40 per share to Array Digital Infrastructure, Inc. stockholders prior to the closing. At $10.40 per share, Array Digital Infrastructure, Inc. would distribute approximately $900 million in net proceeds. This exchange ratio reflects an at-market offer based, subject to the assumptions just described, on yesterday's closing prices for TDS and Array Digital Infrastructure, Inc.
The transaction is expected to qualify as a tax-free reorganization for U.S. federal income tax purposes. TDS expects the transaction to eliminate duplicative corporate costs, streamline corporate governance, increase share liquidity, and strengthen the capital structure of the enterprise, providing greater flexibility to pursue strategic investments across all our businesses, including towers and fiber. As noted in this morning's press release, the proposal is subject to review and recommendation by a special committee of Array Digital Infrastructure, Inc.'s disinterested directors, and the approval of the majority of the disinterested shareholders of Array Digital Infrastructure, Inc. based on votes cast. It would also require approval of TDS' shareholders and the satisfaction of customary closing conditions.
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TDS does not intend to sell or otherwise transfer its interest in Array Digital Infrastructure, Inc. and will not entertain any third-party offers for Array Digital Infrastructure, Inc. or its assets in lieu of this proposal. TDS continues to support Array Digital Infrastructure, Inc.'s previously disclosed intention to opportunistically monetize its remaining unsold wireless spectrum. TDS looks forward to working constructively with the Array Digital Infrastructure, Inc. board's special committee as they evaluate this proposal. Beyond what I just disclosed, and the information included in our press release and proposal letter to Array Digital Infrastructure, Inc., we are not going to comment further on or take questions regarding the offer on today's call.
With that, let us turn to slide three. The enterprise is making good progress on its 2026 priorities. Our focus remains on advancing our strategy with financial and operational discipline. As I just mentioned, the proposal announced this morning will aid in strengthening TDS' corporate and capital structure, and we look forward to working with the Array Digital Infrastructure, Inc. special committee. Both business units continue to make progress toward their operational goals. TDS Telecom continued to add fiber addresses and customers in the quarter. Array Digital Infrastructure, Inc. is off to a strong start in 2026 and is making good progress growing tower tenancy.
In the arena of spectrum, Array Digital Infrastructure, Inc. closed on a small transaction with T-Mobile earlier this week and expects the remaining announced T-Mobile and Verizon spectrum sales to close in the second or third quarter, subject to regulatory approval and other customary conditions. I am pleased with the progress each business unit is making and with the efforts we have underway to strengthen our culture as we go through this period of transformation. I would like to personally thank every associate across the enterprise for their continued commitment and contribution. I will now turn the call over to Vicki.
Vicki L. Villacrez: Thank you, Walter, and good morning, everyone. Slide four updates you on our capital allocation priorities. TDS Telecom continues to make nice progress toward achieving its long-term objective of reaching 2.1 million marketable fiber service addresses, delivering 40,000 in the quarter. Ken and Chris will discuss more about the opportunities and momentum we are seeing in that space in a moment. We continue to evaluate M&A opportunities in a financially disciplined, accretive, business case-driven fashion. In mid-April, we announced an agreement to acquire Granite State Communications.
As I have communicated in the past, we are primarily focused on small to medium-sized opportunities that are already fibered up or have an accretive economic path to all fiber and support our clustering strategy. Granite is just like that: fully fibered with over 11,000 service addresses that are adjacent to several of our existing markets in New Hampshire. We are excited to welcome these associates and customers into the TDS family and expect the transaction to close in the third quarter, subject to regulatory approval. Finally, in the area of shareholder return, in the form of TDS share buybacks, we were not in the market during the quarter.
At the end of the first quarter, we had a $520 million authorization for TDS share buybacks available, and we remain committed to executing on that program. Across all three priorities, the company intends to continue to be disciplined, balancing the needs of the business, evaluating future returns, along with market and other conditions as we move forward. Thank you. And now I will turn the call over to Ken Dixon to discuss TDS' fiber business.
Ken Dixon: Thank you, Vicki. And good morning, everyone. At TDS Telecom, 2026 is focused on executing our fiber growth plan: building fiber addresses, driving fiber sales, and continuing to transform our operations. This quarter, we made progress across all three priorities as we scale our fiber network and advance our long-term strategy. As shown on slide six, our fiber builds are off to a good start. We delivered 40,000 marketable fiber service addresses in the first quarter. This is the highest first-quarter total in our company's history and nearly three times our delivery in 2025. This performance reflects both effective execution and increased construction capacity, including our highest ever internal and external construction crew counts.
While we are pleased with the record construction number, we still have more work to do. We continue to invest in our internal construction teams by adding headcount and upgrading tools and equipment to support increased build capacity, giving us a strategic advantage. We believe these investments provide greater control over our builds and improve long-term efficiency. In addition, we have a robust pipeline of addresses currently under construction, positioning us very well for the spring and summer build season. This pipeline includes a mix of addresses from our fiber expansion into new areas as well as fiber upgrades in our existing markets through our Fiber Deeper program and the federal E-ACAM program.
As a reminder, the E-ACAM program provides federal support that enables us to bring fiber to approximately 300,000 service addresses, including those along the route where it would otherwise not be economical, helping to drive copper out of our network. Looking at sales, we ended the quarter with approximately 11,000 fiber net adds, up 32% year over year. As we continue to scale our fiber footprint, we remain focused on converting new service addresses into customers and improving the overall customer experience. During the quarter, we strengthened leadership in key sales and customer experience roles to support these priorities. Our operational transformation is centered on efficiency, improving the customer experience, and simplification.
We continue to make progress modernizing our systems and remain on track with our transformation roadmap. I am happy to announce that we have now completed the billing conversion in our cable markets and have also introduced a new FieldForce platform to support our technicians. These updates simplify our back-office processes and provide an improved customer experience. We are now able to launch multi-gig speeds in our entire cable footprint. These areas are some of the best markets in the country and we continue to see great opportunity here, so expect more to come. Finally, as Vicki noted, in mid-April, we signed an agreement to acquire a fiber-based telecommunication business in New Hampshire.
The transaction adds over 11,000 fiber addresses that are contiguous with existing TDS markets and supports our clustering strategy. Along with approximately 30 associates who will join the TDS team, we are excited about the opportunity to continue to deliver excellent service in this area and look forward to closing this transaction in the third quarter, subject to regulatory approval. Turning to slide seven, our long-term goals reflect our continued focus on executing our growth strategy that delivers scale, speed, and long-term value. With the delivery of 40,000 fiber addresses in the quarter, we now serve approximately 1.1 million fiber service addresses, representing 58% of our total footprint, with 79% of addresses capable of gig speeds.
While there is more work ahead, the progress we are making reinforces our confidence in the path forward as we continue transforming into a fiber-centric company. I will now turn it over to Chris to walk through our first quarter results.
Chris Bothfeld: Turning to slide eight, the chart on the left shows our quarterly fiber service address delivery over the past five quarters. As Ken highlighted, our first-quarter fiber address delivery nearly tripled year over year. This significant increase reflects the additional construction capacity we introduced last year and are continuing to scale this year. Our execution in the first quarter demonstrates the effectiveness of the strategy and the momentum we are building as we advance toward our long-term goals. The chart on the right illustrates the continued expansion of our fiber footprint. Over the past three years, we have nearly doubled the number of fiber service addresses across our markets, demonstrating steady and meaningful progress.
On slide nine, residential fiber net adds were approximately 11,000 in the first quarter, a 32% increase compared to prior year, driven by continued footprint expansion and ongoing copper-to-fiber conversions. Residential fiber connections have also nearly doubled over the past three years, and we expect continued growth as we expand our fiber footprint. Turning to slide 10, the chart on the left depicts our residential revenue per connection, which increased 1% year over year. This growth reflects annual price increases offset by ongoing industry-wide declines in video attachment rates. The chart on the right is new this quarter and breaks down total residential revenue between copper, cable, and fiber.
You will see our fiber revenue is up 13% versus prior year, an uplift of approximately $11 million, which helps offset the legacy revenue stream pressures we are experiencing. In cable, revenues are down roughly 10% versus 2025. As Ken highlighted, we are increasing investment in our cable markets to stem these declines. Overall, total residential revenue declined $5 million compared to prior year. Approximately $3 million of this decline is attributable to divestitures of markets that were predominantly copper-based. We remain hyper-focused on driving fiber revenue at a pace that is expected to more than offset legacy declines. Slide 11 summarizes our financial performance. Total operating revenues declined 3% in the quarter, or 1% excluding the impact of divestitures.
This reflects continued legacy revenue stream pressures partially offset by growth in fiber connections and modest improvement in revenue per connection. Cash expenses decreased 3%, driven primarily by benefits from our transformation initiatives, including lower costs for billing, circuits, and facilities. Adjusted EBITDA declined 3% in the quarter, driven largely by the revenue losses from divestitures. Capital expenditures totaled $126 million, reflecting higher construction activity, a robust funnel of addresses under construction, and accelerated investments in our internal construction crews and equipment. Slide 12 reflects our guidance for 2026, which remains unchanged. We are projecting total telecom revenues of $1.015 billion to $1.055 billion.
Current headwinds in our copper and cable markets are guiding us toward the lower half of this range. Adjusted EBITDA guidance remains between $310 million and $350 million as we continue our transformation efforts. Capital expenditures for the year are projected to be between $550 million and $600 million to support our goal of delivering between 200,000 and 250,000 new fiber service addresses. Before turning over the call, I want to thank the entire TDS team for their continued execution and focus. Their efforts across fiber delivery, customer growth, and operational transformation are critical to the progress we are making toward achieving our long-term objectives. I will now turn the call over to Anthony.
Anthony Carlson: Thanks, Chris, and good morning. 2026 has got off to a busy but great start. The organization is laser-focused on fully optimizing our tower operations and monetizing our spectrum. In the first quarter, we saw cash site rental revenue up 64% over Q1 of last year, also demonstrated sequential tower tenancy growth when adjusted for DISH, and we continue to move our announced spectrum transactions forward. Before I get to the details of the quarter, I want to acknowledge the Array Digital Infrastructure, Inc. Board's receipt of TDS' proposal to acquire the remaining public shares of Array Digital Infrastructure, Inc.
Our board has formed a special committee of independent directors who have retained independent advisers to carefully evaluate the proposal and make a recommendation as to what is in the best interest of Array Digital Infrastructure, Inc.'s shareholders. Array Digital Infrastructure, Inc. will be providing updates as appropriate, but we will not be commenting further or taking questions regarding this proposal today. Moving along to slide 16, I want to provide an update regarding DISH. As previously disclosed, we received a letter from DISH Wireless in 2025 in which DISH asserted that unforeseeable actions impacted its master lease agreement with Array Digital Infrastructure, Inc., and as a result, DISH believes it is relieved of its obligations under the MLA.
Since early December, DISH has generally failed to make the required payments and is therefore in breach of its obligations. Array Digital Infrastructure, Inc. continues to take actions it deems necessary to protect its rights under the MLA. Given the ongoing nonpayment, in the first quarter, Array Digital Infrastructure, Inc. ceased recognizing DISH revenue, and all unpaid 2025 amounts have now been fully reserved. Accordingly, our tenancy ratio no longer includes DISH collocations. When normalizing for this impact, we continue to see sequential growth in our tenancy ratio as depicted on the right, from 0.95 in Q4 2025 up to 0.96 in Q1 2026.
Importantly, in Q1, we grew revenue and secured healthy collocation application volumes while supporting T-Mobile and its integration. As noted on slide 17, cash site rental revenue in Q1 increased 55% year over year from all customers, and when normalized for DISH impact, this increase was 64%. When layering in the T-Mobile interim site revenue, the increase was 86% year over year, or 98% when normalized for DISH. Our application volume remains robust, and coupled with our existing pipeline will drive additional revenue growth in 2026 and beyond. Turning to slide 18, T-Mobile has until January 2028 to finalize its 2,015 committed sites under the new MLA.
We continue to anticipate 800 to 1,800 tenant towers after the integration is completed and all interim sites are terminated. Our ground lease optimization work remained a priority in Q1, and we are making progress in reducing the cash burden of these negative cash flow assets. As noted previously, this will be a multiyear effort focused on cost avoidance, additional lease-up, evaluating long-term command, and decommissioning in situations where it makes sense, a process we have already begun on a subset of sites with no path to economic viability. This approach allows us to thoughtfully assess all potential outcomes for the tenantless tower portfolio.
As shown on slide 19 and presented in prior quarters, we have reached agreements to monetize roughly 70% of our spectrum holdings. As a reminder, the sale of spectrum to AT&T closed on 01/13/2026, with the Array Digital Infrastructure, Inc. board declaring a $10.25 per share dividend that was paid on February 2. In Q1, the FCC approved the sale of certain 700 MHz licenses to T-Mobile, and that transaction closed earlier this week. Additionally, the FCC approved the sale of the 100 MHz and AWS licenses to T-Mobile and, pending closing conditions, we expect that sale to close in Q2.
We continue to anticipate that the transaction with Verizon will close in Q2 or Q3 of this year, subject to regulatory approval and normal closing conditions. The remaining transactions with T-Mobile are expected to close by the end of 2026, once again dependent on regulatory approval and closing conditions. We continue to pursue opportunistic monetization of our remaining spectrum, primarily C-band. We view our C-band spectrum as a highly compelling 5G asset, with a mature ecosystem ready for carrier deployment, and with no near-term buildout requirements, we have ample time to realize its value. Slide 20 summarizes the results of our partnerships, our noncontrolling investment interests.
As discussed last quarter, investment income and distributions for full year 2025 were impacted by several one-time factors, including the impact of the Iowa partnership selling their wireless operations to T-Mobile, and distributions received from Verizon related to their transaction with Vertical Bridge. For Q1, equity income was elevated due to prior period adjustments recorded by the managers of certain investee entities. Regarding cash distributions, certain entities distribute cash only twice per year, resulting in an uneven distribution pattern throughout the year. Slide 22 summarizes Array Digital Infrastructure, Inc.'s financial results. Year over year, we continue to see the impact of the T-Mobile MLA driving revenue growth.
As noted last quarter, there was a prospective change in classification of property taxes and insurance from SG&A to cost of operations. As such, that is driving roughly half of the year-over-year increase in cost of operations. SG&A expenses continue to include costs to support the wind-down of wireless operations, but sequential quarter-over-quarter results are declining as planned. We expect these wind-down expenses to persist throughout 2026, but with additional reductions over future periods. On slide 23, our guidance across all metrics—total operating revenue, adjusted EBITDA and OIBDA, and capital expenditures—is unchanged. As a reminder, our guidance ranges are wider than industry norm due to uncertainty with the T-Mobile MLA and the timing of interim site terminations.
In closing, I want to again thank Array Digital Infrastructure, Inc.'s associates for their continued passion and dedication to driving operational efficiencies and growth as we continue to move through our first year as a stand-alone tower company. I will now turn the call back to Walter.
Walter Carlson: Thank you, Anthony. As I noted in my opening remarks, TDS continues to make solid progress advancing our strategic priorities. Our first quarter execution, combined with the momentum we are seeing across the business, positions us well as we move forward into the year. I would like to again thank all of the outstanding associates across the TDS enterprise for their continued dedication and hard work in serving our customers and supporting the advancement of our business. Operator, please now open the line for questions.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please raise your hand now. If you have dialed in to today's call, please press 9 to raise your hand and 6 to unmute when prompted. Your first question comes from Ric Prentiss with Raymond James and Associates. Ric, your line is now open.
Ric Prentiss: Great. Hey. Man, you continue to be very busy. Couple of questions. On the fiber side, the TDS Telecom side, have you looked at is there an ability to put fiber into a REIT structure or any desire at some point to put fiber into a REIT-like structure to be more tax efficient? Okay. Second question, I think this is a legit one. Can you update us as far as the number of shares or percent ownership TDS has of Array Digital Infrastructure, Inc. just so we can understand exactly how many of the disinterested might be out there. Okay. That is great.
And we had some people who had been buying and saying there were some Bloomberg numbers out there saying 70%. We knew it was 80-something, so appreciate that. And then the last question for me, a little more strategic looking. I know you guys have been looking at maybe providing more reporting metrics on the fiber business. Any update to what you think you could provide or help people understand what is happening with the fiber business as far as any cohort analysis or any trend lines to help us kind of look at the value of that business as it is going through a capital spending cycle, some EBITDA pressure as you watch the market?
Just trying to think through is there a burn rate? What can you give us to help understand the traction you are gaining and the future look of what the fiber business might be.
Vicki L. Villacrez: Yeah, Ric. This is Vicki. I will take that one. You know, we have looked at a number of structural options. But given where we are at today, they are just not optimal. And I am not going to speculate going forward what we may or may not do in the future, but, you know, as I think about SunFiber and our program that we have this year, we are in a really good position. We have got a strong balance sheet, and we are focused on funding fiber with our cash. On your disclosures question, we added this quarter disclosures for our residential revenues, and we broke them out by technology.
So you will see the reporting by fiber, cable, and copper, and we think this is something that will be helpful to investors going forward. Furthermore, we have included metrics in our trending schedules on our investor relations website, so I will point you there. Ken, do you want to jump in on the rest of Ric’s questions?
Ken Dixon: I think the metrics that are most important as we are going to a fiber-centric business are how well we are delivering addresses from a build plan perspective, and then what are our fiber net sales in terms of selling into that new open-for-sale base and also increasing our overall penetration into those new cohorts. So those are the two big things: our build velocity and also our overall fiber net performance.
On your follow-up, we definitely see the cash cost per customer improvements on everything from just the trouble tickets—copper versus fiber—the call-in rate is lower, so we love the fiber business, and we think the faster we migrate away from copper and bring it to fiber, we will continue to see improvements in the bottom line.
Walter Carlson: Well, let me take the ownership one. I think the press releases that have been issued speak to that, Ric. I think 81.9% is the right rough number, and we can get back to you with precise numbers offline.
Ric Prentiss: Great. That is helpful. Everyone, have a great Mother’s Day weekend. Thanks.
Operator: Thank you. As a reminder, if you would like to ask a question, please raise your hand. If you have dialed in to the call, please press 9 to raise your hand and 6 to unmute. Your next question comes from the line of Sebastiano Carmine Petti from JPMorgan. Your line is now open.
Sebastiano Carmine Petti: Hi. Thank you for taking the question. Sticking with TDS Telecom and Ken for a second here. You hired some sales folks and customer experience to help support your priorities. Maybe just help us think about where you are from a process improvement standpoint or trying to instill some of your decades of experience running fiber businesses into TDS Telecom. What inning are we in terms of priorities? What is some of the near-term low hanging fruit that you still think you can achieve to improve process performance and construction build? And then it is interesting you talked about investing in the cable footprint, which seems like something we have not heard talked about in a bit here.
Is that strategic? Is that core? How do you think about the blocking and tackling improvements needed in the cable KPIs to begin stabilizing, given the backdrop of what we hear from some of the larger cable guys out there—pretty competitive, pretty intense, some repricing pressures? Just a little bit of color around that would be great.
Ken Dixon: Thank you for the question. I would say we are in the very early innings, and I think we are starting to make what I would say is very nice progress. I am starting to see wind in our sails. On address delivery, I am very happy with the team's 40,000 service address delivery—almost three times more than last year. It was important to prove we could keep our crews working all winter, and we accomplished that. We have started the spring and summer months with record crew counts for the two most important quarters of the year when you have the most daylight and opportunity to build fiber.
We are also at record numbers through April, a combination of our internal crews and external crews, and we continue to see sequential month-over-month crew count improvements as we head into May. Going into the second quarter, I am bullish on what we can accomplish with service addresses because we have the largest funnel of addresses in our company's history in some form of construction. On sales and customer experience, we continue to see the opportunity: as fast as we can deliver a new address, how quickly can we penetrate that new address and get a fiber customer in there? We are very happy with our presales velocity.
We typically go in 60 days before an address becomes marketable, and we are seeing excellent results in that low-20% range. We have put a tremendous amount of sales capabilities into our door-to-door channel. We see that as a huge opportunity. We have been very aggressive in bringing new vendors in—we added several in the fourth quarter last year and more in April and May—and we have several others in our funnel. We believe we have to be in the markets and use door-to-door to continue to drive our sales agenda.
We have also expanded significantly our .com business, and we have seen sales improve significantly in a channel that is open 365 days a year and 24 hours a day. We will continue to put more resources there. We are now developing our multi-dwelling unit sales capabilities, and I think there is a tremendous opportunity there. Early innings, but starting to see nice progress. The 11,000 fiber net adds—again, 32% year over year—is a very good start to the year. On the cable business, I love our cable markets. We are in some of the best markets in the country.
Last year, we decided to convert those markets first onto our new billing system and get them on a single stack across the whole company. We also made a significant investment in enabling a new field service tool with our technicians to improve overall service delivery. We think we are just getting started in terms of what we can do in those markets, including moving to multi-gig in 2026. A lot going on, but I like what I am seeing, and we have a lot more work to do—we are definitely moving in the right direction.
Sebastiano Carmine Petti: And then maybe for Vicki, the deal for Granite—is this what we should anticipate as you look for bolt-ons, smaller systems that are adjacent versus big chunky deals out there? And then, not related to the deal, but does the combined entities make it easier to REIT the tower business over time versus the current structure?
Vicki L. Villacrez: Sebastiano, thank you for the two questions. On the last one, again, we are not going to comment on any impact or implications of the offer on the table. We just cannot speculate on what the future will look like at this point. On the second one, this acquisition is consistent with our capital allocation priorities—three-pronged priorities: building fiber and M&A acquisitions in the space of fiber—and this is perfectly aligned with that. It is a tuck-in, it is accretive, and it is adjacent to our current markets in New Hampshire. It is 100% fibered up.
We are really excited to bring this company on board and welcome all of the associates with Granite State Communications, and it brings 11,005 service addresses to our portfolio.
Operator: Thank you. As a reminder, if you would like to ask a question, please raise your hand. If you have dialed in to the call, please press 9 to raise your hand and 6 to unmute. Your next question comes from the line of a follow-up from Sebastiano Carmine Petti from JPMorgan. Your line is open again.
Sebastiano Carmine Petti: For Chris, a question about the cost transformation efforts. Remind us—is that $100 million run-rate by 2028 still the right figure to think about? And are we at a point now where the cost savings are falling to the bottom line here in 2026, or is there some reinvestment going back into the business to contextualize the cost program?
Chris Bothfeld: Hi, Sebastiano. Yes, we remain on track to hit $100 million of run-rate savings by year-end 2028. As you heard in my remarks, we are starting to see some of those benefits this year. The bigger benefits you will see in 2027 and 2028, but we absolutely are starting to see some of those benefits drop to the bottom line. As I have said before, we do not expect that entire $100 million to fall to the bottom line, because some of that is helping offset inflationary cost increases, and as we continue to expand our fiber footprint and our customer base, we do plan to reinvest some of those savings.
But we are seeing some nice benefits and are still optimistic about the full potential of this program.
Sebastiano Carmine Petti: Thank you. And then one for Anthony. The upcoming auction for the AWS-3 re-auction and then upper C-band coming next year—any change in your conversations regarding monetization of the remaining C-band and CBRS?
Anthony Carlson: Thanks for the question. We continue to believe that the C-band spectrum we hold is excellent and valuable spectrum. It is usable property available today with an ecosystem to support it. Additionally, we are not going to be a forced seller in these circumstances. We believe the carrying costs are modest, and while we are open to a deal at a fair value, we do not feel that we are in a position where it is burning a hole in our pocket. We do not have any further updates to give on any developments on the sale of our C-band spectrum at this time. That said, we continue to be very optimistic about realizing fair value in the appropriate time.
Operator: Thank you. Your next question is from Ric Prentiss with Raymond James and Associates. Ric, your line is open.
Ric Prentiss: Question—just want to make sure on the service addresses, Ken. Is the build plan still this year targeting 200,000 to 250,000 service addresses, and what would cause you to miss it versus hit it or beat it?
Ken Dixon: Yes, that is still the target, and I have a very good degree of confidence based on the crew counts that we have as we started the second quarter and the funnel and pipeline of addresses that are at a new record in terms of some form of construction. I am very confident that we are going to deliver in that target you referenced.
Ric Prentiss: And, Anthony, one of the themes was the high rent relocation effort some of the carriers are looking at. Assume you do not have a whole lot of high rent locations given the low level of tenancy, but what are you seeing out there on that? Do you have an appetite to do some new builds? What is the ability or capital commitment that you might put to work there?
Anthony Carlson: To be very clear, as we have stated multiple times, we are laser-focused on optimizing the value of the assets we have in hand and have significant upside that we believe we can achieve on the towers that are currently in our portfolio. That is not to say that we are not going to be open to opportunities that appear, but from what I have heard anecdotally and some of the numbers that I have seen, the current going rates for high rent relocations for us to participate in new builds—we have not seen numbers that are consistent with what we think we can get from optimizing our current portfolio.
In terms of high rent relocation on our side, a little nugget for you: we had only one total tenant churn in the entire first quarter. That speaks to the strength of our portfolio in terms of its relative susceptibility to high rent relocation.
Ric Prentiss: One for Walter—an obligatory satellite question. As you think about your assets, broadband with fiber and towers supporting the wireless world, how are you thinking about the somewhat existential threat of satellite coming into terrestrial?
Walter Carlson: That is an excellent question, Ric, and it is a technology that has gotten substantial additional focus over the last 18 months and substantial additional investment over the last 12 months. I think satellites will have a substantial influence going forward on the communications industry. That being said, we feel very strongly about the continued benefit of a terrestrial tower portfolio, and we feel very strongly about the superior capabilities of fiber networks delivering specific communication into individuals’ homes and businesses without interruption and without fear of being impacted by weather, but we are paying attention, and we feel very good about the thrust of both of our businesses, and we are watching.
Operator: Thanks. Next question comes from the line of Sergey Dluzhevskiy with Gamco Investors Incorporated. Your line is now open.
Sergey Dluzhevskiy: Good morning. First question on the TDS Telecom side. Last quarter, you expanded the fiber build target by 300,000 edge-out passings in, I believe, 50 adjacent markets to your current expansion footprint. How do the demographics and the return profiles of these markets compare to your older cohorts? And among this new cohort of markets, what types of markets are you prioritizing for a build sooner rather than later?
Ken Dixon: Thank you for the question. We are looking at markets where we have already planted a flag—where we have established our brand and deployed fiber—so we already have technicians and sales capacity. We have looked at demographics, the overall market, and competitive intensity, studied very closely what our build cost ultimately would be, and then what our return rates would be, and we prioritized those markets. That is what we are calling the edge-out opportunity, and we think those are excellent markets in terms of checking all the boxes I just referenced. The key is we were first to the original market with fiber, and now it is just a natural extension.
We think we have prioritized the right markets first, with the highest opportunities and also the highest returns. We like the markets that we have selected.
Sergey Dluzhevskiy: In terms of cable, maybe following up on the previous question—can you talk a little bit about what you like the most about your cable footprint? Maybe comment on the competitive environment. And in terms of investments you are planning to make, at a high level, where will the dollars go, and how quickly do you expect those investments to pay off?
Ken Dixon: From an investment perspective, our focus now is going to a multi-gig environment in our cable business, and I think that is the opportunity for 2026. In terms of the markets that we are operating in, they are highly attractive markets. Some of the cable businesses are in markets that have some of the highest housing growth right now in the United States. That is why we look at these markets and think there is definitely an opportunity going forward.
Sergey Dluzhevskiy: A question on the Array Digital Infrastructure, Inc. side. The wireless partnerships produce nice cash flow for you every year, and you are focused on optimizing your tower business and monetizing spectrum. Any updated thoughts on partnerships? If you look at some recent transactions, the last transaction of size was Verizon acquiring minority stakes in some partnerships consolidated at about 11.5x cash distributions. At this multiple, your stakes could be worth a significant amount. Any updated thoughts on monetizing those stakes, and what could potentially move you closer to taking that step?
Anthony Carlson: As we have said before, we like the cash flows from these assets. Moreover, there are some challenges with transactions for us similar to the ones that you mentioned. We have them in a very low tax basis. Candidly, if you were to look at the performance of those investments over the very long term and do a DCF on those, it would be challenging to get a multiple that was commensurate with the full value. That said, we are open to offers that would deliver full value on that, but they would have to deliver full value net of taxes. We like those cash flows, so we are not in a hurry to sell.
Sergey Dluzhevskiy: Got it. Last question also on the Array Digital Infrastructure, Inc. side. EBITDA is expected to be somewhat depressed in the medium term, pressured by transition wind-down costs and some other costs. Can you talk about your targets, qualitatively and quantitatively, in terms of taking cost out of the business and improving margins in 2026 and 2027, and longer term post T-Mobile transition what kind of margins do you believe are realistic for Array Digital Infrastructure, Inc.?
Anthony Carlson: We do think there is significant opportunity to improve Array Digital Infrastructure, Inc.’s margins. We focus on the tower cash flow side. We believe we are on the trend of some of those legacy costs coming out of the business, and Array Digital Infrastructure, Inc.’s direct team is also quite lean. We focus most of our efforts on tower cash flow. There are a couple of areas where we believe we have significant opportunity to improve. First, land ownership: land is our largest cost for our tower business. We also have a much lower rate of land ownership than many of the large public players in the market.
So we think there is significant opportunity and value to be realized by, where appropriate, purchasing more of the land interests on current towers. Second, we are a new tower company; we believe that as we transition from a maintenance posture that was more in line with operating a full-fledged wireless company to a tower company, we can improve our margins on that dimension. Those are the two big opportunities we see to improve our tower cash flow margin on the cost side, in addition to expanding margins by increasing collocations, which is something we work very hard to do every day.
Operator: There are no further questions at this time. I will now turn the call back to John Toomey for closing remarks.
John Toomey: Thank you again for joining us today. As always, please reach out to us if you have any questions. I hope everyone has a wonderful weekend. Thank you.
Operator: And this concludes today's call. Thank you all for attending. You may now disconnect.
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Array Digital (AD) Q1 2026 Earnings Transcript was originally published by The Motley Fool
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